How To Stand Out And Succeed: What I've Learned About Hotel Brands And What I See Happening Now - Professor Chekitan Dev, Cornell University

Josiah: You were quoted by the Wall Street Journal in an article about the proliferation of brands. There are so many out there. You told them this environment now where travelers are facing this confusing sea of sameness, right? Do you feel like at this point of saturation we're just kind of gone overboard, I guess, as an industry with this?

Chekitan: There are a couple of ways to think about the proliferation of hotel brands. At one level, you can think about the fact that there are, let's say, in 1990, there were about 300 brands fighting for shelf space. By 2020, Smith Travel Research reports about 1,000 brands competing for shelf space. So by that definition, the number of brands, hotel brands, has more than tripled in 30 years. On another level, in 1990, there were roughly 10 million hotel rooms competing for shelf space. 2000, by 2020, there was something like 17 million or 17 and a half million. So if you take the ratio of the properties of the rooms to brands, in that sense, that ratio is held constant. So to take your viewers and listeners through a bit of math, in 1990, about 20% of the world's hotel rooms were branded. By 2020, about 40% of the rooms were branded. So, if you look at the ratio of the branded rooms versus a number of brands, what I call the brand coverage ratio has remained constant. So that's at one level, the number of brands vis-a-vis the number of hotel rooms has been constant. On the other hand, the distinction between brands, the overlay between brands, and what I call the swim lanes, has gotten confusing. So even though the number of brands has exploded, they haven't all been able to maintain a distinct profile. So, the confusion is many brands look and sound the same.

Josiah: Well, I want to dig into this confusion and potential ways out of it for industry participants. And maybe as a way to tee up how that might look, I wonder if you could speak a little bit about some of the components of a brand? We may think of just the flag that flies outside of the hotel or maybe a set of operating procedures or requirements for the property. You've spoken before about almost like the hardware and the software of the brand. I wonder if you could walk us through a little bit of what are the components of hotel brand today.

Chekitan: So just to back up a little, when you think about the bigger picture, I mentioned earlier that there are about 10 million rooms in 1990. There are about 20 million rooms today. If you consider just the top five brand companies You come up with over 100 brands. So Hilton has 19. Marriott has about 32. Accor has 43. Hyatt has 29. And IG has 19. Totally about 113. Just between the top five brand families or top five brand owners. In that sort of crowded marketplace, you have many different sorts of signifiers, sometimes known as indicators of a particular brand. Of course, you start with the brand parent and the brand name. For example, for Courtyard by Marriott, you start with Marriott and then Courtyard. And then within that, you have all manner of names, colors, fonts, brand standards, for example, the specifics that the brand imposes on particular owners to design the hotels in a certain way, to run the hotels in a certain way, the brand is promoted in both traditional media and new media. So all the signals that the brand sends, the way the brand treats the customers through the customer's journey, both before, during, and after the hotel journey, all those components collectively in my mind, define a brand.

Josiah: Interesting. And so I guess if you kind of think about all those different components, are there some that you feel like are underappreciated? I'm trying to get this notion of differentiation. Where might the opportunity to drive innovation be? I've heard some people talk about technology possibly becoming a differentiator. What's your view on some of the maybe underappreciated aspects of a brand today?

