Starwood hotels and resorts worldwide inc 2007 case study

Case Study Reflection

Bringing Aloft To India

Tural Ismayilov

Vishal Gonuguntla

Introduction

Starwood hotels and resorts - hold, control and franchise hotels

Barry Sternlicht – Founder

Approximately 850 hotels under these brands

1994 - purchased Hotel Investors trust

Aloft - attempt to compete

Nine Brands

Summary

Starts with overview

Plans to open 50 hotels by 2010

Indian economy, trends and overall business environment

Discusses tourism and the hospitality industry (new business opportunities)

Increase in economic conditions in India (attracts FDI)

Big domestic players - Leela Ventures, Oberoi Group, Taj Group

Summary

Indian hotel industry looks promising, but hurdles

Corruption

Infrastructure limitations

Money laundering

High construction prices

Shortage of skilled labor

Cultural adjustment

Aloft - its features and benefits

Mid-priced select service brand developed by Ross Klien

Focus on new generation of travelers

Incorporates sea green program

Environmental Analysis

The broad environment

Success - internal and external

Successful company - analyze existing factors and forecast results

Most common tool - PEST framework

PEST Analysis

Rules and norms to operate in the country

Hotel industry in India:

Labor regulations

Environmental regulations

Merger regulations

Food and safety regulations

Cost to adhere to these laws - expensive

Laws regarding minimum wage

Laws governing treatment of employees

Heavy fines

Political

Economic

Favorable economic conditions - Attracts tourists (domestic and international)

Huge growth in Tourism sector

Liberalization reforms in 1990s - emerging market for FDI

GDP expected to rise from 6% - 11% by 2025

Hotel, Transport and communication sector - growth rate increased from 10.4 - 13% in 2007

Real estate sector - positive growth (construction expected to rise 4 times)

PEST Analysis

Economic

Inflation increased from 3.9 - 6% (overshadowed due to improved economic conditions)

Government allows owning 24% in publicly traded real estate for foreign shareholders

Improvement in financial market and advancement in electronic payment infrastructure

Indian citizens net income and demographic profile - rise

More people in high and middle income level

Stability and longer growth prospects

PEST Analysis

Socio-Cultural

Core objectives of hotel service - maximization, satisfaction and happy experience to customers

Knowledge about ethnicity, race and cultural backgrounds

Aloft

Change foodservice menus

Fresh fruits and juices

Food, beverage and meeting spaces in tune with mentalities

PEST Analysis

Technological

Modern infrastructure

Increasing use of internet

Aggressive advertising on the internet

High-tech information systems (Competitive advantage)

Increasing cost of energy

Improved payment options

Enhanced guest reservation system

Online booking facilities

Wi-Fi on-the-go

First mover maintains competitive advantage

PEST Analysis

Industry Analysis

Business tool - examines current business environment

Helps in detailed research on competitors, products and consumers

Most famous tool - Porter's five forces analysis

Identify intensity of competition

Profitability and attractiveness of industry to outperform competitors

Starting point for strategies and competitive position

Five Forces That Drive The Industry

Bargaining Power of Customers

Threat of New Entrants

Competitor Threat

Bargaining Power of Suppliers

Threat of Substitutes

Threat of New Entrants

Response:

Change tactics, prices, market shares, advertising

High capital costs

Manage spending in equipment, construction and pre-operational expenses

Good location - Target market

High quality service

Starwood - take advantage of brand image and loyalty

Taj, Oberoi and Leela - brand loyalty influences new entrants

Also control raw materials and distribution channels

Threat of Substitutes

When does it occur?

Different prices, amenities etc.

Same service, different price

Constant challenge - Make customers choose them over competitors

Recession

Hotel relationship with customers

Change in demand and supply of hotel rooms

Competitive Rivalry

Fierce competition

Internet – Key role

Customer inclination – Price Sensitivity

Intensity of competition – Factors

Product differentiation & low switching costs

Bargaining Power of Suppliers

Provides raw material

Dependent on products & services

Long-term relationships

Quality

Experienced staff

Bargaining Power of Customers

Higher power

Increase threat of backward integration

More exposure to internet

Compare prices

Eradication of intermediaries

Loyalty programs

Strategic Issues of the Industry

Access & Connectivity

Amenities

Human Resources

Security

SWOT Analysis

Strengths

Weaknesses

High Reputation

Brand Loyalty

Geographical Reach

8 Different Brands

850 Hotels

150,000 Employees

More focus on domestic brand

Small Brand

International Brand Awareness

Opportunities

Threats

Vacation Ownership Market on the rise

Aloft in India

Digitalized Media

Skilled Labor

Competition

Political Disturbances

Developing the Strategic Plan

Strategic Direction & Major Strategies

Target Market – Upscale business

Online presence & Sales capabilities

Loyalty Programs

High quality services at best costs

Cross promotion of complimentary products

Evaluation of Opportunities &

Recommendations

Top Managements – Evaluate shortcomings & benefits

Digitized Media – Problems & Security concerns

Internet – Cost effective tool for marketing

Reputation – Time & Effort

Positive & Negative comments

Excellent prospects, but economically dependent

Cross-Selling

Organizational Resources Analysis

Strategic Direction

Internal Environment

Values (Promises)

