Private Flying Takes Off, Boosting Demand for Business Jets
Some well-heeled, would-be private-jet fliers are being turned away as industry booms
A boom in private flying is helping revive business-jet sales, but it is also challenging charter operators who are scrambling to meet the holiday-travel rush.
After a multiyear slump, flying by private jet is soaring again. The number of flights in the U.S. over the Thanksgiving travel period is forecast to be up as much as 10% from 2019, according to WingX. Private-jet flights were up 60% in the first half of November compared with a year earlier, the data tracker said.
The boom comes after a long, fallow period since the global financial crisis. The more than 495,000 private-jet flights in the first 10 months of the year is up 9% from the same period in 2019, and just ahead of the previous high in 2007, according to the Federal Aviation Administration.
Demand has risen during the Covid-19 pandemic thanks in part to fliers’ desire to avoid crowded commercial planes and airports, as well as cuts in airline service to smaller communities. The increased availability of on-demand private-jet services also has helped.
Private-jet operators and charter brokers, who secure aircraft and then rent them out to private customers, said they are stocking up on spare parts and trying to secure pilots.
“They know the surge is coming,” said Ryan Waguespack, senior vice president at the National Air Transportation Association, a trade group.
Amid the surge, sales of new jets are booming. Orders in the third quarter rose more than 50% over the past year, according to the industry’s four largest manufacturers— General Dynamics Corp.’s Gulfstream, the Cessna unit of Textron Inc., TXT -3.43% Bombardier Inc. and Embraer SA . New private jets sell for between $5 million and $70 million.
Sales are being propelled by wealthy individuals—many of them first-time buyers—and companies that sell shares in jets or charter planes, according to aircraft manufacturers. Plane makers are responding by boosting production after a decadelong slump stretching back to the 2008 financial crisis.
Gulfstream, the world’s largest business jet maker by revenue, has its biggest backlog of orders in six years. Brazil’s Embraer is sold out of private jets until the first quarter of 2023.
Jet makers, especially those making smaller planes carrying six to 10 passengers, said buyers who have never owned a private jet account for as much as a quarter of sales, far higher than historical levels. Some customers include fliers who previously traveled commercially but have shifted toward business jets for health and safety reasons during the pandemic, according to Eric Martel, chief executive of Bombardier.
Industry executives said as many as a quarter of buyers of new planes this year haven’t previously owned a jet. Michael Amalfitano, CEO of the executive jet arm of Embraer, said at a recent industry conference that users were also getting younger, including millennials and those from Generations X and Z.
A shortage of used aircraft has some buyers snapping up multimillion-dollar planes on the spot, rather than after the more typical extended due diligence, said aircraft brokers. The average asking price for a used jet increased to $10.7 million in October, about $1 million higher than its pre-pandemic level two years ago, according to JPMorgan.
Executives say all the demand has led to the tightest market for used aircraft in a decade. The number of previously owned business jets for sale in November fell by half from a year earlier, according to investment bank Jefferies Group LLC.
“You’ve got used aircraft available for sale at record low numbers, particularly if you look at something that’s [newer than] a 10-year-old aircraft,” said Scott Donnelly, chief executive of Cessna owner Textron Inc.
Fliers are mainly heading to U.S. beaches, mountains and other leisure destinations rather than to slowly reopening offices and factories, said charter operators and flight-tracking services.
A pilot shortage has led some jet ride-share operators to say they are introducing blackout periods for flights.
Private-plane operators such as NetJets, a unit of Berkshire Hathaway Inc., BRK.B -1.46% offer prepaid blocks of private flights to customers. For instance, a traveler can buy a certain number of flights to and from Chicago and Palm Beach, Fla., during a certain time period. The company also offers common ownership of jets, providing them rights to the jet much like a condo share.
NetJets suspended new sales and memberships to maintain service for existing customers. The company expects demand over the Thanksgiving period to be up 42% over 2019. Wheels Up Experience Inc. in October told most new members they can’t fly for 90 days after joining. Other operators have frozen new business completely.
