Ian Schrager and Arne Sorenson on compatibility and copycats

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The unlikely pairing of boutique hotel pioneer Ian Schrager and corporate giant Marriott International for the launch of Edition in 2008 raised some eyebrows, five years on and the pair is soon to open its second hotel under the lifestyle brand, The London Edition.

One of the highest-profile hoteliers of the past three decades, Schrager shot to success in the late 70s when he and his business partner, the late Steve Rubell, created arguably the world’s most famous nightclub, Studio 54.

The club, which was frequented by Michael Jackson, Woody Allen, Andy Warhol, Dolly Parton and Rod Stewart to name a few famous regulars, opened in 1977 and is said to have made US $7 million in its first year. In 1978, a raid by the Internal

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Revenue Service (IRS) turned up hoards of cash stashed away in the building, the club was closed and Rubell and Schrager were each sentenced to three years in prison, of which they served 13 months.

It’s during this sentence that Schrager is thought to have first concocted a plan to enter the hotel industry. He and Rubell opened Morgans New York Hotel in 1984, introducing the boutique hotel concept to the world. Rubell died of hepatitis in 1989, while Schrager went onto sell the renowned Morgans Hotel Group for a reported $400 million in 2005 and founded Ian Schrager Company, which owns, develops, manages and brands hotels, residential and mixed-use projects.

“The idea behind the boutique hotel kind of got adopted and became part of the English language,” Schrager says. “I can tell you what it meant when Steve and I used it to describe our hotel because it wasn’t used before then; you know it had nothing to do with size.

“We come from New York City which is dominated by the fashion world and we thought that the other hotels were like department stores — trying to be all things to all people, offering anything that anybody might want — so as an alternative to that we were going to be boutique,” explains Schrager.

“We were going to have a singular vision, a very specific attitude and we were not trying to be all things to all people, we were trying to be very focused on what this hotel was going to be. What made it a boutique wasn’t the size, but the limited idea and the focus of the idea. That’s still just as relevant today as it was when we invented it 25 years ago, it’s just that it’s been used by everyone and in ways we never intended [it] to.”

Great minds
So when Marriott International executive chairman and chairman of the board J.W. Marriott Jr., fondly known as Bill Marriott Jr., who was CEO at the time, approached Schrager with a view to a partnership, Schrager saw it has an opportunity to bring boutique — as it was intended — back.

“Together Marriott and I have a new vision and plan to radically rethink and catapult the boutique and lifestyle category hotel into the present by capturing the spirit of the times,” he said upon the launch of Edition.

“Bill Marriott Jr. is a legend in the business and the company he has built is incredible, it’s one of the largest hotel companies in the world. Their execution is superlative and it just seemed like it was a really great opportunity for me to do something on a really grand scale. So we came from different perspectives, but I have nothing but tremendous respect and admiration for Bill,” Schrager tells Boutique Hotelier.

“On the surface it may seem there are a lot more dissimilarities between both of us, but there are a lot more similarities — important fundamental things about each other. We’re both driven, both pursue excellence, both competitive and we both want to do something as good as we can possibly do it and those are the things that bind us together,” Schrager says. “Not the fact that I might wear a black t-shirt and jeans and he might wear a grey suit and a red tie, those are things on the surface”.

The two recognised in each other an ability to do something together that they couldn’t do apart. “And I think that realisation made us attractive to each other,” Schrager says.

Marriott International had been watching the boutique and lifestyle space since Schrager launched Morgans.

“I think in the early years we wondered whether it was so niche that it really wouldn’t amount to much scale and as we got towards the first decade of this century it became pretty clear to us that this was a sizeable enough space that we really wanted to be in it,” Marriott International president and CEO Arne Sorenson tells Boutique Hotelier.

“Our plan from decades ago has been to make sure we have the leading brand in each distinct space of the lodging market. Once we realised this was appealing to many and a big enough space that it should be relevant to us, we thought we really ought to be in it.

“It seemed a relatively obvious decision to go out and get the founder of this aspect of the lodging industry who could bring us expertise that we really didn’t have since we had not been in this space,” continues Sorenson. “And Ian was, as far as we were concerned, the absolute best in this space, most of what’s been done in this space was either started by him or is derived from stuff that was started by him and we thought if we could have him on our team that was the perfect way for us to get in.”

