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Interview with Ed and Debbie Mace - Thoughts on Hospitality Industry and Leadership
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You’re listening to a special Interview with the Executives in Residence.
The Executive-in-Residence program brings senior executives to the school for an academic year of student advising. This is a unique opportunity to interact with and learn from highly successful hospitality leaders who bring to campus a wealth of proven management strategies. The 2006/2007 Executive in Residence is share by Ed and Debbie Mace.
Ed Mace has had a distinguished thirty-five-year career in the hotel business. He has served as a director of the San Francisco-based REIT, BRE Properties since 1998.
Previously, he served as President, Vail Resorts Lodging Company and Rock Resorts International LLC and as President and Chief Executive Officer of Fairmont Hotels & Resorts,U.S. /Mexico division as well as President and Chief Executive Officer of Fairmont Hotels.
Debbie Mace has spent more than twenty years as a hotel architect. Debbie Mace's previous experience includes Director of Design and Development with Exclusive Resorts, Vice President at Gensler. She also worked at renowned hospitality design firm, WAT&G, in London.
Let’s listen as Kathy Enz talks with Ed and Debbie.
I: We’re at Cornell University’s School of Hotel Administration and we have the good fortune this morning of having Ed and Debbie Mace who are Executives in Residence this year, spending a little time talking about their experience over the years in the industry and what they’ve learned about leadership, managing others and dealing with complex strategic issues. Good morning to both of you. DM: Good morning. EM: Good morning. I: Lets start by just learning a little bit about your background perhaps some highlights of your professional lives. EM: Well thank you all. I’ll begin. EdMace01_backgroundI graduated from the school from the Hotel School as an undergraduate and began my career in consulting having first gone to work for Laventhal and Horwath and later Peat, Marwick, Mitchell which became KPMG, and we moved around a bit. I started in Philadelphia, from there we went to Los Angeles then to Chicago and then to Houston.Eventually I ended up going back directly into the industry as executive vice president for a company called Lincoln Hotels which was based in Dallas, Texas. Lincoln was a very entrepreneurial private real estate company. We had a nice small hotel company at that time based in Dallas. I became President and CEO and we sold the company several years after I started there. So I stayed on with the parent company which is a large… even today a large commercial real estate developer and the company’s name is Lincoln Property Company and there are offices mainly in the United States but also overseas and I ended up becoming managing partner of a joint venture that we had put together with GE Capital, that took us to London and we’re very fortunate to move the family and live in London for four years. We were developing real estate in Europe.I then came back to consulting with Peat, Marwick again returning as a partner of the firm in Chicago and shortly thereafter I had the opportunity to go to work at Fairmont Hotels based in San Francisco and I was initially Executive Vice President at Fairmont and later became Chief Operating Officer, then President and CEO. During that period of time we put together a very successful merger with Canadian Pacific Hotels forming what's today known as Fairmont Hotels and Resorts and following the merger I had different responsibilities but ultimately became Vice Chairman of the new combined company. Thereafter, few years after the merger I had the opportunity to move to Vail, Colorado and become President of Vail Resorts Lodging Group and at that time we had acquired a company called Rock Resorts, very famous legendary company in the hotel industry and became President of that company as well as Vail Resorts Lodging.The … kind of reflecting on that bit of my career, I've had the opportunity to be both with public companies, publicly held companies, private companies and at times in an entrepreneurial role. Today I have the opportunity to be a perfectly free and independent entrepreneur and I'm pursuing various opportunities and projects on my own in the hotel industry today. OUT DebbieMace01_backgroundWell Ed and I met at the Cornell Hotel School and you didn’t give the year that we graduated. Ed was class of ’73 and I was class of ’75 and we met and after graduation we moved to Philadelphia where I worked in the industry for a little while.I was … coming out of the Hotel School, I was in sales and marketing basically and moved with him to Los Angeles, continued that for a while and at that point we decided we wanted to have a family, so I took a break and with that … began about… you know being in the hotel business and what it would require as far as the kinds of things that I was apt to do in sales and marketing probably requires travel and strange hours with very young children so at that point, decided to pursue another love and passion which was architecture and went back and got my masters in architecture while the kids were in grade school and graduated in ’89 with masters and subsequently worked very briefly ‘cause we were living in Dallas at that time, for HKS Architects in the… hospital division which I kept saying is kind of like a hotel just with the surgery unit and then we moved to London and I joined a very famous hospitality architectural firm WAT&G which was perfect for me because I was able to marry both careers. Coming back to the States I got involved in project management for a little