Case Study

Starwood Hotels: Innovation through marketing

16 pages
December 2010
Reference: IMD-5-0766

Starwood Hotels & Resorts Worldwide was one of the world’s largest hospitality ownership, management and franchise companies in 2010, with 992 properties in some 100 countries. Starwood had started out as an owner and operator of hotels in 1994. But in 2004, it had shifted its strategy to an asset-light model, whereby it reduced its ownership and focused its attention on managing and franchising hotels. As of 2009, 95% of all of Starwood’s hotel net income came from upper upscale and luxury hotels. Its 2009 revenues were $4,712.0 million, a -19.5% decline from the previous year’s results. As a successful pioneer of the world’s first portfolio of “lifestyle” hotel brands., Starwood’s brands were differentiated by emotional concept, determined by the type of experience customers sought. Its customer loyalty scheme provided opportunities to maximize customer lifetime value, by cross-selling and up-selling hotel brands over time. Additionally, Starwood’s partnership programs helped it to enhance its customer experience, while generating additional revenue from partnersIn 2007, Starwood entered into lower-end markets in North America with two new hotel brands: aloft and element. But emerging markets were viewed as the major source of Starwood’s future growth. In 2009, CEO van Paaschen announced his plan to open 70% of its new hotels outside the US, primarily in countries such as China, India and Qatar. In 2010, with 31 hotels in China (and another 34 in the pipeline), Starwood was the four- and five-star hotel leader in China. Looking to the future, industry observers wondered whether the Starwood brand portfolio was balanced. To grow, should some brands be added? If so, should the additions be acquired or developed in-house. And, were there some brands in the portfolio that were surplus to requirements?

Learning Objective

In understanding Starwood’s marketing strategy, participants will be challenged to analyze the company’s approach to the following:Product: how does Starwood differentiate its product offering sufficiently to target different customer segments? How does it meaningfully manage its product portfolio, which may mainly consists of seemingly similar products? Pricing: how does Starwood use pricing to maximize revenues, given its cost structure and the perishable nature of the product? Distribution: what impact has the Internet had on Starwood’s product? What other channels has it used and how? Promotion: how has Starwood innovatively used branding, loyalty schemes and partnerships with other companies to promote its brand to customers?

Keywords
Customer Lifetime Values, Pricing Strategy, Branding, Asset-Light, Franchising, Revenue Management, Product Portfolio, Internet Distribution, Segmentation, Cross-selling, Partnership Marketing, Scale-up, Luxury, Brand Portfolio, Experiential Marketing, Hotel
Settings
Global, United States of America
2004-2010
Type
Published Sources
Copyright
© 2010
Available Languages
English
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