Photo courtesy of Gideon Lewin
Monday, Feb. 21, 2011 | 3 a.m.
The way Stephen Cloobeck sees it, the federal government operates with analog equipment in a digital world.
Cloobeck — chairman and CEO of Las Vegas-based, privately held Diamond Resorts International, the second-largest time-share company in the world — has always been a proponent of finding efficiencies in government operations.
So, when lawmakers passed the Travel Promotions Act in 2009 and operations began in 2010, Cloobeck was all-in for the plan to market the United States abroad for the first time.
The concept was right in the CEO’s wheelhouse — a nonprofit organization charged with convincing more of the world’s travelers to visit the United States. It was a perfect fit for Cloobeck, who not only understands the tourism industry, but also has given much of his time to nonprofit causes. He served on the board of directors for the Nevada Cancer Institute from 2003-09 and has worked with many charities and civic organizations, including the Prostate Cancer Foundation, Kids Charities.org, the Police Athletic League, Boy Scouts of America, Inner City Games, the Alzheimer’s Association, the Andre Agassi Charitable Foundation, Autism Speaks and was a founder of the Brent Shapiro Foundation for Drug Awareness.
Although the brand-new Corporation for Travel Promotion was filled with tourism industry luminaries, Cloobeck was elected chairman of its board.
Cloobeck spoke with In Business Las Vegas about the work that lies ahead for the corporation and the time-share industry:
IBLV: You’re the CEO for Diamond Resorts International, a high-end time-share company based in Las Vegas. Now, you’re undertaking a new challenge as the chairman of the board of the Corporation for Travel Promotion. How did this come about?
Cloobeck: The Travel Promotion Act was signed into law in ’09. It was instituted in ’10 and the executive branch through the Commerce Department appointed 11 individuals to serve. I believe all the appointments were made by the end of September or the beginning of October. With the statute, that’s all the government did. It was left up to those 11 individuals to constitute themselves as a nonprofit, private entity with no involvement from the federal government because the revenue that will fuel this marketing arm do not come from the federal government. There are no taxpayer dollars. The money comes from ESTA (Electronic System for Travel Authorization) visa fees. Out of the $14 that are charged for international visitors, $10 comes to the corporation. The corporation was given a startup fund of $10 million from those fees and moneys that came after that fiscal year (Fiscal Year ’10) from those fees we’re able to pull down a 2-to-1 match from in-kind contributions, whether they be services rendered or cash given to the corporation. We have been collecting in-kind contributions since we started. For example, every single board member agreed at the beginning that no one would take any reimbursement for travel or lodging or food. So everyone is acting pro bono, and their services will be rendered in kind. Nobody receives a fee for being on this board, and we were all basically appointed by the secretary of commerce and there were recommendations from various folks in the Senate.
This corporation has representatives from some of tourism’s heavy hitters — Disney, Sabre and the California Travel and Tourism Commission …
… and United Airlines and city of New York …
How did a Las Vegas guy get elected to head this board?
What most people don’t understand is that at Diamond Resorts International, our primary mission is the hospitality business. We have more than 25,000 beds in 26 countries. The reason people don’t know about us is that we were a sleepy little private company here in Las Vegas. It was created from some failed roll-ups, public companies that I took private, rebranding them as Diamond Resorts International. So it’s like a double coming-out party because when the folks in the hospitality space found out that I was representing hospitality in the United States, they said, “Who is this guy?” They had a little party for me — Marriott, Hilton, Starwood, Hertz, American Express, Avis. The companies met me and some of them knew who I was. But when I spoke to them at that little party that we had for me, they said, “This is the right guy.”
It was obvious to me that I was the only entrepreneur on the board. I was the only guy who could obtain the role of chairman and CEO. I was chairman of the Nevada Cancer Institute and involved with it since its inception, including the building of the buildings and the raising of the funds. I stepped down from that board to do this. So I did have the ability and the knowledge of running a nonprofit organization from the board perspective. I was really the only person from all these wonderfully talented people on the board who knew how to set up a corporation quickly and get it going, which I did.
We did this at light speed — just six weeks. We created bylaws, articles of incorporation and incorporated in the District of Columbia and reported back to the White House and the Senate, and they said, “Oh my God! Oh my God! We got the right guy running this thing.”
We’ve got a great board and I’m proud to represent our state and this city. We are working collectively with all visitor and convention bureaus, including the Las Vegas Convention and Visitors Authority. I talk with Rossi (Ralenkotter, president and CEO of the authority) quite a bit. Of course, Caroline Beteta, who runs the California Tourism Commission is on the board. Just last week, I spoke to the San Diego Convention and Visitors Board, to 1,000 people and we’re getting some wonderful accolades all over the place, just getting the word out as to what we’ve done and how quickly we’ve done it.
