Newsletter - June 14, 2002

STARWOOD RISING

How is Starwood faring in Asia/Pacific? President Miguel Ko talks to Yeoh Siew Hoon - TravelWeeklyEast.com -  about the company’s plans in Asia as well as shares his views on globalisation and branding

Ko on globalisation, integrity and branding

In the immediate aftermath of September 11, Starwood Hotels & Resorts took a battering. Its high exposure to the American economy rendered it vulnerable to the twin effects of terrorism and the American economic meltdown.

But things are looking up. Its stock price is up and its chairman Barry Sternlicht said that while business conditions remained pretty difficult, they are “looking much better than we probably would have thought sitting here three months ago”.

In an interview with CNBC, he said Starwood’s booking pace was 12 percent ahead of last year. “In the last 60 days, we have seen a sea change in booking patterns. Both short-term transient and groups are really stepping up. And we’re increasingly optimistic about our business globally, particularly in Europe and Asia, too.”

He noted that in Bangkok, which was running in the low 80s percent occupancy, “we’re beginning to sell out nights and raise room rates”.

The company continues to be very leveraged however, said Sternlicht and when asked if he was thinking about acquisitions, he said, “It would have to be a very compelling situation because we still trade well below our net asset value.”

How is Starwood faring in Asia/Pacific? President Miguel Ko talks to Yeoh Siew Hoon about the company’s plans in Asia as well as shares his views on globalisation and branding.

Q: Your chairman, Barry Sternlicht, recently described the last year as a 1,000 year flood.

Ko: Yes, it’s been a challenging year – an economic slowdown led by the US slowdown led by the IT world collapse, and then September 11. After 9-11, there wasn’t much travel business to speak of. On top of that, the airlines ran into trouble. Everything happened all at once.

Q: Do you believe the world was ready for a correction in every way – and all these events have done that?

Ko: My personal philosophy is, new highs always create new lows; just as new lows create new highs. At 5,000 Nasdaq was ridiculously high. A correction needed to take place; but it was harder than expected.

We thought IT was the dream of the future. Yet it also led to total over-inflation.

Q: So it was greed that needed to be corrected?

Ko: Well, IT has transformed how we do business and the world is moving towards this change. A lot of the infrastructure that was overbuilt is now left behind to benefit us.

For the next 10 years, we will reap the benefits of excess capacity at a low price.

Q: This will fuel globalisation, no doubt. Do you think globalisation has become a dirty word in the light of current events?

Ko: Globalisation will just happen naturally. I don’t think there is any one human force behind it – it’s going to happen anyway.

Q: There is a school of thought that globalisation can make global companies such as Starwood vulnerable. Look at how the global name of Arthur Andersen was brought down by one scandal in one country.

Ko: Yes, it can make global companies vulnerable. That’s why you need higher standards of disciplines in doing business. If the Arthur Andersen problem had happened in a Third World country, people would have blamed the poor standards of that country. But it happened in Houston.

So one standard should apply to all. We should not treat the Asia/Pacific as the area where ‘these problems happen’. Major scandals have happened everywhere.

Q: What is that one standard?

Ko: A global company must have checks and balances, best practices transfer and set the highest levels of business ethics, wherever it operates.

Q: That can be a challenge to implement.

Ko: Yes, because it is not just systems and processes but also the mentality of people – the morality and ethics of doing business. Not even the strongest check and balance system can detect everything. The human side – dignity and moral standards – have to be upheld as well.

Speaking as a former auditor and a CPA, I am convinced that the best detection system still has weaknesses.

Q: I presume that is your mission at Starwood Asia/Pacific, to operate to the highest standards?

Ko: It’s a high priority to populate our policies in the hotels we operate. We hire accordingly and we work on how to develop the mutual trust and integrity of doing business.

Q: How would you define integrity?

Ko: You act on what is good for the business and not do anything immoral or unethical. You do what you say – deliver on your commitment.

Q: What lessons should the hotel industry take from the 1,000 year flood?

Ko: I think you learn to focus on the people side in difficult times. As a company, we did that. We emphasised guest and employee safety. In good times, you should maintain efficiencies so that in bad times, you don’t have to do things that hurt people.

