ORLANDO—Hard Rock Hotels & Casino’s recent announcement to license its brand to three Palace Resort properties in Mexico represents the next phase in the former’s flexible approach to expansion, according to Michael Shindler, Hard Rock’s executive VP.
Announced Wednesday, the deal will see the first fruits of its labor in winter 2012 with the relaunch of a Hard Rock-rebranded hotel in Cancun. Properties in Puerto Vallarta and the Riviera Maya will follow in spring 2012 and fall 2012, respectively.
This is not the first partnership between the two companies. Hard Rock previously licensed its brand to Palace’s struggling resort in Punta Cana, Dominican Republic, which opened during the tail end of the recession in 2009. After the rebranding and subsequent relaunch in February 2011, the resort saw a 50% lift in occupancy, said Frank Maduro, Palace’s VP of marketing.
“We looked at the Hard Rock brand as an opportunity to really differentiate ourselves in the destinations that we’re at,” he said. “It allows us to justify the (average daily rate) we do charge.”
Through September, the Mexico hotel industry reported a 4.3% increase in occupancy to 57.7%, a 3.8% increase in ADR to US$104.37, and an 8.3% increase in revenue per available room to US$60.22, according to data from STR and STR Global, parent and sister company, respectively, of HotelNewsNow.com.
While the details are still too fresh to put a specific number on the final cost of the rebrandings, they will comprise significant changes that will materially alter the look and feel of each property, Maduro said.
“They will not be mistaken for a Palace resort,” he said.
Palace, as licensee, will absorb most of the cost, though Hard Rock has made a “multi-million dollar” capital commitment that “we did not deem to be insignificant,” Shindler said.
“It shows the depth and the strength of the partnership that in a license relationship that we take it all seriously enough,” he said.
The three-hotel deal represents a natural progression of the relationship between the two companies.
“We have come to admire and respect Palace Resorts and (owners) the Chapur family for their dedication to great hospitality, terrific buildings, and an embrace of the Hard Rock brand,” Shindler said.
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While it will likely be a 15-month process just to absorb the three hotels, both executives said they’ve begun discussing future deals—although they’re too early in the process to release any further information.
“We are thrilled about doing this, but to try to then look at the next step—there’s a couple of things we’ve talked about, but nothing that I’m prepared to talk about today,” Shindler said.
Rockin’ throughout the globe
Shindler said the company is targeting other world regions for expansion, leveraging its flexible approach along the way. The company has 15 hotel/casinos in the United States, Mexico, Indonesia, Macau, Thailand, Malaysia and Singapore.
All properties operate under a licensing agreement, with the exception of the casino in Punta Cana, which Hard Rock operates on behalf of Palace.
“In many cities, we would like to be the operator because that’s the best way to set the example for our licensees,” Shindler said, “but we are approaching most of our transactions in a flexible way.”
Future targets include the Middle East and Asia. In the former, Hard Rock has a handful of projects in the works, including one in Abu Dhabi which is expected to open in late 2013, and another in Dubai with a tentative launch date in 2014.
Shindler is about to embark on a two-week trip to Asia, where the company has planted some seeds and must now tend to a few sprouts.
“We feel the properties we have make a great launching pad into parts of Asia where we don’t have a hotel presence,” he said, giving specific mention to China, India, Korea and Japan.
Safety and security in Mexico
Despite an increase in violence throughout Mexico, executives from both Hard Rock and Palace are confident their properties will see improved performance and will continue to operate unfazed.
“For both Palace and Hard Rock, safety and security of our guests is the most important thing we can deliver,” Shindler said. “But if you look at the history of these destinations particularly, in the last six years over 65 million American and Europeans have visited Cancun alone. The incidents compare to some of the upper Midwest states in the United States in terms of incidents directed at tourists in these marketplaces.”
The negative media reports are something Palace is forced to deal with on a regular basis, Maduro said, though he is optimistic—especially given the uptick in performance Palace has seen throughout its portfolio.
“We’re very confident in the destination, and the perception will improve in the next couple of years,” he said.
Added Shindler: “We’ve looked into it. We’re obviously wary of it and cautious of it, but are we overly concerned? Not at all.”