December 13, 2024 • 28 mins
CBRE's Rachel Rothman and Christine Bang understand hotel brand performance and equity analysis like very few others in this business. We talk about the overall health grade they'd give to hotel loyalty programs, what we mean when we talk about luxury, hospitality partnerships aiming to reach new audiences, how loyalty programs can grow, and way, way more.
https://www.cbre.com/insights/reports/hotel-brand-performance-2024
https://www.cbre.com/insights/articles/hotel-loyalty-programs-betting-on-the-law-of-large-numbers
https://www.cbre.com/insights/viewpoints/maturation-of-the-hotel-industry-drives-convergence-with-other-sectors-to-facilitate-growth
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Matt Brown (00:08):
Hi everybody, welcome to no Show.
I'm Matt Brown, joined asalways by Jeff Borman.
Jeff, today we are in thecompany of clairvoyance.
As CBRE's head of hotelsresearch and data analysis,
rachel Rothman identifies trendsto help hotel owners, brands
and management companiesmaximize profits while
minimizing risks.
(00:29):
Like Keanu Reeves from theMatrix, she's constantly
processing a wave of data to seethe hotel industry as it really
is.
Aiding Rachel in thisprognostication is her colleague
, christine Bang, patron of thearts, advocate for golden
retrievers, queen of the hottake and research manager for
CBRE.
They understand hotelperformance and equity analysis
(00:52):
like very, very few others inthis business.
Rachel and Christine, welcometo no Show.
Rachel Rothman (00:58):
Good morning.
Thank you for having us.
Or maybe it's afternoon wherethe listeners are.
Matt Brown (01:03):
Time's a flat circle here, or maybe it's afternoon
where the listeners are.
Time's a flat circle here.
Every other week the New YorkTimes and its ilk run a piece on
loyalty programs and just a fewdays ago the Times ran a long
one titled Frequent Flyers areRethinking Loyalty Programs and
Setting Themselves Free.
Now airlines and theirrelentless credit cards are a
(01:23):
different kettle of fish fromhotels.
But overall consumerquestioning of loyalty programs
I think is high right now.
Business reporting and siteslike the Points Guy have made it
so that people can kind of lookbehind the curtain to see just
how beneficial these programsare to travel and hospitality
brands.
These programs are to traveland hospitality brands and often
(01:47):
that subsequent coverage skewsto critiques that people are
sort of losing value.
I'm turned away at the lounge,there are no upgrades at the end
, my history of loyalty ismeaningless.
It's the credit card that theycare about and it kind of begs
the question who do theseloyalty programs work for and
are they working well?
So I said at the top that youtwo are clairvoyants, but you're
(02:08):
really doctors, experts indiagnosing the hotel business.
So I've got a split question tokind of kick things off here.
What health grade would yougive loyalty programs right now
from the hotel business side?
And then part two what gradewould you give them personally
as consumers?
And Rachel, let's start withyou.
Rachel Rothman (02:30):
The first, just to differentiate between and I
didn't see the article but todifferentiate between the
airline and the hotel industry.
I can understand how some mightview an airline seat as an
airline seat as an airline seatright.
That is a very commoditizedproduct.
I'm sure there are differences.
I'm not an airline expert butin a hotel there are of course
(02:52):
many different room types, right, many different tiers,
different views, different sizes, different geographies, and so
I think that the hotel loyaltyprograms have a way to
differentiate themselves thatmaybe the airlines don't right.
Row 22, seat by the window onthe right, is going to be fairly
similar regardless of where youare as a consumer.
I happen to be somebody thattraveled so much throughout my
(03:15):
career that I have the goodfortune of having the highest
level status in many of thebrands, and I would say from my
experience it's pretty good.
Still, I think you're not wrongthat there is certainly
feedback in the sort of socialmedia or internet universe that
suggests that for that customerthat travels less frequently,
(03:37):
that it's harder to see thevalue, certainly in terms of
upgrades and status.
So many people, with the adventof the credit cards, are sort
of in that middle tier rightJust by spending on the card,
that it makes it really hard todifferentiate at the center of
the bell curve.
That would be my perspective asa consumer, from the brand or
(03:59):
the owner perspective.
We continue to see brands andloyalty programs grow in their
overall occupanciesno-transcript.
Christine Bang (04:25):
We've seen growth from an owner and brand
perspective.
We did a little digging fromthe data that comes out from
public market companies andyou're seeing percentage of room
nights booked by membersgrowing about 5.2% in the last
year.
So roughly 51% of room nightsbooked by members growing about
5.2% in the last year.
So like roughly 51% of roomnights are booked by members.
(04:49):
So it still has a pretty bigimpact for the brands.
Personally, you know I've nothad trouble booking or getting
what I need from my loyaltypoints.
So as a consumer I find that itdoes keep me loyal to certain
(05:09):
brands when I travel and it alsogives the brands an opportunity
to let me know aboutopportunities that exist within
the portfolio that I might notbe necessarily aware of.
So I would say they are stillmeaningful.
And certainly to Rachel's pointduring COVID, you know you saw
a big spike during the COVIDyears in terms of redemptions
(05:33):
and burning those points.
Matt Brown (05:36):
How seriously do hotel brands take credit card
loyalty points?
You know, like the chases andthe Amex's of the world?
Do they see them as a threat,that's kind of encroaching on
the loyalty space, or is thatstill relatively kind of a small
section?
(05:56):
They don't really have to worryabout that as much.
Rachel Rothman (05:59):
The brand family is thrilled to have you know.
Expand what they might considertheir network of loyal
customers.
Get access to that customerspend data.
Have you know?
Expand what they might considertheir network of loyal
customers.
Get access to that customerspend data.
Have you know, 150, 200 millionpeople to market to at any
given time?
I think it's a huge win for thebrands.
Now, for the owners or for theoperators, it might complicate
(06:20):
things, but for the brands Ithink it's, without a doubt, a
win.
