Starwood CEO Defines the Future of Hotels in ‘Age of Great Change’
With exponential growth in global wealth and connectivity, Starwood anticipates the next phase of hotel innovation will revolve around personalization.
Starwood Hotels & Resorts CEO Frits van Paasschen is regarded as one of the brightest minds in the hospitality industry, which was on full display this summer at the hotel group’s annual Rendezvous sales pow wow in New Orleans. Starwood operates nine hotel brands: W Hotels, Westin, Sheraton, St. Regis, Starwood Luxury Collection, Le Meridien, Four Points by Sheraton, Element and Aloft.
Previously the CEO of Coors and GM of Nike Europe before moving into hospitality in 2007, van Paasschen has injected his lifestyle brand expertise into the Starwood brand building machinery. No hotel company has created and delineated hotel brand stories as well as Starwood.
During his 22-minute presentation at Rendezvous, van Paasschen defined today’s shifting global travel economy, tomorrow’s hotel trends and how his company is adapting to those trends ahead of the curve.
The following is a slightly abbreviated transcript of Frits van Paasschen’s speech at Starwood Rendezvous New Orleans 2013:
It’s safe to say it’s been a very big year. If you remember back to Seattle [Rendezvous 2012], we talked a lot about globalization and how the world is changing so quickly. One of the things we said then is that, ‘We focus on the trend lines, and not the headlines.’
That is how we shape our business and our brand, from what I like to call ‘our court side seats at the global economy.’ And that change we talked about a year ago, if anything, today it has accelerated.
We see so much change in the world that we’ve coined the phrase ‘The Age of Great Change’ to describe what’s happening. Because around the world as we speak to customers and companies and industries in every sector, we also spend time talking to pools of capital and investors in over 100 different countries…. They are the people who build hotels with us. And maybe most importantly, every day we see the faces of over a quarter million travelers, and what’s going on in 1,150 hotels around the world. And here’s basically what we’re seeing.
We’re seeing change at a rate that’s unprecedented in the history of humanity. Behind that change are two pretty much unstoppable forces: Rising wealth and greater global connectivity through technology.
Staggering numbers of people are entering the global economy every year. So if you go back 20 years, there were roughly a billion people in the global middle class. Move forward to today, 20 years later, and we’ve added another billion. We’ve doubled the number of people in the global middle class….
In the next 20 years, we’re going to go from two billion people in the middle class to five billion…. It’s hard to overstate the impact on the travel business. In fact, my view is the stakes couldn’t be higher….
So that means more roads, airports, buildings and hotels will be built in the next four years than have been built in all of history before that.
The other force behind the Age of Great Change is hyper-connectivity through technology. And this is reshaping the global business environment at least as much as that rising wealth.
There were 500 million internet users in 2000. Now there is roughly two billion. In the next decade, that two billion goes to five billion. And sometime over the next year or two, there will be more mobile phones than there are people on the planet.
With technology changing this quickly and this profoundly, we have no idea what’s going to happen. The best we can do is get a glimpse by seeing what’s happened over the last few years up until today.
If you think about it, anybody today with an iPhone has more computing power in their pants than a Department of Defense computer did in the Clinton administration. And that fast pace of change is creating gaps not just across generations but even within generations….
[van Paasschen discusses here how children today in middle school have access to social media like Instagram, unlike their siblings five or six years older.]
I was thinking about all of the things that have disappeared into my iPad over the years. Our offices are essentially wherever our devices are today. I don’t even use a laptop anymore. I think it’s safe to say technology has changed the way we work and the way we live.
But it might also be changing the way we think…. For example, today’s luxury is turning into tomorrow’s necessity by technology. And this is something that’s been happening for a long time.
[van Paasschen mentions that ultimate luxury once meant electric lighting in JP Morgan's office 100 years ago.]
So people start to take for granted what’s widely available. So today for example in the travel business, a hotel brand can’t stand apart just by having a comfortable, reliable, clean room. In fact, hotel brands can’t define themselves simply by promising a delivery on guest experiences. Because I think that’s increasingly becoming table stakes in our business. If you want to have the world’s best brands, which we do, then we know we’re not successful unless our guests are happy and having their expectations met and exceeded.
