Virgin's Richard Branson plans his own line of luxury hotels

Billionaire Richard Branson, peddled everything from airline tickets to space travel under his Virgin brand's iconic name, hopes to bring his own brand of hip to the hotel scene.

His newly created Virgin Hotels will likely appeal to younger, up-and-coming travelers: "the guys walking around with the shirt untucked and no ties, very similar to Mr. Branson," says Charles Quinn of hotel investment advisory firm CBRE Hotels.

"Virgin is a hip brand, no matter how you slice it," he says.

While the opening of the first Virgin-branded hotel is probably at least a year away, the timing seems right, lodging analysts say.

Virgin's hotel venture comes at a time when travel has started to rebound from the recession that sent occupancy rates to record lows last year. In August, the U.S. hotel industry's revenue per available room rose to USD 63.08, up 8.1 percent from a year ago, according to industry tracker Smith Travel Research. The average rate increased 1.5 percent to USD 98.69 a night.

Luxury hotels are benefiting. "As we have begun to recover from the economic downtown, luxury brands are enjoying the strongest revenue per available room of any segment," says Carlos Becil, a North American vice president for Starwood.

Virgin Hotels will focus on four-star, stylish hotels that attract the high-income, metropolitan, creative class — the same audience chased by chains such as Starwood's W, Kimpton Hotels and Thompson Hotels.

Branson and his investors will develop and run luxury hotels in key U.S. cities such as New York, Miami, San Francisco and Los Angeles. The venture aims to buy as much as USD 500 million in properties with 150 to 400 rooms over the next three years.

Competition in the luxury segment "keeps us on top of our game," says Becil, noting Starwood has a 50-hotel head start.

"Branson has all the capabilities of hitting a home run. However, it's not that easy," says Stephen Brandman, Thompson Hotels' co-founder. "A recognized name doesn't necessarily ensure success."

Thompson recently opened its 10th hotel in Toronto and runs others in New York, Los Angeles and Chicago.

The keys to Virgin Hotels' success are the locations of the hotels it decides to develop or manage, as well as the response from competitors, Brandman says.

Chip Conley, chairman of California boutique hotel company Joie de Vivre, suspects Virgin Hotels will charge higher rates than does his company, which operates mainly 3½-star hotels.

He predicts Virgin's room prices will be more on par with higher-priced W, Thompson and Kimpton hotels, driven by pricey real estate choices, licensing fees and brand requirements needed to create the Virgin vibe.