Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
American mid Hampton Inn has become the nation's most powerful
hotel chain and a global export by being rigorously Okay
by Patrick Clark read aloud by Mark Leedorf. Shortly before
six a m. Early risers stalk the cafeteria at the
(00:20):
Hampton Inn and Suites in El Segundo, California, waiting for
the breakfast buffet to open at the appointed hour. Proteins
and starches spin out in combinations that change slightly but
perceptibly from day to day. On a Tuesday in March,
its egg white fritatas Yukon gold potatoes and maple sausage.
(00:40):
Soon after its scrambled eggs, red potatoes and hardwood smoked bacon.
There are yogurts and hand fruit scattered about for the
truly health conscious, and a drawer of bite sized lemon
scones for those who are merely playing at it. The
key constant is the tub of Hampton's malted vanilla waffle
batter in a noun how familiar ritual guests push a
(01:02):
plastic tab to extrude the mix into a paper cup,
drizzle it over a waffle iron, then flip the handle
and watch the second stick down on a digital timer.
As with almost everything at Hampton, the process has been
rigorously engineered. Those little paper cups of batter are what
peak hotel performance looks like. Last year, Hampton Ends around
(01:23):
the world cooked up more than two million gallons of batter,
or about thirty million waffles. With all due respect, they're
not great. Nor is the coffee or the orange juice,
the bananas, or the convection of an egg's. What all
these things are, crucially is free to lodgers. It costs
a US Hampton franchisee less than five dollars per occupied
(01:45):
room to furnish this cornucopia, but to a family of four,
the perceived value is closer to fifty dollars, or roughly
one third of the average cost of a nightly stay.
That math has helped power Hampton D's unlikely rise to
become the world's largest lodging brand, with almost three hundred
and fifty thousand rooms spread across forty three countries. Hampton
(02:07):
sold almost ninety million room nights last year, according to
Bloomberg Estimates, a few million more than its closest competitor,
Holiday and Express. That helped it generate nearly twelve billion
dollars in room revenue, dwarfing that of the industry's luxury leaders.
Hampton's story is a triumph of Wall Street deal makers,
corporate taste makers, and immigrant entrepreneurs. The chain was the
(02:31):
unsung hero in one of the most successful leveraged buyouts
in history and helped make the chief executive officer of
its parent company, Hilton Worldwide Holdings, a billionaire. The major
US hotel companies live and die on their appeal to franchisees.
They spend the money to build hotels and usually fly
the flag that gets them the best return. Customer loyalty
(02:53):
is a big part of what's made Hampton the top
US brand for franchisees for sixteen years running, according to
Entrepreneur magazine. Even as its fees have outpaced those of competitors,
it's quietly become ubiquitous in the US, and in many
places it's unambiguously the best hotel available, winning fans such
as Jay Leno, who took a well publicized tumble down
(03:16):
to Hampton adjacent Hill, and Barack Obama, who appreciates always
knowing where the light switches are. Hampton has proven that
when you make an investment in your guest and your people.
You're able to drive a performance premium, says shrewty Gandhi Buckley,
the Hilton executive who oversees the chain. The waffles are key,
as is the slightly chaotic process of making them during
(03:37):
the breakfast rush hour. There's something more dynamic about making
your waffle and pouring the batter and the anticipation of
it coming out hot and steamy. But launching is a
copycat industry. Best Western has free waffles too, as does
Wyndham's Laquina brand. Choice Hotels International, whose comfort In competes
with Hampton, decorated a recent press release with the photo
(04:00):
of the comedian Keegan Michael Key on an oversize waffled throne.
In fact, Hampton and some of its competitors buy waffle
mix from the same supplier. The law of diminishing differences
applies to virtually every amenity the chain offers. Everyone has
free Internet, now everyone has free parking, says Michael Belisario,
a senior analyst at investment bank Robert W. Baird. Buckley
(04:24):
doesn't disagree. This is a commodity product, she says. What's more,
the US is increasingly saturated with meh Hotels, pushing Hilton
to focus on foreign markets for future growth. That puts
Buckley and her team in an unrelenting race to find
better ways to greet guests, purchase bedspreads, or translate the
American idea of a free hot breakfast for palettes in
(04:47):
places as far flung as Amedabad and Gadansk. The task
is even more important now, with recession warning signs making
vacationers and corporate travel departments more cost conscious. Hilton cut
its outlook for hotel demand in its latest quarterly earnings
report on April twenty ninth, joining airlines and lodging rivals
in predicting a slowdown in the event of a protracted downturn.
