Rethinking Hospitality: Bold Moves for 2025 and Beyond - Matthias Huettebraeuker

Josiah: What's on your mind as we head into a new year?

Matthias: I do see a lot and I've actually seen a lot already. And I mean, I wasn't born and raised in hospitality, right? So I entered hospitality about 20 years ago after having like 10 years in creative agencies, working for customers from aviation to automotive to fast moving consumer goods, to sporting goods, to banking, to a lot of different industries. And I actually joined hospitality at a time when there was a lot of interesting stuff going on, right? And there were all those people like Ian Schrager and André Balazs and Claus Sendlinger and Alex Calderwood, who had just started Ace a couple of years ago. Nick Jones had just taken Soho House to the US, and so on and so forth. And I joined hospitality at Design Hotels at a time when everything seems to go in a totally new direction, right? It seems to be an industry that had really understood that it's important to be consumer brand, that it's important to be more about the overall experience, about community, about how you combine the sometimes insulated idea of a hotel with a neighborhood, with a local scene and stuff like that. So it seemed like an industry that really was going places, right, was going somewhere, was innovating. A couple of years later, my friend from citizenM came and also changed the way you built hotels, that you operated hotels, and some of that. And it feels like we're still organizing ourselves spiritually around those ideas, right? So it doesn't seem there hasn't been so much news until then. So what seemed like such a dynamic industry seems like an industry that for a variety of reasons is actually so keen on displaying let's say cultural with-it-ness or trendy with-it-ness, that differentiation seems almost impossible these days. And that seems true both for individual hotels and for the bigger groups or the bigger chains. I think as we're now entering the last year of the first quarter of the new century, it might be time to rethink, maybe, and to try to innovate and to dare to suck. Because if you always play it safe, you can't transcend something, right? So you have to dare to suck in order to transcend what everybody else is doing, basically. So in this spirit, like all those guys I just talked about did it 25 years ago.

Josiah: In your writing, you said this is the time to be bold, right? What does that look like in hospitality? What does bold hospitality look like?

Matthias: It's funny. I listened to a podcast with Nancy Pelosi. And not that she's a hospitality expert, obviously. But she said a couple of times it's important to know your why. And the 21st century is probably called purpose or something. But I think it's very important to know you why, to know why are you doing this, what's your point in hospitality, because if you want to be successful in hospitality in a market that is more and more a buyer's market, right, so it's not enough to build it and then you sell it. but you actually have to go into a competition to get either your occupancy or your rate or both. And even if the market is good enough that occupancy is not so hard, you still can do better on rate. And that's the function of preference. And preference is never a function of parity, but preference is a function of differentiation. And you can differentiate either by price, which is a fight that nobody wins, or you differentiate by value, and value is another word for experience. So if you want to differentiate by experience, you can either go the utility, convenience, seamlessness route of the experience, be a tool, basically. Or you can optimize the experience in terms of the entertainment factor, the emotional value, the sociability of stuff. And in order to do that, you have to be true to your own values, your own personality, you have to develop a personality. And you can't please everyone, right? So you have to find your niche, you have to have the patience to wait till your niche discovers you. So you have to be bold at what you firmly and truly believe in, because it is your why. You have to be bold enough to understand that eventually you will find the people who understand you, who like you, who follow you and all the stuff like that. I mean, there was a lot of hating at the beginning of design, like it's all minimalist and there's no service and this is not hospitality and stuff like that. But we just believed in that that actually is the truest form of hospitality, right? And you have to have the audacity and the stamina and the patience to believe in that. And that's what I mean with bold. I mean, not being not being totally over the top crazy, but to believe in what you think has value, has validity and all that.

Josiah: It inspires others. I had Eric Jafari on the show a couple of weeks ago, and he talked about how observing what you were doing at Design Hotels caused him to leave a probably safer, more predictable path in hospitality to create something new. And so I think this not only helps your business, but others. I want to bring these ideas to life if we could, through an example, not so that people can copy it, because I think, as you mentioned, it needs to come from your unique perspective. and there needs to be a why behind it. So this isn't about copying, but I guess as you look out there in the hospitality landscape today, is there an organization or a person that you think is doing a good job with this so that we can understand what this might look like?

