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4. Executive Summary
• Starwood is the world's largest operator of luxury and upscale hotels
• The company has a 9 strong brand portfolio of high-end luxury and upscale
hotels and properties in 100 countries
• 2013 Revenue: $6.12 Billion
• Headquarter in Stamford, Connecticut
• CEO & President - Fritz van Paasschen
2009 2010 2011 2012 2013 2014
Starwood Stock Price $34.65 $60.95 $48.69 $59.83 $78.99 $80.15
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5 Year Stock Quote: HOT
5. 1991 1993 1998 2000 2005 2006 2010 Future
Formation of
Starwood
Starwood Purchased first hotels
By 1994, 8000 rooms across more
than 30 properties
Acquired
Westin and Sheraton
Launching of
W Brand
Starwood
Preferred
Guest
Launching of
Aloft & Element
Hotels
Purchasing of
Le Meridien
Starwood 1000th
Property Opened
8. Strength Weaknesses
• High brand-recognition
• Financial Efficiency
• Strong management
• Customer Focused(plans like SPG)
• High staff turnover rate
• Possibility of Commoditization of
product/rooms
• Dependency on Foreign exchange
Opportunities Threats
• Growing GDP in China/India and
increased disposable Income
• Improvement in economic conditions
around the world
• Improvement of vacation ownership
business
• Government Policies
• Exit barriers in China
• Volatility of Foreign Exchange
• Fickle mindedness of consumers
9. How can Starwood leverage its brand
and financial efficiencies to tap into
the high growth markets with
increasing disposable incomes?
The Question
11. Company Analysis
• Starwood aims to capitalize on the rise of a new breed of wealthy luxury
travellers worldwide and high-powered business travellers while venturing into
emerging markets
• Six of its nine brands - St. Regis Hotels & Resorts, The Luxury Collection, W
Hotels, Westin Hotels & Resorts, Le Meridien and Sheraton Hotels & Resorts -
represent full-service properties which range in amenities from luxury hotels and
resorts to upper-upscale hotels
• Starwood also operates three moderately-priced, select-service hotel brands -
Four Points by Sheraton, Element and Aloft
12. Starwood’s USP
• Starwood is strongly focused on the Luxury Segment of the market
• In 2012, the company expanded its Starwood Preferred Guest(SPG)
program at a cost of 25 million USD
• The new programme benefits included rolling 24-hour check-in and
check-out times and personal travel assistants or “ambassadors”
13. • It is the most global hotel company with 1,200 properties housing
347,000 rooms across 100 countries
• The share of rooms in USA is only 45% as compared to nearly 70% for
the biggest three competitors
• Starwood has taken up a leadership position in the Non-US Luxury
and Upscale market with more than 162,000 rooms distributed across
the world
• Transformation from Owning hotels towards Managing and
Franchising Hotels
Success Driving Factors
14. Development In China
WEST & CENTRAL
16 OPERATING
26 PIPELINES
NORTH
33 OPERATING
24 PIPELINES
EAST
36 OPERATING
35 PIPELINES
TAIWAN, MACAU & HK
11 OPERATING
7 PIPELINES
HAINAN
10 OPERATING
8 PIPELINES
17. • Revenue of $717 billion, an increase of 5.3% over the last five years.
• The sector’s performance indicators have been showing year-over-
year improvement
oOverall occupancy was up 3.5% year over year
oRevenue per available room (RevPAR) went up 9.1% in 2013
oPwC expects healthy RevPAR growth of 8.2% in 2014 and 7.4% in 2015
oTotal earnings for this sector increased 10.1% in 3rd quarter 2014, 10.9% in 2nd
quarter 2014
oTotal revenue grew 5.4% in 3rd quarter 2014, 4.2% in 2nd quarter 2014
Industry Analysis
18. • The industry generally requires high product differentiation.
