The Karmic Capitalism of Chip Conley

San Francisco's rebel hotelier isn't satisfied with making a splash in the industry. He likes to teach, preach and, above all, spread joy.

September/October 2001

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The Karmic Capitalism of Chip Conley

Photo: Barbara Ries

It's an unusually hot March morning in the Tenderloin, San Francisco’s downtown ghetto. On the streets surrounding the Glide Memorial United Methodist Church, cars are double-parked for blocks and blocks. Inside, ushers hand out paper fans to the standing-room-only crowd jammed in for the first of two Sunday morning services. A mournful rendition of “Danny Boy,” played on a lone violin, fills the unadorned hall. A moment later the seven-piece Change Band and 60-member Glide Ensemble jump into a driving version of “Down by the Riverside.” Immediately the entire multiracial congregation is on its feet, singing and swaying as one. As the song wraps up, Cecil Williams, the 73-year-old African-American preacher who has been the conscience of the Tenderloin and Glide’s spiritual leader for nearly 40 years, gestures offstage. “Chip Conley!” he announces.

In contrast to Williams’s ample figure, full salt-and-pepper beard, and booming preacher’s voice, Conley is tall, slim, clean-shaven, relatively soft-spoken and white. He takes the pulpit and begins talking about the importance of home. Though Conley is one of the city’s most prominent hoteliers and one of the nation’s most innovative businessmen, lately, he says, he’s felt himself drifting after the break-up of a decadelong relationship. Glide has become his anchor, his home. “You find your life as you lose your way,” he says.

“That’s right,” several voices call out.

“When I think about Glide,” Conley continues, “I’m able to open up and show my jewels.”

The crowd of 1,500 momentarily falls silent, then cracks open with laughter. Recognizing his faux pas, Conley smiles. “Sorry about that,” he says.

Coming to Glide, he tells the now composed congregation, is a way to “open our oysters—to get completely out of our heads and completely into our hearts.” He has come a long way, he confesses, from the days when he looked down on religion as a crutch for the weak—even as he was “meditating and getting drunk at the same time.” Now he recognizes that everyone needs a crutch from time to time. Glide has become his.

There’s nothing inconsistent about finding a business executive like Chip Conley preaching from an inner-city pulpit. Conley has been intent on creating a values-driven company ever since he founded Joie de Vivre Hospitality in 1987. He now runs 21 boutique hotels, but ministering to people in need, whether they’re customers, employees or neighbors, is still important to him. His 900 staff get so much time off for self-improvement classes at Joie de Vivre University (interspersed among the business offerings are language training, yoga, sailing and kayaking sessions) that his managers occasionally grumble they don’t have enough workers to get the work done.

But Conley’s management style is just one piece in his plan to change the way guests think about the nights they spend away from home. Conley, ’82, MBA ’84, describes his combined focus on personal values and the bottom line as “karmic capitalism.” He believes that consumer trends are driven not by demographics but “psychographics,” distinctive profiles of people’s cultural tastes. With that in mind, he and his creative services department crafted each hotel around a theme inspired by a familiar magazine. The funky Phoenix is his Rolling Stone hotel; the artsy Rex his New Yorker. Conley describes Millennium, his tremendously successful vegan restaurant in San Francisco’s Civic Center, as “The Vegetarian Times meets Vanity Fair.”

“He’s a visionary,” says Lalia Rach, associate dean at New York University’s Tisch Center for Hospitality. “He has brilliantly seen unmet needs. He says, ‘If you fit this psychographic, you’re going to love this property.’”

Psychographics didn’t always govern Conley’s decisions; neither did karmic capitalism. When he was 19, a Stanford undergraduate living at the notorious Phi Delta Theta fraternity, he spent nine months wearing “a really bad suit” selling commercial real estate in Silicon Valley. A few years later, still in “the same bad suit,” he took a job in commercial real estate with Morgan Stanley. “From the outside it seemed as though I was very successful, but it felt as though I had sold out,” Conley recalls.

After completing his MBA, Conley went to work for Bill Poland, a San Francisco developer. His salary of $24,000 a year was measly by business school standards, but Poland, MBA ’71, enticed him with a piece of each deal and the chance to get his hands dirty. His first assignment was leasing a renovated former Masonic Temple, where he showed his genius for marketing by putting a theater in the basement.

