Merger of Starwood Preferred Guest Hotels and Marriott Merged Starwood - Case Study Example

Starwood Рrеfеrrеd Guest Hotels Name: Institution: Starwood Рrеfеrrеd Guest Hotels Introduction Starwood Hotels and Resorts Worldwide, Inc. is an American hotel and leisure corporation that has its headquarters in Stamford, Connecticut. Considering its position as one of the world's largest hotel companies, Starwood Hotels and Resorts owns, controls, franchises and manages a variety of hotels, resorts, spas, residences, and vacation ownership properties. Starwood Hotels and Resorts operate approximately 11 owned brands in different states. In 2014, Starwood Hotels and Resorts became premium owners and managers of over 1,200 properties. It employs over 180,400 people in its diverse branches (Enz, 2010). To build a strong and valuable business, Starwood Hotels and Resorts operate a variety of brands that include luxury collection, St Regis, Meridien, Sheraton, Westin, Four Points, aloft and Element and other brands. This discourse will establish an analysis of Starwood Рrеfеrrеd Guest Hotels identifying the history, major mergers, competitive advantage and a SWOT analysis of the company to define the recommendations for future benefit. Over the years, the company has aimed at creating a concise portfolio that would become of extensive relevance to the consumers. Starwood Рrеfеrrеd Guest Hotels offers a unique selection of offers that are part of the best luxury brands in the world with increased possibility of eligibility for rewards (Enz, 2010). As the hotel, business changes and becomes more comprehensive, Starwood Рrеfеrrеd Guest Hotels intends to concentrate on the benefits that come with increased demand for luxury. Developed countries and states have a better chance of accruing more from the tourism and hotel business. As a way of attracting more consumers, the business incorporates a number of procedures and promotion offers that constitutes the richest elite benefits in the industry, including the opportunity to achieve Gold or Platinum status for life. More destinations mean more ways to attain rewards. Discussion History To acquire a complete understanding of the steps that Starwood Рrеfеrrеd Guest Hotels has taken to achieve a solid and successful brand, it is important to identify the history of the company. A number of high net worth families formed Starwood Рrеfеrrеd Guest Hotels in 1991 in Chicago. By 1994, the company had built a strong foundation by owning about 30 properties. During this period, the company was eligible for a number of interests. The company identified that the tourism sector was gaining popularity at an alarming rate and the need for business class and luxury hotels had increased. During this period, Starwood Рrеfеrrеd Guest Hotels announced an agreement with its shareholders and other businesses to acquire their Westin Hotels and Resorts. This cost the business about $1.8 billion. In 1997, the company also purchased the ITT Sheraton Corporation for about $ 14.3 billion (Ireland, Hoskisson & Hitt, 2006). With such major advancements in business, Starwood Рrеfеrrеd Guest Hotels has become one of the most successful enterprises. Once the contracts were fulfilled and the payments made, the business renamed from Starwood Lodging to Starwood Hotels and Resorts in 1998. Starwood launches Starwood Preferred Guest in 1999 to reward and recognize frequent travelers. The program makes headlines with its policy of no blackout dates and no capacity controls for both industry firsts. A major contributor to the popularity of the business was the Eighth Annual World Travel Awards that Starwood was granted in 2001 (Ireland, Hoskisson & Hitt, 2006). Similarly, the reward program designed was identified as the program of the year winning more consumers and luxury clients. Between 2006 and 2008, the company launched various brands to meet the increased demand for diverse services. In 2009, Starwood launched a partnership with global environmental non-profit organizations. The partnership created an environmental plan addressing precedent environmental issues. They included hotel initiatives to conserve water, decrease energy consumption, improve indoor environmental excellence, and reduce waste (Ireland, Hoskisson & Hitt, 2006). Since then, the company has acquired a variety of contracts and agreements that has resulted to the creation of more brands. Marriott Merged Starwood A relevant stage of the history of Starwood Рrеfеrrеd Guest Hotels is the merger with Marriott International. The merger was a momentous milestone towards creating one of the largest lodging organization and strongest reliability program in the hotel industry. Marriott International, Inc. is a global lodging business. The Company is an operator, franchisor and licensor of hotels and timeshare properties in about 90 countries and territories under over 20 product names (Olsen & Zhao, 2008). Its loyalty programs include the Ritz-Carlton Rewards and Starwood Preferred Guest. To acquire Starwood, Marriott had to outbid China's Anbang Insurance Group. Both American and European anti-trust regulators were quick to approve the sale but the Chinese government hesitated, delaying the sale by months. Through the merger, the business connected 1.1 million rooms in more than 110 countries. This constitutes about more than one out of every fifteen-hotel rooms around the international scene. Starwood associates the success of the merger with the opportunities that were present. Considering that the purpose of business is to serve the valued guests, Starwood merger with Marriott intends to create a parallel loyalty program that will involve a complicated task of integration. Advantages of the Merger The merger comes at a point when the company requires al the resources and workforce to ensure success in business. It also has a number of advantages to the consumers and Marriott Company. The purchase will offer Marriott the opportunity to control the different brands and