tv Bloomberg Businessweek Debrief A Conversation With Justin Trudeau Bloomberg May 17, 2019 6:00pm-6:31pm EDT
♪ david: marriott started in 1927. arne: on 14th street. david: it was a big story that a non-marriott became ceo. arne: i worked with bill marriott for all the 22 years i had been at the company. david: the mini bar is the same thing, pringles and toblerone. arne: sooner or later, the government will say that is a balanced meal. david: when i check out, they want my credit card again. arne: they shouldn't need that unless there is something deeply suspicious about you. david: that could be the case.
>> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. alright. ♪ david: i don't consider myself a journalist. and nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. how do you define leadership? what is it that makes somebody tick? marriott started in 1927 when j. willard marriott started a root beer stand, is that right? arne: the a&w root beer stand on 14th street. david: when did marriott get into the hotel business? arne: 1957, some 30 years after the company was founded.
david: that is the late 1950's. what propelled marriott to become the largest hotel company in the world? arne: two things, one is a cultural piece, when it was the restaurant company, the founders talked about take care of ourr people and the people will take care of the customer and the customer will come back again and again. in that is a focus on an authentic welcome. we had a period where we were a mini conglomerate, but increasingly, the last 30 years or so, it has been focused on the hotel business. david: you are the first nonfamily member to be ceo. how did that happen? arne: one day at a time things evolved. i came to washington -- david: you grew up where? arne: the midwest mostly. i was born in tokyo, japan. david: what were you doing in japan? arne: my parents were lutheran
missionaries. david: when you were growing up, did you speak japanese? arne: rumor has it, yes. david: you went to -- arne: minnesota. i grew up in st. paul. i went to a small college, where my grandfather and both grandfathers went to school. david: it is a lutheran school. arne: right. david: your family ancestry is scandinavia. arne: mostly norwegian. a little swede to make it interesting. david: why did you not want to be a lutheran minister or missionary? arne: the language we use is i didn't get the call, which is a sacred call towards a profession. david: what did your parents say when he said you want to be a
lawyer? arne: they were obnoxiously proud of me and my siblings and great supporters. david: after you graduate law school, you practiced where? arne: in washington. david: minnesota, how did you go from minnesota to washington, d.c.? arne: maybe a little adventuresome to get away from home. david: how did you go to marriott? arne: i represented marriott. david: marriott must be happy with your job. it was a big story that a non-marriott became ceo. were you shocked? arne: by that time it was no longer surprising. i worked with bill marriott for the 22 years i have been at the company, plus the years before, learned a lot from him.
he got a sense of who i was, to know my family. there was an evolution over those years that made it a not surprising event. david: bill marriott is -- arne: 87. david: i guess his family is still the largest shareholder. arne: that's right. david: he is still involved. arne: marriott made the largest acquisition it has ever made. it bought starwood for $13.7 billion. you were competing with a chinese company at the time, were you worried you are overpaying? how did you win? arne: it was a great process. it is a company that had been for sale for most of 2015. we thought it was too expensive. it got cheaper for us over the
year. in early 2016, that throws a new wrinkle in it and cost us more, but we still came out on top. david: did bill marriott say i don't like to spend $13.7 billion for hotels. did he say your job is on the line if this does not work out? arne: no, i was touched by his reaction, maybe his second reaction. i called him and said i want to talk to you about buying starwood, but don't form any points of view yet. david: what did he say? arne: he held himself back three or four days, but then i got back.
