Last year when J. Allen Smith was appointed President and CEO of Four Seasons Hotels and Resorts replacing longtime company executive Katie Taylor many in the industry saw it as a sign that big changes were in the works. Cascade Investment Management, controlled by Bill Gates, and Kingdom Holdings, led by HRH Prince Alwaleed bin Talal, own 90 percent of the Toronto-based group. Founder Isadore (Issy) Sharp remains Chairman. Smith came from Prudential Real Estate Investors, the real estate investment management business of Prudential Financial. Having now eschewed entering new segments and saying there are limited opportunities to acquire other groups there is still plenty of action. With Moscow and Orlando, 94 hotels are open and 70 more are in the pipeline, including the next two years in Dubai (with two hotels), Johannesburg, Bahrain, Casablanca, Seoul, North Miami, Tribeca in New York, Kuwait City, Kyoto, and a third property in London. With so much chatter, Smith spoke to Elite Traveler Editor-in-Chief Doug Gollan just prior to the grand opening of the Four Seasons Orlando (below) to discuss what the plan is.
Elite Traveler: The change in CEO that brought you here caught a lot of people by surprise. What was behind it?
Allen Smith: The shareholders had a view of the direction the company needed to take and that a change was in order to accomplish that. I’ve spent a lot of time in my first year working with the shareholders to establish a strategic direction for the business. It is an enviable position to be taking over the helm of a business that isn’t broken, per se. It may need change but that change can be evolutionary, not revolutionary. We have extraordinary attributes to build on, whether it is the iconic characteristics of our brand, or remarkable culture of people we have that have a commitment to service that is unrivalled. We have a group of shareholders that are committed to the growth of the company and are in it for the long term, and we have owners around the world that want to do more business with us. What’s been important from a strategic point of view is lending clarity to what are the priorities among the opportunities we have today. That’s where I’ve focused most of my time.
ET: What are those priorities?
AS: There are a couple things. One is for clarity among market priorities and how we are wiling to use our own resources to facilitate growth. Our presence in gateway markets – certain key markets – we need to have the right type of representation. We need to take full advantage of our opportunities to be present. If you think about London, perhaps it is the global capital of the world the way it functions today. It is a large market and a diverse market and it can support multiple Four Seasons hotels as illustrated by the property at 10 Trinity Square (a third Four Seasons in London). So there are opportunities like that we are focused on taking advantage of. There are markets where we may need to reposition our brand such as Philadelphia, where we are transitioning out of our old property and into a new one over the next several years. In addition we have been very clear about what the highest priority markets are for the distribution of our brand. If you look at a map of the world and you look at the most important places for travel and tourism, you can figure out places where we need to be. We identified in the range of 15 markets, and said these are the highest priority. It is important to signal that to the organization because how you allocate resources is a critical job for a CEO. Allocating resources to the highest priorities is a critical job of a CEO, and if people don’t know what those are, it’s very hard to do that. The other aspect is that there may be things we are prepared to do to enter those markets in terms of the use of our own financial resources. That type of clarity is important for the organization. It is also important for others such as people who do business with us. It’s not a mystery we want to be in Barcelona or Rome. It’s good for the market to know.
ET: What’s the message?
AS: Extending the leadership of our brand also goes to product, service, technology and so forth. We need to do fewer things, and we need to do them better. It is a dynamic business and, there are a lot of things that can be important. At a brand level you have to choose. Among the things we are focused launching in the coming year is a mobile app. That is what I would characterize as one of the first, more visible steps in our transition from a high touch, low-tech business to high touch, enabled by high tech. It’s clearly the way the hospitality business is moving. In general the hospitality business has lagged other consumer segments. The idea of how our product is represented in the marketplace is critical. In many instances it feels like an arms race. There are many people with money who are capable of hiring the same designers we do and building beautiful buildings. That’s the price of entry today. Then you get into the service dimensions and providing experiences. That is harder for other to replicate.
ET: What will your customers want in the future that’s not there now?
AS: The market continues to evolve so rapidly. Think about the entertainment systems in hotels. There is a very big capital investment in the large flat-screen televisions and everything that supports it, yet look at how kids consume television today. It’s on their laptops. Part of it will clearly be giving people complete optionality on how they consume content be it their device or our device.