Jeff Borman (06:26):
Rachel, I agree with that that the purpose of
the brand is different than thepurpose of the owner and it
ultimately comes down to who dothe loyalty programs serve,
which, when you publish anarticle in July this year on
betting on the law of largenumbers and showing that there
was an increase, but on a permember basis there's actually a
(06:52):
lower level of liability thesedays.
And my question is is that justbecause they've gone from tens
of millions to hundreds ofmillions of members it's just
the denominator has grown?
Has the actual liability inthese programs increased in that
timeframe?
Rachel Rothman (07:08):
No, the liability declined.
But I think a lot of that iswhat Christine spoke about
earlier this sort of boon inredemption points over COVID,
right.
So you're burning down theliability and then, as rates
increase, each point becomesworth more.
But it takes more points to getthe room night that you wanted
(07:29):
previously.
I think the big question thatmaybe you're alluding to is it
used to be that the averageloyalty member spent close to
two nights a year in the hoteland now it's just above one.
And that doesn't mean theprogram is worth less.
The aggregate program isactually worth more.
(07:50):
But the question becomes how doyou market to somebody?
How do you service them?
How do you provide a guestexperience to somebody that's
only likely to stay with you avery few nights in any given
year?
That can be tricky for theowner and operator of the actual
asset.
What does that guest want?
You know, 20 years ago it was.
(08:11):
There's the corporate travelerI'm on the road 100 days a year,
which was me.
There's a leisure guest who'swith their family and there's a
group guest, and it was veryclear segmentation.
Now, with the proliferation ofthe loyalty programs, you're not
really sure who's going to movethe needle and who's going to
be in-house on any given night.
It does contribute tremendouslyto occupancy.
(08:33):
It's just what do those guestswant?
How do you create loyalty inthis new dynamic and how has
that shifted?
Who your channel mix is?
And I think that's why we'reseeing the proliferation in so
many brands, because they'retrying to niche the consumer
down based on the brand right,like psychographically, who's
(08:55):
staying in a boutique, limitedservice, experiential, branded
hotel, right?
There's just been tremendousproliferation.
And what can you tell about whostays in what hotel based on
how that brand is positioned?
Jeff Borman (09:10):
So to the brand proliferation.
You recently did a study thatbrand companies have expanded
from 13 to 26 brands on averagein their umbrellas, and you also
say that selecting a brand thatoutperforms the average has
become increasingly difficult.
What do you mean by that?
Rachel Rothman (09:26):
Well, part of it is just math.
If there's so many brands, noteverything can beat the average
and a lot of the brands are newand so you don't necessarily
have a strong track record.
Christine manages a database ofpublicly reported hotel KPIs.
Manages a database of publiclyreported hotel KPIs.
(09:48):
It goes back 20, 25 years andso some of the brands have a
long history, very transparentsort of it's not same store but
it's close to same store,because unit growth isn't that
strong.
When you have a new brand thatcomes on the scene, that's
opening a hundred new units ayear and it's a relatively young
brand, you don't knownecessarily how that's going to
perform.
And that's where I think youwould contract with a
professional developer, somebodyto help you with operator
(10:11):
selection, somebody, likeyourself, right, that can help
you price appropriately, assetmanagement.
These are all going to becomecritical.
It used to be that geographywas the main determinant.
I mean, when I went to hotelschool, em Statler right,
location, location, location.
And now it isn't just aboutlocation, it's also about what
(10:33):
brand, what price point.
If anything, christine and Ijust did some work.
She can talk a little bit abouthow location is becoming
relatively less important due todistributed technologies.
Jeff Borman (10:46):
Over the last five years, the top performing brands
outperformed their laggingchain scale counterparts by 79%.
Right In an environment wherewe're talking about brand
proliferation and the massiveexpansion of loyalty programs
and trying to put those twothings together right, I think
(11:06):
the very blunt force objectwould be to say I owner, don't
know anything about the business, need a brand, right, give me
one.
I got a piece of property,don't know what to do with it,
slap a brand on there.
And the bigger the programprobably the better.
Let's go.
The other hand, I'm reading theresearch and thinking there
might be something inside ofwhat you're writing that's
(11:27):
saying no, it's not that simple.
The brands are not just plainoutperforming.
But I'm looking to you help,help guide me here.
What am I interpreting rightand what am I getting wrong?
Rachel Rothman (11:39):
I mean and I'll let Christine talk to this but
one of the things that we makethe point in that article that
it's not just the brand, it'sthe brand family.
They both matter, right,because it used to be that you
were buying into a specificbrand.
Now you're buying into anentire loyalty point system and
the quality and the halo of theother hotels in that brand
(12:02):
family, the halo of the otherhotels in that brand family.
So if the other hotels in thatbrand family are not kept modern
, are not viewed positively byguests, don't have strong guest
satisfaction, doesn't have astrong loyalty program, even if
it's not your specific brand, itwill impact or could impact
your overall hotel performance.
(12:22):
You brought up the stat, jeffthe difference between the best
and the worst is dramatic, evenwithin the same chain scale.
Jeff Borman (12:33):
Do you see?
I don't know if this is fair.
If not, we can hook this.
But do you see, within thebrand family, then, is there a
marked difference between thesoft brands that are so popular
today and barely existed adecade ago, and the more
traditional?
I won't name which ones theyare, but the first brands that
come off your mind, top of yourmind.
(12:54):
Are you seeing those twoseparate from one another, where
one is getting more value fromthe family?
Rachel Rothman (13:00):
I don't think most of the soft brand KPIs are
reported.
Christine Bang (13:04):
Christine, yeah, it's a little bit difficult to
tell because, you know,depending on how large the brand
is within the brand family sortof dictates how much data is
publicly available.
So while there is, you knowsort of you can point to the
proliferation, like ofcollections right that are the
sort of softer brands thatlarger brand families are
(13:26):
affiliating themselves with,it's a little bit more difficult
to sort of drill down to seewhat the performance looks like,
because there is not that samelevel of data as you might have
on a sort of traditional brandwhere that you know you have
sort of metrics that arereported year in and year out
and on public, you know, onpublic conference calls and
(13:46):
things like that.
