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Homework answers / question archive / Answer these 3 questions (1 page per question) according to the case study at the attachment   Question 1: Present and discuss your own ideas on how you would have advised to include the “five human truths” described in the case study into a Westin hotel operation

Answer these 3 questions (1 page per question) according to the case study at the attachment   Question 1: Present and discuss your own ideas on how you would have advised to include the “five human truths” described in the case study into a Westin hotel operation

Management

Answer these 3 questions (1 page per question) according to the case study at the attachment

 

Question 1: Present and discuss your own ideas on how you would have advised to include the “five human truths” described in the case study into a Westin hotel operation. What programs would you propose? How would you implement them? What would you want to be careful about?

 

Question 2: Discuss how the HR training program developed based on the Westin three core values (instinctive, personal, renewal) affected the overall product and operations of the hotel?

 

Question 3: In “the road ahead”, suggest your ideas as to why Westin brand seems to be loosing ground despite all the innovations? What would you suggest as a next step for the Brand?

FRANCES X. FREI CHEKITAN S. DEV LAURE MOUGEOT STROOK Westin Hotels and Resorts: Operations of a Lifestyle Experience Four years after the launch of the Heavenly Bed®, senior vice president and global brand leader for Westin Hotels & Resorts (Westin) Sue Brush and her colleagues at parent company Starwood Hotels & Resorts Worldwide, Inc. wondered if Westin was reaching the limits of its product strategy. “We mastered the sleep experience, the bath experience, the fitness experience, but quite frankly we could not see the next big product improvement that would give us a lasting competitive advantage over our competitors,” Brush explained. Signals were also being received from the operations team that Westin hotels’ owners might object to additional costs. “It was unclear for how long we could keep on winning with adding the next best amenity,” Brush reflected. “Although our margins were not declining, we were afraid that eventually this strategy would be economically unsustainable.” In October 2005, the 121 Westin hotels worldwide were in the process of adopting a new “lifestyle” brand strategy aimed at providing guests with a new service experience. Implicit in this experience was a service culture “renewal” that Brush and her team were attempting to effect through a new approach that combined sensory, visual, and verbal symbols, signature products and services intended to elicit relaxation, and a “smart, sophisticated, appropriate, and refreshing” voice to be used in interacting with guests. But Brush tempered enthusiasm for the new approach with pragmatic concern for its underpinnings: “This lifestyle branding is a very exciting turning point for Westin, but building a brand and delivering consistent service on such intangible values are big operational challenges.” Westin Westin Hotels & Resorts was formed in 1930 under the name Western Hotels, Inc., at which time it operated 17 hotels, mostly in the Northwest. It affirmed its focus on people and culture with the 1954 adoption of its trademarked slogan “People Make the Difference.” As it expanded abroad in the 1960s, Western became Western International Hotels. It merged with United Airlines, Inc. in 1970, and in 1980 changed its name to Westin Hotels & Resorts. During these years, Westin pioneered such industry firsts as the guest credit card, 24-hour room service, and personal voice mail in guestrooms (see Exhibit 1). For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 2 Westin’s purchase in 1988 by Aoki Corp., a Japanese construction company, marked “the end of the family-oriented/promote from within era,” according to Brush, who had joined Westin in 1975. Hit by the economic impact of the 1991 Gulf War, Aoki put Westin up for sale in 1992, at which time the company managed about 80 hotels. To make itself more attractive to potential investors and achieve parity with the rest of the industry, Westin rolled out new services and products including Service Express®, Westin Kids Club®, and Westin’s Guest Office®.1 In 1995, Starwood Capital Group bought Westin in a joint venture with Goldman, Sachs, and Co., Nomura Securities International, and the Edward Thomas Companies.2 In 1998, Starwood acquired full ownership of Westin and bought the ITT Sheraton Corporation.3 The subsequently renamed Starwood Hotels & Resorts moved its headquarters to White Plains, New York and became a CCorporation. Recalled Brush: “It was chaos, as we now had three companies with clashing cultures coming under the roof of one structure. There was Starwood with a real estate finance mentality merging with Sheraton, a huge franchise-driven hotel company, and in the middle tiny little Westin.” Westin was positioned in the upscale segment occupied by brands such as Hyatt and Marriott (see Exhibit 2). Its management wanted to propel the brand to the upper end of that segment to compete with InterContinental and Omni.4 “We want the brand to be the number one brand in the upper upscale market, and we are going to do that by introducing a series of new products that will vault Westin into this category,” claimed a top executive. The Heavenly Bed® The idea of reinventing the hotel bed emerged in the late 1990s, when the hotel industry was focused on peripheral issues, in particular, telecommunications (i.e., internet access and telephones). “The hotel