Patricio Fuks, Chairman of Fën Hotels, speaks to The Worldfolio about the evolving tourism landscape in Argentina, how Fen Hotels is “the most efficient company in hotel management”, as well as his other venture, WeWork, for which he is CEO of the Latin American arm of the US firm that provides shared workspace, community, and services for entrepreneurs, freelancers, startups and small businesses
How have international perspectives changed toward Argentina?
The exchange rate unification made a significant difference. During the clampdown--in which the population was not allowed to freely buy US dollars--we were being paid at the official exchange rate, which was significantly below the real one. Inflation was terrible as well. Having said this, the first decision the current government made – which was to eliminate the Forex clampdown – was a great one.
When it comes to the investment coming to the country, I would have to say that is not going to take place after just the one year. Even though there has been a change in government, we have had twelve years of populism, which is something that investors do not forget overnight. They need to be sure, first, that the change is sustainable; that things will not go back to the way they were in a year or two.
Many investors are weary of coming back to Argentina because of bad experiences. How can the country overcome this perception? How can it foster sustained investment?
The number one measure is to create the awareness that the change is for the long run; not for two or four years. Investors need to be sure that the change is real, which depends more on the people than on the government. It is more about the word on the street.
I remember going to Peru before the elections in which Ollanata Humala won. I could sense that the Peruvian people felt their country was not going to end up like Venezuela, but it was going in the opposite direction. That made me decide to invest, as I had the certainty that there was no going back to populism for Peru. There needs to be a complete change in the direction of policies and we need to convey it.
There also is the question of where the business opportunity is. At the end of the day, investors are coming in to invest somewhere. We need to create those opportunities for investors to come into the country. The winning sector is still undefined. The agricultural sector could be the one, or oil and gas –which does not depend on Argentina but on the international prices.
Domestic confidence has been highlighted as particularly important for tourism. Argentines themselves invested $1 billion in the first nine months of the Macri government. How can the private sector advance the country forward?
Things have significantly changed since the current government took office. We used to lose money, and we are now making it. But to really start growing and expanding, we still need a little more time. With stability, foreign investors will start coming in, companies will start opening branches here, they will need hotels and the wheel will start turning.
All we need is stability, as the beautiful sights Argentina has are unparalleled: Salta, Bariloche, the glaciers in the south, Puerto Madryn, for example. The country has such a diversity of places worth visiting that tourism will definitely grow.
The growth of the middle class in the rest of Latin America will also have an impact on local tourism. There has been a huge growth of the middle class in the region in the past few years, and I think this tendency will keep on going, which will boost tourism in Argentina.
The Ministry of Tourism has targeted sixteen strategic markets to attract foreign tourists to Argentina. Some are the traditional ones -- such as the US and the UK – however the Ministry of Tourism is also targeting Chinese tourists due to their numbers and spending power.
If we opened the doors to Chinese tourists, we would need to double or even triple the number of hotels we have. Today, we are at 85% occupancy. China offers huge potential.
What does this mean for Fën? You clearly have an established brand in the region, but will there be any modifications to adapt to a new market?
No, we think we have a universally appealing brand. Even our names sound Swiss-inspired – such as Dazzler.
In 2002, people thought Argentines were going through a civil war; people were sorry for us. Back then, we wanted to create a brand that sounded Swiss or German, because it conveys a certain sense of security. But we went the other way around with Esplendor, with which we emphasized or Argentine origin. It all depends on the time each hotel was created. Fën, for example, sounds Norwegian but actually means 'seed' in Mapuche – one of the local tribes.
You launched these brands and they did very well, very quickly. What element of entrepreneurial spirit has allowed your projects to display such rapid advancement? Particularly in such unstable environments you have had to face.
It is the power of dreaming and the ability to convince people. If you have the latter, it is like having a weapon that enables you to sell your dreams and it makes it easier to achieve your goals. I had the dream to create the biggest hotel chain in Latin America, and there were no real reasons for that to happen; but I kept on insisting on the idea and I moved fast. I do not waste time: when I see a market, I go for it. Such is the case of our property Asunción. Who would have said Asunción was going to work? Now it is the best performing hotel in the company. If you move fast and you come in first and you come in big, anyone who is coming behind you is at a disadvantage.
What are your growth prospects here in Argentina, given that the country is expensive for new projects?
That is a tricky question. I think Buenos Aires is still incredibly cheap, because if I want to build a room in the best location in Buenos Aires it is going to cost me USD 150,000 - USD 200,000. If I compare that to Lima, it seems expensive because the cost there would be USD 140,000. But if I compare it to Sao Paulo, rooms cost USD 1,000,000. That is a huge difference, particularly when it used to be the other way around during the 90's.
The growth potential Buenos Aires has is tremendous, particularly because there are very few prime spots – Recoleta, Palermo, Belgrano – available.
Buenos Aires has always stuck out compared to other Latin American cities in terms of choice. For example, Rio de Janeiro has only two luxury hotels.
The situation in Rio is that the numbers did not add up. The cost of a room was way too high, so it was a better deal to build apartments and sell them at USD 1,500 the square foot than to build hotels. At the moment, the equation could be changing, as real estate is not selling as fast as it used to. However, I was in Rio lately and I can tell you prices are still not going down.
There is another difference, and that is Rio is a tourist destination. Buenos Aires, on the other hand, is a place where not only tourists come. In Palermo, 80% of our clients come from Argentina. Everything is still very much concentrated in the capital city: the administration, banks, customers, they are all here. Buenos Aires has the people coming from the provinces, added to the tourists coming from abroad.
There might be a tight competition when it comes to very high-end hotels such as Park Hyatt, Four Seasons and others. But when it comes to the upscale market, there is no one 500-room or 300-room hotel.
