MCR Hotels CEO at Skift Future of Lodging Forum 2023

please join us in welcoming chairman and CEO of MCR hotels Tyler Moss in discussion with skiffed founder and CEO rafit Ali [Music] alright folks now comes the best or worst part of the day you guys will decide the the next two interviews are mine this is the Rafa Tower the last hour left for the day so thank you for staying thank you for for being here two very different conversations to come one from uh you don't like to be called hotelier we're going to talk about why you don't like to be called hotelier but Hotel owner investor and then the last one is Catherine Powell who's the global head of Hosting for Airbnb couldn't be more different in terms of businesses but obviously there's a lot of commonality lodging which is staying of humans is definitely the the common part so thank you Tyler for coming you obviously are don't have business currently in Europe working on it working on try to change that trying to change that you're the third largest hotel owner in us correct um that happened over the pandemic you took a contrarian strategy uh of of going all in buying hotels when the whole industry was shut so so explain your contrain strategy there first and why uh when there's blood in the streets that's when you should be buying uh you know this is not some uh Nostradamus esque uh philosophy it's been around for a long time uh the lodging business it's a terrific business the hotel business is great uh you heard one of the speakers say earlier it grows at a four percent kegger uh and has for the last hundred years Supply grows at less than two percent uh those are positive Tailwinds so covid you know if you look at what happened in 911 or even uh farther back in the early 90s and then in the global financial crisis the hotel business always recovered and then some so it's the same concept when everyone else was frozen in panic we made a lot of terrific investments in hotels and software companies Hotel related Investments and how many hotels did you buy during covet I think about 70. and there's still blood in the water or streets due to say Street of water one of those blood in the streets in the streets Chum in the water blood but not a zero interest rate environment so what Joe almost cried on stage the the guy from uh Starwood almost started crying on stage so tell me uh don't be hard on you don't be hard on Joe Joe we love you um what's what's your um sentiment now in terms of buying it's a stopped uh so the FED uh in the U.S has raised interest rates 500 basis points in 12 months uh that is the steepest increase ever uh in the history of the world um and I would say as of about three weeks ago that was definitely annoying uh uh our cost of debt was increasing uh and then out of nowhere comes Silicon Valley Bank uh and I run on the bank and I run on a variety of other Banks and you know Credit Suisse I thought was a terrific Bank apparently not uh so they're you want to hear our story well they've been wiped from the face of the Earth are you a depositor or a borrower Silicon Valley Bank every cent of my money was in Silicon Valley Bank all right well now you're a client of citizens first so now we're a client of UBS which I'm so glad is not Credit Suisse so it would have been the other way would have been so um but three weeks ago uh the world changed and um I am of the opinion that there's going to be some real banking Contagion uh that is going on in the next six months 12 months uh you know that you're going to see other runs on other Banks they might be this small or Regional or mid-sized Banks but there is some real pain in the system uh Silicon Valley Bank bought a lot of uh long dated low interest rate debt right and they got crushed and if you look at Banks balance sheets that's the same thing for almost everybody so uh you know the other shoe is going to fall I think interest rates are about to go back to zero so we're going to be in a high inflation with zero interest rates what is that interest rates are going back to zero The UU maybe not zero one or two but they're they're I mean if you look at the forward yield curve it used to be like this going into 25 and 26 it is now like this uh swaps have come down 125 basis points in the past 10 days uh you know the market is pricing in banking Contagion so that is going to keep deal volume uh lower because it's going to be very hard to borrow right now right with uncertainty so that'll decrease transaction volume but uh if you can buy stuff I think there's going to be good good buys out there so my question is are you buying we are we are we're closing on four hotels next week uh we have about 12 hotels in the pipeline right now and what's uh how are you financing those compared to what you were doing a year ago uh we can still borrow uh we have a bunch of house banks that have been lending to us for the past 20 years uh spreads have gone up they've gone from 250 over sopher to 350 over so far so again annoying uh but not uh catastrophic we bought a big hotel uh about a month ago at a 12 cap so you know there are attractive deals out there but not as many as there were in 2006 or in 2017. and so you are um you're a fan of airport hotels so for those of you who don't know MCR uh actually explain MCR because this is Europe may not they you may not be as known uh in this part of the world as you are in the U.S give a quick overview uh I know we jumped uh quickly into it sure so MCR we own 150 hotels in 37 States uh we are vertically integrated so we're an investment manager uh and a hotel operator so we have about 10 000 employees