while, outside of the hospitality industry and really realized at that point, I still loved being involved in the hospitality industry. So when we moved to San Francisco I pretty much started the Gensler, very large architectural firm, their hospitality division and became a Vice President with them. Having left Gensler, we moved to Denver, having left Gensler, I then recently joined Exclusive Resorts which is a residential club and worked in their design and development group bringing online almost I think a hundred homes within a two year time frame.Right now I'm doing consulting, trying to catch my breath a little bit but definitely have been involved in both aspects. I guess the only thing I’d add to our lifestyle is that you know, pretty much I've learned to be a chameleon because with every move in Ed’s career that’s really taken us some place, it’s given me an opportunity to rethink and redirect something that I might want to be doing. So it’s been fun. OUT I: Lets talk a little bit about leadership. It’s a very important topic and one that we hear a great deal about in the hotel school in terms of shaping students to become leaders for the industry in the future. Based on your career experiences and what you've seen over the years, what are your observations on the role of being an effective leader and how to think about leadership. (00:07:12) DM: Wanna take that? EdMace02_leadershipWell leadership, you know it can be… to me it can be so many things and used in so many ways depending on where in a person’s career of the situation they find themselves in, but there are couple of principles that I sort of have found work almost universally in terms of leadership. The first that I think is critical is you have to believe in something. You have to stand … a leader must stand for something. It’s very hard for people to follow someone if they can’t grasp what it is, where it is they’re going, what the mission is, why are we doing it, how are we doing it, why should we do it. It’s … the best leaders in my view whether it’s political or business or not for profit have an internal compass that says here’s what we stand for and they can communicate it in various ways to the different constituents that they have to organize and manage.So first and foremost is to believe. Secondly, is to communicate and to communicate well. Aligning the vision with all of the various parties that have to be involved in whatever it is you’re leading, is perhaps the most critical. You can believe and you can be passionate and you can understand the mission but if you can’t communicate that mission to people well and regularly in a way that they can understand it, it’s very hard as well to get people to follow the course that you’re pursuing. So communication and also frequent communication. I think one of the things I would point to in very successful leaders and perhaps one of the shortcomings where I've seen leadership struggle is that people have a tendency today to kind of retreat to their office, the forms of technology and communication we have enable us to spend great deals of time on e-mail and other forms of communication electronically.But in any organization that involves people, I think people need to see the leader. They need to see and feel and touch ones leadership so that you can communicate to them your values and your beliefs and it’s much easier and often easier done in person than it is electronically which sometimes doesn’t come across well. And I guess consistent with that is leading by example. We had a saying that we often use with our general managers in our last organization is values are not taught, they’re caught, and that is to say if you stand up and preach in a public forum that this is what your values are and this is what you believe but your audience or your … the people who are working for you don’t see you acting in that manner, it becomes this disjointed communication about what you are trying to communicate.So again we would often repeat to our general managers that the values are caught not taught, and I think that’s an important… a very important leadership value. OUT DebbieMace02_leadershipI guess what I’d add to that is more of the kind of touchy, feely kind of things that I think people respond to and one is passion. I think if a leader is really passionate about what they’re … they believe and what they’re trying to get you know, the people that work for them to do and they see that passion, it’s easy to kind of follow along with that.And plus I think leaders are … really good leaders have to be, you know, positive and optimistic. You know, my example that I always say or the thing that I always say to a group of people I'm leading is don’t be you know, problem identifiers, be problem solvers. You know it’s always easy to get caught up in the everyday, you know, who did this or why did this go wrong or what's… you know, it’s passed, you know, it’s a problem maybe you can focus on it later on to figure out how you could correct it the next time but you need to be positive and optimistic and say, okay, we’ve got to problem, how are we going to tackle it and lets move forward. And then I think that the people that I've always enjoyed working for the most are people that I believe are thoughtful and kind and you know, aren’t ranting and raving and inconsiderate to others.I think people basically want to be around people that they know respect them and they’ll respect you know, them in return. OUT So … EM: I would just like to … actually one thing Debbie said because I think it is so critical and that is the optimism and leading with hope. EdMace03_optimismPeople will follow people who truly see the positive ability to get to a goal that they can … that they believe