Frank M Pfaller

Founder President Hoteliers Guild
www.hoteliersguild.org





Ambassador Extraordinaire
WorldGuide www.worldguide.eu

Condé Nast Traveller Gold List 2011
Thermae Spa - Villa Padierna Palace, Marbella, Spain

Ambassador Extraordinaire
To King Denpasar IX. Bali

President
SENSES Wellness Awards 2009 and Chairman of the Advisory Board

International Trustee
The American Academy of Hospitality Sciences www.stardiamondaward.com

Hôtelier cum laude
Travel Digest, USA

Excellence in Management Award
Travel Digest, USA

Honorary Member
Légion d´Honeur du Voyage, Brussels, Belgium

Five Star Diamond Award
The American Academy of Hospitality Sciences

Number One within the Top 25 Hideaways in Europe, and Number Eleven Worldwide, 1999
HIDEWAYS for Las Dunas Beach Hotel & Spa

Number Two
Best New Resort Worldwide, 1997, Gallivanter’s Guide, for Las Dunas Beach Hotel & Spa

Most Memorable Hotel Cuisine Worldwide
Gallivanter’s Guide, for Las Dunas Beach Hotel & Spa

One of the 100 Top Spas in the World
VOGUE, England, 1999, for Las Dunas Beach Hotel & Spa

One of the 30 Top Spas in the World
SENSES, Germany, 1999, for Las Dunas Beach Hotel & Spa

Hôtelier of the Decade
Marbella, Spain, October 2001

Founder & President of the Davidoff Gourmet Festival
Kitzbühel, Austria

Golden Globe with Diamond
VIP-Loge, Zurich, 2002-10-26

Founder & Leading Partner
Couture Hospitality Concepts - Munich | Marbella | Beijing | Shanghai

Owner's Representative
Donghu Group, Shanghai - The RuiJin

Managing Partner
Ca Isabelle | Lugano | Switzerland

Managing Partner
Hacienda El Retiro | Malaga | Spain

Owner's Representative
Hoteles Villa Padierna | Marbella | Spain
Development & Management of Eco-Luxury Villa Estates & Spa Retreats | Bali | Indonesia
www.delmangobali.com

Founder President
HoteliersGuild and Partner Hotelier TV, Asia, Pacific & Australia
www.hoteliersguild.org | www.hotelier-tv.com



Owner's Representative
“Vita-Life Health Retreat”, Tabanan Hills, Bali, a Holistic Health Retreat
with an investment volume of approximately 100 million US dollars.
www.vita-life-resort-bali.com

CEO
Ascari Race Resort, Ronda, Marbella
www.ascari.net

Owner’s Representative
Greif Group International
www.greifgroup.com

Owner's Representative
Hotel Los Monteros
www.monteros.com

Chief Operating Officer
Greif Group International

Vice President & Managing Director
Las Dunas Beach Hotel & Spa, Marbella, Spain
www.las-dunas.com

Vice President & Managing Director
Hotel Weisses Rössl, Kitzbühel, Austria
www.weisses-roessl.com

Vice President & Associate
Prestige Resorts International

Managing Director
GRUPO LA QUINTA, Marbella, Spain
www.laquintagolf.com

General Manager
Hotel Puente Romano, Marbella, Spain
www.puenteromano.com
Including marketing responsibilities for Marbella Club Hotel
www.marbellaclub.com

Vice President & Managing Director
Hotel La Bobadilla, Granada, Spain
www.la-bobadilla.com

Vice President & Managing Director
Ca Isabelle S.A., Lugano, Switzerland
www.ca-isabelle.ch

Project Assignment, Managing Director
K-Club, Barbuda
www.kclubbarbuda.com

General Manager
Metechi Palace Hotel, Tbilisi, Georgia, USSR
www.sheraton-metechi.com

General Manager
Hotel Operations/Executive Adviser to the Board
Planal, Portugal

General Manger Hotel Operations
McInerney Properties, Portugal and Spain

Executive Adviser to The Board
Planal, the owning company of Quinta do Lago Resort
www.quintadolago.com

Managing Director
Hotel Guanahani, St. Barth, Caribbean
www.leguanahani.com

General Manager
Kuwait Regency Palace, Kuwait

Project Management
El Rancho Country Club & Casino, Haiti

General Manager
St. James´s Club, Antigua
www.eliteislandresorts.com

General Manager
Beverly Hills Hotel, Durban
www.durban-venues.co.za/beverlyhills.htm

General Manager
The Maharani, Durban


General Manager
Le Touessrok, Mauritius
www.lhw.com

General Manager
Hotel Tres Islas, Fuerteventura, Canary Islands.

General Manager
Safari & Sea Hotel Blue Marlin, Kenya, East Africa

PHILOSOPHY

Frank M Pfaller joined the forces of his CHC (Couture Hospitality Concepts)
signature label, operated by Selected Hotels Promotion LC,
with his international project teams for a mission.
This merger of expertise has been instrumental in assisting private,
institutional investors and even a government-owned group in China to develop,
position and manage an exclusive portfolio of independent luxury hotels
around the globe while they remain the sole properties
of the respective owners and companies.

VISION

Because we can think and act without the constraints of a large chain,
we are able to maximise a hotel’s potential without surrendering to standardisation.
This must be the task that we pursue with pride and exuberance.

WHAT WE DO

We BUILD and EXTEND Brand Value!

Luxury brand owners know today that the value of a company, the ROI and the bottom line
profitability is more than 50 percent dependent upon the value of their brand.

But for a brand to have high value and be extensible to adjacent segments,
it must first be based on a solid strategy that is flawlessly and relentlessly implemented
every hour of every day in everything that every person in the company endeavours to achieve.

We assist clients through the construction of a solid, strategic foundation based on time-tested,
classic principles developed by the world’s leading academic and business strategists.
Then, we help implement the strategy on a consistent and persistent day-by-day,
week-by-week, month-by-month, year-by-year basis to build Brand Value,
and then extend the brand to even further enhance its value.

BRAND VALUE

Brand Value is, in simple terms,

Products with a nearly identical look, feel and function as Apple’s iPhone
and iPad can be purchased in China,
but these products must be sold at prices less than half the price of an Apple product.
The over two times the price premium commanded by Apple is what we call Brand Value.

Imagine two identical products are sold by two different companies –
let’s say one is the manufacturer of a famous brand of luxury goods and the other
was founded by some of its former employees using identical equipment, materials,
craftsmanship and so on. Manufacturing costs are the same.

With the exception of the costs associated with maintaining and communicating the brand,
the top line price premium commanded by the branded provider flows heavily to the bottom line.
Having high Brand Value converts a much higher percentage of revenue into net income.

Using the scenario from above, we can construct this simplified income statement:





In the un-branded case the product’s purchase price is 100 US dollars,
while in the branded case the price is twice that at 200 US dollars.

Cost of Goods Sold (COGS) in both cases is 50 dollars, producing a Gross Margin
(or Gross Profit) of 50 dollars un-branded and 150 dollars branded.

The assumed sales and general and administrative (SG&A) expenses are higher
for a branded product to cover marketing, staff training, policy development
and other expenses associated with maintaining the brand’s value for a branded offer.
In this analysis the SG&A assumed for the branded offer is twice the cost of the un-branded offer.

GOP (Gross Operating Profit) produced by the un-branded offer is 25 dollars
while GOP produced by the branded offer is 100 dollars.

Keep in mind that this simplified model is based on a purchase price difference
of only two times, although it could be much bigger.
For instance, the Hermès Birkin ladies handbag sells for 5,500 euros
(about 7,500 US dollars) – much more than only two times that
of an equivalent un-branded version.

Building Brand Value is good business!

BUILDING BRAND VALUE

Building Brand Value starts with a solid strategy.
Of primary importance within the strategic framework is Position
(the perception of the brand or offer in the minds of consumers)
and Differentiation (what it has that others don’t from the view of the target demographic).


From this basis Brand Value may be constructed over time.

InterBrand is the world’s leading firm providing services to help companies
calculate Brand Value and, in fact, have achieved the world’s first ISO certification
of their renowned methodology identifying ten elements contributing to Brand Value.

We focus on developing the six external factors of a brand: AUTHENTICITY, RELEVANCE,
DIFFERENTIATION, CONSISTENCY, PRESENCE and UNDERSTANDING.

AUTHENTICITY means that what is being offered and marketed must be
based on a true capability of the company or real attribute of an offer.

RELEVANCE requires that the offer must have meaning and value to the target consumer.

DIFFERENTIATION is measured using our eight-point methodology, but in summary can be
described as supplying a superior benefit not offered by others.

CONSISTENCY demands that the value of the offer be provided across all touch-points at all times –
every minute, hour, day, week, month, year, in stores, in interaction with staff,
online, and in marketing.

PRESENCE means the availability of the brand and information about the brand at offline
and in online venues, and the degree of positive communication between real consumers
in traditional socialisation as well as online social media.

UNDERSTANDING starts with awareness but also extends to consumers having a deeper grasp
of the true and full qualities and value of the brand.

To ensure these external factors can be implemented and create value for the brand,
we assist clients in developing four internal brand factors as well:
CLARITY, COMMITMENT, PROTECTION and RESPONSIVENESS.

CLARITY is required internally so that all team members are fully aware of the value
and differentiation of the brand to ensure that the value and differentiation
is maintained and fully extended to clients.

COMMITMENT refers to the degree to which internal people believe in
the importance of the brand’s differentiation and are dedicated to maintaining,
implementing and expanding the brand’s value.