So it's it's a little difficultto say you can look anecdotally
at you know sort of theinterest in that space, but it's
harder to sort of really digdown into the numbers because
they're just not, it's just notthere yet in terms of size and
depth.
Jeff Borman (14:02):
I've kind of had this theory going too and again
waiting for the two of you totell me how wrong I am that over
the last 20 years you've gonefrom you know, you, the, we, the
industry a set of kind of core,select service brands, and then
you have just these few core,big monolithic fullservice
brands and then a luxury brandor five right and the blurred
(14:28):
lines between all of those.
From 2005, to call it 2020, itseemed, at least to my
observation, that there was adilution of the premium held at
the top right.
So luxury 20 years ago I don'tknow the number, but let's say
it held a 20% premium in pricein ADR From 05 to maybe 2020,
(14:51):
that premium droppedprecipitously as full service
caught up or luxury dropped.
Whichever one it was, they cametogether.
Along comes COVID and luxurykind of reestablishes its
dominance or it's, you know,extends itself in pricing from
the marketplace First of all.
Do you see something like thatand do you see luxury
(15:14):
maintaining kind of its rightfulplace for another decade, or is
it going to begin that qualitydilution again?
Rachel Rothman (15:21):
I think we have to be careful when we talk about
luxury, what we mean by luxury.
If I recall correctly, I thinkSmith Travel Research in 2005,
for the first time ever brokeout the luxury chain scale.
I could be a tiny bit off, mymemory's not always perfect, but
I think that was the first timethat they split upper upscale
(15:44):
and luxury.
I think now there's luxurywhich is, you know, $750 a night
, a thousand $2,000 a night,which is what I might consider
true luxury, and then there'sjust a big commercial brand,
just a big commercial brand,which might be sort of the
middle point of an STR chainscale.
(16:07):
If you're talking about themidpoint of the STR chain scale
as luxury, that's probably a biggroup house in a premium
location I don't know, monarchBeach, naples, florida and it
might not be what you'rethinking about when you think
about a boutique high-end resortin I don't know Napa Valley or
(16:30):
Deer Valley.
So I think luxury itself.
It's interesting because itused to be fairly narrow when it
was first introduced and nowthat category itself has a huge
range of what is consideredluxury.
So it's hard to say.
If we were just talking aboutthe very high end, I would say
global wealth creation is a hugedriver of hotels over $750 or
(16:56):
$1,000 a night, and those are,of course, outperforming because
they're less dependent on thereturn of the corporate traveler
or big group business.
So I don't know if that answersyour question, just because I'm
not sure exactly what we'rereferring to.
But if you're talking about theboutique luxury customer with
(17:18):
multiple homes, staying in alarge branded residence, maybe
going in a fractional jet, Ithink that those are truly going
to remain distinguished.
For some of the other brandsit's a little bit harder to
differentiate between upperupscale, a new upper upscale
property and what might beconsidered a luxury group house.
Jeff Borman (17:39):
In my opinion, it felt like there was an
aspirational traveler.
And we go back into loyalty,where someone would stay in a
select service hotel a thousandnights a year and go burn their
points at the luxury property.
I don't observe that same thinghappening quite as much today,
but I do see the luxury pullingaway.
(18:01):
So whether it's cash or points,I think, is largely irrelevant.
Probably has a lot to do withcredit card spend.
It's changed dramatically overtwo decades and how those
programs reinforce the vacationcash in.
But I'm hopeful that luxurypricing stays significantly
elevated and that the qualityand the service and the unique
experience that was diluted overabout a 15-year period.
(18:23):
I'm hoping that that also staysvery different as a result of
pandemic and 2020 and the way itjust turned markets upside down
for a while.
I say this as just someone.
Yes, I work with luxury travel,but I work with all kinds.
I say this more as I thinkluxury has returned to
potentially its rightful spot assomething truly unique and
(18:43):
special and not so much of acommoditization.
I hope that continues.
Rachel Rothman (18:48):
I think if you just looked at some of the
standalone luxury brands I meanjust using what exists as an
example I think many of thosedon't necessarily have loyalty
programs.
Yeah Right, I mean, I thinkthat in of itself sort of proves
what you're saying.
Yeah Right, I mean, I thinkthat in of itself sort of proves
(19:32):
what you're saying in terms ofpoints not just for the room
night, but for food and beverage, for entertainment, for a
chaise lounge.
You know, that's truly anopportunity that didn't exist
prior to maybe 10 years ago.
Matt Brown (19:58):
Right, right real estate companies to create
trusted and amenitized livingoptions like student housing,
co-living senior communities andvacation homes.
What did you mean by that, andhow is this going to kind of
play out?
Rachel Rothman (20:12):
Well, kudos to Christine and the team when they
wrote that, because we just sawa big deal from a major brand
family and Blackstone and amajor student housing company be
announced so it happened withinless than a year of them
calling that trend.
I think that you know and shemight have a different
perspective, but in some waysthis isn't that different than
(20:33):
where the brand families camefrom.
Right, if we roll back the tapeto the late 90s, when Christine
and I were equity analysts,right, many of these companies
offered corporate housing,senior living, food and beverage
at airports.
They were completely verticallyintegrated and they could take
(20:53):
the guests through the entirelife cycle.
They had timeshare, etc.
Now they all went asset lightand they are reforming those
partnerships, not in terms ofhard asset businesses but in
terms of strategic partnerships,which gets at gathering a
larger percentage of thecustomer's wallet and not just
(21:14):
within their primary travelyears, which is like 30 to 50.
You know, imagine what youcould do if you could capture
somebody at 18 when they, whenthey entered college, and stay
with them all the way throughsenior housing.
I mean that would be.
The value of that customerwould be tremendous.
Jeff Borman (21:32):
You mentioned something in that article too
about the key factor isincreasing your total
addressable market your TAMpotential guests who buy
products and services Is theessential point here.
Just grow the loyalty program.
Is that what you mean by theTAM potential guests who buy
products and services?
Is the essential point herejust grow the loyalty program.
Is that what you mean by theTAM?
Rachel Rothman (21:50):
So no, it isn't, it's growing the total
addressable market.
