Hilton vs Marriott | Pretty Cool Hotels | 5

0:06I'm David Brown and this is Business Wars.

0:30From humble beginnings to global institutions, Hilton and Marriott have become two of the most recognizable and ubiquitous hotel chains in the world. For years, Hilton was the unrivaled leader. Here's Mad Men's smooth-talking ad exec Don Draper pitching Conrad Hilton in the early 1960s. Now there's one word that promises the thrill of international travel with the comfort of home. Hilton. Later, J.W. Marriott would give the Hilton family a run for its money. Marriott pioneered a new business model of building and then selling its hotels while continuing to manage them for a cut of the revenue, of course.

1:10This allowed Marriott to expand fast and galvanized a fierce competition that's still with us today. But with Airbnb and the rise of short-term rentals, the hospitality industry has shifted dramatically in recent years, and the big hotel chains are no longer competing against just each other. Allison Poehle is a travel reporter for The Wall Street Journal. She joins us to explain how these companies are doing today and which elements are under fire from disruptors. Later, we'll step away from the corporate hotel world and take a walk on the quirky side with Margaret and Corey Beinert. The couple founded the online travel series A Pretty Cool Hotel Tour, where they pay a visit to some of the world's most unique hotels, sharing photos and videos with nearly one and a half million fans on TikTok, YouTube, and Instagram.

1:57They'll be giving us some of their favorite spots and exploring the line between vintage chic and just plain old shabby. Get ready for the vacation of a lifetime because all that's coming up.

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4:19Allison Poli, welcome to Business Wars. Thanks for having me. It's my understanding you cover travel for the Wall Street Journal. I would guess that would make you, what, a frequent flyer at least and probably a well-known face at a lot of these major hotel chains? You could say that. Covering the industry, we don't take as many business trips as you might expect because we're covering what's going on. But, yeah, I'm a frequent traveler. Now, when you stay at a hotel, what are you paying most attention to as someone who sort of follows the latest travel trends and that sort of thing? So I'm looking at staffing levels.

4:56I'm looking at how many people are staying at the hotel. I'm looking at what lines are at the front desk. Do they have a front desk attendant? Are they using digital keys? Are they having people check in with a person at the desk? So I'm looking at the latest tech advancements, also what the experience is like for my fellow travelers who are there. And what are you noticing? I mean, I will tell you that from my experience, I notice that I check in a lot less. except on my phone. And I have all kinds of different ways to get into my room. But I will tell you, it's been my experience that certainly lines at airports are long.

5:40And it feels like my wallet is a little lighter. How is it? How is all this squaring with your observations? Yeah, that seems accurate. Prices are high and they've remained high because demand is through the roof for travel. So this was something that people were not able to do during the pandemic, and it's something that they're prioritizing this summer. And they have been for many months. So we see record numbers of people passing through airports. We can see the latest TSA numbers, and they are recovered to pre-pandemic levels. A lot of people are staying in hotels. They're staying in short-term rentals.

6:21They're traveling domestically, and they're especially traveling internationally. All of that is expensive. It costs money to be able to take these trips, but so far consumers are paying and they're happy to do so because they've missed out on these experiences earlier. But if you ask executives from a lot of these companies, they'll say there's been a permanent shift in what people are prioritizing. So it's just the new normal and what people want to spend their money on. What do you think recalibrated there and what are the implications? So the thinking is that life is short. You never know when you might miss out on an opportunity.

7:00And so people are prioritizing travel in all forms. And you do see this across all income levels. Now, in the current economy, people with lower incomes are cutting back already. So instead of staying at a four-star hotel, they might be staying at a three-star hotel. Instead of going away for a week, they might be going away for four days or a long weekend. Interesting. But they're still traveling. They're still taking trips. They might just look a little bit different than they did before. Of course, making trips means making lots of choices. And one of the primary choices that people make is where to stay, right?

7:40I mean, Hilton and Marriott, they're the focus of our Business Wars series here. How big are those two companies? And it seems like they sort of house a lot of sub-brands as well, right? They do. So these are the two biggest hotel companies. They are global in scale. If you look at Hilton, they have 22 different brands ranging from the five-star resorts to some of the lower budget extended stay brands. Marriott has more than 30 brands. Again, some of the ultra luxury down to budget roadside hotels. So they are catering to every type of traveler under their umbrella, and they have a global presence.