PROTECTION measures the security of the brand across legalities, suppliers, operations,
distribution, geography and other categories.

RESPONSIVENESS calls for the brand to have the ability to change in the market environment
both in view of emerging threats and new opportunities.

Of these ten factors, AUTHENTICITY, RELEVANCE and DIFFERENTIATION
are of utmost importance. The remaining factors support and serve to bridge
and extend the offer to clients and to maintain internal “brand health.”

Let us help you today!

BRAND EXTENSION

Brands that have built high Brand Value have exciting opportunities for extension,
creating new platforms for dramatic improvements in bottom-line profitability.

Brand extension functions and succeeds with low risk on the basis of leveraging client loyalty
and identification, while maintaining an unswerving eye toward the brand’s target demographic
and toward the brand’s differentiated position.

Brand extension, in simple terms, is expanding the offer in view of the needs of the existing
targeted clients. Practically, it is not at all simple, but fraught with pitfalls
unless sharp discipline is maintained relative to target and position.

The Hermès entire business model (since 1837) has been based on brand extension.
Veuve Clicquot Ponsardin recently expanded into hospitality. They did this carefully,
with a view toward target and position. Its team of strategists carefully collaborated
with the design team to ensure that the position was reflected in every detail of
the design implementation. Bvlgari is also expanding into hospitality.

Brand growth and brand extension must be viewed within the framework of risk of eroding
or damaging the existing position (and thus the overall Brand Value).
Any decision that extends or changes the position, target or offer details must be carefully considered
so that the base business is not damaged and loyal customers are not alienated.

EXTENSION RISKS

Brand extension is the single most attractive option for mature brands
that have to some extent saturated the target demographic with existing offers.


Often, the need to extend a brand is felt when the competition is doing so,
but creating attractive, competitive offers can cannibalize much of a brand’s less-loyal followers.
Thus, choosing to NOT extend a brand is often a serious risk in and of itself.


Among the primary methods companies use to extend their brands are
(listed in order of dramatically increasing strategic risk): extended or new offers,
extended or new targets, and extended or new positions (sometimes required to reach new targets).

(We refer to “strategic risk” as a risk category that can be extremely destructive
to a company’s reputation and that may require long periods of time to recover from.)

Creating an extended or new offer while maintaining existing targets and existing positions is
considered relatively low risk. Introducing an extended or new offer is fairly easy to research
in advance, and even if the research is flawed and the product is not widely accepted
(unless the product introduces other negative factors such as poor quality),
it is unlikely to do much long term harm other than the loss of
the initial investment to create and launch the new offer.

Extending or approaching new targets has higher risk. This higher risk arises from the fact that
a company often does not understand the extended or new target very well
and the company’s focus on a new target may in some cases alienate the current
and historical target leading to erosion of the base business.

Lastly, extending or creating an entirely new position entails the highest risk because
it entails modifying or even abandoning the very reason that current customers are buying from the brand.



If we assume there are three strategies (stay with existing, extend and create new) along with three methods
(offer, target and position) we can see 33 (or 3 x 3 x 3) = 27 scenarios to evaluate.
For the purpose of theoretical analysis, we can calculate risk values for each of the 27 scenarios
by assigning relative risk values as follows:



These numbers are somewhat arbitrary but reflect common strategist opinions about the relative risk of different approaches.

For the sake of thoroughness and full understanding, here are the 27 scenarios:



And here are the results for all scenarios:



The three noticeable plateaus on the chart above are of course driven by our assignment
of risk associated with existing, extended or new position.

Clearly, to deviate from existing successful positions begins to
dramatically increase risk compared to other methods of brand extension.

Do extend, but extend wisely!

HERMÈS MINI CASE

Thierry Hermès in Paris, France founded the Hermès Company in 1837.

Its first product was a horse bridle. Today (early 2012),
its annual business is nearly 3 billion euros.
How did Hermès accomplish this remarkable feat?

They did it via brand extension, strictly following the strategy he had established in 1837.


Let’s look more carefully at Hermès – our favourite brand in terms of strategic discipline resulting
in incredible success that results from unfailing adherence to strategic principles.

Immediately after its founding, Thierry Hermès established a strategy
(whether he knew it or not) based on targeting noblemen using the simple
but powerful position of MCCS:



From its first horse bridle, Hermès quickly became known for MCCS among Paris elites.
Demand increased dramatically along with requests for other products.

While Hermès sought to expand, it did so in a manner that never compromised MCCS,
nor did it ever lose sight of its target. By around 1880, the brand had extended
“all the way” to saddles. Then a Hermès retail shop opened near Palais de l'Elysée,
and geographic expansion extended into Russia and Asia.

In 1922, Hermès’ first handbag was introduced; in 1924, it first ventured into the United States;
in 1929, its first collection of women’s apparel appeared.
In the ‘30s came its now famous silk scarves, in ‘46 its silk ties, and in ‘49 its fragrances.

Today Hermès has over 50 product lines and about three billion euros in annual revenue.
In 175, years the company has not deviated from its target except to extend it
to include wealthy women, or from its MCCS position!






As mentioned in EXTENSION RISKS the most common extension methods
may be some combination of approaches shown below:



As previously covered, with each of the three methods (position, target, offer)
having three approaches (existing, extended, new) there are 27 common ways
for companies to extend brands, and each carries its own level of risk.

Of the 27 possible ways for Hermès to extend, they used only five:



What level of risk did Hermès face with these five means of extension?



Their extension approach has been extremely low risk and incredibly successful.

And that, in our view, is pretty smart!

COKE MINI CASE

This is the story of one of the most colossal strategy and marketing mistakes in modern history.
We examine this story in the context of brand extension and introduce a few other key concepts.



Coca-Cola was introduced in the US in the 1880s. It was the first cola product on the market
and created a new category. Coke’s subsequent marketing strongly relied on an “original”
position and heavily emphasized their “original” standing. In the 1940s, advertisements read,
“The only thing like Coca-Cola is Coca-Cola itself. It’s the real thing.”

In 1898, Pepsi-Cola was introduced and was the only even marginal challenger
to Coke’s near complete dominance of the market.

By the early 1950’s, Pepsi found it self in a position competing head-on
with Coke (the industry leader by far), with no noticeable differentiation,
with only about 15 percent market-share, and losing market power to Coke
in terms of distribution influence, marketing budgets, etc.

Faced with increasing marginalization and even extinction, Pepsi decided to launch
a new offer to a new target with a new position. On our scale of measuring risk
for brand extension, this move scores at the very top, but faced with the alternatives,
it was actually no risk at all. Essentially, Pepsi was a company with no market-share
and no net income with which to start over with a completely new brand.
But they had a secret weapon.



Strategic research and thought had been advancing in the US. Concepts of segmentation,
targeting, and differentiation were relatively new ideas and, apparently, unheard of by Coke executives.

Pepsi chose to re-position itself as a youth brand; it narrowed its focus with a slightly
sweeter product more appealing to a younger demographic.
In essence, their secret weapon was differentiating for a narrower demographic than the entire market.

By maintaining and carefully and consistently investing in its new position and maintaining
focus on its new target, Pepsi began to gain ground. The marketing was consistent and persistent.
In the 1970s, it secretly conducted blind taste tests and, finding a significant advantage,
publicly launched the Pepsi Challenge where it regularly won in blind taste tests.

In the 1980s, it began a worldwide tour of the Pepsi Challenge and later announced
that the “Pepsi Generation” had arrived. Market share continued to grow and the fierce
marketing battles between the two companies brought even more attention to the segment,
increasing its overall size significantly.

Why was this happening?

The powerful, positive trends had been set in motion and maintained by Pepsi through relentless,
unblinking focus on maintenance of its existing position, dedication to its target, and refusal
to dilute energy by adding new offers to a segment that had little “elbow room” to start with.

Coke’s market share in the soda segment dropped to a record low of 24 percent in the early 1980s –
still the leader, but with Pepsi close behind in number two position, and Diet Pepsi in number three.

Some analysts say the market was reaching a new equilibrium with Coke owning
the older demographic segment and Pepsi the clear leaders of the younger demographic segment.



But Coke panicked and began shelling out millions of dollars to an army of hot-air consultants.

In a growing market with a likely stabilizing market-share, the solution dreamed up
by the consultants (strategists the world over shook their bowed heads at) was for Coke to:




Regarding the abandonment of its original position one analyst said,


With its “new real thing”, Coke was essentially telling consumers that for the past 20 years
they had “missed the boat” and been making the wrong decision.



In response to the announcement of New Coke by Coke executives, Pepsi’s CEO declared
at his own press conference that, “The cola wars are over. We won.”

Then he announced a company wide holiday in celebration.

Your competitors will not sit idly by while you manoeuvre.



Coke’s “strategy” involved new position (the riskiest), new target (second riskiest)
and new offer (third riskiest). On the Extension Risk scale, this approach scores 113, the highest figure.

Let’s take a look…






Most people would agree that choosing the riskiest strategy possible would be bad enough,
but not for Coca-Cola.

First, it chose to enter a market behind a leader and with no differentiation.
Despite the fact that Thierry Hermès at least seemed to understand this concept in 1837,
and Pepsi had clearly understood it in the 1950s, Coke executives in 1985 seemed unable to grasp it.

Second, Coke did not just make a line extension. It also slaughtered its global,
market-leading offer. This was done due to distribution-related issues. Shelf-space itself
is a war that supermarket brands wage against one another, and Pepsi had gained a lot of ground
in this arena, reducing Coke’s available shelf space. Splitting shelf space between
two of its own competing brands was not considered feasible, nor would be the increased distribution,
inventory and marketing costs.

