There aren’t that many industries that have taken the type of battering that has been served up recently, hospitality and travel have suffered tremendously in the last 18 months. So, it’s a real pleasure to meet a person who has succeeded despite the circumstances.
Step forward John Spence, chairman and founder of the Karma Group. Established on a beach in Goa (while living in a hut) in the early 90s, John has a reputation (as well an interesting past) of being a trail blazer and free thinker, I began by asking him how the Karma Group work and how he set it up.
“Much of what I have done has been an accident as much as anything, I didn’t have a detailed plan. I dropped out of university, but now one of the things I do as a side-line is teach at Yale University. I was explaining this to a class last night to much hilarity and disbelief. I explained that the reason I dropped out of university is that I thought I was the best guitarist in the world, I soon realised I was the worst guitarist in the world, and if you couldn’t get a job in a punk band in 1980 then you had to question your sanity”.
Where did it go from there?
“So, I drifted into the business side of music industry and through chance rather than skill I started to look after bands that went on to be quite successful, so I looked after The Eurhythmics, Culture Club, Bananarama, The Cult etc. As well as working with bands that went on to do nothing, I must stress. I did that for a number of years and lived on the road. I’ve always loved travelling; I was born at the end of the runway at Gatwick Airport. I had aviation fuel in my nostrils since I was a baby and my whole family were involved in aviation. I was excited by planes, hotels and going to distant places. Since I was 20 years old, I lived in hotels with bands. Then I drifted into timeshare back in 1984 in Tenerife through fate, my mother was living there, I started to work for an American company, I was the annoying kid on the beach hustling people into a sales presentation with a free bottle of wine. I grew, I thoroughly enjoyed it, as the company grew, I continued to grow. I became sales manager, sales director, regional director and eventually managing director.
“In 1993 I was at a conference in India talking about travel and fell in love with the place, it got under my skin. I saw the emerging middle classes who clearly had money and wanted western products. I saw very cheap land that one could buy and develop cheaply. And I saw an inbound market of Europeans who were looking for cheap winter sun. So, I went back to try to convince my employers to invest and being an American firm, they thought that India was full of leppers and beggars and really wasn’t the place to be. So, I resigned, cashed in my life savings, sold my flat in London and managed to persuade a few brave souls to come in with me and we opened our first resort on the beach in Goa in 1993. Vastly underfunded, one computer, sales had it in the day, marketing in the evening and the accountant worked overnight because everyone hates accountants.
“We were living in non-air-conditioned huts on the beach, it should never have worked but bizarrely it did. It grew and grew and never took on debt. I don’t borrow money; I have never sold equity I own 10 percent of the business. We just reinvested cash flow. After starting with three people, it has become 3,500 people, 42 resorts all over many parts of the world. Fraught with spur of the moment decisions, I’ve really been learning as I go along, it’s been a wild journey”.
Many people would love to be in the position of not having any debt, it’s almost impossible though isn’t it? It’s an incredible achievement.
“It’s interesting, one of my students asked me if it was legal to grow a business without debt? It’s engrained in the American psyche that you must borrow to grow. I have no business education and the reality is that we could have earned much more had we borrowed but I didn’t want to be exposed. There have been times when we just didn’t have the cash reserves to build resorts and grow when we’ve wanted to, but also, it’s enabled me to sleep at night, we’ve never been overexposed. When the proverbial hits the fan like in the Asian currency crisis and with the recent Covid horror story it puts us in a very strong position. We are not beholden to banks; we are not paying back debt. We don’t have to create cash to tread water. We have grown enormously in the last 18 months, as Warren Buffet said you only see who’s wearing a swimsuit when the tide goes out. In boom times a lot of people criticised me for my corner shop trader attitude and in bad times I’m called a guru!”
I was curious to know how Karma has survived seemingly intact after the last 18 months, did you shut everything down?
“Yes, it was tough, and we suffered like everyone else, but it’s been a very interesting period. My recent lecture was about growth in Covid, is the glass half empty or half full? For us it was certainly half full. We went from having 30 plus resorts, spas, restaurants and within one week everything had shut. Most of the places we trade like in India, Vietnam, Thailand there’s no state support, so there was no safety net for members of staff. So, if we didn’t pay them, they didn’t eat. We decided in the early days that we would support everyone, we made no one redundant. At one time we were supporting over 1500 families with food packages. I was locked down here in the UK and it’s the only since leaving school that I’ve stayed in one country for three months. It was a worrying time, but we quickly realised that as we are quite geographically spread, Australia, Asia, Europe etc swiftly it became possible to open in some places but not in others, so we were able to trade. And when we could open resorts in between lockdowns people were desperate to go on holiday and they did, so that was positive.
