In 2002, renowned hotelier Horst Schulze retired after spending two decades building the iconic Ritz-Carlton brand, only to turn around and start all over again with Capella Hotels and Resorts, a group that is quickly establishing a new “ultra luxury” category of hotel designed specifically for the highest end of business or luxury traveler. In just a few years, Schulze opened five hotels around the world in cities such as Dusseldorf, Singapore and New York City, with ten more in the development stage in countries including Japan and Mexico.
In 2008, D.C. developer Bruce Bradley called on Schulze to help him open and manage Capella Georgetown, which Bradley’s Castleton Hotel Partners, which includes Southeast Asian partners Point Ford Management Limited and ICG Properties, is developing and is expected to open its doors in February 2013. The 49-room Capella Georgetown stands to be the new jewel of D.C.’s luxury hotels, the insider’s spot with a personal assistant assigned to each guest in lieu of a front desk (check in and out at your own leisure), a premier restaurant overlooking the canal, a guest-only lounge and roof deck with 360-degree views, indoor/outdoor pool and a spa. Schulze sat down with Washington Life to reflect on his “baby,” starting a new empire at 65 and looking forward to next 20 years.
What attracted you to the Washington area?
That answer is clear. Washington is one of the greatest cities, if not in America then in the world. If you put it in terms of the hotel business, it would probably be third in the country. It is not only a business destination, it is also a huge tourist destination. The top market also comes here because of the embassies. For us, not only for the business and the hotel but for exposure to our brand, it’s a very important market to be in.
What have you taken away from your Ritz-Carlton experience and how have you applied it to Capella?
If you want to be successful you have to have good people. You have to have a great understanding of who you are, and you have to be sure that your organization is aligned to who you are. I also learned that you have to be very careful not to compromise. Once you take that leadership role, unless you are very clear who you are and stick to it, you start compromising. It’s pretty easy to become the best but it’s very difficult to stay the best. This is a key element — you have to move with the guest.
When we first opened our hotel we had security cards for the doors. We had a very negative reaction from our guests who said, “This isn’t a first-class hotel. You need a key.” So, we changed the locks. Three years later a guest said “That is very insecure and unsafe.” So we had to change the locks again. We have to be able to move with the guests. And if there is a nuance of change you have to wait. That was pretty dramatic in my learning. Once you start making the mistake that “we’ve always done it like that,” it’s very dangerous.
What made you decide to start Capella Hotels and Resorts after retirement?
I actually retired on a Friday. I went home that weekend in all sadness and the first thing was [a friend] came over and said “Congratulations, we’re retired. Let’s go play golf.” I asked him “Why did you retire?” and he said “So I can do what I like.” I thought, wow. I like hotels. It’s only when you step away that you know what you did wrong. I decided to do it again, otherwise I’ll worry about it because this pain is there for the rest of my life. I told my wife on Monday, I think I’m going to start one more time.
What mistakes did you make when you ran Ritz-Carlton?
That 65 percent of our business was conventions when the best customers said “We don’t like conventions.” I should’ve gone in to it totally differently. We should’ve set aside a group entrance, and when they came in we should have immediately shuffled them into a different elevator. It would have been a little bit more expensive, but not that much more, and we could’ve maintained that leadership position. I didn’t do that and it was my fault. Everyone would say “You’re great” because they would rather I lead them nevertheless, but how good is good? Maybe when they say that, maybe you’re the best of a lousy lot, and maybe you’re not.
Now that you have a second chance, what is the biggest challenge?
Money is a particular setback. The challenge for me is most of the hotel companies today when they get a contract they put cash under the deal. I don’t. That has been the biggest challenge. In August 2008 we had new hotels under construction in addition to the ones that we had, and in 2009 none were under construction any more. They were all gone. We were looking to have 30 hotels in 2010 but we had 14. We were doing badly but we overcame that and now we’re doing well. Business is unbelievable, however, they’re still weak, particularly in North America with new development.
It’s a challenge to find deals particularly in North America, and I want to become more established in North America. The deals come all the time but they have a lousy location, not enough capital to capitalize. It’s more expensive. To find the right location and the right investment is difficult. And remember what I said that compromise was my biggest mistake.
That’s going back to your core values.
It’s a huge challenge but it’s also much more fun because I’m doing what I want. I have no regrets. Not everyone starts a new company when they are 65. It’s pretty exciting.
When it’s all said and done, how will you measure success with Capella?
Customer satisfaction. You know what my expectation is with customer satisfaction? 90 percent top marks, and that’s minimum.
In this new market segment it’s the customer that we serve. In a normal situation the customer can influence 20 or more others. This customer controls hundreds. They don’t just influence, they control. You have to do it right with them. My whole philosophy is don’t lose a customer.
What’s next for you?
We have a bunch of hotels in development including Bangkok, Japan, Qatar, two in Russia, China. We have 10 in construction. And Sochi Russia, we’re figuring out where that one is going to be. With the embassies becoming international we have the Capella being built and it will probably open the day before the Olympics. We have another Capella in St. Petersburg, so we have quite a few going.I hope I’m here to see it.
It doesn’t look like you’ll be retiring any time soon.
I feel like Moses standing and looking to the Holy Land but never getting there. We have two hotels in construction in Mexico. There’s a lot of great stuff going on that is exciting and fulfilling. There’s no question that we will be a leader in that market. The question is only when.