When you launched it, this was a relatively new product to Argentina, but it was an already known concept in other countries. Since then, the expansion has been rapid in the rest of the region. What was the level of innovation that you brought to the business?
Being efficient in the management; this is something I learnt from day one. When I rented my first hotel here, I was paying USD 5,000 a month for the 90 rooms. But other brands were paying that exact amount to have their hotels managed, which is when I realized the importance of management. We then became the most efficient company in hotel management.
We can manage a 250-room hotel with 30 employees. How do you that? By being very efficient. For example, we designed a way to make breakfast with two people instead of eight, which gave us more place to stock our kitchens with plates and cutlery. This enabled us to have enough dishware for all the guests in the hotel during rush hour, after which the same waiters will go and do the dishes. Instead of having eight people busy during the three hours that breakfast is for, and then free for the rest of the day, we have two people busy all day long.
This is not usually something that someone of your level usually does. Generally, they delegate these tasks to lower-level managers.
We needed to make money, or we were done. And this happens in everything we did; we could not afford not to make money. I also have a very smart business partner, Alejandro Frenkel. He is short of a genius; he has created all these processes that make us very efficient.
I also came with the idea of outsourcing many aspects we did not need to have in-house, like food and drinks, a gym or a spa. We profit from the room rate, and we need to offer the best product. We do not need to make money from anything else, which is why we got rid of it and focused only on what made sense.
You now operate under the Wyndham Group.
Wyndham has purchased our ability to manage the hotels with the efficiency we do. This means nothing has changed. Wyndham was not doing any management in the region, and they now have two established brands that they can develop – Esplendor and Dazzler. These are unlike anything else they had in their portfolio, as they are very different from Howard Johnson and their other brands.
They also now have a great management team and are the biggest players in countries like Uruguay and Paraguay, big in Argentina, present in Lima, Tamarindo and New York.
They are not here to change anything. At the beginning, people were rather weary. But Wyndham needs our expertise, and they give us the opportunity to grow. This is a game changer, in that sense.
We can now go to Mexico with Wyndham and sign seven deals in one week which could have taken us a decade. Big investors rely on a company that is listed and that has many years of tradition. When you are investing, you need to feel secure that the people behind the project are really capable. Wyndham gives us the seal of approval that we are 100% reliable, and they get brands that are modern, updated and that work efficiently. This is definitely a win-win situation.
Concerning your independent venture of WeWork: there is a new generation of entrepreneurs in Argentina and the human potential aspect is a major driving force of this economy. How do you solidify this through WeWork?
WeWork is not solely focused on entrepreneurs; this is a misperception. We are getting more and more corporations moving to our offices. It is happening here, as we opened WeWork offices in the Bellini Tower in May, and we just got one client that signed 300 desks, taking three whole floors. We have three or four of these examples, companies taking their people into our facilities.
This is happening around the world: it happened in Mexico with Baccardi, Xperia and Uber. WeWork changes the way we work. This is a 12,000-square-meter space that is like walking into Four Seasons; this is not a boutique hotel. This building has many community floors where you can go get coffee, meet people and interact. It even has a barbeque and a DJ. There are different kinds of scenarios integrated at the same time.
Plus, there is the fact that we are already worldwide. So next time you are in Sao Paulo, or London, or New York, you already have an office space. And it is even cheaper: you can rent as many desks as you need, with an incredibly designed workspace; you can eat and drink as much as you want. You can also renovate your membership for as many times as you want.
WeWork creates a community. I do not know who works in the second floor of this building, and I have been here for fourteen years. I have never spoken to anybody, and if you asked me who is on the fourth floor I would not know the name or the company. But maybe if I had met the fourth floor guys, we could have been partners and made incredible deals; but we never crossed paths.
Are you saying companies and entrepreneurs may have the opportunity to have better networking through WeWork?
There is a study that 70% of the members of WeWork have done at least something with other members. There is an endless number of stories of people who have made connections through WeWork. There is the barber who joined WeWork, and now has all his clients coming from WeWork. There is also the guy making shoes in Mexico who made connections in London through the app, which already has 100,000 members.
The way WeWork is designed fosters these experiences. The staircases, the common spaces, the parties and events we organize, everything is made in a way that boosts communication.
There is no way, if you go into a WeWork, that you would ever go back to a regular office. It happened to me. After I met Adam and came back from New York, I realized it was not about opening the office space, it was about co-working. If I just throw my office walls down, I will still see the same faces everyday.
Co-working is the future of offices. We are the leaders, and it will take a long time for a competitor to get to where we are, because we already are in the United States, Europe, India, China, and Latin America. Our growth pace is very fast, and it is incredibly fun to work in this company.
What is next for you? You now have to report to Wyndham now.
I am now the chairman of Fën, so I am not in charge of the day-to-day decisions. But I am CEO of WeWork, which means this is what is currently occupying my daily tasks. In Fën, my job is to create new opportunities of growth, though I am still part of the decision-making process, because of the way we work with the Wyndham people; they want us to be involved.
Your track record is clear and your trustworthiness as someone who can carry out projects is clear. This trustworthiness has always been based on your ability to innovate--this has been your trademark, even before Fën. How will you continue to innovate?
I think I am innovating in WeWork. When I joined Wyndham, I had the challenge to make five deals during the first deal, to which I said I was going to make twenty deals. And I think I am going to make even more now. All my energy and strength are in WeWork. How can I help Fën grow? It is now more Wyndham's role, as it is an institutional play. I could help the company not to lose its soul, as this company is comprised by its people, by their strong sense of belonging. We need to keep this, because it is what makes the difference.
Interview by Nicolas Carver, follow him on Twitter at @WorldTempo