Engagement Journey:
Starwood Hotels and Resorts

The most successful companies understand the importance of cultivating a culture that reflects the core values of their leadership and associates. Starwood Hotels and Resorts Worldwide is such a company. Best known for its world-class hotel brands – Westin, Sheraton, Four Points by Sheraton, St. Regis, Le Meridien, The Luxury Collection, W Hotels, aloft, and element – Starwood has over 900 hotels and resorts in over 90 countries with approximately 150,000 associates worldwide.

One key to Starwood’s continued success is the creation of what it deems a branded service culture – one that strives to fully engage its associates in delivering world-class service to its guests. This chapter outlines Starwood’s branded service culture journey thus far. In March 2006, Starwood’s then-CEO, Steve Heyer, stepped to the stage at a major investors/media meeting to announce a new vision for Starwood.

“For the last 18 months, we have been working to unlock the substantial potential that exists in our brands, infrastructure, and team,” said Heyer. “We are implementing a clear and exciting strategy, which is already generating significant benefits. We are committed to connecting emotionally with our guests through our brands with brand-specific innovation and the creation of memorable experiences, resulting in the cultivation of great preference and brand loyalty for Starwood brands. Our strategy will generate industry-leading revPAR [revenue per available room], footprint growth, and return on invested capital for ourselves and our owners.”

This statement reflected a major shift in Starwood’s strategic vision and direction. At the time of Heyer’s announcement, Starwood was gaining market share, posting record profits, and showing increased strength in our portfolio of hotels. Nevertheless, our board of directors and leadership team had begun to recognize that we were at a crossroads. The market conditions and business environment had changed, but our business strategy had not. With that realization, we began a concerted effort to create a branded service culture – a culture that would support our strategy to be a branded lifestyle hospitality company delivering different, better, and special guest experiences.

Our History: A Fortune 300 Startup

Starwood Hotels and Resorts Worldwide was created in 1998 as a result of the acquisition of Westin Hotels and ITT Sheraton by a real estate investment trust called Starwood Lodging. Founder Barry Sternlicht continued to grow Starwood through a relatively quick series of large real estate acquisitions. As a new and emerging player in what was a stable industry with many established competitors, we were often viewed as “David taking on the Goliaths.” We were also regarded as somewhat of a “Fortune 300 startup” because of the nearly instantaneous manner in which the company developed.

With our continued growth through real estate and the highly successful launch of our W Hotels brand, Sternlicht and Starwood Hotels developed a reputation for generating strong business results and building increased market share – often through design and innovation. Throughout the early 2000s, we continued to grow, strengthening our portfolio to include approximately 500 hotels globally, covering the five major brands we had at that time. However, given how quickly Starwood was formed and our rapid growth since then, several challenges emerged, including:

A lack of a strong, unifying culture – most associates still identified with their heritage organizations instead of Starwood. Associates would introduce themselves and state if they were with Sheraton or Westin. Even the culture within each brand was disparate – there was little connection between a Sheraton in New York and a Sheraton in New Jersey, never mind a Sheraton in Portugal.

Limited focus on developing and engaging talent – with our primary focus on achieving business results, we were not as focused on our associates and their growth and development as we needed to be to achieve those results.

Limited focus on process – our fast growth limited our ability to define and improve processes and procedures, and leverage best practices and innovation.

Many of us felt that these issues, if left unaddressed, would inhibit Starwood’s abilty to maximize its business potential.

Building a Foundation: Creating a Leadership Culture

To meet this initial challenge, Michelle Crosby, then vice president of Organization Capability for Starwood, whose extraordinary vision would drive the entire culture transformation for the following seven years, assembled a small team of industrial-organizational psychologists and human resource professionals. With the support of Bob Cotter, then CEO of Starwood, this team took a very deliberate approach to developing the Starwood culture needed – an engaging, high-performing leadership culture, focused on its talent. We knew that focusing on our associates and ensuring their continued development would result in greater guest satisfaction and better financial performance. For our associates to feel part of this new organization and for them to have a clear mission and purpose, we needed to create a work environment and culture that focused on helping them grow with the company.

The first step in this journey was to define what a leadership culture looks like. To do this, the team embarked on a global effort to define a Leadership Success Profile, or competency model, which described what it means to be a “successful leader” at Starwood. Working with a broad group of senior leaders from around the organization, we identified 24 competencies for all leaders at Starwood. These competencies provided a common language for all of our leaders and defined our expectations for how leaders should behave and what they should value and be responsible for at Starwood going forward.

Once our leadership model was defined, we began to incorporate the Leadership Success Profile competencies into all of our talent management, development, and cultural building programs, including:

360-Degree Feedback: An online multirater survey instrument that measures and reports on observed leadership behavior in each of the 24 competencies.

Performance Management Process (PMP): Online goal setting and performance evaluation tools in which half the overall rating is based on performance in the 24 competencies.

Talent Review: A succession planning and career development tool that leverages the PMP and 360-degree competency data to inform career development and potential placement decisions.

