Starwood Brands Are On A Roll
Innovation, ingenuity, high style, industry-leading amenities and exceptional functionality are just some of the reasons Starwood Hotels & Resorts are on the fast track. Fresh product for new markets gives Starwood a special momentum, too. For evidence, consider that this spring, Starwood's pipeline is deeper than ever before: of 496 active deals, 264 are new-builds, 84 are conversions and 45 are new-builds of the Westin and Sheraton Prototypes — plus, of course, additional projects.
That's a remarkable number for a company so young and already so mature. Since its inception in 1998, Starwood has become known for its distinctive image. It's just as well known for its drive; in only seven years, Starwood has become one of the largest hotel companies, with over 750 properties in more than 80 countries and 120,000 employees at its owned and managed properties.
Starwood is a company on the move, and this year is Starwood's time to shine. Armed with the most robust development program in its history, buoyed by the success of the Westin and Sheraton Prototypes it launched just last year and a product line that appeals to developers in all kinds of locations, Starwood is ready to seize the moment.
Starwood is also synonymous with originality. Consider Heavenly Bed
Starwood's is a story of vision, lifestyle and customization. It's also one of growth so dramatic, all it can do is build. Not only are Starwood customers satisfied, so are developers, and the franchise community is eagerly embracing Starwood's fresh and responsive development strategy. In addition, Starwood's pioneering efforts in mixed-use projects are catching fire. People — developers, customers and the brand's stewards — feel strongly about Starwood because it makes emotional connections with its customers.
“We have seen a considerable growth in our pipeline for all of our brands,” says Ted Darnall, President of the Starwood Real Estate Group. One reason is that happy customers can't help but spread the word of these memorable Starwood brands: Westin, Sheraton, St. Regis, The Luxury Collection, Four Points by Sheraton, and W.
That stellar brand collection will expand soon.
It will include a new-build Four Points by Sheraton Prototype, along with a new brand in the upscale business- class category. These will supplement a roster of brands that is soon expected to include Le Meridien, the upscale European flag.
Starwood has lofty goals — and the strategies to achieve them. It aims to be best in class in client support. It intends to better help developers identify markets where Starwood would perform well. And it will devote more resources to design and the facilitation of conversion projects.
On the consumer side, a good night's sleep has always been key to Starwood's high customer satisfaction ratings. That's why Darnall points with pride to The Westin Heavenly Bed
Darnall says that momentum has translated into Starwood outperforming its competitors. Combine that with brands that are growing faster than their competition — and the fact that Starwood has fewer units in North America than its competitors — and you come up with a winning formula for development.
Another part of that formula is a fresh and successful approach to franchising. Starwood's franchising push is so aggressive and creative, it is stealing market share from competitors.
Starwood finds significant interest from emerging owner-operators in North America to evolve or enhance their development strategies, Darnall says. By wooing multi-brand operators, it is developing new market opportunities.
That's because the franchise market is always eager for imaginative hotel concepts, particularly when Starwood introduces brands to a market in which it hasn't been a player. “A lot of owner-operators assumed that franchising was not a strategy for Starwood,” Darnall says, “but we convinced them it is, and will be, a key element of our growth and development and we've seen a very positive shift from some of our competitors to our brands.”
In 2004, 72 agreements were signed to add hotels to the Starwood system. Fifty-six of those were in the upper-upscale and luxury segments, two-thirds are new-builds and 16 are mixed-use. Those numbers speak volumes. And they speak to new marketing opportunities, especially for a brand like Westin. “Westin is a more aspirational brand and represents better lifestyle positioning,” Darnall says. “And it certainly was created through a more current design platform.”
STARWOOD'S GROWTH OPPORTUNITY
Brands create opportunity, especially an array as dazzling as Starwood's. What's equally important is the support system. Meet Chuck Tomb, Starwood's Senior Vice President of Development-North America, the Starwood Real Estate Group. Tomb has developed rich resources and heads a talented team dedicated to Starwood development. He works closely with the Real Estate Group's account solicitation expert Bill Linehan, Vice President, Marketing and Strategic Development Partnerships.