We do have a website up, corporationfortravelpromotion.org, which lists all of our board members. It lists all of our past meetings and the minutes of those meetings because I made sure that as one of the tenets of what we are going to do is be transparent and we would have open meetings. We’re not subject to that, but I wanted to make sure that everyone who has a role in tourism and travel has the opportunity to voice their opinion. We also wanted to make sure that all of our board members are open and available to talk to all the states and territories and all areas of tourism and travel, all the way down — and I don’t mean this in a derogatory sense — to the day-to-day tour operators that provide junkets into communities or Grand Canyon trips, or Cape Canaveral, as an example, have the ability to address the board.
Explain what the Corporation for Travel Promotion will be doing.
We’ve tried to keep it very simple. It’s our job to increase gross domestic product through travel and tourism. One of the greatest exports we have is the United States, and we’ve never marketed the United States. From that will come tens of thousands of jobs. When you look at the competitive landscape of tourism and travel and the other great cities and countries of the world, every other country has a ministry of tourism. We are the only country without one. Now we’re not a parliamentary government, but this will de facto fill that role. Every other country markets itself. The United States, unfortunately, was so arrogant for many decades that it just believed people would come. After 9/11, we saw a demonstrative reduction in international visitor volume in the United States and that was for a lot of reasons.
With that, we have to look at how we present ourselves and this body not only will market the United States with approximately $200 million budget in countries where we will get the best return on invested capital because we’re all going to be metrically based. We’re a private company so we look at things differently. We keep our expenses low and look for great return on invested capital. When I sit and explain these tenets to the White House and to various senators and folks in Congress, they say, “Oh my God! This is what government should be like.” So perhaps if we do the right job — which I know we will — it will be a transformative company to show government how public-private partnerships should be put together in the future and show how cost-effectively and speedily we can get things done.
If we were a government-run body, we wouldn’t be incorporated by now. We have very candid board meetings and I hold the agenda tight with votes that are quick because I have requested that everyone study before they show up to a meeting. We have also decided that our board meetings will alternate between conference calls to an actual on-site visit somewhere in the United States. Our calendar is set for the balance of the year, and it’s posted online. We’ve already been to Washington, D.C. We’ve been to Dallas, Texas. We’ve had a couple of phone calls. We’ll be in Washington, D.C. again in March. We’ll be in San Francisco in May, and I believe we’re going to be in Wyoming, Chicago and Honolulu. So we’re trying to get across the United States. We’ll show our transparency and openness to listening to what the issues are at hand because it’s not where this corporation will be guiding international visitor volume to any one place. We just want it to come.
You noted speaking with Mr. Ralenkotter from the LVCVA. What other industry peers are you reaching out to?
Of course, we’ve talked to New York, we’ve talked to San Diego. We have met with the Canadian Tourism Commission already. They basically gave us a presentation that showed us how they did it, their successes and their failures. It’s important to learn from both. We hope to grow off the shoulders of all who have created a private-public partnership like this to manage and market tourism in this way and I believe there are a lot of interesting paradigms that we’re going to leverage off and, of course, we’ll get those dollars in-kind because we’re not going to spend money on research that’s already been done.
Explain the revenue process. A fee will be assessed on travelers coming to the United States and the resulting fund will be matched by the tourism industry, right? How will the match be accomplished?
It’s collected from the Department of Homeland Security and they are working hand in hand with us, not just on the revenue collection side but understanding that they are the necktie of what our guests will see — those international visitors when they come through Customs and Border Control. We have met with David Aguilar, deputy director of U.S. Customs and Border Protection, and he is highly supportive along with Secretary (of Homeland Security Janet) Napolitano with regard to the hospitableness that needs to be elicited at the point of entry. We’re not going to be perfect. We’re going to get better and better, but we know that it’s an issue that’s got to be solved. It’s been discussed and we keep banging on it. We also understand that the visa-waiver countries, which number 36 today, need to be increased. That’s an issue that we’ve discussed with the State Department. Of course, we’ll have to work with Congress on that also.
We’re not a lobbying arm, but this is a way of increasing our (gross domestic product) and it’s not about letting the bad guys in because Homeland Security will protect us and they’ve assure us of that. We’ve had this tremendous fast start and the folks on the Hill know who we are and are paying attention. It’s time now for us to get our first public service announcement out, which the president has agreed to do. Who’s not better to sell the United States than the president, because he’s a rock star? We’ve also quietly talked about other folks that probably would be willing to do the same. We’ve got Hollywood here. We’ve got tremendous culinary talents in the United States.
