Among the various movements (CRE tech, co-working, amenities, community-building, etc.) currently working their way across commercial real estate (CRE), there is one over-arching theme I believe was inevitable and has the potential to make the biggest impact on the future of the business. That is the transition to a hospitality-focused mindset for operating and managing buildings.
Over the years, I’ve written several pieces about what CRE can learn from the service industry including these blog posts: How Stellar Customer Service Can Assist with Tenant Retention and, Assessing Your Approach to CRE Customer Service, which is about Disney’s strategy including the grounding concept of creating “Wow opportunities.”
While I’d love to take credit for the current movement, the reality is that it’s the combined impact of several well-documented market and demographic forces at work: the ascent of the millennial generation as the largest component of the workforce, a strong economy, an incredibly tight labor market and new competitors to the traditional model of leasing space.
Could This Be Another Result of the WeWork Effect?
Most people will point to WeWork (again) as the most identifiable catalyst that prompted much of the current push for change in CRE. Their rapid overall growth and more recent upsurge in their enterprise business kicked off the amenities arms race that has accelerated over the past couple of years. This race has evolved to include lobby renovations (underway now at our own building), the growth of concierge services, hiring of “community managers” and, on the technology front, the explosion of tenant experience apps. We have even seen our clients eliminate use of the word “tenant” and substituting either “customer” or “guest.”
Executive & Organizational Change
Perhaps most telling of the reaction and shift are executive hires like Mark Zettl as President, Property Management at JLL earlier this year who brought more than 25 years of hospitality experience to the job. I also had a call recently with the CIO at a class A office owner-operator who told me that their number one strategic priority was a complete organizational shift to a hospitality mindset. He said that “hospitality is our key product.” He described a complete internal change that includes a branding revamp, hiring architects from the hotel industry to “activate lobbies,” and internal culture, hiring and training changes.
What Else is Driving the Movement?
It’s important to look beyond the industry’s reaction to WeWork, to ask what else is behind the movement? My sense is that the market recognizes that there is a real opportunity, and a need, to focus on building an operating brand. And much like hotel companies, there will be premium, mid-level and budget providers.
Fully recognizing the distinctions between a transient hotel guest and a long-term occupant tied to a lease, there is growing recognition that in a cycle like the one we’re in, the physical attributes of a building and often, location, are becoming more commoditized. The one thing that you can control entirely, is how you make people feel through the service you deliver, and the experiences provided.
It’s also become an accepted truth that it’s important to make every single occupant of a building feel special and enjoy their experience – not just the lease-signer, CEO, or principal contact. A building team and the services they deliver are a talent-acquisition and retention tool. Savvy property owners recognize that if they help their
tenants customers succeed, they have a far more likely chance of retaining them and attracting new ones.
The physical aspect – the design of your building – is the easy part of the transition. Re-orienting entire organizations and management teams will be a significant undertaking.
A Shifting Skillset
In our recent Tenant Experience Gap Report, respondents identified the following skills required for the next generation of CRE professional: 74% building technology, 65% customer service, (on page 22 of the report).
When I’ve had conversations about this with people in the industry over the past several years, some of the pushback I’ve heard include thoughts like, “We already know how to deliver great service,” “We’re doing this now” or, “There’s no way we can deliver hotel-like service to a building with thousands of occupants. We’ll be overwhelmed with complaints and problems we can’t solve.”
These are understandable reactions to the uncertainty of what it means to make this shift. I think back to my experience working for Four Season’s Hotels and how they set the standard for a premium guest experience. While the physical attributes and locations of their properties may have initially attracted a guest there, the things that guests remember, and keep them coming back, were the way they were made to feel. How they were greeted by name by the staff, how if they previously requested an extra pillow, they would automatically receive an extra pillow on every subsequent stay at a Four Season’s hotel anywhere in the world. The things guests don’t see, but surely notice are things like the 27-point guest room cleaning checklist that details the exact placement of the pencil on a desk.
Think of what it might mean in an office building if the management team greeted people cheerfully in the lobby every morning? If it was welcoming and people congregated there instead of just passing through? If more people knew who the management team were by name, saw them periodically and knew how to reach them?
Re-training existing staff and learning how to hire a new generation of talent with the right customer-service attributes is obviously not a simple or inexpensive proposition. Hospitality companies have perfected their processes for generations. Perhaps the best way to start is the way JLL did, by bringing in-executive level talent with the background and experience to help manage the transition. The good news, as evidenced in the quote below from Paul Klink, Executive Managing Director, Cushman & Wakefield Investor Services, is that the movement to find people with the right attributes is happening.
“When hiring, we’re always looking for people who understand customer service and creating an experience. If a person has no financial or property management experience, yet has demonstrated a knowledge of customer service, they have a strong foundation for this business and can learn the operational tasks.”
These are positive trends and, to me, clear indicators of a movement underway. It remains to be seen if this is a long term, fundamental change in the business, or a temporary reaction. My sense is that the companies that fully commit to a hospitality-based operational mindset will outperform their competition for the long term. While price and location will always be primary considerations, all other things being equal, facility quality, amenities, etc. my bet is that companies and their employees will choose the properties and operators that know them best as individuals.