(05:10):
Travelers who've been shocked by hotel prices in recent years
will feel that much further removed from many lodging options.
At the average Hampton Inn, on the other hand, you
can get a comfortable bed on a typical night for
about one hundred and twenty five dollars, though the domestic
number is a bit higher. Sure, it's cookie cutter, just okay,
decidedly average, but US travelers see the brand as dependable,
(05:34):
and many other people around the world have come to
view it as a cultural signifier, representing the luxury of
reliability at a price they too can afford, both at
home and abroad. Hampton is the reigning purveyor of American
mid That title takes a surprising amount of work to defend.
Hampton Inn was born as a cheaper sub chain of
(05:57):
Holiday Inn in nineteen eighty four, a moment when US
hoteliers learned to succeed by offering less for less, Marriott
created Fairfield In Around the same time, Holiday Corps hired
branding companies to come up with names for its new concept,
but hated the results. They were too hokey, too cheap,
sounding sounded like competitors' names, recalls Phil Cordell, who served
(06:20):
as the general manager of the second ever Hampton in Spartanburg,
South Carolina, and went on to run the chain for
thirty years. Then, while leaving through a travel magazine, the
wife of Holiday's CEO saw an ad for a new
England bed and breakfast called Hampton House, which seemed to
evoke the cozy feeling the new brand was going for.
The idea was to focus on people's favorite amenities and
(06:43):
ditch the rest because Bellhop's room service, sit down meals
and other perks cost more than guests wanted to pay.
Hilton bought Hampton Inn in nineteen ninety nine and started
looking for ways to put some meat back on the bone.
Some of the things it came up with feel like
gimmey the idiot proof alarm clocks. The company still holds
a patent on the design the white bedspreads so guests
(07:06):
could see they were clean at a glance. But one
addition was game changing. In the early aughts, Hampton and
most of its competitors offered uninspiring cold breakfasts that were
more afterthought than selling proposition. After surveying guests, executives decided
the best way to stand out would be to serve
free hot meals. They canvassed dozens of chicken farms in
(07:27):
search of a liquefied egg product that could be scrambled
in hotel microwaves and produced in sufficient quantity to supply
a chain that at the time numbered more than a
thousand hotels. When Hampton standardized hot breakfast, customers noticed. By
the time its competitors followed suit a few years later,
execs had decided to test additional options. One contender included
(07:48):
a sausage rolled in scrambled eggs, then rolled again in
pancake batter. Test crews called this good morning turducan breakfast
on a stick, though they could have just called nine
one one. This is where the waffles came in. Nowadays,
a typical Hampton has two irons. One has the classic
waffle shape divided into four slices, while the other yields
(08:11):
four circular mini waffles. To limit food waste and help
guests with portion control, the batter has been extensively tested
to find the one customers like best. Lightly sweetened with
a creamy aromatic hint of vanilla and a touch of
buttered toast. They say similar testing is required before they'll
introduce limited edition flavors. These have included pumpkin spice, red velvet,
(08:34):
and a glitterflecked strawberry batter released in partnership with Paris Hilton,
whose great grandfather founded Hampton's parent company. But the most
important function of a Hampton waffle seems to be as
a scaffold for ample toppings. If you don't like the
whipped cream, syrup and strawberry slices, Hampton bets it'll get
you with the rainbow sprinkles and caramel sauce. Everybody's like, oh,
(08:56):
waffles are just for kids, says Buckley. It's surprise how
many men in suits will pretend nobody's looking and grab
their little waffle with sprinkles. The self serve aspect of
the experience is also a plus. Hilton toyed with the
idea of using machines that dispensed waffles with the press
of a button before deciding that pour and flip made
(09:16):
for a homeier experience. It's a weekday morning, and Buckley
is at a Hampton Inn in Suites in Herndon, Virginia
to explain how the chain is evolving. From the outside,
the hotel presents as a typical Hampton. It's located across
the way from another hotel, a spring Hill Suites, and
fronted with a brick column porte cochere like an unusually
(09:37):
nice CBS. Inside, Buckley's team has been using the property
to test out room redesigns that other Hamptons are now
starting to adopt, making it a good place for her
to explain the brand's evolution. The hotel opened in two
thousand and seven, years before it became common for Hampton
franchisees to post the motto making you happy makes Us
(09:57):
Happy on a vaguely instagrammable way just inside the front door.
