Starwood Hotels and Resorts Essay Example
Essentially, there have been ranging changes in the hospitality industry in which Starwood Hotels and Resorts exist. With changing economic and social contexts and globalization, the hotel industry has been affected both positively and negatively. However, the internal structures and strengths of the businesses have been critical to the enterprises’ capacity to withstand economic and social shocks. Starwood Hotels and Resorts is an international hotel enterprise based in America. The hotel comprises of hotel and leisure services whose headquarters are located in Stamford Connecticut. Indeed, Starwood is perhaps one of the biggest global-based hotel companies. As a matter of fact, Starwood owns and operates numerous franchises, hotels, spas, as well as vacation ownership chattels within its nine owned brands. By the end of 2012, Starwood owned about 1,162 properties with more than 171,000 employees of whom, 26% were based in the US. Its extensive scope enables the company to be an outstanding performer in the hospitality industry relative to its competitors (Packaged Facts, 2013).
Due to the rapidly growing tourist and travel industry, which makes a significant number of the hotel clients, hospitality industry has been a very competitive industry worldwide. However, the performance of the industrial players has been varying significantly due to the changes in internal frameworks of different countries, particularly due to the factors that affect the flow of tourists around the globe. However, Starwood has been able to cope with numerous downturns in both economic and social changes of its prospective clients due to the diverse feature of the business. In analyzing the Starwood Hotels and Resorts Industry, this paper uses a number of parameters including Porters’ five forces model of analysis. In this regard, the hotel and hospitality industry has had numerous operational facets. The hotel has also integrated its operations into capturing the growing market for luxuries around the world (Packaged Facts, 2013).
The Starwood Hotels and Resorts Corporation is located in the hotel and hospitality industry, which comprises of both services and product providers. The industry is made up of hotels and motels with SIC code 7011. Other players in the same industry include Carnival Hotel, Castello di Casole-A Timbers Resort and Casole d’Elsa of Italy. The industry offers a wide range of foods (products), as well as services, such as accommodation and fitness services (Yuksel, 2008).
The hospitality industry in which the company operates is highly extensive with multi-players in all environments worldwide. In this industry, Starwood is quite advantaged in the sense that it poses a competitive advantage by virtue of business operations. For instance, the recent encounter of the company involved the establishment of five novel and distinct options to provide essential service during luxury vacations. This experience in particular is distinct, and no other chain of hotel can offer such. This creates a powerful competitive advantage over its competitors. The industry also comprises of major players, as well as minor players. Indeed, Starwood manages both sizes of hotels worldwide. Of late, the company has sought to manage the three historic Haciendas hotel enterprises besides converting Campeche Enterprises into small luxury hotels (Yaverbaum, 2004).
Indeed, the hospitality industry comprises of numerous players with varying business capacity in terms of quality and capacity. Over the years, the industry has witnessed numerous changes with respect to customer flow. In particular, in the 1980s, the industry witnessed a wide range of changes through mergers and acquisitions activities for both hotels and non-hotel corporations. However, although these changes came to pass, most hotels are reorganizing now selling specific brands with a view to recovering their initial business. This has been a critical trend in the industry. Similarly, the industry has also shifted its attention towards the paperless inventory system through improved scanning equipments among other technological interventions. In this regard, many business functions, such as ordering, payment and delivery, are executed through software that is prompted by information provided by scanning machine with a high level of automation. This development has been a major improvement in the whole process while at the same time has acted as a major source of competitive advantage besides providing sufficient capital for expansion (Finney, 2008).
Additionally, Real Estate Investment Trusts (REIT’s) have been created, which has also allowed small and medium-sized investors to take part in both mortgages and equities. As a matter of fact, Starwood being one of the major players has also engaged thorough product segmentation. In this regard, both first class and luxury hotels have also created a pool of amenities, as well as products for its clients. While at it, both budget and economy hotels have, on the other hand, reduced their services with a view to containing the prices, which could have otherwise escalated to high levels at the expense of prospective clients. In this regard, Starwood remains one of the most super-potential hotels and resort centers for both local and international clients. Furthermore, there have also been the emergences of specialized extended stay hotels, as well as suite hotels, which have increased popularity gradually. Indeed, hotels that are equipped with indoor water parks have also been one of the latest advancement in the hotel and hospitality industry, in which Starwood has invested (Gray & Liguori, 2003).