industry in 1999 was asleep and complacent,” recalled Brush. “Advertising, including ours, focused on the bricks and mortar of the hotels. Nobody was focusing on the experience inside the hotels.” Demand was picking up as the hotel industry recovered from major mid-1990s restructuring, but consumer research showed that hotels were becoming a commodity. Hotel rooms were so similar that hotel guests could not differentiate between brands. A “Sleeping On The Road” survey of 600 executives conducted for Westin by Guideline Research Consulting Corp. of New York found that 63% of travelers considered a good night’s sleep the most important service a hotel could offer. Frequent travelers said they slept less on the road than at home, that the quality of their sleep was worse, and that their performance suffered because of a bad night’s sleep in a hotel room. 1 This service offered business travelers, for a small fee above the standard room rate, the option of staying in rooms that doubled as offices. These rooms included a work area complete with printer/fax/copier, speakerphone, printer cables, voice messaging, free, unlimited local calls, and long distance access. 2 The real estate investment firm Starwood Capital was formed in 1991 in Chicago by Barry Sternlicht. In 1995, Starwood Capital took control of Hotel Investors Trust, a distressed NYSE listed, “paired share” Real Estate Investment Trust (REIT), and renamed it Starwood Lodging. The company expanded rapidly by buying single units and small portfolios at deep discounts to replacement cost. 3 The ITT Sheraton Corporation included the Sheraton, Four Points by Sheraton, and The Luxury Collection brands as well as the original St. Regis hotel on New York City’s Fifth Avenue. 4 The five categories of hotels defined by Smith Travel Research, by average room rate, were: luxury (top 15%), upscale (next 15%), mid-price (middle 30%), economy (next 20%), and budget (bottom 20%). For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 3 A small group of executives from the operations division including Starwood corporate director of rooms Jon Coleman put their heads together to see what they could do to improve the quality of the bed. “We were not satisfied with the existing OS&E [Operation Supply and Equipment], the amenities, and above all the quality of the bed, which we found mediocre,” explained Coleman. “We wanted to give the hotel room a residential look and feel close to what customers had at home, even if it meant breaking the industry’s paradigm.” Initial response to the idea of a revamped bed was not universally positive. Conventional wisdom held that the hotel bed and covers had to last as long as possible and require as little maintenance as possible. The quality of the bed had been given little attention, in part, because the business guest typically spent only one or two nights in a hotel. The company spent six months researching the new bed. “We did not even solicit a customer survey, we just moved forward,” recalled Coleman. “It was not easy, though, because everyone had strong ideas about what a bed should be like.” The all-white, luxury “Heavenly Bed” was ready for commercialization in May 1999 (see Exhibit 3). Before it could proceed with a public launch, Westin had to convince the owners and franchisees who owned 60 of the 83 Westin hotels worldwide to buy the Heavenly Bed. Consequently, in July 1999, all Westin general managers and owners were invited to an official presentation at The Westin La Cantera Resort in San Antonio. Brush recalled the event vividly. We put a Heavenly Bed in all of the rooms of the attendees the night before, so they could experience the product first hand, then we disclosed the bed roll-out plan the following day in a high-drama event with lights, cameras, action, and Starwood presented a $30 million check, which was the amount of investment needed to equip the 23 Westin hotels that Starwood owned at that time to show the company’s commitment to this project. The owners remained skeptical, however. “Many were unconvinced of the necessity to change the bed, and thought that an all white bed was downright crazy from a laundry cost perspective,” recalled Coleman. “They mostly adopted a ‘wait and see’ attitude.” Branding the Bed Publicly launched on August 31 at the New York Stock Exchange and more than 40 other locations simultaneously, the Heavenly Bed generated, over two weeks, 91 million radio/TV/print impressions worth $1.7 million in ad value. The launch was followed by a $2 million provocative mass media campaign with the tagline “Who’s the Best in Bed.” The week after it introduced the bed in 12 of its hotels, Westin received 32 requests from guests who wanted to know where the bed could be bought. By week four, Brush was receiving complaints from guests who were disappointed that the hotel they stayed in did not have the beds. Westin guest satisfaction at the hotels with the new beds increased from 8.2% to 9.1% over the first six-month period. Meanwhile, Westin competitors remained incredulous and skeptical. Many downplayed the fact that the Westin bed was more comfortable and refused to admit any economic advantage. “I think people tend to buy on rates,” maintained a general manager for a competing brand. “A 25-inch TV or a fancy bed are nice things to have, and they may bring in some people, but the vast majority of For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 4 people would not be swayed by that.”5 “I think they were amused and waited for us to fall flat on our faces,” reflected Brush. Creating a Heavenly Brand In 2001, Westin launch a “heavenly” line of retail products. “We wanted to improve our guests’ lives so they felt better