Lens on Luxury

 

Frits van Paasschen speaking in Dubai. He tells Luxury Travel Advisor that the future of the luxury hotel industry is extremely bright. “I think that in many respects this tremendous growth and development that we’re seeing now is unleashing so much interesting potential that’s out there.”

 

When Frits van Paasschen became the president and CEO of Starwood Hotels & Resorts in 2007, he was excited about the prospect of becoming acquainted with its vast network of properties throughout the world. After all, despite having been a long-time consumer of hotels, he was technically new to the industry, having served as president and CEO of Molson Coors Brewing Company’s largest division, Coors Brewing Company. Prior to that, he’d served as a consultant in private equity transactions and before that, he had leadership positions at Nike and Disney Consumer Products. 

In his new role with Starwood, van Paasschen had envisioned himself visiting hotels across the globe and inspiring the associates he met while he was there.

Turns out, it worked the other way, for it was he who was inspired by the associates.

“I have to say that without exception, when I visit our properties, there is such energy and pride there,” he tells Luxury Travel Advisor. “Some of the hotels are wonderful and some of them need some love, but it doesn’t matter, they are all passionate about their properties and the people they work with and the number of years they’ve been with the company. It’s a wonderfully inspiring thing to see.”

Today, van Paasschen runs a big, big company with 1,134 hotels in nearly 100 countries across its nine brands, St. Regis, The Luxury Collection, W, Westin, Le Meridien, Sheraton, Four Points by Sheraton, Aloft, and Element. There are plenty more hotels for each in the pipeline, with each flag growing stronger and stronger globally.

And yet it’s the luxury segment van Paasschen is spending a good amount of his time on these days. That’s because Starwood sees itself as the largest luxury hotel company around, thanks to the fact that the number of W, St. Regis and The Luxury Collection hotels combined total more than 160 hotels in 39 countries.

It won’t end there. Starwood will add 50 luxury hotels across the three luxury brands in 12 new countries over the next five years. Along the way, it will leverage the fact that its luxury segment is part of the larger Starwood machine with access to enormous amount of resources, including the Starwood Preferred Guest (SPG) program, which allows it to know the preferences of its guests across all brands.

“Today, we are the largest luxury hotel company and so we recognize that there is a huge impetus in demand growth. We see that continuing for some years to come,” says van Paasschen. “The key for us is to understand, given the size of our luxury business, how we can operate as a luxury company within the broader reaches of Starwood, using the collective strength of all our brands."

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St. Regis has also doubled in number over the past five years with openings in Bal Harbour, Tianjin, Shenzhen, Doha and Abu Dhabi. It numbers 30 hotels with 13 projects in the works. Of Note: St. Regis will open in Changsha, Chengdu, Kuala Lumpur, Lijiang and Zhuhai in Asia Pacific, as well as in Egypt and Jordan in the next two years. The St. Regis Mauritius Resort opened in March, marking the brand’s first hotel in Africa and The St. Regis Abu Dhabi opened in April, its second hotel in Abu Dhabi following the recent opening of The St. Regis Saadiyat Island Resort in 2012.

The Luxury Collection is on track to reach the 100-hotel mark in five years. Over the past year, the brand has opened six hotels in destinations such as Shanghai and Sanya in China; Chennai in India; Koh Samui, Thailand; and Jakarta, Indonesia. Palacio del Inka in Cusco, Peru, and The Castle in Dalian, China, open this year. More than $200 million has been invested to restore some of The Luxury Collection’s top hotels in Europe: Hotel Alfonso XIII in Seville and Hotel Maria Cristina in San Sebastian, Spain, reopened last year; the restored Gritti Palace in Venice reopened in January 2013 and Prince de Galles in Paris opens this month.

W Hotels has more than doubled its portfolio in the last five years, reaching 43 hotels worldwide. It’s on track to reach 60 hotels by the end of 2015. The brand’s first ski resort, W Verbier, opens this December in Switzerland. W Guangzhou opened in March and was W’s debut in mainland China.

Developing a Lens

Acknowledging Starwood’s broad reach in the luxury hotel market has led van Paasschen and his team to develop a research perspective it calls “Lens on Luxury,” a concept inspired by the fact that an entirely new class of wealthy luxury consumers is emerging all around the world. Research shows that three billion people will move from poverty into prosperity over the course of the next generation and for the first time in history, half of the world’s population will be middle class. This means that more people than ever before will be able to afford luxury travel, according to Starwood.

Fueling that change on the landscape is the fact that high-powered executives are now traveling into emerging markets.

Starwood calls the size of this new wave of jet-setting global luxury travelers cutting across all generations “seismic,” and in fact, van Paasschen has declared these times that we’re in to be especially fortuitous.

