Strategy

Why Company Leaders Should See the World

If all the Starwood Hotels executive team accomplished in its five-week relocation to Dubai was a single management contract with a hotel owner, it...
David McCannApril 9, 2013

When the entire senior leadership team of Starwood Hotels and Resorts Worldwide relocated to China for a month in the summer of 2011, the move was partly a nod to the country’s strategic importance to the hotel company. And it was partly an experiment.

One lesson learned: more preplanning was needed. Well before top Starwood executives operated from Dubai from March 3 through April 5 of this year, activities for the five-week period were orchestrated in detail.

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As a result, the leadership team, including CFO Vasant Prabhu, conducted almost 50 meetings with hotel owners (Starwood runs more than 95 percent of its hotels under management contracts with their owners), traveled a total of 38,000 miles to 19 countries in the nearby region, and met with 3,000 Starwood associates. Altogether about 200 company executives spent at least part of the month in Dubai. “Setting everything up in advance made it more productive,” says Prabhu. “We learned from China how to get more bang from the buck.”

Like the hotel market in China, the one in the Middle East is hot. For example, Starwood now has 14 hotels in Dubai, more than any city in the world except New York. “We want to go to places like China and the Middle East where the future of the hotel industry is being shaped,” says Prabhu. “Our headquarters is in Stamford, Conn. What’s happening in the hotel business in Stamford? Not a whole lot. All the action is elsewhere.”

But from a practical standpoint, what could be accomplished during five weeks in Dubai that would not also have been doable from home?

Lots, says Prabhu. Starwood’s relationships with hotel owners are the cement of the business. “When you do this, you have an opportunity to ‘live’ with your partners, so to speak. You meet them in contexts and frequencies you could not do sitting in Stamford. It builds a [higher] level of personal relationship and knowledge of each other.”

During the trip, the executives encountered several hotel owners who said they were thinking about converting their properties to one of Starwood’s brands, which include Westin and Sheraton. If they asked, “Why don’t you come and see it tomorrow,” Starwood could accommodate them.

“You couldn’t do that if you were in New York, of course,” says Prabhu. “And you can make decisions faster. Otherwise when people ask us to consider a hotel, we say ‘OK, we’ll connect you to the right people in the region.’ Then those people have to schedule a visit to the hotel, then come back to us with their opinion, then we schedule a meeting to talk about it. The whole thing can take a month. But in Dubai, both the local people and the corporate people who had to opine on it were all in the same place.”

Indeed, the hotel industry is not just about travel and real estate. It’s a quintessential people business. The executives got to know the local managers of their hotels, among other associates. “When we just visit a region, typically we’re there for three or four days,” Prabhu says. “You’re on a timetable: you get to the airport, go to your hotel, change, go to meetings, go out for dinner.” In terms of interacting with the associates, “it’s almost like you weren’t there at all.”

While Starwood held a board meeting during its China trip, this time the biggest single event was “Investor Day.” It was a quite strategic move, considering the depth of sovereign-wealth funding in the Middle East. Value also came from pulling investors out of their comfort zones in New York, London and the world’s other great financial centers.

It was a good opportunity to show them first-hand that global business-travel patterns are changing. “Fly Emirates Airlines into the Dubai airport, and you realize what a sea change is happening,” says Prabhu. “It’s not all Americans and Europeans on the plane. We tell our investors all the time that there’s a revolution in travel going on, but by bringing them to Dubai, they could see for themselves. It’s a ‘now I’ve seen the future and know how it works’ kind of thing.”

Starwood does plan to conduct a thorough cost-benefit analysis of the trip but isn’t expecting to discover that the trip was a bad idea. It’s expensive to send so many people so far from home for such a long time, but Prabhu says that only a fairly small portion of the cost was incremental.

There are a number of factors that make that so. Many people in attendance would have had to travel to meetings that took place in Dubai anyway; they’re not all in Stamford–and even when they are, some people come from out of town. Also, some of what was done in Dubai ordinarily would have taken place later in the year, but now there is no need. For example, Starwood executives typically go to the M idle East a couple of times a year, but now additional trips may be unnecessary.

“The ROI can’t be measured tomorrow,” says Prabhu. “But we came away from China satisfied that the ripple effects and longer-term benefits that played out there after we left were strong, in terms of the profile of our business, the number of inquiries from hotel owners, the number of deals signed and the kind of relationships we built.” And the feeling is similar about the Dubai trip.

Even so, Prabhu notes, the nature of hotel management contracts is such that it’s almost a foregone conclusion that the trip will net a profit, as such deals are often for 30 or 40 years. “If all we got was just one because we did this thing, it would pay for [the trip] many times over,” he says.

Still, a next extended international sojourn is not yet on the drawing board. “We’re taking these one at a time. This isn’t like the Olympics, where we’ve got the next location figured out years in advance. If there’s another location that looks obvious within the next couple years, we will consider it.”