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David Eisen of Hotels Magazine

• Jeff Borman and Matt Brown

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Every day David Eisen translates the avalanche of data and news about the hotel industry into something everyone, not just people in the business, but everyone, can understand. He joins Jeff and Matt to talk about the rise of partnerships among hotel management companies, the ever-multiplying number of hotel brands, and the impact of flashy stunts on loyalty programs.

https://hotelsmag.com/
https://www.linkedin.com/in/david-eisen/


Speaker 1:

Hi everybody. It's no Show. I'm Matt Brown, joined, as always, by Jeff Borman. Every day, david Eisen translates the avalanche of data and news about the hotel industry into something that everyone not just people in the business, but everyone can understand. He never panders to the industry he covers, and that is a rare gift as a writer and a rare gift as a reader. David is VP and editor-in-chief of Hotels Magazine, which covers the deals, disruption and day-to-day details of the global hospitality industry. For that, he worked for Questex, a hotel data company, and then he was director of Hotel Intelligence Americas for the benchmarking firm HotStats. You've heard a lot about HotStats on our show previously and this is also a historic occasion. It's the first time we have two Miami University grads talking to each other on no Show. Jeff went there. David is a proud graduate. David Eisen, welcome to no Show.

Speaker 2:

Well, I appreciate Matt and Jeff inviting me on the show. Quite an introduction. I must say I appreciate that no one spoke so glowingly about me, probably since my mother maybe years ago, and that was years ago. So you know I appreciate the introduction.

Speaker 1:

She actually Venmo'd us before this.

Speaker 2:

Well, now I know you're lying, because there's no way she knows how to Venmo anyone.

Speaker 1:

David, let's get right into it. You recently did a story on the increasing role of partnerships among lodging and management companies and how partnership has kind of become a much more popular way of doing things with hotel brands over, I think, what, for years decades was kind of a dominant model of merger and acquisition. Let's just buy them out and absorb them and we'll all march forward. Of the many examples you cite, you mentioned Marriott International, which, in 2023, did a long-term strategic licensing agreement with MGM Resorts, and MGM represents more than 40,000 rooms in Vegas and other cities across the US, and this deal took effect this year, and it enables members of MGM Rewards and Marriott Bonvoy to link accounts and receive an assortment of benefits. This is happening all over the industry, though. Why do you think partnerships are so in vogue and on the rise?

Speaker 2:

Yeah, it's interesting you bring up the MGM and Marriott Bonvoy kind of partnership there. It's interesting when you think of Marriott because Marriott's always been that huge in M&A. I mean they've made the biggest deal in the hotel industry, acquiring Starwood. That was years ago, it seems like years ago, but they were big in M&A and they brought all these diversified kind of brands on, but doing it through the M&A route. But then these partnerships is a way for companies to kind of add scale, kind of add scale and grow, but without that outlay of money. I mean it's. I mean it costs a lot of money these acquisitions and we're seeing you know where the cost of debt is right now and everything else to finance something. Some of these M&A, it's very, very difficult. So why not do these partnerships where there's, like you know, really no money changing hands? It's kind of a symbiotic relationship. Because Marriott, you know as much as the biggest hotel company in the world. They didn't have a big presence on the strip right. They had a couple hotels and collections, like with an autograph, the Cosmopolitan Hotel, but within one fell swoop that's adding 40,000 rooms to kind of the Marriott Bonvoy ecosystem where you know MGM loyal customers can take part in Marriott, bonvoy and vice versa. So there's that symbiotic relationship and, as we all know, or at least I believe, of all the brands of any hotel company, the biggest, most important brand is the loyalty program and that's kind of like the middle spoke and everything else kind of dives off of that. But we're seeing these partnerships where you know and we talked a little bit about Marriott these Bon Boy moments with Taylor Swift and Bryan Cranston and you know, drinking mezcal with the Breaking Bad guys. How cool would that be, right, even though I don't think they're. I've had their mezcal before. It's not the best mezcal out there, although I'm a tequila guy. Shots fired, shots fired. I'm sure I'll hear something from Corzo Diageo who owns them. I don't even know who it will be.