Chekitan: So brand differentiation to me is job one for these thousands of small brands competing for shelf space. In my view, brands that will win will do two things. One is to manage the brand around five pillars that I've developed after about 40 years of study. And the five pillars spell the word brand. So it's very easy for people, your listeners and viewers to remember. And the first sort of mandate from me is to get people to embrace these five pillars. The five pillars stand for B, which is for bold. R is for relevant, A is for authentic, N is for novel, and D is for distinct. So, a few seconds at each one, successful brands are bold. They stand out from the crowd. They are making statements in whatever domain that they operate in that is different from the rest. Relevant, to be relevant in the lives of the people that they serve, whether it's the employees, customers, or intermediaries, be authentic. Be something that's not fake, something that's true, something that's genuine. Be novel. People love new. People love the fact that brands are trying to break out of this sort of sea of same-ness by offering something that's a novel amenity or a novel service. And be distinct. Be different from all the others. So that's the first part, is embrace the five pillars of successful branding. The second part is to stake out a meaningful, defensible, sustainable and profitable position in the market. I know that's a lot of words, big mouthful, but successful brands have to stake out a position that's meaningful to the end users. It has to be defensible. You hear the term moat very often. If there's a moat around the brand, people aren't able to jump across the moat as easily, be novel, something that's different from what's on offer, and be different from all the others. And so when you think about this meaningful, defensible, sustainable, and profitable, again, for owners, those two are the key elements. And then finally, successful brands find their own tribe. Aman found, and I would admit, lost its tribe. CitizenM has found a tribe. Ace has found a tribe. Flyzoo out of China is finding a tribe. So I say to brands and brand managers, find your tribe. The definition of a tribe, a carefully defined set of customers whose problems you can uniquely solve wherever and whenever they need them solved.

Josiah: You said Aman had and then lost its tribe. What happened there?

Chekitan: So one of the brands that I study and I'm a big fan of is Aman, the brand that originated out of Southeast Asia. There was a term that I've used in a Harvard Business School case study that I wrote called "Aman junkies." And there were literally a large group of people that were collecting this brand wherever the brand opened. So their life's mission was to stay in as many Amman hotels as possible. Today, the brand has sort of lost that polish for two reasons. One, because the brand has changed hands many times. There have been a lot of disputes, legal and otherwise. There's disputes between various owners of the brand. So that's kind of caused some confusion in the marketplace. The growth sort of slowed down. There were also a lot of competing. luxury brands, a small luxury, kind of very bespoke brands that were created, many, many more. So it's become a crowded marketplace. Aman hasn't, in my view, been able to distinguish itself like it did when it first originated, when it was first born. And so to me today, the tribe isn't as strong in my view as it was when it first started.

Josiah: I'll be sure to link to that case study in the show notes, because I'd like people to read that. I think it's, we often learn the most from situations where things did not go well, right? And I think sometimes we're always looking for kind of best practices, but it's helpful to dig into something like that. I was talking with the team at CBRE the other day, and they had done some research around brand performance and how that translated into financial performance. One of the findings of that study was brands that were built in-house tended to perform better than brands that were acquired. And so hearing you talk about Amman was interesting. You touched on elements of stewardship of a brand. I want to get into brand development, but I want to stay on this notion of stewarding a brand well. What does that take in your perspective? If you already have something there, how do you avoid some of the pitfalls that you mentioned?

Chekitan: So the interesting thing about brands and branding in the hospitality and specifically a lodging business is there are many stakeholders that quote unquote own the brand. So let me explain the following. If you are selling soap or toothpaste or light bulbs you're creating the brand you're controlling the product you're manufacturing the product you're distributing the product. And once the product comes into the customer's hands that's when the customer takes over. In the hotel business, there are really two sets of brand stewards. There's a brand management team that conceives of the brand, that creates this brand that's hopefully following all of some of the five pillars that I just mentioned. But once the brand is created, the way the brand proliferates, the way the brand grows in a lot of instances, unless the brand owns and operates its own hotels, and some of them do, is with the involvement of third party hotel owners. So it's a collaboration between the brand and the owner. And sometimes, that collaboration works really well when the brand and the owner are on the same page. And sometimes, it doesn't work well because the brand has one idea in mind. The owner has another idea in mind. Let me give you an example. So, owners typically would love to have hotels that are more cookie-cutter. They would love to have funding. So they like to have the brand attached to the hotel so they can get funding. They want there to be cookie-cutter in the sense that they want the hotel to be fairly generic because then they're not beholden to one brand. They can transfer from brand to brand, or they can go to independent, and they're worried about the bottom line. Brands want bespoke hotels. They want hotels that are specific to the brand, the way they're built, the way they're operated. They want scale, so they want a large base of hotels on which to thrive to create what I call living billboards. So these are hotels that are sort of billboards for the brand. They want uniquely configured hotels and they want a top line to generate a healthy fee income and a perpetual stream of income. So sometimes brands think one way and owners think the other way. And so one of the issues that I've had to deal with over the last 30 or so years at Cornell is being involved in legal disputes between owners and brands because owners have one set of priorities in mind and brands have another. And so to sort of wrap this point up in terms of my response to your question, and that is successful brands that have been stewarded well is where I find brand managers thinking like owners and owners thinking like brand managers. having the interests of the other party top of mind. So brands are thinking about owners not only top line but also bottom line and the cash and income generated from the hotel. And the owners are thinking about ways in which they can only make their own hotel thrive but also make the brand thrive. And that's just the first two parts of it. Of course, there are employees. There are third party intermediaries that help with this brand stewarding. There are communities that help with branching. There are funding agencies. But at the heart of it, it's really the dynamic between the brand and the hotel owner.

