Hotelier Lights a Fire : Kimco Will Move Its Successful Bay Area Formula to Southland

Bill Kimpton was an investment banker on an expense account years ago when he stayed at London’s high-priced and somewhat haughty Hyde Park Hotel.

His work done, he moved to a small hotel down the street, where the room cost one-third as much, the bartender treated him as a friend, and the front desk clerks endeared themselves by asking: “Is there anything we can do for you, Mr. Kimpton?”

The experience stuck. Not long after, Kimpton traded in his Wall Street pin stripes for khakis and slouchy sweaters and remade himself as a hotelier, with the aim of offering comfort, value and hospitality. Operating from a base in San Francisco, his Kimco chain of one-of-a-kind, European-style “boutique” hotels--many of them paired with stellar restaurants such as Postrio--has created something of a revolution among small Bay Area hotels, outperforming most of the rest of the recession-racked industry.

Come next March, with successful forays into Portland, Ore., and Seattle also under its belt, Kimco Hotel & Restaurant Management Co. will take its concept to Southern California. The 18th property in the group and the first south of the Bay Area is the Beverly Hillcrest Hotel in West Los Angeles. Kimco is overseeing a remodeling that could cost as much as $15 million and will manage the hotel for the current owners, the U.S. arm of a New Zealand conglomerate.

It took Kimco more than three years to find the right deal, a snail’s pace that suits Kimpton just fine.

“Our pace is based on quality opportunities,” he said as he settled against the cushions of a green sofa in the lobby of the Galleria Park Hotel in downtown San Francisco, where Kimco has its offices. “We don’t believe in goals per se, of saying: ‘I want this number of properties.’ ”

It is a warm and sunny June morning, but Kimpton has asked the crew to light the logs in the Art Nouveau fireplace, around which guests will cluster in the evening for complimentary glasses of wine--Napa Valley bed-and-breakfast style.

Fireplaces, which Kimpton said give solitary travelers a chance to “connect,” are a signature of Kimco hotel lobbies. “People checking into a hotel are nervous, lonely,” said Kimpton, who spends many weekends at his country home in Napa. “They’re sure things are going to go wrong.

“The warmth and the odor of the wood (put) people at ease.”

Born in Kansas City, Mo., William Drennon Kimpton had a youth troubled by dyslexia and emotionally distant, alcoholic parents. Although the family moved to Chicago when he was 8 and later to the West Coast, he often spent summers working on his grandfather’s Missouri farm. Grandfather Drennon, a fishing buddy of Harry S. Truman, had hopes of passing on the property to his namesake.

But young Bill had loftier ideas, which he credits in part to his childhood love of Monopoly. “It was one of my very first visions at 4 or 5, playing with those little red hotels,” he recalled. “I was always good at it.”

As an investment banker for Lehman Bros. and later a small San Francisco firm in the 1960s and ‘70s, Kimpton had ample opportunities to experience the loneliness of the long-distance traveler--and to learn about getting investors interested in projects. While at staid Lehman, he persuaded his bosses to gamble on taking public the nation’s first fast-food franchise, Kentucky Fried Chicken.

Later, Kimpton was tapped to raise the money to build the first luxury hotel on Maui, the Kapalua Bay Resort Hotel. During that time, he met Harry Helmsley, the real estate and hotel magnate.

Hearing that Helmsley wanted to build a hotel in Manhattan, Kimpton flew to New York and offered to raise the $23 million himself, a feat he pulled off over the next 18 months. Helmsley built his grandiose (and now troubled) Helmsley Palace Hotel. Meanwhile, he filled Kimpton in on the success of his small hotel on Central Park South, one unencumbered by the ballrooms and other extras that cost the big hotels so much in overhead.

Eager to be on his own and disillusioned with the climate of greed that was starting to permeate Wall Street, Kimpton quit investment banking and bought a derelict hotel building in downtown San Francisco. It was refurbished and opened in 1981 as the Bedford Hotel, and Kimco was on its way. Among the company’s investors are Warren Beatty, Paul Newman and Harrison Ford.

Early on, Kimpton developed a winning formula of pairing restaurants with the hotels, each of which has its own sophisticated yet comfortable decor. (The chain’s newest and most outre San Francisco inn, the Triton, features whimsical, oddly shaped furniture designed by a local artist; the bathtubs come complete with rubber duckies.) Among the Kimco restaurants that have proven as popular with locals as with visitors are Masa’s, in the Hotel Vintage Court, and Postrio, in the Prescott Hotel.

“It’s a very smart product,” said Patrick Quek, president and chief executive of PKF Consulting in San Francisco, the consulting arm of hotel accounting firm Pannell Kerr Forster. “There’s no pretentious, big lobby. It’s much akin to what you have at home.”

The key to financial well-being, Kimpton said, is getting a good deal on an older property, usually with 90 to 180 rooms, and avoiding the “cookie-cutter approach” of hotel design.

Between purchase and refurbishing, Kimco generally spends $50,000 to $150,000 per room (compared to $500,000 per room in some luxury hotels in Europe). In healthy economic times, Kimco’s published room rates (which now range from $90 to $150) generally run 20% to 30% below those of the big luxury hotels. But during the recession, the likes of the Fairmont, the St. Francis and the Ritz-Carlton have in some cases undercut Kimco hostelries. (Prices at the Hillcrest are expected to be by far the highest in the chain, tentatively starting at $210 per room, but the company maintains that the demand is there.)

Kimco hasn’t remained unscathed by the recession. Occupancy at most of its hotels, which reached a lofty 85% in 1986, is now in the low-70% range, but Kimpton notes that much of the rest of the industry is mired at 50% to 60%. He also points out that Kimco’s break-even point is much lower because of its lower overhead.

With the addition of the Hillcrest and another property opening in August in Seattle, Kimco will own 10 hotels and manage eight others.

As relatively small as each Kimco hotel is, the chain nonetheless accounts for about 2,500 rooms in San Francisco, enough to cause some other hotel managers to lose a little sleep. Competitors say that Kimco has done especially well attracting business travelers seeking value.

“Their success tells us all that there is a market segment interested in a very good product without the frills,” said Diane Shields, a spokeswoman for the Mandarin Oriental, a 160-room luxury hotel in San Francisco.

Kimpton said he is well aware that too-rapid expansion could doom the company. In the meantime, he said, success comes down to a very basic element: “We sell sleep.”