Applying the "Amazon Prime Playbook" to Hotels - Ernest Lee, citizenM

Ernest: So the context for us creating and developing mycitizenM+ was not unlike many other hotel brands where They recognize that they had, just through the organic nature of their brand and for us, design and service levels, that you will cultivate a loyal following. But if, like us, you're targeting a very affluent, young, urban, professional audience, they also have their choice of options as well. Within that space, especially when trying to target those that you want to be loyal, it's a very fierce competitive playing space. And it's very commoditized, too, right? If you think about points programs, yeah, there's so many. And for us to try to do that and attack loyalty in the same manner as one of the large chains, yeah, we will be the smallest fish in a very big pond. So we said, OK, what do we have that's different? And one of the biggest differentiators, and I think the business advantages that we had, is the fact that we are a true owner-operator. And what does that allow you to do that others can't? And for us, that's typically speed and coordination when it comes to delivering physical benefits, right? So, you know, the downside of the fragmented asset bite model is you have to convince thousands and thousands of owners to agree to one brand standard change, right? Where I just have to walk down the hallway. And so that's a little bit of the context of why we decided to, let's say, zig while everybody zagged. And the way that we wanted to do it was, okay, how can we look at all the different types of loyalty programs, membership models, and subscription models, and what could be something that works for us? One of the areas that we kept on going back to was this thesis that Amazon had when they developed Prime, where they said, at the end of the day, if you're delivering strong value, transaction after transaction for us, stay after stay, experience after experience, ultimately that will garner enough loyalty. And so, for us, we followed the same path as them. We took a bet. Their thesis was that we will give up economics in the short term. But ultimately, we will be rewarded by our customers in the long term. And they saw that very much in their huge impact to their ultimate, their CLV, their frequency of transactions, their average basket size. We also looked at it the same way. We wanted to have a braindead proposition where customers and guests felt like they were stealing from us, right? They were getting a break even very quickly on their commitment to us. And we very much saw those same results where we saw average revenue, the average number of bookings, CLV, frequency, and NPS scores all elevated pre and post-for the same type of audience. And for us, yeah, we felt that this was the right way to do it because if you're consistently providing value, just like Amazon, that will ultimately lead to a much more satisfied and ultimately frequent and repeat guests.

Josiah: Well, I wonder if it is too much of a stretch to tie this into something else that you've talked a lot about over the past few years, and that is the rise of flexible work or distributed work. Do you see this as, and I know through partnerships, and just how you're communicating around this, it feels like you are a big advocate of entrepreneurship around, you know, kind of this new mobile workforce? How does all of that tie into this program? Is it if I look at the benefits that mycitizenM+ offers, there are things like co-working, things that are very attractive to me; it seems a new way of working. Was that something that's been baked in since the beginning? Yeah.

Ernest: I, you know, we, we take the word lifestyle in lifestyle hotels very seriously, right? For us, lifestyle doesn't mean that we're just catering to you when you're out of town and on a business trip or vacation; it also means being relevant to you in your backyard. From the beginning, we have always wanted a product and a program that offered a lot of different touch points. So one, it started with the travel benefits. So you get discounts, upgrades, room guarantees, et cetera, et cetera. Then it spilled over to the social benefits, where you get access to events, food and beverage discounts, etc. And the last part for us, and one of the, like really the ribbon bringing everything together, is the professional or the work benefits, right? We wanted to make other people's business essentially with co-working a feature in ours, a free feature in ours. So, co-working anywhere you come, anywhere you want to go, and in any city you want, in addition to the ability to pop into meeting rooms if you need it. The reason why we do that is really to stay top of mind, right? The more frequent that you take a step into our hotel, the more you'll think about citizenM, and the more you'll be thinking about citizenM also in terms of ultimately your next booking. And so for us, all these things work together.

Josiah: Amazing. So it's a holistic perspective in supporting your guests and your members. I'm curious: over the past couple of years, how have you seen the way that people, or how have you seen the workforce evolve? Like, are you seeing this move towards flexible work accelerate or decelerate? What are you observing out there?