Lastly, not only did Coke choose to pursue a new target (the second riskiest approach),
but it chose to pursue a noticeably hostile new target, made so in part by the previous
polarizing marketing approaches of both Coke and Pepsi.



The result was, in a word, unsurprisingly, “disaster.”

Not only was this entire debacle destined to utter failure purely on strategic principles,
but also Coke had dramatically underestimated the loyalty of its original target
to the original offer and original position – a treble failure
(beyond all the other failures of basic strategic understanding).

New Coke was introduced on 23 April 1985. Production of the original coke was halted within the week.
And thus began the BOYCOTT of New Coke by the original target demographic.
Intense media coverage fuelled increasing outrage; protests outside company headquarters
in Atlanta garnered more negative press. Disgusted, Coke drinkers switched en masse to Pepsi.



On 11 July 1985, less than two months after the launch of New Coke, the company CEO called
a press conference and said, “We have heard you.” Then he turned the press conference
over to the COO to announce the return of the original Coke.



Strategy is often viewed as an abstract science, but it is not.
It is a reflection of basic human nature set into the context of a commercial environment.
One cannot succeed while ignoring basic human nature.

Stories like the one above unfortunately abound because basic strategic principles are ignored.

In the 1960s IBM was one of the most profitable large companies making more
or less one product, mainframe computers.

By 1991, IBM had extended their brand to include workstations, midrange computers,
pen computers, personal computers, software, telephones and networks.
By then, its revenues were 65,000,000,000 US dollars.
Its losses were 8,000,000 US dollars…per day.

Brand extension is a critically important tool, but it must be used judiciously,
thoughtfully, carefully and with proper analysis before it is executed.

STRATEGY PROCESS

CHC’s strategy process is designed to leave no stone unturned as it progresses
through a methodical sequential analysis to build the foundation upon
which your brand value can be constructed, maintained or extended.

Our process may be applied at many levels within a company,
from full corporate strategy to divisional strategy to brand-level,
segment-level or even product-level challenges.



Customizable to any situation

Based on time-tested approaches developed by the world's top academic strategists

A quantified approach, which helps remove subjectivity
and reduces risk via numerical documentation and ranking of inputs

Objective (completely eliminates "hand-waving" arguments)

A lasting platform for discussion and debate within a rigorous proven strategic framework

The output is a complete strategy that captures:

All high-level strategic elements (such as targeting, position goal and sharp,
rigorously-tested differentiation)

Strategic objectives (SOs) that define major steps required to achieve success

Tactical implementation plans (TIPs) that define actions, assignees and timelines
so that the SOs become actionable and are ensured of implementation

A control plan to provide for management of strategy and periodic review of all TIP’s,
and to allow for minor adjustments as new information becomes available or
in response to changes in the environment



The following are the key steps in the process:



Based on classic SWOT
Two internal assessments: Strengths, Weaknesses
Two external assessments: Opportunities, Threats
This defines the brand, market and competitive landscape,
i.e. What we have to work with and the environment in which we must succeed




Defines potential target segments



Define a preliminary offer concept (required for other analyses)



Completed via Market Factors/Business Strengths analysis
Market factors evaluates the attractiveness of a segment via:
Profitability
TAM (Total Available Market) size
TAM growth rate
Competitive intensity



Ability to deliver the needed offer
Ability to provide the appropriate quality level
Ability of company to be profitable (just because a segment is profitable does not mean
any company can be profitable because different companies have different cost basis)
Fit to sales channel: Can the segment be practically marketed to?
Strategic fit: Does the segment have synergies with other potential target segments?



Categorize each segment into one of four macro strategic approaches:
Exit (or do not approach/enter the segment)
Invest (improve business strengths to better serve the segment)
Grow (invest in increasing sales)
Harvest (take what comes, but spend no time, energy or money)


Note: Business Strengths can be improved via investment/changing approaches, etc.,
but market factors cannot be changed.





Choose specific segments to target (based on the market factors business strengths analysis)
Targets are generally in the invest or grow macro-strategy quadrants



Develop potential position goals and supporting initial offers
This done through brainstorming
“Position goal” means the desired perception of the brand in the minds of consumers



Evaluate differentiability of the offers via the classic 8-point criteria of:
Important (Highly valued by most customers)
Superior (Provides a better benefit)
Communicable (Can be perceived by customers)
Unique (Not currently offered; not easily copied)
Affordable (Customers are able and willing to pay)
Profitable (Company can make a profit) Realistic (Consistent with company/ brand strengths)
Credible (Customers will believe)






Define final Position Goal
Select certain attributes of the offer to be primarily communicated – preferably limited to a small number



Develop the MarCom plan to communicate the selected-offer differentiated attributes. MarCom includes WHAT to communicate, HOW to communicate, Advertising, PR, Promotion etc.


Develop strategic objectives – SO's (these are very often dominated by internal activities
to improve business strengths) The various analyses above create long lists of issues.
For example the threats analysis creates a list of existing or potential threats.
Each threat is numerically ranked for “likelihood of occurrence”
and “severity of impact” if it does occur. These numerical factors are multiplied together
to create an overall ranking. The overall ranking is then used to create some priorities
with top priority items being finally addressed via strategic objectives.



Develop tactical implementation plans – TIP's for each SO (This is the who does what, when, where and how –
basically a project management plan with people assigned and accountable to complete actions.)



Develop the control plan – to ensure actions are completed on time, people are accountable and that adjustments can be made when market factors change or when new information becomes available –
if the above work is done properly adjustments are usually minor for most businesses.



Full strategy reassessment/refresh – usually every three years is reasonable for most businesses
(excluding online businesses where the environment is in rapid flux).

CHC’s strategy process executes all of the elements above
in close cooperation with your knowledgeable team members.
We bring the system and the discipline while we rely on the industry knowledge of
your people for some of the insightful and detailed inputs.


We never “tell” a client what to do. Instead we bring the right answers to the surface
in a structured manner consistent with sound and proven strategic principles.

With quality input, this approach always works.

CONTACT

CHC | Founder and Leading Partner
Selected Hotels L.C. | CEO
selectedhotels@mac.com
+41 22 534 9478
+86 187 1791 2501



CHC | Managing Partner for Strategy and Marketing
Rain8 Group LLC | CEO
tracy@raineight.com
+86 158 0177 9701

Frank M Pfaller

Founder President Hoteliers Guild
www.hoteliersguild.org





Ambassador Extraordinaire
WorldGuide www.worldguide.eu

Condé Nast Traveller Gold List 2011
Thermae Spa - Villa Padierna Palace, Marbella, Spain

Ambassador Extraordinaire
To King Denpasar IX. Bali

President
SENSES Wellness Awards 2009 and Chairman of the Advisory Board

International Trustee
The American Academy of Hospitality Sciences www.stardiamondaward.com

Hôtelier cum laude
Travel Digest, USA

Excellence in Management Award
Travel Digest, USA

Honorary Member
Légion d´Honeur du Voyage, Brussels, Belgium

Five Star Diamond Award
The American Academy of Hospitality Sciences

Number One within the Top 25 Hideaways in Europe, and Number Eleven Worldwide, 1999
HIDEWAYS for Las Dunas Beach Hotel & Spa

Number Two
Best New Resort Worldwide, 1997, Gallivanter's Guide, for Las Dunas Beach Hotel & Spa

Most Memorable Hotel Cuisine Worldwide
Gallivanter's Guide, for Las Dunas Beach Hotel & Spa

One of the 100 Top Spas in the World
VOGUE, England, 1999, for Las Dunas Beach Hotel & Spa

One of the 30 Top Spas in the World
SENSES, Germany, 1999, for Las Dunas Beach Hotel & Spa

Hôtelier of the Decade
Marbella, Spain, October 2001

Founder & President of the Davidoff Gourmet Festival
Kitzbühel, Austria

Golden Globe with Diamond
VIP-Loge, Zurich, 2002-10-26

Founder & Leading Partner
Couture Hospitality Concepts - Munich | Marbella | Beijing | Shanghai

Owner's Representative
Donghu Group, Shanghai - The RuiJin

Managing Partner
Ca Isabelle | Lugano | Switzerland

Managing Partner
Hacienda El Retiro | Malaga | Spain

Owner's Representative
Hoteles Villa Padierna | Marbella | Spain
Development & Management of Eco-Luxury Villa Estates & Spa Retreats | Bali | Indonesia
www.delmangobali.com

Founder President
HoteliersGuild and Partner Hotelier TV, Asia, Pacific & Australia
www.hoteliersguild.org | www.hotelier-tv.com



Owner's Representative
"Vita-Life Health Retreat", Tabanan Hills, Bali, a Holistic Health Retreat
with an investment volume of approximately 100 million US dollars.
www.vita-life-resort-bali.com

CEO
Ascari Race Resort, Ronda, Marbella
www.ascari.net

Owner's Representative
Greif Group International
www.greifgroup.com

Owner's Representative
Hotel Los Monteros
www.monteros.com

Chief Operating Officer
Greif Group International

Vice President & Managing Director
Las Dunas Beach Hotel & Spa, Marbella, Spain
www.las-dunas.com

Vice President & Managing Director
Hotel Weisses Rössl, Kitzbühel, Austria
www.weisses-roessl.com