“We are on the cusp of a new golden age of luxury travel as technology and globalization drive new trade routes, capital flows and wealth creation,” says van Paasschen. “As a company we are looking at what appears to be an extraordinary opportunity at an extraordinary period of time in luxury and luxury travel,” he says. “It’s just massive growth, thanks to the sheer number of people who have acquired the means to be able to enjoy luxury. A phenomenon has been in place for quite some time now where people don’t have to be seriously wealthy to be luxury consumers. They can, however, select those areas where they choose to indulge themselves because it’s their passion or their interest.”

How W Got Luxury

When van Paasschen, who was born in Holland and grew up in Oregon, was in his 20s, he backpacked around the world for six to eight months at a time to places such as China and India. The treks gave him a preview of some of the destinations he frequents today as Starwood Hotels forays into emerging markets. 

“I remember remarking to one of our Chinese hotel owners that China has changed so much since those days and he said, ‘You’ve probably changed a bit, too.’ ” Those words, which van Paasschen found to be both “wise and somewhat poignant” also exemplify how luxury too has changed over the course of three decades.

Case in point: The W brand was launched 15 years ago with the business model of converting existing buildings in good locations into hotels. Turn down the lights a bit to create some mystique and voila, you’re drawing a hip crowd that generates buzz and is willing to pay a bit more for room rate and cocktails at the bar.

That was all well and good for the dot-com CEO who was living large in 1998. Fast forward to 2013 and what does the W customer look like now? It’s an affluent clientele that still likes the casual, stylish stage that W sets for reinventing itself but who is demanding that the dynamic be placed in a more luxurious setting.

Customer feedback led Starwood to really revise the W concept. Last year it embarked on a revitalization project for all the hotels under the brand to bring the physical offering up to an affluent client’s standards. New-builds in the W portfolio are dramatically beautiful, designed with attention to detail and space. Remaining from the original W concept is the chic aspect of the brand’s nature and the fact that W is still very much all about what’s new and what’s next.

Also new is the fact that W is now part of Starwood’s luxury group, joining the likes of St. Regis and The Luxury Collection, whose portfolios have some of the most iconic hotels in the world.

“The positioning of W within our luxury brands group with The Luxury Collection and St. Regis is an acknowledgement that W has become a full-fledged luxury brand and sits very well alongside the other two as a yin to their yang, if you will,” says van Paasschen.

“It’s unusual to have a brand that’s pulled upmarket,” he adds. “We can all think of brands that are over exposed and move downward and it’s hard to reverse that. But to have a brand be pulled upmarket almost entirely by virtue of consumer demand is a remarkable thing.”

W’s new sibling brands, St. Regis and The Luxury Collection, under Brand Manager Paul James have developed sharply defined personalities as well.

Having three luxury brands gives Starwood a collective strength to accommodate this new client, says van Paasschen. “Each clearly defines a luxury experience and yet all three of them are quite distinct from each other,” he adds.

The St. Regis brand is based on the flagship St. Regis, New York, founded by John Jacob Astor and carries vestiges of that 100-year-old hotel’s fine traditions, even if a hotel is a new-build. For example, The Bar at The St. Regis Bal Harbour Resort in Florida has artwork that pays homage to the iconic mural at the King Cole Bar in New York. Butler service is a trademark of the brand as well.

The Luxury Collection, comprising in part iconic hotels that have long defined luxury, particularly in Europe, has a broader scope and tends to skew leisure.

W, again, is still very much all about what’s new and what’s next; fired by the passion of its place of origin, New York City, which is alive and humming 24/7. It’s in an “accessible luxury sphere” and has tremendous deign energy.

These three luxury brands position Starwood well for the flood of guests fueled by the emerging wealthy traveler and the jetsetting business traveler venturing into the developing markets.

The Gritti Palace, which just reopened in Venice after a major renovation, is part of The Luxury Collection.

“It’s not the western businessman needing to go to Doha,” says James, the brand manager for St. Regis, The Luxury Collection and now W. “It’s actually everybody that needs to go to Doha and that becomes a new prospect for us.”

Another paradigm shift: The ultra-affluent are hyper-connected to each other, even if they’re geographically a world away.

“They’ve all gone to the same business schools and they share the same networks,” says James. “There’s a brilliant quote from a guy in Greenwich who said, ‘I feel I’ve got more in common with my friend who runs a bank in Nigeria than the guy who shares my trash collection service down the street.’ Here is a really global group of people for whom country barriers don’t matter anymore. We’ve seen a similar mindset coming out of China, India and other parts of the world.”

Having such a diverse clientele could be a challenge when it comes to accommodating every affluent taste. But van Paasschen and his team have put a ratings and reviews process in place that allows them to get tremendous amounts of feedback from guests in real time. Upon completing a stay, guests are invited to post on the homepage of the hotel’s website, what they thought of their stay and rate the experience.

