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Joie de Vivre recession-resistant in growth

Monday September 21st, 2009 - 1:00PM

SAN FRANCISCO—Despite the nationwide lodging industry downturn, including in its home state of California, that makes many industry players want to forget 2009 ever occurred, San Francisco-based Joie de Vivre Hotels has been having one of its best years.
“Between mid-May and Labor Day, we opened five boutique hotels. In fact, between January 2008 and summer 2009, which is approximately a year-and-a-half, we’ve launched 15 boutique hotels all in California,” company founder and CEO Chip Conley said, sounding fairly nonplussed.
As a developer and operator, Conley runs against the tide in at least two ways. Founded in 1978, Joie de Vivre currently has 38 hotels in its portfolio. But unlike companies such as the Kimpton Hotel & Restaurant Group, which also started in San Francisco, and has expanded extensively to become a national brand, Joie de Vivre has remained strictly California-based.
Unlike many of his competitors, Conley also finds no fault with the term “boutique” to describe the kind of properties his firm develops and manages. “Sure we’re comfortable with the term. Within the industry, we use terms like ‘lifestyle’ or ‘design’ hotel. But I’ve never heard a customer refer to a ‘lifestyle’ hotel,” Conley noted.
The Joie de Vivre portfolio is a mix of owned and managed hotels and hotels that are strictly managed. The five newest additions are the 119-room Hotel Erwin in Venice Beach, the 199-room Hotel Maya in Long Beach, the 157-room Shorebreak Hotel in Huntington Beach, the 130-room Pacific Edge Hotel in Laguna Beach, and the 168-room Hotel Avatar in Santa Clara within Silicon Valley. The first four are managed, the fifth owned and managed.
Going forward, Joie de Vivre’s strategy is more or less to continue this kind of mix. According to Conley, the ratio had been 50% owned and managed and 50% managed. But today it’s closer to 35% to 40% owned and managed versus 60% to 65% managed.
“As we move forward, we’re finding that the owners of our existing hotels are a rich source of additional management contracts. Many owners decide to go out and buy another boutique property in California and ask us to manage it,” he said.
Conley’s preference is to get involved in a new management situation as early as possible. “From the owner’s perspective, if it’s going to be a Joie de Vivre hotel, they should make sure our fingerprints are on it from the concept and design stages. So we’re serious about making sure we’re involved early on,” he noted.
Given the lending crisis and current state of the economy, however, there may be exceptions. “There may be opportunities for us in the next couple of years, considering how troubled the market is and that lenders are taking hotels back, to assume management of properties that have already had a major renovation and it’s just a matter of needing to be marketed and operated better.”
At that point, Conley and his team will have to make a hard judgment call. “We’ll have to look at such a hotel and decide that, if we’re not going to renovate it, nor concept and design it, are we comfortable that it’s going to fit within the portfolio?” he continued.
Asked why the company’s properties seem to be performing relatively well in the downturn, Conley described a double-edged sword affecting the boutique hotel segment. “Generally speaking, in a downturn independent boutique hotels actually lose market share, relative to chain hotels. But if you look at the boutique hotel sector more closely, some independent boutique hotels are operated by companies like us that have years of experience, while others are operated by relatively inexperienced operators,” he explained, adding that “the hotels that are part of larger boutique hotel groups tend to fare better in a bad economy.”
As for the rationale behind 31-year-old Joie de Vivre remaining strictly in California, Conley grew circumspect. “We’ve been very purposeful in terms of being California focused only because there are almost 40 million people in this state alone and California offers access to so many corporate and leisure markets,” he said. “Considering how quickly boutique hotels have expanded into the suburbs, there are lots of opportunities right now in our own backyard.”
Many of the locations where Joie de Vivre is opening hotels today wouldn’t have been considered suitable for such development five or 10 years ago, Conley pointed out. “That means we don’t necessarily have to go to New York, South Beach, Boston, or Chicago to have an opportunity to grow. We can actually do it in places like Santa Clara and Huntington Beach.”

—By Bruce Serlen