• Capital requirements for hotel projects are high
• The success of a hotel project is sensitive to location, management
and the quality and the experience of staff
• Thus, the industry exhibits high entry barriers restricting new
entrants, particularly because of the combined factors of economies
of scale and high capital cost of entry, together with the limited
supply of suitable locations
Entry Barriers
19. • Highly fragmented market with multiple competitors that leads to a
market share of less than 6% for the industry leader
• With sales of US$14.4 billion in 2012, Starwood claims it is growing
where demand is growing – in emerging markets
• In the domestic market for Starwood, i.e. USA, Smith Travel Research
(STR) expects the sector’s demand growth in 2014 to be 4.3% with
only a 0.9% increase in supply
Industry Analysis
26. Consumer Marketing Strategies
• Chinese Consumers:
• Lack of awareness about loyalty programs
• Lack of knowledge on benefits and perks
• Starwood:
• Incorporate the message into advertising strategy
• Expand Partnership with Asian Airlines
• One-in-Service with Uber & China Eastern Airline
• Continue to Support SPG – American Express
• SPG Mobile App
29. Starwood Specialty Marketing
Restaurants Accessibility:
• Allow easily accessibility to non-hotel patrons
• Market signature restaurants of the Starwood brand
• Host specialty events to garner better footfalls in the hotel premises
30. Starwood Specialty Marketing
• University Relationship: Brand loyalty must be locked in earlier on . By catering
to the university students from reputed colleges early on, Starwood can ensure
the future managers and decision makers have experienced the Starwood
hospitality .Collaboration with MBA colleges for executive MBAs
32. Starwood Corporate Sales & Marketing
Starwood Sales Organization
Starwood Sales On-Property Sellers TeamHOT
• 33 international offices
• 450 Global/Divisional of sellers
that deliver business, group and
leisure travelers to your property
• In 2012, $5.9 billion in revenue
was driven to Starwood hotels
globally.
• Network of 4,600+
property-level sellers
works with local and
regional customers.
• Complementing our
global sales executives
who focus on major
accounts of our largest
corporate and leisure
clients.
• Hotel-to-hotel group referral program
is designed to drive incremental
business to all Starwood hotels by
• Rewards property sales professionals
with cash incentives when their leads
result in definite bookings at other
Starwood hotels.
• In 2012, TeamHOT generated $200
million from property to property
referrals.
33. Starwood Corporate Sales & Marketing
Centralized Marketing Channels
Branded Web Channels Customer Contact Centers MARS Field Marketing
•In 2012, Starwood
Web channels
handled more than
334 million visits.
•Handled nearly 20 million
telephone calls and guest
interactions in 2012,
provided 24/7 in 25
languages.
•Minimized Abandoned
Reservation Calls
•Transfer property
reservation calls to a
Customer Contact Center
associate to ensure that
every possible booking is
realized
•Serve as a local marketing
agency that creates and
executes specific online
•Create offline marketing
plans with measurable
goals and tactics that
address the needs of
hotels.
34. Starwood Corporate Sales & Marketing
Starwood Preferred Guest
• Industry’s most honored loyalty program
• Drives revenue and profit for hotel with members
returning more often and spending more during
their stay.
• SPG members occupy half of all Starwood rooms,
paying an attractive rate premium, and provide
substantially elevated food and beverage premiums.
• SPG continues to be the most recognized loyalty
program, with 54% membership growth since 2007.
• Property owners have access through SPG to a richly
targeted database for one-to-one marketing and
innovative hotel promotions.
36. Starwood Project Types
Conversion
• Transformation: Combine property with Starwood's
acclaimed lifestyle innovations
• New Look: Upgrade properties a fresh new personal
and appeal in the briefest time possible
• Improvement: Improve bookings and operational
efficiencies.
Mixed Use
• Diversity: Mixture of residential, commercial and
retail space.
• Enhancement: Enhance value of the surrounding
real estate, creating a thriving destination for other
businesses, locals, and hotel guests.
37. Starwood Project Types
New Build Adaptive Re-Use
• Built to Order: Construct property with unique and
suitable specifications of ownership
• Maximization: Built with the best use of land,
location and technology
• Assistance: Advised by Starwood Architecture,
Design and Construction Teams
• Revitalization: Cosmetic upgrade on a building’s
architecture and site superiority.
• Preservation: Preserves the rich integrity of a
structure while infusing it with a bold new identity.
