Virgin to spend $663m on high-end hotels

The Virgin Group, founded by British billionaire Richard Branson, formed a partnership to spend as much as US$500 million ($663 million) on high-end hotels over the next three years, banking on brand recognition to lure affluent clients.

Virgin Hotels, intended as a four-star chain, will cater to “high income, well-educated, metropolitan ‘creative class'” customers, according to a brochure on its website detailing plans for the venture. The company said it is seeking hotel sites in North American cities such as New York, San Francisco, Miami, Boston and Los Angeles, and plans to expand globally later.

The plans come as business and leisure travel rebound, helping the United States lodging industry recover after the recession sent occupancies to a 30-year low last year. Revenue per available room, or revpar, in the top 25 US markets rose to US$73.87 during the first half from US$71.08 a year earlier, according to Smith Travel Research of Hendersonville, Tennessee.

“With over 25 years in the travel sector and a reputation for delivering unforgettable experiences to millions of Virgin fans, Virgin is a perfect fit for the hotel business,” the company said on its website.

Virgin will have to compete with such established hotel chains as Starwood Hotels and Resorts Worldwide, owner of the high-end W and St Regis names, and Marriott International – which has the JW Marriott, Ritz-Carlton and Renaissance brands. Hyatt Hotels, operator of its namesake properties, entered the upscale boutique segment in 2007 with the Andaz brand.

“There are a lot of brands out there,” said Mr David Loeb, an analyst at Milwaukee-based Robert W Baird and Co. “It’s tough to get a share in this market. It helps to have a globally recognised name like Virgin does, but it’s not a cakewalk and not an obvious transition.”

Virgin Hotels will be overseen by Mr Anthony Marino, with Virgin Group since 2006 and an executive director of the new venture; president and chief operating officer Raul Leal, previously president of Desires Hotels; and Mr Paul Whetsell, an executive director who founded CapStar Hotel.

Virgin Group, based in London, said it formed a partnership with entrepreneur Alberto Beeck and real estate investor Diego Lowenstein for the acquisitions. Virgin Hotels’ properties will range from 150 to 400 rooms.

Source : Today – 23 Sep 2010

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