from check-in to check-out; accomplishing that would build loyalty and clearly distinguish Westin from other hotels,” explained Brush. Respondents to a 2001 Westin survey of 1,000 travelers rated low water pressure as their biggest complaint in the shower or bath and 20% complained that the “shower curtain sucking in and touching you’’ was source of frustration. Westin addressed these problems with the launch, in May 2001, of the “Heavenly Bath®,” which featured a new dual-headed showerhead, curved shower curtain rod that provided eight additional inches of elbowroom, and amenities such as an oversized Brazilian combed cotton bath sheet and custom-designed velour bathrobes. Launched three months later, the “Heavenly Crib®,” aimed at improving the experience of children and their parents, featured 100% cotton-fitted sheets and a sturdy mattress with coils instead of the traditional foam mattress. “Rolling out these two products was easier, because they were less expensive than the bed and because we now had credibility,” remarked Brush. Westin’s “Heavenly Dog Bed®,” introduced in 2003, tapped into the 29 million strong market of people who annually traveled with their dogs.6 Seventy-six percent of respondents to a Starwood commissioned study of 400 dog owners said they would be more loyal to a hotel brand that accepted dogs even when they were not traveling with their pets. The “love that dog” program included a Heavenly Dog Bed, dog bowls, and a welcome kit. No additional charge was assessed for dogs staying at Westin, although guests had to sign a waiver and agree to pay any extraordinary cleaning charges. Finally, in January 2003, Westin unveiled its “WestinWORKOUT® Powered by Reebok(SM), ” a new custom-designed fitness facility that, according to Brush, “featured state-of-the art equipment, Reebok-designed fitness regimens for travelers, and an upscale design scheme.” WestinWORKOUT filled a gap that Westin had detected in a survey that revealed that to 64% of travelers’ hotel fitness rooms “seemed like an afterthought.” Each of these product roll outs represented a first in the industry offering, and Westin spent millions in advertising and marketing campaigns. Jumping on the “Bedwagon” Response to the Heavenly Bed by other hotel companies including Hyatt, Marriott, Hilton, and Radisson, which began creating their own ideal sleep environments, upgrading everything from the mattress to pillows to duvet covers, constituted a veritable “bed war”(see Exhibit 4) that, over time, grew to encompass virtually every amenity.7 5 John Rebchook, “A Real Sleeper,” Denver Rocky Mountain News, August 31, 1999. 6 Britta Waller, “Pet Friendly?” Delta Sky, January 2005, p. 49. Data are from the Travel Industry Association of America. 7 With heavy comforters and extra sheets and pillows, the new bedding introduced by the hotel brands sparked an outcry from hotel workers and unions that they created extra work and risk of injury for maids. In August 2005, the State of Illinois passed legislation mandating that hotels grant maids two paid 15-minute rest breaks per day to compensate for the additional labor. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 5 Hotels were offering spa-quality shampoos, lotions, and linen in bathrooms, high-speed Internet access in rooms and lobbies, flat screen televisions, docking stations for MP3 music players, and revamped fitness equipment. A 2006 study conducted by Smith Travel Research for the American Hotel & Lodging Association® estimated that the lodging industry would spend $5 billion on upgrades in 2006.8 Westin’s performance in Revenue Per Available Room (RevPAR9) is described in Exhibit 2. In 2004, the brand received the number one ranking for upscale hotel brand from J.D. Power and Associates®.10 Beyond Bed and Bath In October 2004, former president and COO of Coca Cola Steve Heyer was named CEO of Starwood (see Exhibit 5). Less than three months after his arrival, Heyer assembled a task force of 45 people and announced his intention to devise a new marketing approach to promote lifestyles that would reposition Starwood hotels from places to get a night’s sleep as cheaply and conveniently as possible to a total experience for the weary traveler. “Uniqueness, not ubiquity,” was Heyer’s new motto. “We are committed,” he announced, “to connecting emotionally with our guests through our brands, with brand-specific innovation [and] the creation of memorable experiences, resulting in the cultivation of great preference and brand loyalty for Starwood brands.”11 Heyer’s plan for Starwood also included lower investment in owned real estate in order to focus on the management and franchise business while expanding Starwood’s presence in established U.S. markets (see Exhibit 6).12 With the help of Scott Bedbury, a consultant and former chief brand officer for Nike and Starbucks, and Javier Benito, who had been Heyer’s chief marketing officer (CMO) for North America at Coca Cola and was again his CMO at Starwood, Starwood’s marketing executives began to research “the anatomy of a hotel stay.” The company also commissioned with the Mayo Clinic a study of travel related stress and how to alleviate it. Starwood’s senior vice president and chief creative officer Scott Williams, who participated in this initiative, described the process. We identified what we call the five human truths, which are the basic customer needs that our brands would need to fulfill: we need to feel special, we need to belong, we need to be in control, we need to reach our potential, and we need to be understood. We then proceeded to translate them into each of our brands. Oscar Avila, “Amenity Creep Making It Almost Impossible for Housekeepers to Clean Hotel Room in 30 Minutes,” Chicago Tribune, August 23, 2005, available at , accessed 10/20/2006. 