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That's what you'd call room service

Le Meridien's Juergen Bartels is spending £850m to turn his five-star hotels from frumpy to fashionable, says Heather Tomlinson

Saturday 21 September 2002 00:00 BST
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Juergen Bartels, the chief executive of luxury hotel company Le Meridien, has a lot to thank his mother for – though gratitude wasn't on his mind as a 16-year-old when she dashed his dreams of becoming an architect. "My mother thought I had no artistic talent. It was very disappointing. She thought the competition would be less in hotels."

Bartels started his career in 1956 in Germany and was trained in "all aspects of a hotel". He learnt the trade in luxury establishments, although his jobs weren't always luxurious. They included nine months in a kitchen and he even "moved laundry", though he missed out on being a chambermaid.

Throughout his career he has worked at luxury hotel companies like Intercontinental, Radisson and Starwood, so he is glad he obeyed his mother. "After the war in Germany, children always said 'yes'," he laughs.

Bartels took up his job at Le Meridien in July 2001 when the Japanese bank Nomura bought the company from Compass Group for £1.9bn. At the time, prospects for the sector seemed relatively rosy. The economic downturn was biting but as the owner of 149 hotels – including the five-star Grosvenor House and Waldorf in London – Le Meridien looked well placed to weather the problems.

Bartels set to work on a business plan. He would invest £850m both to refurbish existing rooms and to open new ones where there was under-utilised space. Guy Hands, who built up Nomura's asset management business, was impressed with the plan and it was announced with a fanfare on 31 August 2001.

But no plan could have envisaged the events of 11 September, or their impact on tourism and business travel.

Bartels says that in the quarter after the terrorist attacks, revenue per available room fell 25 per cent at Le Meridien, and 30 per cent in the industry overall.

Figures from consultancy firm PKF show that last year the UK's total hotel occupancy fell 2.3 percentage points to 73.7 per cent, while the average rate paid was £77.70 a room, down 4 per cent. But in London's luxury sector, where prices are more than £200 a night, occupancy fell from 82.1 per cent to 68 per cent.

Meanwhile, the World Travel and Tourism Council estimates that world business travel will fall 2 per cent this year to $379bn (£244bn), a level not seen since 1998.

But Bartels bristles at any suggestion that his strategy has been knocked off course. "We have restudied the plan and we have no regrets, and are now really implementing our plan," he says indignantly.

"Do you think I'm proud?" he asks, with the answer clearly a 'yes'. "Under difficult economic circumstances, the board has pulled itself together, and the original plans have been confirmed."

The strategy is to prepare the company for the upturn in the economy, which he does not predict until 2004. "We have a cyclical business, so we are preparing to come out of the cycle. And when we come out, our rooms and products will be the best in the world," he says.

Over the past decade, established companies at the top end of the market have had to contend with a new rival: the boutique hotel. Pioneered by the likes of Ian Schrager, the owner of the super-trendy St Martins Lane in London and the Mondrian in Los Angeles, these hotels have the latest in interior design and are intended for the hippest of clients. But the guests are not all celebrities and fashion designers. Research from Pricewaterhouse Coopers found that 68 per cent of boutique customers are business clients, the staple of all luxury hotels.

"The majority of our customers have come from traditional five-star hotels, not the trendy ones," says Gordon Campbell Gray, the owner of One Aldwych in London, a variation on the boutique theme. "We have taken business from five stars."

Le Meridien's response has been to restyle its rooms according to a new "art and tech" design.

But Campbell Gray warns that a successful boutique concept goes beyond a feng shui'd room or designer furniture. "There is an enormous amount of panic in traditional hotels, but it is about a lot more than just a groovy chair," he says. "There's nothing surer than high fashion being out of fashion. At the end of the day, the international experienced luxury traveller is looking for service, but they do want it in a sleek environment."

However, Bartels claims he is not just following a fad. "This is style and substance. The reason it costs more is because it is the best bed, shower and TV there is," he says. "The colours are today's colours, ones that are 'in'; when the colour changes, I paint. That's not dangerous. I'm well aware that colours are in and out."

He is even commissioning brand-new hotels. Work is about to begin on the construction of a hotel and leisure complex at Frankfurt Airport, a futuristic glass-walled design that has won architectural awards. But isn't he worried that it might not be considered so fashionable in five years' time, or even turn into a German version of Manchester's much-derided Piccadilly Plaza? "I am startled by this. I think it is a valuable piece of architecture," he retorts. "I may not be as talented as an architect but I have some taste."

Analysts question whether hotel guests will pay the premium for Le Meridien's "art and tech" concept. "I'm sure we'd all like to go and stay in one, but are you willing to pay what you will have to pay?" asks Mark Reed, leisure analyst at stockbroker Teather & Greenwood. "It is questionable whether they will get the amount of customers they need."

Bartels responds with an anecdote about his company's hotel in Russell Square in London, which has had one of its floors renovated: "I was on the seventh floor, going down in the elevator. A woman said, 'I love these rooms but my company won't pay.' I followed her down and asked her what she would do ... She said, 'I'll pay the difference.' "

He adds that revenue per available room on the redecorated floor has gone up more than 300 per cent.

Bartels is so happy with the results from the completed renovations that he recently unveiled a programme to increase the number of rooms in the company by 19 per cent to 45,398 over the next four years.

And his rivals are getting nervous. Tomorrow, Intercontinental is setting out a new strategy for the brand, and on Tuesday Radisson is announcing changes. If Bartels is right – and he seems to like to be right – the future is fashionable.

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