In addition, there have been timeshares, which most hotel corporations have also invested heavily in. In particular, the development, management and subsequent sales of the timeshares have also increased gradually in the contemporary facets of the industry, particularly with the large chains. Similarly, franchising also continues to spur greater scope of the hotel industry by virtue of extended activities worldwide. Starwood is also a major player undertaking its business activities among other means through franchising. Furthermore, there have been issues of audit, which has also covered a wide hotel and hospitality segment over the years. Besides other matters affecting the industry including but not limiting to cost segregation, which has an additional impact on other industries, the hotel corporations have also executed activities such as donation of used beddings following an upgrade of their equipments; manipulating trusts with a view to deferring incomes, delays with respect to the final days of the receipts of the years, as well as condominium conversions among others (Hales, 2011). A collection of these activities has been used in manipulating the public images of the hotel corporations with a view to creating an outstanding image on the consumer fronts.
Furthermore, there have been advancements in the room booking and reservation mechanisms. For instance, in the past, customers would use toll-free contacts to establish room booking and reservations transaction. However, recent advances in technology have been an essential source of competitive advantage where about 50% of the total number of rooms booked have been reserved via the Internet. This process has helped the companies that have incorporated this technology, such as Starwood and a significant proportion of revenue, which could have otherwise been subject to increasing the costs of operation (Yaverbaum, 2004).
Similarly, change in the global health concerns have also led to immense shift in the demands and offers of most hotels worldwide. For instance, most hotels worldwide have decreased the total amount of space reserved for smokers, particularly in major hotel chains. Also, other premises have eliminated smoking facilities completely with a view to enhancing the social and legal compliance with the health demands of its clients. However, these advances have had both positive and negative effects on the aggregate market of the corporations by virtue of the number of smokers and non-smokers, which make up the client base. This development was first grossly implemented in 2006. Furthermore, the industry has also witnessed numerous changes via the integration of luxury products. For instance, luxury mattresses have been a critical element of the addition of luxury products into end-products of the industry (Klidas, 2000).
Other products include complimentary breakfast, high quality TV, room suites, WiFi connection, as well as high speed internet accessibility. Furthermore, in 2006, most hotels also undertook an extensive plan to re-image themselves on lobbies towards their destinations of interest. For instance, some parts of their lobby could be used for breakfast segment in morning hours while, in the evening and nighttime, the same may be used as a bar. These moves also entail other places and products, such as sliding walls, music, as well as decorative lightings. The main reason behind this advancement in the industry was to maximize income generated per square foot of the physical ground assets of the hotels in the industry. These activities among others mark the dynamisms that have been visible in the hotel and hospitality industry over the years (Yuksel, 2008). Essentially, the industry is expected to grow over the next five years as investors continue to invest in boutique hotels and the emergence of specialty hotels, particularly in the emerging economies.
Industry Environmental Analysis
Threats of New Entrants
Due to the expanding hospitality sector, the industry has continued to experience rejuvenated forces from various epicenters. In particular, there have been an increased number of investors with deep interest in the sector. As a result, the Starwood Corporation has been keen to set up higher standards that would imply high competitive advantage to outwit the ranging competition from new entrants. For instance, as mentioned earlier, Starwood has signed its prospect to establish five novel and distinct options to provide essential services during luxury vacations. This puts the company in a position to offer a combined product and service that its competitors do not. Essentially, Starwood industry possesses a huge capital outlay and operates with large economies of scale within the industry. In this regard, economies of scale enable the company to lower its production and supply costs of various hotel products and services to its consumers below the level its competitors do. In this regard, the attempts by new competitors to enter the hotel market are blown away due to their relatively high production cost, which is the result of low economies of scale compared to Starwood. In this regard, the hotel’s economies of scale are perhaps one of its main strengths within its highly competitive industry (Mathur, 2012).
