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The New York Times | August 19, 2007

A Hotelier Is Breaking the Mold Once Again

By Ron Stodghill

In the world according to Ian Schrager, the master of the ultrahip hotel, there’s no greater currency than a boldface name checking into a stylish guest room or hanging out in the chic bar or restaurant. Mr. Schrager cut his teeth among the in-crowd in the late 1970s and early ’80s, as co-founder of the Studio 54 and Palladium nightclubs in New York City, and has since courted the slender, fashionable and martini-prone with such gusto — from the Royalton and Paramount hotels in Manhattan to the Delano in South Beach and the Mondrian in West Hollywood — that he has earned rock-star status of his own.

Yet on a brisk morning last September, in the fashionably dim corridors of his Gramercy Park Hotel, Mr. Schrager found himself strolling alongside a new and decidedly unhip admirer, a strait-laced septuagenarian who, incidentally, has quite a reputation as a hotelier himself.

“One of my managers called and said that Bill Marriott wanted to come by and tour the property,” recalls Mr. Schrager, 61, sitting recently in his Greenwich Village design studio. “I said, ‘Hmmm, Bill Marriott?’ ”

Mr. Schrager, whose father was a Brooklyn garment worker, evokes Robert De Niro in accent and attitude: “So I go over there and give him the tour myself,” he says. “I mean, it’s Marriott! They are like Wal-Mart. No matter what you think of the brand, you have to respect it. For me, it was like getting the Good Housekeeping seal of approval.”

And so began the whirlwind courtship between Mr. Schrager and Mr. Marriott, a closely watched pairing of virtual opposites that was consummated in June with shotgun efficiency on the bohemian rooftop of the Gramercy Park Hotel.

With Mr. Schrager dressed coolly in a black Nehru shirt and blazer, and Mr. Marriott buttoned-down in a gray suit and tie, the men played down their differences and announced plans to create a new brand of boutique hotel. Also known as lifestyle hotels, boutiques are distinctive for their innovative, individualized and intimate designs, and “destination” bars that lure travelers and locals alike. Mr. Schrager popularized the concept in the early 1980s.

“Ian is going to be developing a new experience for people looking for more than just a bed, and breakfast,” Mr. Marriott proclaimed.

Their plan is straightforward enough: Mr. Schrager will design some 100 boutique hotels for the as-yet-unnamed brand in major cities across the United States, South America, Europe and Asia, and Marriott International will operate them. By tapping a range of renowned architects and designers, Mr. Schrager plans to give each property a distinct character. Financing will be provided by individual developers, many of which already own Marriott properties. Mr. Schrager and Marriott will each take a cut of the developers’ profits.

MARRIOTT is hoping to leverage Mr. Schrager’s aesthetic ingenuity and cachet with its own marketing and organizational muscle to gain entry into the boutique segment, among the fastest-growing in the hotel industry. According to Smith Travel Research, an independent lodging industry data firm, the United States hotel industry racked up $25.3 billion in operating profits last year amid record high occupancy rates. Marriott estimates that the global market for the boutique segment is $6 billion to $7 billion a year, of which about half is in North America.

“We’ve partnered with Ian because he is unique, and we don’t have anyone who can do what he does,” Mr. Marriott says.

While Marriott has $12 billion in annual sales worldwide through its 2,900 properties, the company is notably absent in the boutique segment. Starwood’s W line, with 21 hotels worldwide, is the biggest player, but hundreds of independently owned boutique hotels have mushroomed across the world’s major cities in recent years, industry analysts say.

Similar to its recent deal to create family-friendly theme hotels with Nickelodeon, Marriott’s partnership with Mr. Schrager will enable the company to extend its reach. Its current base includes the modestly priced Fairfield Inn brand, the midmarket Courtyard, the more upper-tier Marriott brand and the luxury Ritz-Carlton, but the company is aiming to capture a fresh crowd of younger, affluent travelers who want five-star amenities amid snazzy, more individualized surroundings, industry analysts say.

“Every traveler has all these needs at different times, and hotel companies are creating portfolios of different price and service levels in order to build loyalty across a family of brands,” says Bjorn Hansen, a managing partner at PricewaterhouseCoopers who specializes in hospitality and leisure. He adds that Marriott’s affiliation with Mr. Schrager “brings an instant image of being able to bring something innovative to a more conservative hotel company.”