Kenny Dichter, chief executive of Wheels Up, said on an investor call last month that the industry had missed out on hundreds of millions of dollars in potential revenue by limiting or suspending new membership and charter sales to protect services for existing customers.
“We have done thorough analysis of flight patterns and behaviors and we are confident we can deliver in a responsible manner for those members,” said a Wheels Up spokesperson.
Barron’s Weekend Summary: Investors have understandably forsaken Big Blue, but it may be time to start paying attention to it again
Cover Story:
-Investors have understandably forsaken Big Blue, but it may be time to start paying attention to it again. IBM is repairing its reputation with a new CEO who is making serious and lasting changes to its structure and ambitions. Arvind Krishna was named chief executive in January 2020, after years running IBM’s cloud unit. His appointment was reminiscent of Satya Nadella’s promotion to Microsoft‘s top job in 2014.
Interview:
-Barrons interviews New School Professor Teresa Ghilarducci. “In graduate school, she helped her mother’s union in Sacramento, Calif., negotiate a new pension plan.
Today, she is campaigning to get mandatory pensions for all Americans.” Ghilarducci “envisions a plan that would invest in professionally managed funds and bolt on top of workers’ Social Security accounts.”
The Trader:
-A new coronavirus variant discovered in South Africa, dubbed Omicron, caused stocks to fall sharply in a holiday-shortened trading session on Friday. The S&P 500 index dropped 2.2% for the week, while the Dow Jones Industrial Average lost 2%. The Nasdaq Composite fell 3.5%.
“Knee-jerk reactions were abundant. Zoom Video Communications (ticker: ZM), for instance, rose more than 5% on Friday. It had fallen 15% on Tuesday after reporting earnings. Investors were worried about slowing postpandemic growth for the collaboration software company. Now, the stay-at-home trade appears to be back. It isn’t time to panic. ‘The S&P 500 has built up a cushion the last seven weeks, and a 4% to 5% pullback alone won’t alter its longer-term trend,’ says Instinet strategist Frank Cappelleri.”
-“Buying growth stocks when profits are just a rumor can feel like tempting fate. But some companies reward investors’ faith. And highflying stocks can grow into their eye-popping valuations, giving investors another chance to buy into the trend. That looks to be the case with a trio of electric-vehicle makers: China’s NIO, XPeng, and Li Auto.”
Features:
-The UK has confirmed that two Omicron Covid-19 variant cases had been found in the country. “The two cases are linked and there is a connection with travel to southern Africa,” Health Secretary Sajid Javid tweeted on Saturday. The WHO designated the newly identified strain of Covid-19 first found in Southern Africa a “variant of concern” on Friday, prompting stocks to fall on Wall Street as well as new travel restrictions from a number of countries, including the US.
-Not all companies suffered amid the Omicron variant triggered stock market dip. Qiagen closed higher Friday after the diagnostics company reaffirmed the efficacy of its PCR tests against the new Covid variant which scrambled stock markets on Friday.
The stock closed 3.5% higher at $56.47.
-Casino stocks such as Caesars Entertainment closed lower Friday as concerns over a new, heavily mutated variant of Covid-19 triggered new travel restrictions. Caesars fell almost 3% to $91.20, Las Vegas Sands dropped 5.35% to $37.87, Wynn Resorts slipped 6.04% to $85.69, and MGM Resorts fell.
Europe:qiagen
-Uber shares fell after the ride-hailing app was asked to shut most of its services in Belgium starting Friday evening. The stock closed down 3.71% to $40.52. UberPop, a service which allowed private individuals to offer professional taxi services, had been banned back in 2015, but on Wednesday the Brussels Appeal Court extended the ban to professional Uber drivers. Also, in another blow to Uber ride hailing giant Didi Global is being pushed by Chinese regulators to delist from the New York Stock Exchange, according to a Reuters report. Uber owns 12.8% of Didi.