Vice President & Associate
Prestige Resorts International

Managing Director
GRUPO LA QUINTA, Marbella, Spain
www.laquintagolf.com

General Manager
Hotel Puente Romano, Marbella, Spain
www.puenteromano.com
Including marketing responsibilities for Marbella Club Hotel
www.marbellaclub.com

Vice President & Managing Director
Hotel La Bobadilla, Granada, Spain
www.la-bobadilla.com

Vice President & Managing Director
Ca Isabelle S.A., Lugano, Switzerland
www.ca-isabelle.ch

Project Assignment, Managing Director
K-Club, Barbuda
www.kclubbarbuda.com

General Manager
Metechi Palace Hotel, Tbilisi, Georgia, USSR
www.sheraton-metechi.com

General Manager
Hotel Operations/Executive Adviser to the Board
Planal, Portugal

General Manger Hotel Operations
McInerney Properties, Portugal and Spain

Executive Adviser to The Board
Planal, the owning company of Quinta do Lago Resort
www.quintadolago.com

Managing Director
Hotel Guanahani, St. Barth, Caribbean
www.leguanahani.com

General Manager
Kuwait Regency Palace, Kuwait

Project Management
El Rancho Country Club & Casino, Haiti

General Manager
St. James´s Club, Antigua
www.eliteislandresorts.com

General Manager
Beverly Hills Hotel, Durban
www.durban-venues.co.za/beverlyhills.htm

General Manager
The Maharani, Durban


General Manager
Le Touessrok, Mauritius
www.lhw.com

General Manager
Hotel Tres Islas, Fuerteventura, Canary Islands.

General Manager
Safari & Sea Hotel Blue Marlin, Kenya, East Africa

PHILOSOPHY

Frank M Pfaller joined the forces of his CHC (Couture Hospitality Concepts)
signature label, operated by Selected Hotels Promotion LC,
with his international project teams for a mission.
This merger of expertise has been instrumental in assisting private,
institutional investors and even a government-owned group in China to develop,
position and manage an exclusive portfolio of independent luxury hotels
around the globe while they remain the sole properties
of the respective owners and companies.

VISION

Because we can think and act without the constraints of a large chain,
we are able to maximise a hotel's potential without surrendering to standardisation.
This must be the task that we pursue with pride and exuberance.

WHAT WE DO

We BUILD and EXTEND Brand Value!

Luxury brand owners know today that the value of a company, the ROI and the bottom line
profitability is more than 50 percent dependent upon the value of their brand.

But for a brand to have high value and be extensible to adjacent segments,
it must first be based on a solid strategy that is flawlessly and relentlessly implemented
every hour of every day in everything that every person in the company endeavours to achieve.

We assist clients through the construction of a solid, strategic foundation based on time-tested,
classic principles developed by the world's leading academic and business strategists.
Then, we help implement the strategy on a consistent and persistent day-by-day,
week-by-week, month-by-month, year-by-year basis to build Brand Value,
and then extend the brand to even further enhance its value.

BRAND VALUE

Brand Value is, in simple terms,

Products with a nearly identical look, feel and function as Apple's iPhone
and iPad can be purchased in China,
but these products must be sold at prices less than half the price of an Apple product.
The over two times the price premium commanded by Apple is what we call Brand Value.

Imagine two identical products are sold by two different companies –
let's say one is the manufacturer of a famous brand of luxury goods and the other
was founded by some of its former employees using identical equipment, materials,
craftsmanship and so on. Manufacturing costs are the same.

With the exception of the costs associated with maintaining and communicating the brand,
the top line price premium commanded by the branded provider flows heavily to the bottom line.
Having high Brand Value converts a much higher percentage of revenue into net income.

Using the scenario from above, we can construct this simplified income statement:





In the un-branded case the product's purchase price is 100 US dollars,
while in the branded case the price is twice that at 200 US dollars.

Cost of Goods Sold (COGS) in both cases is 50 dollars, producing a Gross Margin
(or Gross Profit) of 50 dollars un-branded and 150 dollars branded.

The assumed sales and general and administrative (SG&A) expenses are higher
for a branded product to cover marketing, staff training, policy development
and other expenses associated with maintaining the brand's value for a branded offer.
In this analysis the SG&A assumed for the branded offer is twice the cost of the un-branded offer.

GOP (Gross Operating Profit) produced by the un-branded offer is 25 dollars
while GOP produced by the branded offer is 100 dollars.

Keep in mind that this simplified model is based on a purchase price difference
of only two times, although it could be much bigger.
For instance, the Hermès Birkin ladies handbag sells for 5,500 euros
(about 7,500 US dollars) – much more than only two times that
of an equivalent un-branded version.

Building Brand Value is good business!

BUILDING BRAND VALUE

Building Brand Value starts with a solid strategy.
Of primary importance within the strategic framework is Position
(the perception of the brand or offer in the minds of consumers)
and Differentiation (what it has that others don't from the view of the target demographic).


From this basis Brand Value may be constructed over time.

InterBrand is the world's leading firm providing services to help companies
calculate Brand Value and, in fact, have achieved the world's first ISO certification
of their renowned methodology identifying ten elements contributing to Brand Value.

We focus on developing the six external factors of a brand: AUTHENTICITY, RELEVANCE,
DIFFERENTIATION, CONSISTENCY, PRESENCE and UNDERSTANDING.

AUTHENTICITY means that what is being offered and marketed must be
based on a true capability of the company or real attribute of an offer.

RELEVANCE requires that the offer must have meaning and value to the target consumer.

DIFFERENTIATION is measured using our eight-point methodology, but in summary can be
described as supplying a superior benefit not offered by others.

CONSISTENCY demands that the value of the offer be provided across all touch-points at all times –
every minute, hour, day, week, month, year, in stores, in interaction with staff,
online, and in marketing.

PRESENCE means the availability of the brand and information about the brand at offline
and in online venues, and the degree of positive communication between real consumers
in traditional socialisation as well as online social media.

UNDERSTANDING starts with awareness but also extends to consumers having a deeper grasp
of the true and full qualities and value of the brand.

To ensure these external factors can be implemented and create value for the brand,
we assist clients in developing four internal brand factors as well:
CLARITY, COMMITMENT, PROTECTION and RESPONSIVENESS.

CLARITY is required internally so that all team members are fully aware of the value
and differentiation of the brand to ensure that the value and differentiation
is maintained and fully extended to clients.

COMMITMENT refers to the degree to which internal people believe in
the importance of the brand's differentiation and are dedicated to maintaining,
implementing and expanding the brand's value.

PROTECTION measures the security of the brand across legalities, suppliers, operations,
distribution, geography and other categories.

RESPONSIVENESS calls for the brand to have the ability to change in the market environment
both in view of emerging threats and new opportunities.

Of these ten factors, AUTHENTICITY, RELEVANCE and DIFFERENTIATION
are of utmost importance. The remaining factors support and serve to bridge
and extend the offer to clients and to maintain internal "brand health."

Let us help you today!

BRAND EXTENSION

Brands that have built high Brand Value have exciting opportunities for extension,
creating new platforms for dramatic improvements in bottom-line profitability.

Brand extension functions and succeeds with low risk on the basis of leveraging client loyalty
and identification, while maintaining an unswerving eye toward the brand's target demographic
and toward the brand's differentiated position.

Brand extension, in simple terms, is expanding the offer in view of the needs of the existing
targeted clients. Practically, it is not at all simple, but fraught with pitfalls
unless sharp discipline is maintained relative to target and position.

The Hermès entire business model (since 1837) has been based on brand extension.
Veuve Clicquot Ponsardin recently expanded into hospitality. They did this carefully,
with a view toward target and position. Its team of strategists carefully collaborated
with the design team to ensure that the position was reflected in every detail of
the design implementation. Bvlgari is also expanding into hospitality.

Brand growth and brand extension must be viewed within the framework of risk of eroding
or damaging the existing position (and thus the overall Brand Value).
Any decision that extends or changes the position, target or offer details must be carefully considered
so that the base business is not damaged and loyal customers are not alienated.

EXTENSION RISKS

Brand extension is the single most attractive option for mature brands
that have to some extent saturated the target demographic with existing offers.


Often, the need to extend a brand is felt when the competition is doing so,
but creating attractive, competitive offers can cannibalize much of a brand's less-loyal followers.
Thus, choosing to NOT extend a brand is often a serious risk in and of itself.


Among the primary methods companies use to extend their brands are
(listed in order of dramatically increasing strategic risk): extended or new offers,
extended or new targets, and extended or new positions (sometimes required to reach new targets).

(We refer to "strategic risk" as a risk category that can be extremely destructive
to a company's reputation and that may require long periods of time to recover from.)

Creating an extended or new offer while maintaining existing targets and existing positions is
considered relatively low risk. Introducing an extended or new offer is fairly easy to research
in advance, and even if the research is flawed and the product is not widely accepted
(unless the product introduces other negative factors such as poor quality),
it is unlikely to do much long term harm other than the loss of
the initial investment to create and launch the new offer.

Extending or approaching new targets has higher risk. This higher risk arises from the fact that
a company often does not understand the extended or new target very well
and the company's focus on a new target may in some cases alienate the current
and historical target leading to erosion of the base business.

Lastly, extending or creating an entirely new position entails the highest risk because
it entails modifying or even abandoning the very reason that current customers are buying from the brand.



If we assume there are three strategies (stay with existing, extend and create new) along with three methods
(offer, target and position) we can see 33 (or 3 x 3 x 3) = 27 scenarios to evaluate.
For the purpose of theoretical analysis, we can calculate risk values for each of the 27 scenarios
by assigning relative risk values as follows:



These numbers are somewhat arbitrary but reflect common strategist opinions about the relative risk of different approaches.