After 2 ½ years in real estate development, Conley realized he wasn’t a financial whiz or a shrewd negotiator, and therefore wouldn’t make his mark in real estate, according to Conley. But he was a great product packager, he loved people, and he enjoyed serving them.

“It dawned on me that the hotel business was a natural, an industry where I could be world-class,” Conley says. Prospective investors were mainly unmoved. “That’s great,” they said of his enthusiasm, “but you don’t know a thing about the hotel business.” Motivated by their skepticism and his own desire, Conley set out to learn as much about the business as quickly as he could. It couldn’t be that difficult, he figured. After all, he had “stayed in a lot of hotels.”

He began his search for a property on Halloween 1986, his 26th birthday, and wound up buying the Caravan Motor Lodge—a “bad hotel in a bad neighborhood [the Tenderloin] that nobody wanted,” but one that, at $1.1 million, was affordable. His father, Steve Conley, ’59, a successful Southern California businessman, came in as lead investor. Conley says his parents wanted to call the place “Magnolia Court,” but to him that sounded like a rest home. So he chose “the Phoenix,” which Steve says he thought was “the stupidest name I’d ever heard.”

Thinking back on her son’s first gamble in the hotel business, his mother, Fran, ’60, says, “He took a really stupid step.” Then she corrects herself. “He took a really gutsy step. He had no business going into the hotel business at all. It never occurred to me that he would ever make something as big as he has. It blows my mind.”

Within weeks, Conley learned that his most frequent clients were hookers. He also discovered that seniors and traveling families, the bread and butter of the motel business, are primarily concerned with safety. His “motel in the ghetto” wouldn’t appeal to them regardless of the $200,000 makeover featuring a ’50s pink-and-turquoise exterior, island-inspired furnishings and a tropical motif.

Providing a venue for turning tricks was not what Conley had in mind when he adopted “Creating Opportunities to Celebrate the Joy of Life” as his personal and corporate mission. But after rooting out the Phoenix’s best customers, Conley saw occupancy drop to 40 percent. He had racked up $40,000 in credit-card debt within the first four months as he borrowed to make payroll. At that point, he admits, he was “sort of lost. How was I going to get people to stay at the Phoenix if they didn’t know it existed?”

Increasingly desperate, Conley spent two or three days a week at Fisherman’s Wharf handing tourists discount coupons. “People looked at me like, ‘Are you going to sell me a watch, too?’” he recalls.

Salvation arrived in a 60-foot tour bus carrying the aging pop singer Brenda Lee. Conley quickly found out that just a few travel agents book rooms for rock ’n’ roll bands—customers most estabishments would rather see go elsewhere. So he got in touch with those agents, and the rest is rock ’n’ roll history. In the 15 years since it opened, the hotel has hosted Faye Dunaway, David Bowie, John F. Kennedy Jr., Linda Ronstadt, Anthony Kiedis of the Red Hot Chili Peppers, Sinead O’Connor and Keanu Reeves, though “not in the same room,” Conley notes. Timothy Leary was a regular.

More recent guests include Charlie Musselwhite, G Love and Special Sauce, The English Beat, Radium, Dixie Dregs, Maceo Parker and St. Germaine. Don’t know who any of those folks are? Then maybe you don’t fit the psychographic for the Phoenix and ought to check out Joie de Vivre’s other hotels. Like the Nob Hill Lambourne, where Conley turned around a moribund property by targeting, among others, recent plastic surgery patients not quite ready for prime-time socializing. Or Costanoa, Conley’s “luxury campground” on the San Mateo coast, where a tent site costs $30 and a sumptuous room in the lodge can go as high as $260. Or the Hotel del Sol, an ugly-duckling motor lodge off San Francisco’s Lombard Street that Conley transformed (Martha Stewart Living meets Islands magazine) with a bright, colorful and relatively inexpensive redesign. The result? A near tripling of the average room rate in less than two years. But that’s chump change compared to the results achieved at the Kabuki Hot Springs, San Francisco’s largest day spa, which Conley acquired from AMC, the movie-theater chain.

“They didn’t know what to do with it,” Conley says. As a regular customer at the spa, Conley knew he could make it successful. It’s part of his “I am the market” theory, his belief that if he wants a product or service, there’s a chance others will, too. It took six years—including Conley writing a letter suggesting that the goings-on in the poorly run spa could spoil the company’s wholesome image—before AMC agreed to sell.