And that expectation today, driven by technology, is personalization.
Anybody today who owns an iPad, anybody who buys something off Amazon, anybody who spends time on Facebook intuitively knows what we mean by personalization.
So how long will it be before all of us expect a hotel brand where we spend x number of nights a year to know things like what temperature we want our rooms set at, what our comfort foods are, where we might like to go on vacation?
At Starwood, we’ve come to realize that our next innovation may not be a physical thing, like a bed or a shower. Think about those things that disappeared into my iPad. But instead it could be about service and personalization. Because I think looking ahead, hotel brands—in fact, I think all consumer brands that live in the Age of Great Change—they’ll have to know what you want and they’ll have to know that you want it right now. And to be able to deliver that consistently and globally.
This is a big change. And for us, meeting those expectations is a daunting challenge. We have something like a half billion touch points a year with our guests. We have 40 million guest stays, we have over 200,000 associates working in our properties, 1,150 hotels, 100 countries.
So this has to change the way we recruit, the way we train, the way we talk to our associates, and how we think about leading our business. Because you know, in Starwood tradition, when we see things changing we say, ‘Bring it on.’
If you go back to the 80s and 90s, we were going global before it was cool to go global. In the 90s, we were the first company to create a signature design to position a brand like Westin. In the last decade, we built a global brand around W based on new insight about what people said they wanted from hotels.
Delivering meaningful, personalized branded experiences for our guests is what we’re about. Knowing what people want, meeting those expectations and creating memorable experiences consistently around the globe is what we’re working to do.
So let’s tie these two ideas together. Thanks to the Age of Great Change, there are more people in more places with a demand for more luxury. But today’s wealthy aren’t the faces of past generations, right? They’re more diverse, they’re more sophisticated, they tend to be younger, and a lot more of them are women. And no surprise, they’re a lot more global.
For them, whether they’re old money or new money, luxury and luxury brands are a personal statement. Because it used to be that luxury was very prescribed. Right? Society dictated what luxury was. You drank scotch because you were supposed to like it. You went skiing in Maine because it was supposed to be fun. Right? Society dictated to us it was all about china, crystal and caviar.
But today, your definition of luxury isn’t my definition of luxury. Today, our guests are the true arbiters of what luxury is, which is really important. A couple are still the same. Luxury is still about exclusivity, and exclusivity is still about scarcity. But now with things as diverse as they are, exclusivity and scarcity mean very different things to different people.
And that plays into our luxury brands. So, we realized that we were in great position with three luxury brands to play in these spaces in different ways, with a great platform between W, Luxury Collection and St. Regis.
So take W, for example. It takes that old definition of luxury, that prescribed notion, and puts it on its head. And so exclusivity with W is about insider access to what’s going on here and now with the W Insider experience.
Compare that to Luxury Collection. This is a portfolio of iconic properties, some of them five and six centuries old, there to create real indigenous experiences, which in this Age of Great Change, is becoming increasingly difficult to find. And some of these hotels are just impossible to replicate, right? You’ve got the Gritti Palace, Alfonso XIII or the Imperial in Vienna as examples.
And then there’s St. Regis. So the whole idea of St. Regis is taking that heritage of the St. Regis at 55th and 5th in Manhattan and redefining traditional luxury for a new age. And take that century-old tradition of a gathering place for masters of the universe, social swans and robber barons, and creating a new gathering place that’s relevant to today’s global elite.
So today we have these three distinct luxury brand propositions between W, Luxury Collection and St. Regis. In fact, put simply, growing brands are what we’re all about. It’s leveraging our global platform, SPG, our mobile apps, our relationships and tapping into what we call our “global smart teams” around the world….
We are united by a simple, single belief. And that is: People want a better way to experience the world, and it’s our job to give them that better way.
Greg Oates covers hospitality trends and next generation hotels. He has participated in 1,000+ hotel site inspections in over 50 countries.