Josiah: Thinking about brand stewardship, if you're in this environment where there are these multiple stakeholders, you touched on each party thinking like the other one. If you're stewarding a brand, you're thinking like an owner. Ideally, there's financial incentives in place so that you actually have skin in the game as an owner. would. I know this is going to grossly oversimplify it, but as you look at all the brands out there, I'm curious if there's any relationship between the most interesting brands, brands rather that follow this five point framework that you mentioned, and them being integrated top to bottom. So they are owning not only the brand, but the real estate and they're also operating their locations. There's not a lot of those brands today, but do they tend to become more effective brands? Or is that not the case?

Chekitan: No, that's a fascinating question. So if you go back, let's say 50 or so ago, using that sort of 50 year frame, that 50 years ago, a lot of brands owned, operated, and branded their own properties. So it was a vertically integrated system. In that instant, it was very easy. So I'll give you sort of the good news, bad news story. The good news is it was very easy to make sure that all the components of brand being tightly controlled by one entity were delivered in a very particular way, very specific way. When you start to have hotels that are owned by multiple entities, so a pension fund might own the hotel, an asset manager might oversee it, an owner, an independent owner might own the brand, somebody else, a third-party white-label management company might manage the hotel, and a brand might have its name on the door. Now you have five entities, just in this one example I gave, that are going to try to move this property forward and either be on-brand or off-brand. And it becomes very difficult to try to stay on brand when all five parties, in this case, have to be following the same direction. In the instance, though, where the hotel owns and operates its own brand, I actually did a study published in the Journal of Marketing some years ago that showed that when you compare owned and operated hotels versus third party owned hotels, that the I guess the level of, we call it opportunism, which is seeking self-interest with guile, technical term, which essentially means kind of doing some maybe not inappropriate, taking inappropriate measures to manage the property, manage the brand, that the company-owned operator brands actually indexed higher on bad behavior than third-party owned. So when you have this separation of powers, and you have the checks and balances between the owner and the brand, in our study we found that in that instance, the hotels behaved better than when the whole thing was controlled by one entity, when there was goings-on happening. And the reason we had trouble publishing that study was because the conventional wisdom was, well, it's got to be easier if you control all the components. And what we found was that the incidence of bad behavior was higher with company owner and operator hotels. So it can happen either way, but I think you put your finger on an important point, and that is having systems in place, having shared incentives. So traditionally, Brands are compensated on the top line. Owners are compensated on the bottom line. So they're sort of working at odds. The brand wants to put as many bells and whistles as possible in the property. You know, more is better. And they convince owners that they should keep adding amenities and services. Whereas owners are interested in the bottom line, so they only want to add those services and amenities that pay off. Another study that I did, and I can provide you links to all of these, was published in the Journal of Market Research that showed that when you look at amenities, certain amenities pay off and others don't. So clinically examining the payoff from amenities. So one of the brand manager's jobs is to, when proposing an amenity or a service to an owner, is making sure they're very clinically and scientifically shown that this is going to positively impact the owner's well-being without just saying, you know, it sounds good. Let's just put it in because everybody else is doing it.

