Starwood Hotels & Resorts, Research Paper Example

Abstract

In the contemporary world, for a business to be successful it has to think systematically and orient towards the future changes in the market and consumers’ potential demand and preferences. Companies that are leading in their respective fields and segments of the market often have to treat their strategic framework and performance creatively. In terms of this paper, attention is paid to Starwood Hotels and Resorts Company. This company is explored in terms of its background, place in the industry, leadership position, comparison with two other companies from the same field of specialization, overall company’s performance and personal learning relevance of the research conducted.

Key words: Starwood Hotels and Resorts, hospitality business, completion, luxuries.

Starwood Hotels and Resorts

In the contemporary globalized and interconnected world, for a business to be successful it is no longer suitable to achieve a god quality of the product, but also to think systematically and orient towards the future changes in the market and consumers’ potential demand and preferences. In this regard, companies that are leading in their respective fields and segments of the market often have to treat their strategic framework and performance creatively. In terms of this paper, attention is paid to Starwood Hotels and Resorts Company. This company is explored in terms of its background, place in the industry, leadership position, comparison with two other companies from the same field of specialization, overall company’s performance and personal learning relevance of the research conducted.

Company’s profile and background

Starwood Hotels and Resorts was founded by Barry Sternlich in 1991. He served as company’s CEO from 1995 till 2004. The initial company was oriented toward real state and was named Starwood Capital Partners, yet gradually it began to reorient towards hospitality business.  The first hotels were bought in 1993, reaching 30 properties by the end of 1994.[1] In 1997, the company made a significant purchase of one of its most famous brands Westin Hotels & Resorts for $1.8 billion. The same year, Sheraton Corporation brand was bought for $14.3 billion. In this purchase, the company overruled its primary competitor for this brand – Hilton Worldwide Holdings. With purchasing these two brands, the company started its global direction of development. By the end of 1997, Starwood stock estimated 57.48%.[2]

The year of 1998 was characterized by the acquisition of the two aforementioned brands and renaming of the company into its present title. At that time, the company had 650 properties across 70 countries. The first W Hotel was opened in January 1998 in New York. In 1999, Starwood added another brand – Vistana Inc, which was oriented on vacation segment of the market, and became one of the most successful elements of the company under the name of Starwood Vacation Ownership. Gradually, the company begins to receive various awards for leading positions in various aspects of the industry:

“In 2001, Starwood is named the World’s Leading Hotel Group at the Eighth Annual World Travel Awards. And Starwood Preferred Guest is voted Program of the Year for the second consecutive year during the 13^th Annual Freddie Awards, one of the most prestigious honors in the travel industry. In 2005, for the sixth year running, Starwood Preferred Guest is voted Program of the Year both America and internationally during the 17^th Annual Freddie Awards.”[3]

Thus, these awards demonstrate official recognition of company’s successful performance and devotion of customers to the variety of company’s brands. This success and recognition gave the company a stimulus for further expansion. In 2006, Le Meridien was acquired which resulted in adding of 137 properties and strengthening of company’s presence in the regions of Europe and the Middle East. In 2007, the company announced two new brands Aloft Hotels and Element Hotels, which were characterized by select-service distinctiveness: Aloft by urban/boutique orientation, and Element by eco-friendly considerations. The first hotels of each brand were opened in 2008 in Lexington, Massachusetts.[4]

By 2013, the company oriented its brand in three directions: Luxury (St Regis, The Luxury Collection, W Hotels Worldwide), Upper Scale (Westin, Sheraton and Le Meridien) and Select Service (Aloft, Four Points and Element). In 2013, the company owned 1,134 properties, 335,415 rooms across 100 countries. The company’s strategy is “individual spirit and collective strength.”[5] In this regard, the primary competitive advantage of the company is distinctiveness of its brands and their orientation on the diversity of lifestyle concepts, leadership designs and cutting edge innovations. The collective strength is achieved through the centralization of services including sales, management f revenues, and e-commerce aimed at the systematic drive of the performance of all brands.[6]

Furthermore, company’s business model consists of four fundamental pillars: operations innovations, strategic sourcing, service culture training and the company’s commitment being a learning organization. Operations Innovation team is responsible for finding and adoption best practices, costs optimization schemes across all branches. Strategic sourcing unit is responsible for signing contrast in terms of “balanced procurement model” to achieve the best value for money and accordance of practices with legal, sanitary and ecological norms across various properties. Culture-oriented training is aimed at providing unified standards of service provision together with different perspectives of culture-friendly details. Finally, as a learning organization, Starwood invest continuously into training programs and implementation of the most advanced techniques and technologies of services provision on the highest level.[7]

In terms of competition in the hospitality industry, it is very high. On the other hand, the segment the company orients on which is luxurious and upper-scale hotels of four and five-star rank, the number of competitors is lower than across the rest of the sector. However, due to the limited number of the rich people in the world who can afford services of the luxury brands, the competition between a few primary competitors for this market is quite severe. The primary purpose of companies targeting this segment is to achieve customer’s commitment to the brand that requires a constant innovation and preservation of competitive advantages. This is especially crucial if company’s main rivals of a global scale include Hilton Worldwide Holdings, Hyatt Hotels Corporation and Marriott International.

