Chairman and Founder of Karma Group, John Spence, discusses his work, the impact of COVID on the travel industry, and how he keeps positive.
PHOTOS BY KARMA GROUP
Karma Group is an award-winning international travel and lifestyle brand offering extraordinary experiences in the world’s most beautiful locations.
Karma Group is led by Chairman and Founder, John Spence, former Ernst & Young Entrepreneur of the Year and member of the judging panel for the Ernst & Young World Entrepreneur of the Year.
John has also been awarded the Edward P. Bass Honorary Fellowship at YALE in the Fall Semester of 2019 in the School of Architecture, marking the first time YALE has extended this to the same person more than once, alongside a Distinguished Visiting Fellowship at UCLA.
Excerpts from an interview
How did you build the Karma Group and what inspired you to enter the travel industry?
I was born at the end of Gatwick airport in England. So, I had the smell of aviation fuel in my nostrils since a child and my whole family has been involved in travel. I went to university but I soon dropped out because I thought I was the best guitarist in the world. And, I went down to London and quickly discovered I was the worst guitarist in the world. I couldn't even get a job in punk bands back in 1980, which was a challenge. And, so I drifted onto the business side of music and I became an agent putting on tours and a tour manager. I ended up looking after quite good bands when they were small people like Culture Club and Bananarama and other groups.
And I lived on the road, I would take them on tour and we'd go play concerts around the world. And I spent a lot of time in hotels and a lot of time traveling, which I love, and then I got a bit tired of the music business and I drifted into the hotel business in Tenerife in the Canary Islands in Spain. And, I started working for an American company that was developing properties. I started off as a junior salesman, very much at the bottom of the food chain. And I worked my way up and I grew in rank and I sort of self-educated myself. And I ended up as the managing director. And then in 1993 by accident, I was in India, um, speaking at a conference, a hotel conference in Hyderabad, and I went to Goa and I fell in love with it. I saw a huge opportunity. I saw amazing beaches and fantastic scenery and friendly people. And the price of land was very cheap in those days.
But, why Goa?
Number one is it was attractive for international tourists because it was a relatively low-cost winter sun, destinations and airlines were beginning to fly them. And also it was attractive to the Indian consumer because the middle class was growing and more money was coming into the system. And, it represented an exotic, slightly Western place to go on holiday. So, I took a gamble. I tried to persuade the company I worked for to back me and they refused. So I left and I put my own money in. I sold my flat in London and mortgage and persuaded a few brave people to join me. And we started off with six of us on the beach in 1993 with our first vastly underfunded resort. And, then the rest is history as they say.
A lot of travelers today are choosing not to go towards big legacy brands and prefer bespoke experiences. How do you factor that into your business when you're building a place, building an experience?
I much prefer both as a developer and a consumer the boutique hotels. I much prefer something that's a bit more individual and a bit more special. and so I've always gravitated to that part of the business. The big problem is that the big brands through consolidation and aggregation are getting bigger and bigger and they often have the same products wherever they are. And, I personally don't like, and I think a lot of consumers don't like the hotels that look the same, whether it's on the beach, or it's in Hawaii or it's in Florida. And we very much design our resorts and base them relative to the location. And, so they all look different and feel different depending on where they are located.
How is your brand coping with the COVID situation?
Obviously, I think if anyone in hospitality says they haven't had a problem is probably lying. Looking back over the last 12 months, we have fared much better than I would dare to have hoped last April. What we have seen is that it's very cyclical when we are able to open a resort and when a consumer can come to us, we've done great business. I mean, there's no question that people want a holiday and to travel more than ever. The problem, of course, is when restrictions mean that we can't open our resorts or people can't travel to them. It’s been very stopped and started in cycles over the last twelve months because we are spread out into many territories around the world.
We said better than some people, because often when one area is locked down and the other is open and vice versa. So generally we've had some of our operations always open apart from in the early days. What we've also seen, and this really encourages me for the future, is that people have a lot more saved up money because they haven't been able to spend it. So in England alone, there are 250 billion pounds of extra money in people's bank accounts because they haven't been able to travel or go to restaurants or, or they've been working from home or whatever it is. So people have more money. I think people have this absolute passion to travel when they can.
