Hotel CEOs talk mergers, Airbnb and robots

USA TODAY's Nancy Trejos moderated the discussion. The text has been edited for clarity and length.

Q:  How do you remain unique in the face of such epic consolidation? (On March 11, a consortium of investors led by Anbang Insurance Group made an unsolicited bid to buy Starwood.  Friday, Starwood declared the Anbang bid "superior." Marriott has until March 28 to make a counter-offer. If Starwood backs out of the deal, it will owe Marriott $400 million in cash as a termination fee.)

Marriott's Sorenson: There are tremendous advantages of scale that we've talked about in the context of announcing this (prospective) deal. It includes the ability to build a loyalty program that is even more compelling as it gets bigger because you offer more places for guests to stay.  We can get more economies of scale that allow us to be the best for the consumer. That to us is really the driving point of consolidation. Fundamentally, we've got to make sure this business stays local and stays one where the teams around the world are empowered to do what they need to do in order to be as individualized and genuine as they possibly can.

Accors' Alaux: Globally, size matters. But I do think that hospitality is a local business, a people business, an experience business. All these big consolidations will not change the fact that we need to think and operate locally for food and beverage, for design concepts and moreover guest experience. For us, at AccorHotels, we were not that strong in the luxury segment in North America, so (the Fairmont deal) is a unique opportunity to further penetrate the luxury market well in this region.

Q: The experts are saying that we'll see even more consolidation. Do you think that will happen?

Hilton's Nassetta: I do think you'll see more consolidation.  There are benefits of scale. We, of course, have the benefit of scale, largely because we've done it organically.  Over the last seven years, we've grown by 50% to get where we are today.  We launched our latest brand, Tru, by Hilton in the mid-scale segment. Launching it instead of buying it allows us to really figure out exactly what the customer wants in that segment to ultimately give them something that really resonates with them.

Q: How does a company like Loews Hotels, which has 24 properties, compete with a company with more than 1 million rooms and 31 brands, which is what Marriott would have if the Starwood deal is completed?

Loews' Kinsell: With a small company like ours, the benefit is that we can be nimble and quick-acting. We really control all the decisions effectively across all of our hotels.  I don't have to work through intermediaries in the case of a franchise. If we want to place in any one of our hotels a technology or a platform or a process or a system, something that helps us augment our relationship with our guests, with our team members, we can do that immediately. We have the benefit of being able to work quickly and to have the most direct and intimate relationship, not with just our team members  but also with our guests and with our clients.

Q: InterContinental Hotels Group (IHG) bought Kimpton last year.  How has Kimpton managed to maintain its identity while being owned by a big company with big brands and big hotels?

Kimpton's DeFrino: We were growing organically in the United States, and we were at an impasse. With the energy and the resources of IHG, we will be able to launch Kimpton on a global basis. We've made also the decision to keep the Kimpton operation separate from IHG operations. Kimpton still maintains its autonomy. The development, the design, the creation of the restaurants and bars is all done still by Kimpton in San Francisco.  We intend to leverage the strength of IHG, the distribution of IHG and the global reach of IHG to be able to launch in many, many other places.

Q: Obviously there are differences in guests who use budget hotels vs. five stars.  But what are some things all hotels should do right, regardless of price point? 

G6's Amorosia: Simplicity is part of success.  A clean, comfortable room, great service — for us at the lowest price for any national chain. Every single room is consistently done so that the guest never wonders about what they're going to get. One of the things that we are adamant about is the goal always has to be that whether you have 10,000 rooms or you have 150,000 or a million, your ultimate nirvana is every single room is impeccable.  Nothing in that room is going to be a problem for the guest.

Q: Let’s talk about brands. Hilton just introduced Tru and will launch Canopy this year in Iceland. Marriott last year debuted AC Hotels and will soon be bringing Moxy.  All these new brands are edgy and targeting young, so does that mean that some older reliable brands will age out?

Nassetta: I don't think so. All of our brands as we think about it have to be modern and contemporary in their approach to product, to functionality, to service delivery, to appeal to customers.  Whether that's about a so-called Millennial (those in their 20s and early 30s) or that's my father who's 85 years old and carries an iPhone around and wants all the same functionality that I want or my children want. The trick is really to adapt all of our brands over time to a modern context.  And that modern context will appeal to everybody.  The other thing we all have to remember is people grow up. So what younger Millennials want is exceptionally different than what older Millennials want.