Starwood Development Center: Online learning management systems linked to our Core People Processes that provides development resources for building skills in each of the 24 competencies.

Leadership Development Programs: Benchmark leadership development programs that leverage the Leadership Success Profile to further communicate and reinforce the new role and expectations for leaders at Starwood. In summary, the creation of the Leadership Success Profile shaped and communicated the culture we wanted to be and the behaviors we expected to be demonstrated. It aligned everyone on the same path and provided a foundation of our talent systems and tools to communicate, reinforce, and reward these behaviors on a daily basis. They also provided the “people” infrastructure and foundation to build upon for our later culture-building initiatives. The first few years of Starwood’s brief history were thus focused on developing strong leaders in the company and providing them with the resources they need to deliver great guest service.

A Call to Action: Brands!

At the end of 2003, the entire travel industry was emerging from a series of historic crises starting with the devastation of September 11, 2001, and culminating with the impact of the Iraq War and SARS on the travel industry. Starwood survived this period in great shape financially and was well positioned for stable growth moving forward.

However, as market conditions improved, it became apparent to our board of directors and senior leaders that our current business model focused on owning and operating hotels. While profitable, it was not fully leveraging the potential value of Starwood and its brands. Our status as a real estate investment trust and a philosophy of wanting to own the actual real estate of our hotels was reducing our growth potential and limiting the success of the powerful brand names. The board and the senior team recognized that what Starwood needed to be successful in the future was a change in its strategic focus and direction. Thus began our journey from primarily being a real estate company to becoming brand experts. Based in part on this realization, it was announced that Barry Sternlicht would be “stepping up” to take the chairman role and that he and the board had selected former Coca-Cola CEO Steve Heyer to take his place as CEO.

The reason for this move quickly became apparent. Steve Heyer had a strong reputation for marketing innovation and brand building at both Coca-Cola and Turner Broadcasting. Through this transition, we would soon learn how marketing, operations, and human resources can come together to build a set of branded service cultures that would ultimately define Starwood.

Defining Our Brands: The Big Dig

The organization saw the hidden, untapped potential of our legacy brands and immediately began work with our brand teams, leadership teams, and market research agencies to better define and differentiate our brands. As a result of this effort, a transforming initiative called Building World Class Brands was launched. Initially, the efforts were focused on defining the brand from the guest’s perspective. Brand teams were challenged to better define what each of our brands truly was and to carve out a distinct space in the marketplace for each of them. Whereas, in the past, brand teams focused on identifying innovative features and attractive guest programming that drive loyalty and demand, this time the teams were challenged to answer two key sets of questions:

How do we best engage our guest needs? What are our guest needs? What creates and drives guest loyalty?

How is each brand different, better, or special? What distinguishes our brands from another and how are we different from our competitors? What are the unique sets of values that are core to the brands’ guest experiences?

To answer these questions, a huge set of market research initiatives was born. Because of its size and breadth, we called it the Big Dig, a comparison to Boston’s massive highway construction project that was going on at the same time. It involved countless internal and external focus groups, cross-functional teams, market research and consulting, and guest feedback. This effort was focused on identifying how each brand was different or unique and ensuring that we have a brand that addressed the needs of nearly every traveler. It also focused on the holy grail of marketers, namely, brand loyalty. Our goal was to create guest experiences that would ultimately lead to loyalty beyond reason. In other words, guests needed to feel comfortable, even justified, in paying a premium for our offerings because they knew that every time their experience would be different, better, and special.

Building Loyalty: Going Beyond the Box

The Big Dig supplied a treasure trove of information about our properties and the people who work and stay in them.

Starwood’s early success was based on innovative design; therefore, it wasn’t surprising to learn that the physical characteristics of our properties (colloquially referred to as “boxes”) were important to our guests. The style and furnishings of our hotels were the initial features that brought our guests to a property for the first time – the better the box, the more attractive the hotel would be to a guest.

The Big Dig’s larger revelation, however, was that it was the gift inside the box that differentiated great experiences. It was our associates and the memories they created for our guests that kept guests coming back to our properties. The concept may seem simple and obvious, but it is revolutionary thinking in the hospitality industry. Guests wanted a fantastic service experience rather than merely a place to lay their heads at night, and we needed our associates to deliver that experience.

The path to our transformation became clear: The service profit chain. The service profit chain states that engaged associates create satisfied guests, which in turn leads to better business financial performance. Starwood’s commitment to the service profit chain wasn’t a blind leap of faith. We examined our own data to demonstrate the service profit chain in action at Starwood.

Taking advantage of robust, global measurements of associate engagement (our StarVoice survey tool), guest loyalty (our Guest Satisfaction Index), and financial performance (RevPAR Index, an indicator of market share), we found that:

• Properties with the highest levels of associate engagement had significantly larger levels of guest loyalty – on average over 60 percent of the guests were considered loyal (highest levels of satisfaction, likelihood to return, and likelihood to recommend).

