Travel2020: What’s luxury got to do with it? Just ask Ted Teng
Monday, December 17, 2018
Ted Teng, president and CEO of Leading Hotels of the World, has been at the helm of the luxury hotel branding organization since 2008 and oversees the management of this branding through its more than 430 hotels. The properties all bring unique histories and their own styles of architecture. Some 88 percent are family-owned and nearly all are independently managed.
We talked with Teng in a roundtable discussion last month held at the annual Signature Travel Network conference in Las Vegas.
Q. Tell us a bit about yourself in your tenure at Leading — what you do, how you got here …
A. In 2002, I was an unlikely candidate to join Leading at the time, because I really didn’t come from luxury or independent hotels. So, as I started with the company, I naturally wanted to listen more than pontificate. I needed to give people some direction as to how I was doing that. And, as I examined the company, I really wanted to connect past, present and future. If, for example, I was merely joining a startup, I wouldn’t be looking closely at its history.
But Leading at the time was 80 years old and had quite a legacy. In my interview conversations, they were very proud of their history. But they were also concerned about whether they’d be around another 80 years. The business model seemed to be challenged every day, disrupted every day.
So, the reason they hired someone like me was to obtain a fresh pair of eyes. I developed five guiding principles and this was one of them: to give some assurance that what created our past success would continue. Also, we would have to continue to be selective as to what we kept and did not keep.
I remember Bill Marriott’s book "A Spirit to Serve." In it, he talks about one of the most important tasks for a leader — to think about what to keep and what to build.
I think that gave me the inspiration that, as we start assignments, we should think about not just trashing the past and saying everything is about going forward. It is about going forward but there are a lot of things are worth preserving. The question is what to preserve and what is of no future value. And it works. In a company like mine, which has been very conservative, if I didn’t preserve I think I probably would have been thrown out.
Ted Teng, President and CEO of Leading Hotels of the World, talking to travel advisors and journalists.
Q. The description on your company page says the following: "The Leading Hotels of the World is a collection of authentic and uncommon luxury hotels comprising more than 400 hotels in over 808 countries. Our hotels embody the very essence of their destinations." My question is, as this description focuses on individuality and authenticity and with so many brands appearing in the hotel world, wouldn’t you call Leading the anti-brand?
A. So, in our industry, brand is really short for chain brands. Because if you think about it, if I say Villa D’Este, it’s a brand — a single-asset brand. When I was with Starwood, St. Regis was a single-asset brand.
Brand doesn’t have too many meanings. But generally, a brand in this context denotes a chain brand. Individually branded hotels are not known as brands. So, there is a little bit of a disconnect here.
I do think of our hotels at Leading as a brand. I don’t necessarily think of Leading as an anti-brand. I certainly think we are the anti-formulaic brand. That’s not to disrespect chain brands. I used to work for some of them.
The strength of a chain brand has to do with a promise of consistency. And that was a big promise when the chain brands were doing really well. That promise works really well when consumers are uncertain about the quality, about what that they may get.
When you promise consistency it’s very reassuring and securing for consumers. The trouble with that is that with consistency can also come sameness. So that’s the flip side of the coin. The good news is that it will be the same. The bad news is that it will be the same.
For Leading, our promise is that the properties will be consistently great, but in their own way — and they won’t be the same.
Certainly, it wasn’t born that way. It was really created 90 years ago by 30 hotels, European hotels, that wanted to pull their resources together and felt they had to tap into this developing emerging market known as the USA. Imagine that. The USA as an emerging market. Think back to, say, “Downton Abbey.” That’s when Leading was created. Europeans had the castles and Americans had the cash.
So, we were created really just to promote the hotels at that time. If you think back 40 years, most luxury hotels were individually branded. It wasn’t really until the Four Seasons and Ritz Carltons came along that the chain brand became popular in the luxury world.
In Europe, even today, most luxury hotels are still individually branded hotels. For Leading, 85 percent of our hotels are family owned and operated. Why would that make a difference to a consumer?
It makes a difference in the sense that owner-operators tend to hire managers with a local tie. And managers with local ties tend to understand the local culture and also can relate better to the employees. You travel to experience the local culture, you travel to experience what’s real and authentic.
For our hotels, this is their indigenous face, their way of expressing their local hospitality. And they know how to do that. Of course, chain brands are also very profitable business models, most of them.
Four Seasons does a great job creating the Four Seasons experience around the world. They don’t always reflect the local culture well, however. But what you get is a very consistent Four Seasons experience, which is great, but it’s not necessarily very local.
These luxury chains also tend to hire designers from around the world, famous ones, who impart an international feel to the spaces. Our hotels tend to be more local and neither of these is a good or a bad experience. It depends on what the consumer is looking for. But I find more and more consumers are now looking authentic, original experiences and are less concerned about the lodgings being consistent. I think we occupy a nice, rich, unique spot in terms of offering that to travelers.