Amorosia: One of the things we did in terms of our renovation program is we took what was a typical economy room back in the '90s and early 2000s, and we did a tremendous amount of focus groups in 2007, 2008 and asked a couple of very basic questions:  If you're going to travel, you're going to want to make sure that you get a good night's sleep and a good experience and consistency, but what else do you want to see?  The first thing they all said was, "I want to feel like I'm in this century rather than last century." That's the responsibility of any brand manager. That's the responsibility of an owner in terms of challenging the brand manager to constantly be relevant. The brands that don't take that seriously, they're the ones that in are in danger of becoming irrelevant.

Q:If the merger goes through, Marriott would end up with 31 brands. Will you have to get rid of some of these if there's duplication? Can you reassure those avid fans of Starwood’s W Hotels, for example, that they have nothing to worry about?

Sorenson: We're going to keep all those brands. There are advantages to scale, which we keep by keeping the portfolio together. We'll have to do everything we can to make sure those brands are as distinct as they can be. Some of those brands have got tremendous momentum and relatively few challenges. Others have been in business for decades longer, and they have challenges. How do you make sure that those hotels are getting the capital they need so that individual hotels are being reinvented? For those that are not being reinvented, how do you make sure you've got the strength to ultimately exit them out of the system if there's no resolution?

Alaux: Taking the example of ibis in Europe.  We created ibis Styles in 2008 to have a lifestyle brand, a sister brand of ibis, the iconic standard brand of AccorHotels. We created that because we identified this as a potential to grow. The franchisees said yes and embraced this initiative as they want to differentiate from having a standardized product: not have the same room, the same product, the same design, the same look everywhere. We started moving from something which was very product-focused, product-oriented, to an experience-oriented brand — ibis Styles.  We have been very successful with this non-standardized brand and now have over 320 hotels in 24 countries, with over 100 hotels in the current pipeline.

Kinsell: The number of new brands that have come into the marketplace can only be good for the consumer.  We have a lot of good information. It gives them a choice.  It gives them an opportunity to judge for themselves.  I wouldn't say that consumers are more demanding.  They just have more information so they're more informed.

Q: Let’s talk about the boutique hotel market, which continues to flourish.  It seems that every company is either starting their own brand or acquiring one. In this day and age, what is a boutique hotel?

DeFrino: A few things that are required are great design and a feeling of fun and excitement.  It should also be completely different from anywhere else you've stayed before.  Every boutique hotel can't be the same.  The localization and the sense of place, it's required to have that.  It's very difficult to do brand and boutique in that respect. Great restaurants and great bars are part of the experience. Not every boutique hotel should have the same boutique restaurant because that is inherently a brand and not boutique. Never use the same design twice.

Sorenson: But it also can exist in a space which is part of an IHG or part of a Hilton, part of a big platform and get the benefit of size and perform that much better. One of the things that Kimpton was confronted with was: We started the Autograph Collection (of independent hotels), and Hilton stepped into this space as well, saying we're going to create a portfolio approach that allows boutique hotels to exist. That was a fairly profound change in many respects.  The owners were saying, I can live with Autograph and still have my strong personal point of view about designs, have a strong local flavor of offerings in terms of food and beverage, and I can wrap the advantages of scale around a loyalty program.

Q: No matter how hard you want to fight it, Airbnb does not seem to be going away.  Do you think you're competing with them for the same travelers?  And if so, what are you doing to entice guests who might otherwise choose a private rental?

DeFrino: From our perspective in San Francisco where Airbnb sort of got its start, we compete with them only because they're adding a great deal of inventory to our market, and it's one of those markets that is highly compressed, and there's not a lot of new hotels coming on.  So there's a tremendous need, and the market will find a way to fill that need. We are doing things in our hotels that are making it easier for families to stay.  We're putting bunk beds in rooms, we're having a complement of rooms made with kitchenettes, or we're offering more services and facilities that are allowing people to live that sort of lifestyle.

Amorosia: This is not a new business. Airbnb saw an opportunity to be able to create an entity that has grown upon itself and has caught the imagination of part of the traveling public. The strategy of the hospitality industry always has to start with hospitality.  The more you're able to connect — whether it's through social media, whether it's through face-to-face interaction, whether it's through interactive platforms — that is going to allow the hospitality industry to be able to grow and to thrive. Airbnb is a fantastic business, quite frankly. It's got a lot of opportunity, but it still is a disjointed business in the sense that any given experience has no direct correlation to the next experience.  Most people want to have some level of expectation that they can bank on.

