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Why Marriott, Hilton and Hyatt Don't Actually Own Most of Their Hotels | WSJ The Economics Of

Video vocabulary

operator

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US / ˈɒpəreɪtə(r) /

UK / ˈɑ:pəreɪtə(r) /

A2
  • noun
  • Someone who operates or controls a machine
  • Person whose job it is to connect phone calls

like

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US / laɪk /

UK / laɪk /

A1
  • adjecitve
  • Being equal in status or kind to something else
  • Similar; the same
  • adverb
  • For example
  • preposition
  • Used as a filler; used to ad emphasis
  • In a way similar to the way something is done
  • Such as; for example
  • verb
  • To want to
  • To find something pleasing; to prefer something

thirty

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US / 'θɜ:tɪ /

UK / ˈθə:ti /

A1
  • number
  • 30

different

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US / ˈdɪfrənt /

UK / ˈdɪfrənt /

A1
  • adjecitve
  • Not of the same kind; unlike other things

own

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US / əʊn /

UK / on /

A1
  • adjecitve
  • Belong to oneself
  • determiner
  • Yours, his, hers, etc.; not belonging to another
  • pronoun
  • (Something) belong to myself
  • verb
  • To have something as your property

similar

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US / ˈsɪmələ(r) /

UK / ˈsɪməlɚ /

A1
  • adjecitve
  • Nearly the same; alike

people

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US / 'pi:pl /

UK / ˈpipəl /

A1
  • noun
  • Persons sharing culture, country, background, etc.
  • Men, Women, Children

happen

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US / 'hæpən /

UK / ˈhæpən /

A1
  • verb
  • To take place or occur

commonplace

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US / ˈkɒmənpleɪs /

UK / ˈkɑ:mənpleɪs /

C1
  • adjecitve
  • Being average or ordinary

case

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US / keɪs /

UK / kes /

A1
  • noun
  • Container used to carry things, e.g. clothes
  • Set of facts about a crime
  • Set of facts about an event
  • Example or instance of something
  • verb
  • To find out about a place, as in planning to steal

block

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US / blɒk /

UK / blɑk /

A2
  • noun
  • Solid piece of material used for building
  • A piece of wood, chocolate etc.
  • Hard piece of wood, stone etc. with straight edges
  • Building made up of offices or apartments
  • Area of a city divided by four streets
  • verb
  • To stop from going forward or making progress

hire

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US / ˈhaɪə(r) /

UK / haɪr /

A2
  • noun
  • Short term rental of something e.g. car, phone
  • verb
  • To give a job to someone in exchange for pay
  • To give the use of something in exchange for money

fly

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US / flaɪ /

UK / flai /

A1
  • noun
  • Common flying insect, sometimes blue in color
  • Opening with fold of cloth hiding zipper on pants
  • verb
  • To move in the wind, e.g. a flag
  • To move at a high speed
  • To travel in a plane, helicopter, balloon etc.
  • To pilot people or items by plane
  • To travel through the air using wings

that

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US / ðæt /

UK / ðæt, ðət /

A1
  • adjecitve
  • The person or thing being talked about
  • Used to identify something both the speakers know
  • adverb
  • Used to reinforce adjectives and adverbs
  • To such a degree
  • conjunction
  • Used to connect a noun clause
  • Used to introduce an adverbial clause
  • Used to introduce a noun clause
  • determiner
  • Used as a noun to refer to something
  • pronoun
  • Referring an object far away
  • Used to refer to the relative pronoun ‘which’

down

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US / daʊn /

UK / daʊn /

A1
  • adjecitve
  • Being sad, sick, or unhappy
  • Not operating, working, or functioning as expected
  • adverb
  • In a sitting or lying position
  • Towards or on the ground, floor, or bottom
  • Written or copied onto a piece of paper or book
  • noun
  • A period of play in American Football
  • The soft, smooth hairs that cover a bird's body
  • preposition
  • Along something's path, course, or direction
  • Going from a higher position to a lower position
  • verb
  • To eat or drink very quickly and without stopping