It's figuring out who theuncaptured guest is.
So it's not just a loyaltyguest, it's, again, if somebody
is 18, they're not travelingwith you 5, 10, 20, 30 nights a
year, right, that's a customerthat you never had before.
The same as somebody, maybe.
(22:10):
My parents live in a retirementcommunity right, they are no
longer traveling the way theyused to.
It's another opportunity foryou to capture that guest and
capture a share of their wallet.
So you want to identify unmetcustomers and this might be why
you start to see some of thesebrand families partner with
(22:31):
glamping companies.
This has multiple touch points.
It's not just about age, it'salso about use case and, again,
as we talked about with thebrand proliferation,
psychographically like who isthis customer?
Are they a hipster, are they atraditionalist?
Trying to make sure that youare engaging with every
(22:52):
potential customer out there, inevery geography, in every price
point, for every needs date.
Jeff Borman (22:59):
To grow the TAM of potential guests or customers.
Hotel companies must trackguests outside traditional
businesses, right?
How do you do that when the topcall it five programs are half
a billion members.
Who's left?
Rachel Rothman (23:16):
The other seven and a half billion people.
Christine Bang (23:18):
There's a lot left.
Rachel Rothman (23:22):
My son I mean my son's about to go off to
college.
Christine has a couple ofcollege age kids, right.
Jeff Borman (23:28):
The largest loyalty program is now the size of the
population of Brazil, right Likethere aren't that many
traveling people out there?
Christine Bang (23:40):
And I guess maybe I'm answering the question
I asked you, which is it's notabout who's actually traveling
yet, yeah, I would say that it'snot about who's actually
traveling, it's about opening upthat addressable market and, to
Rachel's point, like capturingpeople that are maybe looking
for student housing, that's whyyou're seeing these strategic
partnerships with brands or withstrategic partners outside of a
(24:02):
traditional sort of box.
Right, it's about the peoplethat want an experience that
involves being outdoors and youknow, hiking and kayaking, but
they want to have, you know,sort of a nice expected
experience you know that livesup to their standards.
So I think you have there is alot of opportunity outside of
(24:25):
just the sort of traditionaltraveling loyalty members that's
out there and exists and you'reseeing that sort of in terms of
some of the partnerships thatare being announced, like almost
on a daily basis.
There's another partnershipthat you know pops up where a
major brand is partnering withsomething that kind of at first
you kind of scratch your headand say I didn't see that one
(24:47):
coming, but you know they're,they're looking at that.
You know sort of broader,broader profile of guests who
aren't necessarily their guestsright now.
Jeff Borman (24:59):
So I appreciate you for working with me as you
watch interviews in excellencehere.
What I've learned from Matt isto ask a question and then
answer it before you can, sothank you for that.
Appreciate that.
Rachel Rothman (25:11):
I think you hit the nail on the head right.
If people only have so muchvacation and you're already
getting the most frequent guests, then you need to build your
total addressable market.
You need to find people thatyou can leverage and attract
through other channels.
Matt Brown (25:29):
It's time for the mystery question.
This is for both of you, andthis one's this easy one what is
the most unique hotel you'veever stayed in, christine?
Christine Bang (25:39):
let's start with you unique hotel you've ever
stayed in.
Christine, let's start with you.
That's a tough one, I would tobe honest.
I would say I've stayed in Nice, and some of the products in
Nice have a very unique designelement.
Your experience is differentbased on what room you stay in,
(26:01):
and it was something I'd neverseen before at the time.
Now you know you can stay in aBarbie room at the Hilton, you
know, but, but at the time itwas very different and the
service was elevated andexcellent, and so you felt like
you were being pampered.
Matt Brown (26:18):
Rachel.
Rachel Rothman (26:20):
That's a hard one, unfortunately.
I think I'm probably a prettymiddle of the road, mass market
kind of girl.
I will call out a specialthanks to the St Regis New York
who I felt took exceptional careof me when I was a patient at
Sloan Kettering many years ago.
I would say many of the world'sgreat hotels have strategic
(26:40):
partnerships with differenthospitals and I think they
really go out of their way totake care of the patients and so
I appreciate them.
Is it the most unique hotel?
The service is definitelyoutstanding and the rooms are
beautiful.
I haven't stated that manyspecial properties, but that one
stands out in my mind at thatmany special properties, but
that one stands out in my mind.
Matt Brown (27:00):
Can you two enjoy hotels, or are you so used to
like just walking in like theTerminator?
You're just kind of looking atthe whole place, looking at the
structure of it.
Can you?
Can you separate yourselfsometimes from the experience?
Christine Bang (27:19):
of being in a hotel with what you know about
the business.
I mean, you know that's part ofwhat draws people to this
industry.
Is that it's you know, it'sit's how you're treated, it's
it's it's hospitality, it'sabout making the person feel
welcome and at home, rightBecause and it has the benefits
of you don't have to do laundryand you don't want to, you know
what I mean.
It kind of takes you out ofyour normal day-to-day and
(27:44):
allows you to have an experience, whether it's a you know, the
highest end or even just youknow sort of something that's a
little bit more you know to runof the mill, typical.
It's about that personal touch.
Rachel Rothman (27:59):
Christine's much a happier person than I am.
I still get stuck when I seesomething wrong.
I had the good fortune of beingwith Jeff at a conference last
week at a place that y'allremain nameless, and I bought
myself a drip coffee you knowwhere you pull the little spout
forward and one for my colleague, and it was $25 and I almost
(28:22):
fell over.
So there are times when youknow, knowing what we know about
the data, you really think likethis is a hugely missed
opportunity, like to the pointwhere you're thinking I probably
won't go back there again.
Like period to that event, thatthat really shifted the burden
of the cost, the cost of theevent, to the attendee, which I
(28:46):
just think is an unforced error.
So so yeah, I love a greathotel nothing better than a good
bed and a good pillow but whenpeople, when there are things
that you see that could be donebetter, it does still bother me.
That's why Christine and I workwell together.
Christine Bang (29:03):
She's much more positive than I am.
