Four Seasons: The Story of a Business Philosophy
Four Seasons: The Story of a Business Philosophy
Isadore Sharp built an iconic brand by relentlessly catering to wealthy travelers
It is not unusual for top executives of large companies to receive compensation packages well into the eight figures. Although agency problems and poor corporate governance are notorious issues, there is no doubt that a highly capable executive can justify enormous pay.1 If we concede that such executives exist, clearly the value of an hour of their time is worth many thousands of dollars and it makes sense to ensure that they are as productive as possible when traveling, even if the “sticker price” of private jet travel and five star hotels seems outlandish on the surface.2
Isadore Sharp, the founder of Four Seasons, built his business around the concept of providing exceptional and uncompromising service for busy executives and other wealthy travelers. Four Seasons is known for charging the highest room rates in a city and still attracting customers, many of whom are so loyal to the brand that they would hardly think of staying anywhere else almost regardless of cost.
I have never stayed at a Four Seasons myself but I can vouch for the high level of service based on an experience a decade ago at the Four Seasons Prague.3 I was responsible for planning the trip for a group of family members, one of whom uses a wheelchair. From previous hotel experiences, I knew that booking a five star hotel was the best way to avoid issues with accessibility, but Four Seasons went far above and beyond my expectations. When we arrived with a broken wheelchair, the staff scoured the city for the right replacement parts and fixed the wheelchair the same afternoon at no cost. Four Seasons saved our group at least a day of stress and many hassles.
Isadore Sharp’s memoir, Four Seasons: The Story of a Business Philosophy, is essential reading for anyone selling products or services to executives and other wealthy travelers. The son of immigrants, Sharp rose from modest circumstances to create a successful building business in Toronto. As he accumulated experience building and operating hotels effectively, Sharp gained an understanding of what busy executives really needed, but perhaps did not yet realize they needed. Design and amenities are important, but really just represent table stakes when dealing with the wealthy.
Four Seasons would offer all the style and amenities the wealthy were accustomed to but would differentiate its brand by providing relentlessly uncompromising service.
Both of Isadore Sharp’s parents immigrated to Canada from Poland in the early 20th century. As Jews, they faced obstacles in Toronto but life was far better than for family members who remained in Eastern Europe as antisemitic pogroms increased and eventually escalated to the genocide of the Second World War. In Canada, Isadore’s father, Max Sharp, rose from his humble beginnings through determination and hard work, at one point continuing work on a construction site after breaking his shoulder.
Max Sharp practiced parenting tactics that would be frowned upon in today’s society, such as teaching Isadore to swim by taking him out on a lake in a boat, throwing him overboard, and saying, “Now swim.” Isadore was expected to be self-sufficient from an early age and learned from his father’s example. On one occasion, Max badly under bid a job due to his limited command of English. He misread a plan that showed only half of a building. When the mistake surfaced, Max went into debt that took years to pay off in order to complete work on the building. Max could have walked away from the job but his word was his bond, something that his son never forgot.
Isadore dug ditches, worked as a bricklayer, constructed walls, handled electrical work, and much more. Born in 1931, he experienced difficult economic conditions as a child and came of age as building activity increased following the Second World War. It was natural for Isadore to join his father’s business and he soon took a leading role.
The book provides a good sense of how Four Seasons was built from the ground up over several decades, but the emphasis throughout the narrative is much heavier on the cultural elements of the business than on how the financial aspects worked. Lacking capital initially, Sharp describes how he obtained backing and subsequently reinvested earnings to grow further, but readers who are looking for a very detailed financial history are likely to be disappointed.
Beyond a well written account of an up-from-the-bootstraps life story, the book provides the greatest insights in the following areas:
Personal service is essential when catering to the wealthy. Whether on business or personal travel, a convenient and trouble free experience is highly sought after and customers will not mind paying for peace of mind. Sharp was the first to bring European style concierge services to North American hotels. Staying at a Four Seasons comes with a personal “fixer” capable of securing dinner and theater reservations, locating a tuxedo for an unexpected black tie event, fixing a wheelchair, or doing just about anything needed to satisfy the customer.
Providing best-of-class service is impossible without the best employees. Four Seasons strives to treat its employees far better than typical service industry workers and has historically experienced lower turnover as a result. More importantly, the company empowers employees to solve problems on their own without seeking approval for every action.
Maintain price integrity by avoiding discounting. Sharp describes how he avoided discounting during the travel disruptions that followed September 11, 2001 as well as the recession that followed. Sharp was urged to discount rooms both to increase occupancy and because executives supposedly were reluctant to be perceived as spending on luxuries during an economic downturn. Sharp resisted taking such steps which he believed would weaken the brand.
In 2007, Sharp took Four Seasons private in a sale to Kingdom Holding Company, controlled by the Saudi royal family, and Cascade, an investment firm controlled by Bill Gates. Under the terms of the deal, Sharp retained a 5% interest in Four Seasons and remained in control of its operations. In 2021, Cascade increased its stake in Four Seasons to 71.25% by purchasing half of the interest owned by Kingdom Holding Company. Sharp continues to own 5% but is no longer managing the company.
If you are interested in learning more about Four Seasons and Isadore Sharp but undecided about reading the book, I would recommend listening to David Senra’s podcast episode, Isadore Sharp: The Four Seasons Founder, in which he shares additional details about Sharp’s life including many more anecdotes from the book.
As an investor, it is important to expose yourself to mindsets that might seem crazy at first glance. I just checked the nightly rates for rooms at Four Seasons New York for this weekend and found that the cheapest room would cost $980 per night, for a total of $2,256, including tax, for a check-in on Friday and check-out on Monday. This seems insane to me but I am not the target customer. Clearly, the target customer is happy to pay a high price provided that they receive the service they are accustomed to. To maintain this “moat” in the long run requires keeping the company’s culture intact.
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Even Warren Buffett, a longtime critic of irrational executive compensation schemes, has said on multiple occasions that he has no issues paying a lot of money for performance and that highly capable executives can deliver value far exceeding their compensation. Of course, the problem is when executives who create little or no value (or, even worse, destroy value) receive excessive compensation anyway.
I happen to favor exemplars like Robert Kierlin, the founder of Fastenal, who was once named the cheapest CEO in America and preferred to stay at roadside motels on the outskirts of cities in which he was doing business. The benefit of setting such a frugal tone for a large enterprise is arguably greater than whatever lost productivity the executive might incur, but my views on this issue are hardly mainstream.
In Prague, I opted to book a room for myself at a very pleasant small hotel a few blocks away from Four Seasons in a building dating back to the 14th century with a great deal of “character”. My style of travel is to strive to experience a city in the way that ordinary locals might live. As luxurious as five star hotels can be, they often serve as a barrier between the guest and the city they have come to experience. Of course, this observation is more relevant to personal rather than business travel where efficiency is the paramount concern.
I've stayed at a number of the Four Seasons hotels, and they have great service. They keep their staff for a long time and them directly unlike many hotels where they contract out the entire hotel management and rely on low paid staff. That means they tend to know the hotel and the area very well. They are organized and professional. If you ask for a restaurant booking, they'll know how to get it. If you need something for your room, e.g. a humidifier, they'll get one.
I admit that they are expensive, and they don't discount. Even during COVID, they kept their baseline pricing.
The really rich just buy or lease a house or apartment and hire staff to manage it, but for those of us in the middle, the Four Seasons is a good option.