The Original Hospitality Disrupter

Jun 08, 2017

Long before there was Airbnb, there was Ian Schrager. In the 1980s, Schrager pioneered the concept of the boutique hotel, a new breed of high-design hotels with distinct character and heavy emphasis on chic, atmospheric lobbies that became social hubs for locals and travelers alike. The concept was unheard of and even laughed off at the time; now, boutique hotels are a mainstay of the industry. This month, Schrager cuts the ribbon on his latest solo work: Public New York, a 370-room luxury boutique hotel on Manhattan’s Lower East Side. While it has all the requisite Schrager touches—stylish, elegant design, copious amounts of bar, lounge and coworking space—this time, the disruption is in the price: rooms for an average of $200 per night. We sat down with the 70-year-old visionary to talk about the Public concept, the hospitality industry, and, of course, Airbnb.

So what’s the big idea behind Public?

Ian Schrager pioneered the concept of the boutique hotel. Photo: Neil Wilder—Contour by Getty Images 

The primary idea is luxury for all. I think that is an important idea. It’s revolutionary. It’s taking luxury and democratizing it and making it available to everybody. It has noting to do with how rich you are, or the traditional criteria used for luxury. It’s a very sophisticated place, but it’s not dumbed down. People aren’t giving up anything that they might expect to find in a luxury hotel. Not only in terms of service, but in terms of style, panache, food and beverage, and entertainment. To be able to do that and startle people and astonish them is something that makes me get up in the morning.

How do you do that for $200 a night in New York?

By editing and rethinking the business model and getting rid of all those things that people really don’t’ care about that are superfluous and leftovers from a bygone era. I don’t think getting service by somebody in a military uniform with gold buttons and gold epaulets and white gloves, with an obsequious manner and a script about how he’s supposed to address the customer, is something people really care about. Or the bellman taking $5 out of your pocket just to roll in the bags. I don’t think people care about getting their coffee served in fine bone china or served by a waiter with a linen tablecloth. I think they care about being made to feel comfortable, that their dignity’s intact and they’re being treated with respect and that they have a good experience. They don’t care about those traditional signposts of luxury. They’re completely changed. Because people have changed. But for some reason the luxury approach in hotels hasn’t changed.

But you say this is not a hotel for millennials.

Building a hotel for millennials is the most stupid idea I’ve ever heard in my life. If you do a product that resonates, it doesn’t know any one demographic. Did Steve Jobs make the iPhone for millennials?

You have a coworking space in the lobby and a concert venue in the basement. Why?

The entertainment factor is critical to the idea. Because not only does it make the hotel more than a place to sleep, which I think is important, but it also allows us to make money with it, which traditional hotel companies don’t know how to do. But more importantly, it lets us provide that social function, that interaction with people that people now demand because they spend so much time on Facebook and so on. And it allows us to compete with Airbnb. Because they can’t provide that.

A rendering of Schrager's Public New York, a stylish, 370-room luxury property on Manhattan’s Lower East Side. Courtesy of Public New York 

Since you brought it up….what do you make of Airbnb?

Airbnb is one of those brilliant, genius ideas, and I don’t really throw “genius” out so quickly. I think those guys were brilliant. They came up with a really great idea that’s so obvious-- but I think all the great ideas are kind of obvious. Why not take an existing inventory stock and allow people to make money off of it and give people a true experience of getting the real flavor of a locality and getting enough room so that you can avoid some of the high expenses with a hotel? Not only is it a great idea, but it is a mortal threat to the hotel industry. I mean, it’s a mortal threat. It is a direct competitor and they provide things that we can’t provide. Whether they’re saying it or not, it’s a mortal threat.

What do you make of the hotel industry’s response?

The hotel industry is in denial about [the impact of] Airbnb. They’re saying the same thing about Airbnb now that the industry said about the OTAs when they got started. The exact same thing. That’s not going to work. That may slow them down, but they’re not going to stop it – you can’t stop progress. Because the public knows. And you can’t fool them. And they’re going to always go to the best product.

Do you agree with the hotels’ take that Airbnb and other home-sharing platforms should have to comply with the same taxes and regulations as hotels—sprinklers, access for the disabled, etc.?