Economies of Scale
Additionally, Starwood has an extensive distribution network, which is pivotal in scaring away its prospective competitors. In the contemporary business front, the company has projected that it will extend its provision in Canada to about 70 hotels in about one year period. Among the upcoming hotel chains belonging to Starwood include Four Points Surrey, Four Points Regina and the Element Vancouver Metrotown among others. Indeed, the company has been witnessing an extensive growth over the years, which includes a huge growth in 2013 involving the grand opening of Four Points Edmonton International Airport center, as well as the Element Vaughan Southwest. According to Starwood’s global development president, Simon Turner, the company’s demand for advancement to both tertiary and secondary markets in Canada and beyond has been rising considerably. This growth is a major strength to the company that helps it keep off most prospective competitors while taking a huge market. Furthermore, the company business outlay also scares away prospective entrants who could perhaps form a competition base for the company. In addition, the company boasts of globally recognized and attractive brands, as well as the ability to tap across its strong distribution network and loyalty program (Gemkow, 2010).
In recent accounts, Starwood has also opened The Aloft Hotel in the western Canada after opening Four Points Waterloo-Kitchener Hotel and Suites. In a simultaneous advancement, the company’s Aloft Hotels in Canada have grown to approximately 30 hotels within the Canadian market. Indeed, the company also possesses an extensive property outlay comprising of approximately 1,200 properties in about 100 countries as a fully integrated proprietor, franchisor, as well as operator of resorts, residences and hotels with renowned international brands, such as the luxury collection with Le Meridien and St. Regis among others. From the analysis, the Starwood company, therefore, possesses an extensive capital outlay with a wide range of market dominance. Consequently, this strength puts off numerous prospective competitors who could otherwise enter the market and stir up competition. Therefore, any entrants are scared off by the protruding size of capital outlay, as well as the extensive market outlay (Yaverbaum, 2004).
Starwood Hotels and Resorts has a wide product outlay across the globe. Indeed, the company is a major player in the international luxury hotel business, timeshare and resort market. Indeed, the company owns a significant share of real estate. Besides, the hotel also boasts a robust pipeline of vacation tenure inventory and residential projects. In particular, Starwood has been on the move to convert at least four floors within St. Regis hotel located in New York into several fractional units, as well as residence in addition to having partially demolished Sheraton at Cancun, Mexico, where it seeks to develop a timeshare and expects it to comprise of about 73 units at completion of its initial phase (Brotherton, 2003).
Besides, the company has also been working towards enhancing stronger business partnership in developing similar conversions within its extensive outlay of managed hotels worldwide. This would imply a new opportunity on a global scale. In this regard, Starwood has extensive product differentiation on the upfront with a wide capital outlay that smoothen out the path to new innovative ventures and, therefore, a competitive advantage over its competitors within the industry. Indeed, the company also possesses one of the leading loyalty programs in the entire industry commonly known as the Starwood Preferred Guest (SPG), which allows its members to earn and subsequently redeem points regarding stays in rooms, rooms’ upgrades, as well as flights. The latter services are free from blackout dates. It is also the mastermind of vacation interval ownership resort through its Starwood Vacation Ownership, Inc. (Brotherton, 2003).
Starwood Hotels and Resorts has an extensive capital outlay over a long stretch of business activities. As of the 2004 full year report, Starwood reaped turnover worth $5.98 billion. In particular, its joint venture and leased hotels contributed about $3.5 billion dollars while the vacation ownership and its residential businesses contributed a total share of approximately $889 million. In total, the company reaped a total profit worth $422 million. In consistence with the above data, Starwood profit has shown an upward trend over the years with an explicitly positive growth. Due to its huge financial outlay, the company is capable of rapid expansion into new and upcoming markets, such as Canada, with widely differentiated products and services (Brotherton, 2003).
Starwood Hotels and Resorts is located in an industry with a market potential for condominiums. Indeed, the majority of the industry’s investors have been seeking prospective enterprises with a high rate of return on investments. As a matter of fact, the hotel through its long chain of franchise often targets the elite categories of customers. Besides, the hotel franchises also seek to divest their capitals within the condominium, which could sometimes result in losses as pertains to their business partners’ operations in addition to their businesses. In this regard, Starwood customers enjoy relatively high value services attached to relatively low costs compared to its competitors in terms of strategic marketing prospects, particularly for the luxury products and services. As a result, the customers have extremely high switching costs of shifting from the use of Starwood products to other providers’ products (Yaverbaum, 2004).
