By Michael Matthews
October 7, 2010 -- I can't say that he's a friend, but I have met him on more than one occasion and found him to be charismatic, friendly and certainly a man who enjoys life. He also happens to be an extremely successful businessman who is a master at generating publicity and convincing people that he's some sort of Don Quixote of commerce.

But now I wonder if Sir Richard Branson hasn't finally gone off the rails.

As you probably know, Sir Richard built a successful record label starting with a 1973 album called Tubular Bells. (Its opening theme became the featured soundtrack of The Exorcist.) He sold Virgin Records for a nice packet of cash, started an airline (Virgin Atlantic) and then franchised the Virgin name to other carriers (Virgin Blue in Australia, Virgin America in North America, the gone-in-a-merger Virgin Express in Europe and the disastrous Virgin Nigeria in Africa). His Virgin Group has dabbled in everything from mobile phones and banks to private islands and a purported space-flight service for tourists.

Now he's getting into the hotel business and claims that he's serious. His says his plan is to create a chain of 4- and 5-star hotels around the world. Twenty-five properties in 10 years is his goal.

Why is he doing it? I'm not sure. And all I can say is caveat emptor, Richard.

With the tanking of the lodging industry over the last couple of years, I would suggest that Richard take another look and find a nice, safe investment like, oh, gold. On the other hand, it can be argued that there's no better time to get into any business than when it's at the bottom. And few can suggest that the hotel industry isn't at the bottom. About a hundred hotels in the Dallas area went into foreclosure in the past year. More than a thousand properties tanked in California during the past two years.

Of course, Sir Richard isn't exactly a, uh, er, virgin in the hotel business. He operates a fabulous resort on Necker Island in the British Virgin Islands. A very apt location I might say--and it does double as one of his second homes. He also has a small hotel in Italy, but nothing on the scale of this project.

His proposed group of hotels will naturally be called Virgin Hotels. He claims to be capitalizing his venture to the tune of $500 million. Given today's market, that will allow him to buy about $2 billion in hotel real estate. That's a pretty good start, I admit. And Branson is known for never doing anything in a small way.

Right off the bat, he says he's looking at major gateway cities and expects to buy existing hotels in New York, Los Angeles, Miami and London. Of course, every major hotel chain (and every investor who claims he's starting a major hotel chain) talks about starting in the "major gateway cities."

Branson says he'll then do the hotels up "lifestyle." I think that means cool and modern. But, you know, everyone is doing "lifestyle" hotels, too.

Given what he claims he'll spend, Branson should be able to close some deals in short order. He has already appointed a team of professionals in hotel development, operations and marketing. I don't know of any of them, but I'm sure they are fine chaps. One is Raul Leah, best-known for a boutique hotel group called Desires. Branson's development man is Paul Whetsell and he is truly experienced. He's been chief executive of Interstate Hotels, one of the nation's largest third-party management companies, and founded CapStar, once one of the hotel industry's largest real estate investment trusts.

In the next six months or so, expect to see coy ads asking you to come and sleep with a Virgin in New York or LA. Well, actually if you go to the Virgin Hotels Web site, you'll already see the innuendo.

Good on you, Richard. And good luck to you all. You'll need it.

ABOUT MICHAEL MATTHEWS Michael Matthews has managed and marketed fine hotels around the world for more than 45 years. He spent 14 years in Hong Kong building the legendary Regent International group. He has also worked with St. Regis, Ritz-Carlton and Rosewood hotels. Matthews is currently based in Arizona. He began writing Do Not Disturb in early 2004.

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