Interview: Commune and Destination Hotels CEOs Explain Their Merger

Following the announcement of their merger late last month, Commune Hotels and Destination Hotels are working with a third party to examine the possibility of creating a new brand name for the newly combined hospitality group.

Creating a new name is only one potential scenario, however, according to Niki Leondakis, CEO of Commune Hotels. She told us that very little should be assumed about the company following the merger, including the final brand name or who will be CEO, because they and the ownership groups are still hammering out some of the details.

Jamie Sabatier, CEO of Destination Hotels, said the priority right now is gauging everyone’s strengths and building a strategy around that.

“I think once we conclude the parent name exercise, we’ll then finalize the specific titles,” he told Skift. “But make no mistake that we’re laser focused on understanding what our respective responsibilities are, and we are laser focused on the brands that we have in place.”

The four Commune brands and the Destination portfolio of properties will remain intact, creating one sole hospitality group with five distinct brands.

Commune presently includes Thompson, tommie, and Alila. They are autonomous “hard” brands with a singular identity for each. Thompson and tommie hotels are mostly North American urban properties with an edgy design and fashion-forward delivery, while Alila is a luxury Asian and Middle Eastern resort group.

Joie de Vivre is Commune’s soft brand collection consisting of individually branded properties.

Destination Hotels is a sales, marketing and distribution platform with a diverse collection of primarily U.S. resorts, including urban resorts, which do significant meetings and corporate incentive travel business.

We spoke with Leondakis and Sabatier to see where this merger is heading and why it made sense in the first place.

Skift: How do the two hospitality groups complement each other in terms of product?

Jamie Sabatier: Our portfolio is very resort-oriented with a little bit of urban. The Commune portfolio is very urban with a little bit of resort. From a footprint standpoint, combining the two companies gives our guests and likely our team members great opportunities. We also looked at where we have real strengths, and where Commune has real strengths, and we felt like those were very complementary as well. For example, if you look at how we’ve grown our company, it’s much more on the group side, where Commune has grown their company much more on the transient side.

Together we’ve become the leading operator of independent and lifestyle hotels, with over 90 properties. I think why this also makes sense is what he have in common. We both already were in this space. We weren’t trying to get into the independent lifestyle space. That was how we built our business models. We have a very similar philosophy in terms of having hotels that offer relevant and authentic experiences. We’re very focused on making sure we deliver for our owners. Then, the most fundamental similarity is just the value system — doing things with integrity, doing things with a higher purpose. So we do not want to commoditize what we’re doing at the brand or property level.

Skift: Niki, what attracted Commune to Destination Hotels?

Niki Leondakis: From Commune’s standpoint, it’s very exciting to partner with a company who has been in business for over 40 years, which has such great resort expertise and distribution from coast to coast. For me, a really big part of wanting to do this merger was the understanding among Destination Hotels’ leadership and team members that the guest is the focal point.

At Commune, everything that we do, from the culture that we create for the employees to how we think about technology, it’s all about the guest. It centers around the guest experience. There was a lot of dating in this merger process, checking each other out in different ways, and we saw that Destination Hotels prioritizes the individual guest experience as well. Now we see a future in what we can do together from a differentiation standpoint in the hotel sector.

Skift: Did all of the other consolidation in the hospitality and tourism industry influence the merger decision in any way?

Leondakis: Not necessarily. It was really about a more proactive, positive merger to look to possibilities in the future with a focus on the guest. It seems to me in the hotel industry, so much has become about defensiveness against OTAs, or HomeAway, Airbnb, and real estate investments. A whole lot of other things other than the art of hospitality. What we’re really excited about with this merger is, one, we both really believe in the art of hospitality and share a passion for that. Two, that is the means to the end result that we are after, which is obviously economic success for everyone involved.

Skift: There’s been a lot of questions since your merger about the future brand structure and leadership. Can you talk about that at all?

Sabatier: At a very high level, we’re happy with our line-up. Our owners are happy, our guests are happy. We want to keep that intact, and we’ll absolutely do so. In terms of the parent company name, we’re going to be going through a process to ensure that we get that right. There are a few different directions we can go in the coming months to come to a conclusion on that. We also have great clarity on what I’m going to be doing, and what Niki’s going to be doing.