what

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US / wɒt /

UK / hwɑt, hwʌt, wɔt, wʌt,hwət, wət /

A1
  • pronoun
  • Thing or things that; the same kind as
  • Used to emphasize something you are about to say
  • adjecitve
  • Used to refer to a particular amount, or number
  • Used to place emphasis on a particular quality
  • adverb
  • To a certain degree
  • determiner
  • Question words used for asking for information
  • exclamation
  • Used to express excitement, shock, or surprise
  • Used to ask people to repeat something they said

then

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US / ðen /

UK / ðɛn /

A1
  • adverb
  • A time that is not now
  • Following another thing in time or arrangement
  • Following on reasonably from what was just stated
  • At that time, not now

mean

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US / mi:n /

UK / min /

A1
  • adjecitve
  • Being good at
  • Nasty; unkind
  • Not liking to spend money; cheap; stingy
  • noun
  • Average of a set of numbers
  • verb
  • To express a particular idea or thought
  • To intend to do something in particular
  • To have a particular meaning or value

independent

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US / ˌɪndɪˈpendənt /

UK / ˌɪndɪˈpɛndənt /

A2
  • adjecitve
  • Making your own decisions; acting by yourself
  • noun
  • A person not connected to a political party

chicago

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US / ʃɪ'kɑ:gəʊ, -'kɔ:- /

UK / ʃɪ'kɑ:ɡoʊˌ -'kɔ:- /

A1
  • proper noun
  • A city in northeastern Illinois, on Lake Michigan; population 2,853,114 (est. 2008). Chicago develop

before

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US / bɪˈfɔ:(r) /

UK / bɪˈfɔr,-ˈfor /

A1
  • adverb
  • At a time earlier than the present; previously
  • conjunction
  • In advance of something happening
  • preposition
  • In front of someone or something

fall

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US / fɔ:l /

UK / fɔl /

A1
  • noun
  • Season after summer and before winter; Autumn
  • A drop in amount; decrease
  • Dropping from a standing position to the ground
  • verb
  • To drop in amount; to decrease
  • To come down from a higher position suddenly
  • To go from standing to the ground, by accident

commodify

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US / /

UK / /

A1
  • transitive verb
  • Turn into or treat as a commodity.

model

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US / ˈmɒdl /

UK / ˈmɑ:dl /

A2
  • adjecitve
  • Being an excellent example of
  • noun
  • Person who wears fashion to show it to the public
  • A small scale copy of a full original
  • verb
  • To wear and display clothes at a fashion show
  • To make a small scale copy of a full original

decade

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US / ˈdekeɪd /

UK / ˈdɛkˌed, dɛˈked /

B1
  • noun
  • Period of 10 years

expertise

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US / ˌekspɜ:ˈti:z /

UK / ˌekspɜːrˈtiːz /

B1
  • noun
  • The special knowledge that an expert has

departure

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US / dɪˈpɑ:tʃə(r) /

UK / dɪˈpɑrtʃɚ /

B1
  • noun
  • Act of leaving a place, to start a journey
  • Starting something new or doing it in a new way

competitor

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US / kəmˈpetɪtə(r) /

UK / kəmˈpɛtɪtɚ /

B1
  • noun
  • Someone taking part in race, business, etc.

economic

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US / ˌi:kəˈnɒmɪk /

UK / ˌɛkəˈnɑmɪk, ˌikə- /

A2
  • adjecitve
  • Concerning trade, industry, and money

nor

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US / nɔ:(r) /

UK / nɔr /

A2
  • conjunction
  • Not this or that; also not

world

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US / wɜ:ld /

UK / wɜrld /

A1
  • noun
  • All the humans, events, activities on the earth
  • Political division due to some kind of similarity

away

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US / ə'weɪ /

UK / əˈwe /

A1
  • adjecitve
  • Not present
  • adverb
  • Disappear completely
  • Doing something with a lot of energy
  • Not here; far from here; in a different direction
  • To a different area, location

behind

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US / bɪˈhaɪnd /

UK / bɪˈhaɪnd /

A1
  • adjecitve
  • Concerning a later or slower time than expected
  • Being in a losing position in a sporting event
  • Being in the past; old fashioned
  • adverb
  • Remaining
  • noun
  • The part of the body that one sits on
  • preposition
  • At or toward the back of someone or something
  • Supporting or helping someone