Matthias: I mean, first of all, what I just said, I think a lot still revolves around those people from 20 or 30 years ago, right? So those people are still trying to be the next trigger or the next ace or the next citizen or whatever. On the upside, I feel there's a lot of smaller, intimate places coming up lately that are quite good. If you look, for example, at the Michelberger guys from Berlin. or not even that new, but they totally understood that it's about being part of a local community, right? That it's part of what makes the neighborhood tick and vibrant and lively and stuff. And they created that hotel, which is right in the middle of the musical scene. And it's a totally different vibe. And funny enough, there's a chain hotel right next door who made it into a musical industry theme park. without having the local connection, right? So that doesn't work and Michelberger does work. And then they took it one step further because at some point Ace came to the Michelberger people and said, why don't we roll it out? And they thought about it and they were like, no, no, no, I don't think so because we're really true here, right? We have the sense of place and we're really a product of that neighborhood, of that local scene and stuff like that. And they decided not to roll out, not to grow. And speaking about boldness, that's a very bold decision, right? To say something works spectacularly well, but we know that it only works on the way here. So I think that's a very good example. There's a couple of products like the Ett Hem in Stockholm that you might have heard of, pretty new place in Barcelona, which is called the Margot House, that are so intimate, right? One has, I think, seven rooms, the other has four rooms, and they're really like sharing a very luxurious apartment with other people and you really live there, right? Not in a fake Airbnb kind of style, but in a very curated, very high-class, exclusive, elegant kind of way. But that kind of intimacy seems the total opposite of those over-decorated lifestyle hotels where everything's a show and a part of some story that's not your story, right, but their story. And if you want to tell a story, it's obviously, I mean, I have a background in advertising and I worked. A couple years for tobacco companies, which, A, shame on me, obviously. But you learn a lot about storytelling there, because the product is absolutely interchangeable. So you have to think, what does it do to the identity of the customer? And a lot of those lifestyle hotels that are more like theme parks, actually, they care so much about themselves, right? They talk so much about, we're fancy here, we're funky here, we understand that code, we're leading here. that you have almost no space to live your own life and connect that to the place. And those places I was just talking about in Stockholm and Barcelona, they are really that intimate backdrop in which your life can unfold. And I think that's very valuable. I mean, the other thing which Eric said that sometimes it's nice to go places and have this transformational experience, which is brought to you by others, is also nice. But I think there's a space and a time and a motivation for that intimacy and for that sociability, maybe. I'm talking about that, obviously, the new development for Claus Sendlinger and Berlin, the Reethaus, is actually exactly that, because that's really, again, at the cultural avant-garde forefront. So you really meet people and creators and artists that are really different and really inspirational and forward-looking and stuff. So that's another great example of someone who did something back 25 years ago, kind of reinventing himself, going even more niche-y, if you like, but still with that keen sense of cultural relevance and resonance. And that also, I mean, if you look at Alex Calderwood, I think on his business card was cultural engineer, right? So he wasn't even a hotelier, but he thought I engineered meetings and minglings and stuff like that. And I think that's very much what's missing in an urban context. It's very much what's missing in a context where hotel experience is almost the last analogous experience you have, right? Everything's virtual, everything's digital. So being in a hotel, actually in a physical place and actually physically meeting people and or being together with people that you maybe don't meet meet, but you kind of like share a physical environment with them. That's a very strong aspect and you shouldn't disrupt or distract too much by too much effects and decoration because that fails to fill the voids in the design actually.

Josiah: I'm curious, I was looking at your recommendations for hoteliers to think about moving into 2025. You touch on concept and you also touch on technology. And one thing that I found, you actually close your article with this, you say you gotta ask the right questions. And I feel like the right questions are such an important tool, whether you're trying to validate a concept, if you're trying to think about what the future can hold, if you're trying to assess technology, what are some useful questions that you have found to assess, is this something that I should pursue? How can our listeners think about that?

