Wednesday, September 9, 2015

Paul James, Global Brand Leader, Starwood Luxury Hotels

Paul James

Paul James, Global Brand Leader of Starwood Luxury Hotels, explains why today there is no destination too obscure to build a luxury hotel.
“We’re on a bit of a global rampage at the moment,” explains Paul James, global brand leader of Starwood’s luxury hotels – W, St. Regis and Luxury Collection. “W literally just opened in Verbier for the ski season. The next W opening will be in Beijing, and then, within a month or two after that, we’ll be in Bogata in Columbia. “

“We’re looking at our first Luxury Collection hotel in the Lebanon. We’ve got a Luxury Collection opening in San Antonio, Texas. Then we’re opening in Dalian and in Hangzhou in the next four to five months.“

“For St. Regis, the big story for this year is Istanbul. The company has been there a long time so we’ve got a really good understanding of how the market works and we’ll be opening there late summer. Then the next flag I think will be in Chengdu in China. That to me kind of is a real picture of global diversity.”

Appointed Global Brand Leader in 2008 for the three Starwood brands, James has been responsible for providing the overall strategic and creative direction for all three brands by leading the development of marketing, guest experience and communications programs.

He has also witnessed the luxury hotel industry undergo a significant period of change; disrupted by the advent of the Internet, challenged by the global financial crisis and eventually resurrected by a new segment of younger, globally diverse high net worth individuals.

We spoke with Paul James about how each of his hotel brands are positioned to serve the luxury consumers of the future.

    “ You can’t really have a five-year strategic plan anymore because things change so quickly ”

For your three brands, what best describes your strategy going into the next five-odd years?

As our CEO says, you can’t really have a five-year strategic plan anymore because things change so quickly. Instead, what we’re trying to do is to distil a five-year plan into one stream of thought. So we are clear on the steps that we know that we want to take but hopefully still nimble enough to make changes as they come along.

Also, I honestly don’t think that the enormous period of change that we encountered in the last five years is something that’s going to happen again regularly. We had a moment when the world readjusted after the great downturn, where consumers developed a new normal.

Internally we came up with this idea of Generation LuXurY (with a capitalized X and Y) to convey the passing of the baton from one generation of consumers to the next. A lot of people didn’t want to believe it, but it was happening as early as 2008/2009. Around this time a different generation of luxury audience began to take control of the buying power.

We as a company sat down and took a deeper look at what it meant to be a luxury player, where we thought luxury was going to go and where it might grow. And we’ve come through the other side of that, that consumer shift, and that’s exactly where we are today.
The Imperial Suite at The St. Regis New York

So who are these Generation LuXurY consumers?

They’re global, they’re more resourceful, they’re richer, they’re much more connected and they travel like crazy. Most of them have made their own money and – because of this – they look for value in different ways than the traditional luxury guest.

W is only 15-years-old. Over 40 percent of our hotel room guests are under 40, which shifts slightly older than the people who are in the bars and restaurants. W has always had a younger audience, but even in those 15 years the 28-year-old has become a totally different beast.

Essentially it is our job is to reach out to hotel managers within each of these brands and really understand who our core customer is, from a psychographic perspective. What is happening to the business leaders, commercial leaders and social leaders that constitute our audience? How are their tastes and needs changing?

    “ Consumers are more global, more resourceful, richer. They’re much more connected ”

In terms of source markets, who are your biggest customers by nationality? Does this differ between brands?

There is a significant difference across the three brands and it has changed a lot. As a US-based company, our strength was always within the US market. So when St. Regis and Luxury Collection and W opened up internationally, in the first instance it was to a predominately American audience. Some of the classic European hotels could have 50 or 60 percent US traffic.

But what’s happened in the last few years is reflective of those consumer changes that we were talking about. Even if I look at something ‘traditional’ – for example the St. Regis New York – in 2007 the audience was 80% male and 80% American. That core audience had not changed in decades, if ever.