In the contemporary market frameworks, Starwood Hotels and Resorts has been planning to enter the upcoming hotel and motel industry of the Asian markets with its highly reputed luxury rooms for middle and high income customers. Besides, Starwood falls at a risk of losing its business if it does not constructively cater for the condominium markets while at the same time allowing its competitor, Hilton Hotel, to enter the market with relatively low prices as a strategic market entry mechanism. The main reason for the overriding trend in the hotel industry, where players turn towards providing cheap accommodation facilities and services in their particular lines, has been critical to the development of a concrete plan for migration towards the emerging markets by Starwood Hotels and Resorts. Indeed, there have been relatively low impeding barriers of entry in such markets, which often requires just capital and human resource (Yaverbaum, 2004).
In this regard, Starwood Hotel is renowned with abundant capital thus enabling its penetration into the market offering the products and services to the group. During its entry into the Indian market within the Asian wider market, the hotel can capitalize in major restaurant services since such a trend is far missing in the context of the Asian market. Besides, Starwood has very low switching costs for buyers. Consequently, this phenomenon leaves the burden of maintaining and retaining clients entirely to Starwood, through its extensive experience and service delivery (Yaverbaum, 2004).
Besides, Starwood Hotel comprises of an edge in which they possess a centralized management system and reservation. However, if the company enters a new market with old marketing techniques, other systems of management may create significant issues within the Asian market. Indeed, the Asian market is quite different from other foreign markets the hotel has had penetrated earlier, for example, the American market. Consequently, Starwood therefore requires creating a sustainable change within the context of its management, as well as marketing styles in order to capture a wider market within the consumer base in the Asian market. Indeed, for Starwood to effectively capture the market, it must engage in local supplies a factor that will enhance its prospects of competition with other pre-existing local hotels in the Asian market. In the event that Starwood does not change its business style, it risks facing supplementary supplier costs, a factor that would put its prices on an upward pressure. In this regard, the suppliers would play a significant role in the business success of Starwood Hotels and Resorts since its ability to provide extensive and high quality products makes it very costly for Starwood to change supplies in the long-run thus, high switching costs (Yaverbaum, 2004). With time, the delivery of the hotel’s products will also be a function of suppliers since delays may subject the entire company’s service facing a slowdown.
Access to Distribution Channel
In order to succeed in the business, any firm must establish a well networked distribution channel, which will allow free flow of both products and services. Starwood Hotels and Resorts comprises of a diverse distribution channel. Essentially, Starwood has approximately 1,200 hotels and resorts spread out to over 100 countries worldwide. Indeed, the business distribution channel comprises of about nine world class brands. Consequently, the hotel remains one of the most visionary leaders within the prospects of the global hospitality industry. The company is committed to setting the pace of innovation, signatory services, sturdy traveler loyalty and lifestyle-focused designs. As a result, the enterprise continues to show high rewarding hotel experience. Combining the latter attributes with intimate team support, as well as dynamic sales within changing distribution systems, promotes the overall success of the business. Besides, Starwood believes in success arising from working with the right partners, right properties and places in expanding its portfolio to all destinations as appertains to their guests’ needs to travel (Yuksel, 2008).
Cost Disadvantages Independent of Scale
Starwood business has been engaging in widespread hotel and resort services with high serviced luxuries. In particular, the goods and services traded within the context of Starwood are distinct luxuries with multiple elements of quality and substance. As a result, the company has been able to secure an exclusive market for its hotel products with a view dominating the hospitality industry. The company also has to expand its scope to the emerging market, such as India, with a special focus on the big restaurant and high class products and services. This line of operation could be very important in developing a conscious market for its products while at the same time creating a constant customer flow in the context of hotel and resort services. Despite high scale of operations, Starwood also comprises of reputable brands that are highly acceptable by its elite customers across its supply chain. Consequently, this implies that low costs of operation accrue to the reduced costs of advertisements and promotions relative to the costs incurred by other competing big corporations in the hospitality industry. Eventually, this enables the company to extend its scope in capital extension investments in the established markets, as well as other emerging markets. The latter acts as a favorable competitive advantage over its competitors while at times may bar other entrants into the hotel and resort business (Green, 2007).
