Garrett McCloud

Fairmont Hotels and Resorts

Part 1: Brand Inventory

Fairmont Hotels and Resorts is a Canadian based company that operates hotels in

19 countries around the world. The most popular hotel they manage here in the United

States is The Plaza Hotel in New York City. They have famous hotels in Canada as well

such as the Royal York and Empress Hotel. In London they manage the Savoy Hotel to

add to their collection of hotels. They were founded in 1907 by Tessie and Virginia Fair

in Toronto, Ontario, Canada. The first Fairmont Hotel was in San Francisco, the same

city we now have our corporate office for the United States hotels. In the 1960’s there

were seven hotels built in the major cities in the United States, such as Dallas, Chicago,

San Jose and Boston as well. Canadian Pacific acquired Fairmont Hotels in 2001, and

even as Fairmont was a small company they decided to take on the Fairmont name. In

2006, the Fairmont Hotels and Resorts brand was sold again for 3.9 billion to Colony

Capital, LLC and to Saudi Arabia’s Kingdom Hotels International. When the acquisition

became official, Fairmont Hotels and Resorts merged with Raffles Hotels and Swiss

Hotels to join together while still maintaining their original name. Although I was unable

to find up to date financial reports I did come across some from 2003.

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2003 sales (millions): $691.4

One-year sales growth: 17.1%

2003 net income (millions): $50.7

One-year net income growth: (45.2%)

Price-to-earnings ratio (trailing 12-month): 40.82

Worldwide, RevPAR in the fourth quarter of 2003 rose 8.8% to $97.79.

ADR (average daily room rates) increased 11.7% to $184.27 from 2002 to 2003.

Worldwide occupancy was down 1.3% to 53.1% from 2002 to 2003.

Fairmont Hotels and Resorts also 11 properties that make up a significant amount of the

EBITDA, these properties are known as the “Big Eleven Assets” which make around

65%-70% of the entire company EBITDA, now although these financials are a decade

old, they are still a good range of the financials of the Fairmont Hotels and Resorts brand.

Category and Competition

The Fairmont Hotel and Resorts chain is made up of 4-star hotels to 5-star hotels in

mainly large cities around the world. However there are properties in more rural, exotic

areas such as The Franz Klammer which is located in the mountains of Colorado, as well

as our Safari Club Resort which is located very far south of Africa. For their upcoming

hotels currently being built, they follow a similar aspect of ranging in location. There is

currently a very large Fairmont currently being built in Austin, Texas and an example of

another hotel being built is one that is Moscow, Russia. As a brand they are very open to

locations, and do not limit their brand to a certain area or continent. In order to find

similar hotels, it will depend on your source. According to JD Power and LQA audits,

they match up similar to many W hotels, as well as some Omni hotels. However their

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corporate office will say they match up well with Ritz Carlton and Four Seasons when

they do their research within their brand image. From all accounts though, they match up

with W Hotels, as well as Omni when speaking of price point and consistency. Fairmont

Hotels and Resorts does have properties that do match the Ritz Carlton image, however

they are not able to bring that image to each and every hotel. For example The Plaza

Hotel in New York would be considered comparable to the Ritz Carlton, however

Fairmont San Jose would not be considered competition for the Ritz Carlton there in San

Jose.

Products within the Brand

The Fairmont brand has their very own spa services that are known as Willow Stream

Spas which is located at many of the Fairmont Hotels however it is not at all the hotels.

First started in 2001, they are spas that are located inside the hotels as guest may use at

their leisure, as well as outside guest are welcome to use as well. Although not all the

Fairmont Hotel properties have a spa on site, when they do it usually boost the hotel into

a 5-star category, and add to the brand image of that specific hotel. All of the Fairmont

Hotels have at least one 4-star restaurant on site, with many hotels consisting of more

than one restaurant, as well as a bar. For the resorts that operate within the Fairmont

brand such as Fairmont Mayakoba, they consist of 4 restaurants so that the guest may

never have to leave the premises for food. Many times at the large resorts, they will offer

bundles for eating at each of the restaurants during the course of your stay or combining

with the Willow Stream Spa to promote interest of the facilities. One final added product

to the hotels is the use of a gift shop which operates within the hotel, however is typically

contracted outside with the Fairmont brand gaining a percentage of all sales.

