Bisnow Exclusive: Sir Richard Branson On Virgin Hotels, Women And The Future of Travel
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Publisher's Note: With the Bisnow editorial staff now covering nearly 30 cities coast-to-coast, we're excited to bring you our latest longform report. Based on exclusive interviews, our New York colleague Jesse Nash has prepared this Special Report on the one and only Sir Richard Branson and Virgin Hotels CEO Raul Leal. You can read past longform articles, including pieces on the founding family of General Growth Properties here; the remarkable Goldman family here; Alter Group chief Michael Alter here; and the tale of the Barclays Center shakeup here.
When Sir Richard Branson opened his first Virgin Hotel in January 2015, the 26-story, 250-room property in Chicago’s CBD, he told reporters he designed it to be “female friendly” to suit the needs of “female business travelers.”
“They were not particularly catered for by any hotel,” Sir Richard tells Bisnow.
His wife, Joan, initially tipped him off to the problem—complaining that there was never enough light in hotels to put her makeup on; most hotel rooms were poorly lit. “This was one of the first things we paid attention to,” he says. “The rooms have been well-thought-out for this. Even when they take a shower, we have a bench in there where they can sit, take their time and do whatever.”
In fact, in the past 10 years, the number of female business travelers has doubled, according to Virgin Hotels CEO Raul Leal, jumping from 25% of the traveling population to almost 50%. “So as we were designing the guest rooms, we decided to design those rooms from the point of view of the female business traveler,” Raul tells us. “We started to have a variety of focus groups, and we started speaking directly to many female business travelers. We wanted to create a better guest room through the eyes of the female business traveler because we just thought they were more discriminating in terms of details.”
Co-designed by the Rockwell Group Europe and Virgin Hotel’s in-house design team, Raul adds what makes a Virgin Hotels guest room different is this: when Virgin is designing something, it already has a point of view about the product before it even overlays the colors, the fabrics, etc. So it’s designed to make the room work better.
“When you walk into a guest room at a Virgin Hotel, it feels like you’re walking into a luxurious dressing room,” Leal says, “where you’re able to drop off your luggage, your keys, plug in your phone.”
Sir Richard adds that the area works in that it’s technically a double chamber room, explaining that when you walk into the first half of the room, it’s the area that you would get dressed, or put your makeup on, etc., in the front of the room. “The second half is really the guest bedroom. And there are these privacy doors in between,” he says.
Commentary from hundreds of female business travelers posting on Trip Advisor and directly from those who’ve stayed at the Chicago hotel has been overwhelmingly positive, says Raul. “We’ve taken a typically 300 to 400 SF room, and we’ve just made it flow better. So it feels like you have more space than a typical guest room, more amenities that are user-friendly, not just for female business travelers, but for men as well.” Men, for instance, like the dedicated vanity area, which can be shut off for privacy.
Raul will be among the all-star panelists speaking at Bisnow's Lodging and Innovation Series in Los Angeles April 28. (Info here.)
Sir Richard and Raul say a 2011 study from Cornell’s Center for Hospitality Research, which said that the female business traveler is going to be a force to be reckoned with, served as a guide for Virgin’s strategy. When Marriott first came out with the Marriott Courtyard in the late 1980s, it was designed for the dominant demographic—men—“and it never quite changed until recently,” Raul explains.
To develop the brand, Virgin created and tested designs on focus groups that were half men and half women. “So we went to these four model rooms, we got lots of feedback, and every time we came up with something new that we could fine-tune.”
One of the things Sir Richard and Raul learned about female business travelers is that they don’t like room service and the way it’s handled by most hotels. In a typical hotel, Raul says, a guest has to open the door for room service and sign the bill. “You could be in some state of appearance like you could be in your robe or having just come of the shower,” Raul explains. “So if you’re a female business traveler, it definitely can make you feel a little uncomfortable.” In response, Virgin divided the room with a set of doors so the guest actually has a peephole. Guests can then order room service in the traditional way using the phone or with a special app named Lucy.
In fact, Lucy will help you with just about anything. There’s no front desk, just two computer screens sitting atop a former cigar bar (the building used to house the Dearborn Bank built in 1926) where you can access your reservation profile and check in.
“Hanging out in our hotel is better than virtual reality,” says Sir Richard. “Technology will [always] play a role in hotel development. From our app Lucy to kiosks at the front desk for self-check in and out, Virgin Hotels guests can do things like use our Lucy app to control the temperature in their chambers and make sure their mini-bar is stocked with their favorite snack and use the front desk kiosk for self check-in and out. We will keep looking for ways to make your stay enjoyable with your device and also without.”
“Not only can you check in, but you can order from anywhere in the hotel and say, ‘Look I want my room service delivered in the front half of the chamber,’” Raul tells us. “Room service waiter knocks, comes in, drops off the order, you’re behind the second set of privacy doors, you never see the server. And he or she never sees you. You could be in a complete state of undress, it wouldn’t matter. And our female business travelers are loving that. So you can close off half the room and complete privacy and security.”
Both Sir Richard and Raul acknowledge that the customer today wants a complete technology experience. “I always make a joke that could lose your dog for a few days, you’d be upset but you’d be alright. Lose your phone for 30 minutes, and all hell breaks loose,” Raul says.
Also, in an era of privacy concerns, Virgin Hotels addresses it head-on. Each guest who registers at the hotel has the option to sign off or on in terms of data privacy. “We have preferences program that when you make a reservation at the hotel, you fill out this questionnaire,” Raul explains. “We only use the data to get to know the person staying at the hotel better. But it’s up to them.”