Ernest: Yeah, I noticed that there's a lot of things after the pandemic that just kind of returned to the way it was. But there was one that really had a lot of staying power, which is there's a structural impact to the relationship between employees and their companies and employees and their work. And I think a lot of that is in the benefit of just people, right? Getting more time back to have more balance in their lives. And for us, the way that we think about it is, okay, more time means more opportunity to go experience the world. And a way to experience the world is through travel and to be with others. And for us, we've always felt like we're a conduit to connecting people and allowing people to use this time in a little bit more of a gratifying and fulfilling way. And for us, it really comes to this structural change that we see in terms of how mobile people are and how empowered people are to have a little bit more control back in terms of how they spend their days.

Josiah: That's interesting. I think more control means more people reverting to the mean of just how we've operated in some sense, but becoming more human in a way and more flexible there. It feels like that's been a core tenant of Citizen M's philosophy since the beginning, right? And you're staying relevant, you're staying adaptable to these changes. I'm curious, behind the scenes, were there any sort of operational or process changes that you had to work through? Because there are so many elements to what you described. I'm kind of curious operationally: what went on behind the scenes to make this all happen?

Ernest: Yeah, let's just say that if a benefit looks easy. To the customer, it's very complicated on the back end. And so any new benefit or feature that you unveil as part of your program requires a heavy amount of buy-in because the product is so physical. And physical means that you have to onboard so many different people across so many different countries, cities, and different levels of understanding what the product is and what we're trying to do. And so there's always a lot of complexity in being able to bring people together so that they could deliver a seamless experience.

Josiah: I want to follow up on that because I'm really interested in training these days around how do you roll something new out? And especially for a global company like yours, it can be, I imagine, very difficult to think about this. What has been your experience or observation around how to train people? You mentioned onboarding or, you know, kind of bringing people up to speed on some of these changes that you roll out.

Ernest: Yeah, so maintaining and executing any strategy as a global business requires not just an intense amount of focus and deliberation but also simplicity. And so you have to be able to communicate what the vision is for the direction that you'd like to head towards and create a framework that allows people to really understand what is within the boundaries of their work and the decisions that they can make. Because if you're sitting there trying to make every single decision for them, then it's going to be a very slow way to roll out and it's just not scalable. And so you have to empower people, but you have to empower people within a framework so that you're ultimately all marching towards the same direction. With that, the last part is really the repetition and the development part where you have to repeat your message in a simple way as possible so that as many people understand exactly what you're trying to do, in addition to constantly upskilling and developing people so that they're also getting better every single day and are able to ultimately have it click so that they're getting faster and more efficient as well. For us, everything has to work in tandem with the company's goals, in addition to developing people on a personal level.

Josiah: That's great. Now, I guess reflecting back, since you've rolled out the first stage of the My Citizen M Plus program, my understanding is you have more than 30,000 members that are now a part of this. What is it? 120 years, something like that. So you're getting, what is that? 3.6 million at least. These are maybe a little bit old numbers, but you've created a significant revenue stream off of this. I'm curious on kind of your reflections on the impact so far, you know since you've launched.

Ernest: Yeah, so my impression is that the program is having its impact or its intended impact on what we wanted as far as average order value, CLV, repetition, frequency, app usage, and PS. For us, the fee stream that you reference is minuscule in comparison to the total effect, which is ultimately, as a business operator, we want to grow the bigger part of our revenue. sources, which is rooms revenue, rooms bookings, right? And ultimately, this is a way to do that because it creates an anchoring point where people are committed to you. And the best way to get their validation of your product is the fact that they are making a financial commitment to you over a longer period. And so for us, ultimately, it's doing what it was intended to do, which is drive our business to a slightly higher direction.

Josiah: I think it's pretty exciting because, as you pointed out, that's the big win, right? It's all those other metrics. That's where you look at the impact. I still think it's kind of cool that you get people to pay for the privilege of being part of something that traditionally loyalty programs are structured differently, right? And so it feels like you're kind of winning across all elements of this. And yes, there's operational complexity to it, but you've kind of created a really unique model that is resonating with people.

Ernest: Yeah, and you can't do it without proving its value. to customers in a very obvious way and reminding them of that value over time. Because as I mentioned, if you don't have that, then you don't have the relationship. And that's ultimately what we are trying to get to. We don't want to be into a transactional mindset with our guests and our customers, but we wanted actually to build something a little bit more in-depth.