that the leader is optimistic and needs to create hope. The toughest thing in the world is to follow a leader who sees the glass half empty all the time and so the best way to motivate and lead an organization that I found is to always lead with hope. OUT (00:13:06) I: I know we’ve been talking a little bit about mergers and acquisitions and some of the challenges there but I'm immediately struck by the fact that when two firms merge it becomes sometimes the contrast of cultures or a conflict of cultures. So what is leading with hope look like when you are blending two organizations and many of the people in them might either not know what the future looks like or might not even be in the future with this firm, how do you manage and navigate leading under those circumstances.EM: Oh that’s … kind of at the heart of the matter of our successful merger I think. EdMace04_conflictOfCulturesThe leadership of two organizations and I can speak to examples if you would like for me to but you know realistically any two organizations that you put together may share a vision for a business strategy but maybe have had a different culture or a different style of leadership and now suddenly that style of leadership that the organization has known feels like it’s changing and so it becomes even more important for the two organizations to project an alignment of what it is we are trying to do together and then for the leaders of the two respective companies to go out there and be visible and communicate how good this is for the organization, how optimistic you are about how well this is going to turn out. You know that’s not to say you are whitewashing challenges and problems. I think you’re also not creditable if you look like Pollyanna you have to be able to say yes, this is going to be a challenge for us and we need to… we maybe don’t have all the answers today but here’s how we’re going to go about getting to the answer and we’d like to get to that answer fairly quickly.We’re going to involve a number of people in our organization to help us solve this problem and then we’re going to make a decision and we’re going to get on board together and we’re going to move forward and implement and I think that’s one other element of this in a successful merger and that is too often … two organizations sometimes in an effort to be sensitive to each other take too long to get on the same page, you know, meetings after meetings that go on for a year or two years. In the merger… the largest merger I was involved in was Fairmont Hotels and Canadian Pacific. We had two management teams that were very much together and very much on board with each other as to where this company could go and to their credit, much to their credit, I was coming from the US side, the Fairmont side and the other company actually had controlling interest … bought the majority interest, so it was really their privilege at the end to have the deciding vote on which way we would go.But there we put ourselves together and we spent a great deal of time trying to understand the respective cultures of each other but then we realized you know, some people are going to win and some people are going to feel like they win and some people are going to feel like they lose but we have to make decisions because the worst thing for an organization, a larger organization is a gridlock where no decisions are getting made and people after a few months of worrying about whether the decision is going to go their way or not go their way, just want the decision to be made and to get on with their lives. So I think that’s another aspect of leadership, is having your pulse on when it’s time to make the decision as difficult as the decision maybe, make your decisions and move on and get the organization focused in a positive way. OUT DM: It’s kind of a… it can’t be a we-them mentality, it has to you know, immediately become an us. (00:17:00) EM: Very good point Debbie and I think it’s particularly true in a situation where one company buys the other effectively even though it looks like a merger, one company has bought the other company. The associates or the employees in the minority company look to their leadership as to the signal of how you feel about this and it’s not just the guy at the top, the guy or gal at the top, it’s all of your leadership team, has to publicly and privately be talking about the benefits because if the organization senses that the minority people are losing … it’s a very tough way to get people on board. I: You've both been in very different kinds of businesses, you've been in consulting businesses and architectural firms and then in the hotel business and in essence commercial real estate and having an own building business, is there anything you need about how you have to lead in each of these different businesses that you've observed as managing architects or leading with that group of professionals or consultants… is that different than what we typically think of in managing the sort of diverse array of positions and people in a hotel company. (00:18:20) DM: Yeah maybe I’ll jump in on this one DebbieMace03_leadershipDifferencesI think managing professionals that are design oriented that are in many ways artistic and you know, left brain thinkers, you've got to give them a little bit of that kind of leeway to allow them to bring forward that creativeness that you're looking for. Having said that you know, in order to see a design through and be realized you've got to have the right brain, keeping everything on course and so you need to be able to kind of harness that creativity to be able to make it happen. So I think there's a little bit of that that goes on. The other thing in the architectural profession is it’s not so much the