8 Tom Graves and Jeannine DeFoe, “Industry Survey,” Standard & Poor’s, August 3, 2006. 9 ?????????????????????????????????????????????????????????????????????????????????????????????????????? 10 J.D. Power’s winners in the upscale segment from 2001 to 2006: Embassy Suites Hotels (2001-2003), Westin Hotels & Resorts (2004), Omni Hotels (2005 and 2006). 11Janeen Christoff, “The Starwood Experience,” TravelAge West, August 21, 2006, available at http://www.travelagewest.com, accessed 10/02/06. 12 Starwood’s pipeline targets included 150 new hotels contracts for 2006, minimum 5% net annual unit growth through 2009, and the sale of 15 to 18 non-strategic owned hotels (including 13 Westin Hotels). Already represented in 42 U.S. markets, Westin had identified 129 new markets that it could potentially penetrate. Heyer expected a 7% to 9% progression of Starwood’s RevPAR through 2009, which would translate into 13% to 15% EBITDA growth. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 6 The marketing executives for all Starwood’s brands were given 90 days by Heyer to come up with a brand positioning that met the five human truths while enhancing customers’ emotional experiences. The result was eight individual brands, each with distinct and defining core words designed to elicit an emotional response (see Exhibit 7). Early in 2006, at a Global Conference in San Diego, the new lifestyle strategy was unveiled to Starwood’s 2,200 senior leaders, general managers, and owners. “The reception was phenomenal,” recalled Williams. The cost of implementing this repositioning effort, although not made public, was estimated in the press to be in the neighborhood of a few hundred million dollars, at least a third in payroll. Creating a Brand Experience Brush viewed the new lifestyle strategy as a natural evolution of the Westin product strategy. “It is not that we are switching gears and going in a different direction,” she explained. “We are simply leveraging the product strategy into the lifestyle strategy because we see the product strategy pricing us out of the market over time.” As Westin invested in lifestyle branding, it was reducing costs in other areas by eliminating products to which guests attached minimal value. Explained Brush: We are focused on eliminating unnecessary clutter and costs from the guestroom. For example, we changed from a four-cup to a one-cup Starbucks exclusive coffee brewer. It is more economical while providing a better, hotter cup of coffee. That is a “win win.” Likewise, why have an amenity tray that costs money and takes up valuable counter space when you can put the amenities in the shower where they are more convenient to the guest? Another advantage is to reinvest the cost of the tray and other low-value products into upgraded bath amenities, which guests are clearly demanding. Brush also elaborated on Westin’s new brand mantra: “personal, instinctive, renewal.” We landed on the idea of not just sleep, shower, and workout, but the broader context to be at your best, to achieve your potential, and to feel better when you leave a Westin than when you arrive. That is the whole idea of personal renewal. Westin’s new brand mission became to transform the nature of the hotel stay by defining and owning personal renewal. The Westin-Mayo Clinic joint study revealed that 50% of travelers were sick or not feeling well while traveling, 52% felt lonely, 57% wanted to meet new people, and business travelers did not expect any sort of “renewal” from a hotel stay. “We want the Westin lobbies to have the same appeal and attraction as Starbucks,” explained Brush. “We want them to be this third place, a communal meeting place, a place to unwind, meet, chat and connect.” The Sensory Welcome Program The Sensory Welcome Program aimed to provide guests walking into a Westin with a “renewing oasis.” “Research told us that if you could make a positive impression in the first and last ten minutes of guests’ stays, the chances of them having a good stay throughout, leaving feeling good, and wanting to return were fairly high,” explained Brush.13 13Janeen Christoff, “The Starwood Experience,” TravelAge West, August 21, 2006, available at http://travelagewest.com, accessed on 10/02/06. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 7 The Sensory Welcome Program included the following elements. • A signature white tea scent used in Westin lobbies • Signature music developed by an eMusic musicologist • A lighting design by Philips Lighting Company® that adjusted the lighting throughout the day • Specialized botanicals designed by Bloom in New York City “This Is How It Should Feel,” the advertising campaign for the Sensory Welcome Program, included four television spots, a multi-tiered print effort that included a White Tea fragrance strip magazine insert (the first time a hotel company had used this type of execution in an advertising campaign), and an online component.14 The Breathe Program Contemporaneously with its sensory renewal program, Westin decided to become smoke-free.15 It was the first hotel brand to do so. “If we really believe in personal renewal and standing by our positioning, going smoke-free is perfectly natural,” observed Brush.16 The launch of the Breathe campaign was accompanied by the installation of breathing lights in Westin lobbies nationwide. A blue light projected on a wall pulsed at the average speed of a healthy human’s breathing and counted the number of fresh breaths taken by each Westin guest each day. In 2006, the brand received awards from the American Lung Association and the American Legacy Foundation. Perhaps in response, Marriott announced in September 2006 that all of its lodging brands in the United States and Canada, totaling 2,300 hotels and nearly 400,000 guest rooms, would become smoke-free. The Service Culture Renewal Westin also wanted to change the way its employees interacted with guests. “We want to improve guest loyalty and repeat stays,” Brush emphasized. “For example, since first impressions are so powerful, we want to improve ‘speed of check-in’ and ‘staff friendliness.’ We also want to increase guest satisfaction ratings on ‘intent to return’ and ‘likely to recommend,’ both huge measures of guest loyalty.” The company embarked on a new training initiative for employees, who were rechristened “experience engineers.” Explained Williams: “We took the three core values of Westin [instinctive, 14 One television spot entitled “breathe” encouraged viewers to take a moment to breathe and relax, another, entitled “wake up,” demonstrated how much nicer it would be to wake up to the sound of birds chirping or waves breaking than to an alarm clock. The “News” spot gradually replaced the sounds of a business news show with calming imagery, and the “Mask” spot blocked out the outside world and made the viewer see it through the cool, onscreen sensation of a mud mask and cucumber slices. 15 Westin’s consumer data revealed that 92% of its guests requested a non-smoking room when traveling and did not smoke in any part of the hotel including public areas. A smoke-free poll conducted by Westin found that the majority of consumers who traveled preferred a smoke-free environment. Concurrently with the implementation of this new policy, 3,900 smoking rooms underwent extensive cleaning. 16 Janeen Christoff, “The Starwood Experience,” TravelAge West, August 21, 2006, available at http://travelagewest.com, accessed on 10/02/06. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 8 personal, renewal] and, together with Human Resources, we defined the core competencies that we expected our managers and associates to develop. We then integrated them into training modules and manuals for the brand.” Westin’s Human Resources directors became “coaches” for the cultural branding strategy. They were supported by seven full-time, field-based Regional Brand Trainers who were responsible for training all hotel managers and hotel-based Service Culture trainers. These brand trainers were hired from both within and outside Starwood (e.g., from Disney) based on their ability to “train the trainers” and to engage and establish emotional connections with guests. “Once the leadership ‘drank the kool-aid,’ a process that took six months, brand trainers went to work on the hourly associates,” Brush explained. The training modules focused on core values, communication skills, and team issues, using roleplay and group activities to further understanding. For example, trainees were given Polaroid cameras and asked to go through the hotel and take pictures of what was “on-brand” and “offbrand,” and to imagine anticipatory “on-brand” services that might be provided to, for example, guests arriving for special occasions such as an anniversary, a bachelor party, or a funeral. Williams observed that the employees “are taught to read body language, to watch for emotions, to instinctively engage with guests, to anticipate their needs, and to make them feel special.” Associates were encouraged to take initiative by being allocated a monthly credit line of $500- $1,000 (depending on the hotel) to meet their guests’ needs. The Westin St. Francis in San Francisco used these funds to create a treasure chest into which associates could dip to fill specific needs of guests (as for a hair brush, power cord, or adapter). Guest satisfaction stories were collected in a shared database called “Live Westin.” Westin’s service culture renewal could be extended beyond traditional operational areas. At The Westin Resort St. John all prospective associates, even those applying to work for a third party as, for example, a parking attendant, were interviewed by the general manager, who also required all associates who worked for third party companies to attend service culture training. Observed Brush: “This instills the culture in every associate and teaches them that ‘everything communicates’ and that their role is key to overall guest satisfaction.” Finally, to inspire employees, a number of initiatives had been launched across all the Westin hotels, the following among them. • “Dream Westin,” a quarterly contest conceived to spur innovation • WestinWORKOUT, a fitness challenge • A global communication program with a monthly web-based seminar to update general managers and executive committee members • “Workplace renewal,” which involved revamping employee premises, referred to as “the heart of the house,” by painting walls in the brand’s new visual languages (color palette, language, and vocabulary) and suffusing rooms with white tea scent diffusers and music • Pride pins • A new, renewal-based website for Westin Careers By the fall of 2006, the training of Westin’s top management was nearly complete. “The reaction at all levels has been positive and instantaneous,” observed Brush. “Managers love having new tools and methods to talk about servicing the guests. Associates appreciate the time, attention, and resources focused on them.” Her sentiments were echoed by John Sweeney, general manager of The For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 9 Westin New York at Times Square. “Our staff has enjoyed the training so far, and we now have identified our own trainers… to teach the hourly employees. It is working like a big snow ball.” Having had to spread the training over