For hotelier Chip Conley, providing the perfect working environment for employees is just as crucial to success as giving guests their dream home away from home. By Scott S. Smith

Inspiration for Chip Conley’s career path came after experiencing what he calls “the nobility of the hospitality industry.” While backpacking through Germany, Conley fell sick. He was staying at a bed-and-breakfast, and the kind woman who owned it cared for him until he recovered. The care provided during this stay prompted him to become involved in what turned out to be a fulfilling and profitable business.

Five years later, in 1987, Conley made a risky decision when he purchased the Caravan Lodge, a seedy San Francisco motel that was in foreclosure. But at 26 years old, shortly after earning his MBA from Stanford University, Conley was set on making his mark on the hospitality industry. With little cash for renovations and no experience running a hotel, Conley says, “My friends thought I was out of my mind.” Looking back, he admits that his business plan was “slightly delusional.”

Fast forward to 2008, and Conley’s company, Joie de Vivre (“joy of life,” in French) Hotels, has become the largest independent boutique hotel operator in California. Conley is part-owner or manager of more than 30 properties, and the company’s projected revenues for 2008 are $225 million. In May, a survey ranked it the second-best company of its size to work for in the Bay Area. Conley says that’s the result of operational principles that rest on psychologist Abraham Maslow’s “hierarchy of needs.”

Maslow’s need pyramid starts with human survival at its base. As satisfaction is achieved, the desire for a better life increases. Safety, social connection and self-esteem build up to self-actualization. This is where people feel “in the zone” and have peak experiences.

Conley’s primary goal is to facilitate these moments, whether it’s the thrill workers get when they see their ideas for improving the company implemented or a guest who feels they have found the perfect hotel.

But the process of being able to live up to those ideals was almost derailed during the dot-com implosion, when the Bay Area’s economy went into a free fall. From 2001 to 2004, Conley had to stop taking a salary, cash out his retirement funds and borrow money from friends. Still, while many competitors went under, JdV grew 50 percent. Conley attributes this to the principles of “karmic capitalism,” investing in long-term growth based on a strategy of integrity and creativity that aligns the interests of all stakeholders, starting with the workforce.

“There have been many studies that show that if you treat employees really well, it pays off enormously in productivity, profitability and customer retention,” Conley says. So why doesn’t every company implement such smart management? “They get stunted by short-term thinking and focusing too much on the easily measured basic needs,” Conley explains. “To do it right is much, much harder.”

This is especially obvious in the hotel industry, where millions of dollars are spent on architecture, but raises and benefits for the lowest-paid workers get the axe first when costs need to be cut. While hotels average at least 60 percent annual turnover, it is just 25 percent among JdV’s 3,000 employees. “We don’t just want to motivate them, we want them to be inspired,” Conley says. That means giving everyone challenges, a sense of community at work, a deep belief in corporate goals and regular input into policies.

At JdV, a culture of recognition has been developed. Feedback—both critical and appreciative—is the norm. Managers are trained to personalize awards and to make job reviews extraordinarily constructive. “Workers typically join a company they like, but leave because they don’t get along with their supervisors,” Conley says.

The company makes sure to deliver concrete rewards to the employees, not just praise. They range from free tickets to see Phoenix Hotel’s band guests perform to treatments at JdV’s day spas. Surprise gifts from the company for someone who has put in long hours can include a check before going on vacation or a voucher to take the family to one of the hotel’s gourmet restaurants.

JdV University sponsors free courses in everything from English as a second language to surfing. And, while everyone goes on a corporate retreat at least once a year, salaried managers get a four-week paid sabbatical every three years—a benefit at that frequency is virtually unheard of anywhere else in corporate America.

“We survey our employees’ wants and needs, and the compensation and benefits at the competition—our employee satisfaction is ahead of the industry average at 90 percent of our properties,” Conley says. JdV’s human resources department also studies what top firms are doing outside the hospitality industry.

Are such programs really necessary for employees engaged in less creative work? “One third of our employees clean toilets,” he points out, and while cleaning toilets might not be a peak experience in and of itself, Conley has been successful in helping those who do the work to see this as a necessary part of the nobility of the service hotels provide.

The Perfect Match

Joie de Vivre Hospitality’s award-winning service helps potential guests find the hotel that best suits their personality.

Yvette, JdV’s online matchmaking service, takes potential guests through a short quiz about their personalities and preferences in order to recommend five hotels. It also provides ideas about things to do in the area, supplemented by the knowledgeable and enthusiastic staff.

“Other hotels sell sleep; we sell dreams,” Conley says. The intended result is that after a guest stays at a JdV hotel, he or she feels an “identity refreshment.” Guests are so pleased that they tell their friends, making word-of-mouth the company’s strongest advertising technique. jdvhospitality.com

MAGAZINE STAND

Chip Conley brands each hotel to reflect a distinct personality by focusing on themes found in top publications. These four JdV hotels were inspired by the magazines that Conley found appropriate for his guests. Five words that he felt best described the magazines were chosen to guide the individual design and service.

PHOENIX HOTEL
Rolling Stone Funky, hip, young-at-heart, irreverent, adventurous This San Francisco hotel is edgy and funky, right down to the bottom of the pool—where you will find a mural by Francis Forlenza, titled “My Fifteen Minutes.”

HOTEL REX
The New Yorker Worldly, sophisticated, literate, artistic, clever The literary theme at this San Francisco retreat can be found in the pictures of great authors that line the walls and classic books lying around everywhere you look.

HOTEL AVANTE
Wired Smart, avant-garde, visionary, iconoclastic, creative Set in Silicon Valley, this hotel looks to exercise guests’ brains by equipping all guest-rooms with a yo-yo, an Etch A Sketch and a Rubik’s Cube.

GALLERIA PARK HOTEL
Business Week meets Vanity Fair Engaging, warm, savvy, classy, glamorous Located in San Fran’s Financial District, the hotel shows its business side with work stations in each room, and its glam side with Art Deco design and an evening wine hour.