|What is the biggest improvement you feel you’ve
made to Starwood in Asia Pacific in the past nine months?
Getting people closer together as one team. In
the past, the organisation was a bit fragmented, even though there was
a strong brand organisation. But we are not actually that big in Asia Pacific,
where we have around 73 hotels, compared with 400-plus in North America.
It’s more beneficial to work closer as a team, versus having strong demarcation
lines by brands.
Some of the brands, such as St Regis and Four
Points, are in the early stages in the region. If you start having regionalised
brand organisation, they find themselves not getting enough resources or
support, compared to the bigger brands like Sheraton or Westin.
So we reorganised by geography, with six area
MDs [in Sydney, Bangkok, Bali, Tokyo, Shanghai and Kuala Lumpur] reporting
We downloaded a lot of ownership and responsibilities
to the area offices. For example, the area MD for China was previously
based out of Singapore, but is now in Shanghai. Besides being back in the
country for which he is responsible, he’s been given a lot more authority
than in the past.
I find my job actually easier than my predecessor
[Ted Teng] because I have six good generals in the field and my time is
focused on running strategy and helping Starwood to develop and grow.
Are you already seeing the fruits of the restructure
that you introduced last April?
We’re seeing the area MDs beginning to step up
and take charge. They look at a whole area’s profit and loss, people development,
brand ownership, development opportunities – it’s a much more proactive
approach to business.
Is there any one brand that Starwood is focusing
on for growth?
No. Our brand line-up is interesting. We are fortunate
that we have two core brands, Sheraton and Westin, each as well-known as
the other big hotel brands. Most of our competitors only have one core
We are also very fortunate that our two new brands,
St Regis and W, have gained so much attention, W especially. Most of the
phone calls our development people get right now are about W.
Why the high interest in W?
The advantage is you don’t need to be downtown
and there’s no need for it to be a new build – this saves us on capital
costs and time to build, yet it gets high rates. The W Sydney, for example,
is doing very well. In the first year of operation, the room rate and occupancy
are actually as high and, in some months, higher than our other two major
brands in Sydney.
Compared with the traditional hotel investment,
the W is favourable - you get the rate of a top hotel, and we are looking
at whether we should be a core investor in the whole process.
The brand, no question, is new age – the living
room concept in the lobby, the clean-looking rooms – it’s comfortable,
but not overbearing.
It’s what the customer of the next 20 years wants.
It tries to cater to the high-end, experienced traveller of the next generation,
but starting from now.
So there is a connection between the hotel and
the kind of people who look forward – investment bankers and people from
the entertainment and advertising industries. These people can catch what
people want in the next wave.
The difference between the W and some of the other
trendy hotels is that it is supported by our major worldwide reservations
and frequent guest programme programmes. It is new age, but supported by
How many W Hotels do you figure will open in
12 to 15, mostly in the big capital cities and,
usually, a trendy neighbourhood. We are looking at opportunities for under-performing
hotels in Asia for conversion, which need not be smack in the middle of
the banking district. Lan Kwai Fong in Hong Kong, yes, that’s a great location,
but the problem is the buildings are so small. Anything below 100 rooms,
and you are stretching the economics of the brand.
Apart from Hong Kong, we are also looking at Tokyo,
Seoul, Singapore, Bangkok and Shanghai.
Let’s look at Sheraton and Westin. Did Sheraton
change under Starwood?
Yes. I left Sheraton in 1992 when I was president.
Sheraton was under this big conglomerate, ITT, which ran other industries,
including forestry, defence technology and insurance. We felt we were just
a company that co-existed with the other product groups. It was not really
easy to try and drive excellence or make quick decisions, and we always
had to fight for resources with the other industries.
Starwood, on the other hand, is a single, hotel-focused
company and moves a lot faster. The culture itself is different. I talk
to the chairman and COO, regularly. It actually feels like a much smaller
company than ITT, but with greater ability to act as one team. My decision
to leave ITT in 1992 was precisely the reason why I came back to Starwood
last yea - because this company has changed so much.
How do you see the Sheraton brand growing vis
a vis Westin?
Sheraton is three times the size of Westin, but
Westin is more focused. Its product innovation is also greater, be it the
Heavenly Bed, the Heavenly Shower or the contemporary design, which is
almost near the W. It has a distinctive brand standard, and is a good brand
to build on.
Sheraton has a much longer history and, as a result,
is in more secondary cities, not just capital cities.
Sheraton is also successful in brand extension
– with St Regis on top and Four Points at the bottom. So Sheraton has become
the mother brand.
Where does this leave the Luxury Collection?
It’s a question mark. The brand people in HQ need
to determine the growth of St Regis and how we are going to market the
Luxury Collection. Whether or not it will be phased out is a decision I
personally cannot make.
St Regis seems to be coming along well in the
Yes, we’ve just opened in Shanghai and are thinking
of taking a pretty significant equity in Tokyo. We’re also looking at Singapore
and Hong Kong for the brand. There will be about eight or 10 St Regis properties
in Asia - that’s all. We’re careful about the quality.
There’s also the Imperial Kuala Lumpur,
a Luxury Collection conversion to St Regis. The hotel was built higher
than the typical standard of Sheraton. I signed the contract 12 years ago
and it is consistently running the highest or second highest rate in the
city in any given month.
Is Kuala Lumpur really the kind of market for
a St Regis?
Kuala Lumpur is going through challenging times
- the 1997 financial crisis is still having an effect, as is the overbuilding.
But the Imperial meets our guidelines for St Regis: it has to run one of
the highest room rates, and its standards must be high.