two years at the request of the hotel owners, who fretted about the scope of the investment, Sweeney added: “Training is a never ending story.” Brush had already had customer feedback on Westin’s new brand positioning. Customer response has been gratifying. A guest loyal to another brand said he was switching to Westin when we offered him a towel and bottle of water after his morning run. Another guest wrote how impressed she was when an associate empathized with her about missing a special episode of “American Idol.” The associate recorded the episode, gift wrapped it in a beautiful box, and had it waiting for the guest when she returned from her late night business dinner. The Road Ahead Although the full impact of Westin’ brand repositioning had not yet been felt, Brush was optimistic. “Initial guest reaction to the initiatives supporting Westin’s ‘personal renewal’ lifestyle strategy has been very strong,” she observed. “We know guest satisfaction is affected and we are confident it will translate into market share and margins.” But Brush was also aware of the challenges posed by this new strategy. “The brand positioning and the initiatives are one thing, but to educate a workforce of 50,000 Westin associates coming from different countries with their own language and cultures is a lot harder to pull off operationally than investing in new beds,” she acknowledged. Compounding these challenges was accelerated growth; Westin had added 16 new hotels in 2006 and another 27 were due to open in 2007. “The challenge is to keep up with this growth, but from where I sit,” remarked Brush, “it is the best of problems to face.” Competition was another major concern. “Initially, the competition did not believe us, so it took them awhile to follow our lead,” observed Brush. “Now they have seen the Westin results and they are watching us much more closely. The uncertainty is how quickly they will imitate us and whether or not we can stay ahead with cost-effective innovations.” In late 2006, Westin was still leading its competition in RevPAR, but some customer satisfaction surveys suggested that the brand had been losing ground (see Exhibit 8). For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 10 ????????? ????????????????? ????? ???????????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????????????? ????? ??????????????????????????????????????????????????????????? ????? ?????????????????????????????????????????????????????????????????????????????????????????????????????? ???????????????? ????? ???????????????????????????????????????????????????????????????????????????????????????????????? ????? ??????????????????????????????????????????????????????????????????? ????? ?????????????????????????????????????????????????????????????????????????????????????????????? ????? ???????????????????????????????????????????????????????????????????????????????????????????? ????? ??????????????????????????????????????????????????????????????????????????????????????????????????? ?????????? ????? ???????????????????????????????????????????????????????? ????? ?????????????????????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????17 ?????????????????????????????????????????????????????????????????????????????????????????????????????????18 ????? ?????????????????????????????????????????????????????????????????????????????????????????????????? ????????????? ????? ????????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????????? ????????????? ????? ??????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????? ????? ????????????????????????????????????????????????????????????????????????????????????????????????? ??????????????????? ??????????????????????????????????????????????????????????? 17 Westin Kids Club included babysitting services, children’s menus, and furnishings and amenities geared to kids of all ages including infants. 18 With Service Express, guests dialed just one number from their in-room telephone to make all service requests. The requests were then relayed to Service Express associates for maximum speed and efficiency. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 11 ?????????? ??????????????????????????????????????????????????????????????????? ??????????????? ????????????? ?????????? ??????? ?????????? ?????? ???????? ? ? ? ?????? ?????????? ?????? ????????? ??????????? ??????????? ??????????? ? ?? ??? ??????? ???? ??????? ?? ??? ?????? ??????????????? ???? ??????? ???????? ?????? ???? ? ?? ??? ????????? ???? ???????? ???????????? ???? ??????? ??????????????? ???? ???????? ???????? ??????? ???? ? ?? ??? ??????? ???? ???????? ? ? ? ????????????? ???? ???????? ???????? ?????? ???? ????? ??? ??????? ??????? ???? ???? ???????????? ???? ??????? ??????? ???? ???? ????????????????? ???? ??????? ???????? ?????? ???? ?????????? ?????????????????????????????????????????????????? ? ??????? ????????? ???????????? ??????? ????? ??????? ???????? ?????? ??????? ????? ??????? ???????? ?????? ??????? ????? ???????? ???????? ??????? ??????? ????? ???????? ???????? ?????? ??????? ????? ???????? ??????? ?????? ??????? ????? ???????? ??????? ?????? ??????? ????? ???????? ??????? ?????? ??????? ????? ???????? ???????? ?????? ??????? ????? ???????? ???????? ??????? ???????? Source: Case authors’ research. Hotels, room numbers and financial data come from the companies’ Annual Reports. Operating statistics for Starwood come from Joseph R. Greff, Kamaldeep, Manaktala, and Kevin Milota, “Starwood Hotels & Resorts Worldwide, Inc.” Equity Research, Bear Stearns & Co. Inc., December 6, 2006. Joseph R. Greff, “Starwood Hotels & Resorts Worldwide, Inc.” Equity Research , Fulcrum Global Partners LLC., December 4, 2003 and February 5, 2004. Joseph