“We also acquired a lot as we went into Covid with no debt and a substantial war chest. We have emerged from this with 10 new properties in Vietnam. Indonesia, Spain, Caribbean, England, and Scotland and looking at a Nile cruise ship and a Masai Mara site in Kenya. There are lots of good assets to be had and not many people competing for them. Covid has given us time to develop new programs, we’ve launched Karma Club a bit like a Soho House type membership, Karma Nomad which is a fleet of camper vans in Australia so that members can visit the outback. Even got involved in the wine business. The old will come back, we’ve developed the new and our competitors have mostly disappeared. We’ve grown by about 30 percent, so we see it being very robust for the next few years. We are predicting a hospitality boom, people have more money in their banks than ever before, people are looking to rewarding themselves for lockdown.
“We have almost 80,000 members and what they respect (and the directors and managers of the company) is loyalty, which is what we have shown them through all this. We depend on their good will, returning to our destinations etc. That as much as anything else will repay us ten times over in the next few years”.
Was it the mix of your client base John, where do they come from?
“Historically our two biggest bases are India and Australia, it was started in India, and we are very active in SE Asia, I lived in Australia for 15 years, so we are very centric on SE Asia. But only about 3-4,000 are from UK. When I started the main driver was cost, land was cheap in Asia and expensive in Europe, now it’s the other way round”.
What makes you a free thinker, were you born with it, or can you be taught it?
“I think it’s a combination, one of the benefits I’ve had is I did have a limited education, if you look at other entrepreneurs, a high percentage are university drop outs, or they have ADHD or are dyslexic, so there can be a benefit in that because you have to think laterally, work it out as you go along rather than being educated to some sort of format that you work with. People who go to business school are taught to be some of the best CEOs of other people’s companies. They are not necessarily taught to be the best entrepreneurs or owners of their own company. One of the key factors is they are taught risk aversion. The difference is that we are not risk averse, maybe because we’re too stupid to understand what the risk is. Rarely do I ponder too much over a decision or worry too much of the risk about the downside. It’s not usually a eureka moment but failure, failure, failure, success. You need to be wrong 49 percent of the time to get to the right solution. No one just invents something; they make mistakes many times. They hedge their bets and learn from their mistakes. You have to move swiftly to compete against the big boys. The longer you take to make up your mind the more likely you are to talk yourself out of the decision. Some of this can be taught but there is an innate element of it that is in your DNA”.
Where’s next for Karma, what territories are you most interested in?
“People want experiences, I love resorts that are reasonably small, and boutique sized, 30 to 50 rooms, which make me a contrarian to others in this world. I’d be much better off having a hundred, a thousand rooms in one place to make more money, but I hate that, I hate that as a consumer going there. I tend to make decisions as if I’m a consumer going there, and I like to travel so we have places all over. I want to continue doing that, we are in the entertainment business not just lodging business, I want to provide diverse experiences and our clients love that too, they love to travel around picking up new experiences. So, Laos is happening soon, an elephant sanctuary where the guests will be able to be part of it. Central and South America, it’s a destination I want to go to as do our members. It’s also an opportunity to get involved in the American market which is something we haven’t really done. I don’t particularly have a desire to have resorts in America now, but I would like to increase our client base. So, Costa Rica and Mexico are the obvious places to look at”.
What do you see as the up-and-coming trends in hospitality and luxury?
“People develop bucket lists and from a travel perspective they might want to take a Nile cruise or an archaeological trip, maybe it’s a culinary trip, inevitable when the world is less troubled than now people tend to put these things off until later, but what Covid has done is polarised this and people are now thinking as soon as we can we are going to do those things. So, I think there will an acceleration of not necessarily expensive trips but once in a lifetime trips. From a travel perspective people are braver than they were, and value tourism very strongly, so maybe pay a bit more for the plane ticket or stay two weeks instead of one. Also, from a demographic age point of view it’s the younger consumer wants that as well. These experiential trips will thrive, our members are nomadic so like to move around our resorts rather than stay in the same one each year”.
So, in short John, you’ve set up a company offering things that you’d want to do yourself?
“Unashamedly virtually everything the company does is something that I want. I choose the wine lists, I get involved in the menus, the experiences, often in entrepreneurial business the founder is driving it in his image. And wherever possible we offer local, sustainable food, local architecture, and culture. I have a passionate dislike of hotel brands that self-replicate themselves the way they look or smell. My pet hate is waking up jet lagged, go to the toilet and it’s the same bloody picture above as it is in every other of their hotels. We are exactly the opposite, wherever we are we honour the local chefs and cuisine. We also look at vegetarian and vegan options for some clients who have these requirements”.
It’s an inspiring story from a man with remarkable energy, vision, and drive. If you’d like to taste the Karma experience, then why not check out where John Spence started it all and head off to Goa.
Rates at Karma Royal Haathi Mahal, Goa, India start from £145 for two people in a recently renovated Deluxe room, including dinner and breakfast. For more information and to make a reservation, please visit: https://karmagroup.com
Neil Hennessy-Vass is Contributing Editor for Our Man On The Ground as well as a widely-published globetrotting food and award-winning travel writer and photographer.