Some industry analysts, though, are bracing themselves for a culture clash, with Mr. Schrager’s team of artists and designers trying to meld their edgy sensibilities into Marriott’s cookie-cutter template. On the day the deal was announced, the hospitality industry consultant Jim Butler asked rhetorically on his blog: “What will Schrager do when Marriott criticizes the color of the silk hanging from the ceiling, or some innovative design feature in the restrooms?”

To be sure, Mr. Schrager is famously obsessive about the details of his work. At the Gramercy Park Hotel, for instance, he is known to protest if the bouquets in guest rooms do not contain exactly 10 pink carnations or if the lights are too dim. (He likes dim corridors to contrast against a burst of light in guest rooms.)

As Anna Wintour, the editor of Vogue magazine and Mr. Schrager’s friend, puts it, only half-jokingly: “Ian is a perfectionist and a control freak. Everyone is terrified to even move a chair without his permission.”

Ms. Wintour adds, though, that she considers Mr. Schrager’s move to be wise and reflective of broader fashion industry trends. “In my neck of the woods, if you will, more and more people are working within the mainstream,” she says.

Citing such collaborations as Vera Wang designing for Kohl’s, and Isaac Mizrahi for Target, she says: “I think it’s terrific that style and fashion are winding up in places that are accessible to everyone. Ian is a natural at tapping into whatever is going on in the culture, and he also knows the right time to change.”

THE designer Calvin Klein compares the partnership of Marriott and Mr. Schrager with his own relationship with Unilever, the consumer products behemoth, which he says turned his namesake fragrance into a worldwide household brand. “This is a win-win,” Mr. Klein says. “Marriott has the resources and infrastructure to manage a global brand, while Ian has the ability to create it. The cynics will always find a negative side, but my experience has always been that with the right partnership you can do anything in the world.”

Mr. Schrager, for his part, concedes that partnering with Marriott will likely require some tough compromises. Marriott, for example, will probably require him to brighten the hallway lights a bit for safety reasons, and those stylish notepads he likes to leave in rooms might prove too costly to a mainstream hotelier.

“The properties might not be as quirky or individualized as I might make them if I were doing this alone,” Mr. Schrager says. “But Apple manages to pull off really sleek designs that everyone of all ages responds to. And believe me, I’m not going to have a book of standards. It will be. ...” He pauses for effect. “The anti-chain.”

More important, though, Mr. Schrager says that working with Marriott will instantly cast him into his rightful place as a major player in the “lifestyle” market segment, and in the longer term position him to build a mass customer base for his innovations, à la Apple, Nike and Sony.

“Right now, the impact that I have had on the market is not commensurate with the number of my ideas that have influenced the industry,” Mr. Schrager says.

The biggest example of this, he says, is the boutique hotel boom. Despite his role in pioneering the very concept, he remains a relatively minor financial player in the segment. “It has always been a nightmare of mine, that I would have an idea and somebody would come and make the money off of it,” he says.

More philosophically, Mr. Schrager goes on: “Look, if it’s not your original idea, if it’s an interpretation then it doesn’t have the ethos, the gravitas, the heart with all the depth and dimension to it. And it won’t evolve into something else. Design is just a marketing tool. My ideas come from the heart.”

Standing amid the dust of a spacious penthouse-in-progress at his newest property, 40 Bond Street in Manhattan, Mr. Schrager peers down at several loose planks of wood, studying the appearance of oak, teak and walnut under the shafts of high-noon light shining into the apartment. He is flanked by two of his most valuable employees: Anda Andrei, his principal architect for the past 20 years, and Michael Overington, once a custodian at Studio 54 who has risen to oversee project development.

“So which do you like, Mike?” Mr. Schrager asks. “I need your opinion so I can, well, choose the opposite.”

Mr. Overington smiles. “Thanks for using me as your reverse barometer,” he says.

Ms. Andei, her arms folded, sighs. “Well, at least Ian’s narrowed the forest down to just a few trees,” she says. “That’s some progress.”

In recent years, Mr. Schrager has had a much rougher time laying a foundation for his future as a hotelier. Beginning in the early 1980s, he served as chief executive of the Morgans Hotel Group, a development company that would grow into a portfolio of nearly a dozen upscale hotels, which he operated and in which he held a controlling ownership stake. But in 2005, Mr. Schrager, tired of day-to-day management pressures, resigned from the post.