“All the IP companies we use are best in class,” he says. “As a CEO [privacy] is one of the top five things that I’m always thinking about. I’m always asking questions: ‘What are we doing? What are we not doing?’ Questions may not be enough with technology changing so quickly.” Virgin Hotels does an internal security audit twice a year on the hotel’s IP system.
Key to the castle
Social media is another business driver for Virgin that helped to ramp up the Chicago hotel to maximum occupancy in less than eight months. The first person who checked in actually posted the room on Instagram, says Raul, and it received an overwhelming response. “I think it’s a combination of social media and the power of the brand globally,” he adds. “Virgin generates a ridiculous amount of social media and public relations globally every day. So when anything new happens with the brand, you find out quickly.”
“We’re quite a large hotel but we run it like a boutique hotel,” says Sir Richard, also noting that the room prices are very reasonable, starting at $209 a night. The mogul can’t help himself when it comes to promoting the formula he believes is the key to all his successes: starting his businesses from scratch.
When Virgin Airlines launched 30 years ago, for instance, the company had only one plane. “But we did everything better,” he says, “and it’s why they’ve gone on to outlive the competition. PanAm, TWA, Eastern—they’re all gone now.”
It’s all about the right people for the job, the right quality, getting the little details right.
“Whether it’s for our airline business or for our hotels, it’s really the key,” says Sir Richard, adding that when people try one Virgin product, they usually have a great experience and that’ll make them try another one.
Ground-up or conversion?
Today, ground-up hotels are being built in Nashville, Dallas, New York and, just announced, Palm Springs. There are also plans for future hotels in Downtown Los Angeles, Vancouver, Portland, Seattle and in Europe. So when is a market better for a conversion versus ground-up?
“For Virgin, it’s always going to be a mix,” Raul tells us. “In fact, I just spoke to a gentleman I know about possibly converting an office building in Vancouver into a Virgin Hotel. We’re looking for good locations in primary and secondary markets, and we have the ability to do whatever works.” However, Raul admits, it’s been a much more difficult process building a hotel as a conversion than ground-up.
It was difficult to create a hotel within the confines of a historic 1926 building in contrast to the ground-up hotels in the works, which allow Virgin to carve out the product exactly as it wants without restrictions. He anticipates a full two-thirds of future hotels will be ground-up.
“Look we love preserving a landmark and mixing that with the Virgin Brand,” he says. “It was sitting there on the corner for 20 years and not being noticed. And now it’s back to being a beautiful building with a great hotel and the community is very grateful for that.”
Indeed, Raul says he recently looked at a landmark property in Downtown Los Angeles that would be an amazing conversion. Although no deal has been made, Virgin Hotels continues to seek out these types of properties whenever the opportunity presents itself.
The cost for either—depending on the price of the land, is about $350k a room, with markets like New York, San Francisco and Miami on the beach running from $350k to $400k.
Virgin is also opportunistic, meaning some of the deals are straight management agreements in which they operate the hotels long term while they put equity into others with partners. “We always take on the management side of any hotel we run. Virgin manages all their businesses,” says Raul. The strategy is to maintain a “very specific tone of voice. The brand has a certain way of doing business. It would be too difficult for someone to replicate that.”
The Chicago Virgin Hotel was just certified LEED Gold but the hotel group has aspirations for a net zero carbon footprint across its portfolio. “One of the things that Virgin stands for is—and one of the things that Richard is out all over the world doing—people and planet first, right? So, we want to be responsible,” he says. “We want to make sure that we’re environmentally friendly at every hotel.”
The minimum certification for any Virgin Hotel is LEED Silver. “Ten years ago, there was a premium on making these buildings LEED certified.” The former 20% premium alone in construction costs is now 5%. The energy savings in the Chicago hotel have been significant and Raul notes, in fact, Virgin won’t make deals with developers who won’t do it.
Virgin’s real estate partners and how much they spend is of the utmost importance.
“Some of our board members are our real estate partners,” he says, but what they’re ultimately trying to achieve is a brand that makes financial sense, that isn’t overleveraged.
And while Virgin may only have 25 hotels 10 years from now, Raul says that’s enough. “We’re not going to have a hundred hotels or a thousand like the Marriott. So we’re looking for real estate partners that have a little bit more of a long-term view as opposed to people who only want to be in the business for three or four years then want to exit.”
In Europe, Virgin is aligning itself mostly with local real estate partners who know the margins and understand the culture and business climate.
Sir Richard admits it’s been a learning experience. Both he and Raul agree one of the key things they’ve paid attention to is the community you open your hotel in. That was one of the most important decisions management made in the opening of the Chicago Virgin Hotel where 98% of the employees are Chicagoans.
“Our success at the Chicago Hotel has taught us when you go into the different communities around the world, we never want to be perceived as this big brand that’s just landing—we want people to embrace the brand like in Chicago.”
In addition to supporting the local community, Sir Richard notes that “Virgin Hotels understand the little things that make the consumer happy,” he says, like the price of items in the mini-bar. “We have a policy of no nickel and diming,” Raul adds. “I mean, how many times have you opened the door to the hotel room mini-bar and discovered the price of things offensive?”
Sir Richard says if a bag of candy is $2 at the corner store, then it’s going to cost you $2 in your Virgin mini-bar. “Hotel guests are being short-changed at every turn,” he says. “Entertainment options are stale, customer service is lacking, and there hasn’t been significant room design changes for years.
“Virgin is a customer champion so we changed all that. We offer services that are a right, not a revenue stream, like free (and powerful) WiFi, no room service fees, no charge for early check-in or late check-out, fair mini-bar prices and no cancellation fees as long as guests tell us they can't make before that day. I certainly hope this will be a standard across the industry moving forward.”