First Free Story (1 of 3)

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Shortly after I helped launch Skift, I took a weekend escape with my family to wrap up the summer.

3_years_of_skiftAfter a night at a Holiday Inn Express in Mystic, Connecticut, we spent Labor Day at the Ocean House, just over the border in Watch Hill, Rhode Island.

Ocean House has been in this location since 1868, but was closed in 2003 in order to tear the property down and then rebuild it on the same footprint, but according to modern needs. What once was a worn-down property on its last legs was turned into a Relais & Châteaux property with five stars from Forbes and five diamonds from AAA. It has the look of a turn of the last century resort with the technology and service of the current century.

In the summer high season, it’s difficult to spend a night there for less than four figures, and in the off season it’s still more than you likely want to pay. Still, it’s been a wild success and it owes nearly everything to its staff and management. Its owners have since expanded the local empire to two other properties, Weekapaug Inn in nearby Westerly, and Watch Hill Inn, a condo-style property a short walk from the original Ocean House.

Since my first visit, I’ve returned with my family multiple times every year. We’ve spent the last three Christmas holidays in rooms there, and we’ve celebrated milestone birthdays with friends, Easter breaks, and simpler weekends with parents, too. We’re on a first-name basis with several employees, and we’ve kept contact with others who have moved on to other work, too.

It’s expensive, but it has always been worth it. And we’ve spent more money at places that do their job so much more poorly. (Note: My wife has always booked under her name, and we’ve never received a press discount or freebie.)

It has become a perennial inclusion on magazines’ lists of the best hotels in the world. That’s fitting because the hotel is one of the best examples of how to run a smaller property we’ve ever seen.

Earlier this season, we met with General Manager Daniel Hostettler in our New York office, during a tour to promote a new cooking program at the hotel that’s, like almost everything else, included in the daily resort fee (with few exceptions).

The resort fee, and what it includes, was the start of the conversation.

Skift: Nickel-and-diming is a great way to describe what you’re talking about. You guys don’t do that.

Daniel Hostettler: No.

Skift: … which is a very nice guest experience.

Hostettler: It’s stunning more people haven’t copied us. I’m surprised. You don’t mind it so much in a city hotel, but I hate going to a resort and feeling like every time the car comes around, you have to dig into your wallet. Do I tip the guy who gets me the lounge chair and the towel at the beach or do I not tip the guy?

Skift: It takes you out of the moment.

Hostettler: We wanted to take that out of the equation, and we wanted it to feel very much like you are a guest in our home and that you don’t do that. Then, at the same time, we wanted to deliver value for the resort fee because you walked in here and people just slap on a resort fee. So we wanted to make sure, I think it’s $36 or $38 now, that we were using a portion of that for all of these free classes. Even if you didn’t do the classes, you wouldn’t mind about the resort fee because you didn’t have to tip anyone. You wouldn’t mind about the resort fee because the minibar is complimentary and the Wi-Fi is complimentary, so you’re not getting dinged. There’s no charge for parking.

Of the $38, $30 of it actually goes to the staff into a tip pool. The tip pool is awarded based on comment cards. First it’s allocated by departments. If you are, for instance, a bellman, who in every other hotel makes a ton of money on tips, they get 50% of the gratuities. Then housekeepers get like 10%. But the guy who washes your dishes, who normally would not get any tips, gets 3%, so it’s allocated by department.

Then it’s allocated by guest comment cards. If you have a flub month of some kind, we don’t want the staff to feel punished, but we do want them to understand that the guest experience is also motivating their pocketbook, that you want to know the guest’s name. You want to make sure they have a phenomenal experience because you want to score well in your department on the comment cards.

Skift: From experience, it doesn’t seem like they’re grubbing for that.

Hostettler: No, they’re really not.

In the beginning we said, if you take a tip, we’re going to have to fire you. I think we’ve fired one person in five years for taking a tip. They really are very good, because we’ve done a lot of spreadsheets. We’ve shown them what the average bellman makes at another hotel versus what our guys make on a hourly basis with the gratuity, so we’ve shown them that this is really good for you too, that you don’t have to worry about how much you’re going to make from one day to the next. You’re going to have a steady salary as long as the guest leaves happy.

Skift: We were up there for my birthday last year. We had a dinner in a two-bedroom suite. We were desperately trying to give a larger tip to the two people who were helping. It was as if we were trying to get them to carry illegal drugs. They were very, very polite. We’re like, “It was great. Please, we won’t tell.” They’re like, “No, we can’t.”

Hostettler: I’m so glad actually that they did that. We do say to the staff if a guest really insists that you’re putting the onus back on the guest. We want them to refuse two or three times, or we tell them to direct the guest to a manager, so then manager will explain to you one more time. We don’t want to make the guest angry either that they won’t take a tip, but we really mean it when we say we’re no tipping.

Skift: Do you think that as a GM you’re able to make decisions like the tipping one because the ownership structure is such that they’re such interested parties in the experience as well?