associate companies that Starwood is an active partner. It offers them advantage with the corporate travel departments that in most cases observe for a singe giant in the market to house their employees. Considering that, Starwood is associated with travel agencies all around the globe, Marriot will be granted exclusive rights to transact on behalf of the company (Olsen & Zhao, 2008). In this case, it has the jurisdiction over the travel allowances and rewards that it offers consumers. In the recent years, the hotel industry has attempted to bridge the imbalance in costs and fees that accumulate for consumers who pay differently for travel and accommodation. Therefore, through this merger, consumer costs of travel and accommodation will reduce with the involvement of travel agencies such as Priceline and Expedia. Similarly, this acquisition provides the chain of hotels with an opportunity to offer increased choices to the consumers in terms of the location, kind of hotel and the disposable amount of money that consumers intend on spending. The merger also creates an opportunity for the chain to implement the Starwood guest loyalty program comprehensively (Olsen & Zhao, 2008). A central and strategically designed system would elevate the position of the company in the global hotel market. Consumer loyalty is one of the factors that tend to build or destroy a successful brand. In this case, the merger has the opportunity to increase consumer loyalty through revising the Marriott rewards ember rates. They will be redesigned exclusively to members who possess the lowest rates. Similarly, the Marriot applications and call centers will prove effective while reaching out to diverse consumers and clients in the international scene. Disadvantages of the Merger One major effect that the merger will cause includes that of increased costs of Marriott properties compared to the Starwood properties. Considering that Marriott consists of top-tier hotel chains, it is possible that consumers will avoid using the points based on the high costs. This proves to be a disadvantage regardless of whether the hotels operate a luxury system. In most luxury operational business, consumers are the most important element that steers success. However, the merger fails to consider that top-tier Marriott is expensive regardless of the services offered. Therefore, consumers are likely to avoid using the reward system arguing that it is just a means to an end and fails to conform to the values of the company. Initially, acquiring Starwood points of 20, 000 would allow consumers to stay in a top-tier hotel room that would alternatively cost $500 a night (Olsen & Zhao, 2008). However, for a Marriott top-tier stay for a night, it would require a consumer 75, 000 points. Another disadvantage of the merger would be to the reputation that Starwood has built in the transport and flyer system. The Marriott frequent-flyer exchange program may be weak that would eliminate any use by consumers. Without a comprehensive and inclusive flyer program, consumers are likely to prefer alternative companies that offer an applicable and beneficial system. Marriott offers a point for miles program that requires consumers to maintain an ambiguous point value to qualify for various rewards. This will prove a disadvantage for the positive transport program with collaborated agencies that Starwood has built. Another disadvantage that the merger may cause is reduced quality of consumer service. Starwood has had a successful and friendly customer program within the hotel market. They have made systematic steps to renovate their hotel chains with features like offering an app/keyless-entry combination that lets guests open their door with their phone. However, the fear that the merger may warrant a change in operations may have adverse effects for the business. Competitive Advantage Starwood Рrеfеrrеd Guest Hotels has experienced a successful competitive advantage since its conception. Among the elements that have proven to be of extensive relevance is the incorporation of technology and modernization. The developments made in such sectors have encouraged the company into investing more in marketing and advertising of their services and products. They use social media to sensitize the consumers of any developments and rewards that may be coming up (Williams, 2000). For instance, during the holiday season, the company would intend on offering promotion services and facilities to the consumers who have been loyal over the years. In this case, they use social media such as Facebook and You tube to connect to the consumers and enhance responsiveness. Once consumers feel that they are part of the organization, they are likely to respond positively to the management by engaging with the management through the various platforms. Similarly, the management of the hotel responds to requests made by consumers through allowing members to earn and exchange points for room stays, room upgrades and flights, with no blackout dates. Starwood achieves effectiveness of services through a proactive and experienced workforce that ensures services are accessible through a range of systems. The mobile application provides consumers an opportunity to view the facilities and services offered and acquire first hand information at the comfort of their homes. This proves efficient especially when calculating and planning the structure and use of Starwood points to acquire rewards (Williams, 2000). They are also able to achieve efficiency by actualizing their programs, which are a core value towards building a trustworthy brad. Once consumers identify that Starwood fulfils its promises on the rewards, they are likely to defect from using other competitive companies to satisfy their needs. Similarly, the brand has created efficiency in strengthening a solid brand that is dependable and satisfactory. With a superior global distribution, Starwood has invested in diverse brands with determined recognition that is available