The other thing I must say, that has been positive for us is that we've been very acquisitive. So during the last 12 months, we've been acquiring new resorts. It’s been possible because the prices are good and I am able to make decisions quite independently unlike big company structures.
I own a hundred percent and we have no partners, so we can move quickly. We have bought new properties in India, we have a new one in the Cotswolds which we opened up two weeks ago, two new ones in Indonesia. And, I will go down next week to Spain to acquire our newest one. We try to retain the original staff in the properties we acquire.
Personally, in Karma Group, we had over 2000 members of staff that we were paying salaries and compensation for many months because clearly there wasn't a state support system set up in India. We wouldn't let people go or abandon them in times like this, because we have great loyalty. Over three decades, our staff has been our rock and they have been incredibly loyal to us, and so it was our chance to repay that.
How important has it become for your brand to communicate with its clientele?
Hugely. I believe in PR both in terms of customer-facing and internally-facing, so we have our weekly newsletters within the community. I personally do a talk to my owners in sort of recorded sessions every other week, which we post out to them. We do town halls. I communicate over email very freely. And, we're much more like a private members club than we are a vanilla hotel. You see our core business is that we have members and we have 45,000 members, and member families, which means over a hundred thousand people, because they're couples or with children. So our fundamental business is developing members and, and we view them not as just someone that will come and stay with us for one night, but it really is a lifestyle. So we produce our own wine and olive oils, and we sponsor sporting events and we have events in the cities, and we do all sorts of things around the name memberships. So our fundamental business is making sure that our owners and members are happy because really that's how we create our new business and unlike a normal hotel, that's just really trying to get someone to stay for one night. We’re trying to develop a long-term relationship with our members.
The cost of operating is so high in hotels these days that often you lose money the first time that you have a consumer, but then you make a lot of money over the next 15, 20 years because they keep coming back and they like you and that's how you make your money. So that's our viewpoint, it's really a long-term relationship.
What has the experience of teaching at Yale University been like?
Yeah, it's amazing. I'm a university dropout myself and I get to teach at one of the best universities in the world. They have a very good program and Yale obviously attracts some of the smartest students in the world and it has some of the best professors in the world and it has more money than they could possibly ever spend.
I mean, it's an incredible, incredible institution. However, a number of years ago, they were given an endowment and it was by an ex-student Edward Bass, and his observation was, which is very clever is that although they have the smartest students and the best professors and the most money, there is a danger of that they're divorced from reality. And, so what they do each year is they give a fellowship to someone who's not academic and is not a professor, but is successful in the real world.
The business students are incredible, make the best spreadsheets and study business skills. But, my job is to tell them, tear all that up. This is how it really works in the real world. You want to make lots of mistakes. You know, you want to learn as you go along, and you've got to take chances. And so it's really a balance between the professor who tells them how it should be. And you know, the mad entrepreneur who says it can also be totally different. And, I think it opens their eyes a little bit to how it really works in the real world.
I teach alongside architecture professors but I'm not an architect, I'm a developer who made it up as I went along. I challenge their notions of form and function. It has to look more than pretty, it has to work. So I teach them about blending the two. For example, one of the students had the most amazingly designed resort and it looked fantastic. It was absolutely perfect on paper, except I pointed out that the kitchen was two floors below the dining room and it had only stairs and no room for a lift. So that doesn't work. It doesn't matter how beautiful it looks on paper. It won't work.
I have another example of teaching, where I was asked to teach a group of business students who had come for a conference. I agreed to do it but I told them I will do it my way, so they were asked to dress casually and meet me at the lobby of the hotel we were staying at, I took them to a football game in Monaco. I told them we have a box at the stadium, and I told the students, I've got six friends there. Your assignment is, whilst you're watching the football and having a beer, you have to sell them a property investment. We role-play there. So I said, that's real life. It isn't sitting in a classroom learning how you should sell it. The students loved the challenge, they had no spreadsheets, they just had to sell an idea in 90 minutes.
