LONDON’S five-star hotel market is set to take off over the next six months and a septuagenarian Maltese businessman called Alfred Pisani will be at the heart of the glamorous action.
His £300m luxury Corinthia Hotel London, on Whitehall Place, is being completed and will take its first paying guests in April 2011. It is all part of a major trend for London, with a raft of other top hotels either coming back into service after extensive refurbishment or opening their doors for the first time.
They include last month’s reopening of the Savoy on the Strand after a £220m multi-year refurbishment, as well as the new Hotel Verta, which comes complete with its own heliport in Battersea, W London on Leicester Square, and the reopening of the Four Seasons on Park Lane after a £70m makeover. All are slated to take guests by the first half of next year.
Although the London luxury hotel market is set to become more crowded over the coming months, Pisani, who is chairman of the International Hotel Investments (IHI), which owns eight hotels (including London) and manages another 13, which stretch from Tripoli to Prague, is in no doubt why he is in the capital.
“London is a great city,” says a relaxed but watchful Pisani. “It is still the financial centre of the world. It has people from all over the globe living here. And its cultural attractions have a strong pull.”
Pisani, who comes from a wealthy Maltese family, is sitting in a suite in the Royal Horseguards Hotel, off Whitehall, with his back to his own hotel, which is just across the road.
I have just come back from a tour of the site, which is busy with 1,500 builders working around the clock to rebuild the large Victorian building that had been the Metropole Hotel from 1885 until it closed in 1936. It was then taken over as a Ministry of Defence (MoD) building until three years ago.
But the MoD moved out and the Crown Estates put the building up for sale in November 2007. Thirty bidders were whittled down to just one.
“Crown Estates liked our plans to restore the building, which they thought would help regenerate the area,” says Pisani. The IHI chairman, who had spent five years looking for a site for a London hotel, signed the freehold for the building in April 2008.
On opening day the hotel will boast 294 rooms including 45 suites as well as 12 private apartments. Among the hotel’s features will be an Italian and a British restaurant, a grand ballroom and a four-floor spa. Rooms will start from £400 a night, while suites will range from £2,500 to £15,000 a night.
But if those prices seem steep, Pisani believes he is offering value for money.
He says: “Our standard rooms are 45 sq metres, the largest rooms in their class in London. When the Metropole opened in 1885 it had 500 rooms. Our hotel will have 294 rooms. So you can see we are offering our guests more space even though land costs much more.”
IHI holds an equal share in the hotel as part of a consortium, which also includes Nakheel Hotels of Dubai and the state-backed Libyan Foreign Investment Company.
Pisani also thinks the rebounding London hotel market can afford these prices. He says: “This year and in 2009 rates and occupancy levels have been quite staggering.” A Deloitte survey last month found that average room rates in the capital had increased by 15.6 per cent over the previous three months. Pisani says that although the industry was hit by the financial crisis and recession, it was mid market hotels that were squeezed hardest, with the top end holding up well and budget hotels benefitting from guests trading down.
The IHI boss predicts by the end of next year rates for five-star hotels will have risen back above the pre-crisis peaks of 2007.
However, Pisani is aware that over the last two years guests have turned up to even luxury hotels and were confident of getting a discount. But he thinks that discounting is beginning to return to more normal levels.
He says: “Generally our policy is to try and hold rates. But it is something you are always weighing up – the balance between rates and occupancy. It is a fine consideration.”
Pisani says he was confident that signing the deal to buy the site at the start of the financial crisis would not prove a mortal blow for the project. But there was a minor knock on effect for the financing of his hotel. A consortium of banks led by Barclays was due to finance the venture at a spilt of 40 per cent equity and 60 per cent loans. After the crash this was changed to a 50/50 spilt, which delayed the project “for a few months”.
The IHI boss is convinced the firm’s management style and attention to detail will make his hotel stand out and allow it to shrug off the competition.
He points out that the only two fully completed bedrooms in his new hotel have so far had 27 people stay in them overnight, and as a result the layout of the rooms have been changed seven times. Also the marble in the bathroom comes from Carrara in Tuscany, where Michelangelo also sourced his. The marble for each bathroom was boxed on site so when it was fitted in London the grain in each room will be consistent.
As regards management style, Pisani says his hotels aim for something that is “intimate” but not intrusive.
He explains: “We don’t want too many ‘good mornings’ and ‘how are you’s?’ It feels too artificial. That can be part of the difference between feeling cold or comfortable in a hotel. We want the customer to feel relaxed in our hotels. It’s an intangible but you can feel it. Just like when you open an oven you can’t see the heat but you can feel it.”
IHI’s London development is more than just another hotel for the group, which derives its turnover via a roughly equal mixture of management fees from running the hotels of other owners and revenue from its own hotels.
Pisani hopes the London hotel will act as “a shop window” and that other owners will see and like the way his company operates. The hope is that this will attract more management business. The hotelier says: “Building your own hotels takes a lot of capital investment. We want to offer the services of our management company to other hotel owners. Once we get this moving we can shift the pace of our growth.”
Last year IHI, which employs 6,000 staff, swung to a pre-tax loss of €1.6m (£1.36m) from a profit of €22.3m the year before. Sales also slipped 19 per cent to €103m. The firm has a market value of around €426m on the Maltese stock exchange, although the group complains its property portfolio is worth €1bn and a more liquid index would reflect that. The firm blamed the falls on an 18.6 per cent drop in revenues per available room in Europe, which plunged to 35 per cent in central Europe, where it owns three properties.
Pisani, the second of four brothers, has long been the driving force behind the family-led business. His father held stakes in a matchbox factory and a flourmill in Malta, as well as a third property. After his father died Pisani borrowed $20,000 and built a restaurant. “But I didn’t see myself doing that for the rest of my life,” he says.
And in 1964, when the island won independence from the UK, he saw the potential for tourism, borrowed $2.5m and built a 156-room hotel alongside the restaurant.
He says: “I promised the bank I would put all my hard work into it. If I failed I would lose everything.”
Two years later – in 1968 – the hotel opened, the gamble paid off, and that was the start of the Pisani family’s hotel empire. And at 71, Alfred Pisani’s latest move shows that he can still keep his nerve in heavy weather. The battle for London’s top hotel customers is about to get much tougher.
CV | ALFRED PISANI
Work: The four brothers, led by Alfred, sold the stakes their late father had in a flourmill and a match factory and invested them in a restaurant in Malta, which opened in 1962. They then invested in a 156-room hotel on the same site, which opened in 1968. International Hotel Investments was floated on the Maltese stock exchange in 2000. He is chairman and CEO of the group, which owns eight hotels and manages a further 13.
Education: St Edward’s College: “It was a strict catholic boarding school. I went there from seven to 16. And then I went to work for the family business.”