Today Hilton is comprised of 17 brands, with more than 5,900 properties in 114 countries around the world. Marriott International controls over 7,000 properties in 131 countries, including the Ritz-Carlton and St. Regis luxury brands. But...were they really competing with each other over the last century, or competing with the world?
In this episode we're going extremely meta in a review of another podcast you should absolutely listen to. Also, we investigate the intriguingly named "bed wars" of the late 90s.
Today Hilton is comprised of 17 brands, with more than 5,900 properties in 114 countries around the world. Marriott International controls over 7,000 properties in 131 countries, including the Ritz-Carlton and St. Regis luxury brands. But...were they really competing with each other over the last century, or competing with the world?
In this episode we're going extremely meta in a review of another podcast you should absolutely listen to. Also, we investigate the intriguingly named "bed wars" of the late 90s.
I feel reasonably secure in my ability to fake my way through that. So, as always, as always on this show hi everybody, it's no Show. I'm Matt Brown, joined as always by Jeff Borman, and this week we are cultural critics. We are bringing our refined critical eye to a podcast. Another podcast, that's right. We're getting meta. We're doing it on a podcast called Business Wars and it's done by Wondery.
Speaker 1:I'm sure everybody out there has heard of Wondery and they've done something like 89 seasons of this pod called Business Wars and they take on all these different companies that have competed against each other over the last 100 years or so, and a couple of months ago they dug into Hilton versus Marialad, I think. To non-hotel people they're like wait a minute, was there really a battle royale that span generations and continents between two headstrong founders and the children of business titans who followed them? Short answer yes. Long answer might be a little more complicated. Today, of course, hilton is comprised of 17 brands with more than 5,900 properties in 114 countries around the world. Marialad International, same deal, controls over 7,000 properties in 131 countries, including the Ritz, carlton, st Regis luxury brands, and the family still owns something like 18% of the company shares, so still has a really prominent voice in how the company functions. Jeff, first of all, what did you think about Hilton versus Marialad? You have been in the hotel game for a long time. You worked for Marialad for a long time.
Speaker 2:It reminded me a bit of the Adam Richman show, the food that built America. I don't know if you've ever seen that, but I love it. It's a history behind how craft or how Heinz came to prominence. I thought it was overall a pretty good dramatization. By the way, matt, you mentioned Marialad International controls 7,000 properties. I think it's like 8,500 now or something. But overall, listen, I found it very entertaining.
Speaker 2:My background I spent nearly 20 years at Marialad, three at Hilton. For Hilton the competition is more in its DNA. Christes Seta is an alpha, win-win-win type guy and with him at the helm I think Hilton takes on a little bit more than maybe the personality of the us versus them kind of stuff the win approach At Marriott. In my years there I really cannot recall a single moment where the motivation was to beat Hilton or Hyatt. Marriott focuses entirely on itself internally, thinks generationally. When Marriott starts referencing comparisons to Hilton, I actually think that means they're kind of showing a weakness. If they go, we're better than Hilton. I think that actually means they're not very comfortable with where they are. So I don't really see necessarily some of the background and the drama that Business Wars really presented, but that's what also made it an entertaining four or five chapters to listen to.
Speaker 1:When you were working for Marriott, how much would you talk about the competition?
Speaker 2:I think at a hotel level all the time. Right, this Hilton hotel competing for business against that other hotel, and many times that's, of course, a Marriott, but it's also a Hyatt and a scenery. You name it, you name all the brands in the business, right, if you're out there competing at a hotel level to win a group or a convention or an account, competition is right there every day, at the forefront of an era. At the brand level. I really don't, you don't hear about it that much.
Speaker 1:I mean the podcast. I think we should stop for a second and say I think it's worth listening to this podcast. If you're part of the hotel industry or if you're just kind of interested in these two brands or how brands work, I think it's worth a listen. The episodes go by very quickly. They're loaded with stories, they're very dramatic. The whole series sort of resembles like one of those old ABC miniseries like Shogun or Winds of War, and the voice acting can be next level. It takes a second to get into it because it is so dramatic. But by episode three I'm completely in on this and I just I can't do justice to how they do it. But they'll talk about conversations between business titans and they'll do like little accents, kind of folksy accents for each one and it's like you're plunged into the story of the frontier. Did you have any favorite stories?