I’ve heard some people describe the corporation as being like the Las Vegas Convention and Visitors Authority, except that you’ll promote the United States abroad instead of Las Vegas. Is that a fair assessment?
Yes, that’s exactly the same. And it’s the first time the United States has ever done that.
That’s amazing that we haven’t.
Nobody can believe it. And we need to let more people know about this. That’s how quickly we can move the needle, because you know what a great job the LVCVA does. If we can leverage off what LVCVA has learned and what California has learned and what Florida as learned, what New York & Co. has learned and other convention and visitor bureaus, we’re going to do great. They have off-site sales sites all over the world. So we’ll take Brand USA and hopefully leverage it in all these sales sites that already exist. We’re not going to go hire new people.
The corporation also plans to explain the United States’ entry policies and procedures. Why is this necessary?
It’s necessary because that’s the necktie of the United States. It’s the first thing people see and if we’re inhospitable, rude or obnoxious, that’s not going to fare well for the rest of the trip for those folks who are coming in to spend an average $4,000 to $4,500 per person. It’s not just that first point of entry. It’s all over the United States where these international visitors come. We have to represent and be great ambassadors to these visitors. We want them to come back. We want them to tell their friends how great we are. So it starts with that entry process.
Have there been any philosophical discussions about the line between inviting travelers to visit the United States and homeland security issues?
My opinion — and I think every board member has a different mind-set — is let’s invite them all in and let Homeland Security do their job to protect us because they’re going to do a great job. That’s what they’re there to do. We shouldn’t be second-guessing whether Homeland Security can do their jobs. The system works just fine. We have great checks and balances, perhaps too many. Perhaps we’ve increased the size of that wall so high that we need to knock it down a little bit to let more folks in. Why aren’t we letting people in from China without a visa? We finally gave visa-waiver status to South Korea, and I believe the number spiked 22 percent in visitor volume. Everyone wants to come to America.
How will the corporation develop the creative materials to promote the United States?
It’ll be a 100 percent bid process. We are not going to hire a team of creative talent on our staff. We’re going to use great advertising and marketing gurus who exist throughout the United States and make sure we have diversity. We’ve got folks on our board from Disney, United Airlines, New York & Co. and California. They’re the best of the best. I’m sure the LVCVA will be involved also because I plan on creating subcommittees within our board that will liaison with specialized hit teams of advisers.
How will the corporation or these subcommittees guide the tone of the campaign?
The board of the corporation will guide the tone, which is Brand USA. With all due respect to Procter & Gamble, Ford and Google, I don’t know if there’s a better brand. Brand USA wins every time. There’s a lot of giddiness on the board by the marketers because they’ve gotten to market California or New York or Wyoming or Disney, but there’s nothing better than marketing Brand USA.
Any early indications about the tone? Will it be humorous or no-nonsense?
Too early to tell. I do know that the ads that are going to be placed will be culturally tested and specific to the various countries that we market within. There’s not a one size fits all. If there’s anything I’ve learned running an international company is you must be culturally sensitive. The things that we do here in the United States, the way we market ourselves, the way we sell, the way we give hospitality is different that how we operate in Britain or Spain or France.
The LVCVA and Nevada have found that you can’t sell Las Vegas to China the same way that you sell it to Great Britain.
That is exactly the point I’m trying to make and we’ve already discussed that early on. You’re dealing with a lot of experts on this board and none of us are naive enough to think that a one-stop message would fit all. Even as we think of what our brand name would be — we believe it’s going to be “Discover America” — we looked at whether it should be “Discover USA.” Culturally, is South America going to be upset by us using “Discover America”? Do they consider themselves to be America? They have America in their name, but there is only one America. We’ve looked at the research relative to that but I want to make sure that everyone understands that we are culturally paying attention to nuance and it’s very important to us that we have the best penetration because we’re looking at return on invested capital. We’re running a business.
Will the focus on some of the promotion be on places to go, the people, the culture or something else?
I bet we’re going to do all of the above. Disney is probably the best at fun and the California ads are unique. They’re whimsical and they sort of juxtapose what California is all about. For example, Kim Kardashian is sitting at the pool reading a chemistry book and you’ve got various people playing with skis and surfboards, but it’s not really their genre. But they create a message of outdoorsiness and a lot of things to do. It wasn’t the Disney ad for the parks. It wasn’t the Seaworld ads or the Legoland ads. It was more about the day-to-day what it’s like to be a Californian and wouldn’t you like to be one? So I think we can play off that, we’ve got tremendous culinary talents, we’ve got great national parks. We’ve talked about that. We’ve got great gateway cities that most people will come through and then take a secondary trip from that point. Las Vegas has kind of made its mark on international travel now because before international arrivals, way back when, you used to go to L.A. or San Francisco. Those were gateway communities into Las Vegas. I think all the great gateway cities are going to have tremendous uptick and so will all the ancillary communities and attractions from that point forward.