people that you lead or manage within the organization but it’s all the teams that you get involved with as far as making something come true, if a hotel’s going to be developed, you know, you’re more than likely going to have a developer or you’re going to have a hotel operator, you’re going to have an owner which maybe you know, one of any of those things or separate, you’re going to have all the design professionals that are on the team and you know, as well as a variety of other team members that come together and in order to lead the process through, you’re going to have to have probably two or three very strong leaders that take a piece of that together to make it happen.And so it’s kind of a different… it’s different in the sense as far as being an architect even though it’s a hospitality situation, I come from it in a different way tha necessarily Ed Might … which he would still be involved in that and you can speak to it but he’d be also very involved in making sure that the design that’s being realized is what they’re looking to have achieved. OUT EM: Yes… speaking to … let me kind of come around to it but speaking to how do you lead different styles of organizations, as Debbie said, I wouldn’t compromise what we stand for or what our values are. (00:21:00) EM: I think those values we talked about earlier are still central to the core but EdMace05_leadershipStylesDifferent people need different styles of leadership at different times and so one finds in the successful leaders that they can adjust their communication and their style to reach the audience that they’re communicating to. Leading a group of professionals whether it’s architects or consultants or others, these are professional people or faculty or organizations where the entire organization is well educated, has strong views about particular areas of expertise. They have a different style of leadership. The style needs to be adjusted to be a little more collaborative perhaps and then to pull out the strings of each of the individuals and to get the respect of each of the organization of people working towards each other and managing in that sense and that’s true of the corporate office of a hotel company.Now when we get to the field and we get inside a working hotel which has a fairly diverse demographic of people working in a large organization like a hotel, it becomes often more about execution and an execution style of leadership requires that you make decisions rapidly, that you make short term… you make decisions more in the short term general manager or department heads or having daily meetings and talking about what we’re going to do today and often very specific instructions on how we’re going to go about doing it which of course is different than pulling back and being an intellectual leader of a professional group as an example. OUT She ____ the question over my way and I missed it. I'm sorry I was … DM: Were you listening to me? EM: I was not practicing my listening skills. I: Why don’t we chat a little bit about the challenges of dual careers. You both had very successful careers and also raised apparently three wonderful children. Trying to figure out that balance is not an easy thing. It can’t be an easy thing. So based on trying to make this happen and clearly having succeeded, what observations do you get on the managing of two careers, demanding careers simultaneously while … in the sense trying to have it all. (00:23:31) EdMace06_balanceWell I’ll attempt to go first here. The first observation I would make is, it’s not easy and we would be giving bad advice if we looked like we made it easy, because it’s very difficult to juggle all of life’s demands and raise a family and to make it all work and we make mistakes. So the one most important attribute or aspect that I think you can have in a dual career marriage is commitment. A commitment to each other that you’re in this together, there are going to be challenges, there are going to be disagreements, there's going to be strong opinions at times that are differing and together we work through them and it’s not always perfect and there are times where we wonder if … with your spouse or significant other that you… whether you've made the right decision and so there's always this sort of working collaboratively together on life and these conflicts of demand on time and the children, just takes commitment. OUT (00:24:50) DM: Yeah and I think… adding to that, you've got to… DebbieMace04_balanceAndCommunicationI see marriages that have fallen apart because people get together and they are very strong in whatever they set out to do or whatever they you know, their paths of life that started and I think just as is in business, I think one of the biggest things is communication and you've got to be able to communicate with each other, you know, gee I really want to try this or there is this great opportunity and you know I want to move the family again and you know talk about the pros and cons but one of the things that’s been great for me is although I started off on kind of the hotel path, I soon learned that I really wanted to develop this other side or other career that I was interested in and Ed was totally in support of it even though it was going to take a commitment on his part to help me realize that. So I think you always got to be communicating with each other as to you know what your needs are, what your wants are as far as personally but you know, professionally and then be supportive of that which is the commitment end of it.The other thing as you … I think you need to learn, it’s like almost as a business relationship, learn your strengths and your weaknesses and recognize them and laugh about them but the kids early on learned that if they