Bloomberg reports that "the owner of the Margaritaville Resort Times Square Hotel filed for bankruptcy after disappointing results since its 2021 opening left it fighting a foreclosure auction, court papers show.
"The legal entity that owns the equity of the island-themed hotel filed for Chapter 11 protection Sunday night in New York, according to court papers. The hotel itself will likely seek protection from creditors soon, the filing shows."
The story notes that "The hotel — the only Manhattan outpost of Jimmy Buffett’s kitschy hospitality chain — opened in 2021, when tourism in Times Square had not yet recovered from the Covid-19 pandemic. It has lost money since then, and a mezzanine lender has since said the hotel’s owner is in default … The hotel boasts more than 230 guest rooms and over 34,000 square feet of retail space."
- KC's View:
I bring this up for a reason - not surprisingly, a business lesson.
First of all, return with me to June 2021, when the hotel opened. I wrote about it then, saying that while I am an huge Buffett fan, this property set off all sorts of alarm bells in my head about how this would reflect on the Buffett brand:
It's not just because there are elements of the story that suggest a greed that seems unseemly and a little out of synch with the persona that Buffett has carefully crafted over the years - actually, one of the miracles of Buffett Inc. is that somehow, through it all, the singer-songwriter seems completely authentic and maybe even a little incredulous at all the brand development.
Let me give you three reasons the story made me worry about the brand.
The first one has to do with the New York opening. A Margaritaville resort in Times Square may have a natural expiration date, and it may not be that far in the future. I was one of the people who went to see Buffett's Broadway show, "Escape To Margaritaville," which closed fairly quickly and lost money - even while watching it (and, admittedly, enjoying it), it felt to me like a show that was made more for a touring company or Las Vegas. Not New York City. Not Broadway. It just doesn't fit. (If I want to have the island experience, I'm not going to Manhattan island … I don't care what the brochures say.)
My second concern is that I'm honestly not sure the degree to which the Margaritaville brand will outlive the 74-year-old singer. I'm not trying to be morbid here, but it seems to me that I'd be trying to figure out ways to make my fan base wider and more sustainable. In other words, figuring out a succession plan. I'm not sure that the solution is to bring Kenny Chesney into the Margaritaville fold, but when Jimmy stops touring or worse, is there going to be a natural decline in fan loyalty and brand equity? (A subset of this concern is the Margaritaville brand of retirement communities. I just think that sends the wrong message about who the audience is, and that it skews really, really old.)
Third … I'm a little worried about the lack of control. The story makes the point that Buffett Inc. - the actual name is Margaritaville Enterprises - doesn't actually own very much except for intellectual property. Almost everything is a licensing deal (which actually reminds me of another fellow from New York who has his name all over stuff that he didn't actually own). That's great in terms of not having to lay out much money, but there's also the risk that comes when you put your name and reputation in the hands of other people who may not share your priorities or values.
The business lessons are three: First, it is incredibly important to make sure that a retail offering fits the location - wishing that a square peg will fit into a round hole won't make it so. Second, brand equity is everything - every decision should hinge on whether it supports a sustainable brand strategy. And third, control matters - as someone once said, a farmer's best fertilizer is his (or her) shadow. (Actually it was Aristotle, and the exact quote is, "The best fertilizer for the field is the heel of the farmer.")