Josiah: Okay. I need to hear more about this because I'm very curious, but just to underscore the point you made, I appreciate you sharing that because I think a lot of those listening, a lot of those in various roles within this ecosystem sort of fantasize about having that total vertical integration. We could do whatever we want. You've made the case for there could be benefits and accountability. And I imagine even just best practice sharing, if you're working with multiple brands, you may see things as in management company, for example, you're bringing to the table. And maybe all of that pushes the business forward, the hotel forward, not only from a financial perspective but from a guest perspective, as well. Over the years, we've seen a interest from a lot of fashion or lifestyle brands, furniture brands, others in having a hospitality offering. I think back in the day, Ralph Lauren had a study done and you know, kind of we've seen different fashion brands since then. What are some of the opportunities or challenges as you think about some of these fashion or lifestyle companies offering some sort of hospitality, whether it's a hotel or something else? Does that become an area that could be interesting?

Chekitan: So generally speaking, the lifestyle brandings portion of the market is underserved, fair to say that it's an underserved market. And while traditional legacy companies are trying to come up with lifestyle brands to fill that space, Exhibit A would be something like W, right? When Starwood created W, they tried to create a brand that filled the lifestyle space. Every other company I know either has or tried to do that. Marriott acquired Starwood because they had a lot of trouble creating their own lifestyle brands. Then they bought a couple from Europe, the AC, the Moxy that became sort of there. Sort of affordable lifestyle offerings. There are other companies that bought the lifestyle brand. So I bought Kimpton. Because they want to be in that lifestyle space. I talk in the in the earlier podcast that you saw about a case where there was a dispute between 2 companies because. Company A created a very successful lifestyle brand. Company B hires executives from Company A and the executives from Company A bring with them illegally documents pertaining to the creation of that lifestyle brand. And so because it became a big dispute, Company B was actually prohibited from creating a lifestyle brand for a certain period of time as punishment for stealing, for their employees stealing documents from Company A. So I think it's a very fertile area. The trouble is that a lot of companies that run legacy businesses don't understand the lifestyle business as well as the lifestyle business brands do. So for example, one of the companies that I know that the CEO of Starwood envied when he created W was Ian Schrager. In fact, I know on good authority that they offered Ian Schrager an opportunity to sell his company to Starwood and he declined. And so Starwood decided they were going to create a lifestyle brand to out Ian Schrager, Ian Schrager, which is the attempted W. Then subsequently, Ian Schrager lost control of his company. And now there was a couple of different people that owned it. And now Accor has that sort of umbrella brand. They're trying to create that. So that's one dimension is how do you take to be somewhat controversial, say, how do you take a company that has very uncool brands, functional but uncool, that are trying to create these cool brands? It doesn't always work. You need somebody in a separate space that creates that cool brand that brings it on. In fact, it might, as a sort of a very in the weeds side note, when Starwood created W, even though Starwood headquarters was in White Plains, they kept W in Manhattan. because they want to make sure even symbolically the new lifestyle hotel had its house, its home. in a very hot kind of vibrant market, very different. They didn't want to contaminate the cool new brand with the legacy kind of, you know, sort of lockstep mechanical functioning of the traditional brand. That was one thing. So this is the issues. Can you, in fact, and that's been a struggle. So there have been people like Ian Shrager, for example, and others of Kimpton that have created the lifestyle brand that have been absorbed. And you mentioned the luxury brands. the people that are in the luxury branding business, Bulgari, Armani, they've all tried, have or try to create their own brands. For them, it's a couple of things. It's a way to showcase the brand in a physical setting. So it feels like instead of just going to a Armani showroom, you're in an Armani hotel so that you can actually feel Bulgari. You can feel these products and live in them and live with them so that you can feel the connection and maybe bring them into your own life in some way, either staying at the hotel or bringing them home with you. And there's been some success because just like hotels have a very tough time understanding the lifestyle brands, the lifestyle brands have very difficult times executing on the hotel side. So Bvlgari, for example, you may not know this, but the reason why Bvlgari decided to move ahead with a hotel brand extension was they got an agreement from Marriott to connect the Ritz-Carlton brand with the Bvlgari brand. So Bvlgari would be the name on the door, but the engine under the hood would be Ritz-Carlton. Now, as a sort of a side note, as a brand student, it can get you into trouble because Bvlgari and Marriott get together. Bvlgari specifies that they want to be affiliated with the Ritz-Carlton brand. They want no mention of Bvlgari with Marriott because they felt bringing the two together would bring the Bvlgari brand down. They created the brand. They reached out to owners that wanted to have this brand on their door. An owner from Bali, Indonesia approached them. and said, I'd like to build a Bulgari hotel. And of course, everybody saw dollar signs. The problem was that Ritz-Carlton had already promised the brand rights to the Ritz-Carlton brand and all of its attendant capabilities to another owner in Bali. And by creating Bulgarian Bali, using the Ritz-Carlton know-how was a violation of the owner's contract. And the case went up to a federal court, there was a jury trial, and the jury awarded the owner of the Ritz-Carlton Bali a $10 million judgment as punishment to Ritz-Carlton for violating the owner's rights. So things can go off the rails every so often. But back to your question, it's bringing in capabilities. So maybe I'll end on this. And there is a reason why Marriott created an addition in collaboration with Ian Schrager was because Ian Schrager had what Marriott didn't. and Marriott had what Ian Shager had. So combining the two forces, the idea was that Ian Shager would help create this new lifestyle brand for Marriott, and Marriott would then find a way to run it efficiently so they make maximum amount of money for the owners. So again, work in progress, but this is still an area that's seeing more action than maybe all the others.