wanted any help in math and science they came to me and if it was English or history, they went to Ed and that’s the kind of the balance that we’ve learned to recognize in making things work in the family and especially with traveling commitments and everything else. So you know, we’ve been at it 32 years and … so far so good. OUT EM: Yeah it’s still a work in progress. I: So one of the things that’s interesting about your profile is you took a little bit of time in the middle there off presumably to take care of the kids… to deal with that. How did you make that choice because very often the woman is the one who engages in sort of separating herself from her career to take care of children, is it a good thing, bad thing… (00:27:19) DM: Well it was something I wanted to do and I find it’s interesting. DebbieMace05_takingTimeOffI just got asked that question the other day from another Cornell hotelie who graduated… who’s in the mid 30s and she's pregnant and she wants to obviously take some time off when she has the baby but she wants to go back to work but she doesn’t want to go back to the 70 hour weeks that she's doing and she said, what advice can you give me and I said, you just walk right in there and say, I'm really looking forward to coming back to work but I'm going to come back four days a week and you know, she was a little nervous about that and I said, you've got to be strong, you've got to recognize you know, that you can do … you know, both but you've got to determine your limitations and you’re good at what you do and they’re going to want you.So you've got to find a way to make it work. I chose to take the time off because we had three kids very quickly and then I realized I didn’t want to be home that much. So I figured out a way real fast to get back into graduate school or something. But it’s just… I think it’s a personal thing and I think nowadays more women and because of the way that the companies are structuring things where … they give the time off and they can come back and there’s daycare that’s more affordable or companies are supporting, you know, 25, 30 years ago it wasn’t quite that easy and perhaps I might have done something else but then you know I'm really glad that I was at home for those first few years.And although the kids you know, as they grow up were always trying to make you feel guilty that you’re not at this thing or the other. My advice is to take a lot of pictures so that when they say you never came to something you can pull the picture out and say, oh yes I did. So you get through it. OUT I: Now if you can… you wore a president, CEO hat, how do you feel about employees who are trying to balance their lives while your agenda is to maximize shareholder return. EM: Yes. EdMace07_healthyLivesWell I feel the same way as I preach personally and that is I think people to have healthy lives and in healthy lives means some balance in family and in personal, are much more productive and can contribute much more to the organization.And I think … I'm very proud of the fact that if you look at the people who worked in organizations that I've led they have felt … there has been an attempt to balance the needs of working mothers and people who have need to balance their lives differently. We had a strategic retreat few years ago at Vail Resorts and Vail Resorts is a company where balancing lives is pretty easy to sort of get a feel of people are interested in because many people live in the mountains of Colorado because they enjoy the lifestyle and to be there and to work them insane hours, they don’t get to enjoy, perhaps the reason they live in a resort environment like that. So we took our team offside and in our management team we had young single people, young single professionals, married working mothers, people with children who were grown and different age groups and we sat down together and said, look we’re not going to find enough people in the workforce who have the skills, the talents of this group of people. So if we want to keep our corporate director of revenue management who has young children working we have to find a way to allow her to do what she does and be happy.Otherwise, someday she's going to walk in our office and resign and we’re going to have to replace that position again. So I was really amazed and proud of the fact that this group of people with different lifestyles rose up and said, no, here’s how we have to … here’s what we can do to help make this work and how we can change our work hours or work habits or our meeting times to allow working mothers in particular to be in the workforce. So I think there is no alternative to that. I think our organizations and our workforce needs people with different lifestyles and we need to find a way to make our organizations work around that. OUT DM: And I might just add as a working mother having gone through that, my feeling is that you've got to be … you've got to… and I don’t think it’s really any different from a man’s perspective but DebbieMace06_workFamilyFunI think you basically have to recognize there's work, there's family and there's fun and you've got to have some sort of balance in all of those things. You know a tired and crabby mother from working too hard who gets no time alone isn't good for anybody. So you’ve got to recognize it’s not the perfect solution for everybody but you’ve got to figure out for yourself what is the balance and then you have to I think be pretty strong and stick to it. There's going to be times when you know, one outweighs the other time frames but you basically go forward with that and I think the other thing that …the key piece to this is manage people’s expectations. If people are …I do this in business as well as at home, you know, manage