The last three to four months were bad, but the industry has proven it can recover fast and that it did not panic. And if you are a well-operated and well-managed company like Starwood, you come out of it well.

Our stock price is higher now than it was before 9-11.

We have clearly emerged with a fitter corporate body.

Q: I am sure you have had to make some tough decisions, like fire some people in the past months.

Ko: My personal philosophy is, in Asia, we operate at a high level of service. That creates a higher headcount. The ideal situation is, wherever there is a customer touchpoint, we should deliver the highest, uncompromised level of service.

But in the non-guest area, we can be as efficient as in the high-cost environment of North America, for example, laundry. I believe there are opportunities for the industry to make cost efficiencies in the non-guest area.

Q: You came from a fast moving consumer goods (FCMG) background, managing Pepsi-Cola.

Ko: Yes, but I am a hotelier at heart.

Q: What lessons can the hotel industry take from FCMGs?

Ko: FCMGs work on the notion that a strong brand attracts a higher retail price. Brand equity equals pricing. FCMGs also believe that you drive value not just as real but as perceived.

Consumer goods companies drive marketing at an equal level as sales. In hotels, marketing takes a backseat to sales.

In hotels, the branded product does drive a premium price compared with a non-branded product, but it still has some work to do with branding. Starwood drives brand equity to a high level in terms of perceived value.

Q: Is the W brand your benchmark?

Ko: Yes, as well as Westin which also has a strong brand identity. St Regis is strong at a high level but has no critical mass. Sheraton and Four Points – we need to spend more time and resources on redefining these two brands.

Q: Some people say Sheraton has lost its way in Asia/Pacific after its inclusion in the Starwood family.

Ko: It had very high recognition and awareness but I think how you differentiate yourself from the other major brands in the industry is also important. We need to make it more distinctive, more cutting edge.

Sheraton is our mother brand – its family gives us 70 percent of our business. We know that Sheraton will be the easier platform for growth and we intend to grow the brand.

We are lucky in Starwood to have many good brands, while some hotel companies are still trying to find a good brand. What we have to do is maximise the most out of each brand.

Source:  TravelWeeklyEast.com

JUDGES ANNOUNCED FOR 2002 GOLD KEY AWARDS

A panel of five judges ¡V each renowned for their contributions to the hospitality industry ¡V has been announced for the 22nd annual Gold Key Awards for Excellence in Hospitality Design. Judging for the Gold Key Awards, which are presented by the International Hotel/Motel & Restaurant Show„¥ (IH/M&RS), and sponsored by Hospitality Design and Hotel & Motel Management, will be held Wednesday, July 24, 2002, at the Hotel Association of New York City (HANYC).

Judges for the Gold Key Awards are Raymond Bickson, general manager, The Mark; Wing Chao, executive vice-president, Walt Disney Imagineering; Suzanne Couture, design manager, Ian Schrager Hotels; Steven Hanson, president, BR Guest, Inc. and Colum McCartan, principal, MCCARTAN. The judges will select restaurant and lodging properties for excellence in seven design categories: Restaurants * Seating to 110; Restaurants * Seating over 110; Lobby/Reception Area; Guest Rooms; Suites; Senior Living Facility and Spa and Resort, with one of the winning designers/projects recognized as ¡§Best of Show¡¨ from among all entrants.
¡§We are pleased to have a line-up of such distinguished designers and hospitality industry professionals for this year¡¦s Gold Key Awards,¡¨ said Christian Falkenberg, show manager. ¡§The notoriety of the organizations they represent reflects of the hospitality design excellence the Gold Key Awards recognize.¨

The competition is open to all designers of hotels, motels, timeshares, restaurants, clubs, congregate and senior living facilities, cruise ships, casinos, conference centers, spas and other hospitality facilities. All entries must represent areas constructed or completed between January 1, 2001, and June 1, 2002. Entry fees are $125 for the first project submitted and $100 for subsequent projects. The entry deadline for the Gold Key Awards is July 1, 2002. Applications are available online at www.ihmrs.com, or can be requested by contacting Jennifer Ashare, event supervisor, at (914) 421-3309, or jennifer_ashare@glmshows.com.