ET: Will the flat screens televisions disappear?
AS: It’s hard for me to imagine. People expect it, but how it will be used will change. Instead of lying on their beds looking at their laptops, they will want to stream it to the flat screen. The guest will consume their content as opposed to us providing the content. I think it’s almost here now. It’s just figuring out how do you accommodate that.
ET: What are other impacts of technology?
AS: I anticipate there will be seamlessness between hotel systems and guest devices. You are seeing some of it in terms of mobile apps. Your smart phone may be the way you check in, the way you get your key, the way you pay, if that’s what you want. The key thing for us is not all of our guests want the same thing. Some will want that. Some will want to be greeted at the front door by the general manager and taken to their room. Our task is to provide service to our guests as they want it provided. We are not in the commodity business. We are in the personal service business. Presumably the technology should help as it helps in communicating what (guests) want and how they want it delivered.
ET: Near luxury hotels have been upping their game, and at the same time in some cities lead prices for hotels like yours start at close to $1,000 a night. Is that a concern?
AS: At the end of the day, notwithstanding the fact somebody is spending a thousand dollars a night, there is a value proposition they expect for a thousand dollars a night. The imperative we deliver is essential, and we do it very well. In Paris there is a very deep market for people who want those type of accommodations and the level of service we can provide there. There are a lot of markets where the top end and the middle of the market are far more compressed. And there in many respects, demonstrating the value we can provide compared to the middle of the market becomes incredibly important. You can never lose sight of that. Everyone coming into our hotels is looking for a value proposition. For us it is providing a level of service that we can provide that others can’t. If we fail to consistently demonstrate that the premiums we generate are worth it, there are plenty of options. That’s part of why it is so important for us to continue differentiating what we represent and the service quality we can provide. It’s a competitive market.
ET: What’s it like to work for a legend?
AS: An appealing aspect was my ability to work with Mr. Sharp and develop a relationship with him. He has been incredibly supportive of me every step of the way. He is chairman of the board of directors. He is involved in new projects in terms of design, which is his passion, and he is a grand ambassador of the brand. Having said that, he is mindful the company is at a critical juncture of transition, and he has been incredibly supportive of me facilitating that transition and giving me authority to begin to move the business in the direction it needs to go next. He has built an extraordinary legacy, and I view one of my roles is to be a steward of that legacy. When we are both in Toronto I make it a point to meet at his house for coffee just to talk about what’s on his mind, what’s on my mind. It allows us to have a helpful exchange of ideas. He also has a perspective in terms of time on what it took to build the business to this point that is helpful to me. He is a remarkable individual.
ET: Why do you think you were chosen?
AS: He believes leadership is situational, and where the company is today, I am the right leader for the business. The shareholders were looking for somebody who understood the hospitality business, understood the perspective of our hotel owners, understood running a global business and would be compatible culturally with the company. In terms of the first three, those were things I had done. The question of cultural compatibility entailed both parties spending time together and concluding there was a fit. I spent a lot of time with the shareholders prior to their making this decision. I was confident the fit was there. The business I was in previously was an investment management business. We managed money for other people. We were a fiduciary. It meant we always had to put their interests first. We always talked about doing the right thing. Our clients always associated with us that we would do the right thing. And if you think about it, that’s not dissimilar to the Golden Rule (“Treat others as you wish to be treated.”) Issy built Four Seasons. In a way we act as a fiduciary on behalf of our owners and guests. At this stage in my career it was important for me to go to an organization that was compatible with my views on how to conduct business. Four Seasons was very much that, and I think they viewed me similarly.
ET: What separates Four Seasons from the other luxury players?
AS: Our guests don’t think of us as just providing hotel rooms and coffee. They think of us as providing experiences that go beyond that. It’s very personal, and it’s very customized. We have the people to execute that. You still can’t automate that. People are willing to pay for service and they want it to be genuine and authentic, and we can do that.
ET: So what do you say to the folks who thought you were here to make dramatic changes?
AS: There were a lot of people who anticipated that. I was given time to come to my own conclusions. This is a company with great attributes. That’s not to say there aren’t things we need to do differently, but fundamentally the business model has great value and we’re not going to change that.