The School of Horst

At 66, Horst Schulze is not only back in the game; he's back on the high-end tip. Four years after establishing West Paces Hotel Group, six years after leaving Ritz-Carlton, the German-born hotel legend is pushing two new luxury flags, Solis and Capella. The time is ripe, Schulze suggests, for customer-driven brands dedicated to the very well off.

“Elegance without warmth is arrogance,” the maxim-rich, energetic and peripatetic Schulze says during a recent lunch at Naha, a chic Chicago restaurant. “I believe in organization. A good organization knows itself, and too many organizations don't. They write great annual reports and make great statements but they have no meaning. “

A year after Ritz-Carlton Hotel Co. won its second Malcolm Baldrige National Quality Award (in 1992, it became the first service industry company to do so), Schulze left the brand he launched in 1982 and then made synonymous with sumptuousness. He spent the next two years consulting and studying the hotel market he knew so well.

“I knew from the beginning I would not retire,” says Schulze, who is based in Atlanta. “I planned to do some consulting, some speeches. I joined some boards; but in a sense, that was all about maintaining or supporting something. It wasn't really creating something.”

During this break, he began to notice areas of opportunity within the hotel industry, opportunity that seemed to gain substance during studies and at focus groups. “I looked at market demand changes and said, ‘Gee, there is something the customer wants that is not reliably produced’,” he says. “The whole issue of reliability is a very important business issue, particularly if you talk about brands. In one of our studies, one participant in a focus group told us there is no such thing as a hotel brand. I said, ‘Why the heck do you say that?’ Brand implies a reliable, repeatable situation, but if I go to a name hotel in one place and it is friendly, warm and clean, and I go to the same hotel in another place and it isn't…In the beginning, those thoughts triggered my desire to do it again.”

It became clear to him that consumers were looking for a new product in the top segment of the market. Meeting planners, a key target market, told him and his associates they were tired of dealing with unseasoned, under-informed hotel staff and were dissatisfied with the high turnover. “The customer said, ‘I'm not going to a Ritz-Carlton or Four Seasons for the chandeliers or marble, I go there because I feel they're somewhat more reliable’,” Schulze says. They also go to a Fairmont hotel; all three brands are good. But none is nurturing loyalty, Schulze asserts. Cleanliness, friendliness and reliability are key to the demanding, high-end customer.

People also told him they wanted to feel at home in a hotel, Schulze says. But that message was actually a form of code.

“It didn't mean at all that they wanted to feel at home,” he says. “They want to feel like in a memory, like they felt in their mother's home. What that meant to them was that in their mother's home, they didn't have to give any thought to what was in the refrigerator. It was just something they liked. It just all happened.” Another key factor was that “in their mother's home, when something went wrong and they went to their mother, their mother said, ‘Come here, I will help you.’ She just opened her arms and said, ‘I am here for you.’ That's the whole essence of our training.”

These homeward-bound drives spring eternal, he suggests, making a homey feeling a permanent requirement. At the same time, the concept of luxury has changed since Schulze began to put his stamp on the high-end market.

“When we started Ritz-Carlton, our whole approach was to understand the market and respond to it as a whole, and that market wanted (something) good-looking, clean and friendly,” he says. “When the father of today's customer checked in, he wanted a smooth, simple transaction, to get his key, have the bellman take him up and leave him alone.

“The son comes in today, the same age as his father was 30 years ago — incidentally, the father had a suit and tie on when he arrived — the son comes in blue jeans and wants to say, ‘Here I am. I'm just a simple guy like everybody else, but at the same time I'm important and you better take care of me. I'm the one who spends the money here and I want real value for my money.’”

The son might demand a secretary, an individualized food selection, even the opportunity, “in the middle of the night, to climb a mountain with a bottle of champagne,” Schulze says. The father never would have thought to make such demands.

“I'm talking about us here,” Schulze says, winking and smiling. “What people want is a suit tailored to their body, not off the rack. They don't care that there's a convention going on; they don't want to be pushed aside. A hotel today is a home and headquarters away from home, so we have to be able to respond to every need a customer has while in Chicago — not while in the hotel, but while in Chicago.