Grand prize winners, finalists, and the Best of Show winner, will be recognized at the Gold Key Awards Breakfast Ceremony, Monday, November 11, 2002, at New York City¡¦s Waldorf=Astoria. Tickets for the Gold Key Awards Breakfast, which runs 7:30 a.m. - 10:00 a.m., are $65 per person with a portion of the proceeds donated to charity. Tickets can be purchased online at www.ihmrs.com or contact Jennifer Ashare, event supervisor, at (914) 421-3309, or jennifer_ashare@glmshows.com.

The 87th annual IH/M&RS will be held November 9-12, 2002, at New York City¡¦s Jacob K. Javits Convention Center. The Show will feature more than 1,750 hospitality industry suppliers and attract approximately 48,000 in total trade attendance. Registration information may be obtained on-line at www.ihmrs.com. For additional information, contact GLM¡¦s Customer Service Department at (914) 421-3206.
The IH/M&RS is sponsored by the New York State Hospitality & Tourism Association, the Hotel Association of New York City, and the American Hotel & Lodging Association and is managed by George Little Management, LLC (GLM). For IH/M&RS exhibitor information, contact Christian Falkenberg, show manager, at GLM, Ten Bank Street, White Plains, NY
10606-1954. Telephone (914) 421-3296. Fax (914) 948-6180. E-mail: christian_falkenberg@glmshows.com.
Show hours are 10:00 a.m. ¡V 5:00 p.m. from Saturday, November 9 through Monday, November 11, and 10:00 a.m. ¡V 3:00 p.m. on Tuesday, November 12.
 

EUROPEAN E-COMMERCE

Source:  Tourism Technology   -  We are today seeing dramatic changes in Europe: not only are most European countries going online at an unprecedented rate, but 15 countries of the European Union are phasing out their own currency and accepting a common currency (the Euro). The Euro is already legal tender between banks for company payments, and the banknotes and coins of each member country will disappear by mid-2002. The combination of these two factors is widely thought to give strong stimulation to e-commerce, and projections are for $200-220 B in European e-commerce in 2002. For a quick summary of the Euro ( ), Europe's new currency, click here.

Fuente: Electronic Commerce-Europe (in English, French, German and Italian)

For more details, click here.

MAJOR PLAYER IN DRIVE FOR BUSINESS TOURISTS TO SOUTH AFRICA

THE SA exhibition industry is set to be a catalyst in the growth of business tourism to this country, a sector acknowledged as one of the country's major revenue earners and job creators. Deon Viljoen, chairman of the Exhibition Association of Southern Africa (Exsa), says the industry needs to market itself more aggressively to the other tourism stakeholders. "Conferences and exhibitions provide our windows to the world," Viljoen says. "They are export industries that translate into foreign exchange, which in turn helps grow our tourism industry. They provide a highly economical forum to create sustainable jobs for a developing country."

Viljoen says he is passionate about exhibitions and what SA can offer both local and international exhibitors. He wants to see the exhibitions industry play an integral role in tourism. The fastest-growing component of the tourism industry is the meetings, incentives, conventions and exhibitions sector, which can play a positive role in promoting the country as a favoured destination, he says. This is reinforced by a favourable exchange rate for overseas visitors, coupled with SA's new position as a preferred safe destination, which bodes well for tourism and business travel to this country. SA is ranked 22nd among international conference destinations, with size, location and accessibility cited as key influencing factors, says Viljoen. He says the economic benefits to the country are enormous, with a contribution of R17,4bn to the economy a year, as well as the creation of about 246000 jobs.

Traditionally, Europe has been the preferred destination for major international conventions and exhibitions, with other popular destinations being Australia, South America and Asia. "But southern Africa is well placed to compete as a popular destination and even to challenge conventions that would normally be scheduled in Europe." He says Durban, Cape Town and Johannesburg co- operate on international bids for major conference events. "Our main aim is to make SA and southern Africa a convention player in the world market, and there is enough business for all of us to have a slice." Viljoen says that until now the exhibition industry, unlike the conference and special events components, has not been regarded as an integral part of the tourism industry itself. Exsa is finalising research to identify the tourism impact that exhibitions generate. Viljoen says Johannesburg is becoming the Dubai or Hong Kong of SA. "There is a great deal of cross- border trade and international tourism from neighbouring countries is growing rapidly." Exhibitions have a major role to play in this, says Viljoen Instead of flying to Europe, for example, to purchase new products, African countries are increasingly sourcing new products from Johannesburg.