Company’s leadership

From outlined above background and trends in company’s development, Starwood Hotels and Resorts is considered to be one of the leaders in the hospitality business for a few reasons. First of all, it has acquired a network of the most luxurious brands under its trademark, achieved their constant success and further global expansion. Secondly, the company is leading in luxurious hospitality business because it managed to attract and create long-term commitments with top-level clientele through its points program of Starwood Preferred Guest, which is praised to be the most transparent and adaptive to clients’ preferences. In its turn, the company is leading in keeping commitments of its top-level clientele that attributes for a vast part of company’s profits:

“Starwood Preferred Guest launches richest elite traveler benefits in history for global mega traveler – this small, but powerful, group drives 30% of the company’s profit. The more SPG members stay, the more choices are available and the more personalized the benefits become with standouts like lifetime status, first-of-its-kind 24-hour check-in and a dedicated Starwood ambassador who provides one-on-one service to uniquely tailor the guest experience.”[8]

In this regard, the company’s is leading in providing its top clientele with the most individualized and person-centered experience ever possible. Consequently, the company’s leadership is evaluated in terms of qualitative features rather than the quantitative ones. In terms of figures, in the overall sector of the global hospitality business the company, depending on a criterion, the company can be on the third or fourth place. In terms of market capacity, Hilton has $28.68 billion, followed by Marriott International – $21.63 billion and then is Starwood with the market capacity of $14.62 billion, followed by Hyatt with $8.48 billion.[9] On the other hand, Starwood has the first place in terms of employed associates – 180,400 as of January 2015. In terms of revenues, the first lace is held by Hilton with $6.81 billion, followed by Starwood with $3.27 billion, Marriott International – $2.74 billion and Hyatt $2.71 billion.[10]Thus, in terms of its four competitors, the company is second in revenues which suggest it being among the top leaders of the industry. On the other hand, in terms of the net income Marriott International is on the first place with $753.00 million, followed by Hilton – $673.00 million and Starwood – $643.00 million and Hyatt  $344.00 million.[11]

On the other hand, it should be outlined that the company’s performance is compared to its three primary rivals in the specific segment of hospitality business they all specify and thus compete for. In this regard, all four companies are oriented on luxurious and middle-scale customers, while other companies in the industry may include lower-level and budgetary hotels, and thus would be more presented on various markets and have a more significant number of hotels in the ownership. In this regard, the first place of the biggest global hotel chains would be InterContinental Hotels Group (4600 properties), Hilton Worldwide (3900 properties), Marriott International (3700), Wyndham Hotels, Accor Hotels, Choice Hotels, Best Western and only then in the eights place is Starwood Hotels and Resorts (1146 properties).[12] Thus, in terms of the global representation, the company is in the leading ten companies, yet in terms of a specific segment of luxurious business oriented travelling it is in top three global companies.

Comparison with Marriott International and Hilton Worldwide

The two other companies were chosen for comparison due to their close performance and string completion capacities which were demonstrated above. All three companies are specialized in a provision of the same service – accommodation and recreation activities within the hospitality framework. In this regard, all three companies own hotels and resorts in various locations of the world. All three follow the recent trends in expanding their presence in developing Asia-Pacific region. On the other hand in terms of the targeting a certain segment of the market, Starwood and Hilton are more oriented towards the luxurious and upper-scale sides of the brands direction.

Although Starwood outlines its orientation in select-services, it is far from targeting middle-scale segment, which would diversify its customers’ range and increase their number. In this regard, while Hilton and Starwood are still concentrated on luxuries and upper-scale customers and consequent products provision, Marriott International has widened its expertise targeting middle-scale segment of customers. In this regard, it developed four brands: Courtyard by Marriott, Fairfield Inn, SpringHill Suites and Protea Hotels.[13] In this regard, orientation of non-full service provision for business and middle-class travellers increases the number of potential and targeted customers to the brand, which Starwood only starts to think about in terms of its widening of the target customers’ audience and Hilton is yet to consider.