Josiah: It's interesting to see this play out, though, and I find it fascinating to hear behind the scenes on these. I think there's the Restoration Hardware Furniture brand that has a series of restaurants that I really enjoy. They have some lodging offerings open and opening up. And I think, you know, selling furniture, you go there, you sit at the restaurant, you get to experience the furniture, and you do feel more of an affinity with the brand and maybe a little bit more inclined to buy something that they have. And same for fashion. So it's interesting when it's done well, but it takes a lot of partnerships, a lot of moving pieces in there. I know we're close to the top of our time here. I want to hear kind of your closing thoughts on kind of what the future may look like. And I might pose this a kind of a quick two-part question is, is there any brand that you feel especially a personal affinity for? Because you look at so many brands, I'm curious what captures your own imagination. And then just any other closing thoughts on kind of what you're excited by in the future of branding in hotels today.

Chekitan: So in my 45 years or so of studying brands in the space, I will tell you that the brands that have to me have consistently delivered for, if not all, most of the stakeholders, and I'll give you some in every level. And I've talked to multiple owners over the years. And I talked to an owner just the other day at a function I was at, and we were talking about brands that do well for their owners. And the two brands that came up at sort of the lower end of the scale are Hampton Inn and Holiday Inn Express. And I remember talking to him many years ago, it was easier at the beginning because a lot of the Hampton Inns and Holiday Inn Expresses were new builds. And it's always easy to steward a brand successfully with a new build hotel. It's very hard to do with a conversion because you're taking whatever you have and try to make something out of it. You know, sometimes pejoratively referred to as putting a lipstick on a pig, and that's not always the case, but sometimes that happens. And so those brands have stood the test of time where they've not only grown very fast, but have consistently delivered, not only delivered for their owners, but also maintained a very consistent brand profile. So they've been able to stay true to the brand and what I call stay on brand. One of the things I like to tell my students is every time a customer comes in contact with a brand, only two things happen. You either polish the brand, or you tarnish the brand. So successful smart brands are ones where the number of times a brand is polished far exceeds the number of times the brand is tarnished. So they've done a good job with those two brands at that level. So that's one I would pick. At the mid-tier level, I'd have to say I'm a big fan of Marriott, the core Marriott brand. Some of their other extensions like Fairfield and Residences, because they've done a very careful rollout and they've made sure that the properties that carry the brand name have sort of a consistent on-brand offering. So that would be one choice. Hyatt has done a good job with that. Four Seasons at the top of the market is still considered one of the brands that have been very consistent with what they've done with their brand, really guarded the brand very carefully, sometimes that I was involved. in a lawsuit between Four Seasons and an owner one time where the owner felt that the brand was sustaining itself at the cost of the owner, which sometimes puts them at odds, but really has done a good job sort of laying out the brand and staying true to what the brand is, but also, to me, moving with the sweet spot. So a little-known fact is that the very first Four Seasons Hotel was a motor hotel that they called a motel in Canada that they were going to call Thunderbird. That was the name of the brand it was going to be. And the founder's uncle happened to be in Hamburg, Germany. We discovered a hotel that was called the Four Seasons in German and decided to offer that name to this nephew of his. And of course, the rest is history. But since then, as Wayne Gretzky often counseled us, don't go where the puck is, but where the puck is going to be. So the idea being that successful smart brand managers understand that the sweet spot for their brand isn't always going to stay static. And the key to success is to move with the sweet spot. So that's one. So in terms of favorite