Breaking Travel News Interview: Duncan O’Rourke, chief operating officer, Kempinski Hotels
As Europe’s oldest luxury hotel group, Kempinski Hotels is committed to providing guests with memorable journeys inspired by exquisite European flair.
Here Breaking Travel News catches up with chief operating officer Duncan O’Rourke to discuss the brand’s growth in emerging markets, its focus on social responsibility and the importance of keeping luxury exclusive.
Breaking Travel News: The past four years, since you assumed your present position with Kempinski, are often characterised as some of the most challenging for the accommodation industry in living memory.
Has this been your experience of the market? Do you feel the corner has, finally, been turned as we move into 2012?
Duncan O’Rourke: Yes, the recession has taken a huge toll on the hotel and tourism industries. But we feel that Kempinski has emerged stronger from the economic crisis and we have laid the foundations for further growth.
Despite the still difficult economic situation, Kempinski has again been very successful in 2011. We reached our ambitious growth objectives in 2011 and even managed to finish the year on a similar level to our record year of 2008.
We are on the right track and this is borne out by our performance.
This is also reflected in the first figures of 2012; we are cautiously optimistic about 2012, despite its promising start.
As we’ve experienced over the past few years, the hotel industry can easily be turned on its head overnight depending on political and economic developments.
I think in situations where factors are mostly out of our control, the best thing we can do is strive to be either pioneers or the best in class; and that’s precisely what we’ve been doing in our segment.
I am confident the road ahead leads to continued success.
BTN: What factors do you see inhibiting growth in the global luxury hospitality sector this year?
DO: In our volatile global economy, each day seems as unpredictable as the next. Therefore, at Kempinski, we’ve learned to become great anticipators.
Many of the things affecting the world will be the same ones affecting the luxury segment, whether it’s inflationary pressures, political upheaval, natural calamities, or surges in oil and other commodity prices.
BTN: Where do you see funding for those developments which do proceed being sourced? Are sovereign wealth funds, for example, set to play a larger role in the financing of the market as investment banks retreat?
DO: Everything hinges on the market. Much is speculation of course but I am of the opinion that the market always finds its homeostasis.
If you take a list of the top ten SWFs around the world you’ll notice that nearly all of them are commodity based.
If oil prices continue to surge I believe the market will find substitutes to eventually replace it, which will quickly deplete the massive account surpluses in these funds.
Many of these SWFs, particularly in the Middle East, have caught wind of this and are making necessary moves to diversify their capital, which include bold investments within the Hospitality sector.
In this sense, these SWFs are of high importance to us as we have vested interests in the Middle East where SWFs are and will continue to be key players in shaping our development pipeline for this region.
On the other hand, SWFs only account for US$3-4 trillion in aggregate, making it a significant but small number in comparison to say, traded securities, which account for over US$50 trillion in the United States alone.
While SWFs are very important to us, we must also forge and maintain strong relations with national banks, and or private equity/ hedge funds.
BTN: Virtually every major global hotel chain is boosting its position in China, with IHG launching the new HUALUXE Hotels & Resorts brand just this week. However, Kempinski recently confirmed it would take a break in development in the country after 2015, when the group is expected to have 30 properties in operation.
Can you talk us through the logic behind this decision? How will this impact on the development of the Nuo brand, developed for that market?
DO: With the opening of Kempinski Hotel Beijing Lufthansa Center in 1992, Kempinski was the first international five star luxury hotel group to open a property in China and until today, it’s still the only European hotel management company present.
Kempinski isn’t taking a break from China; we are currently pursuing aggressive developments in China. This year alone will see seven new openings in China. By 2015, we aim to have reached our self-defined expansion goal of 25 hotels in China and will concentrate on Hong Kong, Macau and Taiwan.
It’s important to understand that our development strategy in the region doesn’t undermine our prime objective of ‘selective portfolio growth’ - we define luxury as being limited.
But China is a rapidly-growing market with many attractive opportunities for development and incredible potential. That’s why we decided to launch NUO, the first domestic five-star international-standard luxury brand, catering to the Chinese market.
With NUO we are making the best of opportunities available in the Chinese market, our own resources and our management expertise.
At the same time, we are opening up to new target groups without diluting the Kempinski brand.
The first NUO property will open in Shanghai in 2013, followed by another opening in Beijing in 2014.
I’m confident that we are averting one of the major problems in the luxury segment by doing so. The trend for mass scalability of products risks turning luxury goods and services into everyday commodities.
Kempinski doesn’t have 55 hotels in China - we’re in the business of luxury and therefore is has to be exclusive and limited.
BTN: What part does South America play in this strategy? Kempinski recently confirmed a new luxury resort in Colón Province, Panama; is this part of a wider focus on the continent?
DO: This is an excellent time for Kempinski to re-enter these growing markets. The region is attractive for leisure travel and our goal is to inspire travellers from Europe and America with this new resort.
Panama is a geographically strategic location, at the crossroads between the North and South.
We do have plans to venture into South America, with our initial sights set on Brazil and Argentina.
It is part of a wider focus on the continent but we are ensuring that we consolidate our presence in existing markets before we proliferate in the Americas.
BTN: Can you explain the role KREEN - Kempinski Renewable Energies – will play in the pre-opening of new hotels under the Kempinski flag? What role will this new organisation play in the wider hospitality sector?
DO: We naturally see our social and ecological responsibility as a global company and with KREEN we can make a significant contribution in that sense.
Furthermore it’s obvious that conventional energies like oil and gas are becoming increasingly expensive.
Therefore KREEN’s primary objective is to integrate renewable energy as much as technically and economically possible into the hotels’ energy supply according to strict environmental standards.
KREEN provides our hotels with clever, efficient and renewable energy solutions which help reduce costs all-the-while protecting the environment.
According to the hotels’ geographical location, the local energy costs and supply of renewable energies, individual concepts are created for each hotel.
It does not matter whether it is a new project under construction or an existing hotel already under operation.
Thus, the hotels will receive the best bespoke energy-efficient solution - including cost reduction and environmental protection.
This is a new initiative for us and we are really excited about the potential impact it can have.
KREEN offers consulting, planning, project management and quality assurance services to make better use of our resources, reduce operating costs, and protect the environment.
Additionally, KREEN also makes us more interesting to potential hotel owners, because in addition to the excellent hospitality management expertise and technical hotel planning expertise for which Kempinski Hotels is well known, we provide access to advice on renewable energy use.
BTN: Finally, you have personal experience with luxury brands including Rosewood, Marco Polo and Mövenpick. What do you think it is that separates Kempinski from these rivals, and others, in an ultra-competitive marketplace?
DO: Kempinski is about individualised luxury tailored to each of our guests in each of our hotels.
We want to ensure that each experience is new and refreshing.
We do this by not only ensuring that we provide tailored products and service excellence, but also by providing a guest experience inspired by European flair.
Interview by Chris O’Toole