Kerzner's trick then was the same as it is today - to offer people the sort of hospitality they have never experienced before. What has changed is that people didn't expect it back then, and now they do. "If you look at the mid-1960s in South Africa, the expectation was governed by what was on offer. It was nothing like what has evolved over the years. It's natural that people's expectations of a great boutique hotel operation is quite different today than it was 30 or 40 years ago. When you compare the first Walt Disney theme park with what it has become today, it is extraordinary the way it has grown. The expectations are quite different."
Colleagues talk about Butch Kerzner in loving, reverential tones. They refer to his people skills and his way of making things happen. "He was a total package," says Steve Ross, who joined the board of Kerzner International, through Butch Kerzner. "If you talk to people on Paradise Island, they all remember Butch. His presence around that whole company, you don't replace that overnight. The company is doing fine, but it still feels the loss of Butch."
Howard Brett "Butch" Kerzner was the antithesis of his father. Not for him the party-going celebrity-filled lifestyle. Neither did he share his father's gruff, intemperate manner. According to colleagues, Butch was the family man: clean-living, passionate and driven about his work. He was polite and charismatic and his private interests included rock-climbing.
Butch was the only one of Kerzner's five children to follow his father into the business. He studied economics at Stanford University, worked on Wall Street and joined Sun International in 1992. He completed the £125m purchase of Paradise Island, dealing with the Mohegan native Americans over the Mohegan Sun gaming development in Connecticut, and negotiated with both Greenwich and Manchester city councils over the rights to run the UK's first super-casino.
"When Butch became CEO, he had a great deal of respect for Sol and his opinions," says Paul O'Neill, one-time president of Kerzner International Bahamas in 2006. "Sol really was a consigliore. He was an adviser to a large degree. They spoke all the time, and they built great relationships with folks they did business with.
"Butch wasn't someone who sought the spotlight, he was very much the businessman, the family man. Sol was a little bit more comfortable on the dance floor, if you know what I mean." Butch's stand-out moment was taking the company private last year, in a $3.8bn buyout which increased the family's stake from 11 per cent to 25 per cent. Yet the family still ended up making more than $400m from the transaction.
"From Butch's standpoint, he wanted a bigger interest in the business; he saw that the company wasn't being valued correctly," Ross says. "He saw the opportunities of being private."
While Kerzner had a vision for resorts and strong attention to detail, his son had strong business nous and deal-making acumen. It was, says Ross, "a tremendous double act". Investors who supported the company going private had the utmost respect for Sol Kerzner and his capabilities, but didn't want to build the company around one person.
Butch Kerzner built a partnership with the Dubai royal family that secured its investment in Kerzner International and was instrumental in securing land for a -second Atlantis resort on the Palm Dubai, which opens next year. He was negotiating with the Singapore government over a casino licence, building the One&Only brand and scouring the world for other development projects.
It suited father and son. Kerzner senior got time to work on The Cove development and think up new visions, and his son's business reputation grew. The succession of the Kerzner empire was taking a logical and compelling route.
Butch Kerzner died on October 11 2006 in a helicopter crash while overlooking potential development sites in the Dominican Republic. "Obviously it's a huge setback in my life. Life wasn't quite the same," says Kerzner, who speaks with affection for his son, demonstrating respect for him as a business partner and pride in seeing the boy make the grade in the same profession.
"I spoke to Sol very soon after it occurred, probably minutes," says O'Neill. "He wanted my wife, Judy, and I to be in the Bahamas, with Vanessa, Butch's wife." O'Neill was five months retired as president of the Bahamas operation. He had been planning to spend more time with his grandchildren and to travel with his wife. "It's a 24/7 business. We just decided that we wanted to take that break."
O'Neill got another call later that evening. It was Kerzner again. "He started talking about the organisation's needs. He wanted me to come back to take an operating role. I immediately agreed to do that, and I was on a plane the next day."