Starwood Hotels and Resorts centre is an international hotel chain working in many countries. Essentially, the hotel business operates in different countries. As a result, the company is, therefore, influenced by a cross-section of legal formalities since different countries have different legal provisions as appertains to the hospitality industry. For instance, Starwood recently established a merger with the American Airlines with a view to expanding their distribution network. In this regard, this further intensified the company’s government interactions through taxation policy abound with the Airline operation. Over the same, the hotel created a possible navigation to virtually all destinations across the world and particularly US and Caribbean destinations. This increased the company’s susceptibility to inter-state taxation policy.
The sample prices levied by the hotel company are mainly based on the prospects of double occupancy with respect to accommodation and also include government fees and taxes in the airline-packaged segment. However, despite the impeding government taxations, the customer base within the proximity of airlines is very highly characterized with limited seats. For instance, due to varying government influence through levies, the price of the hotel products and services may be subject to variability with respect to the origin city, as well as departure dates while on flights. Furthermore, the government influence is critical to the flight based operations. For instance, baggage fees are also attached to other costs of the operations, which aggregately influence the overall profitability of the organization. The company was established under a legal framework of the United States. Consequently, the company is mainly subject to the US Federal legislations (Wee, 2007).
Other policies that are critical to the hospitality industry include the minimum wage policy in some countries. Essentially, the luxury market is based upon availability of high disposable incomes. Starwood is based on luxury products and services to both middle class and high class clients. Consequently, any policy that would constraint the wage value of the individuals in both developed and developing countries also pose a strain on the company’s business operations across the globe. For instance, the US-based market has stringent regulations on the travel agency industry, which is highly intertwined with the hospitality industry. After 2010, the industry has been facing tough legislative challenges, which impacted virtually all sectors of the industry. Furthermore, legislation exists based on the ASTA’s capacity to stand for the industry, in terms of state capitals prior to the Congress among other regulatory agencies. Furthermore, the travel and hospitality industry in general faces an inexorable tidal wave of taxes, as well as additional fee proposals from various sources, such as federal, state and local, e.g. hotel occupancy tax proposal, which significant challenges the industry’s capacity to respond (Wee, 2007). Complex issues have also rocked into the business. For instance, the United States Airlines have been making futile attempts to shift the costs of credit cards to the travel agents, which would further hurt the hospitality industry in general.
Starwood Hotels and Resorts is based in a very competitive industry, which has a wide range of products and services provided at different levels. However, Starwood engages in business that is highly non-replicable, often in the luxury collection. Similarly, the company also has renowned global brands that are highly reputable compared to its competitors. In this regard, new entrants into the industry would have to engage in high valued brands and services besides developing complimentary service profile. In order to maintain significant market share amidst frequent flow of competitors, Starwood has been gradually identifying distinct opportunities in the global arena including new potential markets, such as the Indian hospitality industry (Gemkow, 2010).
However, various groups and established competitors have been relentlessly seeking to pose a retaliatory influence in the industry in order to tap the benefits of increased profitability of the industry. Starwood is perhaps one of the most innovative hospitality corporations in the world. It operates under the motto, ‘Do the Right Thing, Go the Extra Step, Play as a Team,’ which helps it maintain a sound business operation prompt. Other players attempting to enter the market focus a retaliatory mission base on the operational code above for Starwood. However, this battle is persistent and at times hard to engage since Starwood is already well established with convincing services and brands (Gemkow, 2010).
Bargaining Power of Suppliers
Suppliers in the hospitality industry basically refer to all the sources of inputs that are essential in the provision of both goods and services. Starwood being a high class hotel operates through few chains making them have high control over the industrial operations relative to their minor competitors. Similarly, there are few if any substitutes for the hotel products and services with a fragmented layout of customers. As a result, the hotels have to reduce their relative bargaining power with a view to attracting more clients. Furthermore, their chains have different tariffs and rates since they have a well established personalized brand image. The hotel chains in the context of Starwood operate resorts, which is a major customer attraction base for the hospitality industry. Essentially, a low level of substitutes in the upper class hotel business plays a significant role in maintaining a smooth performance of the business operations of Starwood Hotels and Resorts.
