Interesting interview in the The Sunday Times with Frits van Paasschen, chief executive of Starwood hotels. Van Paasschen, a Disney, Coors and Nike marketing veteran is taking Starwood in an interesting direction with a shift in strategy from owning hotels to franchising, managing and brand building. This strategy means that Starwood is now selling off property and increasingly making its money from management fees and profit share.
As Van Paasschen points out this makes some sense from a purely financial cycle perspective. “In good times it allows us to grow more quickly. In hard times our income stream is less volatile as we are less dependent on revenues than the owner.”
The focus on brand building also makes sense in a category that is increasingly dominated by personal recommendation and word of mouth driven by the success of online travel sites like Trip Advisor provided, and this is a big caveat, this brand focus is driven consistently all the way through the consumer experience. After all in the hospitality sector there is absolutely no room for the brand to be dislocated from the product. This is by no means an impossible task but where hotels are franchised rather than directly owned I would have thought it is a considerable challenge. Indeed, while companies like McDonald’s have proven with great success that the franchising model works in relatively process-orientated sectors like fast food, the skills required to consistently deliver a high-end hotel experience are much less regimented and therefore difficult to franchise.
Having said that having recently stayed in Starwood’s magnificent St Regis Punta Mita resort in Mexico I would have to say if anyone can do it Starwood can.