In terms of products characterization, hotels and resorts of all three hotels demonstrates the most advanced designs, technological innovations, style refurbishing according to the new fashion trends. All three companies are oriented towards reservation of their inner standards of services provision across their brands with a required incorporation into the cultural framework of each particular country or even a region within it. In terms of provided services, all three companies are aimed at providing their customers with an unforgettable personalized experience. In this regard, except for the excellent quality of accommodation, food provision and comfort of the administrative aspect of travelling, all three companies innovate, in order to make their clients’ stay an unforgettable experience.

In terms of mission, all three companies state that they primary mission is to fulfill clients’ expectations and achieve global long-term commitments and partnership. In this regard, Hilton’s mission is to be “the preeminent global hospitality company – the first choice of guests, team members, and owners alike.”[14] This means that the company aims at global leadership and becoming a standard of the best quality. On the other hand, Starwood is more modest in articulating its mission, outlining that it is “to consistently exceed our guests’ expectations in terms of the products and services we provide to our business and leisure travellers; we strive to create an experience that is responsive to our guests’ needs by using the information you entrust us with responsibly.”[15] While both Hilton and Starwood state their commitment to satisfy customer’s expectations and secure excellence of services’ provision, Marriott makes a step forward and connects its mission with its primary values: uniting past and the future with the means of the present. It is stated:

“Our dedication to the customer shows in everything we do. Marriott’s reputation for superior customer service dates back to J. Willard’s Marriott’s original goal for his business: “good food and good service at a fair price.” We take pride in the details –every day, in every destination worldwide.”[16]

In terms of other differences, three companies have quite different approaches to fulfilling their missions and conducting business in general. Hilton is more aggressive in business conduct and treats competitors in a more traditional manner, while Marriott and Starwood are more open to cooperation. In terms of social and cultural innovations, all three companies have implemented various initiatives with placing different emphases. Hilton works in terms of its sustainability initiative of local program oriented towards efficiency and environment-friendly programs like the launch of food compost program in 2011in Hilton Garden Inn Richmond Downtown.[17] On the other hand, Starwood oriented the dimension of cultural and social innovations on a global scale by introducing Global Citizenship initiative:

“Since 2009, Global Citizenship has become a cornerstone of our business, strengthening our resilience in an age of continuous global change. Today, our efforts address critical issues such as human rights, climate change, conservation, and community development. We have set bold goals and made great progress in areas such as energy, water and greenhouse gas emission while laying the foundation in new areas such as supply chain.”[18]

Furthermore, the company is active in equalizing the status of various minority groups among its employees through programs that stimulate protection of human rights, encourage of female equality and career development, assisting underserved people in getting employment in the local communities. On the other hand, Marriott International made a step further and placed human-centered and culture-friendly goals in the heart of its corporate strategy. In this regard, various Marriott properties across the world employed the local population and centered economic and socio-cultural links for long-term cooperation with the local communities.[19] For the same purposes, Marriott’s standards of service provision are adapted to cultural specifics of each location and the type of customers attending.

The differences in cultural and social innovations suggest the difference in company’s perception of the ways they need to interact with the local communities and their perception of personal global responsibilities. These differences are also conditioned by the fact that Hilton and Starwood orient mainly luxury and upper-level clientele, while Marriott targets more diverse categories of travellers and is more accustomed to accommodating diversity of cultures and segments of various markets.[20]

Company’s overall situation

In general, it can be stated that Starwood Hotels and Resorts from its very establishment in 1991 till nowadays is performing very well, becoming one of the top three   companies in their particular segment of the hospitality market. The company survived through all the economic crises of the last twenty years and has well established its presence on the global scale. Irrespective of any changes in global and regional economies, the company managed to achieve stable growth of 5% the Compound Annual Growth Rate (CAGR) in 2004-2013 (Graph 1). The future prediction of the growth is 100,000 rooms and 400 hotel pipelines which is 30% future growth.* [21]Although the company takes different positions in respect to Marriott and Hilton, it is “the largest global upper-scale (5star) hotels company with the fastest growing luxury hotel portfolio.”[22]

The main rationale for company’s success is its orientation on a single segment of the hospitality business. Orientating on the upper-level segment of luxurious hotels and resorts, the company secured the constancy of the demand mainly because the number of customers of luxurious goods and services is often relatively the same irrespective of global economic changes. It might decrease slightly, but the vast majority of people staying in five-star hotels still continued to stay in those hotels. On the other hand, middle-scale and budgetary segments of the industry were affected by economic stagnation since recreational traveling was affected by customers’ limited capacity to spend money on recreation.