brands. To your second part of your question, looking forward, I was giving a talk to a service company a few weeks ago and they asked me, what are the two or three main challenges facing businesses today? And to try to keep things simple and also words that start with the same letter, I told them if I was to boil the three principal challenges and opportunities facing businesses today, hospitality businesses in particular, would be trust, technology, and trash. Let me unpack that for a second. So first is about trust. Because there's so much sea of sameness and because there are so many of these choices available and because many brands are growing through conversions and stating that their growth is going to be through conversions, taking other existing properties and putting the brand name and all the attendant elements on it. we're losing trust. Customers are losing trust in brands. And so we're becoming much more of a commodity business. And so retention is out the door, loyalties out the door, and brand choice becomes random, which you don't want to have happen, right? In any business, if you want to command a premium. So that's the trust part, is really building trust. The former president of Four Seasons was on a panel discussion one time with me, and he said, you know, I think of trust or goodwill as a reservoir. And every time you do well by the customer, you build the trust. Every time you Do something wrong for the customer, you deplete the trust. We just hope that we keep adding to the reservoir of goodwill so that when there's a downturn or a negative impact or even a scandal or a bad story that we drain the reservoir but not by much so that we keep that. So that's sort of the first imperative. The second one is this. high-tech, high-touch debate. We've always been a high-touch business and a lot of traditional hoteliers sort of use the term people-serving people. Well, not all people want to be served by other people. One of my most pleasurable check-ins at the Stapler Hotel in Columbus campus was I had the airport transfer driver, bring the key to the airport, and I went straight to my room, and I didn't have to go to the front desk. Because I had a meeting coming up right after my check-in, it was the best check-in I ever had. So in some instances, we don't want the people who want the technology, we want to be able to self-serve ourselves. I have an owner I work with in New York City who refuses to put espresso machines in his luxury hotel rooms. And I keep telling him, I said, I understand you have room service and I understand you are, you know, people appreciate being served, but sometimes you just want to make your own coffee. You don't want to have to pick up the phone or go down and call room service and wait 15 minutes. So the struggle of what's the right tech solution, what's the right blend between high tech and high touch, moving from a almost all high touch to quite a bit of high. So that I think is another careful balance. And the third element is that as brands in general, hotels, hospitality, we're generating a lot of trash, whether it's single-use plastics, you know, showers. I talked to a New York Times reporter a couple of days ago about slippers. They were doing a story on slippers and how slippers are the next sort of frontier in recycling, reusing, reducing trash. So can we have a lower, and when I say trash, lowercase t, so less of an impact. Can we operate our businesses with less of an impact on the planet around us. So trust, technology, and trash. And the final takeaway for me for sort of the mantra for brand managers is ultimately it's about differentiation. Because the equation I teach my students is differentiation equals premium, and premium equals profit. If you can successfully, meaningfully, sustainably, profitably differentiate, you can command a premium. Premiums aren't given, they're earned. And the one measure always is, if your brand is commanding a premium compared to your closest competitor, that's a good sign. If people are willing to pay more for something that looks the same as somebody else's, for whatever reason, they trust in your brand. So, differential equals premium. And that premium, as you know, you have to be an accountant to figure out that the extra dollar, most of it goes to the bottom line.

Josiah: Well, something worth working towards. Professor, you've taught me a lot. I really enjoyed our conversation. Thanks so much for joining us today. My pleasure. Thank you.