He then began a crusade to reinvent himself in a grander, more expansive fashion. Among the results is 40 Bond, in NoHo, one of his two luxury residential properties scheduled to open later this year. Apartment prices start at $9 million.

Mr. Schrager has already sold most of the 27 units at 40 Bond but has reserved the 8,500-square-foot penthouse — adorned with, among other things, a rooftop spa and fireplace — as a reminder that he belongs at the top.

“I have never lived like some of my friends,” he says. “But now I am going to live like they do.”

Mr. Schrager began making powerful friends in the 1970s, when he and his business partner at the time, Steve Rubell, started the legendary New York disco Studio 54. The pair, both born in Brooklyn, had become acquainted in the 1960s as fraternity brothers at Syracuse University. A few years after graduating, they reunited as business partners. Mr. Schrager had completed law school at St. John’s University and was working at a firm in Manhattan. Mr. Rubell owned several steakhouses in New York, Connecticut and Florida, and a couple of discos in Queens, all bought with a loan from his father.

The businesses proved so successful that in 1977, Mr. Schrager and Mr. Rubell opened a dance club in Manhattan.

“I saw people standing in front of nightclubs waiting to get in and I said, ‘That’s the business I want to be in,’ ” Mr. Schrager says. “Back then, you didn’t have to know anything to go into the nightclub business. You just had to throw a party.”

He adds: “It was a different time. The gay population was setting the cultural tone. The pill was introduced. There was nothing you couldn’t do at night that you couldn’t wake up and walk away from.”

Mr. Schrager and Mr. Rubell decided to house their new disco in an abandoned CBS television studio on West 54th Street. The club opened its doors in the spring of 1977, and its wheeling, pulsating feel would define the era, as would the entrance’s famous velvet rope. Such celebrities as Andy Warhol, Mick and Bianca Jagger and Truman Capote were Studio 54 regulars.

But as the disco gradually developed a reputation for open sex and drugs, its owners, too, came under intense scrutiny. To be sure, Mr. Rubell was known as the more flamboyant of the pair, and for partying as much as his guests, while Mr. Schrager was considered the more serious and levelheaded.

Richie Notar, formerly a busboy at the disco who is now managing director of the high-end restaurant company Nobu, said: “Ian would leave at 11 o’clock while Steve would be there until 6 a.m. I know, because I had to drive him home.”

Yet in late 1978, both Mr. Schrager and Mr. Rubell became targets of Internal Revenue Service agents, who raided Studio 54 and uncovered phony accounting records and some $600,000 tucked in the ceiling panels. The pair were convicted of evading taxes on $750,000 in unreported revenues and spent more than a year in prison, first in New York City and later at a minimum security facility in Alabama

Mr. Schrager prefers leaving those days far in the past. “The nightclub business consumes its people,” he says. “You don’t have many people moving from nightclubs into something else, but somehow we survived it.”

After their stint in prison, Mr. Schrager and Mr. Rubell bought the Executive Hotel, located at 37th Street and Madison in Manhattan, and, with the help of the French designer Andrée Putman, converted it into the sleekly modernist Morgans Hotel. (Mr. Rubell died in 1989 of complications related to AIDS.)

Morgans would be followed by other boutiques like the Royalton, Paramount and Delano. These high-profile properties are credited with exploding the conventions of how a hotel should look and function by popularizing such concepts as “lobby socializing” (in which the hotel lobby became a gathering place for guests), “cheap chic” (which offered luxury in an affordable, stylish and sophisticated environment) and “urban resort” (where the hotel’s amenities like spas and elaborate fitness centers make it a destination point amid metropolitan bustle).

“When I saw the Royalton, I said to myself, ‘It’s hard to imagine that Ian could do this more than once,’ ” says Karen Stein, editorial director of Phaidon Press in New York and a jury member for the Pritzker Architecture Prize. “But he did, again and again.”

BY the mid-1990s, Mr. Schrager’s properties had set an industry standard. As Travel and Leisure magazine gushed: “It is possible that Ian Schrager has done more to bring design to the travel experience than any other living person — single-handedly reinventing the hotel as a site of electrifying cultural significance, art-directing a series of unforgettable lobbies, restaurants, and guest rooms.”