The Herndon Hotel went with a terser message, Enter Happy Zone.
These are the kinds of details Buckley obsesses over another one.
The Herndon Hotel is what's known in the business as
a front loaded property, meaning it's relatively long and narrow.
(10:18):
Partly as a result, the front desk doesn't face the
main entrance head on. Going forward, Hampton will angle the
desk inward so clerks don't have to turn their head
to smile at guests as they walk in. Such features
are heavily prescribed and handed down to franchisees with limited
wiggle room. Sandy Shapery, a San Diego based developer, learned
(10:38):
this the hard way when he began converting a historic
hotel on the Big Island of Hawaii into a Hampton.
Some of the old rooms had gorgeous lava rock walls,
and I thought, boy, these rooms are probably worth an
extra fifty dollars a night, he says of the property,
which is slated to open later this year. Hilton execs
had given him some leeway to depart from brand standards
(10:59):
for the design of public spaces. On the rooms, they
were unrelenting shapery wound up covering the lava rock with
drywall at a cost of more than fifty thousand dollars.
Buckley likes to compare Hampton to Ikea or Zara retailers
that rose with the rising spending power of the middle class.
We said, guests deserve more, and you know what, they
(11:20):
want more, and they're willing to pay more. But unlike
flashier hotels that spring from the soul of o tour
designers to appeal to the vanity of guests who want
to feel rich, or edgy or important, Hampton tends to
reach decisions by market research. Its designers enlist guests to
journal about their stays, then prototype rooms to physically manifest
(11:41):
common pet peeves and private habits, with the most important
features falling into one of four buckets. Lighting, storage, the bed,
and what Buckley calls the bathroom experience. Getting this stuff
right means balancing the demands of industrial efficiency and the
flabby midsection of the travels zeitgeist. These acts of pragmatism
(12:02):
include installing curved shower curtain rods to give guests a
little more elbow room, and making those white bedspreads the
brand standard. More recently, Buckley's team rounded the edges of
Hampton's platform beds to save guests and housekeepers from bumping
their shins. Hilton's research also showed that the average guest
resembles a slovenly teenager. They leave suitcases unpacked and do
(12:26):
most of their laptop work in bed. In Herndon designers
removed the desks and took the doors off the wardrobes
so guests wouldn't forget their coats. Most of Hampton's franchise
contracts require owners to update their room designs periodically. Not
every new idea lasts forever. The iPhone made Hampton's patented
(12:46):
mid AUT's alarm clock obsolete. New hotels are abandoning the
sliding doors Hampton started putting on bathrooms in twenty fifteen
to save space, because it turned out they weren't ideally
sound proofed. In designing the latest room prototype, executives dwelled
on lighting. Specifically, they wanted a warm, diffused light shining
in all directions. Finding the switches too has remained an
(13:10):
obsession long past the days of the last Obama campaign.
So Hampton's have night lights, among other things. A middle
aged guy's got to go to the bathroom in the
middle of the night, says Hilton CEO Chris Nascetta. In
a lot of older luxury hotels, he gripes, you don't
know where the hell you are na Setta. Now, a
billionaire isn't a waffle guy. I'm very gluten light, he says.
(13:35):
What he is, though, is a believer in company culture.
In Hampton's case, that means something called Hamptonality, a concept
he equates with warm and caring service, the way we
hire people, train people, the way they interact with a customer.