As soon as they did, Conley jumped into action. In the first two months, after closing briefly for a cosmetic renovation, he sold $150,000 in gift certificates, more than his purchase price. Today the Kabuki Springs and Spa offers “serenity and simplicity,” and annual profits are four times what Conley paid for the place. Even more astounding: each year customers buy $750,000 worth of gift certificates, only 60 percent of which are ever redeemed. That’s $300,000 that costs Conley nothing more than the paper the certificates are printed on.

Conley's staff seem to appreciate the way he works. When Joie de Vivre took over the management contract for the Laurel Inn in San Francisco, Jacqueline Thompson, the incumbent general manager, wasn’t entirely thrilled. She had begun her career in hospitality at the city’s historic Clift Hotel in 1951. With occupancy at the Laurel running at 95 percent (among the highest in the nation), there didn’t seem to be much that needed improving. Thompson thought it might be time to retire.

“I’m of a certain age,” she says she told Conley before saying that if he wanted to hire someone else, she would understand.

“Is that what you think?” she says Conley asked her. “Or is that what you think I think?” Thompson stayed on another two years, thrilled not to have to kowtow to the corporate regulations she had experienced elsewhere. During that time, she oversaw a major renovation before retiring recently at age 75. Keeping her on, Thompson says, was “very adventurous of him in the hotel business, where women and older people don’t have a chance. You get set in your ways. I’m still a bit set in my ways. I still buck authority, and they [Joie de Vivre] are very good about it.”

Still, Conley is clear about his expectations. He is obsessed with terrorists. Standing before his general managers at their annual retreat, he says he sees terrorists coming in the door. He monitors them as they circulate threats over the Internet. He wants his staff to stop them before they drop their next bomb. In fact, he wants them to do more than that. He wants to turn terrorists into cheerleaders.

The terrorists Conley worries about don’t have anti-imperialist agendas. They are customers who leave unhappy from any of the 27 businesses Joie de Vivre manages.

Conley explains that word of mouth—or, these days, “word of mouse”—spreads most rapidly from either extremely satisfied or extremely dissatisfied customers. On a simple chart, he places the terrorist in the upper left quadrant, a place of low satisfaction and high word of mouth. His managers’ objective, he explains, is to move terrorists along a parabolic line that ends in the upper right quadrant, a land of high customer satisfaction and high word of mouth, where satisfied, giddy cheerleaders will happily do the marketing for Joie de Vivre. Conley’s graph of two points and a curved line describes a classic happy face, exactly what he wants all his employees and guests to wear.

Conley is capable of tossing a bomb of his own now and then. Like the time he told 1,000 franchisees at a Days Inn convention that their product “sucks” because their paradigm insists that they never offend anyone. “Maybe that worked in the 1960s,” Conley says, “but we all want to be stylish now. Even my dad wants to be stylish, and that’s a scary thought.”

The biggest bomb Conley ever threw landed in his father’s lap while the two of them sat in his folks’ kitchen in Long Beach, Calif., 15 years ago. “I think I made a comment about his mannerisms,” Steve Conley remembers. Chip looked across the table and said, “Dad, I’m gay.”

For Fran and Steve Conley, Chip’s announcement was like a fissure splitting open beneath the Ozzie-and-Harriet-like household they thought they had created. His mother seems to be struggling not to use the word “destroy” before saying, “It devastated us; and for a long time, it was hard to live with. We wanted the children to have the picket fence, the 2.5 children and what we had.” Fran remembers asking herself back then, “Was I a ‘smother mother?’ Was Dad too distant?” Steve Conley says he “didn’t want to believe it for about a year. It took me that long. I honestly thought he was going through a stage of life and would change.”

According to Conley’s sister Cathy, ’84, Chip had been “the golden boy in every way there was” back in high school. He’d overcome childhood introversion to become captain of the water polo team, student body president and class valedictorian. At Stanford, she says, he did “a great job of looking every bit the heterosexual boy. He had this beautiful, intelligent girlfriend we all loved.”

Today, Fran and Steve say they are at peace with their son’s sexual orientation. Fran says she’s glad that this story will be read by friends who don’t know about Chip’s homosexuality because she’s felt that she, too, has had to be in the closet, particularly when people ask, “When is your son going to get married?” She used to say, “Oh, I don’t know.” But now, “I won’t have to think up excuses or stories [anymore] or put a table full of people silent by saying he won’t be getting married because he’s gay. There’ll be a day when that won’t matter,” she adds. “But now it still does.”