Speaker 2:out of this. You know my favorite. Like you're talking about, there was one where JW Merriott this is a quote right Bangs his fist on the boardroom table like a furious toddler. Where did they get that? Who gave the insight that he banged his fist like a toddler? I find that pretty hard to believe.
Speaker 1:Points to the script script people on that one. You know, one of my favorite stories from the pod is in the first episode they talk about the origins of each brand and I didn't know a lot about how each brand started. You know, I think when I moved to DC and we met and I think you are working for Merriott, like I knew Merriott was based there but I didn't really know why. I didn't know the connection to it. Hilton kind of I had only known some Hilton history through the depiction of Conrad Hilton on Mad Men. This actor I cannot remember his name, it's Chelsea something he shows up on Billions too. He's great and he did a definitive portrayal of Conrad Hilton in Mad Men. But the episode one story of how Hilton kind of got into the game, is really evocative, even if you don't want to listen to the whole pod.
Speaker 1:That first episode where he kind of goes into a bank. He's trying to buy a bank in Cisco, texas, because there's an oil boom there and the bank owner doesn't want to sell. So now he's stuck in Cisco. He's got to wait a day before he can leave, so he tries to go get a hotel room and there is online out the door of this little pod on Hotel in Cisco. So he kind of muscles his way up to see the owner and it's like ah, we're closed, you have to come back in eight hours. It's like eight hours, what are you talking about? Why? Oh, because that's when all the beds turn over.
Speaker 1:This hotel was doing so much business that they were renting out rooms to people who were growing up and working the oil fields and coming back in sleeping for eight hours, then going back on and doing a single or double shift.
Speaker 1:And then the light went off in his head.
Speaker 1:His family had already run a hotel, I think, in New Mexico where it grew up, and a light went off in his head that he could potentially make as much money, if not more money, as a hotel owner than he could as a bank owner.
Speaker 1:I thought that was such an interesting, interesting start to his story because it, you know, for both Hilton and Marriott. Both those brands are so rooted in the family that started them and I think the podcast shines light on what became a very American arc through all businesses where this kind of family control and this personal stamp of what something is over the decades gives way to investor boards and focus groups and international investors and this whole other group of people who are talking about what the brand is versus this one person control in it. That happens across so many businesses, but I feel like with hotels in particular, you see that very clearly. I don't know, I don't want to overly romanticize that kind of single owner model, but I do think something is a little lost when these hotels are owned by big investment groups versus one person's vision.
Speaker 2:Yeah, I mean both companies are a century old. Hilton has been around maybe a decade longer, I think. Hilton turned 100 in 2019. Marriott joined the club in a century and club in 27. But Hilton, to your point, I think it was a hotel company from the start. Right, the origin story you just told, whereas Marriott didn't really transform from a restaurant company to a hotel company until the 60s let's say really in the 70s is when they started taking off as a really hotel first kind of company. One of the things that I had forgotten about that I thought was fun was they walked through the Ben wars of the odds.
Speaker 1:Oh yeah, I think up until the late 90s and 2000s, hotel rooms up and down the economic food chain were fairly stayed and predictable. Some were nicer than others, some were in historic buildings, some had a nicer lobby. But the interior experience of a hotel room I think up and I didn't stay in that many up until the 90s, but up until that time I think it was a pretty basic experience. The soaps, the TVs, the sheets, the beds were somewhat indistinguishable, particularly when you were within a certain level like your economy level. I mean, your beds are probably not going to be as good as they were if you were staying at a Western. But generally speaking, everything in like a business traveler space, kind of all looks the same once you're in the room. And I think when you got to the 90s and 2000s that changed and the bed wars were part of that. Do you remember the bed wars?