By coordinating its franchise development teams with a solicitation drive, Starwood is creating a more developer-friendly environment. It's all about aligning product, owner and opportunity.
“In today's market, development groups actively looking for opportunities need to be assisted in the facilitation of finding sites in the right markets at the right RevPAR levels in order to execute their growth strategies,” Tomb says. “We are engaging a site selection expert to work with developers to prioritize markets where they should be looking.”
Starwood expanded its franchise development team to reach a broader spectrum of owners, operators and developers in smaller regions and meet their needs.
In addition, Tomb's franchise development team is identifying sites appropriate for the new Sheraton and Westin Prototypes and “our future select-service and extended-stay brands.” It also offers lower entry costs for developers and franchisees.
Financing, too, is part of what Tomb calls Starwood's “tool box.” Starwood is working with a major lending institution on a financing program that would favor developers doing multiple deals with Starwood. The idea is to create an inner circle of major developers through a program that will help them stretch their equity to do more projects with Starwood.
“We are extremely bullish,” Tomb says. “We have been bombarded with requests asking how fast we can deliver these new concepts and ideas to the development community. Actually, it's not really a matter of being bullish; it's more like the running of the bulls.”
The bulls will run even faster when Starwood unveils two new brands later this summer. Last year, it rolled out the Westin and Sheraton Prototypes for suburban and tertiary markets. These 200-room Westins and 150-room Sheratons are building momentum for Starwood and giving the development community a better understanding of development costs. That understanding will only deepen when Starwood offers a 260-room Westin and 260- and 300-room Sheratons.
Starwood also plans to unveil a 100-room, new-build Four Points by Sheraton Prototype and a new brand in the Courtyard-Hilton Garden Inn category. Expect these to feature DNA from W and Westin, along with the great beds and showers Starwood customers expect.
Starwood is the perfect fit for developers who want to build in markets where they know demand already exists. Starwood's advantage is that the competition may already have saturated those markets, giving creative and imaginative Starwood product a potentially lucrative opening. Starwood offerings include:
- Urban convention centers
- Urban convention center destination resorts
- Mixed use projects
- Suburban/secondary sites through franchising
- New product development in select service.
Smith Travel Research suggests numerous prospects for Starwood in markets that other brands have penetrated — perhaps too deeply.
“In growing markets that need new supply, our competitors are there with one or two products and we're not there at all,” says Darnall. “There is more opportunity in North America to develop Starwood product than there is for any of our competitors.”
Brand development through franchising isn't the only strategy, however. Acquisition explains Starwood's intent to purchase the upscale brand, Le Meridien. Starwood will grow Le Meridien in North America, as well as leveraging its strong brand equity in Europe. The focus is twofold: customer acquisition and branding. By hooking Le Meridien into Starwood's loyalty programs, Starwood will gain customers who will spread the word of a legacy flag that Starwood can use to lure independent hotels to become part of a brand family without giving up their identity.
“Le Meridien is going to be a shot in the arm for us in Europe as well as Asia,” says Linehan. “And Latin America is exploding, particularly with Four Points by Sheraton brands and Sheraton Hotels & Resorts.”
MAKING THE EMOTIONAL CONNECTION
You can't have momentum without emotion, and it's the emotional connections Starwood brands make with their customers that differentiates Starwood in the marketplace, according to Linehan.
Starwood is trying to move beyond the bed and pricing wars by having those emotional bonds with its customers.
“We have moved beyond the bed and price wars by having emotional connections that emulate lifestyle,” Darnall says. “What we discovered was that strategy, which was originally implemented to drive customer loyalty, has created a strong relationship with the real estate buyer.”
“We've got consistent brands with quality asset growth. We've got strong performance through lifestyle position. And we have market opportunities,” says Linehan. “How do we capitalize on this opportunity?” With innovation, ingenuity, style, amenities, a very special selection of brands among which to choose, and with a support system second to none.
“To grow with our competitors is a challenge,” says Tomb . “To grow with Starwood, given our opportunity platform for sites and distribution in new segments of the business is like jumping on the front of a freight train that has an opportunity for growth.”
“Our production is only limited by the number of individuals we have to handle the capacity,” Tomb says.
“That's a nice problem to have,” Linehan adds.
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