1 CASE 7 TEACHING NOTES WESTIN IN ASIA DISTRIBUTING HOTEL ROOMS GLOBALLY Jochen Wirtz and Jeannette Ho Pheng Theng 1 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 Westins parent company, Starwood Hotels & Resorts Worldwide Inc., acquired ITT Corporation 2 , 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: 1 To highlight the importance of using global distribution channels to reach out to target customers for an international hotel. 1 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: fbawirtznus.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. 2ITT Corporation owned the Sheraton Hotels & Resorts, St. Regis Luxury Collection, Four Points Hotels and Caesars World brands of hotels and casinos.2 2 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. 3 To appreciate the growing complexity of the marketplace for an international hotel business, and the need to engage in multi-channel distribution. 4 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. Sheratons 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 bookin