Whereas now, we have just completed the restoration of that hotel and about 60% of our guests are male and about 50% of them are American. Even in the most classical, traditional luxury hotel in New York, we had to make changes to our product there to reflect those changes in our audience.
    “ In 2007 at the St. Regis New York, the audience was 80% male & 80% American ”

What would be your fastest growing source market?

China is massive for us. We have had a massive upswing in Chinese business, but that’s also because we’ve also opened five hotels in China, so it depends also how you slice the data. But lately, China has appeared in the top three or four of our global feeder markets, really, for the first time ever.

The Middle East has always been a strong market for us for specific hotels, but that has really taken off over the last couple of years. Even in a relatively small country like the UAE, we are seeing enough travellers begin to register in the top six or seven key feeder markets.

The US is still the number one, probably accounting for half our audience. Though at one time it would have been closer to three quarters. The UK and Germany follow very closely behind that and then it’s a race depending on where you are in the world. And it’s not radically different across the portfolio.

It’s been a truly global story, but we do notice a shift after opening properties in markets that are new for us. St. Regis Mexico City is a great example. Almost within a year of opening we’ve started to see really high-end luxury travellers from Mexico in Aspen, in Deer Valley, in our ski resorts over the winter. Even in our hotels in Europe.

Similarly we’ve seen a 20 percent uplift in Russian travel within the twelve months of us opening the W in St. Petersburg. There’s clearly a massive shift in the way people travel around the world, but there’s also a real sense of local brand awareness that brings people to the hotels as well.

You can’t do it just on its own. You can’t open a hotel and expect that nationality to follow, but it’s a significant start. Having that flag flying in the middle of town is hard to beat.
Les Heures Bar At The Prince de Galles, Paris

And in terms of luxury destinations, is it still the traditional luxury destinations? Or is interest shifting?

It’s very traditional and changing at the same time. It’s still impossible to get into certain destinations at peak times, but what’s interesting is that we’re seeing seasonality start to disappear, or there will only a few weeks where you will have noticeably low demand.

The Gritti Palace has been really strong year-round since it opened, in part because the Chinese travel in what is considered in Europe to be ‘out of season’ – their Chinese New Year window – which traditionally has not been a busy time for those hotels.

Miami used to be a two-season city because its primary business was from the US and people went there in the winter and didn’t go there in the summer. Now, you still have that core market, but you add to it the Brazilians, the Mexicans, and the Eastern Europeans and suddenly that seasonality has just drifted away.

There is interest in new destinations but the trouble with sophisticated, educated, experienced global travellers, is that they’ve been there and done that. They need to go to what’s next. A colleague of mine talks about luxury off the grid and they I keep saying there is no grid anymore. There is nowhere off limits to where you’re likely to build a luxury hotel.

    “ What’s interesting is that we’re seeing seasonality start to disappear ”

And what about underserved markets? Where are the opportunities?

For our brands there are massive opportunities in Russia. Building and developing hotels in Russia is very difficult. It’s a tough time at the moment and I think it’s a short-term tough time. It’s definitely a place that we should be and there’s a real opportunity.

Also in the United States, demand for hotels has reached levels back pre-2007, but there really hasn’t been any development since 2008, so there are definitely opportunities. We’re massively underserved in Sub Saharan Africa and I know that’s an area we could take Luxury Collection, W, or St. Regis to the right markets and find customers there waiting for us.
W Verbier, Switzerland

    “ For our brands there are massive opportunities in Russia. Also in the United States ”

Going back to the customer, do you see three quite distinct customer groups for each of the three brands?

We work very hard to keep very a clear positioning difference between the three brands. But we do know that today, 85% of Starwood’s luxury guests hail from generations X and Y and their approach to luxury is decidedly different than their predecessors.