the expectation that I can attend this, this and this, play, or soccer games over the next couple of weeks but I can’t because I can’t be there because I'm traveling or something. But also at work you know, manage the people you work with their expectations. Yes, I’ll be there for you, I’ll work hard, you know, but at 7 o’clock on Thursday night I've got to be home because you know, I've got to get my kid in the Halloween costume. So I mean there's … I think when people understand and they know where you’re going in both your life you know, personal and profession life. It’s again the communication thing. OUT I: You talked about several skills that are coming out loud and clear … that are pretty exciting. Having a vision, having passion around that vision, setting boundaries, that part of what you've just spoken about is being clear how you yourself think about some of the yes’ and no’s and one of the things you said earlier Debbie, that I thought was interesting is not getting too caught up in the who did what, who said what, why did it happen but move on and make decisions and take things forward and then both of you continue to repeat whether we’re talking about business or we’re talking about our personal lives. The communication is a big thing. So here’s some of the things you've already mentioned and lets see if we can add a few more to the manager’s skill sets. So if we were going to identify and I realize managers change over time, so you might want to think about the evolution but if we want to help our students think about what to put in this skill set that might lead them to be more successful managers who eventually become leaders of enterprises, what are the skills that might come to mind? (00:35:00) EdMace08_preparationWell one of my favorites is relentless preparation. It’s … it doesn’t matter what it is that you’re going to be doing tomorrow, the next day to go into something unprepared is doing yourself a disservice and probably the people, once you’re in a leadership position, they’re expecting you to be prepared. So something as simple as coming… calling a meeting and you’re … everyone’s time is valuable, we’ve talked about how important time is now because you need to balance it in these other ways. So you call a meeting, it starts at 9 o’clock, you’re the leader, you should be there at 9 o’ clock and you should be prepared, you should have an agenda and before it… if you are giving a speech or you’re in a position where you’re going to be communicating a message, understanding who’s going to be there, what they’re looking for, what's on their mind, what … how can you communicate, how can you communicate well. So one of the things… we communicate often to our managerial groups in the last two organizations that I've been fortunate to lead is we expect our managers and leaders to be prepared.To know their numbers, to know what's going on if they’re the general manager of the hotel, to know what's going on in their hotel that day. They don’t have to have all the details but if I pick up the phone and I call a general manager at one of our hotels, and ask him about a VIP that might be arriving or is in his hotel, I expect that he knows that he's got a VIP in his hotel you know, and it’s because he's got a routine and a discipline where he prepares every evening or every morning to know the important elements of what's going on in his day, his or her day, I should say. So I think preparation is one of the really important ones. OUT DM: I probably would add a couple of other things. DebbieMace07_technologyTechnology is obviously you know, it’s just growing by leaps and bounds and we’re all trying to learn today what was invented yesterday, and how we’re going to use it tomorrow, but I would suggest that people really need to learn how to use technology to their advantage but not rely on it and you know, totally. I think hiding behind technology and getting so wrapped up into it with your day to day you know, kind of management of people, it’s the old… you know, get up from your desk and walk over and have a conversation with somebody about what a problem is you know, how you might want to address it or have a cup of coffee, it’s a lot better I think in a lot of ways than, you know shooting back 15 e-mails when you’re just, you know moments away from each other. First of all I don’t think it’s necessarily as efficient. So you know just use technology as a support but don’t use it to be all end all to communicate to people. OUT I forgot what the other thing was… but I thought it was good, I just can’t remember what it was. Maybe I’ll remember it while you’re… (00:38:21) EdMace09_practicingLeadershipI've got one more I think I would offer up and that is taking advantage of opportunities to practice leadership. Leadership is a development of certain of these skills and like anything that you become good at, whether it’s playing a violin or football or a sport, the more you prepare and practice, you learn and you gain experience and you develop techniques that work for you. So as students at Cornell University or any University for that matter, who … probably they were a student leader before they ever got here in high school or in some other way but now on campus there are many opportunities to lead, small groups, extracurricular activities, sports, whatever those things are, opportunities within the school itself.The opportunity to take the leadership role in HEC or some other industry activity. The more one can put themselves into that role and to have the opportunity to practice is worth doing and it’s worth the extra time in that you do to practice leadership. OUT I: Okay… so we’ll just a take a few minutes. EM: Okay great. I: How are we doing timing… are we okay… Male: