The 75-year-old chairman and chief executive officer of Four Seasons Hotels & Resorts, Isadore Sharp, was in India last week on the latest of his many visits to India over the years. After several years of trying, Sharp has finally managed to get a foothold for Four Season’s entry into India. From the presidential suite of rival Taj Mahal Hotel in Mumbai, he goes over each fine detail of his upcoming hotel in Worli, Mumbai’s new commercial hub. In a discussion with Mint, he talks of how he is ready to take on the competition and take hospitality to new levels in India. Edited excerpts:
Yours is one of the many chains that have announced plans to enter India, riding on the back of the whole concept that there aren’t enough rooms here. Do you think too much is being made of that?
Not really. I think India is a destination that most firms have tried to get into.
We tried for three years. Now, we have a situation that fits perfectly with our future and our plans. So, India is going to be a country that many firms, for different products, are going to start making major moves.
Passage to India: Isadore Sharp, CEO, Four Seasons Hotels & Resorts
Do you feel there is a real shortage or is it perceived?
At this point, there is a shortage simply because there is more demand with more people coming into India. This industry is growing, so what is happening in India is also happening in China, in other parts of Asia, Latin America, North America—it’s not just peculiar to India that the hotel industry is expanding. It’s worldwide.
How do you rank service levels in Indian hotels?
I think you have an excellent workforce to offer those services. People here really treat it as a profession, this is a business and people look to make it a career. And that is something that we support, at the firm. We look to people who can join and make it a lifetime career. You have a great workforce, many good schools. Armando (Armando Kraenzlin, general manager, Four Seasons Hotel, Mumbai) is hiring a lot of young people from these schools who are already committing themselves through their education and they would like us to be their guru...
What Four Seasons does well a lot of other local hotel chains do pretty well and to very exceptional standards in India. So, what do you expect your differentiator to be?
We all do good service. It is a service industry, why wouldn’t we do it well? The point is, how often can you do it and how consistently and how high is what you say is good service. We look upon your experience as one that is zero mistakes. So everything you need and want should be at your fingertips when you want it. So our distinguishing feature—and it’s something that has been supported over many, many years, over many different locations whether it’s in North America, Europe or some of the Eastern Bloc countries—(is) the standard and quality of our service (that) has hugely raised or differentiated us from our competitors. Ninety-nine per cent in terms of customer satisfaction just isn’t good enough. Mathematically I can show that if you disenfranchise even 1% of your customers, what that may lead to and that really gave people working in the company a goal. You can only achieve that if everybody makes?an?attempt?through their attitude, so at Four Seasons we raise the bar quite high.
What are the challenges you face in a market you haven’t been in before?
It is to make sure you hire people who buy into that concept by right attitude, that they buy into the culture of the firm. We as a company are probably very different in our hiring process. Everyone will go through four-five interviews and the last one will be conducted by Armando or someone at that level. The purpose is not to examine their technical confidence, but to have a dialogue and say, ‘do they understand what the firm expects from them and whether we can deliver what they expect?’ It is the hiring process that differentiates us.
You’ve tied up with the DLF Group in Gurgaon to bring your hotel properties there. How much of that is driven by the fact that you’re coming in to a country where real estate prices are almost as much as prices in Manhattan or London or any expensive city?
As you have just mentioned, the prices have gone up to what people are willing to pay for a product. So our first hotel is going to open here in Mumbai. And we have been working on it for four years now. So, that’s (with) the Jatia family, they brought us to India. For us this has now led to other opportunities.
Analysts say players coming in now will see fair amount of business till?the?Commonwealth Games in 2010. But after that it’ll be troublesome to sell expensive rooms.
You build a hotel and it’s going to be there for the next 50 years. In that time you are going to have economic cycles that go up and down, you are going to have trauma that the world experiences. You have to have to put your business model in place, where you can get through the good, the bad and the ugly. So, your whole purpose of developing a long-term business plan is to understand, that is what you’re facing. The people that we have partnered with, these are professionals who know the real estate business really well. And they realize that they are coming in at a high time, but they are not coming in just for the Commonwealth Games, they are coming in forever, for what India will become over the next 50-100 years and in that context these investments are really savvy. This industry has great potential and not just because times are good today.
Do you expect India to be a more profitable market than the other markets that you are in?
The labour costs here are much lower than other places in the West. You deal with what is called a gross operating profit and here you are probably going to enjoy something close to a 50% gross operating profit. Whereas others generally average in 30-35%... so, that margin gives you a bit of an edge.
Are you happy with the location you have in Mumbai? And what is the arrangement with the Jatia Group?