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SWOT Analysis

For the SWOT analysis, I will break down into four different parts, focusing on

Strengths, Weaknesses, Opportunities and Threats. The strengths in which the Fairmont

Hotels and Resorts Brand has is that they have a very nice reputation and presence

worldwide, there are many worldwide travelers who are able to continue to stay at a

Fairmont hotel while traveling business from San Francisco to Dubai. They also have the

feel of a smaller chain while maintaining the high level of service. When you stay at a

Fairmont Hotel, you feel as though it’s a boutique chain however they have many hotels

located around the world. They do not have the corporate stigma that a Marriott or

Starwood property may have. On the weakness side however you not like the fact that

they are not a household name. They also are not able to elevate their brand status to that

of a Ritz Carlton at each of their hotels. Although they do have a similar brand image as

such as Ritz Carlton at some properties, other hotels within the chain could be classified

below even a W Hotel or Omni by how their clientele demographic is. They also suffer

that being in that range, the room rates can offer deter guest from trying out a Fairmont

Hotel as if they are not sure of the brand they would rather try a household name. They

do have the opportunity however to elevate their brand image at these hotels that do lack

the elegance of some of their finer properties. They simply must take model similar

properties that are referenced with the prestigious hotels, much of that comes down to

improving service within those hotels. Within the hotel industry, you simply pay mainly

for the service in which you receive. The hotels that have outstanding attention to detail

and service are those that will succeed. Fairmont Hotels and Resorts have taken

appropriate steps to further raise their standards company wide. Four years ago, they

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made a new mission statement they decided was much easier to remember. It is simply

“Turning Moments into Memories”, the previous statement was a paragraph long, so they

decided that using a shorter statement would make it more effective for Colleagues

Company wide. Within the past year they have established a companywide ongoing

handbook known as “The Amazing Race’ which in turn goes over each of the qualities

that will ensure each property has the same quality standards when it comes to guest

satisfaction. While using these two different resources, as a company are hoping to

receive higher JD Power and LQA scores to shorten the gap between hotels. The threats

of course come within the hotel industry of your major chains, such as W Hotels, Omni

Hotels, Hilton and basic Marriott hotels. They are all working on improving their hotels

and their scores just as the Fairmont Hotels and Resorts is. The hotel that stays ahead of

the group with outstanding service, as well as most update hotels will continue to prosper

as the hotel industry you must always continue to look to improve.

Consumer Profile

The target market for much of the Fairmont brand is to reach out to companies having

large conventions in major cities. That is how they make the majority of their money is

by having conventions either with companies or being a part of city wide conventions

held at the local convention center. They must also target the upper middle class to upper

class who are visiting for pleasure. Although this makes up a much smaller occupancy

level, the room rate is generally higher and can bring in fellow friends. One other target

market is those who are having a party and would need to reserve a ballroom as well as

rooms, as well as those who are having a wedding at the hotel. Typically the hotel would

want the target market to be a large convention during the week, and a large amount of

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guest there for pleasure and a wedding happening each and every weekend. That would

be the perfect case. In order to have guest return they have set up the Fairmont Presidents

Club which is a reward based program that will alert the hotel how many stays the guest

has, as well as different preferences they may have. Generally those who are frequent

guest are older with grown kids, however at any point you may have a younger couple

occupy the hotel such as for Valentine’s Day, as a brand they must be flexible with how

they market their hotels.

Advertising Communication

Fairmont Hotels and Resorts have never been large on advertising through publication or

advertising on billboards or such. They are mainly through word of mouth and

partnerships with companies in order to gain their brand image through them. Currently

they are partnered with Cadillac, in that each of the Fairmont properties in the United

States is able to use a Cadillac vehicle for guest use to different locations as they wish.

The previously partnered with BMW to further enhance our brand image as well as

BMW’s. They are also partnered with Taylor Made Golf Clubs that are available for

guest use at Fairmont properties worldwide, again as a way to enhance both companies.

Their main focus is that upon large companies that will need conventions at different

points throughout the year.

