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CASE 16A
TEACHING NOTES
WESTIN IN ASIA – DISTRIBUTING HOTEL ROOMS GLOBALLY
Jochen Wirtz and Jeannette Ho Pheng Theng1
Synopsis
The three Westin hotels in Singapore, Bangkok and Manila have been enjoying high
occupancies and buoyant markets. The economic crisis that hit Asia in mid-1997
however, saw business and ICM arrivals into the three countries declined by some
15% to 25% in 1998. This resulted in a decrease in occupancy rates of
approximately 10% to 20%, and average room prices declining rapidly. To
compound things, the pre-crisis economic boom had seen a proliferation of five star
international hotels in the three cities. Travel management trends in Asia were also
undergoing rapid changes. Many of the hotels’ corporate clients were not local
companies but multi national corporations (MNCs), that were increasingly
centralizing their purchases of travel related services at overseas corporate
headquarters.
In view of the shrinking market conditions, intense competition and changing travel
management trends, the three Westin hotels in Asia have to critically reassess their
own marketing and distribution strategies. A new opportunity presented itself in late
1997, when Westin’s parent company, Starwood Hotels & Resorts Worldwide Inc.,
acquired ITT Corporation2, making it the largest Hotel and Gaming Company in the
world, with over 650 hotels in 73 countries employing more than 150,000 associates.
Uppermost in the mind of David Shackleton was the need to leverage on the size
and global marketing strength of Starwood, to develop new business for his hotels
and gain market share from the competitors.
Teaching Objectives
This case introduces students primarily to the importance of distribution and
marketing strategies, crucial elements in the success of the firm to reach out to its
target customers. The teaching objectives of the case are:
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To highlight the importance of using global distribution channels to reach out to
target customers for an international hotel.
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Copyright  2001 by the authors. The authors retain all rights. Not to be reproduced or used without
written permission from one of the authors. This case was prepared as the basis for class discussion rather than
to illustrate effective or ineffective handling of an administrative situation. Westin considered some data in the
case as confidential, which were therefore disguised.
Jochen Wirtz is Associate Professor of Marketing, NUS Business School, National University of
Singapore, 17 Law Link, Singapore 117591, E-mail: fbawirtz@nus.edu.sg. Jeannette Ho Pheng Theng is
Director of Strategy and Revenue Management at The Westin Stamford & Westin Plaza Hotels in Singapore, 2
Stamford Road, Singapore 178882. The authors greatly acknowledge the generous support in terms of time,
information and feedback provided on earlier drafts of this case by David Shackleton, Senior Vice President
Operations, and Philip Ho, Vice President Marketing for Starwood Asia Pacific.
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ITT Corporation owned the Sheraton Hotels & Resorts, St. Regis Luxury Collection, Four Points Hotels and
Caesars World brands of hotels and casinos.
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To understand the changing nature of the decision maker in a hotel service
purchase decision, and the need to realign distribution strategies to keep pace.
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To appreciate the growing complexity of the marketplace for an international
hotel business, and the need to engage in multi-channel distribution.
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To heighten the importance of relationship marketing, where it is crucial for a
business to develop and maintain ongoing ties with internal intermediaries,
external intermediaries and customers.
Discussion Questions
1. Apart from the preferential rates and good service, what other strategies
can Starwood hotels employ to encourage selection and loyalty from corporate
travel managers and event planners?
Before Sheraton and Westin merged in end 1997, both hotel chains had their own
incentive programmes for the intermediaries. Sheraton’s CHOICE was targeted at
corporate secretaries and rewarded them for bookings made. Similarly, Westin had
Westin Connection, targeted at travel agents, who booked using GDSs. Event
planners were also wooed with membership in Golden Gavel (Westin) and Miles for
Meetings (Sheraton). These programmes had one thing in common, they rewarded
those who booked with the hotel chain, to encourage loyalty, increase switching
costs and to engage in relationship marketing with these intermediaries. Hotel
familiarisation tours were also part of the gambit to allow the intermediaries to
experience the hotels first hand and get them to ‘buy into’ the product. The Westin
Stamford & Plaza has also formed Strategic Partnerships with several key travel
agents, conference organisers and corporate accounts. The hotel guaranteed
extremely favourable hotel rates for their strategic partners, and the partners saw
Westin as being the first hotel of choice for any of their bookings.