In Kuala Lumpur, the Imperial usually captures
the top 5% of guests. It won’t get the rate of New York (US$700-$800) but,
as a St Regis, we’re looking at a 15% uplift on the current rate.
The hotel is in good shape, it just needs fine-tuning
with the amenities and butler service – it has more with the software than
Going back to Sheraton and Westin: you must
be worried that Westin won’t be in Singapore and Bangkok?
In both cases, the contract was not renewed because
the two owners have their own aspirations to run their own brand and management.
It’s not that we didn’t do a good job - so it’s a happy ending in that
We actually have a lot of interest for replacements
in Singapore and Bangkok, but we’ve been careful and selective. I’m confident
we will make an announcement on both within this year.
In Singapore, we’re looking at a new-build or
an existing under-performing hotel, and I’m confident we should be able
to make an announcement end of the year. Remember, we feed 2,000 rooms
at Westin here on a daily basis, with 70% occupancy.
In Bangkok, one possibility is to convert one
of the Sheratons, but we are also looking at other opportunities in the
city - and there are others.
Having hotel projects terminated may not be all
that bad, in my opinion. If you keep extending an old contract, you might
end up having old assets that are actually behind the times. I look at
a turnover rate of 15-20% over three years: we have 19 Westins in Asia
Pacific, so we’re looking at losing one a year, but also adding two or
three a year. Hopefully, the new ones will be better built and better designed.
It’s actually a way of getting your hotels updated
all the time, especially with a brand like Westin. In Shanghai, we’re opening
a Westin [Q4 2002] where every room will measure 50 sq m and look like
a small suite – that hotel is going to be the standard bearer of Westin
We are also building Westins in Kuala Lumpur [opening
next year], Dhaka and Ho Chi Minh City.
In Singapore, can we rule out the Grand Copthorne?
Is the loss of the Westin Stamford & Plaza
[in Singapore] going to make a big dent in your revenue?
No, as they give us only the management fee. I
think they represent less than 3% of the divisional income.
Let’s talk about Four Points’ expansion. What’s
In order for us to make a statement with the brand,
it has to be multiple: one or two in a country would not do it for us.
The plan is to get into master franchising with a local partner in six
or eight regions. A country like China could easily support 100 Four Points,
and other prime markets include India and Indonesia.
We are piloting it first: we opened one in Taipei
in July and will open one in Shanghai 10 months from now. It’s in the early
phase, and we want to get the standards right first. It’s the only brand
How do you decide which hotels you want to own,
and which ones you want to manage?
It’s purely an investment decision: you don’t
fall in love with a hotel and decide to invest in it. Starwood is willing
to invest a lot more in properties that provide good returns or are currently
undervalued. My philosophy is to invest in key cities and resorts and leave
secondary city investments to other investors for the simple reason that
we don’t have the resources to invest in every hotel.
Who do you see as your major competitors?
Marriott on the management side, because the people
who choose to talk to Westin and Sheraton would also talk to Marriott.
These are the big US brands.
Inter-Continental is still a brand that needs
to be developed, so there’s not much competition at the moment. But, with
Six Continents having just purchased the Regent Hong Kong outright, it
is making a strong statement which Inter-Continental did not previously
have, so we expect them to become a more direct competitor in the future.
Six Continents has Richard Hartman – who was with
Sheraton for 30 years - as a leader, and he is someone who thinks big.
Long term, that will give any hotel company, including us, a run for the
money. Plus, Six Continents has investment capital.
But brand wise, I am confident about the Starwood
line-up. It’s the best, in my opinion.
The feedback we get from owners is that they
feel they can work with you, but that Starwood costs at every turn. There
are quarterly bills for technology, bills for the Starwood Preferred Guest
(SPG) programme, bills for Starwood Cares, upcoming bills for Six Sigma,
etc. One owner tells us it feels like a loyal guest who expects good service
to include a fruit basket anyway, yet is charged for the fruit. Is that
a fair comment?
First of all, we engage owners with open communication.
Nothing is hidden.
Starwood, as a big hotel company, tries to do
many things in-house, and the management fee covers certain aspects on
the management side. The programmes that we do are normally what other
companies engage outside consultants for. We want consistency and speed
of execution, so we bring them in-house.
It’s a communication process, more than anything
else. I think I’ve talked to every owner since I came to Starwood and the
vast majority, after you explain to them, understand why there are those
Take SPG, for example: we don’t charge to get
the figures into Starwood’s P&L, but to give out the awards. SPG usage
in Asia Pacific comprises 31% of guests who pay US$21 above the average
rate [in the first six months of 2001].
We are a progressive company - we try things that,
maybe, other hotel companies have not tried. Like Six Sigma – no other
hotel company has tried it. It’s a major, disciplined way of improving
the processes and eliminating inconsistencies up to 99.9997%.
An owner who looks around might wonder why we
are doing it, when other hotel companies are not. But we’re hoping that,
in a couple of years, when we have the lead in service consistency and
cost efficiency, that’s when the other companies will try to catch up.
We do drive results. Our SPG programme is voted
the best. Our hotels measure up, with the average revPAR standing 20% ahead
of the competitive set in each city.
When we launched W, people were sceptical. Now
it’s proven to be a huge success story – the best new hotel brand in the
last decade. We’re leaders, not followers.
So it’s a question of communication, and of
owners being progressive in their thinking?
Owners need to be progressive. We have done a
lot of communication, but we need to do more. We need to open up mindsets
- if you join a progressive company like Starwood, you are going to try