Oh we’re great. I: And I know we want to make sure … Male: No…. DM: Okay. I: As the Vice Chairman of Fairmont, one of your job responsibilities was particularly to deal with growth and building growth strategies. Can you tell us a little bit about what growth strategies meant for you at Fairmont and what they generally mean in the hotel business? (00:40:08) EM: Let me take growth strategies broadly first and then I can see if I could narrow it down to Fairmont. Strategies for a company, growth strategies for a company are often based on what kind of company it is. You know, whether it’s a private company, a public company or if it’s an investment fund or if it’s an operating hotel company as an example, so strategies, broadly speaking strategies are a reflection of the company’s mission, of its capabilities and its financial opportunity to take advantage of those strategies. Now bringing it to Fairmont as an example. When we merged Fairmont Hotels which was a US company with seven very big hotels, we had the San Francisco Fairmont, the Plaza in New York, New Orleans, San Jose, Chicago, Dallas. (00:41:04) EM: These were big 700-room on average hotels. Canadian Pacific at that time had 21 fabulous, great historic hotels north of US border and primarily in Canada and they had acquired a company called Princess Hotels and Resorts which was primarily south of border, two in Bermuda, two in Mexico, one in Scottsdale, Arizona. But here we were suddenly, a full fledged very large North American hotel company with both city hotels and resort hotels and our market was primarily 80% US customers, the guests were primarily Americans. So when we looked at what we had and where we could go with what we had, we certainly had more opportunities to grow within United States and within North America and we needed at the same time to consolidate and get a brand identity of the new Fairmont Hotels and Resorts spread to all of these assets. (00:42:05) EM: But at the same time we had opportunities, we thought to take this very prominent position and expand it globally and more internationally. Asia was a logical place where Asia’s just positively booming. We were on the early … we were on the early edges of what was beginning to happen in Asia and we felt there was an opportunity there for us. Fairmont was a name that was known among Asian travelers as well because of the San Francisco Fairmont in particular but the brand in general and Europe. Here we were in the United States with these great European style historic legendary hotels and they were very European in their heritage and their look and their feel and we knew that the European business traveler, British, German, Dutch, French knew the Plaza in New York. So we looked at what we had and said how can we take this brand equity that we have and move it into other markets and extend our brand recognition even for the hotels we currently have. (00:43:15) EM: And so much of what I did in those first two years after the merger and particularly in the last year that I was there as Vice Chairman, was to look at developing relationships with potential partners in Asia and in Europe that were… we knew that we were going to need help getting overseas that we couldn’t… it would be hard to just launch ourselves from Toronto or San Francisco and so we began to kind of think in terms of what our organization would look like in the future and I'm very pleased that the company has continued much of that groundwork and today has grown, no part of mine, I mean it’s been done by the team that’s there, has been there … I've been gone for six years but growth strategies take long term. (00:44:06) EM: They take a horizon of thinking that’s much beyond a year or two, three years. So groundwork being done today might not show up in a company for five or six or seven years and that’s okay. That’s a good thing. I: Are there some specific differences between growing in Asia versus growing in other international markets? EM: I think the common strategy of growing internationally, there are certain international aspects to a company particularly a hotel company that transcend cultures, transcends local cultures, but it’s very difficult to go into any new country and not immerse yourself in the culture to be successful. I look at a company like Disney that had such great brand strength, such terrific recognition, international recognition and they had to struggle a bit in a place like Paris when they opened Euro Disneyland. (00:45:11) EM: I'm not saying anything critical of Disney because I think the Disney executives would talk very openly about this as well. It took some time to understand the difference between what's a brand standard that’s universal and international and that we can force around the world and what are the brand standards… how do we achieve our look and feel of our brand that back off in different countries and different cultures to allow for the local culture to reflect itself in our operation. And so having said that, clearly how one approaches Asia or even certain countries … Asia is a big place and doing business in China is different than doing business in Japan or Korea and likewise in Europe as we talked … as we’ve said, or I've had the opportunity in my career to work in Europe from an office in London but we were expanding commercial real estate in different European countries. (00:46:09) EM: I think our American partners and myself as well when I first got to Europe thought of Europe as one place. Europe’s not one place and doing business in Germany is different from doing business in France. So even in a European context we’ve had to adjust our strategies to fit with our local cultures and where we wanted to go. DM: Yeah even with it being the EOC