Octavian Report: Can you tell us a bit about your background? What was your first experience with luxury hotels?
Jim Sherwood: I grew up in Lexington, Kentucky, in Berkeley, California, and in Bronxville, New York. My father was a patent lawyer and engineer, with his law practice in Lexington. Right after the war, he was employed by the U.S. government to record the development of the atomic bomb. That took us to the University of California at Berkeley and then to New York, where the Manhattan Project had been based.
After high school in Bronxville, I went to Yale. During that period of the early 1950s, the Korean War was going on. I elected to become a naval officer upon graduation from Yale in 1955. I was commissioned on graduation day, but the war was effectively over, so I managed to miss that. I stayed in the Navy for five years and was all that time mostly in Asia. Every time we would go into port for a few days, I would stay at the local luxury hotel. They weren’t very expensive in the 1950s. They were nothing compared with what they are today. You could get a suite for $50 a night. In the Asia of those years, the dollar was all-powerful. You had something like 500 yen to the U.S. dollar. You got quite a lot for your room expenditure. When we were in Japan, I always went to Frank Lloyd Wright’s famous Imperial Hotel in Tokyo, a magnificent luxury hotel. Sadly, it was pulled down some years later. When we were in Hong Kong, I always stayed at the Peninsula, which is still, in my opinion, one of the best hotels in the world. In Honolulu, I would stay at the Royal Hawaiian. In San Diego it was the Coronado Beach, in L.A. the Beverly Hills, and in San Francisco the Fairmont.
OR: When did you acquire your first hotel?
Sherwood: In 1976. At that point I had been in the container-leasing and shipping business for almost a decade. This was via my company Sea Containers. I’d overseen massive expansion, and I was grateful for that, but the sector was now attracting other big companies that had far more resources than we had. I said to myself, “I think we ought to diversify so that we’re not totally reliant on marine containers.” I tried to figure out what we should we diversify into. We were operating the container-leasing business in 80 different countries, all of which I had visited. I had stayed in the best hotels in all 80 countries. The best hotels were often in a pretty sorry state, although many of them had been famous in their day. And it occurred to me that if we went into the hotel business, we could manage that business side-by-side with the container business.
We had, by that time, offices in all regional centers of the world where there was shipping activity. I felt that it would also be no conflict of interest with respect to the container leasing. We wouldn’t want to get into any business which would conflict, in some way, with our customers, the ocean carriers. Obviously hotels wouldn’t conflict with container leasing.
The first hotel which came on the horizon was the Hotel Cipriani, in Venice, which I bought in 1976 for the huge sum of £900,000. The purchase was made in British pounds because the hotel was owned by three sisters, members of the Guinness family. They all lived in Great Britain. In the second half of the 1970s, you may recall, Italy was a complete mess. The Red Brigades were active, perpetrating a large number of kidnappings and bombings. The country thought that it would go Communist. The sisters who owned the Cipriani panicked and decided to sell out. I felt that Italy was going to survive all this turmoil and that the Hotel Cipriani would enjoy a very good future. I bought it — and that was my first investment.
The hotel was losing money at that time, but I brought in a very skilled manager and he quickly turned the Cipriani around. By the second year, it was making a very good profit. That whetted my appetite to go further in the hotel business. I set about to make more acquisitions. That became what was Orient Express Hotels, at the end of the day. I learned an important lesson, too, about the difference between the two industries: marine containers never complain.
OR: Can you tell us about how you developed the Orient Express railway revival?
Sherwood: In 1977, the year after I bought the Cipriani, the French railways announced that they were stopping Orient Express train service, which then ran between Paris and Istanbul, via northern Italy and Serbia. When that happened, when the announcement was made, in every newspaper that I could read I saw articles about the Orient Express and its history and the terrible loss of this most famous train in the world.
I had it in the back of my mind that what we ought to do is restart the Orient Express and run it primarily between Paris and Venice. We would then be able to bring in a lot of guests for the Hotel Cipriani. In October of 1977, Sotheby’s put up for sale five first-class sleeping and restaurant cars from the Orient Express. These cars, all built between the World War I and World War II, were the epitome of luxury. They had been used in the film Murder on the Orient Express and they were then owned by the film company. They had no longer any use for them, so they decided to put them up for auction in Monte Carlo. I went to the auction. There were only four bidders for the cars; the sale was held in the freight station of Monte Carlo. When I went in there, the place must have had 300 members of the press. Every major TV station, NBC, Japan Television, the BBC — all were represented.