Kerzner arranged a board meeting by conference call. "It was held in a state of shock," recalls Ross. "I remember Sol picking up and saying: 'We've got to do this and this.' You saw the strength of Sol." One of the things someone had to do was make the licence-bid presentation to the Singapore government. Kerzner decided he would do it himself. "Butch was buried on a Friday afternoon, and Sol left for Singapore on the Saturday or Sunday," says Ross. With so little time, the presentation, as put together by Butch Kerzner, was left untouched. "It must have been very tough for Sol. The presentation had Butch speaking on a video tape. You can only imagine what that would have been like for Sol watching it. It had to be unbelievable. I heard he was very strong." Kerzner International lost the Singapore licence contract.
==
Shore thing
By Roger Blitz
Published: June 23 2007 03:00 | Last updated: June 23 2007 03:00
Sol Kerzner is throwing a party, a three-day party. The man once described by Frank Sinatra as "the best saloon-keeper in the world" has got an array of A-list celebrities coming to Paradise Island, his 685-acre beach destination in the Bahamas, to mark the opening of The Cove, the latest phase of his Atlantis resort complex.
Janet Jackson is the headline act for Kerzner's incredible grand opening weekend. John Travolta, Sean Connery, Stevie Wonder, Whitney Houston, Michael Jordan, Lindsay Lohan, Liv Tyler, Rob Lowe and Kanye West also give the event star-studded quality. No expense is spared on the fireworks, the Dom Perignon is in full flow, and sushi, lobster and oysters are in plentiful supply. In Kerzner's world, everything has to be on a grand scale.
Atlantis was big enough even before Kerzner spent $1bn on the Cove expansion. The giant Royal Towers hotel complex has 2,900 bedrooms, including a $25,000-a-night suite, 35 restaurants, a large casino and 20m gallons of pools and lagoons. But The Cove adds a more cosmopolitan edge to the resort, its 600 rooms housed in a Beers and Rockwell-designed hotel slightly away from the more garish Royal Towers.
A tranquil open-air lobby offers an arresting view of the ocean. There are adult-only pools, fine dining and a boutique that wouldn't look out of place in Paris. You can swim with dolphins, or take a ride in the big new spectacular, Aquaventure, a 63-acre water park, complete with harum-scarum rides such as the Leap of Faith, set, for some reason, in a replica Mayan temple.
The Cove is already a success. American families, mainly from the eastern and southern states, fill the place for long weekends or four- to five-day vacations. As Kerzner parties with his family and celebrity friends, Kerzner International, the world's foremost destination resort operator, has notched up another triumph.
A month earlier, Kerzner's mood was altogether darker. A fire overnight near one of the poolside areas is troubling him. He walks up and down the cooking stations at The Cove's Mosaic restaurant, which is busy for breakfast but quiet this lunchtime, and nothing on offer seems to interest him. Staff fuss around his table, and he shows his irritation - he seems to wear a permanently grumpy expression, so that when he smiles occasionally you're rather grateful for it. Pictures from past decades show a bronzed or flushed, well-rounded face. He is no more than five and a bit feet tall, which may explain why boxing was a formative experience in his Johannesburg youth. There is nothing showy about his appearance, his stride perhaps betraying the effects of last year's triple heart bypass.
Kerzner is stilted as he begins to discuss his latest venture. He warms up a bit as the conversation turns to his achievements and the hospitality industry in general. Then, at the end of the lunch, he is asked to head to the beach, a hundred yards from the restaurant, on foot, for a photo-shoot. He grumbles, but relents. The grumble turns into a minor tantrum on the beach walkway when he realises the photographer wants him to step on to The Cove's glorious sand. "I can't be seen in front of my guests like this," he says tetchily. The photo-shoot is abandoned, Kerzner summons a driver and is driven off in a golf buggy, his mood considerably more sour than at the beginning of lunch.
Kerzner is 71 and has been in the hospitality business for almost half a century. One thing he has always valued in that time is publicity, hence the lavish parties, the big-name acts at his resorts and the company's brash number one core value: "Blow away the customer." "I am not mad about shmoozing," he said a few years ago. "I've made some very good friends. But, you know, to me it's really a business."
Kerzner has been married four times. The first ended in divorce, his second wife killed herself and his third was a Miss World winner. His fourth wife is the much younger Heather Murphy, the best friend of a Californian supermodel to whom he had been engaged for some years. He has a rugged, colourful persona and unsettles his staff by going around his resorts finding fault with some detail and "firing" the culprit on the spot. He never actually fires them, but it is his way of showing his displeasure.