uh we run the hotels and we operate hotels under about 17 different brands they're showing TWA which is your iconic hotel at JFK terminal 5. we converted the old TWA terminal into a hotel about four years ago I used to be a baggage handler for Delta Airlines at LAX uh it was an amazing job with the light sticks and driving the plane back into the alley loading the l-1011 with the FMC loader yeah he's a total after as you'll see if you go to this hotel you know uh slinging the bags remember those old Samsonite bags that had the two locks on them yes yes you know I'd be wearing knee pads in a narrow body plane at 727 or 57 and you'd fling the thing to The Far Side of the baggage compartment and sometimes if it hit just right it would torque the locks and the bag would pop open um and then we'd have to put all the underwear back in the bag and stuff like that and send it on its way but that was a whole separate story so um I love the TWA project um you know the TWA airline was an iconic Airline it was TWA in Pan Am that really controlled the global Skies TWA was owned by Howard Hughes and he built this building he spoke with arrow serenin once for five minutes and he said I want the greatest airplane terminal the world has ever seen and I don't care how much it cost so if you're an architect that's the greatest commission ever so Arrow serenin designed the building he also designed the St Louis Arch uh the U.S embassy in Grosvenor Square oh the what what's happening is the the microphone is here and you're speaking though so just use that no worries does this work yes can everybody hear me yes this work a little bit better yeah um he designed the U.S embassy in Grosvenor Square uh oh here yes you can hear that they're now turning into a Rosewood oh yeah Hotel the Chancery so it's going to be a fabulous building uh their basis is not cheap uh but you know that's the hotel investment business is what is your basis uh generally speaking all hotels make money uh the revenue is way above the costs it's a good business it just depends on what your basis is so you were telling the TWA story which is that we did our skip global forum there in 2021 2021 which is just a great hotel if you want to be inspired about the the history of travel which we wanted to during covet times clearly that's the hotel to go to so if you're if you happen to have a layover your flight is delayed at um JFK just take the airtron that goes right to to his hotel and you can walk in and have food there whatever else you want it's about experience fun experience so um let's come back to uh the so what you've done with MCR is you not only have these hotels but you're a buyer of Hotel Tech so you bought stay in touch you bought Opti you have also you said investing in hotel Tech sort of a not a venture capital but but a minority investor so what's the thesis behind uh buying Hotel tech for a hotel owner operator so as a hotel operator uh we use Hotel technology and have been for the last 20 years uh and I describe Hotel technology as a carrier pigeon and a stone tablet having made it uh it is brutal uh it is uh simply awful uh as evidenced by so when I built the TWA Hotel I had to Source 65 different software systems and then I had to stitch them all together uh and none of the vendors care what the owner wants they just want to sell you more software and they tell you that their software except for our sponsors I'll just comment our sponsor they're the best who should I uh who's the innocent here Google uh Google's not going anywhere nor are they going to be offended um Google's a great product um so um we've been investing a lot in making Hotel technology better and we have uh the history and the knowledge and the day-to-day execution to make the products better so we've bought two Hotel technology companies stay in touch and Opti uh We've made six Investments so far we have a pipeline of another four or five uh behind this this is they're showing up to um dashboard I guess and you know I'll give you an example this is Opti but with stay in touch the hotel property management system we use in our company about 16 different Hotel pms's and you know everything from Opera to infor to Springer Miller Jonas Shoreham Fosse fspms Reserve I mean you name it we use it and stay in touch was the best product that we used we were just a customer because stay in touch thinks of the world as 24 units of inventory per day instead of one unit of inventory per day you know in the United States you can't get a hotel PMS that thinks of the world as anything other than one unit of inventory per day so if you go on twa's website we sell a lot of rooms or by uh we don't we don't like to use the term by the hour [Laughter] this is the second oldest business in the world and we don't like to use hourly jokes but uh but we do sell day stays we call it a Day Tripper from the Beatles song uh from 8 A.M to 1pm you know you just need to take a nap have a workout get a sandwich before you drive into the city for a meeting JFK is the landing destination of most of the um red eyes coming out of LA and San Francisco and so people landed five in the morning they take a nap they have a workout then they drive into the City and still make their meeting at a reasonable time airport hotels work yeah you are a fan of airport you just bought the Miami hotels as well so what's with airport hotels Miami Blue Lagoon uh Hilton Hotel how can we reinvent airport hotels uh well I think that TWA we you know we made a valiant effort at trying to reinvent it and uh we were trying to make the product a part of the trip normally