W Guangzhou in China’s new Pearl River New Town district varies wildly from the Ws that launched the brand.

This customer data is then taken and paired with customer satisfaction data and other metrics that measure the hotel’s market share and profitability, creating a toolkit for its general managers, enabling them to make decisions that could bring significant share to their hotel.

Using Customer Opinion

The very idea of having access to a vast amount of customer feedback also enables Starwood to go to its hotel owners with specific issues that need to be addressed. “Being able to do that in a quantitative real-time way is extraordinarily powerful,” says van Paasschen. “We don’t own most of our hotels that we operate. To be able to go to an owner and say, here is what our guests are saying, we have a noise issue on these four floors or maybe we need more bandwidth—this isn’t a matter of Frits walking in and because he didn’t like the color, you have to repaint it and you have to pay for it. Rather, here it is something that if we can solve it, gets us better room rate and better business, and more importantly for us, happier guests that will come back."

It’s that guest focus that van Paasschen is especially keen on.

The St. Regis Saadiyat Island Resort Abu Dhabi is one of the brand’s newest offerings.

“In many respects, service is a monologue, hospitality is a dialogue, personalized luxury hospitality is a conversation,” says van Paasschen.

“The next best thing to being right 100 percent of the time is knowing when you are wrong and making up for it and acknowledging that you didn’t get something quite right. That’s where the idea of a conversation, in the modern hyper-connected context, means to have all kinds of ways to have information going back and forth. For us, that’s another advantage that the system provides. Because being able to do that across all our hotels means we have this remarkable data set.”

Technology provides other challenges, and opportunities. The consumer’s access to social networking channels to voice their opinions over a hotel experience, even while they’re still on property, also demands that Starwood, and other luxury companies, respond to customer issues in real time. As a result, it’s engaged its call centers in Washington to manage the social media process. “That provides us with challenges because you have to work more quickly. But it allows the broader reach of Starwood hotels to give that additional recognition,” he adds. 

There is also tremendous potential in how technology can be used to better serve people and how to anticipate their needs while still providing the personal touch, says van Paasschen, who sees big opportunities along those lines as it relates to Starwood’s loyalty program, Starwood Preferred Guest (SPG), which provides rewards and recognition for frequent stays. “If we were running our business in the most efficient way possible, we could begin to think about individuals and how much business they represent to us and treat them accordingly. If we got them to be even more loyal to us, how much more incremental business is out there?” points out van Paasschen. “We have to be great at hospitality for whoever comes in the door, but there may be people we do special things for, people who represent that incremental business. Those are the opportunities that the ‘Lens on Luxury’ helps us to pursue as we look ahead.”

Luxury travel advisors fall right into this plan. Starwood, which has long worked closely with the advisor market with its StarwoodPro program (see sidebar below), in April launched “Luxury Privileges.” This is an amenity program for top-producing consultants, who, when they log on to the StarwoodPro website, will find themselves on a landing page specifically designed for them. There will be no limit to the number of advisors who can be accepted into the program, says Chris Austin, vice president, global retail leisure & luxury sales. “It’s for as many customers who want to become strong trusted partners and drive significant share of their business to our luxury hotels,” says Austin.

Austin recently spent quality time with some Starwood executives, who are quite important to the luxury travel advisor market, at the company’s inaugural luxury General Managers Summit which pulled together 100 hoteliers from around the world. The event was held in Dubai and in Abu Dhabi in March, in conjunction with Starwood’s month-long move to Dubai, where it set up headquarters with 200 of its team members so as to immerse itself in the destination. Dubai was chosen because Starwood currently has 15 properties there (the largest concentration of Starwood hotels in a city outside of New York) and where it plans to add three new luxury hotels by 2017.

Says van Paasschen of the GM Summit: “We explored the new landscape of luxury, drawing from their day-to-day experiences and the vantage point from our global teams. Luxury today is not only thriving, but it is more global, more diverse, and more sophisticated than ever. It was fascinating and inspiring to hear about how our hotels—from Los Angeles to London and from Beijing to Bali—are working together to cater to the next generation of luxury travelers.” 

It was vital for van Paasschen to bring such a group of general managers together, because for him, it all comes back to the associates. As he goes into his sixth year of leading the company, he remains inspired by the team throughout Starwood.

“There is a type of person who loves to give other people great experiences. In many respects, our job is to make it easier for them. Seeing what our associates are doing, unasked and unprompted, to give guests those special extra experiences is one of the really energizing things about being in this business,” says van Paasschen.

Such people enable luxury hotels to set new stages upon which their guests can reinvent themselves, he adds.

“What is so great about the hotel business and about travel in general is the chance to create opportunities for people to realize their potential. And who knows how many Steve Jobs or Mozarts are out there?" says van Paasschen.