Hostettler: Yes and no. I think any GM in an independent property probably has a lot of that leeway. I don’t have a tremendous amount of corporate experience. I started with Westin. Then I did the Peninsula in Beverly Hills, but Peninsula corporate was a long way away in Hong Kong, so our managing director was the guy. I think that that’s a different kind of GM, that maintenance GM. I think that independent GMs are very entrepreneurial because they usually have one owner, or they’ve got an investment group. Maybe they have an asset manager, but you are running a business.

I think if you’re running a Ritz-Carlton or a Four Seasons, they’re great properties, but you’re a different kind of general manager than if you are charged with actually filling the hotel. When we opened the Ocean House years ago, they didn’t know what we were in Rhode Island let alone name recognition in New York. How are you going to position the property, and how are you going to run it when you don’t have the big Four Seasons logo or Rosewood or any of that? It’s totally different.

The negative in an entrepreneurial hotel is that we don’t have a task force to open the hotel or backup if a great restaurant manager quits. Everyone else has to work harder because you can’t call the Four Seasons wherever and say, “Can you send me your restaurant manager for a month until I find a new one?” From that standpoint you don’t necessarily have the corporate resources and training.

However you can sit around in a senior staff meeting and say, “I have this crazy idea: Let’s not take tips, et cetera, and here’s how I think it will work. What do you think?” It’s very entrepreneurial, and you make the decision. Rarely does it even require a call to the owner, which is great because it allows you to be more nimble and to see what the market is doing.

Which is one of the reasons I read things like Skift because it’s great to be able to see what other people are doing. Then you can take it and create something new yourself — an offshoot – or to be able to call Mercedes and say, “What do you think about giving us a bunch of convertibles?” I don’t know if you’ve done that program yet.

Skift: No.

Hostettler: We have four Mercedes SUVs that we shuttle all the guests around between the hotels, which are provided for us by Mercedes, and we have four convertibles: two E-Classes, four-seaters for families, and then two of the SL550s.

Mercedes gives them to us. We wash them and fill them up with gas, and the guests can just check them out at the front desk for the day and tool around town in them. We have a lot of guests that come up on the train from New York, but they might want to go see Newport for the day. So they’ll just take one of the cars and run around in them.

If I was a GM at a Four Seasons, I probably couldn’t do that. I’d have to go through corporate or whatever. Here we said, “Wouldn’t it be cool. Let’s approach them.” We went to Lexus first and they said, “No, you’re in Rhode Island. Not our kind of guests.” I’m like, “Demographics. You should see my guests.”

Skift: There are a couple of wealthier cities nearby.

Hostettler: Right. They’re all from New York and Greenwich, which is the Lexus capital of the world. But the Mercedes CEO came and stayed with us for a weekend, and he was like, “You’re absolutely right. These are all our guests. I see nothing but Mercedes and Lexus in your parking lot. I want to give you convertibles because those same guys that are driving up in the S sedan are going to tool around for a weekend in a Mercedes, and then they’re going to be like, ‘Hey, 100 grand. I’ll buy one.'” That’s what’s happened.

We’ve had them for about nine months now and guests absolutely love them. It’s all the fun of a test drive and a convertible and a rental car at no fee and no sales guy to try and sell you something when you’re done. Yes, I think we can totally be more nimble is a long answer to that.

Skift: What’s been the most effective marketing for you?

Hostettler: I think that we are still very old school. I’m sure if you stayed with us often, you’d get the magazine and the quarterly newsletters. People love those. We get nothing but comments on how they pass the newsletter around to their friends. But really our successful marketing has really been to take care of the guests and have that word of mouth. We have 47% repeat guests and another 20% of our guest base is referred by other family and friends. We have found that, especially those early adopters, they own the place. They’re like, “I knew the Ocean House before it got all these awards and became famous,” and they tell all their friends. That has been huge for us.

And charitable donations, which I was not a big fan of, I will admit. One of the things our owner wanted to do very early on — I mean all hotels donate to charitable auctions, but he wanted us to do ten times what we would normally do. We really honed in our markets of Fairfield County (Connecticut) and New York and Boston, and we donated nightly stays to any worthwhile charity especially if we were in the live auction where they would show some slides and things like that.

We have found that level of guests who go to those events and bid on those auction items are the kind of guests that are going to come back again, because we donate suites or a dinner experience. Then those are the same people that recommend to their like-minded friends. That was huge for us, and we still do it to this day. We probably donate ten times what any other hotel donates on an annual basis in terms of room nights, because we really do see that as, not just a charitable exercise, but it really is a great marketing vehicle for us too.

Skift: That’s interesting. Do you guys think in terms of a competitive set?

Hostettler: It’s funny because you’ve probably gotten our survey where in the beginning we used to ask the question, “Where else in New England have you traveled?” because we were trying to define our competitive set. About two years ago when we started winning the awards we started to say, “And what other places in the world do you compare us to?” because we started to see the George V or the Savoy in London, which was great, because we didn’t just want to be the best in New England or the U.S. We wanted to say where are other phenomenal properties around the world that people go to and what are we comparing ourselves to?

We’re really competing with markets. Then it’s the best hotels in those markets as opposed to if I was in New York, I might have five other hotels I could name. We compete more with the destinations.

Skift: One of the problems that I think a lot of hotels outside of major cities have, especially ones that are somewhat seasonal, is attracting talent and keeping talent there for the full year.