the airport is a means to an end it's a lousy place that you slog through in order to get to where you're going what if you could actually have fun at the airport I mean this is a whole novel concept um so that's what we tried at least in U.S airport certainly we have an infinity edge pool uh where the tide for the number one plane spotting uh location in the United States it's us in the In-N-Out Burger at LAX true uh that are you know buying head-to-head for the guys with the long lens cameras they come out for five hours and they just watch planes take off and land all day uh we have an ice skating rink a roller skating rink miniature golf course we launched curling this year uh we have the national pickleball not pickleball is not coming no no we did pick a ball we did Pickleball um that we did that on the ice skating rink uh or on the roller skating rink last summer we launched the national Jenga tournament uh which is a you bought the rights to so you were telling me some story you wrote you bought them yeah the national blocking Association also known as the NBA uh not to be confused uh with a different NBA um and the theory behind that is uh people love Jenga uh why not host a fabulous Jenga tournament uh so we had hundreds of players come out we had a ten thousand dollar cash prize for the winner of the national Jenga uh tournament and uh it's a fun game families can play friend groups can play you can drink while you play It's all about having fun this is really in response to the poker craze and the chess craze which lend themselves to smart people uh if you're dumb you're not going to be very good at poker or chess right that's unfortunately discriminatory yeah that would not apply to you no no I don't I don't play any sheer raw intelligence yes I'm sure you're a champion I'm not no don't um but anybody can play Jenga so we do we try to do lots of fun things at TWA so uh so actually let me ask you a question you're a very good Storyteller uh it's very clear I've I've known you for a while now and you've brought that storytelling at your hotel TWA can you bring that storytelling to for instance Residence Inn which by the way tell why you love Residence Inn uh I love Residence Inn because it has the highest margins in the business uh and the highest return on invested capital um so your storytelled through these hotels very difficult uh very difficult but Residence Inn is an amazing product customers love it uh you get uh free breakfast free dinner uh free Wi-Fi the corridors are short uh the distance from your car to the guest room is very short it's a terrific product you get your Myriad points and you save up all your Marriott points and then you can redeem them at a Ritz Carlton right so one of the most important factors of the lodging business that nobody ever talks about is about 60 percent of our customers are spending other people's money so everybody on stage here talks about the Google guy talked about how you're searching and all this kind of thing if you're spending other people's money you don't really care how much it costs right humans are vulnerable to an agency problem uh if it's not your money uh that's okay so a lot of our residents in guests are on work trips they're traveling sales people uh they are plumbers they're electricians they're site supervisors they're doing local construction um it's a lot of business Travelers and Marriott provides 65 percent uh from the central res system in terms of delivery uh the second best return on invested capital is Hampton Inn by Hilton it's an amazing product customers love it they're starting to come over to Europe more in the U.S 75 percent of Hotel inventory is branded and in Europe it's 25 percent right and it's moving upward uh quickly booking.com has essentially taken the place of the brands in Europe so let's talk about your favorite topic booking.com uh your your love for booking.com please explain your love for OTAs um or lack of it it's not a it's not a love hater a frenemy uh type of relationship um you know I do sometimes get tired of the hotel business being the doormat uh and the red-headed stepchild of the entire travel space it's where when everybody goes to extract value uh nobody takes it from the airline oligopoly they take it from the hotels so as evidenced by about 20 years ago two folks came along and they swiped 200 billion dollars of value from the hotel industry uh and those people's names were Expedia and booking.com and the hotel business did not miss a trick this is a testament to how good the hotel business is and then about eight years ago another guy came along and swiped a hundred billion dollars from the hotel business uh his name was Brian chesky and the hotel business keeps on ticking and Airbnb is doing terrific and there was a lot of panic uh in the 15 to 17 to 18 range said oh hotels are going to get eviscerated by Airbnb we've all managed to co-exist hotels keep growing Airbnb keeps growing it's because of the latent demand for travel which is largely driven by the elter ultra low-cost carriers uh you know EasyJet and Ryanair in Europe in the U.S Southwest Airlines JetBlue Value Jet all those kind of things you can now fly from New York to Florida for 39 bucks right and it's a terrible experience but what do you want for 39 bucks uh right I mean Ryanair and EasyJet are the same thing um the Irish guy says this all the time right you know if you want a better experience fly British Airways it's more expensive well I don't know if that's better it's any better but let's let's leave it there um so uh are there a sponsor well actually they