Speaker 2:Weston's heavenly bed was genius branding. Everybody's having their go at a better product what's your stick? And the heavenly bed was just maybe Weston's finest moment. Another thing I thought the show mentioned that I thought was pretty interesting was that the W brand was named so that it could quickly adapt to Weston if it failed, and perhaps the rumor that you and I talked about that it was an upside down M, as Barry Sternlich was kind of given the finger over to Mr Marriott with it. Right, we're going to be everything but Marriott. We're anti-Marriott, which, of course, is great irony today, w being a part of the Marriott chain, but no, I thought that was really cool W they're like yeah, we're just going to hedge our bets a little bit, just in case we got to throw Weston on it.
Speaker 1:It's interesting to think about because I think when you and I met you were working at the Mayflower, a very famous hotel in DC, I think historic hotels and kind of expo center, conference center hotels aside. I also think that up until the turn of the century new hotel construction you wouldn't think of going to a new hotel to hang out Like I'm not going to go to a restaurant or bar in some new hotel in DC or New York to just kind of go out socially. And I feel like the W kind of opened that door, especially for the boutique hotels that would come in after, like over the last 20 years To this day W reverses the F and B right.
Speaker 2:F and B, food and beverage across the industry. It's F and B and W calls it B and F. I mean, it does a lot of quirky things just to not be normal, but to your point, that's, the heartbeat of the hotel is lead with beverage and you create a living room. It's not the lobby, matt, it's the living room. But listen, as much as you can mock some of the silly gimmicky stuff like that, you're right. It transformed and maybe even created the lifestyle brand, as we call many, many brands today.
Speaker 1:So Hilton vs Marat is five episodes and one of the entertaining ways that they handled, I think, very dry material later in the episodes, Once you get past the frontier town stories of the first episode or two, you start getting into mergers and acquisitions and a lot of boardroom finance talk when she gets in the 80s and 90s. But one of the entertaining ways that they handled this very dry material is talking about some of the personalities involved in the process of these hotels becoming not so much property owners but brand management companies.
Speaker 2:Yeah, I thought that that was probably the best part of the series was the way they explained the separation of where management company and real estate development company were split apart, and really the asset light model, how it was created, why it was created, how it really accelerated the growth of two different kinds of businesses that had been kind of burdened by each other. But those are pretty deep accounting and finance conversations and I thought they really did an excellent job showing such a pivotal change in the industry in a way that was really consumable for somebody who doesn't want a lesson on debt, finance and capital allocation.
Speaker 1:Were there any aha moments when you were listening to this, because you know everything about hotels essentially. Was there anything in here that was like, oh wow, I'd never heard that before?
Speaker 2:Sticking to that same part of the pod about the asset light model and the creation. Steve Ballenbach was kind of an aha for me. He might be the most important and forgotten person of the last 50 years and he was central to the Hilton Marriott story. He ran M&A for Marriott when it acquired host. He was CFO at Holiday Inn and Trump Hotels. Briefly he returned to Marriott in the mid-90s and led the spin-off of host, which again might be the most pivotal moment in modern hospitality business structures because it separated the brand management company from the real estate owner.
Speaker 2:And Biz Wars did a really great job illustrating to the non-finance-minded listener how the growth trajectory of those two businesses Marriott and eventually then Hilton. They were thrust into hyperdrive and that guy was really behind it when he unencumbered billions of real estate debt from the management companies. Ballenbach then went to Disney and became CEO of Hilton, something that honestly I'd just forgotten, and there's a whole chapter that either preceded my entry into the business or I was just too junior to really recognize at the time. So I really enjoyed the Ballenbach part.
Speaker 1:Hilltun didn't spin off Park Hotel until many years later. Was that also Steve Ballenbach?
Speaker 2:No, that was all Christen Setter and the Blackstone backing and Biz Wars kind of left off. That part of the story where Blackstone bought Hilton and Hilton International brought in Christen Setter from host, not a coincidence. He then delisted both companies, broke these two dysfunctional behemoths into their component rights, rebuilt them, re-listed them on the stock exchange NYSE and then in 17, hilton spun off Park Hotel Resorts and Hilton grant locations from Hilton, the brand management company that we all know today. Just to clarify, host is what? Host is the largest reet in hospitality and largest by a mile.