Schrager adds: “I can’t do what Marriott does, Marriott can’t do what I do. By combining forces maybe we can do something neither one of us can do alone.”

So Schrager could bring the name, the concept, the attitude. Marriott could bring standards, a reputation for great service, and scale.

Sorenson recalls: “Ian basically said ‘I’ve been labouring in this space for almost 30 years… and I’m very proud of what we’ve accomplished. I continue to learn in this space and I’m excited about what it can accomplish in the future, but I feel like I haven’t done enough because I’ve been working with a very small team, without the scale that Marriott can bring to this space — help me grow this faster and better’”.

Schrager explains: “Now there are thousands upon thousands of versions of what Steve and I first started with Morgans.

“I never was really interested in doing anything on a really big scale, I always had fun doing the hotel and creating a unique ambience and the whole experience.

“The prospect of doing something on such a great scale now was attractive to me for a lot of reasons. One was that instead of me doing a hotel and then have every other hotel company come and pick my pocket with all the ideas, if we were to do this with Marriott — we’d be able roll it out very fast and get out and take it to market before anybody has an opportunity to copy it,” he says.

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The roles
So Marriott International and Schrager set about creating the brand Edition with Marriott largely responsible for the development and management aspects, while Schrager would oversee programming and conceptualisation. He describes the process as a “learning curve”.

“We’ve been partners now for seven years; it is collaboration and we each have strong views. The difficulty is, when you’ve both been successful you’re both convinced your way is the only way. That’s a process that you have to go through, but there’s a tremendous amount of respect we have for each other, and admiration and affection and in some mysterious way it all seems to work out in the end.”

But not without compromise, he adds: “I couldn’t compromise and do something that is below my standards. But there is compromise involved, when I do my own individual projects it’s a very autocratic process.

“Here there has to be compromise and we both realised that going in — that either one of us would not be able to do something that we both couldn’t embrace. When it comes to the programming and conceptualising and those things, they relied on me for that input, but that doesn’t mean I have a blank slate – they’re very much involved and they have their brand standards. My brand standards are in my heart and in my head, it’s not written in a book.”

For Schrager, the number one objective was to create a distinctive product.

“How can so many hotels around the world be different? People have a hard time getting their heads around that. I don’t find it difficult because we’re not cookie cutting them. We’re not taking out a brand book and replicating them, every hotel is different — a different location, a different number of rooms, different public spaces, it will be different by definition. Efficient execution is not the byword of this brand, it is distinctive product.

“Unfortunately, the hotels that picked up the mantle from us are now falling into the same trap that hotels fell into 30 years to 40 years ago and they’re all becoming monotonously similar again. Maybe with brighter colours and more of an emphasis on design, but it’s very difficult now to tell the difference between certain boutique hotels, which is one of the reasons I wanted to do this with Marriott and come up with something unique, I saw another opportunity,” continues Schrager.

“The Editions won’t be carbon copies. When we open up London and the other hotels, they’re all different, they don’t look alike but they have a similar kind of attitude and approach.

“I’ve found in my experience that if you want to have a hit with people it has to be original and authentic and if it isn’t, the people know,” he adds.

No competition
With Edition, Schrager and Marriott were taking on a number of competitors, but most notably Starwood Hotels and Resorts’ lifestyle brand W which had launched with the opening of W New York late 1998. However, Schrager dismisses W as a threat.

“W is completely different; Edition is the creation of somebody that had a real vision — it’s original, there’s a vision behind it. It’s not a replication of somebody else’s idea. So it’s the difference between Coca Cola and another kind of cola — Coca Cola’s the real thing.

“When you have an original vision, you can create something new and original which will excite people. If you’re merely replicating something somebody else did, trying to execute somebody else’s idea and it’s not predicated upon with original vision it can’t really be the same and eventually apathy has to set in, which is what’s happened with the boutique space now,” asserts Schrager.

“That’s why all the hotels are beginning to look alike because there wasn’t an original idea there; all they were doing is trying to execute somebody else’s idea. So each one of the Editions will be original… and they’ll also have the benefit of Marriott’s expertise in being able to provide great, great service,” he adds.

Sorenson acknowledges the competition, but believes Marriott is bringing a more consistent luxury product to the boutique and lifestyle hotel market.

“Obviously W has been in this space now for 15 years so they’ve got a decade or so head start on us and we’ve obviously watched what they’ve done in this space,” says Sorenson.