“Luxury, before, was about being fancy. It's not about being fancy anymore. It's more about responsiveness and about being individualized toward the customer, and doing it all defect-free. And timely.”

Like other hoteliers, Schulze believes a brand must address three constituencies: owners, employees and guests.

“I want to be the absolute best in the hotel business for all concerned,” Schulze says. In his “canon,” the brand must be loyal to the guest and vice versa. To that end, he has assembled a seasoned West Paces executive team, largely drawn from the top ranks of Ritz-Carlton:

  • Robert Warman, executive vice president and COO, was a charter member of the Ritz-Carlton team and is a former general manager of Ritz-Carlton hotels in Buckhead (Atlanta), Cleveland and Pentagon City

  • Philip V. Keb, executive vice president, development, negotiated and closed 24 hotel transactions with a total value of more than $2.5 billion in his eight years with Ritz-Carlton. He also spearheaded incorporation of the Residences, the Ritz-Carlton-managed condominiums, into the company's brand portfolio

  • Fausto Barba, vice president of finance & development, headed the Latin American expansion of Posadas, a major regional hospitality management and development company. He also was responsible for $150 million in luxury hospitality and mixed-use developments in Boston

  • C. Scott Rohm, vice president-operations, opened more than a dozen Ritz-Carlton hotels in his previous position as vice president-rooms, the Ritz-Carlton Hotel Company

  • Peter Schoch, vice president-food and beverage, was VP-culinary for the Ritz-Carlton Hotel Company.

West Paces' strategic investment partner is former Coca-Cola Company Chairman-CEO M. Douglas Ivester. Developer of the premier Solis Resort, Montelucia Resort & Spa, is Crown Realty & Development, owner of a $600-million-plus portfolio of office, trophy retail and luxury resort properties. Robert Flaxman is president and CEO; Jaime Sohacheski is chairman.

Solis properties will average 200 to 400 guestrooms; depending on the market, they will feature condos, too. Other highlights include state-of-the-art fitness centers and spa treatment facilities, distinctive interior design, “guest-only” library lounges, and the “ambience of smaller inns.” Schulze expects the flag will top off at around 75; the first will open this spring in Chicago, with four others due in 2007 and one more in 2008.

Unlike Solis, Capella Hotels & Resorts will launch as an international brand. It's much higher-end than Solis, where construction costs will parallel those of a Hyatt, a Westin, a Sheraton, or a Hilton, according to Schulze.

Why launch two brands? “Two different customer demands,” Schulze says. His studies showed that the “very top-end customer” wants a “more intimate, private, individualized hotel,” like Capella.

“That's the customer that now uses the most deluxe rooms in the best hotels, but he feels kind of pushed aside by the rest of the activity,” Schulze says. “It was not very difficult because there was such a large percentage of individual travelers in the top end it was glaring.”


The only Solis available for inspection is the Solis Chicago, a 454-room condo hotel designed to open in June, and it's in transition: part is Hotel 71, the independent property West Paces took over this year, while part is Solis, including a few model rooms. The difference is striking.

Where Hotel 71 is cutout bin chic, what there is to see of Solis is far sunnier. The model junior suite boasts a palette of rust, khaki and olive, creating a tawny and earthy, yet elegant, ambience. The sconce lighting is soft, and there are 42-inch high-definition televisions in the bedroom and adjoining parlor. There's a divan in front of the bed by the window, and the suite has a spectacular view of the Chicago River. The marble-floored bathroom has an enclosed shower with a rainforest showerhead.

The furniture is firm yet plush, in a style that effectively and distinctively blends Southwestern and oriental motifs. The suite is comfortable and high-tech and, despite its newness, feels familiar; it has that homelike ambience Schulze values so highly. Estimated ADR will be $650 for the junior suite, $1,500 for the regular suite. General Manager Hans Van Der Reijden expects the hotel — the only one at a bend of the Chicago River — will do very well. He jumped at the chance to manage the transition from Hotel 71 to Solis Chicago, Hotel & Spa.

“I heard through the grapevine what was happening,” Van Der Reijden says during that Naha lunch. “I picked up the phone and called John Russell,” a former regional director for Ritz-Carlton who told him the company was “starting over.”

