Hotelier André Balazs, whose stylish boutique properties have long attracted film stars, media moguls and fashion models, is looking to get out of the traditional hotel business.
Mr. Balazs—who operates the historic Chateau Marmont in Los Angeles, the chic Mercer in lower Manhattan and London’s exclusive Chiltern Firehouse hotel—plans to convert at least the first of those hotels into a private residential club and then expand in new cities by creating more members-only properties with annual membership dues.
Mr. Balazs said he is also exploring the idea of selling ownership stakes in his properties to guests who become club members and who would own part of multiple residences in his hotel portfolio.
The 63-year-old hotelier said in an interview that he had been considering this strategy for the past three years. The coronavirus pandemic, which has stifled travel and hurt his business like it has most hotel operators across the country, led him to accelerate his plans.
He said that during the Covid-19 era, guests would welcome staying at properties where they knew many of the other people. He suggested this familiarity would offer some level of psychological comfort as the pandemic has made travelers wary of mingling with strangers.
“There is something to be said for knowing people,” Mr. Balazs said. “You can chat with them; you know where they have been.”
Mr. Balazs said he hopes to convert Chateau Marmont to a private club by the end of the year.
Photo: Keith Birmingham/Zuma PressMr. Balazs said he hopes to convert Chateau Marmont to a private club by the end of the year and is looking at introducing the members-only model in cities like Milan, Paris and Tokyo, and possibly the south of France or a private island in Greece. He could also convert his other hotels to this model if the response is positive, he said.
His plan to shift away from the traditional lodging business is one of the more unusual responses to a pandemic that has caused many hotel owners to rethink their future.
Some owners have permanently closed properties, while others have weighed plans for converting their hotels into rental apartments or condominium units. A number have rented their rooms to the government for housing medical workers or sheltering homeless people.
At the other end of the spectrum are private clubs. A staple of the London social scene, these membership-only venues are a small but growing niche in the U.S., from the Fitler Club in Philadelphia to the Battery in San Francisco and NeueHouse with locations in New York and Los Angeles. Many also offer hotel accommodation.
The best known is Soho House, with multiple locations in the U.S. and abroad and a valuation of $2 billion, according to people familiar with the privately held company.
Still, it is unlikely that many hotel owners could follow the lead of André Balazs Properties and become a members club, lodging analysts say, in part because few properties share the same sort of dedicated clientele. In addition, his hotels function like quasi-private clubs already, only without being able to collect annual membership fees of about $2,500 to $5,000 that make revenue less volatile than daily lodging.
Mr. Balazs said even now his hotels’ reservations are handled through the website or by contacting the properties directly, not through online travel agents like Expedia Group Inc. The hotels keep a database of guests, and it can be hard at times to get a reservation without a recommendation from a regular customer, according to some former employees at the company.
“We have always screened our guests,” Mr. Balazs said. “Guests are never more than one degree of separation away.”
This isn’t the first time he planned to get into the private club business. About 16 years ago, Mr. Balazs drew up plans to launch a members-only club on Manhattan’s west side with media mogul Barry Diller. Those plans were derailed by the financial crisis.
Mr. Balazs said he let go of nearly all his hotel employees in response to the pandemic. He isn’t planning to hire many back because he said he wanted fewer staff and a different skill set for his private club properties.
Some of his laid-off workers had been with the hotels for many years and were dismissed without severance pay and limited extensions of health care benefits. That caused a stir in Los Angeles, though as a nonunion hotel the Chateau’s lack of severance pay was consistent with other nonunion properties, a spokeswoman for Mr. Balazs said.
The spokeswoman said Mr. Balazs donated $100,000 to an ex-employee fund which, with other donations from guests and sales of gift shop merchandise, reached $250,000. The money was distributed to those let go in order of seniority, she said.
Mr. Balazs founded with his father a biotech company in 1981, which they sold for $750 million. With some of those profits, he acquired the Chateau Marmont and the building which became the Mercer. He also created the Standard Hotel brand, though he has sold his position in the management company and properties.
His properties, which also include the seasonal Sunset Beach hotel on New York’s Long Island, have been prominently featured in gossip pages with celebrities such as Leonardo DiCaprio, Courtney Love and the late Karl Lagerfeld.
‘We have always screened our guests,’ said Mr. Balazs, who attended a party in 2009 with Courtney Love.
Photo: NEIL RASMUS/Patrick McMullan/Getty ImagesWrite to Craig Karmin at craig.karmin@wsj.com
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