When Efrem Harkham bought the hotel that is now the Luxe on Sunset Boulevard in Bel Air 30 years ago, he assumed it would be a great financial asset. But it quickly turned out to be a mismanaged mess that lost money year after year, no matter whom he partnered with to operate it.
Finally, Harkham decided to leave his job in the fashion industry and turn the hotel around himself. It only took him a year. In 1995, he bought a second hotel, the property that became the Luxe on Rodeo Drive.
Deciding to share what he’d learned, he founded Luxe Worldwide Hotels in 1998, a division of Luxe Hotels in Bel Air. The company has about 230 employees. LWH helps nearly 200 independent hotels around the world with marketing, sales and reservations.
Now, with LWH and the two thriving L.A. hotels plus another under license, Harkham is bringing the Luxe flag to other cities.
He’s scheduled on Monday to announce the addition of a Texas property to the brand at the Americas Lodging Investment Summit at L.A. Live in downtown Los Angeles.
On May 1, Harkham and his team will raise the Luxe flag at the historic Stoneleigh Hotel & Spa in Dallas. It will join the Luxe City Center, a former Holiday Inn in downtown across from the Staples Center, as a licensed Luxe hotel, and the first one outside Los Angeles.
Robert Feist, vice president of Atlas Hospitality Group in Irvine, said the addition of a Luxe property in Dallas is significant because the brand is still small.
He believes the company will face a challenging market in Texas.
“I think Luxe has done very well in downtown, but that was a little bit easier a market to do well in,” Feist said. “It will be interesting to see how they do in Dallas. There are a lot of brands there, and travelers get pulled in a lot of directions.”
The LWH network provides its members with reservation, marketing and distribution services. The member hotels remain independent and control their own management.
In contrast, the model for Luxe-branded hotels is comparable to other chains. For example, in Dallas, the owners hired a management company to handle the daily operations of the hotel. Luxe provides sales and marketing services, staff training and service standards as well as its name.
Harkham described his role as promoting the hotels.
“We’re offering the brand, not going in to buy the property. We get paid as a sort of franchise, as a branded hotel,” he said.
Bruce Baltin, senior vice president in the L.A. office of PKF Consulting, said Luxe’s strategy for branding existing hotels rather than buying property and starting from scratch is a low-risk way to expand.
“It’s safe,” Baltin said. “They are giving out their intellectual property, but not their capital.”
The uptown Dallas hotel, opened in 1923, recently underwent a $36 million renovation to restore guest rooms and the building’s original art deco design. The owners of the historic hotel upgraded all 170 guest rooms with wireless high-speed Internet, flat-screen TVs and marble bathroom floors.
Harkham said the renovation provided him with an opportunity to demonstrate to the hotel’s owners how they could better capitalize on the property.
“For 170 rooms, that’s a lot of money,” Harkham said. “So we showed them that we could bring them a better return on their investment than they were getting.”
He said he does this by closing gaps in management, cutting waste and keeping rooms nearly 90 percent occupied thanks to the reservation system, which also maximizes room rates.
CAM Hospitality Management, a Pittsburgh company, handles the day-to-day operations of the hotel.
“They actually suggested Luxe to the ownership,” Harkham noted.
He said he is working to slowly expand the Luxe brand nationally and, ultimately, internationally.
“We’ve got an infrastructure that’s worldwide and ready to go,” he said. “We’re looking carefully and making sure that we deliver and that we can take care of each asset individually and personally.”
LWH has 12 offices internationally to handle the sales and marketing services and the technology behind it.
Harkham said he has already had requests from hotels in London, Paris, Shanghai and other cities that want to jump aboard the Luxe brand, but that he’d rather take things slowly and first establish a better base at home.
“We’re really focusing on the United States first, on getting some key hotels in gateway locations,” he said. “We’re going to be watching our step and making sure we grow the brand properly.”
Baltin said there is plenty of room for growth in the licensing model among independent hotels that Luxe is embracing.
“There aren’t that many franchise-type options out there for high-quality boutique-style hotels,” he said.
Luxe’s expanding brand faces competition from companies such as Joie de Vivre Hotels and Kimpton Hotel & Restaurant Group LLC, both based in San Francisco.
But in such markets as New York, Miami’s South Beach and Chicago, Atlas’ Feist thinks Luxe could be reaching too far.
“That’s going to be a tough road for them, because those are highly competitive markets,” he said. “It’s really going to take some work.”
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