I do think that’s important for safety reasons and otherwise. You want to have a level playing field. But in terms of what’s going to happen in this fight, that’s a distraction. It’s a smokescreen. That’s not the issue. That’s not the way to fight. You have to meet a strong idea with a strong idea. Hotels have to offer the public a better service and a better experience and a better price than Airbnb. And until they do that, they won’t be able to defeat them.

How can hotels do that?

I think they have to play to their strengths and do what they can do that Airbnb and other competitors like that can’t. What that individual home can’t provide is all of the other kind of amenities and benefits that the hotel provides. That’s what we have to emphasize. That and good value.

Ian Schrager, left, and Douglas Elliman Chairman Howard Lorber celebrate the topping off of 215 Chrystie. Photo: Ilya S. Savenok—Getty Images 

Should hotels get into home-sharing?

I think they should. I think they’re in a better position to execute. I think the idea and innovativeness has come from Airbnb, but I think the hotels could really take that baton from them and do it better. Because they’re in that business anyway, and they’ve been in that business for a long time.

Does this remind you of when you pioneered the boutique hotel concept and everyone thought you were crazy?

The same thing. Any new idea is always treated with skepticism. People used do say only people who wore black and lived in SoHo would come to my hotels. I’ll probably be met with the same kind of skepticism with Public. How are you going to make money at a hundred and fifty dollars? How are you going to be able to pull that off?

I think people who have successful business models, and even innovators, are sometimes the last to see something new coming down the road because they’re very protective and paternalistic about their business model. Success breeds that kind of complacency. It’s dangerous. When I got started there was complete skepticism about [boutique hotels]. We were outsiders, we didn’t know anything about the hotel business. We just went in there and acted from instinct and what we personally liked. And that skepticism lasted for a very long time. Now there are more boutique lifestyle hotels being developed than any other kind of product in the hotel space.

Ian Schrager and guests at Delano South Beach, 1995. Photo: Rick Boman—AP 

You’ve said the hospitality industry is a “me-too” business. Why do you say that?

The model in this country is that you have a big management company that’s separated from [a hotel’s] ownership. So there has to be agreement [between both parties] on what is going to be done. And sometimes it’s very difficult in that situation to do something that breaks the rules. So we just keep propagating the same thing over and over and over again through the years. That and the fact that it’s so capital intensive mean it doesn’t encourage new ideas. They are the last to respond to something that’s going on or coming down the pike.

You’ve been working with the largest hotel company, Marriott, for a few years now. How has that been?

It’s gone very well. Marriott’s (mar) been great to work with and it’s been very, very expansive for me. There was a little bit of a learning curve for them and for me. I think at the end of the day the fact that we liked and respected each other helped us get through the adjustment each of us had to make to the way each of us do things, which are different. They do everything by consensus. They can’t afford to make a mistake. I do nothing by consensus. I think what got us through was that I have a real affection for those guys, and I really respect them. And I do think they’re the best and the brightest in the business. They’ve become my friends. Arne Sorenson is a unique individual, a really special guy. Arne for president—I say that to him.

Speaking of which, tell me your thoughts about another hotel guy, Donald Trump.

I told the Marriott guys a few weeks ago that you couldn’t run Marriott the way I behave as an entrepreneur. When you’re an entrepreneur, you can make mistakes. You fail, and you pick yourself back up again and you move on. And I don’t think an entrepreneur can run the country. You need to run it like a big company. And everybody laughed, but I really felt that. Look, I know Donald a long time and I do like him. I hope he gets used to the job and does well by the country.

A version of this article appears in the June 15, 2017 issue of Fortune with the headline "The Original Hospitality Disrupter."

An earlier version of this article stated that rooms will cost $150 per night. In fact, $150 is the starting cost. Public will sometimes charge more, but the company says it aims to keep prices near $150.

All products and services featured are based solely on editorial selection. FORTUNE may receive compensation for some links to products and services on this website.

Quotes delayed at least 15 minutes. Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. Dow Jones Terms & Conditions: http://www.djindexes.com/mdsidx/html/tandc/indexestandcs.html. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Terms & Conditions. Powered and implemented by Interactive Data Managed Solutions