Use of Media

Recently the biggest use of media has been the rise of Trip Advisor. It is quickly

becoming the most important website for hotels to be on, therefore the Fairmont brand

pushes colleagues to push the guest to give good reviews on each of the Fairmont

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properties that they stay at, as with good reviews others will see it and be more inclined

to stay at that particular hotel. Typically with each review, there is a member of the staff

that will reply thanking their guest for their feedback and offering a way to fix their

problem if they encountered one. Fairmont Hotels and Resorts are also on Facebook,

Twitter and Instagram with a corporate account and then one for each of the hotels as

well. Guest can leave feedback and here back from a representative from that hotel.

Although this is a much smaller percentage than the feedback seen on Trip Advisor it is

still important as this may be how others can see reviews of the particular hotel.

Promotions

Promotions are a useful feature for the hotel industry as there are many valleys in which

there are no conventions such as around holidays and they must keep their staff busy.

Many times they will offer reduced room rates on websites such as Expedia or

Hotels.com, sometimes even they will have a set booking rate and sell rooms to Groupon

for certain days. Typically they will bring the guest in with the low room rate, and profit

off of the extra charges such as internet parking, and food. The specific hotel may also for

instance have an option when booking on their formal website for a certain amenity or

restaurant discount. For instance, on New Year’s many hotels will have a special rate for

rooms in which you may see fireworks from your room or they will put together a bed

and breakfast amenity in which they typically do not provide when booking a regular

room. They have many options in how they can package different amenities together in

order to show great value to the guest while still achieving a profit.

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Brand Value

Fairmont Hotels and Resorts brand image has continued to rise through 2014, just as it

has in the last couple of years. With the continued success of the company, they have

been able to grow their product throughout the world with new hotels in year 2014, along

with many more to be completed in the upcoming years. They have focused many of

those across the Atlantic Ocean with trying to grow the brand value higher oversears

while pursuing a higher guest service rating here in the United States. You can see the

brand value has been rising, as the occupancy rate and room rate of the brand has

increased each year. They are becoming more of a household name as they continue to

grow. As of right now they are not widely known in the United States, however that

shows that they can continue to grow and have that brand recognition grow as well and

faster than say an already established name such as a Sheraton.

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Brand Exploratory

I surveyed 5 different people, all who come from different backgrounds. I did survey one

who worked at the Fairmont Dallas, as well as one of the guest staying there. The other

three respondents were random and had no affiliation with the Fairmont Hotels and

Resorts brand.

The first question I asked was if they considered the Fairmont brand to be that of the

Ritz Carlton and Four Seasons or closer to the level of a regular Marriott The one person

who did say it was at a comparable level of a Ritz Carlton was that of an employee who

worked at the Fairmont Hotel. Three of the others claimed it was at a level between a Ritz

and a Marriott and the last person claimed it was similar to a Marriott.

The second question I asked was what makes you come back to a hotel that you

previously stayed at. Three of the respondents said that feeling individualized would

make them return to the hotel. The other two respondents said that cleanliness and value

were the two most important items in returning to a hotel.

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The final question was if to rate the Fairmont Hotel brand image 1 to 5 on how you view

the service of the brand and what would be the number you rate it with 5 being the best.

Brand Image Blue represents the 1 person who rated the Fairmont Brand Image as a 5

Yellow represents the 2 people who rated Fairmont Brand Image as a 4

Grey represents the 2 people who rated the Fairmont Brand Image as a 3.

Out of the 5 respondents, not one rated the image as lower than a 3

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Recommendations

My personal recommendations for the Fairmont Hotels brand is to continue to grow as

they are doing worldwide, however they need to put more of emphasis on growth here in

the United States. They should look to build properties in more areas that are tourist

friendly, and that middle class America is more prone to visit such as a hotel in areas of

Florida along the beach. They mainly offer hotels in the large cities of America such as

New York or Boston but have room rates that are too expensive for much of America to

ever stay at, therefore it can limit the brand exposure for much of the tourist population. I

also recommend resist the urge to compete with the Ritz Carltons and find your niche

market that is above the Marriott’s, but below the high prices of the Ritz Carlton. I think

there is a great target market there that is willing to pay prices for great service but not

the exorbitant amounts that some Ritz Carltons will charge.

Garrett McCloud