The Orient Express train and name evoked such interest on the part of their readers and viewers that they felt it was appropriate to be there. Of course, Princess Grace was also there, which didn’t detract from the appeal of the event. I bought two sleeping cars at the auction. I almost didn’t get anything because the first two cars were sold at rather high prices to the King of Morocco. It turned out that his agents only wanted those two cars, so I was able to buy the next two cars, which I considered equally good, but for a much lower price. I sent them to a warehouse we owned in southern France.
Then I set about to try to locate other cars of the same vintage. I went to the Wagonlit company, a Belgian company that owned all of the cars and had, in fact, been the company that started the Orient Express service in 1882. They were very helpful. I was able to acquire 25 of the first-class Orient Express cars, a mix of sleeping cars and restaurant cars. Most of them were languishing out of service in Spain. Wagonlit made a very good deal for me on the basis that their workshops in Belgium, which were underemployed, would be able to do all of the refurbishment of this train. That’s what happened. We sent the cars to Belgium and they did a fabulous job. It took several years. As the project developed, I then felt that we ought to include Britain — that service should really operate from London, as well as Paris, down to Venice and Istanbul. There was no Channel Tunnel in those days. You had to cross the English Channel by ferry. And it just so happened that we owned the ferries, the Sea Link ferries, which crossed the Channel.
We then went and found a number of historic cars, what are called Pullman cars, in Britain: first-class cars which were out of service. We restored them as well. They’re all of the same period, from between the wars. They were the height of luxury train travel in that time. We had those restored. When the Orient Express service in 1983 — 101 years after the first Orient Express made its initial journey — the passengers could get aboard the British train at Victoria Station in London and take it down to Folkestone and get aboard one of our ferries, which would take them across the Channel to Boulogne, where the main continental Orient Express train would be waiting for them.
From there, the train would proceed to Paris, then overnight to Switzerland, and then through the Alps during the second day. It would arrive in Venice in the late afternoon of the second day. That’s how that started. To this very day, there are a large number of travelers on the Orient Express train that get off in Venice and go to the Hotel Cipriani. It’s provided, as I had anticipated, a great source of guests.
OR: Is it the nostalgia that, in your opinion, was the real draw?
Sherwood: Yes. The experience combines a lot of things. The scenery is spectacular. You’re going through the Alps in the daytime, from seven in the morning until almost five in the afternoon. Visually, it’s very interesting. Trains provide a moving visual experience which hotels cannot. They provide a context for a holiday which air travel doesn’t offer. The leisurely pace appeals to many travelers who are stressed out by their urban lives. And the cars have been very sensitively refurbished and are just as they were in the 1920s, so you have the experience of traveling as they did in those days.
We have wonderful cuisine on board. The chef is Paris-based and has been with us for the last 25 years. He produces spectacular food. It’s really a rewarding experience to be able to travel in the atmosphere of these vintage cars, just as they were and to see Europe at a leisurely pace in comfort.
OR: How were you able to put together such a series of iconic properties to create the Orient Express portfolio?
Sherwood: I looked for properties that had fallen out of favor which could be refurbished and re-launched as five star to regain their reputation. The Copacabana Palace in Rio, the Grand Hotel Europe in St. Petersburg, and the Mount Nelson in Cape Town are examples. All are more than 100 years old and are the best in their markets today.
Much of my strategy, too, derived from my shipping experience. In Brazil, all the shipowners were located in Rio. I had to go to Rio every year to see them, the customers, for the containers. The grand old lady among hotels in Rio was the aforementioned Copacabana, which was owned by a woman named Mrs. Guinle. She had let it run down terribly, had really put no investment in it. It was shabby and noisy, but a beautiful, beautiful structure. I said to myself, “What we need to do is to acquire this hotel from Mrs. Guinle.”
Her son was managing the hotel. I went to see him. He said, “Oh, my mother gets an offer once a month to buy this hotel. She has no interest in selling. She’s refused them all.” I was very close with the Brazilian Ambassador in London. The next time I went to Rio, he arranged a dinner party for me and my wife in the Leblon district of Rio. I was seated at dinner next to a little old lady — who identified herself as Mrs. Guinle. I said to her, “You own the Copacabana Palace.” “Yes,” she said, “I do.” I said, “I know you’re not interested in selling the hotel, but if you ever decide that you want to sell, would you please keep me in mind?”
She looked at me and said, “I’m dying to sell the hotel. I’ve been wanting to sell the hotel for years.” I said, “Well, that’s not the information that I had got. How do I arrange to buy it?” She said, “Tomorrow morning, you go and see my lawyer.” The lawyer confirmed that she wanted to sell. We were quickly able to sew up a deal. It transpired, however, that the son, who was managing the hotel, had been siphoning off a lot of the revenue for his horse-racing interests. He did not want anybody to find out what he had done, particularly his mother.