have

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US / həv /

UK / hæv /

A1
  • verb
  • To drink, smoke, eat or use something
  • To experience the effects of something
  • To organize an event, or join in an activity
  • To own, possess, or hold something
  • To cause to happen or produce a particular effect

hundred

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US / 'hʌndrəd /

UK / ˈhʌndrɪd /

A1
  • number
  • 100

see

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US / si: /

UK / si /

A1
  • verb
  • To go on a date with someone
  • To predict whether something is, or will be true
  • To understand what someone says
  • To use your eyes to look at something
  • To visit a place often for sightseeing or pleasure
  • To visit or meet with someone
  • To find out by waiting or looking
  • To watch (a game, movie or TV show)

marriott

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US / mə'ru:n /

UK / məˈrun /

A1

with

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US / wɪð /

UK / wɪð, wɪθ /

A1
  • preposition
  • As an employee of a certain company
  • Against something or someone
  • By using something as a means
  • Due to; because of
  • Including
  • Possessing as a feature
  • Related to
  • (Of the manner/attitude by which you do something)
  • Used to express that people or things are together

one

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US / wʌn /

UK / wʌn /

A1
  • pronoun
  • You; we; people in general; someone
  • The thing or person previously referred to
  • adjecitve
  • Used to refer to people generally
  • Being a strong example of (something mentioned)
  • number
  • Number 1

big

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US / bɪɡ /

UK / bɪɡ /

A1
  • adjecitve
  • Popular
  • Serious
  • Large

the

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US / ðə /

UK / ðə /

A1
  • article
  • Used to refer to something already mentioned
  • Used to show there is only one of something
  • determiner
  • Used to describe all of a family

this

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US / ðɪs /

UK / ðɪs /

A1
  • adjecitve
  • Used to indicate something already been discussed
  • Used to indicate something happening around now
  • adverb
  • An indication by a physical motion or gesture
  • A specific amount of
  • determiner
  • Person, thing, or idea near you
  • pronoun
  • Person, thing that has already been discussed

follow

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US / ˈfɔləu /

UK / ˈfɑlo /

A1
  • verb
  • To come after someone; be guided by someone
  • To support someone, e.g. singer or comedian
  • To be the logical result of something
  • To happen after something else happens
  • To believe a set of values or a moral teacher
  • To understand something happening or being said

run

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US / rʌn /

UK / rʌn /

A1
  • noun
  • Journey between two places made by ship or car
  • Series of similar things or successes and failures
  • Act of running; exercise of running
  • verb
  • To depart or travel according to a schedule
  • To cause an animal to move in a certain direction
  • (Of an engine) to be operating
  • To start or use a computer program
  • To flow in a certain direction, like a liquid
  • To manage or operate a business
  • To operate or drive something
  • (Of a road) to go from one place to another
  • To move your legs faster than walking

three

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US / θri: /

UK / θri /

A1
  • number
  • Number 3

how

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US / haʊ /

UK / haʊ /

A1
  • adjecitve
  • To what degree? in what amount?
  • adverb
  • (Used to explain the way to do something)
  • exclamation
  • For what purpose or reason?
  • (Used to ask someone or something's condition)

might

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US / maɪt /

UK / maɪt /

A1
  • other
  • Used to politely request an action
  • Used to express that something could happen
  • Power, strength, force or influence

than

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US / ðən /

UK / ðən /

A1
  • conjunction
  • Used to compare two things that are not equal

you

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US / jʊ /

UK / ju /

A1
  • pronoun
  • Person someone is speaking or writing to
  • Person or people in general

also

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US / 'ɔ:lsəʊ /

UK / ˈɔlso /

A1
  • adverb
  • In addition; too; in a similar way

year

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US / jə: /

UK / jɪr /

A1
  • noun
  • Unit of time equal to 12 months or 365 or 366 days
  • Used to refer to the age of a person

make

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US / meɪk /

UK / mek /

A1
  • noun
  • Product made by a particular company; brand
  • verb
  • To arrange or prepare something e.g. dinner
  • To get to (a place) on time
  • To gain the status of (teacher, lawyer, etc.)
  • To create something by putting things together
  • To earn a certain amount of money at a job
  • To cause or force a person to do something
  • To cause something to happen or be formed