Q. Let’s talk about the travel trade. Can you speak about Leading’s approach to working with travel advisors?
A. Sure. So, if you look at the fact that we’re going to cross the billion-dollar mark this year, if you look at revenue produced by our 430 hotels, it’s a big deal. It’s just a number, but it’s a big number. And about a third of it comes from travel trade; others are from corporate groups.
I had a lunch meeting with a travel agency owner and asked whether, in his travel agency business, customer retention is a high priority. He said absolutely. Customer acquisition — you get it from word of mouth from time to time. But retention is what we have to do to survive in this business.
So, in terms of customer retention, we ask advisors what can we, as suppliers, do for them? Is it supplying inventory when there is isn’t enough in the open market? Is it giving the best rate? Is it offering upgrades? Amenities? Is it acknowledgement of the travel advisors? Or is it, on the other side, the financial side — the overrides, additional commissions? He looked at me and said “all of the above,” and I understand.
From the suppliers’ standpoint, we have to have the relationship with the travel advisor to know what, at a particular moment, is going to make a difference for them. It may be clearing inventory. But when the need is clearing inventory, the rate is not as sensitive.
If it is offering an upgrade, because this is a loyal client, that comes with an acknowledgement of the travel advisor. So, in the conversation, it’s contextual, it depends on the situation. I would love to be able to offer all of the above all of the time, but that may not always be possible.
For suppliers it’s important to know what has changed and what hasn’t in this part of the industry. In terms of what hasn’t changed, it’s to make the travel advisor a hero in front of his or her client. The how of doing that is a little bit different from time to time, and travel advisors are well-advised to understand that. Thus, we’re always asking how we can make them a hero so that they can be successful, so that in turn, we’ll be successful?
Q. Is there what you might call an "experiential push" within the Leading Hotels to try promote the advantages of family owned lodging businesses?
A. It’s actually not a push to bring this consideration before the hotels. They’re telling us what they’re capable of and our role is to tell their stories.
And then there is their valuable expertise. For example, shopping. Would you like to know what our general managers, as consumers, shop for, and how? I was in Florence. Our GM at the property where I stayed left me a card before I left: "I thought about giving you a gift. But then you’ll have to put it in your suitcase and you’ll be carrying bags already full and it will be very inconvenient. So, here’s a card," he said. "Here’s my tailor’s name. He’ll be coming to visit NYC soon. He’ll call you and he’ll make a shirt for you."
So, wow! A Florentine shirt made in Florence but measured in NYC. How great is that? Our GMs, you might say they are mavericks, nonconformists. But that’s what makes them great.
But when it comes to things you know no one has perhaps even thought of, they’re really, really great. So, the way we work with our hoteliers is often: We have a crazy request. Can you do this? Of course, they say. So, yes, consumers are looking for that. It may even be in the mundane things.
Sometimes they want to have a family dinner, but they don’t wont to have it in the restaurant. They want the chef to come and cook it in their suite. They want things like that, things that aren’t even on the menu. And our hotels, of course, love to accommodate that. We often use a term for this: co-creating. The customers and the hotels create it together.
Q. How are you training the travel trade when it comes to articulating the brand of so many individual hotels, especially as travel consultants must try to match their clients with the right property?
A. It is a challenge in terms of making more efficient the task of describing what a chain brand is. Our targeted customer or consumer for Leading is what we call “the curious traveler.” Curious travelers travel to discover. Discovery is part of their experience.
So, of course, they don’t have to know exactly what to expect; they just want some entrée. They’re very comfortable with going into a situation where they don’t know exactly what they’re going to get but they’re confident that it will be a wonderful experience. So that’s it for us. That’s one of the ways we describe Leading. We are the museum and our hotels are the masterpieces. We provide access to these masterpieces. What we try to do is curate the right ones.
Q. If we are looking at a collection of family-owned, not chain, hotels with 4.5 or 5-star attributes, how does Leading make these venue choices?
A. Let me give you a sense of it. From a quality standards standpoint, about 20 years ago we created this company LQA — Leading Quality Assurance. Today we no longer own that business, but we still use them. There’s a list of about 850 standards that are applied, you know, in the anonymous inspection.
It’s a full two days that the inspector spends at the hotel, going through all of it. He or she then scores the hotel. We get the report and there’s a required score of at least 80 percent to pass — with our company average now being about 85 percent.
It’s the way we approach this that is special. As a member, you do not have to meet every last one of these standards. You only have to meet 80 to 85 percent of them. So already they are somewhat different. So that to me is on the basic standards part. Of course, it’s not what importantly differentiates them. We use the term “remarkably uncommon” to describe our hotels. That seems to resonate.
How do you say what it is concisely? That they are both different from each other and very, if not vastly, different. They are local, authentic, family-owned. Sometimes that description prompts people to say, "So are they like a little inn somewhere?" Well, no.
For example, our chairman is the proprietor of the Baur au Lac in Zurich. He is the 6th generation owner of the hotel that has been in the same family for 160 years. So, what keeps him up at night? It’s thinking about the 7th generation. And that’s what it’s all about. And there are many hotels that are 3rd, 4th generation owned. All those progenitors really think about is how to preserve the property for the next generation.