R. Greff, “Starwood Hotels & Resorts Worldwide, Inc.” Equity Research, ABN Amro., February 4, 2002. Bear Stearns & Co. Inc. and Smith Travel Research, “Company Reports,” 1999 Edition. Operating statistics for Marriott and Renaissance come from Joseph R. Greff, Kamaldeep, Manaktala, and Kevin Milota, “Marriott International, Inc.” Equity Research, Bear Stearns & Co. Inc., February 8, 2007, April 17, 2006 and May 26, 2005. Jason N. Ader, Robert A. Lafleur, and Joseph J. Yurman, “Marriott International, Inc.” Equity Research, Bear Stearns & Co. Inc., January 20, 2000. Joseph R. Greff, “Marriott International, Inc.” Equity Research , Fulcrum Global Partners LLC., October 9, 2003. Operating statistics for Hilton come from Jeffrey M. Randall, “Hilton Hotels Corporation,” Equity Research Recent Development Reports, A.G. Edwards & Sons, Inc., February 1, 2006 and January 31, 2007. Joseph R. Greff, “Hilton Hotels Corporation.” Equity Research, Fulcrum Global Partners LLC., October 22, 2003, February 17, 2004, and April 28, 2004. . Jason N. Ader, Robert A. Lafleur, and Joseph J. Yurman, “Hilton Hotels Corporation.” Equity Research, Bear Stearns & Co. Inc., February 28, 2000. Note: Numbers of properties and rooms include owned or partially owned hotels (joint venture), managed, and franchised hotels worldwide. All Westin’s numbers for 2006 are estimates. Marriott numbers include JW Marriott Hotels & Resorts. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 12 ????????? ??????????????????????? ???????? ????????????????????????? 19 ??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 13 ????????? ??????????????????????????????????????????? ?????? ???????? ?????? ???????? ??????????? ?????????????? ????????????????? ????? ????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????? ????????? ?????????????????? ????? ????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????? ???????????????????????? ????????????????? ????? ?????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????? ?????? ?????????? ????? ??????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????? ???????????????? ??????????????? ????? ???????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????? ????????? ?????? ????? ?????????????????????????????????????????????????????????????????? ?????????????? ???????????????????? ????????????????? ???? ????? ?????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????? ?????????????????????????????????????? ???????????????? ???????????????? ??????????????? ????? ???????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????? ???????????????????? ???????????? ??????????????? ??????????? ????? ??????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????? ??????????????????????? ?????????????????????? ????????? ???????????? ????? ????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????? ????????? ????????????? ???????????? ????? ??????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????? ??????? ???????? ??????????????????? For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 14 ????????? ??????????????????????????????????????????????????????????????????????????? Steve Heyer, Starwood Chief Executive Officer Steve Heyer joined Starwood in 2004 after serving as president and COO of the Coca-Cola Company since 2002, and before that as president and COO of Turner Broadcasting System, Inc. and a member of AOL Times Warner’s Operating Committee. Previously, Heyer was president and COO of Young & Rubicam Advertising Worldwide, and rose to senior vice president and managing partner over 15 years with Booz Allen & Hamilton, for which he led the marketing practice worldwide. A native of New York, Heyer holds an MBA from New York University’s Stern School of Business and a bachelor’s degree from Cornell University. Sue Brush, Senior Vice President of Westin Hotels & Resorts As global brand leader, Sue Brush is responsible for the overall performance, integrity, and strategic direction of the Westin brand. A 27-year veteran of the hotel industry, Brush started out in Westin’s original headquarters city, Seattle, where she worked for ten years in various marketing positions. She was promoted to vice president, brand operations in 2001, vice president, Westin North America in 2002, and to her current position in 2003. Scott Williams, Starwood Chief Creative Officer Since 1999, Scott Williams has set Westin’s global visual and verbal communications strategy, developed worldwide creative standards, controlled creative output, and borne ultimate responsibility for the quality of all Starwood advertising/marketing creative products. Prior to joining Starwood, Williams was vice president of programming and creative director for CBS Eye on People, vice president, creative services for ESPN Classic Sports Network, and, from 1991 to 1995, responsible for programming, advertising, and promotion at HBO. Jon Coleman, Corporate Director, Sheraton Brand Operations Since joining Starwood Hotels & Resorts in 1997 as one of its general managers in the field, Jon Coleman has held several key operational roles in the world headquarters. Promoted to corporate director of rooms, he was credited with many of the successful guestroom product transformations including the famed Heavenly Bed and Sweet Sleeper Bed creations. More recently, he served as corporate director of regional brand operations with responsibility for operational excellence before being made head of Sheraton Brand Operations with responsibility for operational programs, products, and processes. John Sweeney, General Manager, The Westin New York at Times Square As general manager of The Westin New York at Times Square, John Sweeney is responsible for overall operation of the 863-room hotel with 32 meeting venues. A member of the award-winning hotel team since its opening in 2002, Sweeney and The Westin New York at Times Square helped to transform that location into a tourist destination for discerning guests. Sweeney’s 30-year career in the hotel industry dates to 1977. Source: Westin Hotels & Resorts. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 15 ????????? ?????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????? ????? ? ????? ? ????? ? ????? Revenues Owned, leased and consolidated joint-venture hotels 2,682 3,517 3,326 3,085 Vacation ownership and residential sales and services 988 889 640 439 Management fees, franchise fees and other income 697 501 419 255 Other revenues from managed and franchised properties 1,585 1,070 983 851 5,962 5,977 5,368 4,630 Cost and Expenses Owned, leased and consolidated joint venture hotels 2,023 2,634 2,519 2,392 Vacation ownership and residential 736 661 488 340 Selling, general, administrative and other 470 370 331 200 Restructuring and other special charges (credits) net - 13 (37) (9) Depreciation 280 387 413 410 Amortization 26 20 18 19 Other expenses from managed and franchised properties 1,585 1,070 983 851 5,120 5,155 4,715 4,203 Operating Income 842 822 653 427 Gain on the sale of VOI notes receivable 17 25 14 15 Equity earnings from unconsolidated ventures, net 61 64 32 12 Interest expense, net of interest income of $19, $3, and $5 (171) (239) (254) (282) Loss on asset dispositions and impairments, net - (30) (33) (183) Income (loss) from continuing operations before tax and minority equity 749 642 412 (11) Income tax benefit (expense) (161) (172) (43) 113 Tax expense on repatriation of foreign earnings under the American Jobs Creation Act of 2004 - (47) - - Minority equity in net loss 1 - - 3 Income from continuing operations 588 423 369 105 Discontinued operations and special items: 456 Loss from operations, net of tax benefit of $(1) and $0 - (1) - (2) Gain on dispositions, net of tax expense (benefit) of $0, $(10) and $40 - - 26 206 Net Income 1,043 422 395 309 Source: For fiscal years 2003 to 2005, data are from Starwood Hotels&Resorts Worldwide Annual Report 2005. Form 10-K. page 66-F4, available at http://media.corporate-ir.net/media_files/irol/78/78669/Reports/05ar.pdf accessed 03/22/2007. For fiscal year 2006, data are from Jeffrey M. Randall, “Starwood Hotels & Resorts Worldwide,” Equity Research Recent Development Reports, A.G. Edwards & Sons, Inc., February 2, 2007. For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. 607-129 Westin Hotels and Resorts: Operations of a Lifestyle Experience 16 ????????? ?????????????????????????????? ?????? ???????? ???????????????????????????? ??????????? ??????????? ??????? ?????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????? ????????? ??????????? ???????? ??????? ???????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????? ???????????? ?????? ???????? ???????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????? ?? ?????? ???????? ????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????? ??????????????????? ??????? ?????? ???????? ?????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????? ???????? ?????? ???????? ????????? ????? ?????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????? ????????? ????????? ????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????????? ???????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????? ?????? ???? ?????? ?????????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????? ??????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????????????? ????????????????????????????????????????????????????????????????????????????????????????????? ????????????? ???????????? ???????????? ???? ?????? ???????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????????????????????????????????????????? ?????????????????????????????????????????????????????????? For the exclusive use of G. Moscato, 2015. This document is authorized for use only by Gregory. Moscato in 2015. Westin Hotels and Resorts: Operations of a Lifestyle Experience 607-129 17 ???????? ? ????? ?????? ???? ??????????? ?????? ????????????? ????????? ??????????? ? ??????? ???????? ??????????????????????????? ???????? ???????? ????????? ????? ???????????? ???????? ????? ???? ???? ???? ???? ???? ???? ????? ???? ???? ???? ???? ???? ???? ????? ???? ???? ???? ???? ???? ???? ????? ???? ???? ???? ???? ???? ???? ????? ???? ???? ???? ???? ???? ???? ????? ???? ???? ???? ???? ???? ???? Source: JD Power figures come from the annual JD Power and Associates North America Hotel Guest Satisfaction Index StudySM. Each year is reported separately at http://www.jdpower.com/press-releases, accessed 4/24/07. Notes on JD Power scores: The JD Power Index changed scale in 2003 to a 1,000-point scale. The study measures overall hotel guest satisfaction across six hotel segments: luxury, upscale, mid-scale full service, mid-scale limited service, economy/budget and extended stay. As of 2006, seven key measures were examined within each segment to determine overall satisfaction: reservations, checkin/check-out, guest room, food and beverage, hotel services, hotel facilities, and costs and fees. Annual data are based on responses from business and leisure guests who stayed in a hotel between January and June of that calendar year. The annual number of responses across all market segments for 2001-2006 respectively has been: 13,335, nearly 13,000, 12,850, 29,424, 37,471, and 42,211. JD Power classified InterContinental and W Hotels as luxury segment hotels. For the exclusive use of G. Moscato, 2015. This document is authorized for us

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