His 60-a-day smoking habit induced a heart attack and his Scotch intake is well chronicled, as was his complaint about having to share a room with another man in the Betty Ford clinic. Worry beads have replaced cigarettes and age may have dulled his fondness for ending a long working day with a stint at the roulette wheel. But no one doubts the man's relentless energy. He is, or was, "a humming dynamo", says Chris Brammer, who worked for Kerzner for 10 years as a general manager. "He is not an empathetic person. He and Napoleon would have got on fine," says Brammer. "I believe, to his friends and associates, he was a very close person. To the poor slobs like me, he was a guy you didn't get across. He was a strong leader."
Born in a poor Johannesburg suburb to Russian Jewish immigrants, Solomon Kerzner was the youngest of four children. A welterweight boxing champion at university, he got a degree in chartered accountancy and set up with a top Durban practice. Hospitality was familiar to him. His parents owned a boarding house in Durban. Backed by some of his accountancy clients, he progressed from buying Durban's Palace Hotel to taking an undeveloped site and turning it ino a five-star resort hotel, the Beverly Hills. When it opened in 1964, resort hotels, equipped with an array of sports, entertainment, bars, restaurants and other leisurely pursuits, were a rarity around the world, let alone in South Africa. "I built South Africa's first five-star hotel," Kerzner recalls.
Kerzner's trick then was the same as it is today - to offer people the sort of hospitality they have never experienced before. What has changed is that people didn't expect it back then, and now they do. "If you look at the mid-1960s in South Africa, the expectation was governed by what was on offer. It was nothing like what has evolved over the years. It's natural that people's expectations of a great boutique hotel operation is quite different today than it was 30 or 40 years ago. When you compare the first Walt Disney theme park with what it has become today, it is extraordinary the way it has grown. The expectations are quite different."
Kerzner's ambitions grew. He built a 450-room beach hotel, then found a partner in South African Breweries to create the Southern Sun Hotel luxury chain. He ventured outside South Africa to open Le Saint Geran on Mauritius, the first of what was to become his One&Only luxury hotels brand. But it was back in his homeland that Kerzner really made his international reputation - and his fortune - with his four-hotel resort, Sun City.
Chris Brammer worked for Kerzner's Sun International in the late 1980s. One of his jobs was to persuade customers from the South African suburbs to visit Sun City, which was located some 300km away in Bophuthatswana, one of the 10 bantustans or black tribal reserves set up by the South African apartheid regime. While gambling was banned in South Africa, it was permissible in these homelands, and Kerzner obtained a gaming licence; soon South Africans were enjoying hedonistic weekends and holidays on an unprecedented scale.
Sun City hosted international artists in a 6,000-seater super bowl; golf courses attracted the world's best players; and Miss World was crowned there - yet many criticised this as giving succour to apartheid. Topless dancers and X-rated cinemas were standard, though Brammer says tales of prostitution are false.
Kerzner stamped his mark on the resort with fantastical hotel structures such as the Lost City, surrounded by a 25-acre botanical jungle, and the Cascades. He built water rides and attractions, something that would feature in many of his future projects. And, of course, the casino was centre-stage. "Sun International was the largest self-governing gaming company in the world," says Brammer. "There was no gaming board. The rules we lived by were our own rules."
Brammer recalls a television ad for the resort. A Boer farmer arrives at Sun City on a cart pulled by four oxen. He wins the jackpot, there are coins pouring all over the place, and his prize is a Lamborghini. The next shot is of the farmer sitting in his new car, being escorted out of the door, but, as the camera pulls back we see that the Lamborghini is on the cart, being pulled by the oxen - the farmer can't drive.
Sun International operated under extremely exacting standards. Pouring beer into a glass was taught using a four-page manual. Kerzner set up lavish conferences for his general managers to show them what was possible with a bit of imagination. But the Kerzner obsession for detail was always rammed home. Brammer remembers him opening one conference after a very fine lunch out by the pool at Sun City. "How did you enjoy your lunch?" Kerzner asked.
"Very nice," the general managers said.