Speaker 2:In the mid 90s it was at one point called Host Marriott and Host Hotels and Resorts. It's had a few different names but the company was all of Marriott's owned real estate. Circa 95 or something was spun off into a different company called Host, and Host is a real estate management company, a real estate ownership company, publicly traded reet. Mr. The biggest hotels in America. Really the New York marquee is probably the gem of the bunch, but 100 hotels plus 70% of them are Marriott and Host really just dwarfs other REITs in the business.
Speaker 1:One of the intimations of the narrative throughout all the episodes, but particularly once you start getting into them into the last 30 years, is that Hilton as a whole is a little bit more of a sleepy operation than Marriott. Marriott's kind of made out as a run and gun always moving, always innovating. Hilton things work. We're really successful. I don't know how true that is. What do you think?
Speaker 2:I don't find that to be true at all. Yeah, in the decade that Hilton was reinventing itself right, all that we just described with merging these two companies, delisting and relisting, and all that during the decade that it took to do that, marriott was in full growth mode, right? So let's just call it seven to 17,. Right, something like that. Marriott was acquiring Galord Protea. Then they bought not in sequence, but bought AC, bought Delta, eventually bought Starwood in 2016. And at the same time, inventing new brands Moxie, they created a dish and created Autograph. Hilton was growing its footprint organically, but it wasn't using its balance sheet like Marriott was to go out and acquire companies for the sake of scale. So I mean, I guess to that point like, hilton's approach to growth is more shrewd. Maybe, if that's what you meant, I would agree with that. The Hilton philosophy is don't pay a billion dollars for Galord, create Signia.
Speaker 2:We talked on this show maybe a year ago about not buying Kimpton for 400 million. Just invent Canopy. Why would you buy Choice or Wyndham when you can just invent True by Hilton or Spark by Hilton? And I think in the MO, what drives the growth for both of these companies? I don't think there's really a bigger difference than that. Right there, marriott uses its balance sheet it acquires for growth. Hilton's gonna do it more organically.
Speaker 1:There's almost a sports metaphor here between a team that puts a lot of effort into draft picks and another one that goes out and just buys a free agent that they can buy. I can't believe that analogy has never occurred to me.
Speaker 2:It's so spot on. I mean, if you wanna understand Hilton corporate culture to me, read the Outsiders. It's basically the MO of Chris Nasseta and the CFO, Kevin Jacobs. The book shows how eight titanically successful CEOs and, by the way, Warren Buffett might be the only one of them that anybody's ever heard of well, that most people have heard of. But it takes these incredibly successful CEOs who their success was based on ignoring conventional metrics that they considered to be distractions and they focused immensely on capital allocation and cash flow. And that's it. And I've heard Chris Nasseta say we wanna be chapter nine of the book, which is, of course, an odd literal question, Of course an odd literal quagmire with the term bankruptcy, right, who stands at the top? What CEO stands up and goes? We wanna be chapter nine, right. But knowing the book, that is the heartbeat of how Hilton will grow.
Speaker 1:What book do you think represents Marriott?
Speaker 2:Ooh, good to great. Shun technology and fads. Marriott does that real well. You know, flash in the pan what's the big story of the day and Marriott just kind of keeps its head down and does its thing. A very central focus, one of the key. It's been a while since I read Good to Great, one of the key parts of Good to Great leaders ask questions rather than dictate answers. That is, I think, core to Marriott culture and success.
Speaker 1:I know the hotel environment is so different now, but generally do you think hotel employees, executives, stay with one team for most of their careers? It seemed like, especially when you were working for Marriott I know this is a while ago now, but a lot of people you worked with had been there for like 10, 20 years Like you don't switch back and forth, you don't switch brands, you kind of stay in the brand, work your way up.