Bargaining Power of Buyers
The bargaining power of the buyers is critical in determining the extent to which customers can impose pressure along the margins, as well as volumes of sales in the hotel’s real business. In the context of the hotel industry, there are huge investments in fixed assets. Consequently, the investors have higher expectations to recover their respective investments very fast thus causing an upsurge in the costs of goods and services from the business operations. Indeed, business suppliers in the hotel industry act swiftly in proving essential information concerning the exact premises and the producer with a view to attracting an extensive customer layout. Similarly, the clients of the business are also highly informed. Starwood has been utilizing the customer response platform in manipulating its prices of products while at the same time providing high quality services relative to its competitors in the industry (Lohman, 2010).
In particular, the company has been setting relatively high prices for their products thus creating high margin rise in customers while at the same time focusing on low price-sensitive customer base. However, due to the changing economic situations worldwide, the consumption behaviors of most consumers worldwide have changed. Inflation has adversely influenced the consumption patterns due to the resultant low purchasing power in the local markets, as well as high purchasing power parity across the globe. For instance, hotels have been engaging in provision of discounts and other incentives aimed at reducing the buyers’ bargaining power. Indeed, large hotels such as Starwood are capable of offering significant and competitive prices to their customers due to their high endowment with extensive capital supply (Wee, 2007).
Threats of Substitute Products and Intensity of Rivalry among Competitors
Basically, Starwood has a wide range of substitutes in the hospitality arena. For instance, the company experiences an extensive threat in terms of timeshares, as well as organized staying with friends at the expense of their quality accommodations and leisure services at a cost. Consequently, substitutes of the product pose a horizontal competition on the company. Threat of substitutes therefore, arises from the availability of an alternative product with relatively low prices and perhaps better performance parameters attributed to a similar purpose as the initial product. Consequently, such products as timeshares may attract a significant proportion of the market thus reducing the potential sales volume of the initial products. Targets on the high class in the society also play a pivotal role in increasing susceptibility of Starwood products to substitutes that would eliminate the high costs of expenditure on leisure, accommodation and other hotel facilities (Gemkow, 2010).
The main company’s competitors have been engaging in aggressive competition in providing high profile brands in the industry, although Starwood has been able to stand amidst such strains. Starwood provides care, healthy environment, as well as comfort to its clients. Furthermore, the company extends its transparency and justice through the provision of freedom to its employees with a view to enabling the reporting of injustice while at the same time fostering its employees’ ethical rights and values. Like other chains, Starwood has a wide range of competitors. However, some of its main competitors include four distinct brands: Hilton, Global Hyatt Corporation, Marriott International Corporation and MGM Mirage. Indeed, all the latter have been struggling to duplicate Starwood’s products across the globe, but Starwood has remained relatively innovative in the global hospitality arena (Yuksel, 2008).
Indeed, the four brands named above have established strong brand images, as well as equity standings, a factor that has intensified competition for Starwood. Indeed, due to the high costs incurred in the undertaking extensive Hotels and Resorts chains, all the major competitors in the latter context face very high costs as an exit barrier. Consequently, Starwood has no better option but to fight extremely hard in maintaining, as well as increasing, its overall growth in the market while, at the same time, maintaining a higher brand image relative to its competitors. Internal conflicts have also influenced the performance of Starwood. For instance, Mr. Heyer, a prominent employee at Starwood, has resigned from work as a result of personal conflict with a member of the staff. At the time of his stay at Starwood, the company was realizing a progressive growth in profits. Indeed, Heyer was aware of virtually all internal working systems and could be manipulated by rival brands in beating Starwood after establishing the main strengths and weaknesses of the company. In particular, other than the services offered by Starwood Hotels and Resorts accommodations, the latter incidence, therefore, may create mayhem and increased vulnerability of Starwood to other substitutes, such as staying in the company’s owned guest houses during leisure trips at the expense of Starwood. As pointed out earlier, the clients may also opt to stay with relatives during leisure trips. Indeed, both options are financially cheap substitutes and hardly entail any switching costs on the customers. In this regard, Starwood must improve, attract and subsequently retain its clients based on its quality control of prices as in the case with its entry into the Asian market. As a result, this move would minimize the move for available substitutes, which may also tag to a number of social costs. (Yuksel, 2008).