"Let me tell you something," Kerzner replied in a rage. "The hot dishes were shit, the desserts were shit, the people responsible for the lunch are shit."
Sun International demanded a doubling of revenue every three years. Kerzner gave his executives excellent salaries and unlimited expense accounts. He gave them the resources to build golf courses with the finest grass from Australia, a fantasy of King Solomon's Mines, man-made lakes and wildlife parks. These standards are reflected in today's practices, and you don't have to look far anywhere in the industry to find someone who used to work for Sun International, Brammer says.
The Sun King, as Kerzner was known, ran into political difficulties. South Africa's post-apartheid justice ministry alleged he had bribed his way to gaming licences by paying substantial sums to tribal leaders in Bophuthatswana and Transkei, another homeland where he won exclusive gaming rights. Kerzner would later admit to one payment involving the Transkei gaming rights, but the case against him ran into the sand.
Kerzner's defence has always rested on two claims. The first was that in the unregulated climate of South Africa's black homelands - set up by the Pretorian regime to stop blacks seeking work in the white cities - that was the way business was done. The second was that Sun City created an industry that gave employment and training to uneducated black South Africans. Nelson Mandela couldn't shower enough praise on Kerzner. If, to the outside world, he was "the sultan of sin", to Mandela he was "by far the greatest entrepreneur in the tourism industry", coming from a family "not only interested in their own enrichment, but willing to give back to their country". When Kerzner handed over a 20m rand cheque for a new hotel school in Johannesburg in 2003, Mandela told his audience: "The Kerzners have... boosted the South African economy with their entrepreneurship."
Kerzner's narrow escape from the South African judiciary did not hamper approval from other gaming regulators. New Jersey gave him a gaming licence in 1997 after concluding that the Transkei payment was "an aberration" in a previous decade. The consent of this and other regulators allowed Kerzner to turn his attention to international developments. Post-apartheid South Africa clawed back some of his -gaming licences, and he sold most of his South African interests. His next move was into the US market, buying up Paradise Island in the Bahamas in 1996. The deal was closed by Kerzner's son, Butch, who was making his way up the business in a quiet but assured manner.
Colleagues talk about Butch Kerzner in loving, reverential tones. They refer to his people skills and his way of making things happen. "He was a total package," says Steve Ross, who joined the board of Kerzner International, through Butch Kerzner. "If you talk to people on Paradise Island, they all remember Butch. His presence around that whole company, you don't replace that overnight. The company is doing fine, but it still feels the loss of Butch."
Howard Brett "Butch" Kerzner was the antithesis of his father. Not for him the party-going celebrity-filled lifestyle. Neither did he share his father's gruff, intemperate manner. According to colleagues, Butch was the family man: clean-living, passionate and driven about his work. He was polite and charismatic and his private interests included rock-climbing.
Butch was the only one of Kerzner's five children to follow his father into the business. He studied economics at Stanford University, worked on Wall Street and joined Sun International in 1992. He completed the £125m purchase of Paradise Island, dealing with the Mohegan native Americans over the Mohegan Sun gaming development in Connecticut, and negotiated with both Greenwich and Manchester city councils over the rights to run the UK's first super-casino.
"When Butch became CEO, he had a great deal of respect for Sol and his opinions," says Paul O'Neill, one-time president of Kerzner International Bahamas in 2006. "Sol really was a consigliore. He was an adviser to a large degree. They spoke all the time, and they built great relationships with folks they did business with.
"Butch wasn't someone who sought the spotlight, he was very much the businessman, the family man. Sol was a little bit more comfortable on the dance floor, if you know what I mean." Butch's stand-out moment was taking the company private last year, in a $3.8bn buyout which increased the family's stake from 11 per cent to 25 per cent. Yet the family still ended up making more than $400m from the transaction.
"From Butch's standpoint, he wanted a bigger interest in the business; he saw that the company wasn't being valued correctly," Ross says. "He saw the opportunities of being private."
While Kerzner had a vision for resorts and strong attention to detail, his son had strong business nous and deal-making acumen. It was, says Ross, "a tremendous double act". Investors who supported the company going private had the utmost respect for Sol Kerzner and his capabilities, but didn't want to build the company around one person.