2. Even after corporate travel managers have selected and negotiated with
individual hotel chains, the individual corporate traveler can still choose
among the various chains listed in his company’s directory. How can Westin
and the other Starwood brands differentiate themselves from the others and
make themselves the top choice of the corporate traveler?
It is clear that despite the trend towards centralised buying of travel services, hotels
still need to build and nurture long term relationships with the individual business
travelers. To build and maintain hotel guest loyalty, Starwood launched the
Starwood Preferred Guest Program in February 1999 – a guest loyalty programme
that rewards members with points, when they stay at any Starwood hotel. These
points can be redeemed for free hotel stays, hotel discounts, free gift certificates
from retail and specialty stores, vacation packages, and instant awards. To make the
program more outstanding against competitor programs, Starwood and its 23 airline
partners allow guests to convert the accumulated hotel points for airline miles at a
1:1 conversion rate, unmatched by any other hotel’s loyalty program (See Exhibit 1).
Other benefits that are provided by Westin’s loyalty programmes include perks such
as a daily newspaper, personalized and fast check in, late check out, room
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upgrades, and guaranteed room availability. The precise benefits depend on the
loyalty program membership level obtained by a guest.
3. In the long term, would it be more effective for the three Westin hotels in
Asia to focus their distribution strategy on intermediaries (travel agent or
corporate travel managers), or should they employ multi-channel distribution
strategies?
There are several reasons why it would be more effective for the three Westin hotels
in Asia to employ multi-channel distributions:
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The hotels would like to have a more diversified geographic customer base
and each geographic market is likely to require different modes of
distribution. Asians are still keen on direct bookings with the hotel, and
Asian retail travel agents also preferred to correspond directly with the hotel
via faxes. The Western markets however, were more technology savvy and
preferred to engage in electronic commerce such as the use of Internet and
GDSs.
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The hotels were also marketing a wide range of service products. Different
service products are best suited for different modes of distribution.
Discounts for advance purchases, for example, are best administered using
the CROs and GDSs, as these systems enabled a hotel to set up and
impose booking restrictions automatically. It would be too cumbersome for
a sales person to calculate whether a booking meets the 21 days advance
requirement, or to remember to cancel the booking if a deposit is not made
by a certain deadline. However, high value added packages, like golf
vacations or corporate packages with lots of value added services, are best
distributed directly to the customer, either through the Internet or via direct
mails, as they require more visual presentations to convince the customer to
trade up.
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The hotels also cater to numerous market segments. Those who are on
business trips would either book through their travel management
companies, corporate secretaries, use the Internet or call the toll-free
reservation numbers. Leisure travelers on the other hand are likely to buy
hotel accommodation via retail travel agents. Group business is again
different and can come in from the GSOs, be cross-sold by a sister property
or through event planners.
4. What are the key challenges facing the three hotels in their move to
leverage on Starwood’s marketing and distribution programs?
The key challenges are likely to be:
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Paradigm shifts for the sales team, as they need to break away from the
mentality of servicing local contacts, to leveraging Starwood programmes to
bring in global business.
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Extensive training and communication would have to take place in order for
the sales and marketing team to fully comprehend and be able to take full
advantage of Starwood’s global marketing programs.
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Another paradigm shift would be required for the sales teams to embrace
fully the idea of cooperation between hotel brands. It would be some time
before the Westin Stamford & Plaza and the Sheraton Towers Singapore
were able to really view themselves as sister brands with little or no
competitive feelings. After all, all hotels have their own P&L to worry about.
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Pricing integrity would become an issue as flexibility needs to be given to
global sales managers to negotiate deals. With so many sales managers
worldwide contracting for the properties, it would be a challenge to maintain
a proper price structure through all the market segments.
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Exhibit 1: Comparison of Frequent Flyer Conversion Ratios across Hotel Loyalty Programmes
Starwood Preferred
Hilton Honors
Hyatt Gold Passport Marriot Rewards
Guest
Frequent
Flyer 1 point =1 airline mile
10,000 points = 1,500 3 points = 1 airline 10,000 points = 2,000
conversion ratio (for
airline miles
mile
miles
most airlines)
20,000 points = 3,500
20,000 points = 5,000
airline miles
miles
50,000 points =
30,000 points =
10,000 airline miles
10,000 miles