Emerging Markets:
-There’s evidence of yield despite the prevalence of low-returns. The Brazilian central bank, for example, has hiked interest rates from 2% to 7.75% this year, and 10-year local-currency bonds yield north of 11% annually. Similarly, Mexican rates have climbed from 4% to 5% since May. Poland hiked from 0.1% to 1.5% over the past two months. And so on.
“This is the first time in 35 years I have seen EM central banks lead the way on tightening,” says David Robbins, an emerging markets debt portfolio manager at TCW.
Commodities:
-Oil prices remained at the $80-a barrel mark Thursday as a decision by the U.S. administration to release up to 50 million barrels of strategic reserves in a bid to push down gas prices faltered.
Some officials from Organization of the Petroleum Exporting Countries (OPEC) warned that the release of reserves by big oil consumer nations would only add to the glut forecast in the first half of next year.
Streetwise:
-In the Streetwise podcast, Jack Hough warns: “Careful loading up on narrow bets on rising prices. Stocks offer better protection than you might think. Jack talks with Katie Nixon, CIO of Northern Trust Wealth Management.”
New York Declares State of Emergency to Combat Omicron Variant
Precautionary measure will allow hospitals to turn away patients seeking nonurgent care
New York’s governor declared a state of emergency to prepare for a possible Covid-19 surge from the new Omicron variant that is spreading around the globe.
The precautionary measure announced Friday is intended to help hospitals in the state prepare for a potential winter wave caused by the new variant, which the World Health Organization has said might be more transmissible and pose a greater risk of illness than existing strains of the coronavirus. New York is the first state to declare a state of emergency in response to the Omicron variant.
First detected in South Africa, Omicron hasn’t been found anywhere in the U.S.
“It’s coming,” New York Gov. Kathy Hochul said of the new strain, which has made its way to the U.K., Belgium and other countries.
Speaking Saturday on the “Today” show, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said all precautions should be taken until more is known about Omicron.
“It likely will be more transmissible,” he said. “We don’t know that yet, but you have to be careful and assume that’s the case.”
Starting Monday, the U.S. will block travel for most travelers from South Africa and seven neighboring countries to try to control the spread of the disease. The ban doesn’t apply to U.S. citizens or lawful permanent residents.
New York’s executive order means hospitals with less than 10% bed capacity, or others designated by the state as being at risk, will be able to turn away patients seeking nonurgent or nonessential health procedures to ensure there are enough resources to treat Covid-19 cases.
The order, which is in place until at least Jan. 15, also allows the state to more quickly access critical supplies.
The WHO declared Omicron a “variant of concern” on Friday, saying it carries higher risks than other strains of the virus.
As of Friday, there have been 47.9 million confirmed Covid-19 cases in the U.S. and about 774,000 deaths, according to the Centers for Disease Control and Prevention.
IWG vs WeWork: investors’ starkly differing views of the rival shared office groups
The UK company is bigger and more profitable than its US-listed competitor — but has a far lower valuation
A New Strain Joins Europe’s Covid Wave. What That Means for the Economy.
A new, virulent strain of coronavirus first identified in South Africa raises fresh fears in Europe just as governments throughout the continent are preparing measures to counter the spread of a fourth wave of Covid-19.
The African variant, called B.1.1.529, was identified within days of its discovery in Israel, Hong Kong, and Belgium, leading to many countries immediately banning travel to and from South Africa and neighboring states.
Whether or not the new variant proves resistant to existing vaccines will take several weeks to ascertain. After nearly two years of the pandemic, governments, businesses, and households are better prepared to cope with the problem. But restrictions already in place—or in the pipeline—will dampen the continent’s economic recovery.
Austria has taken the most radical measures so far, with a national lockdown that shut all stores save for those selling basic goods, and a requirement for people to stay home. However, Austria accounts for less than 3% of the European Union’s gross domestic product.
Up until now, the strength of the new spike has been correlated with the pace and acceptance of vaccinations throughout the continent.