• Best of Both Worlds: Reinvigorating prime resort
locations with their own one-of-a-kind appeal hotel
38. Recent Development
January 2014:
• Starwood will manage 2 hotels in Australia
• Values at $700 million
• Total: 650 room and 1080 apartments
October 2014:
• Sold the St. Regis, Rome to Constellation Hotels
Holding Limited for €110 million
November 2014:
• Sold Hyde Park Sheraton to Sunshine Insurance
Group for $3.76 million
40. Management Team
Frits Van Paasschen
• Has valuable and Unique understanding
of the Operations, Management & Culture
• Global Branding, development & strategy
experienceCEO & President
Thomas B. Mangas
• Has vast experience in Finance, Investor
Relations, Global Business Services
• Leadership experience in Strategic
planning, Resource prioritization, Cost
management, etc.Exec-VP & CFO
Exec-VP &
Senior HRO
Jeff Cava
• Has more than 30 yrs experience with
major hospitality companies
• Successfully implemented the industry’s
first consumer driven health strategy
Christie Hicks
• Is a high energy leader who has built
Starwood’s sales culture around Strategic
Customer management
• She spearheaded Starwood’s Meeting
Innovation project.
Senior VP
Phil McAveety
• Is responsible for marketing and branding
of all aspects of Starwood
• Has vast experience in brand
development, marketing and advertising.
Exec-VP & Chief
Brand Officer
Senior VP
John Peyton
• Drives implementation of key strategic
priorities including SCM, F&B, etc.
• Led Starwood in its launch of 6σ,
becoming the first company in the
hospitality industry to adopt 6σ.
41. Management Team
Martha Poulter
• Leads the global IT team for Starwood.
• Has more than 25 yrs experience in IT
leadership positions.
Exec-VP & Chief
Info Officer
Kenneth S. Siegel
• Responsible for Global Citizenship, Labor
Relations & Compliance.
• Also looks after Legal and Government
affairs for Starwood.
Chief
Administrative
Officer &
General Counsel
Senior VP,
Distribution,
Loyalty &
Partnerships
Simon Turner
• Responsible for Starwood’s Hotel & Resort
Development, property acquisitions, etc.
• Vastly experienced in Hotel Investment
advisories and Investment Banking.President,
Global Development
Mark R. Vondrasek
• Heads Starwood’s central Distribution
Channels, SPG and all Global Partnerships.
• He was responsible for streamlining
Starwood’s Customer Contact Centers and
developing Starwood’s global web
strategy.
43. “Unprecedented numbers of people around the world are
traveling for business and leisure. As we’ve said before, we are
entering a golden age in high-end travel….
As the lodging recovery moves into its fifth year, we continue to
see limited supply of high-end hotels on the horizon in mature
markets of North America, Japan and Europe. All the while
corporate and leisure travel has steadily increased. The result is
high occupancies at our hotels, which allows us to increase
room rates and improve profitability at our hotels”
-Fritz van Paasschen
CEO & President
Starwood Hotels & Resorts Worldwide, Inc
44. Company Owned Hotels
Hotels are only 5% of its properties
but combined with time-shares make
up 70 % of its revenues
Subject to cyclical periods and recessions
Managed or Franchised
Hotels
Make up 95% of its properties
Contributes 30% to revenue at a higher
profit margin
Company Owned Properties
or Timeshares
Villas and properties are only 5% of its
properties but combined with owned
properties make up 70 % of its revenue
Subject to cyclical periods and
recessions
RevPAR
Revenue Model
45. Starwood Inc. Income Statement 2009 2010 2011 2012 2013 TTM
Revenue 4,712.00$ 5,071.00$ 5,624.00$ 6,321.00$ 6,115.00$ 5,996.00$
Cost of revenue 3,684.00$ 3,917.00$ 4,309.00$ 4,800.00$ 1,924.00$ 1,752.00$
Gross profit 1,028.00$ 1,154.00$ 1,315.00$ 1,521.00$ 4,191.00$ 4,244.00$
Operating expenses
Sales, General and administrative 314.00$ 344.00$ 352.00$ 370.00$ 2,998.00$ 3,100.00$
Restructuring, merger and acquisition 379.00$ (75.00)$ 68.00$
Other operating expenses 309.00$ 285.00$ 265.00$ 239.00$ 268.00$ 303.00$
Total operating expenses 1,002.00$ 554.00$ 685.00$ 609.00$ 3,266.00$ 3,403.00$
Operating income 26.00$ 600.00$ 630.00$ 912.00$ 925.00$ 841.00$
Interest Expense 230.00$ 238.00$ 216.00$ 170.00$ 103.00$ 99.00$
Other income (expense) (92.00)$ (27.00)$ 11.00$ (124.00)$ 6.00$ (41.00)$
Income before taxes (296.00)$ 335.00$ 425.00$ 618.00$ 828.00$ 701.00$
Provision for income taxes (293.00)$ 27.00$ (75.00)$ 148.00$ 263.00$ 175.00$
Net income from continuing operations (3.00)$ 308.00$ 500.00$ 470.00$ 565.00$ 526.00$
Net income from discontinuing ops 74.00$ 167.00$ (13.00)$ 92.00$ 70.00$ 1.00$
Other 2.00$ 2.00$ 2.00$
Net income 73.00$ 477.00$ 489.00$ 562.00$ 635.00$ 527.00$
Income Statement
2009-2013
Income Statement Highlights
• Sales revenue decrease of 3%
but a 12% increase in net income
• 176% increase in gross profit
• 14% Increase in 2012 Net Income
46.