8:26Both are big for business travel. Do you think people are more loyal to one over the other, or is that sort of a thing of the past with convenience as king today? People are big into loyalty programs. So, yes, people often pick a hotel brand to be loyal to. If they're on the road all the time, they want to rack up those points, get perks. They want to get an upgraded room. They want to be able to get free stays when they later travel with their family or friends. So the points program can really be decisive. It can be, absolutely. And who has the better? Or is there a way of quantifying them? They're different.

9:04Just as, you know, that's kind of like saying, well, which airline is better? The loyalty programs are massive. There are so many different complicated tiers of points that people can stack up with different travel credit cards or there are different ways to manipulate points. And both Marriott and Hilton provide ample opportunities to do that with their programs. Yes. Well, how is Marriott performing these days? They're doing really well coming out of the pandemic. Like I said, this has been a really great time for travel companies because people are directing their discretionary income to travel and travel-related experiences.

9:43So they are staying in hotels. They are staying in resorts. They are paying for some of the extra amenities at resorts. And that means that when they're on the property, they want an even better experience. So even though corporate travel hasn't completely rebounded, there are so many leisure travelers who are able to keep occupancy high and keep the rate high for hotels. So they're having no trouble filling rooms and they're able to do it at a higher rate because leisure travelers are paying more than corporate travelers are. Let's turn our attention to Hilton because Hilton in the not too distant past was really expanding hard, opening new hotels.

10:24Is it your sense that slowed down or still continuing apace? Still continuing. And something that all hotel companies are looking at are interest rates. And so they're looking at financing for new projects and new builds. So no matter what the company is in this market, if there is a hotel that is already under construction that's been financed, then it is probably going to get built. But if hotel companies are looking for new properties, then the financing can be a little more shaky just because of the general interest rate environment. So that's something to watch for throughout this year is how many new builds will we see across a range of different companies.

11:11Is there a type of traveler that seems to favor one hotel giant over the other? I think it really depends on what you're looking for in your stay. There are people who, yes, they are very loyal to a particular hotel company or hotel brand. They know exactly what they're getting. And that's part of the appeal. There are brand standards for hotels. And that's part of the reason why hotels have been appealing to certain travelers as opposed to Airbnbs, for example. There's no quality standards necessarily for an Airbnb. You don't exactly know what you're going to get. It's an individual property listed on a marketplace as opposed to a hotel, which has very specific criteria for being part of that brand.

11:58Let's explore this quality issue, something that doesn't seem to have increased that much with this travel boom is what we're hearing when it comes to the quality of hotel accommodations. You reported on this over at the Journal. What are we seeing here with shabby hotel rooms? So coming out of the pandemic, we have seen high prices. And so a lot of people are paying more than they did before the pandemic and walking into hotel rooms that do not look awesome. And they're wondering, how am I paying$350 for a hotel room where the ceiling has a stain on it, the shower is leaking or maybe not working, there's no hot water, how is this happening?

12:44So that's something that hotels have been cracking down on in recent months because they have been hearing from people, especially for these bigger chains or companies, that the rooms are not meeting the quality standards that people expect. Why do you think that's become the norm? There was a lot of deferred maintenance during the pandemic. So part of that is hotels were just trying to survive, especially if you think about the early days of the pandemic when people didn't want to stay in hotels necessarily. So hotel owners, they were allowed to spend some of the money that's typically allocated for these projects, for making sure that the furniture is up to date, all of that, they're allowed to spend some of that on their regular payments.

13:32That does mean now that because that budget was depleted, the hotels are having to find financing for these renovation projects. That puts them in a little bit of a tricky spot because in some cases they're still recouping losses from the pandemic. And now they're having to make sure that the hotel rooms are worthy of these high rates that they're charging. Even before the pandemic, it seemed that housekeeping was not coming around nearly as much. Any sense that that may be part of what's going on here? In general, a lot of hotel unions have been drawing attention to the lack of housekeeping issue.