Van Der Reijden had been with Ritz-Carlton for 11 years but in the last two, “started to feel a loss of purpose.” When Russell asked him if he was willing to relocate from Bali, Indonesia, “it was a split-second decision,” he says. “Then I had to explain to my wife.”

Such loyalty is typical of Schulze employees, who seem to value the man even more than the company with which he is identified. For the most part, however, they speak of them as if they are synonymous.

Jim Veil, president of TWELVE Hotels & Residences, a new, high-tech luxury hospitality company in Atlanta, worked for Ritz-Carlton for more than a decade. “I began working with Horst in 1986,” he says. “He's a tremendous visionary, with incredible passion for the industry. For any of us who worked at Ritz at the time, we had a goal to create the finest hotel company in the world, and Horst's unrelenting passion pushed us constantly in that direction.”

“Training was always taking place,” Veil adds. “Training was about observation and experience and setting up the guest expectation. We kept setting the bar higher and higher, and the biggest critics of Ritz-Carlton were those of us inside Ritz-Carlton, because we were always thinking about an incredible level of service for our guests.”

Raising the bar can mean increased costs; some Ritz-Carlton owners complained that the service levels — the ubiquitous fresh flowers, the high staff-to-guest ratio — imposed unrealistic budget demands. According to one industry insider, a “normal” luxury hotel might spend a fifth of what Schulze demanded for flower outlay.

Stephen Rushmore, head of HVS International, calls Schulze “charismatic” and says he raised the service bar, not only for luxury hospitality but also all the way down the segments. At the same time, Rushmore says circumspectly, “It's always a tightrope to walk between providing ultimate guest satisfaction while controlling costs sufficiently that a hotel owner will achieve the sufficient return. The jury's still out as to whether five-star hotels are able to achieve that balance.”

Schulze counters such comments. “I don't think anybody ever made more money per room than we did,” he says of his Ritz tenure. “During a slowdown, some owners insisted that we cut product. An owner in a secondary city told me he wanted me to lower the quality of the shampoo and soap because he couldn't get the same rate as a Ritz in San Francisco.”

Schulze refused that request. “The name outside still says Ritz-Carlton, which in itself is a promise,” he told the man. “If I put a lower product in there, I'm lying to the consumer.

“I cannot do somebody a favor and hurt you and other owners. That does not go.”

Peter Yesawich, a well-known consultant who has participated in executive team sessions with Schulze, says, “he's unrelenting in his pursuit of perfection” and is “one of the most visionary guys in the lodging industry. He has such an incredible appreciation for the guest, and I think that's what makes him truly unique. His contemporaries, though they have knowledge of the guest, don't necessarily pay deference to the guest. Horst does.”

“He taught the passion of service,” says Carter Donovan, a Sarasota, FL-based hotel consultant who began 20 years with Ritz-Carlton in 1984, working for Schulze as concierge in Buckhead. “He taught you how to enliven the senses, because when people came to your home, which is essentially what a hotel is, you wanted their senses enlivened, you wanted the smell to be pleasant, the flowers to be breathtaking, you wanted the hotel to be immaculate in its cleanliness, and most of all you wanted people with a genuine smile on their faces to welcome you.”

How does a hotelier make such behavior feel natural, feel genuine? By being careful about prospective employees, Donovan says. “You look at their behavior. How do they reflect the company's goals and objectives? You don't just hire them,” she says. Careful selection reduces turnover and “enables people to feel ownership. When you have that, you suddenly stop being a manager and become a leader because you found the right people to perform the mission.”

“Horst was a walking, talking epitome of service excellence,” recalls Theo Gilbert-Jamison, CEO of Performance by Design, an Atlanta-based training and development consultancy. Like Donovan, she worked for Schulze in Buckhead in the mid-'80s. “When you're working in the hotel business, it's easy for the job to become mundane,” she says. “Horst helped everyone understand the purpose of their job. He didn't tell us things to do that he didn't live by and exemplify every day.”


It's the system, stupid

“The problem is never with the people,” Horst Schulze says. “The problem is always with systems.”

Loyalty is two-way

“The brand must be loyal to the customer,” Schulze says. “It must honor the guest.”

Make your hotel feel like home

No matter how luxurious, your property should welcome the guest like home does. It's a matter of feeling — with a stress on excellence.

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