47.
48.
49. Plans for Growth & Recommendations
• Global RevPAR increase on a constant-currency basis of 5-6% until 2023. As the demand for global
and luxurious travel continues to increase beyond the supply of such hotels, Starwood expects
increase its fees 8-10 %
• Continue to expand into BRIC and other strategic locations. 80% of Starwood’s future pipeline is
located outside of the of the U.S. This hedges on the slow, mature market (USA, Japan, Europe,
etc.) growth and captures the high growth market
• Continue to leverage long-term management and franchise agreements. Doing so-- keeps switching
costs for the hotel owners high as well as keeps it’s most profitable source of revenue
• Consider selling it’s company owned properties; hedges against cyclical and recessionary business
environments
56. Starwood HR
Possibility
• As part of the Taj People Philosophy(TPP), the Taj Group introduced a strong
performance management system called the Balanced Scorecard System(BSS). As a part
of the BSS, an employee satisfaction tracking system was employed which tackled
employee problems on a quarterly basis. At the start of the ESTS, the company carried
out an organization wide employee satisfaction survey of about 9000 people. According
to this survey, the reported satisfaction level was about 75%. The group intended to
increase this level to 90-95% and eventually closer to 100%.
• The Taj group established Centers of Excellence for its employees at 5 locations in India.
At these centers, the department heads in each functional area were trained. These
departmental heads later trained their own staff. The training was some foundation
material and some accreditation programs that familiarized people with Taj Standards.
• Apart from measures to improve performance of the employees, Taj also recognized and
rewarded its best employees. For this purpose, Taj created a unique employee loyalty
and reward program known as the STARS.
57. Starwood Financials
HR CT’D • The STAR system
• The system was developed in accordance with Taj's core philosophy that 'Happy employees lead to
Happy Customers'. STARS was operative throughout the year for all employees across the organization
at all hierarchical levels. It had five different levels:
• Level 1 - Silver Grade - 120 points in 3 months
• Level 2 - Gold Grade - 130 points in next 3 months of Level 1
• Level 3 - Platinum Grade - 250 points in next 6 months of level 2
• Level 4 - COO's Club - 510 points but less than 760 points
• Level 5 - MD's Club - 760 points or more
• Points were granted to employees based on parameters like integrity, honesty, kindness, respect for
customers, environmental awareness, teamwork, coordination, cooperation, excellence in work, new
initiatives, trustworthiness, courage and conviction,etc. Suggestions by employees that benefited the
organization also gave points. Employees could also earn points through appreciation by customers,
'Compliment-a-colleague' forums and various suggestion schemes.
58. Starwood Financials
HR CT’D
• In one case, a bellboy at a hotel went out of his way to care for an American customer.
Noticing that the customer, who had arrived late at night, was suffering from cold, he
offered to bring him a doctor. However, the customer refused. The bellboy then, on his
own, offered a glass of warm water with honey and ginger, a traditional Indian home
remedy for cold. The customer felt surprised and happy at the bellboy's gesture and left
a note of appreciation for him, which added to his existing points.
• According to the number of points, the employees would received a star, which would
then be pinned on their coat. The points were also redeemable for gifts, cash vouchers
or vacations in a Taj Hotel of their choice in India. The winners were felicitated at a
function held in Taj Hotel, Mumbai. The awards were given out by the MD of the
company. This ceremony significantly boosted the morale of the employees.