By IANSlife Features
April 18, 2021 (IANSlife) With the pandemic still looming large, the hospitality and travel business continues to be one of the hardest hit by COVID-19. A year into the pandemic, despite being armed with the vaccine, the world continues to battle and hope for things to return to normalcy, albeit a new normal.
For a bid's eye view on the months to follow and for an insight into the business of hospitality, IANSlife interviews entrepreneur John Spence, CEO & Owner of Karma Group which has hotels and wine estates across the globe.
Spence is from the music industry but found his first resort in Goa about 20 years ago. The group now has more than 30 retreats, estates and hotels worldwide, ten in India, wine productions in France, Spain, Italy, Australia and UK. The charismatic, super energetic businessman enjoys evolving multiple elements for a lifestyle respecting the environment and is visiting professor for architecture at Yale University, UCLA.
As a pioneer in the field of boutique properties, do you feel the time has finally arrived for boutique hotels to shine with travelers preferring exclusivity and privacy over 5-star branding?
Spence: I have always been in the space both as a consumer and a developer in the field of boutique properties. I love boutique hotels and boutique resorts. I do think that I would say that the time has finally arrived for the boutique hotel, they've always had a niche but I think more and more consumers enjoy what they represent.
Clearly, what we're seeing is major hotel companies are combining and buying each other, aggregating and becoming monsters. I totally understand the economies of scale, and the guarantee of delivery of a brand; obviously there are many reasons for some consumers to like that. I think some consumers don't want any surprises. They need to know exactly what they're expecting, wherever they go in the world.
But our consumer and us think alike, more people really enjoy something which is more of an experience and it's not cookie cutter. I've always said over the years that what we are is a 'five-star hippie', and by that I mean is getting the best of all you ever had in my mind were in your twenties, but didn't have the money to travel the world. You might be backpacking around Europe, exploring Asia or Australia, sleeping in a hammock or on the beach. You probably had too much beer to drink, but you had an amazing experience and you felt alive. As you get married, have children, a good job and bills to pay, maybe you're lucky enough to afford five-star accommodation, but it lacks that spirit, it lacks that sense of adventure; what we try very much with our resort to do is combine the both things.
When I design resorts, I always look for local character rather than some common trend to impose themselves on all our properties and I think people do enjoy that and they like the fact when they are in Karma, they know they're going to get the vibe. They know they're going to get that five-star amenities but the reverence of the hippie and local culture.
I also think it goes back to what I like about Hospitality, the old concept I had as a host in the old days, the person that owns the hotel would be the person to welcome you, would be the person to probably sit down with you and have a drink after dinner. And the fact that it was small that gives it a set of ownership, that owners get to know guest, members and staff. It gives a sense of home, a sense of all being in the same family. So to answer your question, I think definitely more more people appreciate boutique hotels whilst there's still a space for the large 5-Star properties as well.
Travelers have moved away from branded trappings and prefer to seek out experiences and exploration rather than dropping names?
Spence: They have moved away from branded trappings, but I think, it really comes down to the fact that we're not in a lodging business or in the business of providing a hotel room. We are in the entertainment business and that ties in very much with our logos and phrases, we create entertainment. I started off in the music business. I dropped out of University, thinking of becoming the best guitarist in the world. I was actually the worst guitarist the world. I found that out swiftly and luckily drifted into the business side of the music industry. Then I drifted from there into the hotel's primarily because I travel so much and I've always seen myself as an entertainer; I say to my members or staff our job is to entertain.
We are little bit like the guy that dresses up as Mickey Mouse at Disneyland when people come to us we're actors on a stage. We've got to make sure that they are entertained and we do that in different ways. It might be The Spa, restaurant, wine offering, the kids club or excursions. It might be strange treatments and spiritual events. Whatever it is that people resonate with, we provide them, and I do think more and more the consumer wants experiences rather than just going to a five-star brand hotel and having may be the nice-sized room. Even in the most comfy bed they don't get that sense of joie de vivre.
Did you expect a bonus of revenge traveling in 2021 after a lean 2020, and are you disappointed that the pandemic continues to hamper travel?
Spence: Firstly I personally prefer the word 'reward traveling' rather than 'revenge', but I do think that there's definitely this psychological push-pull as we come out of Covid. Firstly the consumer has saved a lot of money, I mean in England I believe there's 250 billion pounds in excess savings in British people's bank accounts and that clearly is mirrored all over the world, because people couldn't go out and have dinner or lunch or go away for a long weekend holidays.
I do think there's a sense of people wanting to reward themselves for the fact that they have suffered and they've done the right thing for society by locking down. So rewarding themselves with a Holiday, or even two they don't mind spending more than they normally would. And I think also allied to that is a sense of fear the government or the pandemic they may be force to be locked down again, so they will go out and they will spend.
More than holiday residences, millennials and the younger generation is looking for a second home, an alternate residence, if you could call it that should another crisis like this occur. Do you feel the Karma group offering freehold villas across regions is the answer to this segment?