Germany, the region’s largest economy, is facing a “highly dramatic situation,” according to departing Chancellor Angela Merkel, who has urged her successor, Social Democrat Olaf Sholz, to implement new, nationwide restrictions. So far, only some regional authorities—including in the capital, Berlin—have begun to try to counter the fourth wave.
Beyond travel restrictions aimed at Africa, the EU’s three other big members—France, Italy, and Spain—have refrained from dramatic steps so far. Even before the discovery of the South African strain, noted Deutsche Bank analyst Jim Reid, “a number of less-affected countries [were] seeing cases move in an upward direction, including France, Italy, and the U.K.”
So the type of measures even these governments might have to take will be “key ones to watch and will have big implications for economies and markets too,” Reid wrote.
While Austria and Germany have some of the lowest vaccination rates in Europe, other governments have no reason to be complacent. ING economists Franziska Biehl and Carsten Brzeski note that “the past couple of years have shown that the feeling of being ‘safe or secure’ can be misleading and can be quickly overtaken by events,” and that further restrictions would “increase the risk of economic stagnation as we enter a new year.”
Austria has made the vaccine mandatory, but other countries are trying to reach the same goal by different means—for example by restricting normal activities such as going to restaurants. But even restrictions limited to the unvaccinated have a negative impact on demand—for example, by banning travel for a segment of the population.
“Fear of the virus is substantially less than last year, but restrictions do hamper economic efficiency—as does the spaghetti bowl of tangled regulation involved in international travel,” writes UBS chief economist Paul Donovan.
No one for now can quantify the hit to growth from the coming restrictions. But they may present a new problem for governments and central banks. If the economy takes longer to recover, the return to some form of fiscal discipline, in countries that were considering it, will have to be postponed.
And if the B.1.1.529 strain proves as virulent as feared, central banks planning to unwind quantitative easing or raise rates may reconsider their decisions —or delay the return to monetary policy as usual.
This Auto Supplier Stock Is a Cheap Way to Play the EV Boom
The road to Dracula’s castle winds through Transylvania’s rolling mountains. The stylish way to go is in the Carpathian Edition of the Land Rover Defender, a $112,000 sport utility vehicle with a high-tech ride and seating, including thermoelectric devices to keep you toasty or cool.
The seating technology comes from Gentherm (ticker: THRM), a small-cap auto supplier based in Northville, Mich. The company has 60% of the global market for heated and air-conditioned seats, towering over its next competitor at 10%. Climate-control products account for 37% of Gentherm’s total sales, estimated at $1 billion in 2021. The rest of the business consists of other seating products and automotive components, and a small medical-device division.
Auto production is ailing due to a global semiconductor shortage. But the supply chain should ease up in the second half of 2022, giving Gentherm a sales lift. Analysts expect the company to report $185 million in earnings before interest, taxes, deprecation, and amortization, or Ebitda, in 2022, up 22% from this year.
The stock, at $84, has gained 29% this year, pushing its multiple well above the industry’s and its own five-year average. It now trades at 24 times expected earnings of $3.51 a share, a premium to most other auto suppliers.
Why the steep multiple? Because climate-controlled seating is expanding to the mass market—growing from 4% of U.S. new vehicles in 2013 to 18% in 2020. More important, Gentherm has a shot at the fastest-growing part of the car market: electric vehicles.
The company’s new ClimateSense product aims to create a “microclimate” around a car’s occupants. The technology uses thermoelectric devices, sensors, and software embedded in seats, footwells, armrests, and the steering wheel to fine-tune a comfort zone.
It sounds a bit excessive, but it could take a load off an EV’s heating, ventilation, and air-conditioning, or HVAC, system—the second largest battery-power consumer in an EV after the motor. And lower energy demands on the HVAC could conserve power for the battery pack, improving an EV’s performance and driving range.
According to Gentherm’s tests on a Chevy Bolt EV, ClimateSense produced energy savings of 50% to 69% in cold-weather conditions and 34% savings in warm weather over a conventional HVAC. And it should improve driving range in both conditions, including 30% gains in cold weather, the company says.