There are certain commonalities between the groups. Luxury as a concept is much more experience-led, more authentic, there’s a much stronger demand for sustainability. So there are some commonalities but we work to find the lens, which is unique to each brand to tell its own story. It’s less about a flag and much more about a philosophy that is targeting an individual.
So are all these consumer groups booking online?

The majority are still booking through either, or through a call centre or hotel direct. As pure math, they’re still the majority. Interestingly we have also seen an increase of bookings travel professionals and our branded web sites. It’s important that we are represented in all channels because our guests are engaging with multiple channels throughout their day to browse or book.

    “ You can reach the wealthy online. This is a massively connected and socially active audience ”

Some research suggests that you can’t reach UHNW individuals online, yet your consumer profiles sound highly connected. What is your take?

I don’t agree at all. You can reach the wealthy online. This is a massively connected and socially active audience. If you were talking about the old cliché of rich overweight Anglo-Saxon men with white hair and fat cigars, then maybe that was true. Well that is true, but that’s a very small audience. If it exists at all outside of caricature, it’s not really who’s staying at any of these hotels.

If I look at the data to support it, The Luxury Collection has more Facebook followers than any other brand in Starwood, even though we’re only 94 hotels, which is a quarter of the size of Sheraton and half the size of Westin. Essentially, people care about the content and the stories and they share, and share frequently.

Not only do we have more likes but we are shared more often than any other brand at Starwood. The speed at which our Luxury Collection Twitter account moves is staggering. That’s fascinating to me. Certainly at W, we can’t afford not to be at the leading edge of what’s going on. We need to have a ‘what’s new what’s next’ approach to technology, as our customers, they breathe WiFi.
Presidential Suite at The W Times Square, New York

  “ Luxury hospitality has always been about experience, it’s always been about the individual ”

There has been a lot of buzz around experience lately. But wasn’t luxury hospitality always about experience?

In mature markets people have moved away from -owning more stuff, so clearly ‘doing more things’ is the obvious place to go. But luxury hospitality has always been about experience, it’s always been about the individual. We’ve always been about recognizing who you are, and why you’re there and giving you the best experience that matches that particular moment.

I think our job as luxury Hoteliers is to continue to build on understanding who you are, and what you want from any particular day. The sensitivity, the classic requirements of great luxury hotel keeping are more important than ever, because we’re able to digitize that, we’re able to share that information in a different way. We’re able to make that much more seamless.

At the moment Starwood is trialing ‘smart check in’ at some of its New York properties, where you can use your smartphone by bypass the front desk and check in using your mobile. Once you have your room number you tap your phone on the door and it will open. You don’t have to stand in line, you don’t engage with another human being and you’re in and done.

That’s great, but what isn’t great is when marketers then think that everybody wants that. The client who wants that type of service knows that hotel inside out already. They are traveling four or five days on the road every week. They have already oriented themselves with the property and this service provides significant value.

But when this – potentially W – customer wants to take their wife to a Luxury Collection island resort, do you think they want to get off the boat and walk straight to their room without talking to anyone? No they don’t. They are on leisure time and their profile shifts. They want personal service and they want to know what they should do on this island.

The check in process and their engagement with the guest service team changes radically. But this is precisely where all the things we learned from their stay in New York comes into play. We know about pillow preference or which side of the bed he sleeps on, or if he prefers sparkling water or still. And we use that to enhance this experience because it’s fewer questions that we need to ask.
 Hotel Grande Bretagne lobby

Lastly, I wonder what will be the biggest challenge that you will face managing this portfolio in the coming years?

Actually, it’s about having enough people who understand that sensitivity. To understand how people behave, to match the demand for our hotels. Getting a great supply of young, enthusiastic engaged talent, staff members, associates, who are able there, to fulfil that delivery on so many continents at such a fast rate of growth.

We’re a great organization for that, because we have great career opportunities and hospitality has always been great for giving people the opportunity to grow, But the definite challenge is that as the audience grows, we need to make sure that these hotels have a pipeline of talent to keep them operating at the levels that we demand.

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