For the sake of thoroughness and full understanding, here are the 27 scenarios:



And here are the results for all scenarios:



The three noticeable plateaus on the chart above are of course driven by our assignment
of risk associated with existing, extended or new position.

Clearly, to deviate from existing successful positions begins to
dramatically increase risk compared to other methods of brand extension.

Do extend, but extend wisely!

HERMÈS MINI CASE

Thierry Hermès in Paris, France founded the Hermès Company in 1837.

Its first product was a horse bridle. Today (early 2012),
its annual business is nearly 3 billion euros.
How did Hermès accomplish this remarkable feat?

They did it via brand extension, strictly following the strategy he had established in 1837.


Let's look more carefully at Hermès – our favourite brand in terms of strategic discipline resulting
in incredible success that results from unfailing adherence to strategic principles.

Immediately after its founding, Thierry Hermès established a strategy
(whether he knew it or not) based on targeting noblemen using the simple
but powerful position of MCCS:



From its first horse bridle, Hermès quickly became known for MCCS among Paris elites.
Demand increased dramatically along with requests for other products.

While Hermès sought to expand, it did so in a manner that never compromised MCCS,
nor did it ever lose sight of its target. By around 1880, the brand had extended
"all the way" to saddles. Then a Hermès retail shop opened near Palais de l'Elysée,
and geographic expansion extended into Russia and Asia.

In 1922, Hermès' first handbag was introduced; in 1924, it first ventured into the United States;
in 1929, its first collection of women's apparel appeared.
In the '30s came its now famous silk scarves, in '46 its silk ties, and in '49 its fragrances.

Today Hermès has over 50 product lines and about three billion euros in annual revenue.
In 175, years the company has not deviated from its target except to extend it
to include wealthy women, or from its MCCS position!






As mentioned in EXTENSION RISKS the most common extension methods
may be some combination of approaches shown below:



As previously covered, with each of the three methods (position, target, offer)
having three approaches (existing, extended, new) there are 27 common ways
for companies to extend brands, and each carries its own level of risk.

Of the 27 possible ways for Hermès to extend, they used only five:



What level of risk did Hermès face with these five means of extension?



Their extension approach has been extremely low risk and incredibly successful.

And that, in our view, is pretty smart!

COKE MINI CASE

This is the story of one of the most colossal strategy and marketing mistakes in modern history.
We examine this story in the context of brand extension and introduce a few other key concepts.



Coca-Cola was introduced in the US in the 1880s. It was the first cola product on the market
and created a new category. Coke's subsequent marketing strongly relied on an "original"
position and heavily emphasized their "original" standing. In the 1940s, advertisements read,
"The only thing like Coca-Cola is Coca-Cola itself. It's the real thing."

In 1898, Pepsi-Cola was introduced and was the only even marginal challenger
to Coke's near complete dominance of the market.

By the early 1950's, Pepsi found it self in a position competing head-on
with Coke (the industry leader by far), with no noticeable differentiation,
with only about 15 percent market-share, and losing market power to Coke
in terms of distribution influence, marketing budgets, etc.

Faced with increasing marginalization and even extinction, Pepsi decided to launch
a new offer to a new target with a new position. On our scale of measuring risk
for brand extension, this move scores at the very top, but faced with the alternatives,
it was actually no risk at all. Essentially, Pepsi was a company with no market-share
and no net income with which to start over with a completely new brand.
But they had a secret weapon.



Strategic research and thought had been advancing in the US. Concepts of segmentation,
targeting, and differentiation were relatively new ideas and, apparently, unheard of by Coke executives.

Pepsi chose to re-position itself as a youth brand; it narrowed its focus with a slightly
sweeter product more appealing to a younger demographic.
In essence, their secret weapon was differentiating for a narrower demographic than the entire market.

By maintaining and carefully and consistently investing in its new position and maintaining
focus on its new target, Pepsi began to gain ground. The marketing was consistent and persistent.
In the 1970s, it secretly conducted blind taste tests and, finding a significant advantage,
publicly launched the Pepsi Challenge where it regularly won in blind taste tests.

In the 1980s, it began a worldwide tour of the Pepsi Challenge and later announced
that the "Pepsi Generation" had arrived. Market share continued to grow and the fierce
marketing battles between the two companies brought even more attention to the segment,
increasing its overall size significantly.

Why was this happening?

The powerful, positive trends had been set in motion and maintained by Pepsi through relentless,
unblinking focus on maintenance of its existing position, dedication to its target, and refusal
to dilute energy by adding new offers to a segment that had little "elbow room" to start with.

Coke's market share in the soda segment dropped to a record low of 24 percent in the early 1980s –
still the leader, but with Pepsi close behind in number two position, and Diet Pepsi in number three.

Some analysts say the market was reaching a new equilibrium with Coke owning
the older demographic segment and Pepsi the clear leaders of the younger demographic segment.



But Coke panicked and began shelling out millions of dollars to an army of hot-air consultants.

In a growing market with a likely stabilizing market-share, the solution dreamed up
by the consultants (strategists the world over shook their bowed heads at) was for Coke to:




Regarding the abandonment of its original position one analyst said,


With its "new real thing", Coke was essentially telling consumers that for the past 20 years
they had "missed the boat" and been making the wrong decision.



In response to the announcement of New Coke by Coke executives, Pepsi's CEO declared
at his own press conference that, "The cola wars are over. We won."

Then he announced a company wide holiday in celebration.

Your competitors will not sit idly by while you manoeuvre.



Coke's "strategy" involved new position (the riskiest), new target (second riskiest)
and new offer (third riskiest). On the Extension Risk scale, this approach scores 113, the highest figure.

Let's take a look…






Most people would agree that choosing the riskiest strategy possible would be bad enough,
but not for Coca-Cola.

First, it chose to enter a market behind a leader and with no differentiation.
Despite the fact that Thierry Hermès at least seemed to understand this concept in 1837,
and Pepsi had clearly understood it in the 1950s, Coke executives in 1985 seemed unable to grasp it.

Second, Coke did not just make a line extension. It also slaughtered its global,
market-leading offer. This was done due to distribution-related issues. Shelf-space itself
is a war that supermarket brands wage against one another, and Pepsi had gained a lot of ground
in this arena, reducing Coke's available shelf space. Splitting shelf space between
two of its own competing brands was not considered feasible, nor would be the increased distribution,
inventory and marketing costs.

Lastly, not only did Coke choose to pursue a new target (the second riskiest approach),
but it chose to pursue a noticeably hostile new target, made so in part by the previous
polarizing marketing approaches of both Coke and Pepsi.



The result was, in a word, unsurprisingly, "disaster."

Not only was this entire debacle destined to utter failure purely on strategic principles,
but also Coke had dramatically underestimated the loyalty of its original target
to the original offer and original position – a treble failure
(beyond all the other failures of basic strategic understanding).

New Coke was introduced on 23 April 1985. Production of the original coke was halted within the week.
And thus began the BOYCOTT of New Coke by the original target demographic.
Intense media coverage fuelled increasing outrage; protests outside company headquarters
in Atlanta garnered more negative press. Disgusted, Coke drinkers switched en masse to Pepsi.



On 11 July 1985, less than two months after the launch of New Coke, the company CEO called
a press conference and said, "We have heard you." Then he turned the press conference
over to the COO to announce the return of the original Coke.



Strategy is often viewed as an abstract science, but it is not.
It is a reflection of basic human nature set into the context of a commercial environment.
One cannot succeed while ignoring basic human nature.

Stories like the one above unfortunately abound because basic strategic principles are ignored.

In the 1960s IBM was one of the most profitable large companies making more
or less one product, mainframe computers.

By 1991, IBM had extended their brand to include workstations, midrange computers,
pen computers, personal computers, software, telephones and networks.
By then, its revenues were 65,000,000,000 US dollars.
Its losses were 8,000,000 US dollars…per day.

Brand extension is a critically important tool, but it must be used judiciously,
thoughtfully, carefully and with proper analysis before it is executed.

STRATEGY PROCESS

CHC's strategy process is designed to leave no stone unturned as it progresses
through a methodical sequential analysis to build the foundation upon
which your brand value can be constructed, maintained or extended.

Our process may be applied at many levels within a company,
from full corporate strategy to divisional strategy to brand-level,
segment-level or even product-level challenges.



Customizable to any situation

Based on time-tested approaches developed by the world's top academic strategists

A quantified approach, which helps remove subjectivity
and reduces risk via numerical documentation and ranking of inputs

Objective (completely eliminates "hand-waving" arguments)

A lasting platform for discussion and debate within a rigorous proven strategic framework

The output is a complete strategy that captures:

All high-level strategic elements (such as targeting, position goal and sharp,
rigorously-tested differentiation)

Strategic objectives (SOs) that define major steps required to achieve success

Tactical implementation plans (TIPs) that define actions, assignees and timelines
so that the SOs become actionable and are ensured of implementation

A control plan to provide for management of strategy and periodic review of all TIP's,
and to allow for minor adjustments as new information becomes available or
in response to changes in the environment



The following are the key steps in the process:



Based on classic SWOT
Two internal assessments: Strengths, Weaknesses
Two external assessments: Opportunities, Threats
This defines the brand, market and competitive landscape,
i.e. What we have to work with and the environment in which we must succeed




Defines potential target segments



Define a preliminary offer concept (required for other analyses)



Completed via Market Factors/Business Strengths analysis
Market factors evaluates the attractiveness of a segment via:
Profitability
TAM (Total Available Market) size
TAM growth rate
Competitive intensity



Ability to deliver the needed offer
Ability to provide the appropriate quality level
Ability of company to be profitable (just because a segment is profitable does not mean
any company can be profitable because different companies have different cost basis)
Fit to sales channel: Can the segment be practically marketed to?
Strategic fit: Does the segment have synergies with other potential target segments?