Matthias: That's a very meta question too. It's a question about a question. A very specific thing, right? Because I don't think there's the right question and it comes again back to know your why and know your how and also know who are you catering to, right? First of all, again, I think you have to ask yourself, am I trying to be this personality brand kind of thing? Am I trying to have a personal relationship that's unique to a place, to a moment and all those things? Or am I maybe a bigger group and maybe my reason or my value to my guests is more the network effect and stuff? So the question is, Am I serving the guest or am I serving this asset capitalism idea of portfolios and stuff? Which is not bad, just different, right? So that's the question to start with. Another question is, how does the location where I'm about to open something or change something or reinvent something, how does it live? How does it work? How does it function? Is the, let's say, the accommodation or the having a place to crash use case really the use case that's missing in that place? Or is it more about attracting the local communities in becoming more of a daily choice as opposed to once a month, once a year, whatever choice for foreign people? So am I predominantly serving travelers with a little bit on the side for local community? Is it the other way around? If I'm a chain, for example, and if my prime business model is not experience but access to space and service, why limit that to the access class of hospitality? So the question could be, If I have a lot of space and if I'm kind of well-versed in servers, why don't I expand this to being a provider of space and service on demand for different user stories, right? For the accommodation case, for the work case, for the meeting case, for the education case, whatever. So I think one of the most interesting questions is that of user stories and use cases. So who can it serve and what ways? I know we're limiting ourselves too much if we prematurely say we're a hotel.

Josiah: I want to follow up on that because you are involved in businesses that I feel are pushing the innovation boundary of what's possible. And I think whether people listening to us are real estate developers or owners and thinking about, to your point, should this be a hotel or something else? but especially the majority of people listening are working in hotels. And even within a hotel context, I feel like there is an opportunity to use space more creatively. My question for you would be, what are you seeing with regards to the use of space and the evolution of that, that you find to be interesting? Because it feels like the economy, the world, the way that people want to interact with the built environment is going through an evolution right now. What are you seeing in that regard?

Matthias: It basically comes back to thinking a bit more freely about pushing the boundaries of asset classes to like adjacent classes, right? For example, and it's not even a new idea, if you think back to the 1920s or 30s, like the Ritz in Paris, for example, wasn't specifically known for its great rooms, right? For what was going on in the public areas, right? There were all this people from the arts and from politics and Hemingway is said to have organized resistance against the Nazis from that space, blah, blah, blah. So if you look at your place as an extension or as an integral part of the neighborhood, And if you look at what you can give the neighborhood and what you can draw from the neighborhood, you would usually get a lot of ideas on how you can create the spaces and how you can also move away from the blueprint of this is the room, this is the F&B outlet, this is the lobby, right? But that comes back to, I guess, use cases and user stories. You can think about, we have a certain need for extremely intimate spaces. You have a need for extremely social spaces. We have a need for semi-private spaces. Well, you maybe want to hang with a couple friends, but not with everyone. We have a need to maybe just hang out for two hours between meetings somewhere. We have a need to work a little bit, maybe collaborate a little bit, maybe work silently, maybe work with some white noise around us. So I think if you look at the potential use cases that might exist in the place you're about to have a hotel or you already have a hotel, you have to deduct those user stories from the neighborhood and then move into how can I serve them. in a spatial way, in an entertainment way, in an educational way, in a service way, whatever, and then find your way to fix the solution. In general, I think it helps to think a little bit more when you create spaces and hotels and stuff like that, to think a little bit more in iterative development, as in we build everything perfect and hope it's going to work, but more like let's do something, let's test it, let's see how people react to it, let's maybe move it a bit to the left, a bit to the right, which is obviously easier in software than it is in something you physically built, but the mindset, I think, helps a lot. And it's something a couple of years ago, a little bit before COVID, there's a place in Munich, which is now a Rosewood Hotel, and that was empty and it was a former bank. And we did a pop-up hotel there, which was open for just 15 months, right? And we were like, okay, could we make this economically at least a zero-sum game within 15 months to convert a bank building into a hotel? have it open for 15 months and then go away and then still make money. And that was a very iterative thing because we constantly were trying, okay, this didn't work, can we try that? That didn't work, can we try that? Okay, events work, F&B doesn't work, let's convert all the F&B spaces to event space. So it was a constant work in progress. And I think that that can teach you a lesson or two about the concept of let's not try to anticipate what people like 10 years from now because we have no idea.