He says. The seeds of the idea were planted decades
before Nasceetta took charge. When Holiday Era Hampton was trying
(13:56):
to figure out how to entice customers to stay at
one for the first time. Early on, Hampton hired a
Harvard Business School professor who was a fierce advocate of
money back guarantees. Soon enough, Hampton was advertising such a
promise on the front desks of every hotel. It created
a self policing system, says Mitch Patel. The CEO of
(14:16):
Chattanooga based Vision Hospitality Group, which owns ten Hampton's, if
you didn't provide friendly service and clean rooms, guests could
invoke that refund, and if you have quite a few
of those refunds, it impacts the wallet. The policy helped
align the interests of franchisees with the needs of guests,
setting the brand up for rapid growth. Hilton was another story,
(14:38):
founded in nineteen nineteen in Cisco, Texas. It's credited with
standardizing amenities like air conditioning and ironing boards. In two
thousand and seven, however, Nescetta, a career real estate investor,
took over a big honking mess with bloated corporate expenses
and an emaciated pipeline of hotels under development. Blackstone had
(14:58):
just bought the company for twin tenty six billion dollars
on the eve of the global financial crisis, when neither
consumers nor corporations felt great about spending money to travel,
Hilton still relied heavily on hotels it owned itself, a
stark contrast to its larger rival, Marriott, which had pioneered
the licensing centric hotel empire a decade earlier. Naceetta swung
(15:21):
toward licensing and points, building out a loyalty program that
today counts more than two hundred million members. At the
same time, he sold off glitzy real estate, including the
Waldorf Estoria in Manhattan, and began building up the franchise network.
He licensed higher end brands such as Waldorf and Conrad
to real estate developers in resort destinations and other tourist magnets,
(15:44):
and pitched mid scale ones to franchises in smaller markets. Crucially,
he spent money to woo developers during the worst of
the financial crisis, even as competitors were retrenching. Hampton turned
out to be the perfect vehicle for Nasceetta's strategy. The
chain's early years had coincided with the ascension of entrepreneurs
of Indian ancestry who'd successfully managed independent motels and were
(16:08):
now looking to invest in better properties. Not all hotel
brands were interested. They thought we were accidental hoteliers who
didn't know the business, says hp Rama, who was the
founding chairman of the Asian American Hotel Owners Association, a
trade group whose members now own an astounding sixty percent
of all US hotels. Hampton embraced the cohort Rama says,
(16:31):
they took chances on us, and we didn't disappoint them.
The brand's success with those investors and others wasn't an accident.
The cost of building a Hampton was materially lower than
some of the other options emerging at the time, says
Paul Novak, a former Marriott executive who helped launch Courtyard
and Fairfield in the nineteen eighties. Hampton hit a sweet spot.
(16:53):
That is, it offered a nice enough stay to command
solid room rates, but was cheap enough to build that
developers could open them and smaller markets. As the chain spread,
it started gaining the economies of scale that made it
easier to acquire customers. Franchisees pay about ten percent of
room revenue in monthly fees to Hilton in addition to
other charges, and then they keep what's left over minus
(17:16):
their expenses. Starting from scratch is no small investment. On
the low end. An eighty nine room Hampton inn costs
fifteen million dollars to build in the US, not including
the price of the land, but the returns are remarkable.
The average Hampton location outperformed competitors by twenty one percent
in twenty twenty four. There are about fifteen hundred Hampton
(17:39):
franchisees in the US, and they're willing to go to
great lengths to stay in the family. Bob Hitchman, who's
wheeling West Virginia location Hilton has repeatedly ranked among the
world's top Hamptons, says he'll need to spend millions of
dollars to update his bathrooms at some point in the
next five years. Still, he says it's worth it. People
don't travel to go to Bob's home hotel. He says,
(18:01):
you need a name that's recognized. The property opened in
nineteen eighty nine, next door to a Howard Johnson's hotel
Hitchman's family had developed in nineteen fifty eight. Hitchman's father
died a month after the earlier property opened. Hitchman was eight. Now,
he says he runs his Hampton as an homage. I
tell people my daddy and I are here to take
(18:23):
care of you. Hitchman's other trick is that he pays
employees well with strong bonuses if the hotel scores high
on customer satisfaction surveys. Hampton opened its first hotel outside
the US on the Canadian side of Niagara Falls in
nineteen ninety three, but Niscetta's tenure has also shown the
brand starting to compete for a slice of the global
(18:44):
middle class. He says Hampton can triple its footprint to
nine thousand hotels in the next twenty years by focusing
on those travelers. But how do you translate a hotel
concept whose primary appeals off ramp locations and unlimited waffles
seem uniquely American. Nascetta argues that Hampton's appeal is universal.