Another reason the company achieved its success is that due to the orientation on a very specific segment of the industry; it had to be innovative in its constant development and adaptation to the new fashion and global trends. In other words, the company achieved success due to its commitment to constant innovations and adaptations to customers’ expectations in order to develop a long-termed relationship and consequent devotion of the target segment customers to the brands of Starwood Hotels and Resorts.

Conclusion

From all mentioned above, it can be concluded that for the company to achieve leadership in its target field, it has to be innovative in its development and global expansion, orient on its target segment of customers and know exactly what are the expectations and cultural specifics of each geographic location and how company’s standards can be adjusted accordingly. In the segment where number of customers is relatively unchanged and completion is high, the company has to work towards creating a long-term commitment relationship with the existing customers so that they would prefer it to any other alternatives.

Starwood Hotels and Resorts did right that it oriented on a single segment and deepened its influence on the hospitality market of luxuries. It was right not to go lower than four-start properties in the last ten years since due to the economic crisis of 2008, it would not be able to gain the same profit as it did in the luxurious segment of the hospitality industry. However, with the predicted strengthening of middle class across the world and the increase tempo of its widening, in order to expand further the company will have to penetrate another segment of the hospitality market, meaning middle-scale hotels like Marriott International does nowadays.

References

Cetron, M., DeMicco, F. and Davies O. (2010). Hospitality 2015: The Future of Hospitality and Travel. Orlando, FL: American Hotel & Lodging Educational Institute.

Chen, J. (2012). Advances in Hospitality and Leisure. Bingley, BD: Emerald Group Publishing.

Gaol, F. and Hutagalung (2015). The Role of Service in the Tourism & Hospitality  Industry. London: Taylor & Francis.

Hilton Worldwide (2014). Vision, mission, and values. [Web page]. Retrieved from http://www.hiltonworldwide.com/about/mission/.

Marriott (2015). Core Values & Heritage. [Web page]. Retrieved from http://www.marriott.co.uk/culture-and-values/core-values.mi.

Pantelidis, I.S. (2014). The Routledge Handbook of Hospitality Management. Oxon, OX: Routledge.

Prabhu, V. (2013). The Starwood Investment Proposition. Retrieved from  https://starwood.q4web.com/files/doc_downloads/investor_day.

Starwood (2015). News: History. [Web page]. Retrieved from http://www.starwoodhotels.com/corporate/press/history.html?language=en_US.

[1] Prabhu, V. (2013). The Starwood Investment Proposition. Retrieved from  https://starwood.q4web.com/files/doc_downloads/investor_day.

[2] Starwood (2015). News: History. [Web page]. Retrieved from http://www.starwoodhotels.com/corporate/press/history.html?language=en_US.

[3] Starwood (2015). News: History.

[4] Chen, J. (2012). Advances in Hospitality and Leisure. (Bingley, BD: Emerald Group Publishing), p. 65.

[5] Prabhu, V. (2013). The Starwood Investment Proposition. p. 175.

[6] Ibid..

[7] Chen, J. (2012). Advances in Hospitality and Leisure. p. 76.

[8] Starwood (2015). News: History.

[9] Gaol, F. and Hutagalung (2015). The Role of Service in the Tourism & Hospitality  Industry. (London: Taylor & Francis), p. 56.

[10] Gaol and Hutagalung (2015). The Role of Service, p. 57.

[11] Gaol and Hutagalung (2015). The Role of Service, p. 59.

[12] Gaol and Hutagalung (2015). The Role of Service, p. 125.

[13] Pantelidis, I.S. (2014). The Rutledge Handbook of Hospitality Management. (Oxon, OX: Routledge), p. 72

[14] Hilton Worldwide (2014). Vision, mission, and values. [Web page]. Retrieved from http://www.hiltonworldwide.com/about/mission/.

[15] Starwood (2015). News: History.

[16] Marriott (2015). Core Values & heritage. [Web page]. Retrieved from http://www.marriott.co.uk/culture-and-values/core-values.mi.

[17] Chen, J. (2012). Advances in Hospitality and Leisure. (Bingley, BD: Emerald Group Publishing), p. 43.

[18] Starwood (2015). News: History.

[19] Cetron, M., DeMicco, F. and Davies O. (2010). Hospitality 2015: The Future of Hospitality and Travel. (Orlando, FL: American Hotel & Lodging Educational Institute), p. 81.

[20] Chen (2012). Advances in Hospitality and Leisure, p. 49.

[21] Prabhu, V. (2013). The Starwood Investment Proposition. p.165

[22] Ibid..