• Properties with the highest levels of associate engagement had significantly larger levels of guest loyalty – on average over 60 percent of the guests were considered loyal (highest levels of satisfaction, likelihood to return, and likelihood to recommend).

• Our properties with the highest loyalty outperformed their markets by 13 percent. This is, on average, those properties got 13 percent more than their “fair share” of the market.

In short, we learned that building associate engagement impacts the interactions associates have with guests – the higher the engagement, the more meaningful those touch points are likely to be for our guests.

These results helped confirm the importance of focusing on our associates as a key part of our transformation journey and was spelled out by our senior leaders at the Building World Class Brands conference in January 2006, in which we announced the Building World Class Brands initiative to 2,200 general managers and hotel executives gathered in San Diego from all over the world to hear the news of our new direction. Our key message: If you take care of our associates, our associates will take care of our guests, and the bottom line will take care of itself.

How we treat associates matters – not just because it was the right thing to do, but also because it was the right thing to do for our business. Loyal associates create loyal guests, which in turn results in superior brand performance. While this connection between associates and profitability may seem obvious, and while the research demonstrating these relationships has been in the public domain for over a decade, Starwood’s public commitment to this principle was another indicator of the shift in thought that was necessary to embark on a Service Culture Transformation.

Since associates deliver the gift inside the box, it was now up to us to figure out exactly what that gift was for each of our newly differentiated brands – and how our associates experienced that gift themselves.

Our Human Truths: True for the Guest, True for the Associate

Based on the Big Dig research and our engagement and service profit chain work, we knew we needed a strong foundation upon which we would build these world-class brands. We decided to focus on satisfying the needs that drive all human beings – guests as well as associates. With the help of renowned marketing consultant Scott Bedbury, we identified what we would come to call the Five Human Truths, which recognized the universal need to

• Be understood
• Be special
• Belong
• Feel in control
• Reach their potential

As a service provider, if you can find a way to satisfy these five needs, you will have created a memorable experience that can certainly lead to loyalty beyond reason.

Through our work in the Big Dig, we also learned that these Five Human Truths are true not only for our guests but also for our associates. Our associates have these same basic needs and, as an employer, it was our objective to address them for our associates as well.

Our Brand Core Values: Defining What is Different, Better, and Special

The Big Dig research told us that our guests could tell the difference between a Sheraton and a Westin, a W from a St. Regis, but these differentiations were mostly related to one or two signature characteristics. Road warriors could recognize a Westin Heavenly Bed from a mile away, and luxury connoisseurs knew when they arrived in a lavish St. Regis lobby. The challenge we now faced was how to articulate and define what differentiated the experience of everyone of our brands. We needed to identify what travelers would find “different, better, and special” in each of our brands.

Consequently, one of the last key outcomes of this research was each brand’s positioning statement and the corresponding core values. Working with Scott Bedbury, each brand team was challenged with establishing a brand positioning statement and three core value words that specifically describe and evoke the kind of experience the guests should consistently expect to have at each hotel.

For example, Westin’s core values are personal, instinctive, renewal. Reinforcing Westin’s core values, Westin’s new brand positioning statement reads:

Westin is more than a hotel. It’s a destination where guests are understood and feel that this is a place where “I can be at my best.”

From the moment I arrive, I feel the Westin ambience and am welcomed by “hosts” who help me get the most out of my stay.

Whatever my state of mind, the GM has inspired all associates to instinctively and thoughtfully respond to my needs on a personal level. Customized renewal experiences energize my mind, body, and spirit, making my stay especially memorable. I leave Westin rested, energized, enriched, and renewed.

In contrast, the core values for St. Regis are "uncompromising, bespoke, seductive, address." In recent years, they’ve been creating the best addresses. St. Regis Hotels and Resorts are in the best cities in the world – New York, Aspen, and Rome for example. But the St. Regis isn’t just about a beautiful place to sleep, it’s a place to have experiences and where memories are made. St. Regis guests can expect the finest bespoke (custom-tailored) service as well as furnishings and linens. Associates are charged with creating custom-tailored experiences for their guests whether it is giving a tour of the hotel artwork or designing the perfect day at the spa. Their brand positioning reads:

For connoisseurs who desire the finest expressions of luxury, St. Regis Hotels & Resorts provide flawless and bespoke service while capturing the distinctive personality of each location. Indelible memories are created as our guests experience an unfolding series of delightful moments and thoughtful gestures. There is no address like the St. Regis.

The core values and brand positioning are the key descriptors, the motivators of the brand, and the lenses through which everything for the brand is passed. They were designed to help drive the decisions and behaviors that go on in the hotel, and they are as much a part of the brand now as when they were introduced.

In summary, upon completion of the Big Dig, our brand teams had refined our guests’ core needs in terms of a set of universal human truths and further elevated the importance of people and service in driving guest loyalty. Our new core brand values and positioning helped us communicate with a unified vision, voice, look, and feel. From the guest experience, to the design of the lobby and rooms, the food served, the marketing programming and strategy, uniforms and print collateral – all was now being aligned. We all began to chant a new mantra: “Everything communicates.”