“We think that it can transform the company over the course of the next decade,” said Gentherm CEO Phil Eyler at an investor conference in early November.
Gentherm is also developing thermal management systems for EV batteries. Using a “thin foil” conducting material, the technology can help optimize battery temperature and performance. The product eliminates some wiring, reducing manufacturing costs, and Gentherm aims to pack it with sensors and other circuitry, with partner Datang NXP Semiconductors. “The idea is to get computing power closer to the battery,” says Baird analyst Luke Junk, who rates the stock Outperform. “That has a swath of positive implications.”
Gentherm hasn’t revealed much about its ClimateSense sales. The product will be in a “low volume” 2024 model-year EV, the company says. That makes it unlikely to be a major player like Tesla (TSLA). And since it adds costs to a car, it could take years to reach mass-market EVs. Still, it should trickle down eventually, says Glenn Chin, an analyst at Seaport Research Partners, who rates the stock a Buy. “It has the potential to be a game changer for Gentherm as the industry transitions to EVs,” he says.
The stock faces several overhangs. One is that Covid-related disruptions could linger well into 2022. General Motors (GM), for example, won’t be offering heated and cooled seating in most 2022 models due to chip shortages, although the company says dealers can retrofit the features.
More specific to Gentherm, the company could lose sales to one of its biggest customers, Lear (LEA), which assembles seating for auto makers. Lear plans to take seating components in-house, recently announcing a deal to buy the seating business of Kongsberg Automotive (KOA.Norway), a European manufacturer.
Gentherm says that 70% of its sales to Lear originate with auto makers. Those contracts aren’t vulnerable in the near term, partly because they last for years, through a full model cycle, says Chin. He figures that Gentherm could still lose 5% of its automotive revenue if Lear cuts back, but even that might be overstated, since Kongsberg doesn’t manufacture products that actively cool and heat seats. “Gentherm is the only game in town for heated-and-cooled seating,” says Chin.
Gentherm aims to hit $2.5 billion in revenue by 2025, a target it established in 2018. Despite the industry slowdown, the company hasn’t cut that goal, a sign that it still views it as achievable.
The financials look solid for now. Ebitda margins are expected to rise from 15.8% in 2022 to 17.4% in 2023, according to consensus estimates. Chin sees the stock gaining modestly to $92, at a multiple of 11 times 2023 Ebitda. Baird’s Junk sees it hitting $94 as the industry recovers, but he likes the longer-term outlook, picking the stock as a winner in the EV market.
“It’s a way to play the EV market without paying the outrageous multiples” of stocks like Lucid Group (LCID) or Rivian Automotive (RIVN), says Adam Peck, founder of Riverwater Partners, a $750-million advisory firm that owns Gentherm stock for clients. Land Rover plans to launch its first EV in 2024. Gentherm could make its Carpathian-climbing SUVs a bit more climate-friendly.
Bulgari’s New Hotel Brings a Touch of La Dolce Vita to Paris
The Italian jeweler will compete with fellow LVMH-owned chain Cheval Blanc to be the number-one luxury hotel in the City of Light.
PARIS— Dolce Vita, meet the City of Light.
Roman jeweler Bulgari is preparing to bring a touch of Italian hospitality to Paris with the opening on Dec. 2 of its seventh hotel worldwide, located in the city’s Golden Triangle just a two-minute walk from the tony Avenue Montaigne, where parent company LVMH Moët Hennessy Louis Vuitton has its headquarters.
Entirely redesigned by Italian-based architecture firm Antonio Citterio Patricia Viel, which has worked on all of Bulgari’s hotels, the former 1970s-era office building has been transformed into an 11-story luxury establishment with just 76 rooms and suites.
Its previously mirrored facade is now clad in signature light gray local stone, framing oblong windows inspired by Italian Renaissance architecture.
The entrance of the Bulgari Hotel Paris.
