Q&A: World Traveler
President and CEO Frits van Paasschen is building Starwood’s brands on a global scale.
Andrew French
The March opening of the Sheraton Qiandao Lake Resort on one of China’s most pristine lakes marked Starwood Hotels & Resorts Worldwide Inc.’s (HOT) 1,000th hotel. By year-end 80 more properties will debut under its nine brands: Aloft, Element, Four Points, Le Meridien, Sheraton, St. Regis, The Luxury Collection, W and Westin. Roughly 80 percent will be outside the U.S., many in emerging markets. Steering the expansion of the $11.5 billion hotel operating company is President and CEO Frits van Paasschen, 49, who joined Starwood in 2007 after serving as president and CEO of Molson Coors Brewing Co.’s (TAP) Coors Brewing Co. for two years and in several global executive positions at Nike Inc. (NKE) from 1998 to 2005.
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How important are developing markets to Starwood’s long-term strategy?
The emergence of a middle class in China and India is as fundamental to changing the world as the Industrial Revolution was. We have 54 hotels in China today and another 60 being built. We’re creating a connection with Starwood. I was in India recently and met 400 associates of Accenture PLC (ACN) who are working for Starwood as part of our IT outsourcing efforts. These individuals represent a new middle class — people with salaries, aspirations, the desire to do and see more.
BIO FACTS
- Age: 49
- CEO since: 2007
- Education: BA in economics from Amherst College; MBA from Harvard Business School
- Previous affiliation: President and CEO of the Coors Brewing Co. division of Molson Coors Brewing Co.
Should a stay at a Sheraton in Chongqing, China, feel like a Sheraton in Chicago?
The trick to having a soul as a global brand is being just different enough so guests don’t feel like they’ve just sat on a plane for 12 hours and haven’t gone somewhere. You want to feel like you’re somewhere new but at the same time feel like you’re in a Sheraton — that you’ll have a Sweet Sleeper Bed in your room, that there will be a Link@Sheraton Internet lounge in the lobby. That said, when we opened one of our newest brands, Aloft, in China, we adapted some aspects of service because of regional guest expectations — a restaurant, a dining room and room service — that we don’t offer at Aloft and other select-service hotels in North America.
As companies become more global, there’s no substitute for human interaction.
What’s the biggest management challenge in running a global company?
Cultural sensitivity and literacy are parts of a mindset that we’re continuing to develop. When people come to me and say something’s not working “over there,” I first ask if they’ve been there yet. Have they sat and listened and looked at the situation? I’ve been to more than 300 of our hotels in more than 40 countries. As companies become more global, there’s no substitute for human interaction.
Starwood is moving away from owning its hotels to managing and franchising. Why?
I believe that large organizations can be world-class in only a few things. Being a global operator of lifestyle hospitality brands is what we want to be better at than anyone else in the world. Owning real estate and managing assets are a separate set of skills. From a financial perspective, the transformation to an asset-light model means you have a business that has great long-term growth without high capital needs and nowhere near the volatility of the owned real estate business.
Will we see the return of prerecession room rates?
Rates will come back strongly. You have to remember how far down the industry was. Prior to the downturn, many hotels hadn’t even reached the financial performance that they had before 9/11. In addition, very few hotels are being built in North America today. The secret to branding is to get people into that “I gotta have it” mode. The trials we’re generating through lower rates are a great way to get people to have a new experience with one of our brands and maybe step up over time.
What motivates you as CEO?
I ran the Pikes Peak Ascent once, and I was nervous the night before. My wife asked me why I spend my free time doing things that make me nervous. I told her because if I got to the top the next day, I was going to stand there thinking that I hadn’t known for sure if I could do it, and that’s a great feeling. As difficult as the downturn was in 2009, part of me enjoyed the challenge of maintaining our focus on things we could control.
Letting people go is never fun, but steering a company to have a year like 2009, during which we reduced debt, lowered costs, drove top line and stayed true to our strategy, is a classic example of what doesn’t kill you makes you stronger.