One subject Chip and his father agree to disagree on is Steve’s continuing involvement with the Boy Scouts of America. Both men are Eagle Scouts, and the senior Conley is a “Distinguished Eagle Scout,” one of the organization’s highest honors. As a volunteer area president, he oversaw a program for more than 55,000 young people, and he still sits on the Western regional board. Despite vehemently disagreeing with the Scouts’ policy against gay leadership, Steve remains a strong believer in Scouting. “My attitude is that I can have a bigger influence on getting people to think about inclusion from the inside than from the outside,” he says. “I think Scouting is making a big mistake. It’s costing them financially and in terms of support. I will continue to argue against the policy.”

“My bottom line about life is that discrimination is no good no matter where it is,” says Chip, opting to say nothing more out of respect for his father’s lifelong commitment.

“Going through the experience of accepting Chip’s gayness has made me a better person,” says his father, “by making me more open and tolerant. And not just on the gay issue. On any issue. I’m not ready to quit the Republican Party, but I’m damn near. I was not that way 20 years ago.” Adds Fran: “I would not change who [he is]. If you deny what you are, then you are denying yourself, and that’s self-destructive.”

Finishing his sermon at Glide Memorial Church, Conley leaves the pulpit to a warm round of applause led by the Rev. Williams. The two met nearly a decade ago when Conley spontaneously joined in a march Williams was leading through the Tenderloin to urge local merchants to stop selling cheap wine to the indigent. Later, Williams got to know Conley as a member of his congregation and through the Celebrity Pool Toss, a fund-raiser Conley founded that brings in hundreds of thousands of dollars each year for Tenderloin causes. People line up for the chance to toss such luminaries as San Francisco Mayor Willie Brown and actors Robin Williams and Don Johnson into the pool at the Phoenix.

“I was so impressed with him that I asked him to join our board,” Cecil Williams says. “He was youthful, bright, genuinely concerned, very sincere and a good talker. He’s our kind of person. A good dude.”

Following Conley’s talk about “home,” Williams begins preaching about the Good Samaritan. He chastises his assembly for wanting to “help without getting involved.” “Why?” he asks. “Because getting involved will get you messy,” and most people don’t like messes.

Today, no one would characterize the life of Damien Hall, the young man Conley effectively adopted 12 years ago, as a mess. The 25-year-old has been working full time as a certified nursing assistant at St. Francis Memorial Hospital in San Francisco since 1999. But when he and Chip met, Damien was a poster child for much that can go wrong with an inner-city adolescent.

As a kid he lived in the Europa Hotel, above San Francisco’s Condor Club, one of several places where his mother worked as a stripper. “I thought it was cool,” Hall says. “I was around naked women all the time.” But as he grew older, it didn’t seem so cool. Both his parents were drug addicts; and while he was growing up, his father was in prison for attempted murder. Hall remembers vividly the day of the arrest. “There was a knock at the door. A man said, ‘Back up,’ and kicked the door open.” Hall was 6.

He has no illusions about what would have happened to him if he hadn’t met Conley. “Being the arrogant asshole that I was,” Hall says, “I’d probably be dead. I’d probably be f****d around in the streets somewhere and wound up shot or hooked on drugs or something.”

Lianne Wong has worked at her family’s Peerless General Supply hardware store in the Tenderloin for 30 years and has known Hall since he was little. Along the way, she has seen dozens of other Damiens. “You can’t imagine what you see out here,” she says. Families of six and seven living in a studio. Both parents drug addicted, prostitutes and worse. Her friend Tess Manalo-Ventresca has been a volunteer and activist here for 20 years. Despite having seen the worst of the worst, both begin crying while talking about the improbable father-son relationship that has developed between Chip Conley and Damien Hall.

Conley met 13-year-old Hall when he tutored him in English and social studies as a volunteer at the YMCA. By the time they made contact again a couple of years later, Hall had spent time in San Francisco’s Juvenile Hall after being arrested for assault and joyriding in a stolen car. He had also passed through a number of group and foster homes. When the group home he was living in refused to let him in after he allegedly hit a counselor, he faced a night on the streets. So he called Conley.