“As we launch Edition we have the benefit of having seen everything that’s been done in the lifestyle space over the last almost 30 years since Morgans was started and we will, because of that learning, find that we open up much more consistently with a luxury product than others in the industry have. Don’t let me point too specifically at anyone but so far the lifestyle space has been defined by some hotels that are great luxury products and some that are not, but try to pass themselves off to be,” he adds.

The roll-out
A “fast” roll-out of Edition had been on the agenda, with Marriott and Schrager revealing plans for “more than 100 hotels in destinations across the globe” upon the launch in January 2008. The pair got off to a good start, with agreements made with developers for the first nine hotels, and expectations for a total of 30 signings by the end of 2008.

The Waikiki Edition was the brand’s first hotel to open in 2010, but less than a year later, the property’s owner M Waikiki LLC filed a lawsuit against Schrager and Marriott, and requested to terminate the 30-year management contract, claiming that not enough had been done to make the brand successful. This was the start of an ongoing saga over the beach hotel, which today operates independently as The Modern Honolulu.

Following on from the 2011 launch of The Istanbul Edition, The London Edition will be the second operating Edition hotel when it opens on September 12. Asked whether the Waikiki incident impacted the pace of expansion, Sorenson dismisses it as “ancient and forgotten”.

“We’ve moved on and I really don’t think it’s relevant anymore, I think folks will see in Edition what they see in these new hotels opening, they’re not going to think about what happened in Waikiki five years ago,” says Sorenson.
Schrager says it was something to learn from: “You have to get a good owner, that’s the important thing. When you have a really distinct product… you need to have a good owner partner, otherwise it becomes a disaster”.

He acknowledges that growth has been slower than intended but does not blame this on its volatile Hawaii start.

“It was really the economy, we ran into a 100mph headwind, most of the western economies were practically going to fall off the cliff and this was a really bad economic downturn, there was zero development going on and now it’s picking up and on that wave we have a couple of great projects opening up so we think it will substantially enhance our prospects,” says Schrager.

“We caught up with the economy and now we’re opening up hotels in London, New York, Miami and LA, and throughout Asia and half a dozen in China. I’m working on a lot of Editions now”.

Asked whether the expectation of 100 Editions still applies, he says: “I’d like to do more, wherever there’s a need for a hotel, we can do one better. We’re in an opportunistic business.”

Sorenson is slightly more reserved in his expectations: “It will take some time before we get to 100 hotels, so I’m not going to give you a date when you can expect 100, it will be many, many years away, but we have a good momentum with the brand today. Between those we’re doing and those that are signed and under construction, we have 10 or 12, it is a very global platform. Our developers are working on another 10 to 12 that are behind them,” he says.

Trendsetter
Meanwhile, Schrager is also working on a number of projects of his own. Public, the first of two new brands, launched with the opening of Public Chicago in 2011 in the former iconic Ambassador East Hotel renowned for its Pump Room restaurant.

“Public is a new class of hotel, one that’s not been seen out there — offering great service, sophisticated F&B which you come to expect from me, but also at a very reasonable value. Edition is more in that five-star area and Public is much more of a value proposition but we’re offering a very high-end experience,” explains Schrager.

“We’re working on a couple in New York City, which will probably open up at the end of next year, beginning of 2015 and we’re looking to role that out internationally as well,” he reveals. Schrager remains tight lipped on the second new brand, only pointing out that it won’t be in competition with Edition or Public.

“At one time I was the largest hotelier in New York City, I had seven hotels but they all had different personalities, price points and attracted different people.

“There’s a great opportunity in the luxury lifestyle space, which is what Edition is doing. People would like to get the service and luxury associated with luxury brands but why not have all the fun and elevated experience and exciting F&B that you’re used to getting in a boutique hotel,” continues Schrager.

“There’s also a tremendous opportunity in a less expensive space. Right now you have spaces dominated by these budget chains that offer no excitement, no food and beverage, no style and those are wide open for somebody to come in with a new idea,” adds Schrager, perhaps offering a clue to his latest venture.

But regardless of segment, shape or size, Schrager’s success lies in his ability to create the original and ultimate boutique hotel experience.

“Not only in design, it’s the attitude, approach and focus. A lifestyle hotel is the same as a boutique hotel — the way we intended it when we first came up with the name boutique. It is the future of the business, every hotel is going to have to be focused on offering an elevated experience,” he concludes.

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