Starwood Group of Hotels and Resorts Marketing Plan - Essay Example

Marketing Plan Executive Summary Starwood group of Hotels and Resorts is a wide spread group worldwide. This report aims at analyzing the company’s profile and recommending a one year marketing plan for the company to improve the revenues and current standing of the company. Firstly, the report briefly touches upon the current standing of the group and analyses of its opportunities and threats are discussed. Further on the strength and weaknesses of the group is discussed. Based on the analysis of the group a twelve month marketing plan is formed to improve the current business and generate revenues. Recommendations are made on the marketing strategy. Starwood Group of Hotels has a number of opportunities to increase the brand awareness and to improve the online facilities for customers. A detailed plan is included within this report. Introduction: Starwood group of hotels is one of the biggest groups of hotels and resorts. This report aims at providing a marketing plan to help develop the current marketing situation of the company and to determine plan which will allow the company to improve. This essay aims at understanding the company in detail and analyzing the company’s profile. Initially the company’s hotels and portfolio are discussed. A SWOT analysis is then conducted which throws light on all the aspects of the company. The main competitors for Starwood are then analyzed which indicates that there is a lot of room for growth. Based on all these observations, the changes required in the company are listed. The following sections will also encompass the promotional methods that the company should use to improve the overall performance. Marketing Objectives: The main objectives that the brand needs to obtain within the plan’s term are to improve the market presence, brand awareness, online presence. Even though the company was amongst the first few to enter into online reservation booking etc., there is lot of scope for improvement in this area as well. The objectives of the marketing plan can be listed as follows: Improve the market presence, and create higher brand awareness among the customers. This can be measured by the traffic to the hotels. Improved Online Presence. The group requires a bettered online presence and improved website to cater to the needs of the people across the world. Again this is measurable by the traffic that the website gains as well as the number of people who book into the hotels. Situation Analysis: Starwood Group of hotels was incorporated in 1980, and two of their largest brands Sheraton hotels and resort and Westin Hotel and resorts have been serving the market for over 60 years (Starwood, 2008). The operations of the group are divided into two main segments being: hotel and vacation ownership and residential operations. However the main business is from the hotels. Starwood has a large number of hotels worldwide naming a few: St. Regis, The Luxury Collection, Westin, Sheraton, Le Meridien, Aloft, Four Points, W and Element. As of 31st December 2007, Starwood group’s portfolio included a total of 897 Hotels with 275,000 rooms across 100 countries that primarily cater to the upscale markets of the lodging industry. The company employs about 145,000 people and has its head quarters in White Plains, New York (Starwood, 2008). SWOT Analysis: A very effective method to understand the internal strengths and weaknesses and also the external opportunities and threats of a company is to conduct a SWOT analysis (Johnson et al, 2006). Strengths: Starwood has created a brand name for itself worldwide and has been able to gain a high number of loyal customers. The group has provided good service to customers and has received a number of positive feedbacks from the customers. The popularity of the group is seen clearly by its ranking in the Worldwide Top 10 hotels. Starwood has over 897 hotels worldwide which shows the large operational scale. Starwood has grown by 3.0% in one year (in Rooms) and this shows how rapidly the company is expanding and now has almost half the number of rooms as its biggest competitor (Intercontinental HG - 556,246 rooms vs. Starwood -.265,598 rooms as per Table 1) (Hotel-Online, 2007). The main assets of a hotel are the properties owned by it. Starwood has ensured to get very distinct properties and has built the hotels in locations that are very sophisticated and well placed for the most sophisticated travelers. They provide impeccable service with high style and high quality (Starwood, 2008). Starwood has shown great returns on investments over the years and has been over market average in 2006 (Datamonitor, 2007). Good returns reflect assets being utilized in profitable avenues (Gillespie et al, 1997). When compared to other groups, one major step that Starwood has taken is to venture into residential projects as well. The diversification is very beneficial not only monetarily but also for the brand name. Starwood has also ensured to keep in pace with time and has developed a fully functional website which is very informative as well. Starwood has always tried to keep its long term debts to the minimum. They reduced the debt $3297 million in 