(19:05):
When countries with rising standards of living build highways and airports,
that helps catalyze international tourism, but the bigger uptick they
see is in domestic travel. Hampton's reliability translates to middle
class travelers of all stripes, he says, even if the
formula may require local adjustments. In the UK, for instance,
travelers expect to order a pint at their hotel, so
(19:28):
the country's forty five Hamptons have a bar sception area
next to the front desk. Other markets are putting their
own spin on American mid In March, Hilton announced a
plan to open seventy five Hamptons in India in the
coming years, and the team is experimenting with Masala Chai
waffles and waffle shaped doses in China, where there are
(19:49):
already more than four hundred Hampton locations. The brand has
developed the panda as its mascot. Every time I go
into a Hampton in China, Nescetta says, there's a big
guy dressed up as Zapanda. American hotels have been seeing
a scary drop in tourism from other countries this year,
as the Trump administration does its best to make visits
(20:09):
on appealing. International arrivals to US airports fell during the
first three months of the year. Among Americans, the so
called Department of Government Efficiency has nibbled away at federal
government travel. Long a dependable source of bookings, Travel is
pretty resilient, says Baird's Belisario, until it's not. At the
(20:30):
end of April, Hilton cut its estimates for twenty twenty
five hotel demand, predicting a year of flat growth at
the low end of its guidance range. There's some evidence
that the travel vibe is brightening as the market's tariff
terror gives way to the Tuaco trade. The idea that
Trump always chickens out when it comes to imposing levees,
but hotels aren't out of the woods. At a big
(20:52):
industry conference in Manhattan in June, researcher co Star Group
slashed its growth forecast for the year by nearly half.
The tenor of the conference was cautious optimism, says Jan Freytag,
co Star's national director of Hospitality Analytics. The underlying data
is murky. The franchise model insulates Hilton somewhat from the
(21:14):
risk of a Cell America trade in China and elsewhere.
Most Hamptons are owned by local investors. Still good enough,
isn't a lifetime appointment? Howard Johnson and Holiday Inn used
to look dominant too. Although Hampton has the edge on
total rooms, Holiday in Express still has more locations. Nescetta
(21:34):
says the pressure to keep guests in franchises happy remains high.
If we don't deliver those things, he says, then the
machine stops. Hamptonality may come and go, but waffles are forever.
During a four night stay at the El Segundo Hampton,
the night crew goes to pains to insure a smooth
check in, confirming guests have linked their loyalty account to
(21:55):
the reservation so they can access free Wi Fi and
searching a three ring binder for applicable corporate discounts. A
fifth floor room is going for one hundred and seventy
five dollars. Staff respond quickly to reattach a loose toilet seat,
but a dead light bulb over the bathroom vanity goes unreplaced,
and there's nothing the desk workers can do but apologize
when a gas leak leaves the property without hot water.
(22:17):
One morning, Bloomberg Business Week opted not to test the
money back guarantee. The breakfast, on the other hand, is
as close to flawless as a Hampton Inn can get.
In addition to the classic malted vanilla, the hotel rotates
flavored batters throughout the week, keeping to the mandate that
franchisees furnish a second variety each morning. In lieu of
(22:38):
Paris Hilton's glitter Flecked formula, it serves older formulations, including
a banana bread waffle that's best enjoyed with a healthy
dollop of syrup. The waffle doesn't have much flavor to
speak of. It is, however, undeniably a bargain