Sorenson: One of the things that's happening with Airbnb now is, as they've gotten bigger, increasingly, they're going to get out of the shared economy and into a space where you have dedicated real estate like micro-hotels and residential buildings or some other circumstance.  But they're no longer hosting.  And as a consequence, they're no longer really local in a way that is unique. How does the more traditional hospitality space compete? With a greater sense of design, greater emotional connection with our customers, and really get them to go back and say, you know, I love that new hotel. We'll end up competing against Airbnb on other platforms for many, many years.  It's a competition which we'd be silly to take for granted.

Q: We’re seeing mobile check-in, Smartphone keys, iPads in rooms that control lights and curtains.  Starwood has robots delivering wine to your room.  Will we see more robots?

Nassetta: I hope we don't see more robots. I'm sure there are things that we'll do that technology's going to enable. But I think the core of what we do, we're in the business of hospitality. We're people serving people. And in the end, you're not going to ever take the people out of this business without great risk to delivering exceptional experience to customers. We as an industry have always done our best at check-in and checkout. With these disrupters (like Airbnb and online travel agencies), it's a healthy level of competition that forces all of us to extend the relationship that we have with the customers in a much more thoughtful way from the first time they're thinking about taking a trip to when they check in and after they leave us, continuing to interact with them. The nice thing is technology helps us do that.

Kinsell: We have the opportunity to have information about our guests that we've never had before, not to be intrusive but to be facilitative and be supportive. My own personal experience: I happened to be back in Orlando at one of our properties, the Loews Portofino Bay.  We had a family reunion, birthday celebration.  We had pictures taken.  I checked in here, walked in my room at JW Marriott.  And there was a picture of my family from the weekend.  Our general manager contacted your general manager, technology shot that over through the bits and bytes, and there it was sitting in my room. That was a nice touch.

Alaux: I have no plan to roll out the drone to deliver room service in a hotel, because this is a people business. I do think that we should look at technology as a unique and big opportunity to move to the next set of opportunities and be connected with our guests, especially Millennials.

Q: Speaking of relationships, there are some consumer advocates who question the value of loyalty programs.  There are blackout dates, expiration dates, and redemption charts keep changing.  Tell travelers some advantages they'll gain the moment they join your program.

DeFrino: For us, the first thing they'll get is complimentary Wi-Fi in the room.  They'll also get a $10 mini-bar credit, so they can raid the mini-bar or take it down to the restaurant bar to get a cocktail at the bar.  One of the things we're trying to do is push interaction between our guests and our employees. You'll also obviously get a stay that goes towards a free night.

Alaux: What we are doing is providing our Only On rate, a unique rate that extends a discount of 5% to 10%  to our Le Club AccorHotels members on our direct websites. This is working very, very well, because we can also use information gathered to anticipate our guests' habits and identify trends to better serve them. Being part of the loyalty club is the best way to get the best experience.

Q: You mentioned free WiFi. Free for loyalty members, but there are still hotels that are charging for Wi-Fi, especially at the luxury level. This is a sore point among travelers. They want free and fast Wi-Fi. Why not give it to them?

Amorosia: You get free Wi-Fi at every hotel at Motel 6.

Kinsell: It isn't the cost of the Wi-Fi.  It's that it works.  And it works with among all of my devices with all my family members.  And it works when I'm in-house with another group that's there, and everyone is getting out at 3:00 in the afternoon and hitting their email.  Those are the critical things.

Q: Hilton experimented with a $50 cancellation fee that could be charged any time after booking. How did that work? 

Nassetta: We did, but we finished with our testing. What we're trying to do is both serve customers well, serve our owner-community well.  You have certain technologies that have created a phenomenon where in some of the major markets around the country, you have astronomically high cancellation rates. People book multiple reservations at multiple properties, and they cancel.  In some major markets across the industry, you have cancellation rates that are far in excess of 50% day of stay. It's hard for us to serve customers when we have no idea how many people are going to show up.  It's hard for us to serve our owners who ultimately have invested a lot of capital, when we really don't have a good sense of what's going on with their and our inventory. So I don't know what the answer is.