We are ecstatic about the location (laughs), it’s about as good as it gets. That part of Mumbai is really developing and the Jatias were great visionaries when they bought that land. Worli is redefining the central business district and is certainly creating a new business district. From the Four Seasons’ point of view that’s perfect! Because we are catering to that clientele. We’re building an outstanding building, it’s clearly what we call reference making for the next generation of five-star hotels—through quality, style, spaces and function. From the owner’s point of view (Jatia Group) and the operator’s (Four Seasons), it is a perfect marriage. This arrangement is a management contract. We will have a minor investment in assisting and financing. We will invest around $7.5 million (Rs30.45 crore) as a loan rather than ownership (equity). It is something we can do to assist getting the hotel built, up and running. It just eases the pressure on them...Stage 2 for this particular development does include service apartments.
Will not the presence of properties such as the ITC Hotel-Grand Central Mumbai in Parel, the proposed Shangri-La Hotels & Resorts at Phoenix Mills and another hotel by DLF, all in the same area, put great pressure on business?
No, because you can’t avoid competition. It doesn’t matter if they were there before or they come in after. You have to be good enough, be able to compete and get a fair market share. As a company we’ve been successful in being able to achieve enough of the market share plus a rate structure that makes the Four Seasons a very good investment. These other firms that are coming in are delighted that we are going to be there because our prices are usually higher and it allows them to look at what we are charging and maybe have a little more encouragement. Remember that we’ve been doing this?a long time and with more than 40 years of history we have established a brand that is recognized worldwide.
You are an architect by training and some of the most marvellous heritage properties have been grabbed by players who have been in the market for the last few decades. Do you feel short-changed?
No, not really. These are wonderful, they are part of history and you want to preserve it, like we have in Florence, in Milan, in Paris. You take over something historic and do your best to preserve it. But you add to it the modern conveniences: air-conditioning, plumbing, electrical, hi-tech. It’s a combination that’s needed. So just an old heritage hotel without modern conveniences won’t work. But starting from scratch, we can develop a good enough product for the consumer, as it should be. You can’t repeat this (looking around the presidential suite at the Taj Mahal Hotel); this was done in 1904. People love the charm of heritage hotels, but they also want a good night’s sleep and they want the phones to work. We do both, but it’s much harder to take an existing building and reconvert it.
Which locations are you looking at in India?
We will go into a city because it’ll be a good city for Four Seasons. You have to be patient to go in with the right product. It’s taken us 10 years to get to India, but we are here with the right product. That gives us a foothold and that will allow us to grow. We will have six, eight, 10 hotels over time. We’ll look at Goa, Hyderabad, Delhi…you could take any major city in India and?that?will feature on our list, if we have the right product.
In your other hotels, Mrs Sharp (Rosalie Wise Sharp, his wife) has played a great role in doing the interiors. Is she also going to oversee the interiors of this hotel?
No, she’s given up practice, but she’s coming out of retirement to do the restaurant in the hotel that we’re building in Toronto. She’s done a lot in life and just completed her book (Rifke: An Improbable Life).
Many years ago, the Pierre Hotel in New York was your gateway to a new market. Today, your closest competitor in India, the Taj Group, is using that hotel to make its mark there.
That was in 1981… It worked great. That’s how we got into New York, the most important city for the hotel industry. (It was) a magnificent hotel that worked very well for the Four Seasons, for so many years. But like most things we’ve moved beyond now. We got something much better which is the Four Seasons in New York, which is the best and, therefore, decided to step out of it (The Pierre). Which is perfect for Taj, because they wanted exactly the same thing we wanted back in 1981. For them it’ll be a perfect way to establish a new image. They’re a good company and have the wherewithal to be an important part of the industry.
Has the delisting of the company given you more freedom with fewer shareholders and investors breathing down your neck?
Not really. When we were public, it wasn’t an issue because we were a very successful company, most shareholders were very happy. My taking the firm private was to put an ownership in position. That I could control the process, these are two partners (Cascade Investment Llc. and Kingdom Hotels International) that never have to sell and my family will never need to sell. It’s an ownership, that I call a marriage for life. Therefore, what happens to me—the inevitable —doesn’t matter any more. Cause the ownership will stay in place and people like Armando will be able to see that there is certainty of continuity and stability for the company.
What is your succession plan?
My two sons were in the business, and they elected to go out on their own, which is fine. I had one son who passed away; he liked this business and he would have been great at it. I think you have to want to do something to do it well. Right now, we have so many people in this firm that have grown up with the firm. Many years ago I’d made a statement, saying the senior leadership...would always come from within...And that’s been proven over the years: we’ve had three sets of changes of senior leadership and that’s come from within the company. I’m the only one still around. I’ll step back some day. I’m the only one that can fire me! (laughs).