With a long-sought beachhead in Europe all but secured -- in the form of a contract to manage London's storied Savoy Hotel starting in January -- Canada's Fairmont Hotels & Resorts Inc. wants to march deeper into the continent.
"We are looking at other European opportunities and certainly hope that over the course of the next year or so, we'll have some additional things to announce," William Fatt, Fairmont's chief executive officer, said earlier this week when reached at the company's head office in Toronto.
"It depends on the circumstances, but I would be disappointed if we didn't have five or six hotels in Europe over the next five years, and I'd be delighted if we had 15."
Fairmont is "more likely" to surface next in major Western European centres such as Paris and Rome, Mr. Fatt said, but former Eastern Bloc cities such as Prague, Budapest and Warsaw, where more new luxury hotels are being built, are also potential targets.
The Savoy contract, announced Monday, depends on the successful conclusion of a bid to buy the 263-room hotel by a key Fairmont shareholder and financial partner, Saudi billionaire Prince Waleed bin Talal.
British news reports say Prince Waleed, who owns about 5 per cent of Fairmont, and the corporate banking arm of HBOS PLC have offered owner Quinlan Private about £200-million ($463.3-million) for the hotel, which was built in 1889 as an annex to Richard D'Oyly Carte's nearby Savoy Theatre. Mr. Fatt said he is confident the deal will close on schedule.
Fairmont's shares bounced up the day the Savoy contract was announced, closing on the Toronto Stock Exchange at $36.52 apiece, up 80 cents from the previous finish. Yesterday, they closed at $35.75 each, up 24 cents.
Fairmont, formerly CP Hotels, currently operates 82 hotels under its name and the Delta banner -- 59 in Canada, 16 in the United States, and two each in Mexico, Bermuda, Barbados and one in the United Arab Emirates. The company had a profit of $28.4-million (U.S.) or 36 cents a share on revenue of $378.5-million in the first half of 2004, down sharply from a year earlier.
Fairmont has been working on getting into London for two years and on the Savoy, specifically, for a little less than one, Mr. Fatt said. In fact, it was involved with one group of investors that unsuccessfully competed with Quinlan -- a Dublin-based investment firm -- earlier this year to buy the entire Savoy Group, which includes other landmarks such as Claridge's Hotel.
"London is a critically important market for us," Fairmont's CEO said. "It's one of the biggest, if not the biggest, hotel markets in the world [and]it has the largest percentage of North American guests of any of the European centres."
The high proportion of North American traffic gives the company a better chance of exploiting the brand strength it has developed at home than it might have elsewhere in Europe to begin with, he said.
Because relatively few new luxury hotels are being built in "the traditional Western Europe market," he said, this means that, as with the Savoy, the company is mostly prospecting for management contracts at existing properties.
It could be a slow process. The contracts most often become available when hotels are sold, and "the large luxury hotels that we would be interested in don't come up for sale that often." Still, Fairmont is also willing to look at a management contract coupled with taking "a minority interest in the real estate," Mr. Fatt said.
One U.S. analyst who follows the company said the Savoy deal is "definitely a good move.
"The management contracts for these guys are very profitable and I think they are clearly willing to go into Europe if they can do so on that basis," he said.