Starting in the late 1990s, Mr. Schrager says he had become frustrated with the day-to-day routine of managing several hotel properties. “It was all administrative, and that’s not what I do,” he says. ”It’s for suits, it’s not for me.” But he delayed leaving, and when the hotel industry went into a slump in the months after the Sept., 11, 2001, terrorist attacks, Mr. Schrager says he felt obligated to stay and "steer the ship through the storm."

In the end, though, he says it was a botched refinancing of his 374-bedroom Clift Hotel in San Francisco in 2003 — which resulted in the debt-saddled property’s reorganization under bankruptcy protection laws — that made him bitter and determined to leave, which he did in 2005. The bankruptcy “was the final straw for me,” Mr. Schrager says. "It didn’t have to happen, and it was embarrassing to me because my name was on the hotel.”

In September last year, Bill Marriott Jr. boarded a flight from Washington, where his company is based, to New York. He was on a fact-finding mission of sorts: he wanted to see whether the concept of the boutique hotel had evolved enough for Marriott to embrace it.

Over the previous several years, Mr. Marriott watched with some envy as rivals rolled out their version of boutique hotels. Most notably, beginning in 1999, Starwood Hotel and Resorts began attracting a loyal following of affluent, urbane customers under its W banner from New York to Mexico City to Seoul.

Although Mr. Marriott liked the idea of creating properties that attracted a similar clientele, he worried that boutique hotels, which often seemed to be geared more toward sex appeal than service, strayed too far from Marriott’s core values and competencies.

“But then I read that at Gramercy Park, Ian was using colors and chandeliers, and that you could check into your room without going through a bar scene,” Mr. Marriott says. “I was interested in seeing it because it sounded like a new approach in boutique hotels.”

Arne M. Sorenson, Marriott’s chief financial officer, puts it another way: “We had become more and more convinced that the space was big enough and that we needed to play in it.” Mr. Sorenson adds: “But Marriott was not interested in opening hotels that had a small cold space located above a bar, which happened to have a bed.”

Mr. Marriott says that upon arriving at the Gramercy Park Hotel, he was also impressed by something else: “A woman walked over to me and introduced herself. She was well into her 60s, and she was very well dressed. I had met her sometime ago at a dinner party in Washington. And I thought, ‘Here’s a Marriott customer or a Ritz customer. But she was staying at the Gramercy.’ ”

INDEED, if there is a criticism leveled against Mr. Schrager’s previous hotels, and boutique hotels in general, it invariably has to do with service and comfort — that they sometimes have chaotic lobbies, cramped rooms and inexperienced staff.

Mr. Schrager concedes that substance has too often followed style at some of his properties. And at the Gramercy Park Hotel, in an effort to rival top-tier luxury hotels, he has leveraged his own star power to poach several seasoned managers from the competition, including Clifford Atkinson, an eight-year veteran of the Mandarin Oriental.

“The opportunity to create something new for the next generation of luxury travelers appealed to me,” Mr. Atkinson said. “Something that is not stiff, or rigid or formal. Luxury encased in different packaging.”

But as Mr. Sorenson says of Marriott’s partnership with Mr. Schrager: “Success will be determined by one thing only: how many of these can we open, and how well they perform.”

He declined to discuss the details, but said that so far the company is enjoying “fabulous momentum” in drumming up the interest of developers, with some 50 serious inquiries and negotiations under way on five letters of intent. “We’re absolutely sure we can do this with him,” he says of Mr. Schrager.

On a couple of occasions, Mr. Schrager has even accompanied Marriott executives to meetings with investors. He acknowledges, though, being less than thrilled with some of the initial marketing materials that Marriott’s team had prepared for the road show, including a PowerPoint presentation that, among other things, featured a photo of one of the company’s guest rooms. "I told them, ’If you want to use this picture, that’s fine, go ahead.’ ”

“But then I said to them, ‘Understand, this is not the kind of thing I’ll be doing.’ " And in what might be considered the first test of creative wills, Mr. Schrager politely suggested that Marriott ditch the guest-room photo, which they did. “Look, I’ve got to pick my battles,” he says, shrugging. He adds: “I’m a rebel still, and in the end my product will speak for itself.”