Virgin Hotels has signed a one-time branding deal with Hilton for its newest hotel in Las Vegas. It’s an unexpected deal for the brand, launched in 2010 – and not opening a hotel until five years later – with the intent of disrupting the hospitality industry and its largest operators.
The Virgin brand isn’t giving up on plans for disruption or cool factors, but a selective association with a company like Hilton and its soft Curio Collection brand can fuel growth, says Virgin’s new top boss.
“There is value in the larger chain and in sales, but I also know from personal experience that smaller companies have high value and market penetration that are very effective in terms of their positioning, target audience and execution side. Said James Bermingham, who in March became CEO of Virgin Hotels after more than 35 years in the industry with companies such as Montage International and ITT Sheraton.
The 1,500-room Virgin Hotels Las Vegas was formerly a Hard Rock Hotel & Casino and is home to two major brand partnerships: the Hilton on the hotel side and one with Mohegan Gaming & Entertainment – the developer of the Mohegan Sun Resort in Connecticut – to close the casino floor operate.
The Vegas Hotel is unique because of its clientele, who rely more on convention attendants than the typical Virgin hotel. A branding agreement with a bigger company like Hilton is helping to raise awareness of the renovated property that’s two blocks from the Las Vegas Strip. The Las Vegas hotel now has access to Hilton’s distribution network, reservation system, and meeting and event platform.
“It’s a bit outside of our normal portfolio,” said Bermingham of the increased number of rooms and event space. “We found it very important to have a partner like Curio who can really support the big meeting site and the convention services that go with it.”
While the partnership is “perfect for Las Vegas,” Bermingham has not announced any further offers from Hilton or other major brands on the horizon. He still sees value in running Virgin as a lifestyle brand.
“I know from my own experience that not only can we compete with the bigger guys, but we can also get market premiums very often,” added Bermingham.
Fuel long-awaited growth
Virgin Hotels has grown slowly since Sir Richard Branson, founder of the Virgin Group, first announced the brand in 2010. Branson promised to make them a leader in what is known as the lifestyle hotel sector, a widely discussed term that generally means a more personal experience and increased food and beverage offerings.
Virgin’s first Chicago hotel opened in 2015, followed by hotels in Dallas, Nashville and now Las Vegas. One location in San Francisco was temporarily closed due to last year’s pandemic and all mentions were removed from the company’s website. But Bermingham sees growth opportunities ahead.
“I’m very excited about the new development we have in our current pipeline and of course the conversion capabilities we know,” he added.
New Orleans and New York City are slated to have their own Virgin hotels later this year. More are planned for Miami as well as Edinburgh and Glasgow in Scotland in the next few years.
Most of Virgin’s pipeline includes new construction, but the company also recognizes that the mortgage lending market is tight due to the pandemic.
Financing a new hotel has been more difficult in the past 12 months than it has been in the past 10 years, Bermingham said. Construction costs are also increasing. Instead of building a new one, Virgin Hotels – like many of its competitors – will seek conversions that will renovate an existing hotel and give it a new brand.
The Las Vegas property was a remodel and Bermingham expects more deals to come in the next two years. The argument may sound familiar: the company planned to grow rapidly at bargain prices for existing hotels after the last economic downturn. That didn `t work.
But Bermingham is not completely ignoring a recovery in the new construction sector either. Analysts assume that funding will loosen and construction costs will fall – eventually.
“I think our industry is really going to be more responsive than we all thought two to three months ago,” said Bermingham. “If that turns out to be true and we’re already starting to see it, I think it will change the way we look at new developments.”
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Photo Credit: Virgin Hotels is not abandoning its plans to be a competing, independent lifestyle brand. However, a Hilton partnership is helping the company attract customers in Las Vegas. Virgin Hotels