are okay um to ig we love you uh that I lost my thought there OTAs so you you but you are you're you're obviously Distributing your hotel through OTAs uh well um if hotels have latent demand you don't need the OTA so TWA is not on the OTAs whatsoever uh never has been the only way you can book TWA is by going to twahotel.com period uh you're not even on Google nope okay zero uh because we're at an airport we have Laden demand and we have a great product uh and if you don't like that you can stay at one of the nearby hotels that are not nearly as nice and you have to take two shuttle buses one there and one back and then you have to deal with the air train and you have to navigate your way around Queens so we've just taken some of our other Manhattan hotels off of the OTAs uh and they're more profitable than ever after you carve out but that's because it's Manhattan right it's because it's Manhattan so that's why I'm making the distinction of hotels with latent demand okay uh we have a courtyard in Brownsville Texas uh which maybe I can take that off of the OTAs one of these days uh because of Elon Musk thank you to SpaceX uh for the filling Brownsville but otherwise uh we're happy to fly a courtyard flag uh in Brownsville Texas you'd never want to be independent or you know you need the central res delivery uh in secondary and tertiary markets but in markets with latent demand you don't need to be on the OTAs and I think what covid has taught a lot of Hotel operators is running 87 percent at a much higher ADR is more profitable than running 97 at a bottom feeder ADR and selling those last rooms and focusing on this perishable inventory aspect of hotels uh so we only have about three and a half minutes and there's so much to talk uh with you about but um AI you told me a bunch of stuff off the Record can you say it on the record about what you said about AI when I last met you about a month and a half two months ago uh what did I say I can't repeat it because it was off the Record so I kind of didn't tell you what it was but tell me your view about obviously that this is the age of AI at least the coming age of AI well I think artificial intelligence and machine learning are um from a labor perspective uh they don't clean your room for you and they're never going to uh I think they are going to decrease overhead Staffing in hotels substantially they might wipe out a lot of overhead jobs and chat gbt uh could have a serious deletion effect on a lot of the manual processes that go on in hotels um but you know every single sales presentation that I see pitches us on oh this product has machine learning and this product has artificial intelligence we clean rooms for a living we make beds for a living artificial intelligence does not make bets it does not make breakfast it doesn't make lunch it doesn't uh you know make you a drink in the afternoon and it certainly doesn't make your life any more fun it might make it marginally more efficient uh but you know we're in the people business and we're in the experience business and we clean rooms for a living we have a lot of Labor we have 10 000 employees and artificial intelligence is not going to eliminate most of those jobs but it may eliminate a lot of the corporate uh jobs people are putting PowerPoint presentations together uh for their living and you love PowerPoints I know that for sure no kidding uh the uh what's the most fun technology what what what's the most exciting technology for you today uh well the the greatest technology in the hotel business right now uh the greatest innovation in the hotel business is fake grass is what fake grass fake grass artificial turf fake rest the technology and fake grass now is spectacular uh and it is better for the environment because you don't have to water it you don't have to pay to put in sprinklers that are always broken uh it magically wipes away the dog poop uh on out that's out in front of your hotel uh it's terrific we're putting fake plants and fake grass everywhere it looks better than the real stuff uh and then in the winter time when you have the dead grass you know in the snowy environments or God forbid in Texas and that kind of thing it's green all year round so like this is an innovation that doesn't get enough air time I don't know how to that was uh I threw you off on that one you're too ready for that yeah that's a hard one um you were supposed to start with saying nice words about skipped please do it at the end of it this gift folks are great uh I love uh what skiff does I was actually telling uh rafat earlier honestly I go to all the hotel conferences in Alice and NYU and the Phoenix conference in uh the Berlin Conference and all these kind of things uh people actually learn things at the skiff conference they attend the sessions and they get information and knowledge out of them all of the rest of them are just networking opportunities for people to get together drink a few cocktails build relationships not that that is not valued to that but I tip my hat to skiff because people actually attend sit listen uh and the speakers do a great job rafat and his team do a great job and you're a huge fan of daily lottery report Allen I love the daily lodging report I have not I've read every single word of the daily lodging report for the past 15 years every single day I can't stand it when Alan takes a holiday all right thank you uh thank you Tyler this is so great I appreciate it [Applause]

Channel: Skift

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Id: B-QAYdjvzLk

Length: 26min 31sec (1591 seconds)

Published: Thu Mar 30 2023