How do you see the travel industry shifting and adapting to this global pandemic?
Well, I think what we're seeing clearly is that domestic tourism is, more than ever, I mean, in the short term, the people who come to our resorts are all domestic tourists. However, I'm a very firm believer that international tourism will bounce back with a vengeance.
I think we're going to see a lot of people making those once-in-a-lifetime holidays or more adventurous holidays. People are looking at adventure holidays and unique destinations, and not go to places they normally go to. We are very well placed to follow COVID-protocols. We have a lot of villas and self-catering units and we don't work in the banqueting space or the big sort of conference space. So we're not a hotel where people are going to have to mix with other people.
With the average traveler now becoming more eco-conscious, how do you feel the Karma Group is addressing this and what developments can we see in this regard for you?
So this has always been one of our mantras. When we build our resorts we build them to respect the surroundings. When we built a resort in Bali, it was on a cliff and normally people would level the land and chop everything down but we maintain all the natural forest, the actual trees. And, so now it looks like a big forest with pathways that work around the existing trees and works with the natural features. We have fantastic butterflies and monkeys and all sorts of birds scuttling around.
But, we looked at how we can be Eco-conscious and make the resorts sustainable. This is something I teach at Yale as well, sustainability is vital, but it also has to be sustainable from a business point of view. There's no, there's no point in building a resort or a house that's very eco. But, it doesn't succeed in business because then it wouldn't be sustainable for the local community. It won't be sustainable for employment. It wouldn't be sustainable in itself and it may go bankrupt. And, so sustainability has to balance both.
What kind of architecture interests you? What would you say is your sense of design?
I like architecture that’s relevant to where it is and what it's supposed to be doing. So again, it's the form and function. For example, we’re building a new hotel in the Greek islands, so now to me, that needs a design that speaks of the Greek islands. So, it needs to be whitewashed. It needs to be low density. It needs to have window shutters that are blue, like the color of the sea.
Why is your company called Karma? And, what can we expect next for you?
Well, that's a good question. It wasn't, to begin with. It was called Royal resort when I first started, but I had a bit of a light bulb moment. I was actually sitting on the beach. I think I was with my wife. It came to me. So, I interpret karma very simply. I like the concept of you do good and good comes back. The concept exists in Australia with the aboriginals, in Peru, so it’s universal. We’ll not necessarily be rewarded but there is a balance. It is like John Lennon said, you only get the love that you give. So that was the concept. And then from that, I thought it was very, it was very suitable because we were big in Asia. We had resorts all over Asia. And so for the Asian consumer, they understood and as the name karma and for the international non-Asian consumer karma isn't known. And it sounds very Asian and exotic. It's an easy word to understand.
Do you have a giving back program within the group?
Yes, we're very big on philanthropy. In fact, people often ask me, what's my proudest achievements? I think it was when I won the philanthropist of the year in America. We have an orphanage and a school we support in India, we also have similar foundations in Bali and Vietnam. In England, we are launching a Karma frontline program, where we have done a deal with the NHS and we've given away 500 free holidays, including food and wine to 500 frontline workers as nurses and doctors.
What next for Karma Group and for you?
I have a sort of internal goal of 50 resorts, which we want to get to. Our goal is to continue to acquire resources in our core markets in Asia, Australia, India, and Europe, and to build our members. We will push our annual membership plan field by year by year. I'm often asked if we are thinking of selling or going to the stock market? And, the answer is no really.
I am very blessed, I’ve never really done a real job, I do what I love and like Malcolm Gladwell says, really successful people are people that do what they love because they love it. The top tennis player hits the ball over the net 10,000 times or a top cricketer plays cricket, 10 hours a day. The top violinist plays violin the whole time. And because they love it, they're always thinking about it. And even when they're not constantly thinking about it, their brain is thinking about it and they don't do it because of the money they do it because they love it. So I will keep doing more of this!