14:13And we're seeing across the country, a lot of hotel workers have gone on strike over this. So what they want is for hotels to bring back daily room cleaning. And to your point, they do say that when the rooms aren't cleaned every day, there is just a bigger mess for them to deal with. It takes more time. It's harder on the workers. You know, if room cleanings are rushed, it might not seem totally clean when you come into the room because somebody didn't have enough time. or the hotel might push your check-in back because they're still struggling to clean all these checkout rooms on the day when a bunch of people are checking in.

14:48We're going to take a short break and we're going to be focusing more on the competition facing these hotel chains when Business Wars continues.

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16:28Hey, welcome back to Business Wars. Our guest, Alison Pohley. She covers travel for The Wall Street Journal and has written extensively about hotels and short-term rental companies. You know, big hotel chains have been dealing with competition from Airbnb for more than a decade now. But Hilton decided to hit back a little more directly in its marketing recently, launching a campaign last summer called It Matters Where You Stay. Here's a clip from one of their ads. They look different online. Jeez. Wow, that's a lot of rules. When you prefer dream vacation over a rental nightmare. Guys, turn tight.

17:07It matters where you stay. Tell us a little bit more about this narrative Hilton is trying to tap into here, Allison, as you see it. The narrative is one that has existed on social media and on online reviews where people are saying that maybe their short-term rental didn't match the pictures or they're getting frustrated with the amount of fees associated with short-term rentals. So we've heard a lot about cleaning fees and how when people check out, there's all of a sudden a$300 cleaning fee tacked onto their bill. And there also is a very long list of chores that they have to do before they check out.

17:52So this hasn't done great things for Airbnb's reputation. And so they've turned a lot of attention to these exact issues. So they've made their fees more transparent. They've told hosts, hey, you cannot have a long list of chores for people to do. But what Hilton is doing here is saying, oh, you know, they're feeding into this narrative of if you're worried about the quality standards of a short-term rental, then why don't you consider us? I guess depending on the experience you're looking for, there may be some truth about some of those Airbnb pain points. But I wonder if it's possible to lure travelers back to the conveniences that hotels offer or if this is something more fundamental, generational, that's hard to change attitudes, harder to change attitudes about.

18:41What do you think? There is something to be said for what short-term rentals can offer that hotels cannot. And if you are a family traveling with small children and you want to be able as parents to put your kids in a separate room after they go to bed and not drink a glass of wine in the hotel shower because that's the only separate room, then short-term rentals do offer that type of amenity. And right now, the closest offerings that hotels have are villas or suites, which are really expensive for most people. And so there is a competitive advantage for short-term rentals, for family travel, for big groups of friends, for people who want to be able to cook or make a meal and not eat out all of the time.

19:32So that will continue to play out, and it'll be interesting to watch that dynamic and see how they try to chase each other, short-term rentals versus hotels. It sounds like you think Airbnb is still the major disruptor it was when it launched. I mean, is the company still a big threat to some of the major hotel chains, you think? I don't know if I'd characterize them as a threat because they both play off each other. So we see, for example, a lot of hotel companies have started to embrace so-called villas or separate areas of lodging or they might even have something, an apartment. Cottages or something.

20:10Yes, exactly. Right. And these are part of the hotel brand. So in a way, they've chased Airbnb in that regard or Vrbo. But if you look at what Airbnb has done, they have had to standardize a lot of aspects of the experience. And, you know, whereas Airbnb started where you were staying in a person's home in a spare room that they had, they have brought that back. But if you look at vacation rentals, you know, people want to know that the fees are exactly as they said they are. They want to know that the listing will match the pictures. And so Airbnb has had to introduce a lot of guarantees for their guests to make sure that people just don't abandon the property as soon as they get there and write a scathing review.

20:58They've had to make sure that hosts are delivering on what they're advertising. You know, it's interesting. You were talking a little bit earlier about how much these loyalty programs can make a difference in where, especially business travelers stay, but travelers of all stripes wanting to take advantage of loyalty points and that kind of thing. But Airbnb and some of those outfits have not jumped on this technique for luring customers. Can you tell us a little bit about the reasoning behind this technique not going with the loyalty programs? You'd think that certainly as the space has become more congested, some of these app-based programs would want to jump onto the loyalty bandwagon.

