Investing icon Richard Branson has created a multi-billion dollar media company, been knighted in England and has even crossed the Pacific Ocean in a hot-air balloon. But now the Virgin Group’s founder is doing something he’s never done before: Starting a hotel chain.
While the business venture is far from the most daring feat Branson has attempted, he is hoping it will be one of his most successful. Branson has set aside $500 million for the new hotel chain, a pittance for the man worth over $3.9 billion.
Branson intends his four-star chain to appeal to “high income, well-educated, metropolitan ‘creative class’customers,” who will be attracted by the hotel’s affiliation with Virgin Group. Locations such as New York, Los Angeles, Miami, Boston and San Francisco have been targeted as potential launching points. Branson expects to open approximately 25 destinations within the next 10 years.
The hotels should compete with other luxury lodging options including Hyatt Hotels Corp. (NYSE: H) and Marriott International’s (NYSE: MAR) JW-Marriott and Ritz Carlton locations, among others.
The business venture comes at an opportune time, as the lodging industry seems to have rebounded from the recession. According to Smith Travel Research Inc., in the top 25 U.S. markets, revenue per available room rose to $73.87 this year from $71.08 last year.
If successful, Virgin Hotels would be just another piece of the Virgin Group’s 360 piece puzzle. With over 360 companies, Richard Branson works in every industry from florists to airlines to alcoholic beverages.
Virgin Group’s flagship company, Virgin Media (NASDAQ: VMED) has posted great numbers in 2010, including a stock climb of +30.3%. Additionally, the stock has gained nearly +69% since last September. In July, VMED reported revenue growth of +7.1% in the second quarter, year-on-year. This represented the largest growth for the company since 2006.
Not all of Branson’s undertakings have been wildly successful however, i.e. Virgin America. The airline, founded in 2007, has seen continual losses even when other airlines are starting to thrive. In the second quarter, Virgin America lost $15.5 million, when competitors all posted gains. Continental Airlines (NYSE: CAL) is up +33.4% year-to-date, while JetBlue (NASDAQ: JBLU) and Southwest Airlines (NYSE: LUV) are up +5.3% and +5.8%, respectively.
Branson is hoping a successful hotel chain will relieve some of the pressure from his less than stellar airline business. The strength of the industry coupled with Virgin’s brand image would suggest a successful future for the hotel chain. However, it’s likely Branson was thinking the same thing when he launched Virgin America in 2007. Even if the hotel business isn’t as kind to Virgin as Branson would hope, you have to believe the next business venture is right around the corner for the $3.9 billion man.
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