COURTESY OF BULGARI
With prices from 1,400 euros for a 450-square-foot room to 35,000 euros for the two-story penthouse, which comes with a roof garden with a view of the Eiffel Tower, the Bulgari hotel sits squarely at the top of the luxury pyramid in Paris, alongside its stablemate, the recently opened Cheval Blanc on the River Seine.
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“We’re very excited because this is probably the most challenging, the most crowded and expensive city in the world when it comes to top hospitality,” Jean-Christophe Babin, chief executive officer of Bulgari, told WWD. “For us, it will be really the ultimate proof of desirability of our brand and concept.”
The hotel will include a 2,365-square-foot boutique, replacing the former Bulgari flagship on Avenue Georges V, and complements the brand’s store on the nearby Avenue des Champs-Élysées, opened in 2018. Bulgari earlier this year unveiled a refurbished store on Place Vendôme, the epicenter of high jewelry worldwide.
“As a jeweler, and being masters of hospitality, Paris eventually is the single most important city for us, even though we come from Italy. So bringing the Roman hospitality and the Roman jewelry to Paris is, businesswise, obviously a must-do, as Paris will forever retain that status of capital of jewelry,” Babin remarked.
Situated on the corner of Avenue George V and Rue Pierre Charron, the hotel is a stone’s throw from the Four Seasons Hotel George V, where Sylvain Ercoli, the managing director of the Bulgari Hotel Paris, previously worked.
As such, he is uniquely placed to know what makes the newcomer different to the French capital’s existing “palaces,” the official rating for hotels that exceed the five-star standard.
A room at the Bulgari Hotel Paris.
TOMMY PICONE/COURTESY OF BULGARI
“I think it brings a touch of Italian elegance which, to me, is absolutely timeless,” he said on a recent tour of the premises. “It’s Italian, bourgeois luxury, but which has somehow espoused Paris.”
He pointed to the decor of a 20,000-euro-a-night suite, lined in glossy eucalyptus wood panels, its dining area clad in straw marquetry from the workshop of acclaimed master Lison de Caunes. Dotted throughout were design objects and furniture from the likes of Gio Ponti, Flexform, Fontana Arte and B&B Italia.
Viel described it as a cross between Roman glamour and Parisian sophistication.
“Somehow Rome and Paris are the two faces of a same ambition, if you like. They are the center of modern creativity. Fashion is both Roman and Parisian; food is both. So they are somehow embodying the same position worldwide, but from two very different points of view,” the architect said.
The hotel shares a number of codes with Bulgari’s jewelry universe, including a warm color palette that ranges from garnet and amethyst to its signature saffron shade. In the entrance, a painting of actress Monica Vitti by Chinese artist Yan Pei-Ming overlooks a marble floor inlaid with a star motif, similar to the one found in Bulgari’s store on Via Condotti in Rome.
The 14,000-square-foot spa includes a semi-Olympic swimming pool covered in mosaics in tones of emerald, jade and malachite. The vitality pool, meanwhile, is decorated with a motif inspired by the Baths of Caracalla in Rome, a major inspiration for the Divas’ Dream jewelry collection.
Featuring nine treatment rooms and a circular spa suite including a private hammam, the wellness area works with beauty brands Amala, Bellefontaine, Ananné and Augustinus Bader, and is the only location offering 111Skin’s clinic treatments in France.
The Il Ristorante eatery is run by Michelin-starred chef Niko Romito. It has 58 seats indoors and 40 outdoors in an inner garden, and offers dishes including his signature vegetable lasagna, and a Milanese-style risotto made without butter. French classics like sole meunière and onion soup are on the room service menu.
Babin said the amenities were exceptional for a boutique hotel, and justified the high average daily rate of the rooms.
“This business model works only if the experience is so exceptional that you accept to pay an ADR which is much, much higher than the other palaces, because otherwise you wouldn’t have the critical mass to absorb the cost of proposing better services and infrastructure — the pool for example, or the spa — than most of the existing palaces,” he said.
The spa pool at the Bulgari Hotel Paris.