Speaker 2:

These partnerships, I think and we saw Hilton has done the same thing Interesting Hilton for years and years has always grown organically. They're not known as a company that goes out and acquires other companies through M&A. They like to build their own brands out. However that may be, they've gone the partnership route and I know the question is about partnership. They've also got the M&A route too. I mean they've acquired the Graduate Hotel brand, which is a collection of about 35 hotels across, mostly in the US.

Speaker 2:

There's a couple, though, in England as well to really tap into that college market, and I've been to one of these. So I've been to a couple of them. They're really cool. A couple of them they're really cool. I mean, they're very like hip and you kind of feel like you're back at your back at school. So they, you know they acquired that brand. They've acquired the nomad hotel brand, one hotel basically in london. There's another in vegas that wasn't part of the deal, to kind of and that's going to be their luxury lifestyle play.

Speaker 2:

But then they've also gone a partnership route and they've done, they did a partnership with I wish I'm sure that are your audience is aware of withamp, which is this kind of you know hip, outdoor experiential company where you know you can and we did actually a brand experience down in Nashville where you can, like you know, rent or stay in one of those airstreams. So it's very like, kind of outdoorsy, but it's again it's just another way that Hilton Honors members can take advantage of another company and then of course, obviously get rewarded for it. We're seeing partnerships and alliances that are kind of creeping down, not just in these, you know, the big consumer brands, but at the third party management companies which you know, there are literally hundreds and hundreds of these third party management companies, all the way from Ambridge, which is like thousands of hotels, all the way down to kind of other companies that I can't even name because there's so many of them that have maybe five hotels that they manage, right, you?

Speaker 3:

mentioned the loyalty program element to this and I think, from what I've seen, if you go back to call it around 2012,. Marriott before Starwood. Everybody remembers the Starwood acquisition is so big, but that was preceded with an acquisition every single year. Big, but that was preceded with an acquisition every single year. Protea brand in Africa, ac out of Spain, the Gaylord acquisition only four hotels at the time, but monster acquisition.

Speaker 3:

Delta made them the largest supplier of hotels in Canada. It was a series of acquisitions that led up to the Starwood one. What I see during that time, by the way, hilton was fairly idle, actually totally idle. They would create a couple of brands organically, but they really wouldn't go out with a balance sheet and use it to go acquire. It was all organic growth.

Speaker 3:

To me, the big shift there and you touched this was the role of the loyalty program. From 2012, call it till today. The loyalty program has gone from something that brands tap into to the center of a hub. And spoke An interview recently with IAG's loyalty IAG, the parent company British Airways, with their loyalty CEO, adam Daniels, and he mentioned something that his words were really emphasized that the new partnerships they're doing with Qatar Airway, finair, but also outside of airlines, with Uber, barclays and banks, is that they're recognizing the power of the Avios as a currency and they're calling it a currency. It's such a departure from the way loyalty programs have always been presented. To me that's the core. I love. Your take on it. That's the core of these partnerships is get on board with my currency.

Speaker 2:

And if you look at it from other, there's other brands you look at, like Four Seasons, some of these luxury level, not to their fault. They don't do any kind of like monetary or points-based system. It's all about a loyalty program just based on recognition. We recognize that you are a loyal member, you have a fealty to us. Here's the thing. The loyalty programs are so like I, for instance, I have one of my best friends. He works for a big bank and I won't even name the brand, but he stays at a hotel. He gives them like a hundred nights a year, whatever it is. He's there all the time and they still don't when he goes to the front desk, they still don't even, like you know, know his preferences or call him by his name. Like you know what I mean, it's all still very transactional. The hotel companies they do a great job of marketing their loyalty programs. You might know better than me the actual effectiveness of them when it really comes down to it, that like the hotels that don't really offer you anything for your loyalty.