Are there target countries in which the corporation plans to be?
It’s too early to tell, but we’re going to look at market research, which we have plenty of and then base it off where we’re going to get the best return on our invested capital. It’s going to be highly metrically driven. Those are philosophies that I have made sure I’ve told everyone about at every board meeting and as chairman of the board our constituents in travel and tourism like that. It’s also music to Washington’s ears because not all decisions in government are based that way. But that’s how we run a business and we’re looking for our No. 1 mandate: increase in GDP and derivative jobs. Keeping it simple, those two are the mandates.
Will residents of the United States be able to see some of the messages that are going to be distributed abroad? How?
We’ll have them on our website. We hope to have our brand launched at approximately the same time. Right now, we just have our corporate website, but we’ll have a branding website and it will be a portal for the various countries that we would operate within. Everything will be available on the Web to any citizen of the United States.
Do you have a timetable for the public seeing some of this branding?
I would hope we would have a full marketing rollout by the third quarter of ’11, which is pretty quick — September or October.
Some critics have said charging travelers an additional fee that will go to the fund will start a fee war with some other countries and make it more expensive for U.S. travelers to go abroad. Your response?
There’s always a small number of ill-informed, unguided, politically driven statements that come from the lack of understanding to what really needs to be created to create jobs and GDP. We can’t have anymore unfunded mandates because or deficit is too high. Why not move the needle like every other country does? Hello? Every time I’ve spoken with somebody — and we’re not partisan — but I’ve got to tell you, enough with the rhetoric. Do you want to increase GDP and jobs or not? I don’t know what else to say.
Have you heard any other criticisms about the proposal?
No, I have tremendous folks from both sides of the aisle on the Hill that say, “Oh my God, I can’t believe you’ve done this so quickly. Keep going because perhaps this is the start of the way we should operate other forms of government.” So we have to prove ourselves, and I believe we will. We have a great team to do it. We have a lot of excitement and brainpower and we have the financial horsepower to get it done. With our transparency, it will hold everyone accountable, and I believe a lot of great things will come from this.
Let me ask you a few questions about your industry. Is vacation ownership in an upswing or is it down with the recession?
Let’s talk first about the industry globally first. If you shut your eyes and went to sleep in ’07 and woke up in the middle of ’09 or the middle of ’10, the percentage of people buying compared with those looking at the product did not change. The numbers are exactly the same. We purposely reduced our sales volume and moved more toward a cash model to insulate ourselves. Other companies that were reliant on the capital markets got crushed. We were not reliant at all on the capital markets. In fact, we paid down $100 million in debt. So you had to be a really good steward of capital. You had to focus on what is the most important aspect of your business, and that’s customer service. Folks that weren’t good stewards of capital and didn’t focus on customer service weren’t given the ticket to go forward. Our entire mission today is about the meaning of “yes,” delivering five-star guest service at a four-star product.
I made the decision in January ’09 to put my business card with my live e-mail address at every front desk. For a chairman and CEO to do that is a pretty aggressive move. My executives at the company said to me, “Are you out of your mind? You’re going to get shut down.” Our team members did such a great job worldwide. I only get a couple of e-mails a day, maybe three or four. Remember, we have 25,000 beds. If they leave a phone number on their e-mail, I phone the guest. The guest goes, “Uh, uh, uh …” because they can’t believe that I’m calling. Or I respond on my Blackberry, no matter where I am in the world. If it requires a little more attention, I get other team members involved and we get with the guest within minutes and the guest goes, “Oh my God.” They can’t believe it. So we have focused 100 percent and made our brand focused in this hospitality space that we’re in on guest service. And we have things that we’re preparing to launch going forward that will take it a step higher.
Can you say what it is?