2004 to $1827 million in 2006. It has managed to keep its debt to equity ratio lower than the market as well (Datamonitor, 2007). This allows the company to start off organic initiatives. The lower the gearing ratios, the easier it is to raise further capital for through debts (Pendleberry and Grooves, 2004). Hence Starwood has the ability to raise its capital in a short period whenever required. Weaknesses: Starwood has recorded low revenues when compared to its closest competitor Hilton. In 2006 Hilton’s revenue reached up to $8162 million, which was an increase of 84% over 2005 figures (Hilton, 2008). Also Host hotels and resorts, another close competitor of the company recorded a growth of 29.8% in revenue when compared to 2005, whereas Starwood recorded in 2006 - $5979 million which was an increase by just $2million as compared to 2005 (Host, 2008). The Starwood group’s employees have also shown very low productivity and the revenue earned per employee is below the average of the market. Starwood’s prices are costlier compared to its competitors operating in the same sector. The expectations from the customer are high, in terms of quality, when they pay such high prices (Fisk et al, 2000). However a few reviews from customers just show that they lack in customer service in a few areas (Starwood-Lobby, 2008). Hence all these areas have to be addressed. Also the number and variety of holiday packages available are lesser comparatively. The marketing strategy is not very focused on the target segments. The high levels of sophistication and amazingly beautiful locations definitely add value, however not the best in service on a few aspects causes a drawback for the group. Starwood has concentrated its business in the US and thus depends on the US market to a high extent. However, competitors like Hilton and other companies have utilized the international markets effectively and so are not completely dependent on the US markets. Over 50% of the company’s inventories are based in the US market, making it more prone to risks (Starwood, 2008). Hilton receives about 39.6% of its revenues from international markets and as for Intercontinental, 54.9% is derived from the international markets. Opportunities: Starwood has grown worldwide over the past few years. They have been able to expand to over 100 countries. A big opportunity for the group would be that of Asia. There is a major growth possible in the developing countries (Ferguson and Hlavinka, 2006). This would help them improve market presence and also help them spread their brand far and wide across the world. The travel and tourism industry is a booming one here and the company will be able to make its mark in the area. The group has large opportunities to get into franchising with third party to spread the brand. Also opening of restaurants would help them create more public awareness and help the brand be popularized (Ferguson and Hlavinka, 2006). The business travel that was affected by the drop of the US markets can now be recovered and improved. This would open up avenues for the Element hotels that specifically deal with business travelers. Also a small part of Starwoods revenues are earned from resort ownership. This now is set for rapid growth, which should also help increase the revenues. Threats: Starwood has shown a good growth rate of 3.0%, according to figures in table 1. However competitors’ growth rate is a threat to the group as well. In table 1 Hilton has shown a growth of 5.30% increase in rooms in one year, this could cause a major threat to the group. As mentioned above, the company has over 50% of its operations in US, this makes it very dependent on the US markets and adverse happening in the markets would also affect the company to a great extent. The development of Internet reservations is causing a great threat to the hotels as well since the intermediaries aim at increasing customer loyalty to their reservation system and not so much to particular hotels. Also competitors are constantly coming up with newer packages and initiatives this could cause a large threat to the brand name of the group and customers might change prefer competitors over Starwood. STRENGTHS WEAKNESS Brand Name Relatively higher prices when compared to competition Large Operational Scale Low Customer Service Distinct Properties Holiday Package options Diversified Business No full focus on target market Large number of properties Low employee productivity Competitive Edge over local ass well as International groups High dependence on the US market Strong Returns   Reduced long term debt   OPPURTUNITIES THREATS World travel and tourism Improvement of competitors like Hilton (5.30% Increase in rooms) Recovery in business travel Reducing market awareness Growth in other Asian countries Increased Packages Opening up of restaurants Economic slowdown of US Franchising brands Increased online reservation channels Improved market presence   Ownership resort operations   Renovation/ re branding of infamous brands   Provide direct stock purchase for investors   BCG Matrix: This method is based on the product life cycle theory. This provides a means to correctly give importance to the product portfolio of a business unit. It is