Speaker 1:

It's like a restaurant or bar that feels so confident about their position that they're not going to do happy hour. It's like you're paying the prices. We don't have to do anything to incentivize you coming here, because we know you're just going to come anyway. I do feel like a lot of the stuff like the Taylor Swift tickets and the Breaking Bad crew doing Mezcal. It feels very press release-y to me, like the rank and file. I don't think care, I have no data to back this up, but I think, like Jeff, when you and I talk about loyalty programs, it's like I want free nights in Tahoe and I want to skip lines and that's what it comes down to.

Speaker 2:

If I can get to the front of the line because I'm kind of a platinum member or whatever it is, that's worth it to me Of the 200 million members that are in Bonvoy, or whatever. It is right how many are active.

Speaker 2:

How active are you? Or they're just the person who had who signed up because they got there was some kind of promo at the beginning or because they get the free watch. You know what I mean? Like I don't know how many are that active using it, and that's really what's important. It's like like, for instance, for me, when I write a story and I go on Google Analytics. There are lots of stats there.

Speaker 2:

My biggest stat that I think is most important to me when someone's reading a story is the stickiness, the engagement. Like how long have they looked at the story? Right, and they've actually. I could tell they read it through, so they spent like five minutes on it. Or the person who goes into a story, clicks on it and is there for eight seconds is gone. Who's more valuable to me? Right? Not the sheer volume, but just the more discerning, the stickier person.

Speaker 2:

By the way, it's very difficult right now when we're seeing, you know, all these companies look for six to seven percent, you know, annual growth and net unit growth. But it's very it's not that's it's not where it is right now and a lot of these companies are looking to conversions and to kind of grow. I call it the conversion wars. Remember they had the bed wars, tv wars, all those wars. It's kind of the conversion wars like hotels, transactors, a dirt of transactions as you know, but like how do you get your flag on this building? Cause that's the way that you can kind of to push that just Wall Street. You're actually growing at a clip that's acceptable.

Speaker 3:

So let's stick with NUG right. Deal flow has been muted for 18 months. Last year, 24 billion in wholesale sales, which is down from 52 billion the year prior. So after a few anemic years, we're hearing that there are signs of improving deal flow. Interest rates haven't moved and I hear that the catalyst is buyers and sellers coming closer together and accepting that a 7% to 8% cap rate is now 9% or 10%. Few things to me are fuzzier math than a cap rate. The number is not big enough. Let's multiply it by 8. Still not big enough? Okay, multiply it by 10. Still not big enough? Okay, Multiply it by 10. Makes very little sense to me. But who cares about my opinion? What's yours? Why are buyers and sellers coming closer together and how have cap rates all of a sudden changed so that deals can get done?

Speaker 2:

Every time I speak to someone I try to be a chronicler of this industry. We always talk about the buyer and seller gap and that delta between the two and what I've heard it is coming down, it's narrowing and I think at the beginning when sellers are like, oh, my hotel is worth this and you can't tell me how it's not worth that, and blah, blah, blah, and a buyer's coming in obviously at a lower ask. So the bid-ask spreads are narrowing, I think a bit. And when you look at where interest rates are, we heard from the Fed yesterday that there probably won't be a rate cut anytime soon, maybe one at the end of the year. I think it's a normalization that people understand that not that I myself was a big buyer of real estate. We're never going to get back to that zero and that was crazy. Probably there's a normalization of that and there's an understanding that money should never be free, that if you're going to borrow money there's a cost to that. So I think we're getting more to that normalization. And if you remember I mean I'm not that old but years ago it was 19% rates. It was ridiculous 10 double-digit interest rates and no one batted an eye. It's just people got comfortable with the fact that it was basically free money and obviously brokers love it when this stuff is starting to kind of thaw out, because the JLLs of the world Believe me, I get hit with my inbox every day about transaction.