Butch Kerzner built a partnership with the Dubai royal family that secured its investment in Kerzner International and was instrumental in securing land for a -second Atlantis resort on the Palm Dubai, which opens next year. He was negotiating with the Singapore government over a casino licence, building the One&Only brand and scouring the world for other development projects.
It suited father and son. Kerzner senior got time to work on The Cove development and think up new visions, and his son's business reputation grew. The succession of the Kerzner empire was taking a logical and compelling route.
Butch Kerzner died on October 11 2006 in a helicopter crash while overlooking potential development sites in the Dominican Republic. "Obviously it's a huge setback in my life. Life wasn't quite the same," says Kerzner, who speaks with affection for his son, demonstrating respect for him as a business partner and pride in seeing the boy make the grade in the same profession.
"I spoke to Sol very soon after it occurred, probably minutes," says O'Neill. "He wanted my wife, Judy, and I to be in the Bahamas, with Vanessa, Butch's wife." O'Neill was five months retired as president of the Bahamas operation. He had been planning to spend more time with his grandchildren and to travel with his wife. "It's a 24/7 business. We just decided that we wanted to take that break."
O'Neill got another call later that evening. It was Kerzner again. "He started talking about the organisation's needs. He wanted me to come back to take an operating role. I immediately agreed to do that, and I was on a plane the next day."
Kerzner arranged a board meeting by conference call. "It was held in a state of shock," recalls Ross. "I remember Sol picking up and saying: 'We've got to do this and this.' You saw the strength of Sol." One of the things someone had to do was make the licence-bid presentation to the Singapore government. Kerzner decided he would do it himself. "Butch was buried on a Friday afternoon, and Sol left for Singapore on the Saturday or Sunday," says Ross. With so little time, the presentation, as put together by Butch Kerzner, was left untouched. "It must have been very tough for Sol. The presentation had Butch speaking on a video tape. You can only imagine what that would have been like for Sol watching it. It had to be unbelievable. I heard he was very strong." Kerzner International lost the Singapore licence contract.
"Remarkably well," is how Sol Kerzner describes himself at the moment. "So far, so good." Eight months after Butch's death, he is preparing his next project. The Atlantis Palm in Dubai opens next year and Kerzner will want to be on site getting every last detail right. "I feel very confident it is going to work like a charm," he says.
One challenge that he has yet to scale is the European market. So far it has eluded him, and Dubai will, he hopes, draw customers from the Continent. He also thinks UK visitors will take to The Cove in a way they would not the main Atlantis complex. "We have never until now tried to penetrate that market place," he admits.
Kerzner has also invested some time in getting into prime position for the UK's casino expansion. When the government announced plans for Las Vegas-style casinos, Kerzner's team built relations with the local authorities bidding to run the new licences. When the government scaled down the ambitions, most of the US-based operators picked up their chips and left the table. Kerzner is the last one sitting, having secured operating rights with Manchester, the site for the UK's first super-casino.
Plenty of hurdles stand in the way, not least parliament's unhappiness at the outcome and Manchester's promise to reopen the selection process for the casino's operator. The controversy has brought some unwanted publicity for Kerzner as the UK media portrayed the would-be operator of Manchester as "a vulgar tycoon" with "a shady past". Kerzner admits to feeling sore about the comments. But after a lifetime in the spotlight, another bout of unwanted publicity is hardly likely to deflect him.
More exacting is the long-term succession issue. In the medium term, Kerzner is in the driving seat again, the company's chief executive. As well as bringing Paul O'Neill out of retirement, he also persuaded Bob Cotter, veteran hotels executive who became chief operating officer at Starwood Hotels, to cancel his retirement to come and work his marketing skills on the business.
Kerzner has about a further 150 acres on Paradise Island for a final phase of Atlantis. Once revenues and occupancy rates are firmly established at The Cove, he will turn his attention to how that final phase will work. Cotter sees a healthy pipeline in the upmarket One&Only brand. Dubai will also attract high-end customers. "I think we will likely be at the higher end of the leisure hospitality industry than we have been," Cotter says.
As for an Atlantis elsewhere in the world, he says, you might not find a site like Paradise Island again.
Copyright The Financial Times Limited 2007
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