While room rates in the most exclusive hotels worldwide are exceeding the $2,000 per night mark, Karim Alibhai, CEO of Gencom, has been specifically acquiring high-end luxury hotels. His company, Gencom, manages an $8 billion portfolio encompassing properties from Chicago to Bermuda and Costa Rica. This year, Gencom acquired the Ritz-Carlton New York, Central Park for $320 million. In 2024, the Thompson Central Park and the InterContinental New York Times Square, as well as the Ritz-Carlton Key Biscayne in South Florida, were also added.
This is remarkable for someone whose first role in the hotel industry was managing a Best Western. Alibhai, who hails from Kenya, studied at Rice University in Houston, and now lives in Coral Gables, Florida, discussed the $1 billion in New York City acquisitions over the past two years, rising room rates, the K-shaped economic recovery, and the evolution of his career.
Asked about the drivers for his acquisitions, Alibhai explained that it is a combination of several factors. In New York City, his company identified a market with the lowest supply in 25 years, while demand began to rise. This was a primary reason for the nearly $1 billion worth of hotel acquisitions in New York City. Another crucial factor is the leisure resorts segment, which has shown the best recovery since the pandemic, far outperforming other luxury segments.
The luxury hotel market shows remarkable resilience to price increases. Karim Alibhai attributes this to the overall robust economy, which allows the luxury segment – both business and leisure travellers – to continue paying a corresponding price for the right product and desired experience. Room rates at the newly acquired Ritz-Carlton in New York and in Costa Rica range between $1,500 and nearly $2,500 per night. Even in other markets where average rates are $750 to $850, these prices represent a significant increase compared to the $400 charged for the same properties before the pandemic. Alibhai expects the percentage growth in rates to return to normal inflationary levels, after having been above inflation from 2022 to the present.
Alibhai confirms the assumption that his strategy targets the K-shaped economy, where people at the top end of the income and wealth distribution perform particularly well. The luxury segment has evolved for this purpose and is now divided into 'luxury' and 'ultra-luxury'. Ultra-luxury hotels are characterised by larger suites, a smaller number of rooms (40 to 100 keys), private plunge pools in the rooms, and often butler service, which is not common in pure luxury hotels. The products, services, and amenities differentiate these two classes.
Karim Alibhai's career began by managing his family's 'negative two-star motel'. He describes this experience as his 'MBA', as it taught him to take responsibility and work hard. He successively acquired individual motels and worked his way up in the hotel industry, from Best Westerns to Comfort Inns, Holiday Inns, and Days Inns, then to Hiltons, Sheratons, and Marriotts. In the mid-1990s, he took a company public. After moving to Miami, he discovered the luxury segment. The most important lesson from his early days, he says, was always to be prepared to commit fully, as there is no simple formula for success.