Enriched Performance

Management

Financial Analysis

Financial position

Profit from each available room

Comparison of revenues per year

Conclusion

Nine Brands

Aloft’s target market – Mid range

Indian hospitality sector – High prospects

Government incentives & concessions

Critical obstacles & challenges

Shortage of skilled labor

Many ethnic & cultural backgrounds

Indian industry analysis

Cater to Indian lifestyle & way of living

References

Ante, S. (2007) Six Sigma Kick-Starts Starwood. Retrieved from

Brenner, A. (2006). Starwood Hotel and Resorts, Inc. Global companies. Retrieved from: www.ilr.cornell.edu/globalunionsconference/.../reports/starwood.pdf

Clough, R. (2014). In Focus: Starwood brands performance update. HVS Dener. Available at: www.hvs.com/article/.../in-focus-starwood-brands-performance-update/

Council of Supply Chain Management Professionals (CSCMP). (2011). Logistics Management. Retrieved from: http://cscmp.org/aboutcscmp/definitions.asp

Farrell, R. (2014). Environmental Business Analysis. Hearst Newspaper. Available at: http://smallbusiness.chron.com/environmental-business-analysis-43238.html

Fritz et al. (2009). Integrated Company Analysis. Wisconsin School of Business. Retrieved from: business.library.wisc.edu/resources/kavajecz/.../starwood_pres.pdf

Gemkow, W. (2010). A Case Study on the Implementation of Six Sigma within Starwood Hotels & Resorts. Retrieved from: http://content.grin.com/document/v167854.pdf

Hotelstockindex (2014). Starwood Hotels advances asset-light strategy. Retrieved from: http://www.hotelstockindex.com/Article/12993/Starwood-Hotels-advances-asset-light-strategy

http://www.businessweek.com/innovate/content/aug2007/id20070830_103596.htm

Jameson, D. A. (2011). The Rhetoric of Industrial Espionage The Case of Starwood V. Hilton. Business Communication Quarterly, 74(3), 289-297. Retrieved from: http://bcq.sagepub.com/content/74/3/289.short

Lee, K., & Carter, S. (2011). Global marketing management. Strategic Direction, 27(1). Retrieved from: http://www.emeraldinsight.com/journals.htm?articleid=1896770&show=abstract

Prajapati, K. B., Jadeja, S., & Goswami, M. (2014). PEST Analysis for Indian Luxurious Hotel Market. Asian Journal of Research in Business

References

Economics and Management, 4(3), 205-213. Available at: http://www.indianjournals.com/ijor.aspx?target=ijor:ajrbem&volume=4&issue=3&article=016

Starwood, (2014). Company values overview. Starwood Hotels and Resorts Worldwide, Inc . Retrieved from: http://www.starwoodhotels.com/corporate/about/values/index.html?language=en_US

Starwood (2014). Starwood Hotels & Resorts. Retrieved from: http://www.starwoodhotels.com/corporate/careers/paths/description.html?category=9916&language=en_US

Tavitiyaman, P., Qu, H., & Zhang, H. Q. (2011). The impact of industry force factors on resource competitive strategies and hotel performance. International Journal of Hospitality Management, 30(3), 648-657. Retrieved from: http://www.sciencedirect.com/science/article/pii/S0278431910001416

Zhao, W. (2009). Issues, challenges and trends that facing hospitality industry. Canadian Research & Development Center of Sciences and Cultures. Retrieved from: www.cscanada.net/index.php/mse/article/download/j.mse...006/816

Executive Officers

Division managers

Corporate officers

Steven J. Heyer, Chief Executive Officer

Stephen Alden, Senior Vice President, St. Regis & The Luxury Collection

Tom Conophy, Executive Vice President & Chief Technology Officer

Javier Benito, Executive Vice President, Chief Marketing Officer

Geoffrey A. Ballotti, President, North America

Jeff S. Drew, Senior Vice President, Corporate Finance and Treasurer

Vasant M. Prabhu, Executive Vice President, Chief Financial Officer

Raymond L. Gellein, Jr., Chairman & Chief Executive Officer, Starwood Vacation Ownership, Inc.

Christie Hicks, Senior Vice President, Global Sales

David K. Norton, Executive Vice President, Human Resources

Miguel Ko, President, Asia-Pacific

Alan M. Schnaid, Senior Vice President and Corporate Controller