Fairmont, the largest luxury hotel chain in North America, has accepted a takeover offer from Saudi billionaire Prince Alwaleed bin Talal through Kingdom Hotel Investments and U.S. fund Colony Capital. The joint offer by KHI and Colony will combine the Fairmont name with the Raffles hotel group. U.S. antitrust authorities have now approved the plan. The bid trumped an offer by billionaire investor Carl Icahn, who put in a partial bid last year.
But what will the $3.9 billion offer do for the chain of 88 hotels? Breaking Travel News put this question and others to William Fatt, the Chief Executive of Fairmont Hotels and Resorts.
BTN: Why did the board support the offer? And ask shareholders to do the same?
Fatt: This deal gives Fairmont a global presence, while providing significant value to all of our shareholders. After an extensive review of competing bids, the board felt our familiarity with the purchasers and their financial background presented the company with a solid platform from which to grow.
BTN: When the transaction goes ahead this will involve teaming up with Raffles, what will this do for the company?
Fatt: This is a defining moment for our company. The unification of the Fairmont and Raffles portfolios provides us with critical mass, something that would have taken each brand many years to acquire on their own, both brands also compliment each other. The affluent market segment is serviced very favourably by these brands and the distribution provided by each is diverse. In addition to the growth potential provided by this transaction, other synergies such as cross-marketing opportunities will enable us to expose our existing client base to new destinations with different cultures.
BTN: Whenever there is a merger there has to be savings, where do you see this happening?
Fatt: Operating efficiencies will certainly be seen by bringing all of the assets under the one umbrella, although our focus will not be on disrupting guest touch points, but on maximizing the infrastructure available to us—including design and construction, technology, finance and legal. Savings in these areas will enable us to apportion more resources to marketing and sales.
BTN: Why is it important to grow the Fairmont brand globally? How do you plan to achieve this?
Fatt: Awareness is a function of presence. To support awareness, it is imperative to have critical mass. Given the current consolidation in the industry, growth is also a means of survival and we are a prime example of this. Less than a decade ago, Fairmont was a domestic chain of seven iconic hotels in the U.S. Since then, the brand has undergone a transformation into a key player in the luxury hotel market in North America, acquiring major brands such as Delta and Princess, as well as merging with Canadian Pacific Hotels in 1999. The offer put forth by Kingdom and Colony will continue upon this path and provide us with a footprint on the international stage.
BTN: You went into profit in the fourth quarter topping analysts’ expectations, what have you been doing right?
Fatt: We were very encouraged by Fairmont’s performance, specifically occupancy gains and RevPar growth at our U.S. and Mexico locations, as well as improving operating results at our Canadian hotels. The demand for travel is strong and we anticipate a strengthening in our results for 2006 and beyond, given the fact that people love to travel, and always will.
BTN: You’ve got a number of projects on the horizon what will these bring to the picture?
Fatt: High profile developments in the pipeline include The Plaza in New York and The Fairmont Palm Island along with others in Mexico, Cairo, Turks & Caicos, and Abu Dhabi. These will further strengthen brand awareness. The new distribution provided by Raffles will also provide our customer base with new travel opportunities.
BTN: What will you be focusing on in the future?
Fatt: The luxury segment has grown in recent years and we are confident that our strong brand reputation and long history of delivering exceptional service will continue to serve us well.
Our portfolio consists of many iconic properties, which are located in one-of-kind destinations. We have also made a significant investment to update our portfolio over the last decade, ensuring all of our hotels are equipped with impeccable décor, modern amenities and high-end features such as spas and golf courses.
We are also focused on creating a loyal customer base. Our Fairmont President’s Club program has also enabled us to develop meaningful relationships with our guests and we are working to enhance these bonds.
BTN: So what is your successful formula?
Fatt: Our ability to remain a customer-focused brand that offers distinctive hotels and resorts in unparalleled settings has been our greatest strength.
Acquiring properties that fit the Fairmont mould, has enabled us to offer a consistent experience to our guests. While a strong emphasis on human resources has ensured a commitment to excellent service from our colleagues.
BTN: 50 percent of your operating profit comes from Canada and U.S. travel to Canada is at a 26-year low. Will you therefore see more of your profits coming from international properties?
Fatt: Our level of distribution in Canada still makes it a key market for us in the short term. We are also encouraged by recent U.S. in-bound travel figures to Canada and are aggressively pursing emerging markets such Australia, which have shown an increased demand for this product. We are also very optimistic about the country’s pursuit of ‘Approved Destination Status’ with respect to China.
BTN: The takeover offer does not include any arrangement for management, would you be happy to continue in your present role?
Fatt: Given that neither Kingdom nor Colony has the current resources to operate a global portfolio of this magnitude, both are looking to take advantage of Fairmont’s infrastructure.
They plan on retaining the management team that is currently in place. Both parties fully endorse our business model, current approach to operations and our goal of growing the company. I look forward to the challenges and opportunities that lie ahead in making the company a global leader in the hotel marketplace.
By Justin Cooke