Viljoen says Johannesburg has the advantage of four major conference venues: the Sandton Convention Centre, Nasrec, Gallagher Estate and The Dome. He says research indicates that 50% of all exhibitions in SA are hosted in Johannesburg. Exsa's research includes an examination of how many visitors these exhibitions bring in, including international exhibitors, and it is calculating the effect this has on accommodation take-up and the number of aircraft flights coming in, for example. Viljoen is executive director of the Sandton Convention Centre, which has recently concluded a strategic alliance with Reed Exhibitions SA for business-to- business events. Reed Exhibitions SA is a subsidiary of Reed Exhibitions UK, the world's largest exhibition organiser. The centre is launching three new exhibitions collectively with Reed as part of the deal. The centre is also developing a strong international profile by participating in important international expos that provide ideal platforms to promote the centre as a world-class venue and Johannesburg as a business tourist destination, says Viljoen. 

THE KNOWLEDGE SERIES FROM T²IMPACT: CUTTING TO THE CHASE IN TRAVEL DISTRIBUTION

What are the top 10 fallacies of multi-channel travel distribution? Which channels are worth your time and money? Which GDS has the most effective Internet strategy? And how can your own company survive – and thrive – in the new travel marketplace?

T²Impact, the travel and technology consulting group, answers these and more in the Knowledge Series, its exclusive new publications packed with critical background and actionable analysis on the fast-changing travel distribution industry. 

The company announced the series, which examine the dynamics of travel distribution and its future, at the Travel Com Expo held this week in New York. Available for order at a special prepublication price via the group's relaunched web site, t2impact.com, the series begins with three essential tools for travel distribution management:
 

Details on the Knowledge Series are available at the group's redesigned and relaunched web site, www.t2impact.com. 

Chicke Fitzgerald has held senior positions with Sabre, Worldspan and the billion-dollar Swiss telecommunications company SITA. Ms. Misunas has served as CEO for Sabre, Reed Travel Group and, most recently, Air Treks of San Francisco.

JARVIS HOTELS HAS A HARD YEAR

The  aftermath  of  the  events  of  11  September  combined  with  the  foot-and- mouth epidemic in the UK wrought predictable havoc with the results posted by Jarvis Hotels for its full year ending 30 March 2002. The company saw pre-tax profit before exceptionals plunge 41.6% to £17.0 million and turnover fall 8.2% to £162.6 million. A fall in occupancy of 3.3 percentage points to 65.5% helped push RevPAR down by 5.0% to £34.91. Despite the difficult trading conditions, Jarvis’s   Chairman   John   Jarvis   reaffirmed   the   company’s   commitment   to becoming  a  hospitality  management  services  group  and  added  that  Jarvis Hotels would offer up a portfolio of hotels for sale and leaseback once market conditions had improved. In addition, the company announced that five of its smaller hotels which no longer fit the Jarvis brand have been put up for sale, with one unnamed property having already been sold.

 Among  the  objectives  announced  by  Jarvis  Hotels  alongside  the  release  of  its full  year  results  was  a  desire  to  establish  links  with  major  international  hotel brands. True to its word, the company is now reportedly on the verge of signing a  multimillion  pound  deal  with  Cendant  Corporation  to  franchise  the  latter’s Days  Inn  and  Howard  Johnson  brands.  Any  deal  would  assist  Jarvis  with  its plans to become a hotel operator, as opposed to a hotel owner, and would be one  way  for  Cendant  to  extend  its  UK  presence.  

Jarvis is no stranger to the franchise  business.  An  agreement  signed  with  
Marriott  International  in  June2001  subsequently  enabled  Jarvis  to  rebrand  56 
of  its  67  UK  hotels  with  the Ramada brand. Jarvis followed up this move in 
December when it signed a deal with  Compass  Group  to  become  the  first  
franchisee  of  the  Travelodge  brand.Jarvis began operating a 98-room 
Travelodge hotel at Glasgow Airport in April.

AFGHAN TOURISM LIMPS BACK TO LIFE