I'm Sally Sunshine.
She's a realist.
Matt Brown (29:09):
This has been wonderful.
Thank you, rachel and Christine, for being guests of no Show.
It's been amazing and veryinformative, and we wish you a
wonderful end to 2024 and a veryhappy 2025.
Christine Bang (29:23):
Thank you for having us.
Yeah, thanks for having us.
Hi everybody, welcome to no Show.
I'm Matt Brown, joined asalways by Jeff Borman.
Jeff, today we are in thecompany of clairvoyance.
As CBRE's head of hotelsresearch and data analysis,
rachel Rothman identifies trendsto help hotel owners, brands
and management companiesmaximize profits while
minimizing risks.
(00:29):
Like Keanu Reeves from theMatrix, she's constantly
processing a wave of data to seethe hotel industry as it really
is.
Aiding Rachel in thisprognostication is her colleague
, christine Bang, patron of thearts, advocate for golden
retrievers, queen of the hottake and research manager for
CBRE.
They understand hotelperformance and equity analysis
(00:52):
like very, very few others inthis business.
Rachel and Christine, welcometo no Show.
Rachel Rothman (00:58):
Good morning.
Thank you for having us.
Or maybe it's afternoon wherethe listeners are.
Matt Brown (01:03):
Time's a flat circle here, or maybe it's afternoon
where the listeners are.
Time's a flat circle here.
Every other week the New YorkTimes and its ilk run a piece on
loyalty programs and just a fewdays ago the Times ran a long
one titled Frequent Flyers areRethinking Loyalty Programs and
Setting Themselves Free.
Now airlines and theirrelentless credit cards are a
(01:23):
different kettle of fish fromhotels.
But overall consumerquestioning of loyalty programs
I think is high right now.
Business reporting and siteslike the Points Guy have made it
so that people can kind of lookbehind the curtain to see just
how beneficial these programsare to travel and hospitality
brands.
These programs are to traveland hospitality brands and often
(01:47):
that subsequent coverage skewsto critiques that people are
sort of losing value.
I'm turned away at the lounge,there are no upgrades at the end
, my history of loyalty ismeaningless.
It's the credit card that theycare about and it kind of begs
the question who do theseloyalty programs work for and
are they working well?
So I said at the top that youtwo are clairvoyants, but you're
(02:08):
really doctors, experts indiagnosing the hotel business.
So I've got a split question tokind of kick things off here.
What health grade would yougive loyalty programs right now
from the hotel business side?
And then part two what gradewould you give them personally
as consumers?
And Rachel, let's start withyou.
Rachel Rothman (02:30):
The first, just to differentiate between and I
didn't see the article but todifferentiate between the
airline and the hotel industry.
I can understand how some mightview an airline seat as an
airline seat as an airline seatright.
That is a very commoditizedproduct.
I'm sure there are differences.
I'm not an airline expert butin a hotel there are of course
(02:52):
many different room types, right, many different tiers,
different views, different sizes, different geographies, and so
I think that the hotel loyaltyprograms have a way to
differentiate themselves thatmaybe the airlines don't right.
Row 22, seat by the window onthe right, is going to be fairly
similar regardless of where youare as a consumer.
I happen to be somebody thattraveled so much throughout my
(03:15):
career that I have the goodfortune of having the highest
level status in many of thebrands, and I would say from my
experience it's pretty good.
Still, I think you're not wrongthat there is certainly
feedback in the sort of socialmedia or internet universe that
suggests that for that customerthat travels less frequently,
(03:37):
that it's harder to see thevalue, certainly in terms of
upgrades and status.
So many people, with the adventof the credit cards, are sort
of in that middle tier rightJust by spending on the card,
that it makes it really hard todifferentiate at the center of
the bell curve.
That would be my perspective asa consumer, from the brand or
(03:59):
the owner perspective.
We continue to see brands andloyalty programs grow in their
overall occupanciesno-transcript.
Christine Bang (04:25):
We've seen growth from an owner and brand
perspective.
We did a little digging fromthe data that comes out from
public market companies andyou're seeing percentage of room
nights booked by membersgrowing about 5.2% in the last
year.
So roughly 51% of room nightsbooked by members growing about
5.2% in the last year.
So like roughly 51% of roomnights are booked by members.
(04:49):
So it still has a pretty bigimpact for the brands.
Personally, you know I've nothad trouble booking or getting
what I need from my loyaltypoints.
So as a consumer I find that itdoes keep me loyal to certain
(05:09):
brands when I travel and it alsogives the brands an opportunity
to let me know aboutopportunities that exist within
the portfolio that I might notbe necessarily aware of.
So I would say they are stillmeaningful.
And certainly to Rachel's pointduring COVID, you know you saw
a big spike during the COVIDyears in terms of redemptions
(05:33):
and burning those points.
Matt Brown (05:36):
How seriously do hotel brands take credit card
loyalty points?
You know, like the chases andthe Amex's of the world?
Do they see them as a threat,that's kind of encroaching on
the loyalty space, or is thatstill relatively kind of a small
section?
(05:56):
They don't really have to worryabout that as much.
Rachel Rothman (05:59):
The brand family is thrilled to have you know.
Expand what they might considertheir network of loyal
customers.
Get access to that customerspend data.
Have you know?
Expand what they might considertheir network of loyal
customers.
Get access to that customerspend data.
Have you know, 150, 200 millionpeople to market to at any
given time?
I think it's a huge win for thebrands.
Now, for the owners or for theoperators, it might complicate
(06:20):
things, but for the brands Ithink it's, without a doubt, a
win.
Jeff Borman (06:26):
Rachel, I agree with that that the purpose of
the brand is different than thepurpose of the owner and it
ultimately comes down to who dothe loyalty programs serve,
which, when you publish anarticle in July this year on
betting on the law of largenumbers and showing that there
was an increase, but on a permember basis there's actually a
(06:52):
lower level of liability thesedays.
And my question is is that justbecause they've gone from tens
of millions to hundreds ofmillions of members it's just
the denominator has grown?
Has the actual liability inthese programs increased in that
timeframe?