The lawyer said very tactfully, “Let’s make this deal into two pieces. First of all, you pay to the son X millions of dollars. He will refund the money that he’s taken from the hotel. Then you make the big check out to Mrs. Guinle. Then nobody will know what happened and everybody will be happy.” That’s exactly the way the deal was done. Almost all the deals that I did over the years were related to my shipping expertise. In the case of the Mount Nelson, for example, the South African ship owners were based in Cape Town. I always went there once a year to see them.
The Mount Nelson was owned by the de Keyser family, a big shipping family in England. Once again, I said if they ever wanted to sell to please contact me. When the furor over apartheid in South Africa was such that the de Keysers decided to exit their shipping investments in South Africa, which included the Mount Nelson, their manager in South Africa alerted me to the fact that the hotel would be sold. He steered me in the direction so I could buy it before anybody else did.
Of course, at that time, people were very negative on South Africa because of apartheid. I had met with F.W. de Klerk when he came to London. I was absolutely convinced that what he said was true: that apartheid would become a thing of the past and a democratic government would be installed before long. I didn’t consider it all that much of a risk. It’s been a big success. Anyhow, there are stories like that for most of the hotels that I bought.
Let me add here: always invest when things are at their worst if you believe the country will eventually recover. I invested, as noted, in South Africa during the apartheid regime and Burma after the military coup in 1990. All these investments have been great successes.
OR: How did you end up with the Villa San Michele and the Splendido?
Sherwood: The Villa San Michele was owned by a Frenchman who was an arms dealer in the Vietnam War. He had taken quite a lot of profit from the U.S., I think. He had bought this beautiful ex-monastery on the outskirts of Florence. He bought it as a home originally. Then he transformed it into a small hotel, a 30-room hotel. He got rather infirm with age and decided that he wanted to sell the hotel and move down to Positano, in the south of Italy. The general manager of the Cipriani alerted me to this. He thought that this might be a good investment for us.
Of course, as generally is the case in Italy, the asking price for anything is always outrageous. That was the case with the Villa San Michele. Essentially the seller wanted me to buy all of the contents of the hotel, which were antiques worth a great deal of money — or so he claimed. I said, “I’m prepared to buy the hotel, but I don’t really want the antiques. Antiques don’t add much in terms of revenue for a hotel. We can always get replicas.” But he insisted. He produced a valuation of the antiques, which was enormous, from a respected antique dealer in Florence. I called up the chief executive of Sotheby’s. His name was Peter Wilson, and he had conducted the sale of the Orient Express cars in Monte Carlo in 1977.
I said, “Peter, could you send somebody to the Villa San Michele and have a look at their antiques and let me have a valuation?” He did that. About a month later, I called and said, “When am I going to get the valuation?” He said, “I can’t put the valuation in writing for you because all the antiques are copies. If I said in writing they were copies, I could get sued.” So I went back to the owner and said, “All these antiques are copies.” He said, “Yes, I know they’re copies but I had this valuation from this Florentine expert, who claims that he sells pieces like this at those sort of prices.” I said, “You and I know that’s absolute nonsense. Let’s agree on a fair price for the contents.” He instantly agreed on about one-third of the price that was requested and we bought the hotel.
The Splendido was different. The Splendido was owned by an Italian family who also owned an insurance company. A hostile takeover bid was made by Montedison for this company. In order to fight off the bid, the insurance company decided to sell some of its assets, which included the Splendido in Portofino. I was able — because the owner needed the money quickly, to defend his company — to conclude a deal at a fair price and rather speedily. Alas, Montedison took over the company. The owners weren’t able to defeat the hostile bid. But at least I got the Splendido.
OR: Was there a master plan behind your two main business ventures or were you more guided by serendipity?
Sherwood: As I mentioned to you, the reason for going from shipping into hotels was to diversify and reduce our reliance upon the container business. Eventually the hotel business became as big as the shipping business. At that moment, we decided to split the two. Orient Express Hotels, now Belmond, became independent of Sea Containers in the year 2000. I have continued to grow the company. I stepped down from Sea Containers about a decade ago. I had an accident. I was hit by a tsunami in 2005. My health wasn’t great. I just couldn’t continue with both companies. I did agree to carry on with Orient Express Hotels, even after my medical setback, but in the chairman role. Simon Sherwood, my stepson, was the CEO. That carried on for quite a few years.
