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June 10, 2013

The Global Hotelier: Strategy and Decision Making Across Cultures

By Chris Boyle

Marriott Marquis, New York City

Marriott Marquis, New York City

By Tova Syrowicz

The hotel business is becoming increasingly global—not to mention complicated, a trend very apparent at New York University’s 35th annual International Hospitality Industry Investment Conference.

For guests, the ideal hotel experience is seamless and unique: Everything comes together with ease, and the comfort of home doesn’t overshadow a sense of place. Of course, what appears effortless requires a great deal of orchestration and advanced planning, especially as the industry becomes ever-more global, and cross-border transactions, brand consistency and cultural challenges come into play.

Last week, the world’s hospitality leaders convened at the Marriott Marquis in New York’s Times Square to discuss everything from international deals and brand strategy to lifestyle hotels and operating costs. As one might expect, the relocation of Starwood’s entire senior management team from just outside New York City to China and then Dubai came up in the context of global deals and regional brand strategy. “They don’t come to dictate,” shared Simon M. Turner, Starwood’s president of global development, “they come to ask questions.”

The importance of international expansion came across loud and clear: Per Benjamin Thomas Leahy, head of lodging group investment banking for Goldman Sachs, the risk is in not doing international deals, as business and travel are global enterprises. “If you’re not looking to grow in that direction,” Leahy cautions, “then you’re going to be left behind. It’s not a question of whether you can afford to tackle the complexity, it’s whether you can afford not to.”

While Loews, a smaller, North America-based company is focused on decreasing its ownership stake from 100 percent to 25 to 50 percent and investing $200 million to contemporize its product, comparatively mammoth India-based Taj is concerned with maintaining market share at home amid the onslaught of international brands. Taj might offer 12 different price points/brands in Bangalore alone to cater to the 780 million Indians who travel domestically, but opening properties in key source markets in North America, Africa and Asia has been crucial to offering competitive loyalty programs and protecting India’s outbound market (5 million a year in the 70s, 18 million in 2012, and 50 million projected for 2022). Smart thinking, CEO Raymond Bickson; a recent study of outbound luxury Chinese travelers shows that they prefer the comfort and familiarity of a Shangri-La when they travel overseas.

Being aware of cultural nuances is as important as awareness of local laws and regulations, so having the right team on the ground is crucial. The fact that 60 percent of Indians are vegetarian, says Bickson, should affect F&B. Names are also important—“Buddha Bar” might not be the best moniker for a drinking hole in Buddha’s birthplace. Michael F. Glennie, president and COO of Fairmont Raffles Hotels International, adds that while the US and Western Europe are very transaction oriented, the Middle East, India and China are extremely relationship driven, so you have to factor in a lot of extra time for relationships in these regions, and be aware that the people and time involved amount to a real cost.

Of course, Glennie continues, you have to really think things through to avoid faux pas…like not using black in your advertising materials in China (the color of death), and being very careful in the language you use to sell a romantic getaway in the Middle East. You really need the right balance of people in your overseas teams, he advises: Locals who can translate corporate programs so that they make sense in the regions.

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In Glennie’s experience, cross-border transactions are in many ways an education as well. “There’s a big difference between being an owner-operator and a pure-play operator,” he shares. “When you’re working with an ultra high net worth individual who may have never invested in a hotel, they might not understand the market segmentation or demand drives in the same way we do. The might want to open a six-star Raffles product, for example, even if the market won’t support it. At this point, primary cities are overdeveloped, and the secondary and tertiary cities need a brand and identity that works.”

Turner takes it a step further, discussing the decision to hire a local operator. With 1,200 hotels and nine brands, each with a distinct personality, Starwood is a hefty player. Turner is careful to point out that the company is a global one that just happens to be based outside New York City. And when decisions get made, input comes from the field as well as the center. “In China,” Turner shares, “we manage exclusively. In India and Russia, it’s a mix. Whether we trust a local operator or not is a case-by-case, country-by-country, brand-by-brand decision.”

Kirk Kinsell, president of the Americas for InterContinental Hotels, which has been in China for 30 years now, says that the group draws insight from its guests, incorporating their feedback into brand strategy.

People, of course, are crucial, both on the receiving and delivering end. Turner points to Starwood’s globally mobile associates, as well as the company’s preference for moving people into a market in advance of the hotels. The group has set up a sales team in India in preparation for the growth of Starwood’s footprint on the subcontinent, and a call center in Guangzhou, so callers can connect with someone who speaks not only their language, but their specific dialect as well.

And what of the future of brand strategy? Starwood’s Turner says, “the right local partners,” Loews CEO Paul Whetsell points to the company’s new, more upscale Loews Regency brand, and InterContinental’s Kinsell speaks about a shift in focus from supply side (think room size) to demand side (the entire life cycle of the guest experience, from the very moment they book and beyond).

Investor or not, you can rest assured that even if your next luxury hotel experience—be it urban or remote, for business or leisure—appears effortless, much careful thought has gone into its conception and execution. And even if it appears that your experience simply can’t get any better, rapidly expanding brands as well as new contenders on the market, ensure that top hoteliers are kept on their toes…always innovating to up the ante and deliver an even better product in what has become a very competitive, complex global market.

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