Categorize each segment into one of four macro strategic approaches:
Exit (or do not approach/enter the segment)
Invest (improve business strengths to better serve the segment)
Grow (invest in increasing sales)
Harvest (take what comes, but spend no time, energy or money)


Note: Business Strengths can be improved via investment/changing approaches, etc.,
but market factors cannot be changed.





Choose specific segments to target (based on the market factors business strengths analysis)
Targets are generally in the invest or grow macro-strategy quadrants



Develop potential position goals and supporting initial offers
This done through brainstorming
"Position goal" means the desired perception of the brand in the minds of consumers



Evaluate differentiability of the offers via the classic 8-point criteria of:
Important (Highly valued by most customers)
Superior (Provides a better benefit)
Communicable (Can be perceived by customers)
Unique (Not currently offered; not easily copied)
Affordable (Customers are able and willing to pay)
Profitable (Company can make a profit) Realistic (Consistent with company/ brand strengths)
Credible (Customers will believe)






Define final Position Goal
Select certain attributes of the offer to be primarily communicated – preferably limited to a small number



Develop the MarCom plan to communicate the selected-offer differentiated attributes. MarCom includes WHAT to communicate, HOW to communicate, Advertising, PR, Promotion etc.


Develop strategic objectives – SO's (these are very often dominated by internal activities
to improve business strengths) The various analyses above create long lists of issues.
For example the threats analysis creates a list of existing or potential threats.
Each threat is numerically ranked for "likelihood of occurrence"
and "severity of impact" if it does occur. These numerical factors are multiplied together
to create an overall ranking. The overall ranking is then used to create some priorities
with top priority items being finally addressed via strategic objectives.



Develop tactical implementation plans – TIP's for each SO (This is the who does what, when, where and how –
basically a project management plan with people assigned and accountable to complete actions.)



Develop the control plan – to ensure actions are completed on time, people are accountable and that adjustments can be made when market factors change or when new information becomes available –
if the above work is done properly adjustments are usually minor for most businesses.



Full strategy reassessment/refresh – usually every three years is reasonable for most businesses
(excluding online businesses where the environment is in rapid flux).

CHC's strategy process executes all of the elements above
in close cooperation with your knowledgeable team members.
We bring the system and the discipline while we rely on the industry knowledge of
your people for some of the insightful and detailed inputs.


We never "tell" a client what to do. Instead we bring the right answers to the surface
in a structured manner consistent with sound and proven strategic principles.

With quality input, this approach always works.

CONTACT

CHC | Founder and Leading Partner
Selected Hotels L.C. | CEO
selectedhotels@mac.com
+41 22 534 9478
+86 187 1791 2501



CHC | Managing Partner for Strategy and Marketing
Rain8 Group LLC | CEO
tracy@raineight.com
+86 158 0177 9701

Frank M Pfaller

Founder President Hoteliers Guild
www.hoteliersguild.org





Ambassador Extraordinaire
WorldGuide www.worldguide.eu

Condé Nast Traveller Gold List 2011
Thermae Spa - Villa Padierna Palace, Marbella, Spain

Ambassador Extraordinaire
To King Denpasar IX. Bali

President
SENSES Wellness Awards 2009 and Chairman of the Advisory Board

International Trustee
The American Academy of Hospitality Sciences www.stardiamondaward.com

Hôtelier cum laude
Travel Digest, USA

Excellence in Management Award
Travel Digest, USA

Honorary Member
Légion d´Honeur du Voyage, Brussels, Belgium

Five Star Diamond Award
The American Academy of Hospitality Sciences

Number One within the Top 25 Hideaways in Europe, and Number Eleven Worldwide, 1999
HIDEWAYS for Las Dunas Beach Hotel & Spa

Number Two
Best New Resort Worldwide, 1997, Gallivanter's Guide, for Las Dunas Beach Hotel & Spa

Most Memorable Hotel Cuisine Worldwide
Gallivanter's Guide, for Las Dunas Beach Hotel & Spa

One of the 100 Top Spas in the World
VOGUE, England, 1999, for Las Dunas Beach Hotel & Spa

One of the 30 Top Spas in the World
SENSES, Germany, 1999, for Las Dunas Beach Hotel & Spa

Hôtelier of the Decade
Marbella, Spain, October 2001

Founder & President of the Davidoff Gourmet Festival
Kitzbühel, Austria

Golden Globe with Diamond
VIP-Loge, Zurich, 2002-10-26

Founder & Leading Partner
Couture Hospitality Concepts - Munich | Marbella | Beijing | Shanghai

Owner's Representative
Donghu Group, Shanghai - The RuiJin

Managing Partner
Ca Isabelle | Lugano | Switzerland

Managing Partner
Hacienda El Retiro | Malaga | Spain

Owner's Representative
Hoteles Villa Padierna | Marbella | Spain
Development & Management of Eco-Luxury Villa Estates & Spa Retreats | Bali | Indonesia
www.delmangobali.com

Founder President
HoteliersGuild and Partner Hotelier TV, Asia, Pacific & Australia
www.hoteliersguild.org | www.hotelier-tv.com



Owner's Representative
"Vita-Life Health Retreat", Tabanan Hills, Bali, a Holistic Health Retreat
with an investment volume of approximately 100 million US dollars.
www.vita-life-resort-bali.com

CEO
Ascari Race Resort, Ronda, Marbella
www.ascari.net

Owner's Representative
Greif Group International
www.greifgroup.com

Owner's Representative
Hotel Los Monteros
www.monteros.com

Chief Operating Officer
Greif Group International

Vice President & Managing Director
Las Dunas Beach Hotel & Spa, Marbella, Spain
www.las-dunas.com

Vice President & Managing Director
Hotel Weisses Rössl, Kitzbühel, Austria
www.weisses-roessl.com

Vice President & Associate
Prestige Resorts International

Managing Director
GRUPO LA QUINTA, Marbella, Spain
www.laquintagolf.com

General Manager
Hotel Puente Romano, Marbella, Spain
www.puenteromano.com
Including marketing responsibilities for Marbella Club Hotel
www.marbellaclub.com

Vice President & Managing Director
Hotel La Bobadilla, Granada, Spain
www.la-bobadilla.com

Vice President & Managing Director
Ca Isabelle S.A., Lugano, Switzerland
www.ca-isabelle.ch

Project Assignment, Managing Director
K-Club, Barbuda
www.kclubbarbuda.com

General Manager
Metechi Palace Hotel, Tbilisi, Georgia, USSR
www.sheraton-metechi.com

General Manager
Hotel Operations/Executive Adviser to the Board
Planal, Portugal

General Manger Hotel Operations
McInerney Properties, Portugal and Spain

Executive Adviser to The Board
Planal, the owning company of Quinta do Lago Resort
www.quintadolago.com

Managing Director
Hotel Guanahani, St. Barth, Caribbean
www.leguanahani.com

General Manager
Kuwait Regency Palace, Kuwait

Project Management
El Rancho Country Club & Casino, Haiti

General Manager
St. James´s Club, Antigua
www.eliteislandresorts.com

General Manager
Beverly Hills Hotel, Durban
www.durban-venues.co.za/beverlyhills.htm

General Manager
The Maharani, Durban


General Manager
Le Touessrok, Mauritius
www.lhw.com

General Manager
Hotel Tres Islas, Fuerteventura, Canary Islands.

General Manager
Safari & Sea Hotel Blue Marlin, Kenya, East Africa

PHILOSOPHY

Frank M Pfaller joined the forces of his CHC (Couture Hospitality Concepts)
signature label, operated by Selected Hotels Promotion LC,
with his international project teams for a mission.
This merger of expertise has been instrumental in assisting private,
institutional investors and even a government-owned group in China to develop,
position and manage an exclusive portfolio of independent luxury hotels
around the globe while they remain the sole properties
of the respective owners and companies.

VISION

Because we can think and act without the constraints of a large chain,
we are able to maximise a hotel's potential without surrendering to standardisation.
This must be the task that we pursue with pride and exuberance.

WHAT WE DO

We BUILD and EXTEND Brand Value!

Luxury brand owners know today that the value of a company, the ROI and the bottom line
profitability is more than 50 percent dependent upon the value of their brand.

But for a brand to have high value and be extensible to adjacent segments,
it must first be based on a solid strategy that is flawlessly and relentlessly implemented
every hour of every day in everything that every person in the company endeavours to achieve.

We assist clients through the construction of a solid, strategic foundation based on time-tested,
classic principles developed by the world's leading academic and business strategists.
Then, we help implement the strategy on a consistent and persistent day-by-day,
week-by-week, month-by-month, year-by-year basis to build Brand Value,
and then extend the brand to even further enhance its value.

BRAND VALUE

Brand Value is, in simple terms,

Products with a nearly identical look, feel and function as Apple's iPhone
and iPad can be purchased in China,
but these products must be sold at prices less than half the price of an Apple product.
The over two times the price premium commanded by Apple is what we call Brand Value.