essential that companies have a combination of both high growth products as well as low growth products. The diagram below explains the BCG Matrix. Stars, refers to businesses use huge amounts of cash and also generate large amounts of monies as well. Here the company has a high growth as well as high market share. These generally include businesses that have a large market share in a fast growing industry. These businesses do generate cash however this is very limited as all of it is required to be used to keep in sync with the rapid growth. Businesses that are successful in this area mature to become ‘cash cows’, as the industry matures. Cash Cows, this is where the investments are low and the growth is also low, however the profits and cash generation should be high. Businesses with large market in a slow growing industry fall into this category. The investments are low for these kinds of business units however these generate cash that can be used as investments in other business units (Kotler & Keller, 2008). Dogs are companies which are low in growth as well as market share. These companies are in a state of almost liquidity. Businesses in this group generally have a small market share in a mature industry. These businesses do not require a lot of money for its working, however all the capital is tied up. These kinds of businesses should be liquidated unless they prove to be very prospective of gains and a better market shares. The last group is the Question Marks, are companies with high growth but low market shares. The businesses that fall into this category normally have a small market share in high growth markets. These normally require resources to grow the market share, however it is not clear whether this would lead to a success and whether they would move to become stars is quite unknown (Kotler & Keller, 2008). Figure: Boston Consulting Matrix (Quick MBA, 2007) Starwood is currently in the Star stage in the current time. The group has started and moved through the early stages of the grid and has been through the question mark phase. Over the past years the company has had a lot of investments that it has made. By 2007, the company has grown to have as many as 896 properties around the world (inclusive of the franchised hotels). The company makes huge revenues of almost $5,977. This has been used by the company to be reinvested into the business to keep in sync with the current trends of the markets. Being in the luxurious hotel category, there is a high level of pressure on the group to create an experience for the customers that the customers do not forget. Hence the amounts of investments that go in to managing this are also quite high (Kotler & Keller, 2008). With the various brands that the group has within its portfolio, there is a strong need for the company to ensure that every brand is correctly marketed and the presence is felt for every brand. This highlights the growth that the company has shown and how the company has moved from the problem child / question marks grid to the stars grid (Brown, et. al, 2008). With the increased stability in the working of the group and having a better stand in the markets the company has moved to become one which has a high growth rate along with a high market share. The groups earn revenues which they can utilise to bring in better services for the customers. Starwood’s mission as it reads, “A Global Branded Life Style Hospitality company that delivers branded consumer products and services in a way that are different, better and special” (Starwood, 20080. Also the company has kept up to it values and still works by them. The possibility for a hotel group to move from being a problem child to becoming a star, is solely if the company recognises the needs of its customers and the groups has made all the necessary improvements. The company’s strategy to excel in all that they take up is one of the major reasons for the company to be able to move through the grid. Starwood groups in a state where the company is going to remain in a growth mode for a very long time, until it moves into the cash cow grid. Target Market: The current target market for the company is mainly based on leisure markets. The company mainly targets families and honeymoon couples and the focus of the marketing has been placed completely on these segments alone. Also the business does also focus on Strategies: The current business strategy of the company is to reduce its investments in the owned real estate. Also an increase in the focus of the business on management and franchisee business is aimed at. This allows for the business to save the investments levels as well as does not risk a lot of their own investments (Kotler & Keller, 2008). The main business objective of the company that has been to maximise the earning and the cash flows of the company. This can be done by increasing the number of hotel management contracts and franchise agreements (Johnson, et.al., 2006). Marketing Environment: Starwood group of hotels has hotels based all over the world. However the main revenues are from the hotels in the United States. The group has nine lifestyle brands that are categorized into three service categories namely; select service, full