Chris Barnett on Business Travel
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No Hotel Is an Island--Unless the Owner Says So
July 28, 2016 -- It takes nerve and very deep pockets for a hotel owner to fire international hospitality brands like Four Seasons and Hyatt, lose their reservation feeds, jeopardize loyal customers and bring operations and management of guestrooms, restaurants, ballrooms and bars in-house.

But the privately held Irvine Company, 100 percent owned by Donald Bren, one of the richest real estate developers in the country, has pulled it off twice with properties in Orange County, California. The saga is instructional for business travelers leery of independent hotels that do not have a national profile or a global frequent guest scheme.

Bren, a billionaire many times over, understands the power of location, synergy, cross-marketing, creativity and sheer muscle. His flagship property, the 295-room Island Hotel Newport Beach is surrounded by 26 office buildings, 155 retail stores and restaurants and nearly 60,000 luxury apartments. All of those are owned by Irvine, which owns 93,000 acres of Orange County land.

A decade ago, Bren sacked the Four Seasons as manager of the hotel. The Irvine Company took over management and operations and renamed it. That surprised veteran lodging industry observers because Four Seasons is famous (or infamous) for imposing iron-clad deals with property owners that can sometimes last 50 years or more.

"Donald Bren shrewdly negotiated a 25-year-window with Four Seasons," explains Alan Reay, the president of Atlas Hospitality Group, an Orange County hotel broker. When Four Seasons "was deemed to be underperforming at the revenue levels written into the contract or against other hotels in the market, he was able to terminate it without [paying] any liquidation damages," Reay says.

The loss of the Four Seasons flag and in-house management hasn't hurt the Island Hotel. Following an 18-month renovation completed a year ago, occupancy levels are north of 80 percent, a double-digit increase from pre-makeover days, estimates Reay.

A fluke? Apparently not. Bren sent Hyatt packing in 2014 and renamed his 529-room property near John Wayne/Orange County Airport as the Hotel Irvine. After an extensive transformation, the property focuses less on business travelers and airport transients and more on millennials, families and meeting planners. But the hotel is still attractive to road warriors: Rates start at just $149 a night and its proximity to Interstate 405 makes it a reasonable intermediate stop between Los Angeles and San Diego.

Unlike Donald Trump, who plasters his name on his hotels, the 84-year-old Bren is low-key and virtually invisible. He's better known in Orange County as a philanthropist than as a hotel owner. (The 152-year-old Irvine Company also owns and manages the top-rated Resort at Pelican Hill.) Bren prefers to hire senior executives with luxury-hotel experience, give them freedom to innovate--and supplies the funds to make ideas happen.

Overseeing Irvine Company's three hotels is Ralph Grippo, who grew up in the Ritz-Carlton organization before it was sold to Marriott. "I was very lucky to work with [Ritz] when customers came first," he says. "That's what we do here."

Grippo, president of Irvine Company's Resort Properties division, says a big advantage is that "we're all located in Orange County. We don't have to worry about hotels in Washington or Chicago. Plus, we own all the assets--the offices, the buildings, the retail stores, the apartments. The banks own nothing. When we market, we have customer intelligence and direct access. I can tell you about every tenant in every one of our 26 Newport Beach office buildings."

In turn, Grippo says, Irvine Company's large tenant base often feeds visitors to the Island Hotel. For example, Pimco, a $1.5 trillion fund management firm headquartered in an Irvine Company office tower, holds its meetings and bunks its guests at the Island. On one recent visit, I spotted Bill Gross, the former Pimco superstar who now fronts his own investment fund, lunching at the Island's Oak Grill restaurant.

Grippo has introduced some of the original Ritz' hospitality strategies to the Island.

"Marriott's way of creating loyalty is through points," he says. "Our way is to know you. I'm not trying to attract point collectors. I want guests who want and expect a high level of personal service. If a guest wants a room to see the sun coming up a certain way every morning, he or she will get it. People are creatures of habit and we know their habits."

For a hotel aiming for free-spending guests on Orange County's so-called Gold Coast, the Island's room rates and prices are surprisingly reasonable. Standard room rates start at $209 a night and suites begin at $500 a night.

There's an emphasis on food and drink at the Island. Portions are generous, but prices are below market for a luxury-class hotel in Newport Beach. Lunch starters begin at $11, salads start at $10 and burgers and sandwiches begin at $13. Craft beers on tap start at $8 for a pint. Wines by the glass start at $12. Dinner prices are steeper, but not off the charts.

The Island's general manager, Gerard Widder, claims the hotel caters to locals with enticing pricing. The hotel's Aqua Lounge has a 3 to 7 p.m. happy hour weekdays where drinks and appetizers are an amazing 50 percent off. "There are plenty of places to drink, but we want this to be a destination, an adult lounge, for Newport Beach residents and shoppers," Widder explains.

A business center and free fitness center are open to guests around the clock. Basic WiFi is free for all guests and higher-speed access is also available.

The Island's recent renovation produced interesting changes. Gone, for instance, is the presidential suite. In its place is the 2,000-square-foot Island Lounge, a 20th-floor club with an extensive complimentary breakfast, afternoon snacks, desserts, wines and other creature comforts. Unlike most hotels, which charge a premium for club-level rooms, the Island offers clubroom access from any guestroom for a $50 premium above any standard rate. Guests who purchase lounge access also get perks such as higher-speed WiFi and some complimentary dry cleaning.

"We would rather be full at lower rates than half-full at the highest rates," explains Widder. "There's more value to having a room occupied because a guest here will tell other people about their experience with us. It is effective marketing."

Another smart new strategy at the Island is called The Market Place, a surprisingly upscale mini-grocery in the lobby. The idea is that guests can stock the in-room mini bar without the typical hotel markup. Instead of a $5 can of soda or $40 for a split of Champagne, Market Place prices are similar to local supermarkets. The fresh foods are of higher quality, too, and prepared by the hotel kitchen.

Still, the Island is not a glitch-free zone. I was told the Market Place would deliver anything to a guestroom 24 hours a day at no charge. However, it was closed at 11 p.m. when I called down to order. A room service request took an annoyingly long time, too. And the hotel switchboard seemed short-staffed because hold times were quite long.

This column is Copyright 2016 by Chris Barnett. JoeSentMe.com is Copyright 2016 by Joe Brancatelli. All rights reserved. All of the opinions and material in this column are the sole property and responsibility of Chris Barnett. This material may not be reproduced in any form without his express written permission.