Hostettler: Number one challenge.

Skift: How do you guys do that?

Hostettler: First of all, we are always recruiting. We are always looking for talent even when we have all positions full. But if somebody sends me a resume and wants to do an interview, I will always take the time to do a courtesy interview and invite them down. Tell them we don’t have a position at the moment, but I want the roster of people, because it is a challenge, especially … Well, it’s twofold.

On an hourly level employee, I think it’s a little easier because we really don’t care what experience we have. We have a saying that we hire for personality, and we train for skill. We really live by that. We would rather have the employee who’s working at McDonald’s but smiles and makes eye contact, which nobody’s going to teach you to be able to do, than someone who has 20 years of restaurant/table waiting experience because it’s not rocket science. We can teach that. So the line level staff is a little easier.

Then we have people that come back to us. Maybe we’ll get a college student three summers in a row. We recruit at all the hotel schools. Hopefully they’ve had a great summer, and in addition to making money, they’ve learned something, and so they’ll come back for two or three summers, which means they’re reasonably trained until they age out.

The biggest challenge is trying to find managers that really enjoying training because everyone will tell you in interview they like training, but we train all the time. Every day on the floor that’s our job is to train the associates. You really have to, again, have that entrepreneurial manager who enjoys owning his own department.

It’s definitely a challenge especially for that mid-level manager, which is the 20-something, of trying to convince them why you would want to live in Westerly, Rhode Island. There’s not a whole lot of boys and girls to date versus being in New York. We’ll keep them for a couple of years, and then we will usually loose them to a bigger city again. We’ve tried very hard with a career progression plan to hire people that we think really are devoted to their career where they know, if you work with us, we are going to move you every year to a new job so that when you leave you got a really strong resume.

Skift: I think that’s always the challenge. You go to a very nice property and you’re paying a lot of money, and then the waiter has never been in a nice restaurant before.

Hostettler: … And has no idea what they’re doing.

It never ceases to amaze me when I sit in Seasons [Ocean House’s primary restaurant] and some of those waiters when we hired them three and four years ago were literally down the street or at the Denny’s or something and that was their table-waiting experience. Now they’re standing at the table describing farm-to-table cuisine and which wine pairs well with that. It’s like, wow, look what we’ve done with some of these local kids that we’ve changed their whole lives.

We spent a lot of time sending them to other places in the off-season. We just sent a pastry cook to spend three days with Daniel Boulud. We pay them and put them up in New York for three days. We’ve got our restaurant manager at the Inn At Little Washington with [chef] Patrick O’Connell for four days working in his dining room, because she’s been with us for a year and the dining room’s gotten five stars, but she wants to see restaurant management from a different perspective.

Our chef in Seasons, our new PM sous chef, he’s been with us for two years as a line cook and then a demi sous. We were going to promote him, so we sent him to a three- Michelin-star restaurant in Germany for three weeks.

I think that our staff also knows that if we see talent in you, we will invest in more than just a salary because to me this is a lifestyle what we’re doing up there. We’re there six and seven days a week, and we have very demanding guests. I want to make sure that the associates get more out of it than just a paycheck. For some people, we say this all the time, it might be the J-1s that are coming in from Europe for the summertime. What they want to get out of it is more immersion of the English language even if they’re a dishwasher.

How do we give them that so they can leave with that experience? For a hotel school student, it might be that they want to go see other properties, so we want to make sure that we have reputation. That you’re not just getting a paycheck. That we’re going to invest.

Skift: Ocean House has a great history. It’s a property that was there for a while. You guys saved it by tearing it down and rebuilding it. In the process, you did things really well with technology. What’s the thinking behind how you approach the technology?

Hostettler: We see the technology as a tool to providing the guest experience. We had a lot of debate about putting the iPads into the rooms because we thought that might be too much technology, because we really want it to feel like an historic property. We finally came to the decision that we would put the paper guest services directory in the room for the people who wanted to do that, but you also had to give the guests the technology if that’s what they wanted, so we put that in.

Most of the technology is behind the scenes. All the technology, as much as possible, is kept hidden behind the scenes. We have a very robust customer resource management system where we’re putting in if you’ve ever had a complaint about something, or the food allergy, or what your kid’s name is, or how old they are, or what dog’s name is, because we feel like the technology allows us to spend more time with the guests giving that hands-on experience. When you walk in with your child and we know their name in advance, that is really meaningful to the parents.

We have a culture where if you make a mistake, you don’t hide it. You put that into the evening report that I get from all three hotels, so I know there is a problem, because we want to dissect that then and figure out what did we do wrong? Was that an employee issue or did we make it wrong from the reservation? Where did the process fall apart so we can fix it? Because I always say you’re not going to get in trouble if we made a mistake, and it’s in the evening report, and we know about it. We can dissect it.

We want to put it in the computer so that we know next time you’re coming that last time everything didn’t go absolutely perfect, because we need to make that up to you, because you might be giving us one last shot. Again, that’s a step I don’t think that the bigger boys do.

Photo Credit: The exterior of the Ocean House property in Watch Hill, Rhode Island. Ocean House