The company prospered until the crash of 2008 and 2009, which was quite a setback. Simon had stepped down in 2007 for personal reasons. We appointed a new management to follow him. I also stepped down as chairman at that time, but I stayed on as a director. I’m still a significant shareholder in the company. I do what I can to steer it in the right direction. It’s sometimes an uphill battle.
OR: What do you think makes a hotel great?
Sherwood: A lot of factors. I think that while the physical plant is very important, one of the wonderful things about these iconic properties is that they were always built in the best locations — because they were built 100 years or so ago, when the getting was good.
I think that the tradition and the beauty of the buildings are very, very important as well. A great hotel today requires a high-level standard of service, which people expect at the prices they pay. I think that you need to have a standard of comfort. You need to have spacious bathrooms. You need to have an appropriate décor — nothing one-size-fits-all. I think the staff is extremely important. The managers must learn from guest complaints and change practices which have been criticized. A great hotel also has to have a very high standard of food and beverage. And I always say that it has to have a very high standard of guests. In other words, the guests that patronize the hotel have to be well-dressed and well-spoken. They create in themselves an atmosphere which is very compelling for other guests.
The Belmond guest experience is always consistent with the location. The company employs interior designers who can create a style which fits a hotel in a location. Such styles are Italian, Spanish, English, French and Russian. We tailor the style to the location and do not provide a uniform decor like some other luxury hotel operators do. The decor derives from the local culture as does the food and beverage offering. In Cuzco, Peru the Hotel Monasterio is built into a magnificent monastery dating from 1592. The spectacular chapel is covered in gilt and the hotel displays huge portraits from the Spanish colonial period. Peruvian ceviche and pisco sours feature on the menu. Let me add here that true luxury can come in different shapes and sizes. In Botswana, the Belmond safari lodges are mostly tents on platforms, but the tents have air conditioning, heating, and large bathrooms.
Another Belmond advantage is that the staff rarely change. People take such pride in their work that they stay. They make it a lifetime job. The management must have style in dress and attitude — which they also demand of their staff.
OR: How were you able to get such good people?
Sherwood: One-third of the earnings of Belmond comes from its eight Italian properties and its one property in Majorca, in Spain. They are managed as a group by a single man. The wonderful thing about Italians is that they don’t change jobs, that many of the key staff members at the Hotel Cipriani and the other hotels have been there for 25 or 30 years.
They are loved by the guests. They are very, very attentive to the guests. If a repeat guest sits down to order a meal, the waiter will know almost exactly what the guest is going to order. The guests feel that they’re appreciated. I think that’s very, very important.
OR: Do you think there’s been a big shift in the business towards hotels being more family-oriented?
Sherwood: I wouldn’t say there’s been a big shift, but in a number of the hotels I can recall children were not welcome at any time. Today, certainly in the peak school holiday period, children are welcome. There are some limitations placed. Young children, for example, at the Hotel Cipriani are expected not to use the pool until four o’clock in the afternoon. There’s another pool just for children elsewhere on the property. The main pool is restricted.
Today, we have so many wealthy younger people who want to travel with their children. We have to welcome them. We have to include them. We often arrange to have them fed early. Kids like to eat at six o’clock; the parents come along and have their meal at eight or later — we don’t want, in the formal restaurants, to have any loud children. It’s just a question of how you manage children. We don’t allow young children to go to the game parks, the game lodges, in Botswana until they’re at least 12 years of age. There are some restrictions there.
In general, children are very welcome. We’ll be heading off to the Mount Nelson at the end of December and for about 10 days, the place will be full of children. What we’ve done there is set up a separate pool for adults, where children are not permitted. The children are permitted in the main pool at all times but, in the quiet pool for adults, they’re not welcome. That seems to work very well.
OR: What is your favorite Belmond hotel and your favorite hotel outside the group?
Sherwood: I own two apartments personally in the Hotel Cipriani. We spend four or five weeks a year there. Obviously that’s going to be my favorite hotel in the Belmond Group.
Otherwise, the “favorite hotel” question cannot be answered because you need to think about where. What region are we talking about? You need to ask, “Well, what is your favorite hotel in Paris?” There, of course, the Bristol is my favorite hotel, although the Ritz is being renovated. It’s going to reopen next year. It may become number one, as it was always in the past.
In London I think Claridge’s is the best hotel, although I never stay in a hotel in London because I live in London. In New York, we stay at the Carlyle which, even though it’s a bit faded, still has all those elements of atmosphere and service that you expect from a grand hotel. In Tokyo, I would stay at the Palace Hotel, which overlooks the royal palace there. In Rome, I love the Russie. In Los Angeles, the Bel Air.