COURTESY OF BULGARI
He noted that Bulgari, which has hotels in Milan, Bali, London, Beijing, Dubai and Shanghai, is usually the number one in every city in terms of revenue per available room. It also scores near the top of the rankings drawn up by benchmarking service Leading Quality Assurance.
“We want, obviously, to become the number one in Paris, which is not easy, because Paris is the most competitive city in the world when it comes to measuring that,” he said, noting the city counts more than 10 hotels with an ADR above 1,000 euros.
It’s an ambitious target, at a time when the city is still struggling to recover its pre-pandemic tourism levels. Ercoli said French people traditionally account for just 3 percent to 5 percent of clients at luxury hotels in Paris, while U.S. citizens represent 35 percent to 40 percent of the customer base.
While American, European and Middle Eastern travelers are trickling back to the French capital, Russian, South American and Chinese nationals are still homebound by COVID-19 travel restrictions. However, city officials are betting on a massive influx of visitors for the 2024 Summer Olympics.
In the race to attract VIP clients, Babin expects to go head-to-head with Cheval Blanc, an internal competition apparently sanctioned by LVMH chief Bernard Arnault. “For sure it’s the group’s ambition that those two hotels become the two new references in ultimate luxury experience in the City of Light,” Babin said.
The executive noted that both were relative newcomers to the hospitality segment. Bulgari opened its first hotel in 2004, and Cheval Blanc’s hotel division was founded in 2006. “Cheval Blanc is primarily the best wine in the world, and we are primarily one of the best high jewelers in the world, so two activities which I would say are a bit far away,” he said.
“On the other hand, our clienteling obsession has helped us to build the business models which insofar have proven very successful in creating, de facto, a style of hotel which I would qualify not only as a 21st-century palace, but the ultimate experience through a boutique hotel format,” he argued.
Up next for Bulgari’s hotel division are openings in Rome and Moscow next year, Tokyo in 2023, Miami in 2024 and Los Angeles in 2025. It’s also hunting for a location in New York City, Babin said.
“The master plan is to have New York, L.A. and Miami. I think that if you’re really to establish a strong presence in the U.S., those three cities are absolutely mandatory, and I think in all those three cities, our concept remains unique, so we have not necessarily the stress to be there as soon as possible,” he commented.
The facade of the Bulgari Hotel Paris.
FRANÇOIS GUILLEMIN/COURTESY OF BULGARI
As the only Italian player in the French capital’s hospitality industry, Bulgari plays to its cultural strengths. “Our style is very different from any existing players in Paris,” Babin said. “We come from a highly cultured historical background and environment. On the other hand, we are Latins, so we are warm, we are cheerful, we have love and empathy.”
That approach plays well to its guests, who he described as successful, independent types seeking a home away from home, and has resulted in a high rate of returning clients elsewhere.
“Today’s clients are much less formal than they used to be more than one century ago, when those [other Paris] palaces were constructed. And they really do appreciate to be in a practical, contemporary, modern environment with a staff which is extremely client-obsessed, but at the same time approachable and friendly,” Babin said.
“When I see the evolution of hard luxury, it looks like it’s a trend right now. Typically, high jewelry is more and more worn dressed up, and dressed down, meaning that people are enjoying their luxury not just for different formal opportunities, but also informal opportunities, and our hotel concept is really following those lines,” he concluded.
Hertz-Tesla Deal Signals Broad Shift to EVs for Rental-Car Companies
Rental providers are focusing more on electric vehicles under investor pressure to cut emissions
Car-rental customers could soon see more electric-vehicle options on airport lots and other places where they are looking to reserve a ride.
The rental-car industry, long a big bulk-purchaser of new models in the car business, is sharpening efforts to add more battery-powered vehicles to fleets, the latest in a broader global shift among companies embracing greener technologies to cut their greenhouse-gas emissions.
