Challenges and Opportunities with Hotel Brands Today: What I Saw As CMO of Best Western With 18 Brands - Dorothy Dowling

Josiah: What does it look like to create a powerful, compelling brand in the world of hospitality?

Dorothy: Well, I would tell you I think everyone is challenged with that, Josiah, because there's so much commoditization in the hotel space, and I don't know that anyone truly has the answers to that, particularly when you look at conversion product being particularly at this particular time in the development cycle being how most brands are growing. So we are an experienced world. I think it is really bringing the experiences to the customer and trying to differentiate in some way what customer expectations can be. When I joined Best Western in 2004, it was a singular brand, and it was quite a challenge for us because we started down a path and it had been tried a few times before to create some distinction separation within the Best Western family, but there's a lot of risk associated with that and that the hoteliers in Best Western get to vote on every decision because it's a membership based business.
And for us, it was really about bringing that business case forward in terms of the customer point of view. And I remember when I did a focus group with one of our, it was a B2B customer group, and the point they brought forward is that Best Western, they did the Forrest Gump analogy that it's like a box of chocolates. You just never knew what kind of chocolate you were going to get. I think that story of Forrest Gump and the box of chocolates is true of most of the brands in the hospitality category today. But part of it is also going back and thinking quantitatively about the business because the average customer stays at a hotel twice a year. Most of the business is leisure in terms of certainly mid and upper mid-market. So when you think about the frequency of their touch with various brands, it is very difficult to build that brand narrative when you think about the frequency.
I know I spoke with a few folks and one of the executives at Apple, and he was talking about with Apple Music at six or seven times a day that the customer is engaging. Well, the lack of frequency of engagement in the hospitality space means that you're really not top of mind with customers all that often. So there's a lot of factors that impact sort of branding in the hospitality space that you have to step back and think about your audiences and then really understand what their need case is, and then how you propel the business forward.

Josiah:
I wonder if we could speak a little bit for those that are unfamiliar with the complex ecosystem of hospitality from the brands or the franchisors and the real estate owners and the management companies in that ecosystem, I guess as a brand leader, someone who oversaw the creation of 18 brands, what are some of the headwinds or things that are not immediately obvious that make it difficult maybe in that ecosystem to create a brand that maybe is as powerful as it could be without the complexity of how the hotel industry is structured today?

Dorothy: Well, what I would offer is that it's very expensive to build a hotel today. That is the reality. So new construction ebb and flows in the industry based on how difficult it is to underwrite a business and work with lenders. Now, of course, we're in a very difficult time with the lending environment that we're in, but I have an owner's mindset when I think about our business. It's mostly because of my personal growth. I started at the unit level and moved up on my journey, but it's really understanding that they're building in a mid-market, it's probably a $25 million box. They have to have 30 to 40% equity to build that. They've got to impress a lender in terms of how they're going to be able to pay their mortgage and drive their return on that business asset. So when you think about why hotel brands have a proliferation, a product, part of it comes down to their structure and they give areas of protection in terms of geographic ownership of a territory to a particular hotel owner with that brand.
And to drive their unit growth, they have to add more brands into their portfolio to be able to add more product in the marketplace. One of the shifts that I see, Josiah, in the marketplace today is that you think about the online travel agencies, which have been disruptors for a very long time, and of course with Hopper and new ones coming into this space that are redefining that experience. But they are marketplace because they have a lot of inventory on the shelf. They have a lot of price points on the shelf. They have a lot of different value propositions that they bring to the customer.
Portfolio companies, which are the top 10, 12 brands in the space, they also need to be marketplaces and making sure that they have inventory on the shelf in all the right markets with all the different types of experiences that customers want because the customer might want an economy stay because they're only going to be in the room for six hours and they're going to be on the road again. Or they may want a luxury experience because it's a very special occasion in their life. So having those kinds of solutions under portfolio brand with the loyalty program being the juice that connects the dots so that Josiah can earn at every step of whatever his experience [inaudible 00:04:49] on that particular trip is really important. And of course, the business traveler powers so much of that because they are the frequent traveler.

Josiah: Interesting. So I'd love to talk about loyalty, but just to that notion of building a brand or a portfolio of brands, it seems that some of the challenge here may be the momentum you mentioned to continue to drive growth, you need different product types. But I'm curious for you, if you were starting new brand from scratch, no constraints today, and the objective was to provide both remarkable hospitality and generate strong financial returns from that, how would you go about doing that from scratch?

Dorothy: Well, I think if you're asking me that question, I think I would go down the path of creating more of a network of support for hotels to have independent product solutions with all of the core marketing assets to power their success. Josiah, because when I look at the customer today, even generationally, there's a lot of differences between the customers, but I do think that experience and unique element is something that many people are seeking in terms of whether it's a vacation, even a business trip. But they do need all the mechanisms of the loyalty program, the distribution capabilities in terms of being able to be powered and put on many different shelves. They need all of the solutions in terms of how to tell their story locally, and then they need the connection in terms of the sales and the loyalty programs, all the ways that you go to market to really drive some of those customers into the hotel.
But that is where a lot of the hotel brands are trying to establish themselves in the soft brand category because they do understand that it's not about that cookie cutter building, which of course is how Holiday Inn really cut their teeth in the marketplace, but there has to be some semblance of product quality, customer experience. But again, the mediaries have really helped us with their ability to provide ratings and give customers a sense of confidence in terms of the quality of the experience that they're going to get. So I think it's leaning into all of those elements that are shaping and disrupting our business to power the hotel's success because that owner, they still only drive 65 to 67% occupancy. The holy grail is always about how to really build that performance without compromising, right? But it's really making that business successful, giving them that tools, but allowing a lot of those individual hotels to really bring their magic to the equation.

Josiah: It's interesting you say that because soft brands aren't a new concept, that they're somewhat new, and I feel like I've heard more and more recently from people who have respect across the industry talking about the benefits of that, whether it's real estate, owners, or brand developers. So this is really interesting space to watch-