service and luxury. There has been a large scale expansion over the past few years and it is noted that the brand has not been able to cope up with the promises made to guests, employee or even the investors. Even though the group has a lot of strengths, there are a lot of opportunities that are yet to be explored. A big opportunity for the group would be that of Asia. There is a major growth possible in the developing countries (Ferguson and Hlavinka, 2006). This would help them improve market presence and also help them spread their brand far and wide across the world. The travel and tourism industry is a booming one here and the company will be able to make its mark in the area. The group has large opportunities to get into franchising with third party to spread the brand (Ferguson and Hlavinka, 2006). The business travel that was affected by the drop of the US markets can now be recovered and improved. This would open up avenues for the Element hotels that specifically deal with business travelers. However the group is also faced by a lot of threats. Starwood has shown a good growth rate of 3.0%. However competitors’ growth rate is a threat to the group as well. Hilton has shown a growth of 5.30% increase in rooms in one year, this could cause a major threat to the group. As mentioned above, the company has over 50% of its operations in US, this makes it very dependent on the US markets and adverse happening in the markets would also affect the company to a great extent. The development of Internet reservations is causing a great threat to the hotels as well since the intermediaries aim at increasing customer loyalty to their reservation system and not so much to particular hotels. Product Evaluation: The Starwood brand has built its name over the past twenty years. The company has grown in different aspects and has diversified to a lot of different fields. The company has built nine different brand names in the global marketplace. Even though the group provides excellent services, it has been noticed that the brand image is not very strong and the name is not very well known. The company has been able to built hotels worldwide; however the name is not very well spread across the globe. The group has ensured that all their hotel meet the industry standards and also have tried to ensure that they can meet the customer expectations. All the hotels under the name of Starwood have been designed to ensure complete customer satisfaction and as their values already highlight is their passion for excellence and standards of integrity and fairness. As already mentioned earlier they have hotel in over 100 countries and are spread across all around the world. Starwood have a lot of strength in their favor. Starwood has created a brand name for itself worldwide and has been able to gain a high number of loyal customers. Starwood has grown by 3.0% in one year (in Rooms) and this shows how rapidly the company is expanding and now has almost half the number of rooms as its biggest competitor (Intercontinental HG - 556,246 rooms vs. Starwood -.265,598 rooms) (Hotel-Online, 2007). Starwood has shown great returns on investments over the years and has been over market average in 2006 (Datamonitor, 2007). However the group has a few weaknesses as well. Starwood has recorded low revenues when compared to its closest competitor Hilton. In 2006 Hilton’s revenue reached up to $8162 million, which was an increase of 84% over 2005 figures (Hilton, 2008). Starwood’s prices are costlier compared to its competitors operating in the same sector. The expectations from the customer are high, in terms of quality, when they pay such high prices (Fisk et al, 2000). The marketing strategy is not very focused on the target segments. Starwood has concentrated its business in the US and thus depends on the US market to a high extent. Consumer Evaluation: The company has a dedicated website called ‘Starwood Lobby’ which is for their guests to leave their comments, positive/ negative feedback and reviews. Most of the reviews here have a common opinion that the stays at any of the company’s hotel were all wonderful. Looking at the reviews from customers it is a common opinion that the hotels are very prompt with the services and how carefully all the staff is chosen, who fit into the hotel perfectly and take pride in being part of the hotel. The weakness of the company is that they have not segmented the market correctly and have not targeted a market in particular causes a drawback for the marketing end and the brand building. Also from the reviews it is quite evident that most of the customers were satisfied with the services provided and would be loyal to the Starwood group of hotels. The company could increase corporate service and thereby increase its revenues (Jobber, 2004). Competitor Analysis: Starwood being one amongst the top 10 companies has to face a lot of competition. Competition for hotels and resorts is based more on the number of rooms, size of properties, restaurants, operations, marketing and other facilities provided. Starwood faces a lot of competition from various hotels both nationally as well as internationally. Few of the main competitors are Hilton Group, Marriott, Accor etc. The