Where the Hard Rock Is Going Soft
Bryan Brown should be a huge Hard Rock groupie. The party-loving 38-year-old copy-machine salesman -- fashionably hip in aqua blue dress shirt, long black overcoat, and moussed hair -- says he was blown away by a visit three years ago to the Hard Rock Hotel & Casino in Las Vegas. "It was the hottest place in town," he recalls.
But ask him about a Hard Rock Hotel that's taking shape along his sales route on Chicago's Michigan Avenue, and Brown balks. Maybe he'll recommend a stay there to nightlife-loving advertising clients. However, the rock-kitsch items and heavy doses of music he enjoyed at the Las Vegas hotel definitely wouldn't work for his more staid law-firm customers, Brown says. He'll continue pointing them to the nearby Marriott.
For 30 years, Hard Rock Cafes, with their beefy burgers and slices of rock 'n' roll nostalgia, have catered to wannabe head-bangers. But now Rank Group (RANKY ), owner of the Hard Rock brand, wants to sell a toned-down version of the rock experience to a broad array of consumers, ranging from trendy road warriors to gambling retirees.
The London-based conglomerate plans at least a half-dozen more Hard Rock hotels over the next three years, backed by $1 billion from private equity firm Becker Ventures and a joint venture with Spanish hotel-management group Sol Meliá. Some, such as the 381-room art-deco behemoth opening in Chicago this January, will go head-to-head with boutique-style hipster hotels such as the W chain, owned by Starwood Hotels & Resorts Worldwide (HOT ). Rank is also licensing the Hard Rock name to two hotel and casino resorts on Seminole reservations in Florida and negotiating a similar deal with a group of investors in Biloxi, Miss.
Talk about a stretch. Hard Rock's cachet was built on the back of must-see restaurants offering Americana fare and real rock 'n' roll artifacts, such as David Bowie's gender-bending Ziggy Stardust outfits and original lyrics to Elvis songs. And the Las Vegas hotel and casino has touted bands from punk rockers the All American Rejects to sugary pop stars Matchbox Twenty at its concert hall, The Joint. Now, however, Rank is betting that the aging Hard Rock image can be resurrected with semi-staid hotels, a move akin to the Rolling Stones comeback tour as Mick Jagger and band turned 60.
Trouble is, in the eyes of many critics, Hard Rock's cachet has already been diluted through overexpansion, cookie-cutter design, and the often mediocre menus at its core restaurants, 113 of which are scattered from Gatlinburg, Tenn., to Guam. Profits at Rank's Hard Rock businesses fell 10% in the first half of 2003, to $22.6 million. And Rank doesn't even control the Hard Rock name for casinos in the Western U.S. -- they're handled by co-founder Peter Morton, who's openly disdainful of Rank's approach.
SHARING THE BURDEN.
With Rank facing such fundamental challenges, some marketing experts wonder why CEO Mike Smith is even thinking about branching out. "This is a brand that's using an expansion to camouflage that it should be polishing itself," says Simon Williams, president and CEO of New York-based marketing consultant Sterling Group.
Smith, 56, the former head of British gambling chain Ladbroke's, scoffs at those skeptics. He says they're ignoring the enthusiasm of Hard Rock's core customers and the cautious nature of his financing. Despite some recent sales slippage, Hard Rock Cafes attracted some 30 million rock fans and their families in 2002. The Hard Rock Hotel in Orlando, Rank's flagship resort co-owned by Vivendi Universal (V ), has breezed through the downturn with an 84% occupancy rate for its $185-a-night rooms, at a time that the hotel business has been stuck at 60.7%.
Furthermore, Smith argues, such hotel gurus as Toronto design firm Yabu Pushelberg, which has worked on W Hotels, and Jeffrey Chodorow, owner of the China Grill and Asia de Cuba chains, are lining up to be part of Hard Rock's hotel expansion. And by licensing the Hard Rock name for hotels and casinos, Smith is putting the risk squarely on the shoulders of partners such as Becker Ventures, a real estate investment group based in Troy, Mich., run by former auto-parts mogul Charles Becker.
"Seven hundred million of other people's money is going into the brand," Smith says, referring to investments already made by Becker, the Seminole tribe, and others. Becker declined to comment.
MANILOW FOR LUNCH?
Then there's the design of the hotels themselves, which will more whisper than scream life in the rock 'n' roll fast lane. Whereas the Las Vegas hotel greets customers with an outsize neon-lit guitar and adorns its gambling chips with a blowsy-looking Ozzy Osbourne, the Chicago Hard Rock Hotel will employ such subtle touches as photos of the Beatles on tapestried hallway walls and little embroidered guitars on pillowcases.
A centralized music bank located at Hard Rock's Orlando headquarters will pipe tunes into hallways, rooms, and bars. "We will not play Metallica at 8 a.m. at breakfast," vows Trevor Horwell, vice-president of Hard Rock hotels and casinos, and a 17-year veteran of Hyatt Corp.
Meanwhile, the Hard Rocks in Tampa and Hollywood, Fla., will be a mish-mash of slot machines inside boxy hotels. They'll have the misfortune of sitting not too far from the seedy discount-cigarette stands that dot Seminole Indian territory.
Even if Rank develops catchy marketing campaigns for its new properties -- it has been teasing the Chicago hotel by having skimpily clad models lie on top of fake boulders at local landmarks with signs that read "Sleep Like a Rock" -- the mix of brand messages will make it hard to go head-to-head with both boutique hotels and glitzy Vegas-style casinos. "I scratch my head and wonder what they're trying to do with the brand," says William Crow, a lodging-industry analyst at Raymond James Financial in St. Petersburg, Fla.
Indeed, Rank's approach is far different from the one envisioned by Hard Rock founder Morton when he sold his stake in the cafes to Rank in 1996 for $410 million. Morton's different vision could prove problematic for Smith's expansion plans. Morton retained the rights to gambling operations in the Western U.S., Latin America, and Australia -- and virtual free rein over how he interprets the Hard Rock name.
Morton operates the Las Vegas hotel and casino and is negotiating to open another Hard Rock casino on an Indian reservation in California. And he has no intention of abandoning the in-your-face presence of his Vegas operation. "Rank doesn't understand the ethos of the brand," Morton grumbles. "Our product's getting too homogenized and blended into the culture. We've got to keep it edgy."
Given the reaction of visitors like Brown, the Chicago copier salesman, Morton's view is probably worth considering. After all, it may only be another entertainment venue to Rank -- but it's still rock 'n' roll to Morton and millions of dedicated Hard Rock fans.
By Brian Grow in Chicago
Edited by Patricia O'Connell