Speaker 2:

I'm seeing more of them now, which is a good thing, I guess. Right, jll CBRE? I don't know, it's interesting. Transactions for me are interesting. I don't mean to go off on a tangent here, but it's like tell me why a heady transactions market is good. Why is it good when hotels are traded every? I mean, is it because once they change hands they'll probably be a PIP or a renovation or just needs new blood? I guess that's what, and it gives it's the opportunity to recap. I don't know. It always seems to me, though sometimes when you see some of these, it's not private equity but a lot of the REITs. They're long-term holders. So I'm always wondering why is it? Why is a good transactions market or not doing a good, but why a one that is a headier? Why is that better for the industry? You might be a better you would. You would tell me you would have a better answer than I would.

Speaker 3:

Well, I probably don't have a great one, but I think markets love action. It doesn't matter what kind of actions. Buying and selling. Markets want to see a company say I'm going to do something and then go do something.

Speaker 1:

Jeff, just to go back for some of our listener edification. Nug stands for what?

Speaker 3:

Net unit growth. I have 5,000 hotels today. Next year I have 5,100. My net unit growth was 100. And one of the things that really gets caught in that net that really people deep in the business get to see, is that there are always losses in there. Also, when I was with the Hampton brand, I was surprised when I saw a year where we had 300 new hotels coming into the system and our nug was 100. Nobody really talks about the 200 that left the system.

Speaker 2:

I guess new growth is better. You get rid of some of the old, kick some of the old out. I mean, some don't they talk about, but in this day and age, when it's so important to hold on to what you have, it might be different. I'm like, okay, well, we can afford to get rid of them, but as long as we're. Maybe if we lose 100, we better add 200.

Speaker 3:

Gone are the days when those 200 would simply exit the system and the brands were okay with it. Now, last year, Hilton invented Spark, which kept Hamptons from leaving, but becoming a tier down with a smaller tip and a smaller renovation requirement.

Speaker 2:

I guarantee if you go on a CEO panel I think I've done it where you ask them name all your brands, they can't even do that, but got you know and then ask the CEO of IHG to name you know 20 Marriott brands, it's very difficult and it's like you know. It goes to your point, though, with the Hampton brand, which was like a category killer and still it's a great brand from a developer standpoint, but it got almost too high up from an ADR perspective and maintaining it. So you're right, they had to build something below it. I think they started with, well, there was True, the TRU True Hotel. That was like the first one, but that's a new build one. Then they figured out well, we need to do something where we can convert hotels to under the Hilton brand, and that's the thing. And that was Spark, right, and I visited the one in Germantown a couple of months ago that was BF. Saul is the owner of that one.

Speaker 2:

But it's like it's funny because all these hotel companies, from Hyatt to Hilton to Marriott, that always kind of played in the upper tiers, right, they were like you know, they didn't really get in at mid-scale, they were all. All their stuff was kind of in that upscale luxury, that kind of thing, and they're all going. You know, downscale, now right, and then you have these brands like Wyndham and Choice are trying to go upscale. So they're like going against each other. Nowadays, it's not about sticking to what you've always been, it's about these companies aren't really hotel companies anymore.

Speaker 2:

You know well, they're franchisors, right, but they're travel companies, and that goes back to the loyalty program. It's all about being offering your audience everything under the sun that they want. So it's like with Hilton, with AutoCamp oh, we have this outdoor thing. We don't have that in our set. We don't have these kind of like where you can stay in a teepee or an Airstream, and now we do. We have that offering right with AutoCamp. It's just about filling in all these gaps from a travel standpoint. I mean, if you look at even look at Marriott with their homes and villas, that's something they added because they didn't have it before and they're trying to compete with Vrbo and Airbnb on that account, trying to compete with Vrbo and Airbnb on that account.

Speaker 1:

David, are there too many hotel brands?

Speaker 2:

There's definitely too many offerings. I think Hilton is a brand, marriott is a brand, hyatt's a brand, and then below that they have all these what they call sub-brands. But really what I just call them are they're really just labels or offerings or options. Howard Johnson to me that's a brand, but Howard Johnson's is different because Howard Johnson's used to be like these cool restaurants, so there's a difference. But a lot of these new brands that have like maybe you know they're not at scale, these are offerings, these are just something, options under that larger kind of brand umbrella, whether it's Howard Johnson had an exterior and interior design that I think, even though we've never stayed in them, we can kind of conjure a Mad Men era view of what those places looked like.