Rachel Rothman (07:08):
No, the liability declined.
But I think a lot of that iswhat Christine spoke about
earlier this sort of boon inredemption points over COVID,
right.
So you're burning down theliability and then, as rates
increase, each point becomesworth more.
But it takes more points to getthe room night that you wanted
(07:29):
previously.
I think the big question thatmaybe you're alluding to is it
used to be that the averageloyalty member spent close to
two nights a year in the hoteland now it's just above one.
And that doesn't mean theprogram is worth less.
The aggregate program isactually worth more.
(07:50):
But the question becomes how doyou market to somebody?
How do you service them?
How do you provide a guestexperience to somebody that's
only likely to stay with you avery few nights in any given
year?
That can be tricky for theowner and operator of the actual
asset.
What does that guest want?
You know, 20 years ago it was.
(08:11):
There's the corporate travelerI'm on the road 100 days a year,
which was me.
There's a leisure guest who'swith their family and there's a
group guest, and it was veryclear segmentation.
Now, with the proliferation ofthe loyalty programs, you're not
really sure who's going to movethe needle and who's going to
be in-house on any given night.
It does contribute tremendouslyto occupancy.
(08:33):
It's just what do those guestswant?
How do you create loyalty inthis new dynamic and how has
that shifted?
Who your channel mix is?
And I think that's why we'reseeing the proliferation in so
many brands, because they'retrying to niche the consumer
down based on the brand right,like psychographically, who's
(08:55):
staying in a boutique, limitedservice, experiential, branded
hotel, right?
There's just been tremendousproliferation.
And what can you tell about whostays in what hotel based on
how that brand is positioned?
Jeff Borman (09:10):
So to the brand proliferation.
You recently did a study thatbrand companies have expanded
from 13 to 26 brands on averagein their umbrellas, and you also
say that selecting a brand thatoutperforms the average has
become increasingly difficult.
What do you mean by that?
Rachel Rothman (09:26):
Well, part of it is just math.
If there's so many brands, noteverything can beat the average
and a lot of the brands are newand so you don't necessarily
have a strong track record.
Christine manages a database ofpublicly reported hotel KPIs.
Manages a database of publiclyreported hotel KPIs.
(09:48):
It goes back 20, 25 years andso some of the brands have a
long history, very transparentsort of it's not same store but
it's close to same store,because unit growth isn't that
strong.
When you have a new brand thatcomes on the scene, that's
opening a hundred new units ayear and it's a relatively young
brand, you don't knownecessarily how that's going to
perform.
And that's where I think youwould contract with a
professional developer, somebodyto help you with operator
(10:11):
selection, somebody, likeyourself, right, that can help
you price appropriately, assetmanagement.
These are all going to becomecritical.
It used to be that geographywas the main determinant.
I mean, when I went to hotelschool, em Statler right,
location, location, location.
And now it isn't just aboutlocation, it's also about what
(10:33):
brand, what price point.
If anything, christine and Ijust did some work.
She can talk a little bit abouthow location is becoming
relatively less important due todistributed technologies.
Jeff Borman (10:46):
Over the last five years, the top performing brands
outperformed their laggingchain scale counterparts by 79%.
Right In an environment wherewe're talking about brand
proliferation and the massiveexpansion of loyalty programs
and trying to put those twothings together right, I think
(11:06):
the very blunt force objectwould be to say I owner, don't
know anything about the business, need a brand, right, give me
one.
I got a piece of property,don't know what to do with it,
slap a brand on there.
And the bigger the programprobably the better.
Let's go.
The other hand, I'm reading theresearch and thinking there
might be something inside ofwhat you're writing that's
(11:27):
saying no, it's not that simple.
The brands are not just plainoutperforming.
But I'm looking to you help,help guide me here.
What am I interpreting rightand what am I getting wrong?
Rachel Rothman (11:39):
I mean and I'll let Christine talk to this but
one of the things that we makethe point in that article that
it's not just the brand, it'sthe brand family.
They both matter, right,because it used to be that you
were buying into a specificbrand.
Now you're buying into anentire loyalty point system and
the quality and the halo of theother hotels in that brand
(12:02):
family, the halo of the otherhotels in that brand family.
So if the other hotels in thatbrand family are not kept modern
, are not viewed positively byguests, don't have strong guest
satisfaction, doesn't have astrong loyalty program, even if
it's not your specific brand, itwill impact or could impact
your overall hotel performance.
(12:22):
You brought up the stat, jeffthe difference between the best
and the worst is dramatic, evenwithin the same chain scale.
Jeff Borman (12:33):
Do you see?
I don't know if this is fair.
If not, we can hook this.
But do you see, within thebrand family, then, is there a
marked difference between thesoft brands that are so popular
today and barely existed adecade ago, and the more
traditional?
I won't name which ones theyare, but the first brands that
come off your mind, top of yourmind.
(12:54):
Are you seeing those twoseparate from one another, where
one is getting more value fromthe family?
Rachel Rothman (13:00):
I don't think most of the soft brand KPIs are
reported.
Christine Bang (13:04):
Christine, yeah, it's a little bit difficult to
tell because, you know,depending on how large the brand
is within the brand family sortof dictates how much data is
publicly available.
So while there is, you knowsort of you can point to the
proliferation, like ofcollections right that are the
sort of softer brands thatlarger brand families are
(13:26):
affiliating themselves with,it's a little bit more difficult
to sort of drill down to seewhat the performance looks like,
because there is not that samelevel of data as you might have
on a sort of traditional brandwhere that you know you have
sort of metrics that arereported year in and year out
and on public, you know, onpublic conference calls and
(13:46):
things like that.
So it's it's a little difficultto say you can look anecdotally
at you know sort of theinterest in that space, but it's
harder to sort of really digdown into the numbers because
they're just not, it's just notthere yet in terms of size and
depth.
Jeff Borman (14:02):
I've kind of had this theory going too and again
waiting for the two of you totell me how wrong I am that over
the last 20 years you've gonefrom you know, you, the, we, the
industry a set of kind of core,select service brands, and then
you have just these few core,big monolithic fullservice
brands and then a luxury brandor five right and the blurred
(14:28):
lines between all of those.