right now. That’s the right term, right… ECU, I don’t know… where they’ve all kind of combined you know, they’re having a monetary and everything, they’re still so very different. So even they’re trying to make themselves more like one, it’s … there's good things that are coming out of that but it’s been difficult for them too because they are very different, their cultures. I: One of the common strategies for entering lets say, China is to have local partners so that you have someone who understands customs, politics, the way to do business and that’s not just in China, it’s frequently true in international markets that North American companies rely other either master franchisee or someone who understands the terrain. Was this part of your strategy for entering new international markets is to build strong alliances with local partners or did you put your own equity into a lot of these enterprises, what was the kind of entry strategy that Fairmont used at that time to expand. (00:47:46) EM: Well the entry strategy for Fairmont overseas was local … was to work with local partners heavily. It was also true in my … previously in my career at Lincoln Property Company when we were expanding into Europe. I don’t think there's any alternative to working with local partners in an international expansion strategy. Sitting in an office, a corporate office in the United States, it is much too difficult to try to run an organization overseas without having local people and local partners. (00:48:17) EdMace10_culturalChallengesThe key and the challenge is learning to listen to them and learning to evolve a relationship where you know when the local partner’s input should trump your instincts and your brand, your brand strategy or your brand standards for example or knowing when to say, no, this brand standard cannot be adjusted for that particular culture, it needs to go down this path and to work with the local partners to find a way to make it work in that context. I think too often some of the players in overseas expansion of companies is they’d select the local partner but something goes wrong early in the relationship. Their own cultures even between them became a dividing point and there was a lack of trust or a lack of credibility and so the international company quickly lost the respect for their local partner or listening to their local partner and while they had one they weren’t using … they weren’t using their local partner.So the most important cornerstone in that relationship is selecting the partner that you can work with and that you can stay with and it goes back to commitment, you know, commitment to each other and knowing that look there's going to be differences here. We’re going to hit some bumps in the road that we can’t possibly know as an American company trying to work in China. But we’ve got a Chinese partner over there telling us that here’s what we have to do, now lets see how we can take that knowledge and work with it to make this successful. OUT I: One of the interesting things we’re finding about mergers and acquisitions in the hotel business is that unlike the more conventional wisdom that tends to show that you lose market value through acquisitions and mergers that very often they’re not as productive and profitable. So that’s sort of the academics wisdom, is that mergers and acquisitions are actually not very lucrative but some recent research that’s been done by Linda Canina, our finance professor at the Hotel School and others showing that in the hotel business mergers and acquisitions actually can produce value that international acquisitions are a little tricky but generally speaking acquisitions raise the performance of the combined firm. Having experienced trying to bring firms together in an acquisition and merger, does that result resonate with what you found and why would it be the case that hotels seem to do better than the general array of businesses in the acquisition domain. (00:51:00) EdMace11_marketValueWell it’s certainly a good question for the hotel school to be studying because I think there is something to travel and tourism and hotel companies having some success with this. My instincts would tell me it’s because we share common markets and there is a business reason for these to be successful. Travel, international travel is growing. Taking a brand like Fairmont or Hilton or Marriott or some brand overseas plays off of a very strong international travel market and so merging a European company, hotel to an American hotel company name that becomes an international hotel company name shares customers and has good business reasons for why that might work. I think that must be fundamental to the success of hotel companies, as opposed to a manufacturer who may not have the same advantages that we have in the travel industry. I think that’s part of it. I do understand that not all mergers are successful and I do see where in the hotel business they have been successful over time but I think over time is a key word and what's the horizon that we’re going to measure success. If a company struggles a little bit it may hit right after the merger, it may hit a down market, it may hit a cycle in the economy that they didn’t understand and if it was a good business plan, a good merger … I mean … a successful bringing together the cultures, the leadership was right, it will come out the other side of the down cycle and it will look like it can be a very successful company but if it’s teetering on the success of putting those two companies together and you hit a down cycle and a lot of other things start to go problematic it leads to … I would say an unsuccessful combination in those circumstances. OUT
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