Speaker 2:There's truth to it for sure, but when I went into Hilton let's just call it the level of people who had been around for 20 years I was very much the outsider, and I'm not to say that people weren't welcoming, but my day one, my pier set had all. They had two decades of Hilton time behind them. So that was it does make changing a little bit difficult. I think that has probably lost some relevance in the last call it five years, six years. I think the Starwood acquisition for Marriott really shook that company up pretty significantly. A lot of cheese got moved and I think so. There are a lot of people who left Marriott, a lot of people who came in to Marriott, like all of Starwood. So I think that may be less true at Marriott today. Covid, of course, rocks both companies to their core.
Speaker 2:When you furlough 90% of your people and you lay them off, it's a difficult thing to bounce back and then answer your question, matt Do people ever leave Hilton? Do people ever leave Marriott? And it's like, well, they do. When you lay them off for a while, you force people to think differently and consider options. Maybe they wouldn't have thought through.
Speaker 2:So I do think, listen, these are two companies with culture as their heartbeat. It drives who they are every single day. Hilton has one best place to work at least two, maybe three times in the last five years. So people don't want to leave and I think Marriott went through a tough time with the Starwood actually just because it was so much change in the world of HR especially. But I'd be shocked if they don't regain those kinds of awards and that kind of longevity if they ever lost it. But it'll be back for Marriott because it's too core to the company culture that's been around for 90 years Take care of the associate, they'll take care of the guest and then everything all figures itself out. That's the core principle at the heart of Marriott culture and that's not changing. It just might have taken a ding in the last couple of years with a pandemic and the largest acquisition in the business.
Speaker 1:As we said earlier, the story of hotels in America is often the story of brand acquisition. Hotel companies seem to be buying and selling all the time. Is there something specifically about the hotel industry that engenders that?
Speaker 2:Great question. You're going to have to give me these in advance. Ok, the first thing that comes to mind, that is that the product itself, the hotel, has a lifecycle. You build it. It's brand new and shiny and you might build the best hotel in the city. Open it tomorrow. You've got maybe a 10-year run before that shiniest product is pretty worn down from so many travelers coming in and out.
Speaker 2:Does that product then go from being a luxury hotel to a really nice full service hotel? And that forces a brand change and an ownership group might sell the luxury hotel to somebody else who's going to develop it a bit different way or position it differently. You see this a lot lower down the chain. Right, you'll build a courtyard and then, when it's no longer up to courtyard standards, you turn it into a comfort inn. Whole brands go through those same evolutions. Right now, home2 has and for the last three years I think the largest pipeline of new hotel openings in America, like hundreds and hundreds of Hilton Home2s are going to open, and in 10 to 15 years when we should come back on this podcast in 10 to 15 years and look at this how many of those Home2s are still going to be Home2s in 10 to 15 years? Probably not many.
Speaker 1:Tap for Mr Question. Wondery, they loved our analysis of business wars so much that they are giving us full reign to do the next season. What would you choose to be the next focus of business wars? What two companies in opposition to each other would you feature?
Speaker 2:Wow, Taco Bell, and like Zantigo or something Like. How did Taco Bell come from? You know, wait a minute. We think Americans might like Mexican food. I don't know when that started and who their rivals were, but how did that company become synonymous with the drive through taco? Was there a rival for Taco Bell at any point?
Speaker 1:There had to be. I'm sure there are regional ones that popped up, especially California, but none of them made it. None of them made it to that level.
Speaker 2:How about the fast food hot dog mat? Why is it always about the burger?
Speaker 1:Good question why did this country turn its back on the fast food hot dog?
Speaker 2:Other than Nathan's? Can you think of a hot dog that's even known nationally Hebrew national as a product but not as a fast food?
Speaker 1:Not as a retailer. No, no, wow, this is a good business idea. We should do it.
Speaker 2:What are we wasting our time doing a podcast for it's going to start a hot dog fast food company.
Speaker 1:God, my parents tell me that every day it's great to see and talk to you, and I will talk to you very soon, thank you.