Spence: Millennials looking for a second home. Well, yes and no, I mean I think one of the one of the great things that we have with our product is we're not a vanilla hotel room. I think that people like space that they are not confined to one room.
And most of our products are apartments or multi-room compilation units and villas. I think that's very relevant in these covid times because a lot of our accommodation does provide a self-catering capability if people wish to do that, I think the days of wanting to stay in a small hotel room and having to eat at a large restaurants, with a fair share of lifts with large amounts of people, are I wouldn't say gone, but people have reservations about this. So this lends itself for a preference of a spacious boutique place.
Low-density people can be self contained in their own bubble, whether it be their own family or their group of friends if they wish if they wish to address they can of course, there's no need to I think also what appeals is very much the sense that we have a multitude of resorts. We have 35 resorts around the world and many many different destinations. They all offer vanilla accommodation or apartment accommodation. So people know what they're getting and it's interesting that we talk about here the Millennials.
A very wise man told me once that the problem with a company like mine was 'ageism'. He said that entrepreneurial firms start up usually when the principle is in his or hers 20s or 30s, I started when I was 33, so you tend to surround yourself by people of a similar age, talk the same language, and naturally the consumer you speak to resonates of a similar age. That's great. However, if you're lucky enough to be successful, as the years go by you still think you're 21 or 33, but you're not, you get old your colleagues around you get old and your clients get old and soon you wake up, you're all 60, and you try re-invent.
We're not reinventing, we're regenerating. We generate a new generation. We deliberately employing young people. And we are very much looking at products that appeal to the Millennials. We are launching a new product which is an annual membership product rather than the longer term product as the millennial generation prefers a shorter-term product.
Speaks of the concept of Airbnb, which really is ironically what the younger generation uses they don't necessarily want a vanilla hotel where there is 30 sq.mt room with a selection of seven restaurants and a large buffet breakfast. They want a bigger independence. They want their own space and that would have been a boutique space. So yes, I would agree with you entirely here, that I think they're looking for a different product. And I think we are ideal to provide that for them and we've recognized that we are going to do that and we are bringing on board some younger people to help us to communicate and connect with the millennial generation.
The pandemic has put the focus on environment. How do you feel the Karma Group has first mover advantage in eco-tourism and adventure, and what break throughs do you see in the next 5 years?
Spence: Well, I figure you know I'm very keen on all sorts of green movement or eco movements for many years. When I taught at Yale, I was privileged to teach at studio along side friend and a fellow professor, Patrick Bellew, he is one of the leading sustainable engineers in the world. He design the Gardens by The Bay in Singapore. I have learnt a lot from him and I try very hard with my resorts to dip my head to nature, tip my head to environment.
So I think its important for a commercially viable candidate, for example in Bali at Kandara, when we developed a magnificence block of land, a sort of cliff, we didn't terrace it we worked with a natural conture, we didn't chop trees down. It looks sort of logical because there are parts going around trees and villas popping up in strange places, we cant live it with constructions, so its not a cheapest way but you respect the earth. We won many awards for this resort, is it's very natural, it feels organic like a village because when you built a village or a town you don't start from scratch you just grow so that the village feels organic, like its been built over the years. We have amazing monkeys and butterflies and wild life. And I think that resonates when clients go there, they enjoy it and like it so much.
There has to be a balance, I think its very important when you develop a resort and make sure it's as green as possible, conscious of the environment, you disrupt as little as you can, but it has to be commercial. And one of the things I teach my students is there is absolutely no point being holier then thou, you can have the most environment friendly resort but if it doesn't make money, it will be very environment unfriendly, because you'll go bankrupt and you'll be empty and can't give back to nature. So you have an eye to look at environments and make informed decisions.
There is a phrase in architecture "Form Versus Function" and what that really means is important. The form, as in what it looks like, the function, what it does, you have to strike a balance between those two things. I think sometimes people make mistakes. They go too much into functionality with no desire to maximise the profit, or they are too form, they want to be on the cover of a magazine or architect digest, it looks pretty but it doesn't really work as a hotel.
We are trying to do both things and I do think in the next five years things are going to get more and more like that. I do think the consumer is very observants and very keen that they stay in a place which respects the environment, I think that's much more so then it was five or six years ago. Again it is flattering to say that we have first move to advantage, I think we have been good and diligent in what we have been doing and will continue to do that. I think other people are leaning that way as well.
A zero-debt hotel company owned fully by a single individual is quite a feat in this day and age,,, how have you managed to sustain this and continue to grow year in and year out without diluting your stand and stake?
Spence: It is unusual in these times, and there many people that criticise me for this. They say, "John its absurd you have taken on board no debt and if you did select or you did raise money, your company will be much bigger. Why don't you have 100 resorts?". I respond with 'I'm quite happy doing what I'm doing'. I like being my own boss. I enjoy what I do, of course at times people go wow isn't that amazing you have got no debt, well its always been my model to be honest with you, I was brought up with the philosophy that neither a lender nor a borrower. So we don't borrow money.