order

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US / 'ɔ:də(r) /

UK / ˈɔrdɚ /

A1
  • noun
  • Religious or social group, as of nuns
  • Instructions to others to do what you want
  • State in which things are neat and organized
  • What you ask to buy, e.g. food in restaurant
  • Social or political control of an area
  • verb
  • To put things in a sequence, e.g. a, b, c
  • To give instructions to others to do what you want
  • To ask for something you want to buy, e.g. a meal

ago

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US / əˈgəʊ /

UK / əˈgoʊ /

A1
  • adverb
  • At a specified length of time in the past

pay

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US / peɪ /

UK / pe /

A1
  • noun
  • Money you receive from your job, work, etc.
  • verb
  • To give money for goods or work done
  • To give (attention, respect, etc.) to
  • To be punished or suffer for something you did
  • To make (a visit) to a person or place

very

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US / 'verɪ /

UK / ˈvɛri /

A1
  • adjecitve
  • Concerning a large degree or amount
  • adverb
  • A lot; much; many
  • Used to stress or emphasize a noun

way

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US / weɪ /

UK / we /

A1
  • adverb
  • Used to emphasize the amount of something
  • noun
  • Particular aspect of something being thought about
  • One of various choices that could be made
  • Particular existing condition or state
  • (Often long) distance or length of time
  • How something is done
  • Route to go to a place
  • Small street
  • Usual behavior, emotions or habits of someone

who

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US / hu: /

UK / hu /

A1
  • pronoun
  • Which person
  • Used to introduce information about people

build

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US / bɪld /

UK / bɪld /

A1
  • noun
  • Your physical shape; physique
  • verb
  • To establish e.g. a reputation, over time
  • To construct a house, office, factory

customer

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US / ˈkʌstəmə(r) /

UK / ˈkʌstəmɚ /

A2
  • noun
  • Someone who buys goods or services from a business

hotel

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US / həʊ'tel /

UK / hoˈtɛl /

A1
  • noun
  • Place where people can stay when traveling

all

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US / ɔ:l /

UK / ɔl /

A1
  • adverb
  • Completely; totally
  • determiner
  • Being every one of something
  • pronoun
  • 100% of something; the complete amount

triple

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US / ˈtrɪpl /

UK / ˈtrɪpəl /

B2
  • noun
  • Group or set of three

responsibility

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US / rɪˌspɒnsə'bɪlətɪ /

UK / rɪˌspɑnsəˈbɪlɪti /

A2
  • noun
  • Job, task or thing you are expected to look after
  • A thing to be done because it is morally correct
  • State of being dependable or reliable

country

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US / ˈkʌntri /

UK / ˈkʌntri /

A1
  • noun
  • An area of land that is controlled by a government
  • Open land that is away from towns and cities

its

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US / ɪts /

UK / ɪts /

A1
  • adjecitve
  • Referring to or belonging to ‘it’
  • determiner
  • Of something; belonging or related to something
  • other
  • Possessive form of “it”

move

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US / mu:v /

UK / muv /

A1
  • noun
  • Act of moving a playing piece in chess, etc.
  • An action; doing something
  • Step taken to achieve a goal
  • verb
  • To cause someone to have certain emotions
  • To cause something to change to a different place
  • To change where people live or a business operates
  • To take action to do or achieve something

hilton

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US / 'hɪlbɪlɪ /

UK / ˈhɪlˌbɪli /

A1

territory

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US / 'terətrɪ /

UK / ˈtɛrɪˌtɔri, -ˌtori /

B1
  • noun
  • Area of land defended by an animal
  • Area of particular knowledge or experience
  • Area owned or controlled by a government, person
  • Area of land with a specific defining feature

their

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US / ðɛː /

UK / ðer /

A1
  • determiner
  • Belonging to them

look

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US / lʊk /

UK / lʊk /

A1
  • noun
  • Person's beauty or physical attractiveness
  • Particular style of dress, clothes, or appearance
  • The way someone, something appears to be
  • Act of searching for or examining something
  • verb
  • To appear to be; seem