I think Niki’s got an incredible amount of strengths and expertise in a lot of different areas. We want to be laser focused on delivering to our owners and our guests, and given Niki’s expertise and background, she’ll be focusing on the property side to make sure that we’re doing a great job there. My focus is going to be on the integration and on the parent company, making sure we’re bringing the two companies together in a way that allows us to be successful on that front.

Skift: We’ve spoken with every brand leader of almost every hotel brand over the last three years. Everyone is now promoting trendy design, local and authentic experiences, and personalized service. Where do you want to go next? Where do you envision the industry going next in terms of the guest delivery to differentiate one brand from the other?

Leondakis: That’s a very good question. Yes, if we revisit history, 15 years ago, it’s all about design. Design was the differentiator. Then design became commoditized, right? We started seeing big box chains hire the designers who designed the boutique brands. All of a sudden, you could go into any big box chain, not all of them, and find great design. Design became accessible to everyone. It no longer is a differentiator, but is an expectation of the lifestyle traveler. The modern traveler has high expectations for design, but it’s not enough to compete in design alone. It doesn’t go away. It becomes a baseline. It’s the price of admission today.

It’s one aspect of what we will continue to do. We’ve always been very focused on design, and we will continue to be so. But what we really see as the future is going back to the past. It’s going back to taking care of our guests, and creating experiences. Now what does the modern traveler want from the experience? They want something that is personalized and undiscovered. They want to learn the story of the neighborhood. They want access to things that their friends and mainstream visitors don’t have access to.

Skift: Yes, but everyone is saying that, and the industry has plateaued following the surge of new lifestyle and upscale  brands over the last two years all promoting the exact same thing, just at different price points. How do you differentiate?

Leondakis: A lot of people say local, local, local, but who’s doing it well? A lot of people are constantly talking about personalized customer service. Who’s really doing that well? We believe we excel from an execution standpoint. We believe that, going forward, everything we will be doing is about providing a more immersive, more experiential, more personalized stay for our guests. With team members who are truly inspired by an employment culture that’s progressive. It unleashes their passion and gets the best of them. Many people say things like this, but I think so few actually really hit it on all cylinders. We believe that’s where we differentiate.

Skift: How is, or will, technology support that across the newly combined company?

Leondakis: We’ve been using SMS technology to personalize the guest experience through our partnership with CheckMate. Well, and this is how we’re so in-step with each other, Destination is piloting CheckMate right now. So we’ve rolled it out across our portfolio, and I know from our experience that the Destination pilot is going to be great. We do have to test it more deeply in the resort sector, which they’re more immersed in. So we’re going to use technology like that to further personalize, further take the friction out of the travel experience for our guests, and further connect our employees to the guests in an emotional way.

Skift: Ok, so what’s next? What is your fantasy for the future of hospitality in the next few years?

Leondakis: My fantasy is that the only ways we will use technology is if it enhances the guest experience truly, or it takes the friction out of their experience. That it’s used as a means to that end, not just because it’s cool and new. That is truly my fantasy, and I think sometimes it’s really easy for people to get caught up in the newness of a shiny new penny, and forget about the art of hospitality — capturing the heart, mind, and spirit of our team members so they engage heart, mind, and spirit with our guests.

Sabatier: We think that technology as a means to an end is important. But we think doing right and delivering what our guests want in terms of service, and recognition, and creating special moments for them is where the game gets won.

Leondakis: There are two places that I think technology would allow us to accomplish what Jamie’s talking about right now. One is the booking experience, booking a room, where the hospitality industry could be as evolved as Uber or Zeel, my favorite app in the universe.

Skift: What is Zeel?

Leondakis: It’s like the Uber of massages. In-home massages. You use Zeel technology the same way as booking a ride to pick you up, but instead you’re have a masseuse come to your house in an hour. On-demand massage. It’s amazing. What I’m saying is, my fantasy would be that we are as easy for our guests to book a room as Uber and Zeel are to book a ride or a massage.

Secondly, and we’re already moving in this direction, but I think another place we can use technology effectively is in communicating with our guests, marketing to our guests, engaging in an ongoing dialogue with our guests. It’s about understanding whatever their lifestyle affinities are that redirect them, or direct them back to our brand and booking rooms with us. Whether it’s serving up content, or tracking their preferences, it’s taking a page out of the retail industry book.

So that’s my fantasy. It would be to get to where some of the other industries out there are at maintaining an ongoing dialogue with their guests from a marketing standpoint, and use technology more fluidly that way.