Two of the biggest car-rental firms— Hertz Global Holdings Inc. HTZ -2.17% and Avis Budget Group CAR -7.58% —recently revealed plans to expand their plug-in offerings as the auto industry rolls out more options for drivers looking to avoid gasoline. Privately held Enterprise Holdings Inc., which owns brands such as National and Alamo, also has said it is looking to add more electrics, particularly for clients that are renting or leasing small vehicle fleets.
“If you look now, 2% or thereabouts of all cars manufactured in the U.S. are electric,” Avis Chief Executive Joe Ferraro said on an earnings call earlier this month. “That number will go to about 10% in 2025, and maybe north of 30% in 2030. And we’ll play a big role in that.”
This shift is expected to come with challenges. Electric vehicles are typically more expensive, creating higher upfront costs for rental-car companies and potentially raising prices for renters. Additionally, a dearth of public charging networks could prove difficult for leisure travelers, who might not know how and where to charge their cars, analysts and executives say. That frustration could hurt the customers’ experience, they say.
Car-rental companies and their corporate clients are facing greater pressure from Wall Street to make environmental issues a higher priority and to outline steps they are taking to combat climate change, analysts and executives say.
Stocks in companies focused on electric vehicles have shot up in recent months, even though sales of battery-powered models remain low—less than 3% of the total new-car market—and many drivers are still nervous about not having enough places to plug in.
Hertz’s news in late October that it had placed a 100,000-vehicle order from electric-car pioneer Tesla Inc. sent shares in both companies soaring, pushing Tesla’s valuation over $1 trillion for the first time. While the two companies are still working out details, Hertz said at the time that the order would increase its mix of electric cars to 20% of its overall fleet.
Avis’s stock also rallied earlier this month when executives said they were working to expand electric options for renters, making it a centerpiece of the company’s efforts to reduce greenhouse-gas emissions by 30% over the next decade. Following the disclosure, Avis’s shares more than doubled that day, the stock’s largest single-day percentage gain ever.
Currently, the pickings are relatively limited for customers looking to rent an electric or hybrid model. For Avis, the share of hybrid and electric vehicles in its global fleet is around 3%, the company said earlier this year.
Chris Haffenreffer, an executive in charge of Enterprise’s electric-vehicle strategy, said it sees the most potential for electrics in its commercial-rental fleets and fleet-management business, which mostly serves companies looking for longer-term arrangements. These business clients tend to be more cost conscious and see value in the lower maintenance and operating costs afforded by battery-powered vehicles, he said.
Enterprise is still studying how to make electric cars a better fit for leisure travelers, who are more likely to worry about finding enough charging stations, Mr. Haffenreffer said.
The shift to electrics can benefit rental-car companies in other important ways. It helps them shrink their own carbon footprints by integrating more zero-emissions vehicles into their overall rental fleets. That, in turn, can help improve their environmental, social and governance, or ESG, standing with investors, executives and analysts say.
“ESG-associated names like Tesla usually get a much higher multiple,” said Hamzah Mazari, an analyst with Jefferies Group who covers the rental-car industry.
Corporate clients also see an advantage because the more clean vehicles they rent, the more they can count the emissions-reduction efforts toward their own ESG ratings, analysts say.
Still, hurdles remain for rental-car providers looking to electrify their lots.
Battery-powered vehicles are typically more expensive than their gas-engine counterparts, requiring companies to make more upfront investment, said Maryann Keller, an independent consultant who previously served on the board of Dollar Thrifty Automotive Group, which is now part of Hertz.
They also require rental providers to install charging stations in their parking areas and to educate consumers about how to use the vehicles, she said. A steep learning curve could be a major turnoff for clients, she added.
There is also uncertainty around the resale market and how much an electric model will hold its value, a factor that is particularly important to rental-car companies because they turn over fleets frequently, analysts say.
Enterprise’s Mr. Haffenreffer said developing a more robust network of public charging stations would be critical to broadening EVs’ appeal to renters.
“The conventional wisdom for EV owners right now is that the vast majority of charging is going to happen at home, but for our renters, that charging is going to happen in the public,” he said.