Rate of Hospitality Industrial Growth
Various reports indicate that the hospitality industry of the US has been experiencing moderate growth with time and aligned to the US GDP rates of growth, which quantifies the measures of the whole economy. Logically, a strong economic performance also leads to a strong hotel and hospitality industry. An industrial growth rate is very essential for the management of the hospitality industry. According to the contemporary growth reports, the hotel room occupancy rates are significantly high. However, gaming revenue is expected to drop below the levels achieved in 2007. Although tourism has been performing well, the majority of people in the US and the world at large have been cutting down their gambling expenditure behavior (Gemkow, 2010).
On the other hand, money is subject to expenditure in the guest rooms, non-casino activities, as well as restaurants. However, the business within the casino may not be as strong as would be expected. Consequently, gambling will therefore be a key driver behind the growth of such destinations as Las Vegas and the Nevada state. In general, the hospitality industry has been experiencing a wide growth between 2004 and 2014. In particular, the industry is expected to increase its wages and salaries by approximately 17%. Besides, the internal wages and salaries within drinks and food services are also expected to rise by about 16% over the same period compared to the 14% growth in wage and salary jobs in all global industries in general (Gemkow, 2010).
In this regard, Starwood being a major global player in the hospitality industry should step up its innovative business procedures in promoting the overall operations within the industry amidst severe competitions from its major rivals. With the expected growth, the hospitality industry also has to constitute major operation strategies to confront negative effects of economic recessions. As mentioned earlier, high fixed costs based on asset layout have been critical to the development of the industry. Starwood has extensive capital assets, which create a state of low mobility in changing business operations through high costs of barriers to exit (Gemkow, 2010). As a result, the hotel must retain a high business profile in order to restrain its competitors from undermining its operations through extensive competition.
High Strategic Stake
The presence of high strategic stake for a company arises in an event where the company has a wide pool of forces pushing it to lose the market share. Coupled with low levels of product differentiation, high strategic stake also promotes high levels of rivalry among different players in the industry. However, with the adoption of proactive brand identification, the rivalry is highly constrained within the industry thus, promoting mutual co-existence among the industrial players. Taking stakes strategically may promote the business operations widely. For instance, both Starwood and Caesar Entertainment Corporations have their stake levels for travels through their announcements of a strategic partnership in the contemporary award-wining loyalty program commonly called the Starwood Preferred Guest (SPG) and its counterparts Caesar Entertainment’s Total Rewards, which marks a pioneer in partnership between two travel and entertainment leaders (Packaged Facts, 2013).
In this regard, both SPG and the Total Rewards enable the members to earn/redeem reward credits and star points after participating, either at Caesar Entertainment hotel or the Starwood’s. Indeed, this form of partnership has marked one of the most profitable accrual partnerships within the industry. Besides, moments with SPG also provide unique accessibility of Caesar Entertainments of the world class gastronomic outlet, shopping experience and entertainments (Packaged Facts, 2013). Consequently, this move creates a long-run competitive advantage of Starwood relative to its competitors and perhaps indicates the long-term innovative business approaches taken by Starwood through high strategic stake.
High Exit Barriers
Finally, Starwood just like any other company in the hotel industry have extremely high asset and fixed investments, as well as asset specificity, which creates a huge barrier to exit from the hotel and resort business. Similarly, its highly established distribution network acts as an impediment to exit from its specific line of business within the hotel and hospitality industry in general. Besides, Starwood Hotels and Resorts has also been subject to an international commitment through legal frameworks in the establishment of new networks and entering new potential markets in the hotel industry. Consequently, the abandonment of expensive ventures is critically hard and, therefore, forces the company to address the contemporary issue through expanding and developing sustainable competitive mechanisms in the industry. Among such measures to guarantee viable competition includes the company’s move to extend its market to emerging Indian market while, at the same time, enhancing its products and services in the older markets such as the US (Packaged Facts, 2013). Furthermore, the company has also sought to establish other competitive networks in the industry through collusion with the America Airline in providing hotel and resort services to the Airline passengers.
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