21:38Airbnb has said that they don't need a loyalty program or that the traditional points-based loyalty program would not work for them. And if you think about it, they say that because the financing of it is different than it would be for a hotel, for example. So if you think about a hotel brand where there's a point system in place, you can – Trade credits and stuff like that. Exactly. And you have certain types of rooms and you can assign a point value to those types of rooms. For short-term rentals, there's not as clear of a chart for how many points would be equivalent for whatever type of lodging it might be.

22:18And then who reefs the benefits of this, for example? You know, if someone redeems points, is that being taken out of the host's cut? Is it being taken out of Airbnb's cut, for example? So they are correct in that it's not straightforward. But there are people who say, you know, I really would stay in more Airbnbs if I got some type of acknowledgement for it or some type of credit for it. Yeah. In fact, if Airbnb were to introduce something like a point system and figure out a way to make it work, I suppose you've got to ask the question, how much of a problem would that be for the hotels? I mean, how much do people really care about these point systems?

22:57And that's sort of what this comes down to, right? Yeah, and the hotels are already competing with Airbnb without the points system. So could it be an advantage in some cases? Would people consider Airbnb more if they got points for it? I'm sure they probably would. But one area where we know a lot of people use points is for business travel. And we haven't quite seen people embracing Airbnb for corporate travel for these short trips. We know that they stay in Airbnb for very long stays, you know, maybe consultants who are somewhere for a couple weeks or a month. But people haven't embraced it quite as much as they have hotels for these short stints where they're there for a couple nights.

23:41Well, zooming back out, Hilton and Marriott, as we were talking about earlier, they seem to own most of the known hotel chains out there. How does this duopoly affect the industry? There are so many brands for people to choose from. But I do think something that a lot of hotel companies are grappling with is travelers want a unique experience. They want something that they can post about on social media or brag about to people. And so in the past, we saw a lot of hotel brands use, you know, there's a very standard room that you could expect with the queen bed and nightstand next to it. But now people want - Standardization was king.

24:21Exactly. But now hotel companies are having to incorporate more elements of the locality into the hotel experience. So more people want more local food. They want to know that they're in New York City in one of these brands, for example, not just in a Marriott or Hilton that could be anywhere. So there is competition for these big brands from independent hotels, from people from hotels that really embrace the local experience and our local owners who could benefit directly from having someone stay there. So a lot of advertising now comes from social media. It comes from word of mouth, as it always has with travel, recommendations with friends.

25:05And if they can be the property where someone said, oh, my gosh, I stayed at this great place and you should go there. It was wonderful. They're all vying for that. Where do you see the future of lodging taking us? I mean, we talked about some of that specialized local flavor. That's going to be a big part of it. What else? The future of lodging is going to be a lot about these individual experiences, even if many people are having them. even if these individual experiences are repeated for the masses. You know, we're in a time when people, as we've talked about, are prioritizing travel. They're prioritizing the experience.

25:41And so when they think about where they're staying, they want something that they can feel good about. But I think a lot of these customized experiences where a lot of hotels will do things like charge for access to their pool or even to a pool chair. and you can have whatever type of experience you want in the lodging space, but you're going to have to pay for it. You're going to have to pay for it. You know, I would think I'm so jealous of you, Allison, that you get to have this gig. What a great beat to have. What do you do? What does a travel reporter for The Wall Street Journal do to get away?

26:18Well, next weekend I am going to Cleveland, which is where I'm from. So like everybody else, it does. Like everybody else, I'm visiting family this summer, and so I will not be staying in a hotel or a short-term rental. I will be staying with my parents when I visit them in Cleveland. Home sweet home. Allison Poley is a reporter for The Wall Street Journal covering travel. You can check out her latest articles at wsj.com. Now, after the break, we're going to be traveling to some of America's quirkiest hotels with a couple who's touring them all and bringing us along for the ride. Stick around.