Josiah: I mean, just for building on it, that is a mindset, but it's also, I imagine if you're doing a new real estate development, it's structuring it such that you can make these changes. So there's very real implications into the build.

Matthias: It is very real implications. And it actually comes back to try to be a stage for life as it happens and not so much a fixed showroom of something right so if you look for example at a theater play a stage very often is nothing but a chair right and a lot of scenes can happen on that stage and you don't tell people so much how to use it but you say look this is a certain space that you can make your own right and the more you allow that the more you can actually learn what people do to make it their own, and then you can support that. And I think that's a very interesting concept to follow. And again, when it comes to ask the right questions, I mean, everybody was copying, or is still copying the citizenM concept, right? But they're asking not the right questions. Everybody's copying the design thing, right? Like the little shelves with all the things on it, and here's a dwarf, and there's a book, and there's a funny thingy, and stuff like that. And the reason why citizenM is the greatest, A, the construction concept by Concrete, is B, the operational concept that Mike Levie introduced, is C, the absolutely adorable personality that KSS Commerce used, and nobody's copying that. Everybody's copying the decor. Which actually happened in two days, because when the hotel was finished, they were like, yeah, it's a lot of Vitra stuff, where it looks a bit cold. And then someone knew a guy who knew someone, and that guy knew a guy called James van der Velde, who was living in a garage in Amsterdam, and was a decorator. And they were like, do you have an idea? And he was like, yeah, I go to a couple of flea markets, see what I can find, and put it everywhere. Basically, it happened in, I think, in three days, right? And it wasn't the idea. And he actually himself has never done anything like that because he has moved on. But everybody else is copying that thing as if it was the reason for citizenM's success, where in essence, the economic reason for the success lies in construction and operations, and the commercial reason for the success is actually because it has personality and great people, right? So the hotel that is probably one of the most standardized hotels ever wins because it feels so personal and it has such a great personality. And I think that's the big, big, big thing that they accomplish that everybody's copying the shelves, right? Because they're asking the wrong question.

Josiah: Shows the power of questions. Before we go, I do want to ask you about what is inspiring you these days outside of the world of hospitality, because it feels like there are creative inspiration, to your point, not copying, but you can get inspired with maybe fresh questions to ask by observing things. You mentioned the advertising industry, theater just now. Outside of the world of real estate and hospitality, are there things, industries, organizations that are inspiring you these days? And I'm curious what those might be.

Matthias: I think there's probably two answers to that question. One is a general answer. I think, in general, there's a concept by a professor from Harvard, I forgot his name, and it's called cross-fertilization. And he's made a couple of studies saying whenever you have a problem which cries for innovation, it's extremely valuable to have non-experts on the team because your probability of succeeding in innovation goes exponentially up. And if you take that to a personal level, It's extremely valuable for people from the hotel industry to not go to hotel conferences, but go for conferences from, I don't know, from automotive or from AI or from whatever. So go outside your comfort zone, go outside your area of expertise. And the same is true for go to an art show, go to a cafe and listen to actual people and stuff like that. So that's the general answer. In specifics, I think, and that's not a new thing, but I think looking, or not that new, Looking at all the transitions that the automotive industry has been going through and is still going through is really interesting because they eventually came from everybody owns a combustion engine car, right? Or two or three or four. And then there's one approach to solving it, which is a little bit what we in hospitality do. So maybe we replace a combustion engine car by an electric car. And that's about the level we are on. Let's replace a lobby with a co-working area. And it's not even a different area. We just rename it. And then we think we innovate it. But what automotive is actually going through is like, OK, maybe a car doesn't need a driver. Maybe people don't need a car. Maybe they don't need to own a car, maybe they can share a car. Maybe if it doesn't have a driver, they don't even have to share a car, maybe the car picks them up. So maybe it's that level of thinking to let's go back from where we are actually not in the car industry, we're in the mobility industry. People want to get from A to B. And a car is one possible solution to the problem. But what do we do with that? So how do we, as a company, come into that equation? And that level of thinking, I think, is very inspirational. And I think it's very necessary, not only for hospitality, but for the whole real estate industry as such to say, OK, we're not pre-outfitting buildings and renting them long term, but we're actually a provider of space and service that gets more and more on demand, that gets more and more short time, that gets more and more multi-use, hybrid, whatever. So rethinking, not the solution, but again, the question, what is asked of us is, I think, what we all need to do. And I think we could learn a thing or two from the automotive industry, both in successful examples and not so successful examples.

