Hard Choices: Ian Schrager
When I started Morgans Hotel in New York in 1984 there wasn't a sophisticated hotel that reflected my lifestyle. When I opened the Royalton just a few blocks away, people said I was crazy to put them so close together. But they were distinctive. I opened another hotel, The Paramount, which had small rooms; rather than disguising them, we made it feel like an ocean liner. Next came the Delano in Miami when South Beach was a tropical slum. Then I went to L.A. and London.
I agonized over whether to do my hotels under one brand. In business, a brand is something that people understand. But it felt cool not to have one, and I thought people would think I was selling out if I named the hotels after myself. I worried about losing what was special about each one, so I gave each its own name.
As I expanded, I realized that was a bad business decision. The properties have value, but a brand itself has a value too. In retrospect it was ridiculous: I should have developed all of my hotels under one name. I'm in the hotel business, not the cool business.
I'm now developing lines of high-end and lower-end hotels under distinctive brands. I'm working with Marriott (MAR) to get scale for my ideas. Everything you see in hotels today—whether it's white beds or no patterned carpets—we did that. When somebody has a good idea, everybody runs to do it and they kill the good idea. The hotel business risks falling into the same trap it fell into 40 years ago. They all look alike.
This time, I want to ramp up quickly so all my ideas don't get taken again. W Hotels showed me how big the market could be. It's the same-sized market that buys Apple (AAPL) products, Nike (NKE) sneakers, and Zara clothes. Consumers looking for a heightened hotel experience are not only in New York and Miami and LA. They're in Milwaukee; they're in cities around the world. And I'd like to think they know when something's the real thing.