Imagine two identical products are sold by two different companies –
let's say one is the manufacturer of a famous brand of luxury goods and the other
was founded by some of its former employees using identical equipment, materials,
craftsmanship and so on. Manufacturing costs are the same.

With the exception of the costs associated with maintaining and communicating the brand,
the top line price premium commanded by the branded provider flows heavily to the bottom line.
Having high Brand Value converts a much higher percentage of revenue into net income.

Using the scenario from above, we can construct this simplified income statement:





In the un-branded case the product's purchase price is 100 US dollars,
while in the branded case the price is twice that at 200 US dollars.

Cost of Goods Sold (COGS) in both cases is 50 dollars, producing a Gross Margin
(or Gross Profit) of 50 dollars un-branded and 150 dollars branded.

The assumed sales and general and administrative (SG&A) expenses are higher
for a branded product to cover marketing, staff training, policy development
and other expenses associated with maintaining the brand's value for a branded offer.
In this analysis the SG&A assumed for the branded offer is twice the cost of the un-branded offer.

GOP (Gross Operating Profit) produced by the un-branded offer is 25 dollars
while GOP produced by the branded offer is 100 dollars.

Keep in mind that this simplified model is based on a purchase price difference
of only two times, although it could be much bigger.
For instance, the Hermès Birkin ladies handbag sells for 5,500 euros
(about 7,500 US dollars) – much more than only two times that
of an equivalent un-branded version.

Building Brand Value is good business!

BUILDING BRAND VALUE

Building Brand Value starts with a solid strategy.
Of primary importance within the strategic framework is Position
(the perception of the brand or offer in the minds of consumers)
and Differentiation (what it has that others don't from the view of the target demographic).


From this basis Brand Value may be constructed over time.

InterBrand is the world's leading firm providing services to help companies
calculate Brand Value and, in fact, have achieved the world's first ISO certification
of their renowned methodology identifying ten elements contributing to Brand Value.

We focus on developing the six external factors of a brand: AUTHENTICITY, RELEVANCE,
DIFFERENTIATION, CONSISTENCY, PRESENCE and UNDERSTANDING.

AUTHENTICITY means that what is being offered and marketed must be
based on a true capability of the company or real attribute of an offer.

RELEVANCE requires that the offer must have meaning and value to the target consumer.

DIFFERENTIATION is measured using our eight-point methodology, but in summary can be
described as supplying a superior benefit not offered by others.

CONSISTENCY demands that the value of the offer be provided across all touch-points at all times –
every minute, hour, day, week, month, year, in stores, in interaction with staff,
online, and in marketing.

PRESENCE means the availability of the brand and information about the brand at offline
and in online venues, and the degree of positive communication between real consumers
in traditional socialisation as well as online social media.

UNDERSTANDING starts with awareness but also extends to consumers having a deeper grasp
of the true and full qualities and value of the brand.

To ensure these external factors can be implemented and create value for the brand,
we assist clients in developing four internal brand factors as well:
CLARITY, COMMITMENT, PROTECTION and RESPONSIVENESS.

CLARITY is required internally so that all team members are fully aware of the value
and differentiation of the brand to ensure that the value and differentiation
is maintained and fully extended to clients.

COMMITMENT refers to the degree to which internal people believe in
the importance of the brand's differentiation and are dedicated to maintaining,
implementing and expanding the brand's value.

PROTECTION measures the security of the brand across legalities, suppliers, operations,
distribution, geography and other categories.

RESPONSIVENESS calls for the brand to have the ability to change in the market environment
both in view of emerging threats and new opportunities.

Of these ten factors, AUTHENTICITY, RELEVANCE and DIFFERENTIATION
are of utmost importance. The remaining factors support and serve to bridge
and extend the offer to clients and to maintain internal "brand health."

Let us help you today!

BRAND EXTENSION

Brands that have built high Brand Value have exciting opportunities for extension,
creating new platforms for dramatic improvements in bottom-line profitability.

Brand extension functions and succeeds with low risk on the basis of leveraging client loyalty
and identification, while maintaining an unswerving eye toward the brand's target demographic
and toward the brand's differentiated position.

Brand extension, in simple terms, is expanding the offer in view of the needs of the existing
targeted clients. Practically, it is not at all simple, but fraught with pitfalls
unless sharp discipline is maintained relative to target and position.

The Hermès entire business model (since 1837) has been based on brand extension.
Veuve Clicquot Ponsardin recently expanded into hospitality. They did this carefully,
with a view toward target and position. Its team of strategists carefully collaborated
with the design team to ensure that the position was reflected in every detail of
the design implementation. Bvlgari is also expanding into hospitality.

Brand growth and brand extension must be viewed within the framework of risk of eroding
or damaging the existing position (and thus the overall Brand Value).
Any decision that extends or changes the position, target or offer details must be carefully considered
so that the base business is not damaged and loyal customers are not alienated.

EXTENSION RISKS

Brand extension is the single most attractive option for mature brands
that have to some extent saturated the target demographic with existing offers.


Often, the need to extend a brand is felt when the competition is doing so,
but creating attractive, competitive offers can cannibalize much of a brand's less-loyal followers.
Thus, choosing to NOT extend a brand is often a serious risk in and of itself.


Among the primary methods companies use to extend their brands are
(listed in order of dramatically increasing strategic risk): extended or new offers,
extended or new targets, and extended or new positions (sometimes required to reach new targets).

(We refer to "strategic risk" as a risk category that can be extremely destructive
to a company's reputation and that may require long periods of time to recover from.)

Creating an extended or new offer while maintaining existing targets and existing positions is
considered relatively low risk. Introducing an extended or new offer is fairly easy to research
in advance, and even if the research is flawed and the product is not widely accepted
(unless the product introduces other negative factors such as poor quality),
it is unlikely to do much long term harm other than the loss of
the initial investment to create and launch the new offer.

Extending or approaching new targets has higher risk. This higher risk arises from the fact that
a company often does not understand the extended or new target very well
and the company's focus on a new target may in some cases alienate the current
and historical target leading to erosion of the base business.

Lastly, extending or creating an entirely new position entails the highest risk because
it entails modifying or even abandoning the very reason that current customers are buying from the brand.



If we assume there are three strategies (stay with existing, extend and create new) along with three methods
(offer, target and position) we can see 33 (or 3 x 3 x 3) = 27 scenarios to evaluate.
For the purpose of theoretical analysis, we can calculate risk values for each of the 27 scenarios
by assigning relative risk values as follows:



These numbers are somewhat arbitrary but reflect common strategist opinions about the relative risk of different approaches.

For the sake of thoroughness and full understanding, here are the 27 scenarios:



And here are the results for all scenarios:



The three noticeable plateaus on the chart above are of course driven by our assignment
of risk associated with existing, extended or new position.

Clearly, to deviate from existing successful positions begins to
dramatically increase risk compared to other methods of brand extension.

Do extend, but extend wisely!

HERMÈS MINI CASE

Thierry Hermès in Paris, France founded the Hermès Company in 1837.

Its first product was a horse bridle. Today (early 2012),
its annual business is nearly 3 billion euros.
How did Hermès accomplish this remarkable feat?

They did it via brand extension, strictly following the strategy he had established in 1837.


Let's look more carefully at Hermès – our favourite brand in terms of strategic discipline resulting
in incredible success that results from unfailing adherence to strategic principles.

Immediately after its founding, Thierry Hermès established a strategy
(whether he knew it or not) based on targeting noblemen using the simple
but powerful position of MCCS:



From its first horse bridle, Hermès quickly became known for MCCS among Paris elites.
Demand increased dramatically along with requests for other products.

While Hermès sought to expand, it did so in a manner that never compromised MCCS,
nor did it ever lose sight of its target. By around 1880, the brand had extended
"all the way" to saddles. Then a Hermès retail shop opened near Palais de l'Elysée,
and geographic expansion extended into Russia and Asia.

In 1922, Hermès' first handbag was introduced; in 1924, it first ventured into the United States;
in 1929, its first collection of women's apparel appeared.
In the '30s came its now famous silk scarves, in '46 its silk ties, and in '49 its fragrances.

Today Hermès has over 50 product lines and about three billion euros in annual revenue.
In 175, years the company has not deviated from its target except to extend it
to include wealthy women, or from its MCCS position!






As mentioned in EXTENSION RISKS the most common extension methods
may be some combination of approaches shown below:



As previously covered, with each of the three methods (position, target, offer)
having three approaches (existing, extended, new) there are 27 common ways
for companies to extend brands, and each carries its own level of risk.

Of the 27 possible ways for Hermès to extend, they used only five:



What level of risk did Hermès face with these five means of extension?



Their extension approach has been extremely low risk and incredibly successful.

And that, in our view, is pretty smart!

COKE MINI CASE

This is the story of one of the most colossal strategy and marketing mistakes in modern history.
We examine this story in the context of brand extension and introduce a few other key concepts.



Coca-Cola was introduced in the US in the 1880s. It was the first cola product on the market
and created a new category. Coke's subsequent marketing strongly relied on an "original"
position and heavily emphasized their "original" standing. In the 1940s, advertisements read,
"The only thing like Coca-Cola is Coca-Cola itself. It's the real thing."

In 1898, Pepsi-Cola was introduced and was the only even marginal challenger
to Coke's near complete dominance of the market.

By the early 1950's, Pepsi found it self in a position competing head-on
with Coke (the industry leader by far), with no noticeable differentiation,
with only about 15 percent market-share, and losing market power to Coke
in terms of distribution influence, marketing budgets, etc.