he said, he was thinking about the human side. he said you know you don't have to do this. you are already working hard. the company is going great. there will be more work with starwood. he was thinking about it from my health and the way i lead my life. david: so far, it has worked out. arne: it has worked great. we had some bumps last year, a cyber hack. david: you had a cyber hack. arne: starwood reservation systems. david: who did the hacking? arne: we don't know. we will probably never know. we know that somebody was in the reservation system from before we bought starwood. david: how much will it cost you
to fix this hack? arne: we don't know that answer either. it will be a number of quarters, millions of dollars. david: some people speculate it was people in china interested in hacking in. do you have any comment on that? arne: there has been public speculation it was china. we don't have a clue. david: you are trying to figure it out now? arne: we could in theory, but we are not investigators. david: what is the most profitable part of the hotel? arne: the guestrooms and conference. the guest room margins are great. it depends on the precise rate and market you are in. the cost is housekeeping and the capital costs of buying the materials in that room. the conference business is good because banqueting is fairly
profitable. it is a predictable food and beverage business, unlike the restaurant business. david: do people complain that sometimes it is hard to figure out how to turn the lights off? arne: i complain sometimes. david: when i complain, i will not get the response you get. arne: you will get the same response, do your best. [laughter] ♪
♪ david: let me ask you about hotels. i travel a lot. i am on the road 230 days a year. my experience has been everywhere i go, every hotel, the mini bar has the same thing, pringles and toblerone. is the pringles person the best salesperson in the world? why are pringles in every mini bar? arne: we figure sooner or later
the government will say that is a balanced meal. [laughter] david: you want to be ahead of the government. arne: in truth, pringles, the brand is known broadly. they are packaged well. they tend to be these cans about this big. people seem to like them. toblerone the same, these are two ultimate, quick comfort foods. david: people that operate hotels like marriott say we lose money on the mini bars, but if you look at the prices, they seem to be hard to lose money on. how do you lose money? arne: we lose money on mini bars and room service. both are expensive when you compare them to buying pringles in a grocery store or buying breakfast in a cafe. david: how do you lose money on room service? arne: it varies by market.
in some parts of the world we still make money. if you look at the u.s., services at higher end hotels, urban markets were labor is expensive, we are often required to have a second line with that material. it has to be delivered. all the things associated with that service, it is an expensive proposition. david: i check into hotels and say here is my credit card. they want my id. when i check out, they want my credit card again. why do they need my credit card after i checked in the day before? arne: they shouldn't need that unless there is something deeply suspicious about you. david: that could be. arne: my advice is don't check
out. [laughter] david: suppose i check in and say i don't like credit cards. i will pay you cash. here is my id. will you take someone's money if they only have cash? arne: i think we will. they will still get your id and use their judgment to figure out why you are paying cash, but they might take a little extra cash in case there is damage to the room. david: suppose i come in with cash and only need the room for an hour -- [laughter] david: do they say you have to pay the rate or i can negotiate an hourly rate? arne: i don't know if we have any hotels with rates by the hour. [laughter] david: i do check out of the hotel, they say, did you have anything in the minibar? i hate to stand there and say i had gummy bears or something else. i assume they will figure it out later. arne: this is another reason why we lose money on the minibar. [laughter] arne: everyone who had pringles, no one wants to admit it. david: do people just say i had nothing and you go in the room and charge them later?
arne: that's right. that is the way this works. someone will take an inventory of the minibar. you probably noticed this, some of the minibar fridges are set up to be self reporting, so you will take -- david: i know that and don't like that sometimes because if i go to pick up something, then i realize i don't want that and put it back down, it is charged. arne: you better drink it. [laughter] david: what percentage of people leave the room a mess? arne: 100%. [laughter] david: the towels are on floor, food is everywhere. arne: very few of us are at our best or neatest when we are in a hotel room. we know we will not cleanup. the towels will be on the floor.
the leftover dinner is on the desk. the bed is never made. arne: what percentage of people accidentally take the towels with them? [laughter] arne: i don't think it is a high percentage. david: what about the robes? arne: those robes are for sale. david: you just sell them later. what percentage of people take the lotions and stuff? arne: most of them. i don't have hard data, but we are buying 30 or 40 million a year. we have 1.3 million hotel rooms open today. the pens are walking out every day. people are welcome to take them. i like it when people have a marriott pen. david: do you tell them who you
are? arne: the soap is also taken as well. that is fine. david: you would save money if they did not take this stuff. arne: that's true. david: i have a theory that hotel companies know when you are in the bathroom, because that is when somebody knocks on the door. is that the case? when i am using the bathroom, the hotel people are coming for this or that. is that true they know when you are in the bathroom? arne: it is not true. david: sometimes they knock on the door and want to give you a piece of paper. they could slip it under. i don't know why don't do that. arne: there is a bit of a riddle here. the riddle is that sometimes we want to give you service because it is the way we have done it traditionally that you may not want. an example of this, which is
happening across the system today, is we have for the first time the ability to give you your key on your phone. you can entirely bypass the front desk. it is a riddle for us. you think about the luxury experience, we want to welcome you and tell you how important you are to us, but if you want to get to room, we are better off saying if you want to do that, we have a vehicle to let you do that. david: what is the biggest complaint you get by people who stay in your hotels? arne: the most frustrating thing to travelers is noise. it varies a little bit by type of stay and the rest of it, but the thing is that is most common is we want a good night sleep. david: that is my biggest concern. number one, i want to be quiet. number two, a hard mattress so my back is not falling apart. three, how to turn the tv on.