table below indicates a few figures for the above-mentioned companies. The table allows us to compare the revenue, employee, net incomes, and profit margins of these companies (Global Hotels, 2008). Basis of Comparison Starwood Hilton 2003 2005 2007 2003 2005 2007 Revenues 4,630.0 5,977.0 6,153.0 3,819.0 4,437.0 8,090.0 Net Income 309.0 422.0 542.0 164.0 460.0 121.0 Profit Margins 6.70% 7.10% 8.80% 4.30% 10.40% 1.50% Total Assets 11,894.0 12,494.0 9,622.0 8,183.0 8,743.0 37,868.0 Total Liabilities 7,509.0 7,258.0 7,520.0 5,944.0 5,932.0 32,670.0 Employees 110,000 145,000 155,000 70,000 61,000 121,474 Basis of comparison Accor Mariott 2003 2005 2007 2003 2005 2007 Revenues 9,746.6 9,764.4 11,112.2 9,014.0 11,550.0 12,990.0 Net Income 416.0 498.1 1,247.9 502.0 669.0 696.0 Profit Margins 4.30% 5.10% 11.20% 5.60% 5.80% 5.40% Total Assets 14,991.4 18,031.8 14,824.4 8,177.0 8,530.0 942.0 Total Liabilities 9,951.8 12,146.6 9,774.0 4,339.0 5,278.0 513.0 Employees - - - 128,000 143,000 151,000 Table: Comparison of a few top hotels (Global Hotels, 2008) The current market share of the companies can be seen in the graph below. Market Share of various competitors The current competitive advantages that the company has in comparison to the above mentioned companies are mainly customer loyalty and technological know how. Starwood has gained a lot of trust and support from the customers. There is also a low switching cost among the buyers and the threat to substitute products is mainly where the other properties where the customers can stay and also the extended stay in hotels and teleconferencing. The other huge positive that the company has is the technical know how (Brown, et.al., 2008). The company has included a number of new technologies like the administered new mobile guest check in solution where there is a use of a wireless mobile computing application. Also Starwood Hotels has always and will continue to improve the technology and work within the entire industry (CRM Today, 2008). This is majorly because the company works with the value to provide their customers with excellence always. Marketing Strategy The business aims at achieving a better market presence overall and improving the brand awareness among people. The main sector of audience that is supported by the group is business travelers. The aim of this plan is to focus on a few other sectors, to increase the revenues of the business and brand awareness. The company can aim at focusing their marketing for families. Also the company could reduce the focus on business travelers and focus on other business related activities like conferences, assessments, official outings, seminars, etc. There are different factors based on the various elements of marketing that need to taken into consideration. Considering the four important elements of marketing below are the strategic plans to help improve the business of Starwood Group of Hotels and Resorts. Promotion Strategies: Starwood over the past few years has been extremely stagnant in marketing their brand. It is essential that a company can stick out their brand to differentiate the services they provide when compared to the competitors. Starwood can promote the brand name using a lot of different media. The traditional media can be utilized very effectively. Starwood can make advertisements to promote the brands and make people aware of the factors that differentiate Starwood from their competitors. The traditional media can play a very important role for promotion of their brand. Starwood could give newspaper advertisements about the Bliss sink side six pack. Also a lot of promotional offers can be given through the traditional media. Starwood could use the television media to emphasis on how the well landscaped properties owned are for families to enjoy their holidays and to spend a weekend at the spa. A lot of offers can be given to customers in the form of gift vouchers in magazines, discount vouchers in newspapers. This would enable the company to improve the brand awareness and it would allow the people to relate to the company. It is very important to have a brand that is well known and well marketed. Also promotional expenditures should also be concentrated on improving the website of the company. With the growth of internet over the past few years it is essential that all the brands of Starwood have optimized websites, with good functionality. This is one of the most essential media for marketing these days. The company can improve their website’s functionality, which would approximately take a maximum of two months. Also it is essential that there is recognition for the brands. This could be achieved by constantly improving the content of the website and ensuring that the websites are all well optimized. Place Strategies: Starwood hotels has developed various projects worldwide, however they require improving the marketing strategies over all these locations. Keeping place in mind, the company would need to ensure that the marketing is aimed at the audience. Also since the group has already built a number of hotels in different countries worldwide, it is essential that they consider all the possible ways to market their good in accordance with the country