Josiah: I find that fascinating because I think even hearing you say that, I was going to ask you, okay, well, what is the parallel if automotive companies are thinking about, we're not in the car business, we're in the mobility industry? You mentioned the parallel on real estate, but I think in hospitality, It's maybe not even useful to say hospitality is fill-in-the-blank. That's what our listeners need to think through. If we're not in the lodging business, what is that in the specific area that they can serve their guests? What is that business? It might be something bigger.

Matthias: We're actually in the business of providing service real estate on demand, right? That's like the meta level. And to provide service real estate on demand might mean the bedroom, but it might be the workspace, it might be the living room, it might be a lot of rooms, right? If you go to the house analogy. And that's not necessarily something that every individual one-off hotel should do because they could still be traditional hospitality. But if you look at the bigger groups, if you look at the Hyatts and the Marriotts and stuff, they have a tremendous need to grow. And growing by rooms or by keys, if you look at the latest acquisitions in Europe from the big boys, they're increasingly buying rubbish because all the good stuff is taken. So they buy rubbish because they have to grow by keys. If they would rethink and say, look, we might just as well serve different needs for space and service in a local context, I think it's a huge growth potential for them. And it would make them a front from a brand that you use every now and then to ideally a 365-day brand, which might finally result in, at the beginning of each year, there's always those lists from Interbrand and Forbes, like the 100 most valuable brands in the world. And we're always like, there's no tablet in there. And why is there no tablet in there? Because we're not an everyday brand, right? But if those big boys would be a brand about access to space and service on demand every day for multiple use cases, I could become an everyday brand, right? And that would be very interesting. And then I think for those, it's immediately clear to transform that. But also for the smaller terms, it goes back to what Eric Jafari said. I mean, what he described was also going away from, okay, a hotel is about bedrooms. Going to a hotel is a place where people meet to have experiences, to have social connections, to say, well, that's already taking it to the next level, right? So I don't think it's so far from hospitality.

Josiah: It's not. And we talked about questions in this conversation. I think what a great question, you know, that you raised there of how does your brand become an everyday brand or put another way, how do you provide hospitality to people every day, the same people in everyday different ways? This really can open up.

Matthias: And how to create that meeting space for people who are traveling with people who actually live in the city, so who travel the streets of their city. Because last week or two weeks ago, I was at a marriage hotel. and they showed me the Bonvoy Lounge, which was at the 19th floor, like the farthest possible away from all the life. And there I could sit with the other Bonvoy people and I was like, what the fuck are they thinking? They show me I'm such an important person by hiding me away with other so important persons and not letting me partake in the social life that's actually happening in the public outlets. So it's like, which is what I always call the members and non-members only approach. You have to bring them together, right? You have to maybe give certain people a better experience, but that doesn't mean segregation. It means recognition. Which is a different point. That's great. That could be another conversation about recognition versus reward, and what about membership, and what about subscription, all those good things. There's another podcast to be had probably.

Josiah: I think there certainly is. Would love to have you back on the show. But I think you've got me excited thinking about a new year ahead, the new opportunities. Where would you point our listeners to learn more about you and your work? I'll include some links in the show notes.

Matthias: My LinkedIn page is a pretty accurate and up-to-date thing with articles and posts and I share stuff and I have discussions with other people there. And I think that's a pretty good start.

Josiah: Excellent. Well, thanks for taking time to chat today. I learned a lot from you and I hope we have the chance to do this again sometime soon.

Matthias: Thank you for having me so much.