Danny Meyer: Success is in 'Hospitality Economy'

NEW YORK CITY-The businesses that are succeeding today operate in the “hospitality economy,” restaurateur Danny Meyer told an ICSC New York National Conference & Deal Making audience Monday morning. These companies, Meyer said, don't necessarily operate within the context of the hospitality sector, but what all have in common is their success at “uplifting” all of their stakeholders: employees, communities, suppliers and investors as well as customers. In the retail sector, he cited Whole Foods Market, the Container Store and REI as examples.

Merely fulfilling expectations, even exceeding them, is no longer an end in itself. “It used to be that being the best was enough,” Meyer said. “Today, it just gets you to the 49-yard line.”

He said the world has evolved into something “more complex than a transaction-based society.” It does not uplift the customer, said Meyer, CEO of the Union Square Hospitality Group, “if you give me your money and I give you food. That's what you expect. You're not going to come back to our restaurant just because we do all the things you expect, even if we do them very well.”

In an increasingly high-tech world that has “turned us all into commodities,” consumers want what Meyer called “high touch.” That means, for example, service that is individualized, even “improvised.”

It also means contributing to the community by investing in nonprofit activities. Shake Shack, for example, was born not with the intention of creating an international franchise—although that is what has since occurred—but to provide an amenity for Madison Square Park, a public park in Midtown South that Meyer wanted to help attract visitors as it was revitalized after decades of neglect.

Helping to build “community wealth” can pay dividends for others as well as the immediate stakeholders. Meyer noted that in the nine years since Shake Shack opened its first location, the area around the park has become a magnet for commercial and multifamily development and redevelopment. Although he acknowledged that his burger-and-shake eatery couldn't claim all the credit for this, it served as “fertilizer' that spread to neighbors' lawns.  

It's due to the Internet that the window of exclusivity on innovations has diminished greatly, said Meyer. In former years, he could have found an out-of-the-way trattoria in a remote Italian village, adapted one of its signature dishes and featured it on his menu for two years without any imitators. Today, he said, “the shelf life of innovation is still a compelling thing. But you can bet it will be copied in two seconds.”