My first luxury hotel experience, as I mentioned, was in Hong Kong, at the Peninsula. The Peninsula was the hotel in 1955 and it’s the hotel today. It’s owned by the Kadoorie family. It’s a brilliant place to stay. As I say, it depends on where you’re going. There’s no one hotel which surpasses all others in the world. In each region, there’s a wonderful hotel that I think is the best.
OR: What are your favorite resorts?
Sherwood: My experience with resorts has been somewhat mixed. The first resort hotel I bought was in the Bahamas. I discovered that there were terrible problems in the Bahamas. The first problem being that the weather was not dependable. It got cold in January and February and it rained. Most of all the government of the day was corrupt and there were terrible problems with drugs and crime. I then sold that and decided that what had to make a great resort hotel is guaranteed good weather, during the entire year or season.
So I bought my next resort in St. Martin in the West Indies. That’s La Samanna. Then that extended to Maroma, which is in the Yucatan in Mexico. It has not only got a wonderful beach but the fascinating ancient Mayan cities and ruins around. The Timeo in Taormina, Sicily, adjoins the Greek amphitheater and is in sight of Mount Etna. The Monasterio in Cuzco is near the ancient ruins of Machu Picchu. The Cateratas is next to the Iguassu Falls in Brazil. For me, the most boring thing to do is to go and sit on a beach where there’s absolutely nothing else on offer. If I go to a resort hotel, I want to be able to of course enjoy my time at the pool, but also to do other things, to have a rich experience.
I would go to Amandari in Bali, which is Adrian Zecha’s hotel. I think that’s a great resort. I go to Southeast Asia every year in connection with business and always stay at the Mandarin Oriental in Bangkok, which is a great resort hotel, although it doesn’t have a beach. Sandy Lane, in Barbados, is a favorite as well.
OR: Do you think that the traditional hotelier is disappearing?
Sherwood: I think you have got a point here. What worries me a bit is that the hotel industry seems to have devolved into brands. Each hotel group now seems to have many different brands; the experience is supposed to be different between the brands. I find it very difficult to keep track of all of these brands. Starwood must have 10 different brands. Marriott must have 10 brands. I think that you have to draw a distinction between personalized, smaller hotels and the big chain hotels.
The big chain hotels tend to be run by graduates of hotel schools. Perhaps they don’t have the same dedication to creating the personality of their properties as was the case in the past. I mean we, in Orient Express Hotels, had great hoteliers, like Natale Rusconi, who managed the Hotel Cipriani for us and was also responsible for all our hotels in Italy and who ensured that the general managers of all those hotels were dedicated hoteliers of great charisma and knowledge with the ability to attract repeat clientele.
OR: What’s the next challenge for you?
Sherwood: I’m really semi-retired, although I carry a card around that says “Belmond Founder and Chairman Emeritus.” I’ve been looking at a number of investments in five-star properties. I think the one thing that we all learned from Adrian Zecha and the Aman group is that you could actually build smaller hotels, say only 40 or 50 rooms, which were so outstanding that they could achieve extremely high rates and cover the overhead.
They’re all existing properties, not new builds. Aman has tended to go for new builds. They do have that potential of being outstanding in their localities. There are several locations that are looking promising. Provided I don’t have to run the hotels myself, I would like to acquire properties of distinction with potential and let them operate successfully. OR: Has the appetite of the luxury hotel consumer changed over the long time you’ve been in the business? Sherwood: Yes, I think that people want a more comprehensive experience. It can’t just be a bed and breakfast or just a hotel room, if you like. I think that every property that I’ve acquired has been acquired because of the other experience which can be enjoyed contiguously to the hotel. People come to me with the most bizarre proposals: to buy big hotel blocks in Panama City or someplace. Who on earth wants to go there? What is the experience of being in Panama City?
I’m very conscious of this need to make a holiday a wider-ranging experience than just staying in a hotel. That’s also been a factor in cruise ships and in seagoing. In Belmond we have several cruise ships. We have small cruise ships. We have canal barges and things like that, all based on providing a five-star hotel experience, but with this extra dimension of scenery and movement.
And as long as we’re talking about what customers want, I’m going to give you my hates. My hates are, first of all, room safes mounted at floor level, rather than at shoulder level. Hotel laundries that will not fold shirts despite being asked to. Soaps in tight plastic wrappers that cannot be removed with wet hands and that are too strongly scented. Rooms that do not have adequate hanging and drawer space. Desks that do not have strong reading lights or convenient sockets for plug-in of devices. I would just say that great luxury hotels do not have any of these deficiencies.