Speaker 1:

And now all these sub-brands, even though they're all trying to go for different markets and they all have a sexy logo, they all kind of look the same right, absolutely, yeah, have a sexy logo.

Speaker 2:

They all kind of look the same. Right, absolutely yeah, they're trying to go for that hip factor or and it doesn't matter if it's mid-scale up to upscale, you know what I mean like they're all trying, they're they're, but but few and far between actually, I think. I think kind of get it right and, and to your point, they're very homogeneous, all these designs, it's. It's just, it's just a different name on the window. But to to Jeff's point earlier brands are interesting because do these hotel companies, do they build brands for the consumer or for the developer? To your point about NUG, you can only build so many Hamptons. Now you've got to build a true hotel and do something else.

Speaker 3:

I think you hit it earlier when you asked, as you were running through Marriott's brands and you mentioned homes and villas. This is something that is 100% for the developer. This is not something that is a product line offering by a hotel company. How do we fend off a threat is what that is. But with that said, you wrote an article that I thought was pretty cool the Airbnb being meaner marketers than hotels. Tell us about that. I thought that was pretty well. I like the impact there.

Speaker 2:

Yeah, am I just noodling around in my head Because I watch probably too much television at night and you watch these. First of all, airbnb does a fantastic job from a visual standpoint. I mean, they're really the newest commercials, are very kind of like um creative, and they have this cartoonish quality to them, but every one of them is like, basically like shows, what's wrong with staying at a hotel versus what's right with staying at airbnb. So it's like you're a family of three and the whole thing is about like you go to a hotel and you have to go to bed when your kid goes to bed because it's one room, right, but at Airbnb you can put them upstairs and go to sleep, and go downstairs and enjoy champagne while watching the fireworks above the Eiffel Tower, which was one of them.

Speaker 2:

And then it was another one where it was like five friends going on a trip and they all go to a hotel and they all go to the hotel and they're all opening five separate doors and going to the room, as opposed to if they go to Airbnb, they can all be together and there's a big fiesta and party and there's music and all that good stuff. So they basically you know it's a shot at, a shot across the bow at the hotel, at the hotels, but on the other side of that, the hotel industry is very still in that kind of mode of like. Let's just present what we're good at and you know not even the industry just what we're like Marriott's or they're very aspirational but it's very much like well, every, every single hotel ad you see is all harks back, gets back to their, their loyalty program. At some point you have to publicize that. But you know the Bonvoy commercial that all these different brands we have and there's and you know best question has a beautiful I love their ad campaign, which is very much. They use the uh, the weight, the song by the band, so it's very like tear jerky. But it's all about like a family, multi-generational. They're on the beach and they go back to the hotel, whatever it is. But it's still very much like just about the hotel itself and the only one that did I've seen that hilton actually did a did one where it was a shot against Airbnb or home sharing, where it was like you know, you look online for an Airbnb and it's like it's supposed to be this beautiful, like Victorian, I don't know house or cottage, and then they get there and it's like a haunted house with haunted dolls and all that stuff.

Speaker 2:

Why doesn't Marriott do more of that? Someone said to me well, it makes sense because we just talked about it. They have their own Airbnb-ish product now. So if they did that, they'd basically be damning themselves with their Homes and Villas product now, because they'd be doing the same thing. It would basically be like saying don't stay at Homes and Villas because it's creepy like an Airbnb.

Speaker 3:

The thought that came to mind when I read that article was that it really shows the origins of these companies. Marriott may be a brand platform now, but it came from a restaurant company that turned into a hospitality company, and Marriott is filled with the nicest people on the planet. I don't know anyone personally at Airbnb, but they're not hospitality. They make no claims to be. They are a tech company.