(Hesitates) It’s a commitment card that we’re giving to every guest. And that commitment card is being launched at a couple of projects. We’re testing it. It’ll have the manager on duty’s text message number and the manager on duty’s e-mail address for instantaneous service. Everybody’s got a PDA or a cell phone or a computer with them. So each guest will have a one-step-away resolution to an issue that’s on-site. Most of the e-mails that I get today are e-mails of congratulatory behavior by my team. I’m so proud of those e-mails that we get. Even when I get those great e-mails, I call the guest up and say thank you for sending this to me. We have a tremendous recognition program that we have in place through Human Resources. If this new service works, hopefully it will revolutionize hospitality. It’s a big, bold move. We have the ability to monitor the texts and e-mails through our worldwide corporate office here. So we can see when the e-mail was sent, when it was picked up and when it was responded to. So we’ve got a check and balance at corporate which also everyone knows about in the field. It perpetuates good behavior, right? And great guest service. It’s all about saying “yes” to the guest. What can we not say “yes” to?
How is the industry changing?
You know, people have to understand one thing. I’ve been doing the business for a long time. It’s evolved in that it’s not just about that instantaneous sale. That’s what everybody used to do 20 years ago. It’s about guest service today. The sale is the start of the guest service. We have to fulfill that expectation when a reservation is made so you have to have a really robust back of the house when there are anniversaries or birthdays. When folks come on-site, they want to see those properties well-maintained and they want to see great guest service and they want to know there is a strong corporation behind it. The industry wasn’t like that 10 years ago, let alone 20 years ago. Today, going forward, you’re only going to see the really big players, the Hiltons, the Diamonds. Wyndham is No. 1, we’re No. 2, Marriott is No. 3, Starwood is No. 4. Then Hilton, then Hyatt. I think you’re only going to see the big brands survive. This last financial crisis was a vetting process. It’ll be better for the consumer. The industry will be stronger and consumers will be taken care of. You won’t see these failed projects built. It’s no different from the commercial shopping center business. It was a vetting process for them. Look across the street here (points to Summerlin Centre construction site). There was supposed to be a mall there. It didn’t happen. There’s some steel in the air, but that’s all they got done. On the Strip, it’s the same thing. You’ve got a project or two that are just sitting there. Who knows if they’ll ever get finished? The strong will survive. Those with great guest service will survive. That’s what it’s all boiling down to. And there probably will be some mom-and-pop folks in the sector, but our business has really merged into total hospitality. What was the sleepy little time-share business or the old real-estate guys are truly in the hospitality business. It has 100 percent evolved that way.
So why have I seen a lot more advertising from companies attempting to buy time shares from disappointed owners?
They’re preying on folks. They’re called resale companies. If you do some homework on the Internet, you’ll see the No. 1 unfortunate scam out of Florida — the Florida attorney general has arrested most of these con artists — are people that try to take upfront fees from consumers and mislead them. The best thing you can possibly do is come up with a resale component for the product and the industry is truly lacking that. We’ve just created one in Europe that we’re testing for our consumers in Europe. If it works, we’ll roll it out in the United States. But it’s a hole in the industry. Marriott has the same problem, so does Starwood, Hilton and Disney. We all have to collectively figure this out.
The product is not a product that is an investment. The product is a depreciable asset, only good if used. The best possible thing that could happen is once it’s paid off or if you paid cash, you give it to a friend or give it to a relative. That’s what the product is meant for. But there are still people that have changed financial situations that can’t afford it anymore. So unfortunately they get preyed on by these con artists. We have warning signs on all of our websites. So does Starwood, Marriott and Hilton and we tell people do not be taken advantage of. Unfortunately, some people still do. They’re looking for something that is too good to be true. We try to assist them and we send out mailers all the time. Hopefully, regulations will be put in place for these folks, because they’re not licensed. We’re highly regulated. We’re regulated by every department of real estate in the United States. I’m registered in just about every state. So is Starwood and Marriott. These other companies aren’t. They’re fraudsters.
How is the time-share model doing in Las Vegas?
We’re geographically spread all over the world.
You are, but what about the companies that are here? Are they thriving?
I don’t think so. I was one of the pioneers way back when, when I built Polo Towers and those days don’t exist anymore. We’ve done well because of our geographic diversification. Just in Las Vegas right now, just promoting one product, I think it would be a tough road because you’re competing against hotel rates that are under pressure with giveaways. You know, stay for four, pay for three, or stay for three, pay for two. Or maybe a $100 food and beverage or gaming certificate. Those are the days of $19 room rates. It’s pretty difficult to compete against that value proposition because the consumer is better off staying in a hotel. But with a worldwide club, you’re buying a different value proposition. When you’re buying with us, you’re not buying in any location. You’re buying into a worldwide system. So you stay in Hawaii or the south of France or the south of Spain or Majorca or you’re staying in a castle in England. Or in the Caribbean. It’s a different value proposition, all with the same level of service. The days of a single-site operator are really gone.