they

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US / ðeɪ /

UK / ðe /

A1
  • pronoun
  • Two or more people, animals, or things

show

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US / ʃəʊ /

UK / ʃo /

A1
  • noun
  • False display of love, emotion or action
  • An event for displaying or promoting goods
  • Play, opera or theater production
  • Presentation that is broadcast on TV or radio
  • verb
  • To be easily seen or displayed
  • To display your emotions or feelings
  • To let someone see something; display
  • To explain or teach how something is done
  • To lead someone somewhere; point them to something
  • To prove something to be true, correct
  • To reveal or allow something to be seen

real

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US / rɪəl /

UK / ˈriəl, ril /

A1
  • adjecitve
  • Actually existing or happening, not imagined
  • Being important or special

familiar

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US / fəˈmɪliə(r) /

UK / fəˈmɪljɚ /

A2
  • adjecitve
  • Well-known or easily recognized

estate

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US / ɪˈsteɪt /

UK / ɪˈstet /

A2
  • noun
  • A large piece of land, usually with a large house
  • Group of houses all built at the same time

from

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US / frəm /

UK / frʌm, frɑm,frəm /

A1
  • preposition
  • Starting at a particular place, time or level

owner

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US / ˈəʊnə(r) /

UK / ˈoʊnə(r) /

A1
  • noun
  • Person who owns or has something

brand

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US / brænd /

UK / brænd /

A2
  • noun
  • A mark burned on an animal to show who owns it
  • Product made or designed by a named company
  • verb
  • To burn a mark on an animal to show who owns it
  • To describe someone as a liar, coward, etc.
  • To give a famous name to a product or service

industry

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US / 'ɪndəstrɪ /

UK / ˈɪndəstri /

A1
  • noun
  • Hard work; being busy working
  • Factories or businesses that make certain products

money

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US / 'mʌnɪ /

UK / ˈmʌni /

A1
  • noun
  • Coins or notes we use to pay for things

something

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US / ˈsʌmθɪŋ /

UK / ˈsʌmθɪŋ /

A1
  • adverb
  • In some degree or measure
  • noun
  • a person or thing of some value or consequence
  • pronoun
  • Thing that is not yet known or named
  • Approximately

back

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US / bæk /

UK / bæk /

A1
  • adjecitve
  • Farthest from the front e.g. in a classroom
  • adverb
  • Have returned to a place you were before
  • noun
  • The part of a chair that the upper body leans upon
  • Location at the rear of something
  • The reverse of side something
  • Area on the rear of your body
  • verb
  • To bet money on something
  • To go backwards in a car
  • To support and encourage someone or some cause

over

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US / 'əʊvə(r) /

UK / ˈovɚ /

A1
  • adverb
  • Finished; no longer happening
  • Towards the ground/away from a standing position
  • noun
  • A set of six consecutive balls bowled in cricket
  • other
  • Finished
  • preposition
  • Showing the relation when a thing is above another
  • On or covering something
  • Above or across something
  • More than you need
  • From one side to the other
  • In the direction of; toward

most

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US / məʊst /

UK / most /

A1
  • adverb
  • Very; extremely
  • Greatest possible degree
  • pronoun
  • Nearly all of something

guy

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US / ɡaɪ /

UK / ɡaɪ /

A1
  • noun
  • Man; boy; any person

nine

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US / naɪn /

UK / naɪn /

A1
  • number
  • 9

think

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US / θɪŋk /

UK / θɪŋk /

A1
  • verb
  • To have an idea about something without certainty
  • To have an idea, opinion or belief about something

affect

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US / ə'fekt /

UK / əˈfɛkt /

A2
  • verb
  • To cause a change in something else

name

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US / neɪm /

UK / nem /

A1
  • noun
  • What something or someone is called
  • verb
  • To state what someone is called, e.g. John

and

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US / ənd /

UK / ənd, ən,ænd /

A1
  • conjunction
  • Used to refer to two or more things
  • Plus; in addition; on top of that
  • Used to introduce an action that follows another

flag

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US / flæɡ /

UK / flæɡ /

A2
  • noun
  • Piece of cloth representing a team, country etc.
  • verb
  • To indicate something should get special attention
  • To work, run etc. more slowly or with less power