From 2005, to call it 2020, itseemed, at least to my
observation, that there was adilution of the premium held at
the top right.
So luxury 20 years ago I don'tknow the number, but let's say
it held a 20% premium in pricein ADR From 05 to maybe 2020,
(14:51):
that premium droppedprecipitously as full service
caught up or luxury dropped.
Whichever one it was, they cametogether.
Along comes COVID and luxurykind of reestablishes its
dominance or it's, you know,extends itself in pricing from
the marketplace First of all.
Do you see something like thatand do you see luxury
(15:14):
maintaining kind of its rightfulplace for another decade, or is
it going to begin that qualitydilution again?
Rachel Rothman (15:21):
I think we have to be careful when we talk about
luxury, what we mean by luxury.
If I recall correctly, I thinkSmith Travel Research in 2005,
for the first time ever brokeout the luxury chain scale.
I could be a tiny bit off, mymemory's not always perfect, but
I think that was the first timethat they split upper upscale
(15:44):
and luxury.
I think now there's luxurywhich is, you know, $750 a night
, a thousand $2,000 a night,which is what I might consider
true luxury, and then there'sjust a big commercial brand,
just a big commercial brand,which might be sort of the
middle point of an STR chainscale.
(16:07):
If you're talking about themidpoint of the STR chain scale
as luxury, that's probably a biggroup house in a premium
location I don't know, monarchBeach, naples, florida and it
might not be what you'rethinking about when you think
about a boutique high-end resortin I don't know Napa Valley or
(16:30):
Deer Valley.
So I think luxury itself.
It's interesting because itused to be fairly narrow when it
was first introduced and nowthat category itself has a huge
range of what is consideredluxury.
So it's hard to say.
If we were just talking aboutthe very high end, I would say
global wealth creation is a hugedriver of hotels over $750 or
(16:56):
$1,000 a night, and those are,of course, outperforming because
they're less dependent on thereturn of the corporate traveler
or big group business.
So I don't know if that answersyour question, just because I'm
not sure exactly what we'rereferring to.
But if you're talking about theboutique luxury customer with
(17:18):
multiple homes, staying in alarge branded residence, maybe
going in a fractional jet, Ithink that those are truly going
to remain distinguished.
For some of the other brandsit's a little bit harder to
differentiate between upperupscale, a new upper upscale
property and what might beconsidered a luxury group house.
Jeff Borman (17:39):
In my opinion, it felt like there was an
aspirational traveler.
And we go back into loyalty,where someone would stay in a
select service hotel a thousandnights a year and go burn their
points at the luxury property.
I don't observe that same thinghappening quite as much today,
but I do see the luxury pullingaway.
(18:01):
So whether it's cash or points,I think, is largely irrelevant.
Probably has a lot to do withcredit card spend.
It's changed dramatically overtwo decades and how those
programs reinforce the vacationcash in.
But I'm hopeful that luxurypricing stays significantly
elevated and that the qualityand the service and the unique
experience that was diluted overabout a 15-year period.
(18:23):
I'm hoping that that also staysvery different as a result of
pandemic and 2020 and the way itjust turned markets upside down
for a while.
I say this as just someone.
Yes, I work with luxury travel,but I work with all kinds.
I say this more as I thinkluxury has returned to
potentially its rightful spot assomething truly unique and
(18:43):
special and not so much of acommoditization.
I hope that continues.
Rachel Rothman (18:48):
I think if you just looked at some of the
standalone luxury brands I meanjust using what exists as an
example I think many of thosedon't necessarily have loyalty
programs.
Yeah Right, I mean, I thinkthat in of itself sort of proves
what you're saying.
Yeah Right, I mean, I thinkthat in of itself sort of proves
(19:32):
what you're saying in terms ofpoints not just for the room
night, but for food and beverage, for entertainment, for a
chaise lounge.
You know, that's truly anopportunity that didn't exist
prior to maybe 10 years ago.
Matt Brown (19:58):
Right, right real estate companies to create
trusted and amenitized livingoptions like student housing,
co-living senior communities andvacation homes.
What did you mean by that, andhow is this going to kind of
play out?
Rachel Rothman (20:12):
Well, kudos to Christine and the team when they
wrote that, because we just sawa big deal from a major brand
family and Blackstone and amajor student housing company be
announced so it happened withinless than a year of them
calling that trend.
I think that you know and shemight have a different
perspective, but in some waysthis isn't that different than
(20:33):
where the brand families camefrom.
Right, if we roll back the tapeto the late 90s, when Christine
and I were equity analysts,right, many of these companies
offered corporate housing,senior living, food and beverage
at airports.
They were completely verticallyintegrated and they could take
(20:53):
the guests through the entirelife cycle.
They had timeshare, etc.
Now they all went asset lightand they are reforming those
partnerships, not in terms ofhard asset businesses but in
terms of strategic partnerships,which gets at gathering a
larger percentage of thecustomer's wallet and not just
(21:14):
within their primary travelyears, which is like 30 to 50.
You know, imagine what youcould do if you could capture
somebody at 18 when they, whenthey entered college, and stay
with them all the way throughsenior housing.
I mean that would be.
The value of that customerwould be tremendous.
Jeff Borman (21:32):
You mentioned something in that article too
about the key factor isincreasing your total
addressable market your TAMpotential guests who buy
products and services Is theessential point here.
Just grow the loyalty program.
Is that what you mean by theTAM potential guests who buy
products and services?
Is the essential point herejust grow the loyalty program.
Is that what you mean by theTAM?
Rachel Rothman (21:50):
So no, it isn't, it's growing the total
addressable market.
It's figuring out who theuncaptured guest is.
So it's not just a loyaltyguest, it's, again, if somebody
is 18, they're not travelingwith you 5, 10, 20, 30 nights a
year, right, that's a customerthat you never had before.
The same as somebody, maybe.
(22:10):
My parents live in a retirementcommunity right, they are no
longer traveling the way theyused to.