Since that night, Conley has acted as Hall’s surrogate father. It hasn’t always been easy for either of them. Conley told Hall that if he wound up back in jail, he’d disown him. When Hall learned his 39-year-old mother had died of a heroin overdose, Conley was with him. But though Hall frequently lived in one of Conley’s hotels, he had a hard time accepting Conley’s sincerity or authority. He continued to run away from foster homes and had two children out of wedlock before he was 20—children Conley now refers to as his grandsons. According to Hall, it was only when he and the children’s mother split up that he and Conley began to get truly close.

“I got older, wiser, a bit more vulnerable,” Hall says. “Ever since then, me and him have had a really tight relationship. He’s my best friend. I never feel judgment from him. I think he’s an icon of how a person can be.&rdquo Still, Hall has not been able to put his past entirely behind him. Twice while working at the hospital, he’s had the surreal experience of admitting his biological father, who had been brought in by the police.

Conley’s commitment to Hall played a significant part in Conley’s split from his romantic partner of 11 years, who was not as prepared as Conley to include Hall in their life. Recently, Hall and his sons, Deshawn, 6, and Denari, 4, spent part of the summer living with Conley in his former Mill Valley home. Whereas Hall once thought Conley would make a “terrible father,” Conley’s persistence and consistency have changed Hall’s attitude completely. “When I need someone to talk to, he’s that person,” Hall says, adding that Conley absolutely adores his two sons. “I love Chip a lot,” he says. “And it’s hard for me to say that about anybody.”

And for those who might look with suspicion upon the motivations of a gay man who effectively took a wayward street kid into his home and adopted him, Hall has just two words. “F*** ’em,” he says.

"Why do you want it?" the cost estimator says to the designers, builders, financiers and architects seated around a downtown San Francisco conference table.

“Because he wants it,” they all say, gesturing toward Conley, who is determined to have a “deluge shower” installed outside the spa of the $50 million hotel Joie de Vivre will put up on the corner of Mission and Steuart streets in San Francisco. Standing under the high-pressure device is like getting a great massage in just five minutes, Conley insists.

The 200-room, eight-story project is Conley’s first newly built hotel in San Francisco. Located on the Embarcadero, kitty-corner from what will be the revitalized Ferry Building and with unobstructed views of the Bay Bridge, the site is a developer’s dream. Conley won permission to build on it after four years of discussions and attendance at 35 neighborhood meetings.

“It’s going to be expensive,” the dour estimator says, flipping through pages of architectural drawings.

“Well, if you could give us some advice on how to make it less expensive, that’d be great,” Conley says jokingly. None of the men seated around the table cracks a smile. “Trust me. It’s really great,” Conley says. “I promise you.”

It’s been a difficult year for Conley. “The joy meter is not great right now,” he says, sitting in his downtown office. He may not get his deluge shower after all, because of the expense. He’s tired after opening four new hotels and preparing for the ground-breaking on the Mission-Steuart streets hotel. Plus, expenses are up and occupancy down as California deals with the double whammy of an economic slump and an energy crisis. Conley has had to spend lots of time soothing the jangled nerves of Joie de Vivre’s 125 investors. He’s decided not to take any salary for the next four months.

“If there’s a time that a company needs to be focused on its culture, this is it,” he says. Reflecting on his start at the Phoenix, he says, “We have to be humble. We’re in a market [climate] we’re not that familiar with. We have to be just as determined and savvy now as we were then.”

So, as Conley and his staff strategize about how to keep ahead of the pack, and about turning terrorists into cheerleaders, he is thinking about someday becoming a teacher. Or a professor. Or a full-time writer. But first he wants to build Joie de Vivre into Northern California’s leading hospitality company, whose hotels people go to for “identity refreshment.” He wants his company recognized as one of the best anywhere to work for. And most of all, he wants to become a missionary, a missionary whose quest is to help people celebrate the joy of being alive.

Williams, who has hosted several U.S. presidents at Glide, has another career in mind for Conley. “I’d hate to see him give up his business,” Williams says, but “he’d make a heck of a politician. He wouldn’t be a chameleon. He wouldn’t change his stripes every vote. He would not be fearful of taking a stand and making sure it counted. Even if he lost, he’d still take a stand.”

Damien Hall has the same thought. “As I get to know Chip,” he says, “I see that he thrives on challenges.” Hall doesn’t think Conley’s sexual orientation—or anything else—could stand in his surrogate father’s way once he’s made up his mind to solve a problem. “F*** the whole gay thing,” Hall says unequivocally. “The man could be president.”

Robert L. Strauss, MBA/MA ’84, is a Bay Area freelancer and frequent contributor to Stanford.

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