across different locations. Among the competitive advantages, that Starwood enjoys is that of uniquely discovered innovation. The company engages in a number of frequent guest programs at affordable and applicable costs that will not strain the performance of the business and will be appealing to the consumer. The Loyalty program of Starwood Preferred Guest (SWG) that offers consumers an opportunity to redeem for stays without blackout dates during holidays starting at just 2,000 star points. To experience SPG moments such as teeing off with favorite golf professionals, experience backstage with the band or walk the red carpet. The star points offer VIP access to sporting events, culinary experiences, concerts that may not be offered in the competitive market. Moreover, the company employs a unique system of managing the diversification of property and assets to steer innovations. This limits the company to specific vocational and ownership systems that may constrain their involvement in various activities. SWOT Analysis Strengths Starwood Рrеfеrrеd Guest Hotels enjoys a number of factors that enable success in the hotel industry. Among the strengths include, a widely recognized social media campaign and increased revenue through digital media. In an increasingly modernized society, the use of technology comes as an important aspect in business. Starwood uses this to interact with consumers actively and ensure they respond to any queries. With a digital platform is the relevance brought by a strong brand. It has created identity for the business by concentrating consumers into different umbrellas based on the desirable brand. For instance, the brand Element incorporates a uniquely colored design, construction and operational systems that create sustainability and generation of profits. Similarly, the expansion of the brand has encouraged development of about 1100 branch hotels in over 100 countries (Olsen & Zhao, 2008). Approximately nine brands of Starwood products and services can be accessed in the 100 countries. The loyalty program that is included with different conditions proves to be an accelerator to business success. Weaknesses Although Starwood has experienced a positive financial record over the years, the shifting stock prices have been an area of concern for the hotel managers. Such prices in the tourism industry have caused the business to review the costs and value of goods and services to match up with the demand. Similarly, although the company has pitched camp in about 100 countries, it is not identified as an international market. The United States forms a large part of the Starwood profits. The company has no mid-market or budget projects. Reduced spending capacity has affected the choice of hotels by consumers frequently that prevents Starwood from realizing full potential. It also fails to operate a variety of services for consumers who are not business travelers, Leisure travelers, families and honeymooners. This limits the amount of operations and eliminates the possibility of gaining from the entire market. Opportunities Considering that Starwood aims at reaching a global market, the company can invest more in the vacation market. The company has an opportunity to gain more from the exploitation of digital and print media. It may invest more on print media to increase the popularity of the portfolio in diverse countries. Making use of increased social sites and applications to provide the consumers, the opportunity of engaging with the management will prove effective while designing structures to rectify any complains and queries by the consumers. Applications such as Snapchat and Facebook may be used to deliver image and video details of the goods and services Starwood offers. The company may also increase the scope of brands that it offers by including more unique benefits to help members pursue their passions and greater (Enz, 2010). It will encourage people who do not seek leisure to use the services. During such advancements, Starwood may offer ppersonalized and relevant service before, during and after the hotel stay. It would prove effective while designing a solid brand. Threats The major thereat in business is the increasing and rising rate of minor companies in the hotel and hospitality sector. As more hospitality global companies invest in the international market, the rate of competition may increase and Starwood may fail to match such businesses (Enz, 2010). Similarly, the hospitality industry has had a constant change in operations considering the seasonal changes. In such cases, the business needs to design strategies that will ensure it maintains its position in the industry. Conclusion Starwood Hotels and Resorts Worldwide, Inc is one of the renowned businesses that offer luxury and leisure services to various consumers. It has experienced a successful history over the years and its acquisition by Marriott International was a huge step in creating success. It has maintained a competitive advantage in terms of efficiency, innovation, responsiveness to customers and quality to become a proactive and preferred business. A SWOT analysis of Starwood shows that it is able to achieve more from the internal aspects and counter the effect of the external threats. However, the business needs to design a strategy of investment to expand its scope in the international market employing a wider scale of marketing and advertisement in order to develop a recognized brand. References Enz, C. A. (2010). Hospitality strategic management: Concepts and cases. Hoboken, N.J: John Wiley & Sons. Top of Form Ireland, R. D., Hoskisson, R. E., & Hitt, M. A. (2006). Understanding business strategy: Concepts and cases. Mason, OH: Thomson Higher Education. Top of Form Olsen, M. D., & Zhao, J. (2008). Handbook of hospitality strategic management. Amsterdam: Butterworth-Heinemann. Top of Form Williams, C. (2000). Management. Cincinnati, Ohio: South-Western College Pub. Bottom of Form Bottom of Form Bottom of Form Read More