It's another opportunity foryou to capture that guest and
capture a share of their wallet.
So you want to identify unmetcustomers and this might be why
you start to see some of thesebrand families partner with
(22:31):
glamping companies.
This has multiple touch points.
It's not just about age, it'salso about use case and, again,
as we talked about with thebrand proliferation,
psychographically like who isthis customer?
Are they a hipster, are they atraditionalist?
Trying to make sure that youare engaging with every
(22:52):
potential customer out there, inevery geography, in every price
point, for every needs date.
Jeff Borman (22:59):
To grow the TAM of potential guests or customers.
Hotel companies must trackguests outside traditional
businesses, right?
How do you do that when the topcall it five programs are half
a billion members.
Who's left?
Rachel Rothman (23:16):
The other seven and a half billion people.
Christine Bang (23:18):
There's a lot left.
Rachel Rothman (23:22):
My son I mean my son's about to go off to
college.
Christine has a couple ofcollege age kids, right.
Jeff Borman (23:28):
The largest loyalty program is now the size of the
population of Brazil, right Likethere aren't that many
traveling people out there?
Christine Bang (23:40):
And I guess maybe I'm answering the question
I asked you, which is it's notabout who's actually traveling
yet, yeah, I would say that it'snot about who's actually
traveling, it's about opening upthat addressable market and, to
Rachel's point, like capturingpeople that are maybe looking
for student housing, that's whyyou're seeing these strategic
partnerships with brands or withstrategic partners outside of a
(24:02):
traditional sort of box.
Right, it's about the peoplethat want an experience that
involves being outdoors and youknow, hiking and kayaking, but
they want to have, you know,sort of a nice expected
experience you know that livesup to their standards.
So I think you have there is alot of opportunity outside of
(24:25):
just the sort of traditionaltraveling loyalty members that's
out there and exists and you'reseeing that sort of in terms of
some of the partnerships thatare being announced, like almost
on a daily basis.
There's another partnershipthat you know pops up where a
major brand is partnering withsomething that kind of at first
you kind of scratch your headand say I didn't see that one
(24:47):
coming, but you know they're,they're looking at that.
You know sort of broader,broader profile of guests who
aren't necessarily their guestsright now.
Jeff Borman (24:59):
So I appreciate you for working with me as you
watch interviews in excellencehere.
What I've learned from Matt isto ask a question and then
answer it before you can, sothank you for that.
Appreciate that.
Rachel Rothman (25:11):
I think you hit the nail on the head right.
If people only have so muchvacation and you're already
getting the most frequent guests, then you need to build your
total addressable market.
You need to find people thatyou can leverage and attract
through other channels.
Matt Brown (25:29):
It's time for the mystery question.
This is for both of you, andthis one's this easy one what is
the most unique hotel you'veever stayed in, christine?
Christine Bang (25:39):
let's start with you unique hotel you've ever
stayed in.
Christine, let's start with you.
That's a tough one, I would tobe honest.
I would say I've stayed in Nice, and some of the products in
Nice have a very unique designelement.
Your experience is differentbased on what room you stay in,
(26:01):
and it was something I'd neverseen before at the time.
Now you know you can stay in aBarbie room at the Hilton, you
know, but, but at the time itwas very different and the
service was elevated andexcellent, and so you felt like
you were being pampered.
Matt Brown (26:18):
Rachel.
Rachel Rothman (26:20):
That's a hard one, unfortunately.
I think I'm probably a prettymiddle of the road, mass market
kind of girl.
I will call out a specialthanks to the St Regis New York
who I felt took exceptional careof me when I was a patient at
Sloan Kettering many years ago.
I would say many of the world'sgreat hotels have strategic
(26:40):
partnerships with differenthospitals and I think they
really go out of their way totake care of the patients and so
I appreciate them.
Is it the most unique hotel?
The service is definitelyoutstanding and the rooms are
beautiful.
I haven't stated that manyspecial properties, but that one
stands out in my mind at thatmany special properties, but
that one stands out in my mind.
Matt Brown (27:00):
Can you two enjoy hotels, or are you so used to
like just walking in like theTerminator?
You're just kind of looking atthe whole place, looking at the
structure of it.
Can you?
Can you separate yourselfsometimes from the experience?
Christine Bang (27:19):
of being in a hotel with what you know about
the business.
I mean, you know that's part ofwhat draws people to this
industry.
Is that it's you know, it'sit's how you're treated, it's
it's it's hospitality, it'sabout making the person feel
welcome and at home, rightBecause and it has the benefits
of you don't have to do laundryand you don't want to, you know
what I mean.
It kind of takes you out ofyour normal day-to-day and
(27:44):
allows you to have an experience, whether it's a you know, the
highest end or even just youknow sort of something that's a
little bit more you know to runof the mill, typical.
It's about that personal touch.
Rachel Rothman (27:59):
Christine's much a happier person than I am.
I still get stuck when I seesomething wrong.
I had the good fortune of beingwith Jeff at a conference last
week at a place that y'allremain nameless, and I bought
myself a drip coffee you knowwhere you pull the little spout
forward and one for my colleague, and it was $25 and I almost
(28:22):
fell over.
So there are times when youknow, knowing what we know about
the data, you really think likethis is a hugely missed
opportunity, like to the pointwhere you're thinking I probably
won't go back there again.
Like period to that event, thatthat really shifted the burden
of the cost, the cost of theevent, to the attendee, which I
(28:46):
just think is an unforced error.
So so yeah, I love a greathotel nothing better than a good
bed and a good pillow but whenpeople, when there are things
that you see that could be donebetter, it does still bother me.
That's why Christine and I workwell together.
Christine Bang (29:03):
She's much more positive than I am.
I'm Sally Sunshine.
She's a realist.
Matt Brown (29:09):
This has been wonderful.
Thank you, rachel and Christine, for being guests of no Show.
It's been amazing and veryinformative, and we wish you a
wonderful end to 2024 and a veryhappy 2025.
Christine Bang (29:23):
Thank you for having us.
Yeah, thanks for having us.
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