large

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US / lɑ:dʒ /

UK / lɑ:rdʒ /

A1
  • adjecitve
  • Big; of great size; broad, tall, wide, or fat

front

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US / frʌnt /

UK / frʌnt /

A1
  • adjecitve
  • Opposite of back; the forward part of an object
  • noun
  • Behavior not showing a person's true feelings
  • Area where fighting in a war is happening
  • Place where air of different temperatures meets
  • verb
  • To have the forward part facing something
  • To lead a group of people, usually a band

shift

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US / ʃɪft /

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A2
  • adjecitve
  • (Of work) starting at a certain time, as at night
  • noun
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  • verb
  • To change in position or direction
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imagine

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  • verb
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true

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try

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  • noun
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  • verb
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strategy

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actually

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  • adverb
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past

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day

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use

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team

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sell

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generally

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playbook

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C2

hospitality

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can

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boom

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size

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not

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want

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good

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decision

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member

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same

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business

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but

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seven

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now

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really

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deliberate

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why

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player

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eighty

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for

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trace

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just

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well

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time

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  • Period in history or the past
  • Something measured in minutes, hours, days, etc.
  • How long an event takes; duration
  • verb
  • To check speed at which music is performed
  • To choose a specific moment to do something
  • To measure how long an event takes, e.g. a race
  • To schedule something to occur at a specific moment
  • Subtitles section
  • There is something going on in the hotel industry.
  • Just look at this one block in Chicago.
  • These might seem like three different hotels
  • but they're actually all Marriott.
  • Over the past twenty years
  • Marriott has more than tripled in size.
  • And we can trace this boom back to a decision Marriott made decades ago to move away from the real estate business
  • and instead commodify its name,
  • Well, of course, as you might imagine
  • we think we're the best.
  • We are the largest.
  • Eighty seven hundred hotels in one hundred and thirty nine countries and territories
  • really showing expertise around the world for what we think hospitality means,
  • And you can see the same happening for competitors like Hilton and now Hyatt
  • because they're also following a similar playbook,
  • It's commonplace to actually invest behind real estate
  • in order to build a brand
  • and then over time sell down real estate,
  • We wanted to do it in a very deliberate way.
  • With this business model
  • the brands don't have to run most of the hotels that fly their flags
  • nor do they have to pay for them,
  • In most cases, that responsibility falls on people like this guy,
  • So, independent owner operators like us generally own the hotels
  • and employ the team members,
  • Most people think that they are Marriott employees.
  • They're generally MCR employees.
  • So why did this shift happen?
  • And how does it affect the customers?
  • This is the economics of hotel chains.
  • The business today looks like this.
  • These are the names you're familiar with.
  • Marriott, Hilton, Hyatt.
  • And these are the players who actually front the money to buy the real estate
  • hire the employees, and run the day to day operations,
  • Owners pay to use these big hotel names
  • referred to as flags in the industry.
  • And, it's a departure from
  • the tried and true strategy of decades before,
  • If you go back to the fifties
  • everything was owned, operated
  • and flagged by the same person,
  • MCR is the third largest hotel owner operator behind these two real estate investment trusts.
  • We get all the revenue
  • and then we get whatever profits are left over
  • and we pay Marriott or Hilton a franchise fee to be part of their system,
  • That means hotel brands mainly have money to gain with every new hotel,