Faced with increasing marginalization and even extinction, Pepsi decided to launch
a new offer to a new target with a new position. On our scale of measuring risk
for brand extension, this move scores at the very top, but faced with the alternatives,
it was actually no risk at all. Essentially, Pepsi was a company with no market-share
and no net income with which to start over with a completely new brand.
But they had a secret weapon.



Strategic research and thought had been advancing in the US. Concepts of segmentation,
targeting, and differentiation were relatively new ideas and, apparently, unheard of by Coke executives.

Pepsi chose to re-position itself as a youth brand; it narrowed its focus with a slightly
sweeter product more appealing to a younger demographic.
In essence, their secret weapon was differentiating for a narrower demographic than the entire market.

By maintaining and carefully and consistently investing in its new position and maintaining
focus on its new target, Pepsi began to gain ground. The marketing was consistent and persistent.
In the 1970s, it secretly conducted blind taste tests and, finding a significant advantage,
publicly launched the Pepsi Challenge where it regularly won in blind taste tests.

In the 1980s, it began a worldwide tour of the Pepsi Challenge and later announced
that the "Pepsi Generation" had arrived. Market share continued to grow and the fierce
marketing battles between the two companies brought even more attention to the segment,
increasing its overall size significantly.

Why was this happening?

The powerful, positive trends had been set in motion and maintained by Pepsi through relentless,
unblinking focus on maintenance of its existing position, dedication to its target, and refusal
to dilute energy by adding new offers to a segment that had little "elbow room" to start with.

Coke's market share in the soda segment dropped to a record low of 24 percent in the early 1980s –
still the leader, but with Pepsi close behind in number two position, and Diet Pepsi in number three.

Some analysts say the market was reaching a new equilibrium with Coke owning
the older demographic segment and Pepsi the clear leaders of the younger demographic segment.



But Coke panicked and began shelling out millions of dollars to an army of hot-air consultants.

In a growing market with a likely stabilizing market-share, the solution dreamed up
by the consultants (strategists the world over shook their bowed heads at) was for Coke to:




Regarding the abandonment of its original position one analyst said,


With its "new real thing", Coke was essentially telling consumers that for the past 20 years
they had "missed the boat" and been making the wrong decision.



In response to the announcement of New Coke by Coke executives, Pepsi's CEO declared
at his own press conference that, "The cola wars are over. We won."

Then he announced a company wide holiday in celebration.

Your competitors will not sit idly by while you manoeuvre.



Coke's "strategy" involved new position (the riskiest), new target (second riskiest)
and new offer (third riskiest). On the Extension Risk scale, this approach scores 113, the highest figure.

Let's take a look…






Most people would agree that choosing the riskiest strategy possible would be bad enough,
but not for Coca-Cola.

First, it chose to enter a market behind a leader and with no differentiation.
Despite the fact that Thierry Hermès at least seemed to understand this concept in 1837,
and Pepsi had clearly understood it in the 1950s, Coke executives in 1985 seemed unable to grasp it.

Second, Coke did not just make a line extension. It also slaughtered its global,
market-leading offer. This was done due to distribution-related issues. Shelf-space itself
is a war that supermarket brands wage against one another, and Pepsi had gained a lot of ground
in this arena, reducing Coke's available shelf space. Splitting shelf space between
two of its own competing brands was not considered feasible, nor would be the increased distribution,
inventory and marketing costs.

Lastly, not only did Coke choose to pursue a new target (the second riskiest approach),
but it chose to pursue a noticeably hostile new target, made so in part by the previous
polarizing marketing approaches of both Coke and Pepsi.



The result was, in a word, unsurprisingly, "disaster."

Not only was this entire debacle destined to utter failure purely on strategic principles,
but also Coke had dramatically underestimated the loyalty of its original target
to the original offer and original position – a treble failure
(beyond all the other failures of basic strategic understanding).

New Coke was introduced on 23 April 1985. Production of the original coke was halted within the week.
And thus began the BOYCOTT of New Coke by the original target demographic.
Intense media coverage fuelled increasing outrage; protests outside company headquarters
in Atlanta garnered more negative press. Disgusted, Coke drinkers switched en masse to Pepsi.



On 11 July 1985, less than two months after the launch of New Coke, the company CEO called
a press conference and said, "We have heard you." Then he turned the press conference
over to the COO to announce the return of the original Coke.



Strategy is often viewed as an abstract science, but it is not.
It is a reflection of basic human nature set into the context of a commercial environment.
One cannot succeed while ignoring basic human nature.

Stories like the one above unfortunately abound because basic strategic principles are ignored.

In the 1960s IBM was one of the most profitable large companies making more
or less one product, mainframe computers.

By 1991, IBM had extended their brand to include workstations, midrange computers,
pen computers, personal computers, software, telephones and networks.
By then, its revenues were 65,000,000,000 US dollars.
Its losses were 8,000,000 US dollars…per day.

Brand extension is a critically important tool, but it must be used judiciously,
thoughtfully, carefully and with proper analysis before it is executed.

STRATEGY PROCESS

CHC's strategy process is designed to leave no stone unturned as it progresses
through a methodical sequential analysis to build the foundation upon
which your brand value can be constructed, maintained or extended.

Our process may be applied at many levels within a company,
from full corporate strategy to divisional strategy to brand-level,
segment-level or even product-level challenges.



Customizable to any situation

Based on time-tested approaches developed by the world's top academic strategists

A quantified approach, which helps remove subjectivity
and reduces risk via numerical documentation and ranking of inputs

Objective (completely eliminates "hand-waving" arguments)

A lasting platform for discussion and debate within a rigorous proven strategic framework

The output is a complete strategy that captures:

All high-level strategic elements (such as targeting, position goal and sharp,
rigorously-tested differentiation)

Strategic objectives (SOs) that define major steps required to achieve success

Tactical implementation plans (TIPs) that define actions, assignees and timelines
so that the SOs become actionable and are ensured of implementation

A control plan to provide for management of strategy and periodic review of all TIP's,
and to allow for minor adjustments as new information becomes available or
in response to changes in the environment



The following are the key steps in the process:



Based on classic SWOT
Two internal assessments: Strengths, Weaknesses
Two external assessments: Opportunities, Threats
This defines the brand, market and competitive landscape,
i.e. What we have to work with and the environment in which we must succeed




Defines potential target segments



Define a preliminary offer concept (required for other analyses)



Completed via Market Factors/Business Strengths analysis
Market factors evaluates the attractiveness of a segment via:
Profitability
TAM (Total Available Market) size
TAM growth rate
Competitive intensity



Ability to deliver the needed offer
Ability to provide the appropriate quality level
Ability of company to be profitable (just because a segment is profitable does not mean
any company can be profitable because different companies have different cost basis)
Fit to sales channel: Can the segment be practically marketed to?
Strategic fit: Does the segment have synergies with other potential target segments?



Categorize each segment into one of four macro strategic approaches:
Exit (or do not approach/enter the segment)
Invest (improve business strengths to better serve the segment)
Grow (invest in increasing sales)
Harvest (take what comes, but spend no time, energy or money)


Note: Business Strengths can be improved via investment/changing approaches, etc.,
but market factors cannot be changed.





Choose specific segments to target (based on the market factors business strengths analysis)
Targets are generally in the invest or grow macro-strategy quadrants



Develop potential position goals and supporting initial offers
This done through brainstorming
"Position goal" means the desired perception of the brand in the minds of consumers



Evaluate differentiability of the offers via the classic 8-point criteria of:
Important (Highly valued by most customers)
Superior (Provides a better benefit)
Communicable (Can be perceived by customers)
Unique (Not currently offered; not easily copied)
Affordable (Customers are able and willing to pay)
Profitable (Company can make a profit) Realistic (Consistent with company/ brand strengths)
Credible (Customers will believe)






Define final Position Goal
Select certain attributes of the offer to be primarily communicated – preferably limited to a small number



Develop the MarCom plan to communicate the selected-offer differentiated attributes. MarCom includes WHAT to communicate, HOW to communicate, Advertising, PR, Promotion etc.


Develop strategic objectives – SO's (these are very often dominated by internal activities
to improve business strengths) The various analyses above create long lists of issues.
For example the threats analysis creates a list of existing or potential threats.
Each threat is numerically ranked for "likelihood of occurrence"
and "severity of impact" if it does occur. These numerical factors are multiplied together
to create an overall ranking. The overall ranking is then used to create some priorities
with top priority items being finally addressed via strategic objectives.



Develop tactical implementation plans – TIP's for each SO (This is the who does what, when, where and how –
basically a project management plan with people assigned and accountable to complete actions.)



Develop the control plan – to ensure actions are completed on time, people are accountable and that adjustments can be made when market factors change or when new information becomes available –
if the above work is done properly adjustments are usually minor for most businesses.



Full strategy reassessment/refresh – usually every three years is reasonable for most businesses
(excluding online businesses where the environment is in rapid flux).

CHC's strategy process executes all of the elements above
in close cooperation with your knowledgeable team members.
We bring the system and the discipline while we rely on the industry knowledge of
your people for some of the insightful and detailed inputs.


We never "tell" a client what to do. Instead we bring the right answers to the surface
in a structured manner consistent with sound and proven strategic principles.

With quality input, this approach always works.

CONTACT

CHC | Founder and Leading Partner
Selected Hotels L.C. | CEO
selectedhotels@mac.com
+41 22 534 9478
+86 187 1791 2501



CHC | Managing Partner for Strategy and Marketing
Rain8 Group LLC | CEO
tracy@raineight.com
+86 158 0177 9701