four, how to turn the lights on and off. do people sometimes complain it is hard to turn the lights off. arne: i do complain. david: when i complain i won't get the response you get. arne: i bet you get the same response, just do your best. [laughter] david: the biggest challenge for marriott today is what? arne: maintaining the right people around the globe as we grow. we are opening one hotel every 15 hours for the next three years. we have to bring in the people who can deliver the authentic welcome we have. ♪
rooms in the world was so is your main competitor hilton or airbnb or somebody else? arne: we have been competing against hilton and other companies for 70 years. that competition is intense. airbnb is up your competitor, but in a different part of the market. many customers are choosing to stay with them because it is cheap. we are not really in the bottom of the market. our business has not been to provide the cheapest day. you get google, other digital platforms that are partners of ours. we obviously get many of our customers coming to us through that search. they also have data about all of us. they are working on monetizing that data. how do we use what we know about
david rubenstein to deliver him to marriott or somebody else and make some money? that makes them not a competitor for a hotel stay, but a competitor in the sense they want to be in the relationship we have. david: you worry about data collectors, google or facebook, having more data on your customers than they should? arne: that is the hardest thing to predict. david: five, 10 years from today, where will the hotel world be? what will be different about hotels in five or 10 years from today? arne: we will have more of them. we will see that people value travel. we will continue to seek a growing travel in class around the world. it will continue to be a more important thing to focus. five years from now is not very long. i think digital keys, using your phone to open the room will be
available everywhere. i think it will be promptly adopted. i don't think it will be exclusive. there will be customers who say i don't really want to figure that out. i want to go to the front desk and get my key. we have to satisfy all of those customers. david: what about facial recognition getting you into your room or not? arne: it could be. we have a couple of pilots on that. you have privacy questions. david: when you check in coming to you tell people in advance you are checking in so marriott knows who you are? do they know you are coming in advance? arne: i think they do. david: do you get the presidential suite? arne: they take reasonably good care of me. [laughter] david: the biggest challenge for marriott today is what? arne: there are many challenges. i would say maintaining the
right people around the globe as we grow. we are growing quickly. we are opening a hotel every 15 hours for the next 15 years. we have a tight labor market in the united states, obviously, so we have to use the tools to recruit, retain, and motivate, and that is something we spend a lot of time on. david: you want tourists to come to the united states, i assume, and you sure hotels. has there been a problem with the administration? they have policies may be more difficult for people to come to the united states? arne: the u.s. is losing share of global travel. it is crystal clear. i will put it in context for a second to set the table. 95% of the hotel business in the united states is domestic travelers. david: 95% is people in the united states traveling in the united states? arne: we are seeing global
growth increased by nearly 10% a year, and the u.s. is only growing by 2% or 3% a year. you can see we are losing share. a reason for that as the rest of the world sees the united states has less welcoming today. david: have you talked to president trump about this? arne: i have. david: what does he say? arne: he doesn't mean his words to be taken that way. he means his stance on immigration, the wall. we are talking about travel and tourism. to the extent he thinks about it, it must be that some how relates to that other issue. david: now you are of scandinavian ancestry, so you are low-key, even-tempered. what makes you upset? do you ever yell, get mad at people, through things? what do you do? arne:arne: i don't tend to raise my voice, throw things.
scandinavians are described as stoic. when we get angry, we get quieter. that doesn't mean it is invisible either. the things that frustrate me the most are not hearing the bad news that i should hear. if somebody is holding back because they don't want to fess up, that is the thing that gets me going. david: so the thing that makes you most excited by your job is what? arne: getting to see our people around the world. i was in china. sunday, i go to cape town. to get to those places and c teams of people that are marriott people. they feel like they are part of our team. david: if i had bought the stock of marriott the day you took
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