  • Because they were not on the hook for the asset cost
  • they were able to scale up their brands much faster.
  • Moving to franchising removed a lot of the financial risks associated with real estate,
  • One of the things we realized as those hotels got more and more popular
  • is that by building them all on balance sheet
  • and with dealing with economic cycles
  • we were constrained,
  • Our growth was constrained.
  • Now, Marriott and Hilton each own less than one percent of their properties
  • while Hyatt owns about two percent,
  • But in shifting to this strategy
  • major hotel brands now have to focus on a new customer.
  • The owner is the one that puts the brand onto the hotel
  • and that's what drives franchise fees to the brand.
  • Those fees can amount to anywhere from five to fifteen percent of what the property brings in,
  • So, the brands have to prove that having the name is worth it,
  • Hotel brands say.
  • It more than pays for itself.
  • Because in addition to data on how lobbies should look and what amenities to have
  • they also provide data to help the owner get the most money for each room each night,
  • At the end of the day
  • you are saying, what will the market bear?
  • When there's a Taylor Swift concert coming into a market
  • we see the rates literally out to forty miles away go crazy.
  • In dynamic cities, the price of a room could change multiple times in one day,.
  • We get questions all the time and they say
  • I was going to book for one hundred and ninety nine dollars
  • and now the rate just went up to two hundred and forty nine dollars,
  • You know, then you should have booked at the one ninety nine,
  • The prices are fleeting.
  • Every one of our full service hotels has a revenue manager
  • and they take account of what's going on in that particular marketplace,
  • And these systems also calculate rates that optimize for the hotel's bottom line,
  • We don't want to sell out our hotels just on a Tuesday
  • because then that leaves us exposed on Wednesday,
  • So we may sell you that room at an extraordinarily high price because
  • what we really want is for you to book Monday to Wednesday
  • or Tuesday to Thursday,
  • This helps make up for less profitable dates.
  • We're giving the rooms away on Sundays.
  • It is the worst night of the week because business travel does not really occur on Sundays
  • and neither does leisure travel,
  • Flying a flag can also help owners target wider pools of hotel customers
  • with better fees for booking platforms like Expedia and Booking.com,
  • So if you buy a hotel room via Expedia for a Marriott hotel
  • we pay a lower Expedia fee
  • we the owner.
  • But analysts say, an even bigger draw are hotel loyalty programs,
  • Marriott and Hilton each have over one hundred and eighty million members,
  • Hyatt has more than forty million.
  • And thanks to points, guests are incentivized to shop within these programs,
  • The points have essentially become currency.
  • Which can help increase the customer base for flagged hotels
  • in smaller markets,
  • If you're in a secondary or tertiary market
  • you generally fly a flag because that brings people to your building
  • because they want the points,
  • The idea is you earn the points in Corpus Christi or in Yuma
  • Arizona, and then you redeem them in Miami.
  • Today, two thirds of all hotels in the U.S.
  • are branded, but, the franchise model isn't always beneficial,
  • For owners in high demand markets
  • like those with more leisure travel
  • independence might be a better option.
  • The highest performing hotels in Manhattan are independent hotels,
  • You have a greater elasticity of demand.
  • So usually the highest performing hotels are smaller.
  • But brands do operate some properties
  • mainly in this tier, whereas franchising mostly happens in these,
  • Those operations have dramatically fewer touch points and offerings
  • by virtue of the fact that they're designed for a person who wants a great room to stay in
  • a quick option for breakfast
  • but they don't need other things,
  • They don't need a ballroom
  • they don't need a specialty restaurant
  • they don't need a spa.
  • In the luxury tier, those amenities are expected.
  • creating more complex logistics.
  • That's why, most luxury hotels are still operated by the hotel brand itself,
  • With respect to most other full service and luxury properties and resorts
  • we would prefer to manage because we want to control all aspects of the delivery of the guest experience,
  • Specifically at the luxury end
  • we do overwhelmingly manage those hotels.
  • And we wouldn't, for example
  • be talking about franchising an addition hotel.
  • What having this range of brands gives us
  • the ability to appeal to our customer for every experience
  • and location that they want,
  • And that is really important for Bonvoy.
  • In some rare cases, hotel brands will still strategically purchase a property,
  • Marriott bought this W Hotel in New York to use it as an incubator for new ideas and designs,
  • And Hyatt purchased Hotel Irvine.
  • We bought the hotel.
  • We completely renovated it.
  • We will eventually sell that hotel.
  • But by and large, more hotels are outsourcing the owning and operating of their properties
  • increasing the volume of branded properties offered to consumers today,
  • The customer now has more choices.
  • They have more places to both earn and redeem.
  • But what you have seen in the past twenty five years is a consolidation,
  • There are really three or four big hotel flag families now.
  • And looking at the properties in construction
  • the number of branded hotels is only set to increase.
  • Thanks for watching.
  • If you liked this, we have a deeper dive into the specific economics of Hyatt
  • and we have a full interview with the CFO of Marriott,
  • Click the link here or in the description to watch on wsshea.com,