In the third of the series on the talent crisis in hospitality, we will take a closer look at how the proposed change initiative can address the root causes of the talent disruption.

I went to Brown University, but my mom said I couldn’t be an artist because I would starve. 

– Barry Sternlicht, CEO of Starwood Capital and Founder of Starwood Hotels

Create Compelling Experiences Not Brands that are Pure Real Estate Products

Four Seasons hotel founder Isadore Sharp is famous for saying that that he built the brand around service not design differentiation:

“There has always been a consistent thread and it propels us forward today, as we continue to grow globally, and that’s service… This isn’t something that can be accomplished by putting up a plaque or making a speech. It took work over many years–I would say a 15-year period.”

That all sounds good but the problem with Four Seasons under Sharp’s leadership was it set a servant worker standard for luxury hospitality: It took 15 years for a front line employee to become a Hotel General Manager and 25 years for them to ascend to a regional operations role. Four Seasons was what venture capitalist Reid Hoffman would call a Navy battleship. That’s a big reason why Four Seasons, while still a very strong brand, has grown very slowly, rarely turned a profit and survived on its own due to its unique private equity ownership structure. Therefore, Four Seasons is not a good role model or relevant case study for the hospitality industry. Brands like Four Seasons, Peninsula, Mandarin Oriental comprise 1-2% of the industry and are the Maybach and Lamborghini of the industry. The better benchmarks are the middle of the road, chain owned full-service upscale hotel brands such as Hilton, Marriott, Hyatt and Intercontinental whose “big box” hotels employ thousands of workers in heavily unionized markets such as New York, San Francisco and Chicago. 

In order to end the talent disruption, hoteliers must build brands and products that start with the employee and customer experiences first.

The real estate community, including equity and debt investors are the core customer of hotel and home sharing brands, not the traveler. The problem with this strategy is that while real estate developers seek a product niche at a certain cost per key to build, travelers don’t care. Customers care about the human experience, not the room size, amenities or design. Product consistency is table stakes. It’s gets you shelf space, but it doesn’t generate customer loyalty or repeat business. In other words, customers are loyal to brands that offer unique experiences and that is not what brands are investing in at all.  

In order to end the talent disruption, hoteliers must build brands and products that start with the employee and customer experiences first rather than the real estate developers’ shelf-space. 

Big hotel chains are becoming less hotel companies and more booking/reservation platforms, making money through franchised brands rather than directly managing hotels.  

Over the last decade over 80 new hotel and home sharing brands have been launched including a combined 20 new brands by the largest five chains since 2013, including five over the past 18 months. One could assume this indicates that hotel chains and entrepreneurs are innovating on the customer experience, right?  

Not really. Baird senior research analyst Michael Bellisario recently told Business Travel News that big hotel chains are becoming less hotel companies and more booking/reservation platforms, making money through franchised brands rather than directly managing hotels.  

In other words, hotels and urban development focused home sharing brands such as Sonder and Lyric are micro-segmented real estate products. Their development strategy to address product and shelf space first, architecture and design differentiation second and customer service third or preferably not at all. And their preference is to out-source management, or in the case of the new home sharing brands, bet on automation, as much as possible.