Q. Do you have subsets of those properties?
A. We used to have Leading and Leading Small. And Leading Small created more confusion, what with the label "small luxury." When I joined the company, I said it’s tough enough to market one brand. It’s too hard to market two — that is, telling people what is Leading Small vs. Leading.
Some people assumed leading small was limited service. What does that mean? We asked Leading Small if they’d just like to be a Leading Hotel. And 85 percent said sure.
Then we asked the Leading Hotels would you mind if your little siblings joined the "Leading Hotels" brand and again, 80 or 85 percent of them said no problem. So about eight years ago we combined the two in order not to have sort of a subset anymore. That’s who we are and we just have one single brand at this point.
Richard Lebowitz, Senior Vice President, Hotel & Resort Program (right); Teng (middle); and Alex Sharpe, President & CEO of Signature Travel Network (left)
Q. What would you consider to be your competition and how do you respond to them?
A. The way I see it is that competition doesn’t always come from your competitors. Who are my competitors? Well, Preferred, Small Luxury, Relais & Chateaux. They’re my competitors because they look like me, they do similar things that I do, as do even Four Seasons and Ritz-Carlton. And then there’s competition.
Competition to me is somebody offering a certain element of what we do but they don’t do the same thing as we do. If I look at the media of brand endorsement — for example, Forbes, many of the magazines, their awards, even TripAdvisor — they’re competition to what we do today for the hotels. We are really a bundled service for hotels. Sales, marketing, distribution, branding, promotions — we offer all of those together in one membership. By contrast, the company’s sales representative would just do sales, and there could certainly be a distribution system to support you without branding and sales and marketing…
What’s different is that Forbes does inspections without contracting with a hotel. They just go out and do their own inspections and then, if you want it, they rate the hotel and if you want to use that rating, you pay a license fee.
And sometimes hotels use them for training as well. It’s a little bit different than what we do. But you’re right, there are elements of what we do in that. I’m old enough to remember when you bought a stereo you bought components — outboard speakers, a separate amplifier, receiver and tape deck — and even the 8-track stuff. So, today, most people are buying whole music systems. I’m just saying, there are elements of what we do that other people do as well.
Q. How would you define luxury as it relates to Leading?
A. Luxury is in the mind of the consumer. And I think if, especially looking at American consumers, the distinction is welcome — challenging the conventional notion of what is a grand European luxury hotel vs. what is just a luxury hotel. Luxury isn’t just defined in the single dimension of a grand European hotel.
Part of the difference — and I’m generalizing here — is that more of the wealth in the U.S. is self-made versus inherited. That’s a big generalization but it can explain things. Self-made wealthy consumers are as comfortable walking into a Walmart as they are walking into Harry Winston. Luxury has to do with a certain intimate and friendly service. And also, a casualness. But still there’s a richness.
I remember having lunch with an owner and he was telling me, he said, "you know, in this hotel, every single bed is different." And I’m thinking, why would a consumer care, they’re only staying in one room! But for him it was an important trait that could build his relationship with the consumer — that is, to keep them coming back. Sure enough, he’s cultivated quite a celebrity following at that hotel.
A respect for guests and their privacy is a key element. I remember that day I walked by the gym and Lady Gaga was working out there. She had actually requested that they close the gym so that she and her trainer could work out. And they actually said no — explaining that the gym is for all hotel guests. However, this GM told Lady Gaga, if you come around noontime, there’s usually not many people there.
Most hotels would have closed the gym for Lady Gaga. But for them on one level she was just another guest. Not that she’s not important. It’s just that to them every guest is important. So, I don’t know if that gives you a useful example.
Part of it for us is that today, Baby Boomers are our core customer, but we need to start building the future generations. Baby Boomers expect to be given luxury products. Whereas a millennial says, I have my own idea of what luxury is to me. Of course, I’m generalizing greatly here, because there are elements of all traits across all of the age groups. But we feel that we need to tap into a sort of younger profile of consumers going forward.
Q. What is mainstay in terms of locations for member hotels and what is new and emerging?
A. We still maintain a very high percentage in Europe. More than half of our member hotels are there, and we continue to get applications there. But our theme these days is "New is new." It’s strange theme, in a way, but it came from an interview I did with a journalist. She asked me, "So what’s new?"
So, I said new is new. What I mean by that is that there are new destinations that people are visiting, and these are the new source markets for our customers. New destinations represent a threat to our existing hotels because their customers can now go elsewhere, to other regions.
Who would have thought of traveling to Vietnam for a vacation in the ‘70s? Who would have thought of taking a vacation in Croatia in the ‘90s? These new destinations are coming up and people are traveling to those new destinations.
What actually represents a great opportunity for our hotels are the new source markets. Emerging markets certainly have included the Middle East, South America, Brazil, Argentina, China, India — they all represent emerging markets. China in particular is one, in terms of volume. And since our annual convention was in Shanghai, "New is New," was the perfect theme, since the location was both a destination and a source market.
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