PHOENIX-“The market will not cover the dumb things we have done,” Jack DeBoer, founder of Residence Inn, among others, warned the audience at the 2010 Lodging Conference. As the lunchtime speaker, as well as recipient of the Above and Beyond award at this year’s conference, DeBoer joked about the current crisis and warned of its implications for those in the room.
“Absolutely not,” he explained was his response to the question of a double-dip recession. “We’re not out of the first one yet.” The iconic “father of extended stay” noted that there have been three times within the last century the U.S. has suffered under terrible economic turmoil.
The Depression, he said, was brought about by the U.S. restricted open trade and other countries turning their backs on the country. The second in the 1970s he blamed on the decoupling of the dollar from gold. This current crisis, however, he explained is due to “our own excesses.”
“Don’t kid yourself,” he repeated over and over. “Development fees are gone. Those days are over.” DeBoer explained that there is development money out there, but you have to figure out the cost at which you’re willing to acquire it.
He explained that his own company, now operating the Value Place brand, was driving to reduce costs for development by 25% and he recommended everyone adjust the numbers in their heads accordingly. “Take IRR out of your vocabulary,” he recommended, driving home the point that it was time for a mental adjustment as well as a monetary one for developers.
Referencing his days building Residence Inn’s brand and shape, he related a few anecdotes that relayed insight into some of the more successful ideas, such as free breakfasts and inexpensive cupboard items for his brands. “I was talking to Jim Shore at Hilton and asked how much money he does for breakfasts. ‘$1 billon,’ he said. ‘How much do you make?’ I asked him. ‘Nothing.’” he related. “I wondered, it’s probably cheaper to give food away in a hotel than to sell it.”
And in regard to the less expensive cupboard items and minibars, he remarked, “I wonder how much money we spend trying to keep people honest.” DeBoer explained that he figured, if you charge someone five dollars for a coke, they’ll pay for a cheaper one and switch it out with yours before your sensor can catch them, but if they pay twenty-five cents for one, they would just as soon drink the one from you and pay for it. His point was not to incentivize people to steal from you.
Finally, the elder statesman imparted some of his 80 years of wisdom. Regarding business, he explained that a lot of people get competitive in business. Ego was a hug motivating factor for a lot of people, but he explained, there is “only one reason to be in business folks, and that’s for the money.”
He joked, “I’ve been rich and I’ve been poor and I like rich a whole lot more.”
DeBoer related a personal experience he had, when he went completely broke after turning down a $100-million offer for his business, simply because of his ego. Again, he emphasized trust and profit in his personal and business dealings.
“I have never been sued by a franchisee and I’ve never sued a franchisee,” he explained. This was, he insisted, because there were only three parts of any franchise agreements that he ever cared about: “Make money, make money and make money. Everything else is (expletive).”
Simply, he expressed a few of his life lessons that he implored his audience to take to heart. Honesty, personal relationships, and giving back were the things that would last over all other things in business. Noting that if you were healthy, had money and were free, then you fell into one of the smallest minorities on the planet.
“Do you have any idea how bright the future is for all of us here?” Hammering the point home, onstage, he matched an earlier $5,000 donation made to a hospitality scholarship fund promoted by the Lodging Conference.
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