Speaker 1:

We could probably apply the same thing to Uber, as Uber a transportation company, and I think skeptics would say well, no, it's a bunch of developers who spent a billion dollars over the last 15 years upending this industry. But I'm sure people within the world of Uber would say no, no, no. You just don't see. We're like the automotive companies competing against horses and stables. You just don't know how to accept us as what we are.

Speaker 3:

Uber has never actually transported any. It's a logistics company.

Speaker 2:

maybe it's like FedEx it's getting from one point to the other.

Speaker 3:

I suppose a recent regulation that requires Uber to consider drivers' employees in some places may have finally given some evidence. If it's their employee, then maybe they did start transporting people, but it wasn't without the greatest resistance they could offer that they got that title.

Speaker 2:

But that's the thing about Hilton Marriott Like are they can we call them lodging companies anymore If they're not operating the hotel? Own the hotel hotel. That's what I wrote a story long ago and it is real quick. Like the people who actually? Who are the real people that are offering hospitality? It's a lot of these like third-party management companies. It's like when you go and stay at a hilton, whatever it is, the guests might be like it's hilton. They probably think it's owned by hello. No, it's. It's run by a group of people that are hired by this third-party management and all they all get their paychecks from, not from hilton, they get them from from the third party, and they're the ones who are actually offering. Now that these the brands, you training and all that, and they wear the it's. You know the the garb, but it's like they're actually. It's these management companies who are really providing the hospitality marriott will still manage.

Speaker 3:

they will, yeah, 500 hotels, maybe 600, 700, right, and it's usually the luxury guys you know the big, the, the, that's right. I think they have to be in that discussion as an operator. But the core of those companies, I think you'd have to say, is no longer in the operation. It came from it. They have operational cultures, hospitality cultures, there's no question, the core of the company, they are brand management companies now.

Speaker 1:

They are platforms, years, and I think we're still trying to kind of wedge, kind of how finance and labor works, and we're trying to put them in these buckets that worked for a long time but just don't work anymore and have no application really to any business. It's time for the mystery question. David, your rich aunt very rich aunt unfortunately just passed away. She had a very long life, though, and she loved you, and she also knew that you were a huge sports fan. So she has bequeathed you a nice chunky $10 billion, and her express wish is that you would use this money to purchase a sports team, but she's giving you the choice of any sports team, any league anywhere in the world. What team would you purchase?

Speaker 2:

Oh, I mean, it's so easy. I'm buying the Baltimore Orioles. He's a sick masochist, no man. Where do you guys bid? Well, here's the thing Baltimore Orioles, yes, in a heartbeat.

Speaker 2:

The problem is that Peter Angelos, who passed away, and the Angelos family sold to David Rubenstein this year, who is the CEO of Carlisle Group. So there's a hotel tie in there, because they own hotels too. So I'd have to go in and buy it back from. Buy it from him and I don't. It would be hard to pry from him because I don't, I don't. At his age I don't think it's so much like something from an investment as a kind of something that's really deep down and passionate about. But if I had $10 billion tomorrow, I'm buying the Baltimore Orioles and on day one I'm inserting myself at shortstop, and even though we have Gunnar Henderson as probably the best one or two shortstops in entire baseball, he either has to go to bench or I'd shift him over to second base because I'm playing shortstop If I can still throw the ball all the way across the diamond. But I'm buying the Baltimore Orioles without hesitation.

Speaker 1:

Sensible leadership. That's what it sounds like you'd bring Sensible decision-making.

Speaker 2:

You own something. You could do whatever you want with it. You might run it into the ground, but at the same time you own it right.

Speaker 1:

Then I think you'd make a perfect owner for the Orioles.

Speaker 2:

Absolutely. The fan base would love me getting in. Oh yeah, batting leadoff too, so I'm not even putting myself down the bottom of the order.

Speaker 3:

You would actually accomplish the one detrimental thing that Peter Angelos did not do to that franchise play.

Speaker 1:

That's true everybody. David, thank you so much for being on no Show, and we'll have you back at some point.

Speaker 2:

I appreciate that. Thanks for having me on this afternoon.