they are located in. Also, ensuring that the brands are linked so that the consumers are able to recognize the hotels and the parent company Starwood. Starwood has developed a lot of projects over 100 different countries. Price Strategies: Starwood would keep in mind the price factor while promoting the business. This is one of the most essential elements of marketing and plays a very important role in the marketing plan. The group has built a number of hotels and it is now very important that they invest into correctly promote the hotels. The websites can be easily optimized however there will be a recurring expense on maintaining the website. The investments made over a period of one year to optimize the website and make it more interactive would help them cut down on the other costs they would normally incur in paying a third party for the reservations. Product or Service Strategies: Since the main business of Starwood is hotels and resorts, they basically are a part of the service sector. It is essential that Starwood look at improving the services it provides. A recommendation for the company would be for it to try moving into the travel and tourism sector. Also the hotel could improvise the systems used within the organization and incorporate customer relationship management, which would allow the group to understand the needs of the customers to a better extent. There are various new systems that have been developed specifically for hotels to be able to track every customers buying and ordering pattern, it can capture small details like the kind of wine the customer normally drinks, etc. Also a separate team is required to follow the comments and suggestions left by customers in the Starwood Lobby and make necessary changes. This would help them improve their service and meet up to customers requirements. Recommendations: Based on an understanding of the current marketing strategy of the company and the current environment that the company operates within, the following can be recommended forms of marketing for the company. The inclusion of an E – commerce website for a company as large as Starwood is a simple process. Since the marketing strategy is one of building an e – Commerce website, the marketing tactics are more based on the website and the user friendliness of the website. Also it is essential to understand that making sales via this medium is more beneficial to the comp any as it reduces the cost of transactions. Also as the customer is not present the cost reduces as there is lesser need for human resources to complete a transaction. These form the basic tactics for the company as the strategy is to include an e – Commerce website for the company. The benefit of the website is more of the non monetary along with the monetary benefits. There is a greater deal of advertisement and a good will which is created for the company. The return on investment is very fast as this would help the company save up on the monies it would otherwise need to spend for the advertisements and the transaction costs when it comes to the physical stores. This will also meet the growing use of the internet and the growing use of the e – Commerce websites. Evaluation, Monitoring and Control The introduction of new CRM systems within the organization is a one time expense and does not require a lot monitoring. Introducing the system into the organization would take a maximum of three months, after which it would require to have maintenance checks. The system is simple and can be used by all employees, however with some training on the system. The marketing will be evaluated and controlled by a team of members who are well trained and have good knowledge of online marketing. The process for optimizing the website is a constant process hence a dedicated person is required for the job. Also as for the traditional marketing a team needs to be set up. This team will focus on creating advertisements for newspapers and television. Both the teams need to be supervised by a marketing manager, who needs to be knowledgeable about both the traditional marketing media as well as the online marketing. References Datamonitor, 2007, ‘SWOT on Starwood’, 15 June 2007, http://www.datamonitor.com, (accessed 12th August 2009) Ferguson, R. and Hlavinka, K., 2006, ‘Loyalty Trends 2006: Three Evolutionary Trends to transform your Loyalty Strategy’, Journal of Consumer Marketing, Nov 5, 2006, Vol. 23, p292-299 Fisk, R. P., Grove, S. J. and John, J., 2000, Interactive Services Marketing, Houghton Mifflin, Boston Hilton, 2008, http://worldwide1.hilton.com, (accessed 11th August 2009) Hotel-Online, 2007, ‘Hotel Ranking’, June 2007, http://www.hotel-online.com/News/PR2007_2nd/Jun07_HotelRanking.html, (accessed 10th August 2009) Jobber, D., 2004, Principles and Practice of Marketing, 4th edn, McGraw-Hill International, Berkshire Kotler, P., & Keller, K., 2008, Marketing Management, 13th Edition, 6th March 2008, Prentice Hall Publications Starwood, 2008, Company Info, Retrieved from http://www.starwoodhotels.com/corporate/company_info.html, (accessed 9th August 2009) Starwood-Lobby, 2008, ‘Starwood Lobby’, http://www.starwoodlobby.com/archives/2008/05/le_meridien_phu.html,(Accessed 7th August 2009) Read More