We technically have a very small amount of unsecured debt so I'm working capitalise, but in general we have zero debt. I keep equity entrust for my managers so we all are a management company, it gives us huge flexibility going through this current economic crises, the pandemic crises. I should say we have no debt paybacks, we have no share holders to answer to, so we can make quick decisions. There's been many decisions I have made literally in a few minutes or in an hour, I believe very strongly in the philosophy that your brain is an amazingly a powerful computer and you should listen to it. Whether you listen to God or gut feeling or decisions based on your intuition, too many times people ignore that and they spend too much time justifying why they should make the decision rather than making a decision; they lose the opportunity. I compare ourselves to being a speedboat against a big hotel company, they are cruise liners, big tankers, huge and robust, but they take a while to change direction or make a decision. We are a speedboat much smaller, we can turn on a dime if we want we can change our strategy in one day, we can look at all directions.
Our growth has been very simple. We reinvest capital, we reinvested by more resorts or expand extensions or whatever it need be and how much expansion we can do if sales are ongoing. I don't believe in over expansion. We're in the situation where we have a robust revenue, a robust profit, we have a good balance sheet and over 30 resorts now, a very strong member base, as you know, we're much closer to a private member's club that we are to Vanilla Hotel company, an amazing staff of almost 3,000 people. So we are in good shape, we compare ourselves a little bit tp a pirate ship. Actually, we are strong and robust, problems like last year affect us far less.
I'd be lying if I say it wasn't hard times, but the positive is that we are sailing out this storm with odds the we went into it. We now currently got six new Resorts and my ambition is to is to end up with 10 by the end of this year.
Salford Hall, Cotswolds, UK opens on the 12th of April... are you excited and what are you most looking forward to at the property?
Spence: We bought the resort a few months ago. It's a magnificent property. It is one of those properties that you really are quite proud to be the custodian of and I don't really think you own a property like that. You are merely the caretakers for the next generation. It dates back to the 14th century, it was part of the Benedictine Monastery or the Abby. We actually believe it's one of the first hotels in England because it was owned by the Abby, that's essentially the guest house or the lodging house when they were visited by dignitaries when someone came from Rome or from Paris to meet the monks and discuss Monk Business, they stayed here and this is where they would have their meetings and meditate.
So yeah, it's quite a proud history for a property which goes back so far and that's still part of the building. Henry the eighth with the dissolution of the monasteries came into possession of it as part of the assets of the Abby. He gave it to a friend of his and the restaurant is named after after him, we have pictures of him on the wall though painted by Hans Holbein, the famous artists. Then over the years it passed through very many people Guy Fawkes was involved at one stage and various other very famous people. We have commissioned a book on its history for our clients and it has many of the original features there.
So I personally love it and get very excited. And I know that our members will absolutely adore it. It couldn't be more quintessentially English. It's got magnificent scenery around it and we're also doing a TV show on it. So yeah, it's fun. I'm excited. I always get excited about a new resort, I'm a little bit like a kid like that. I love finding them, developing them, opening them. I've got many amazing people who do a great job of running them. But my big joy is finding a property, doing it up, getting it ready for opening cracking a bottle of wine. It's a very muted opening. The main opening will be later in the year when we can celebrate properly.
Last and not the least your expectations for the travel industry this year 2021?
Spence: I think positive always, glass half full, and I think that the various factors are going to combine to make a bit of a roaring twenties in the Leisure and Hospitality. But I did not expect that for this year. I wouldn't say I'm a guru by but it wouldn't be until quarter three that we rarely see much of a rebound, going into quarter four, 2022 will be much stronger and really it's because of the vaccine. I mean the vaccine is our liberator, it is the light at the end of the tunnel that enables travel to get back not to normal. But a new normal enables people to get out there and I passionately believe the swifter countries get the vaccine out to a large amount of their population the sooner the travel will come back.
I think business is going to take longer, because I think a lot of companies have discovered the ease and power of Zoom technology for want of a better word. And I think with restricted budgets they will ask people to spend more time on Zoom calls then actually going to meetings. I think also some people being cautious about business travel may be slightly nervous of getting into those conference type environments with 500 different peoples. I think this is supposed to be slow, but that's actually quite good for us, because what that means is more spends on leisure; if someone isn't going on business, they'll be more motivated to go and leisure and I do think as money is saved up and having spent the last year in lock down they've been dreaming and of places they have always wanted to go but didn't. They'll say that's silly because they could at any moment be gone, so they won't wait to travel, whether it's Tuscany, Vietnam or Australia they will want to say 'let's do it'.
Clearly 2020 was a curious egg wasn't a great year, going into 2021 we anticipated early in the year that it would be tricky. I think we're seeing seeds of recovery in many countries around the world, in the United Kingdom. Finally, pubs and restaurants open up outside, self-contained accommodation can start, and it's about five weeks away from when hotels can open. We see nothing in several parts of the world so moving forward it's going to be tough and a bumpy road, but as we move in to quarter three it's going to get a lot better, and quarter four its going to be still better; 2022 its going to be very robust.
So I think people are going to be grateful for holiday as much we are on the other side of the fence grateful for them holidaying with us. So all our interests are aligned. I think it's going to be good.
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