The India head of international hospitality chain Starwood Hotels and Resorts puts great store in instilling a sense of passion to the leadership of a company. That is what he says separates the leaders from the also-rans. “When I joined the industry in 1984, most of my friends said, “Tu waiter banne ja raha hai!” (You are going to be a waiter!) — such was the perception of the industry those days. Today the perception has changed completely, but the fact remains that you require a lot of humility and humbleness to be a successful hotelier,” he says. Dilip Puri, who took over as managing director, India, & regional vice-president, South Asia, of Starwood Hotels and Resorts last year, honed his skills working in operational and development roles in India, South Pacific, Australia and Africa across luxury and upscale hotel brands. His enthusiasm for ‘hospitality’ as an idea is one of the most noticeable aspects of this conversation with Saumya Prakash. Edited excerpts.
Q. With consumer confidence at historical lows and weak economic fundamentals, the global lodging industry in 2009-10 suffered its most severe demand and rate contraction since the Great Depression, says a recent E&Y report. What kept you up at night in 2011?
It’s how to substitute those markets which were more severely affected by the recession, largely the US and the European markets. If we are not able to substitute those markets, it would be a huge challenge. For us, the whole question boils down to this: If the British, the Germans and the Americans aren’t travelling, then who is travelling? Clearly you can see a lot more Asians are travelling. So are we able to make inroads into the Chinese markets, the Japanese market, and the South East Asian market — what we call the intra-regional travel? To me, that is a huge challenge. We don’t see the reduction in demand from the traditional markets to be a big concern because they are clearly being substituted by the emerging markets within India and within Asia Pacific.
In most of our hotels in the big gateway cities as well as in the smaller tier 2 markets, we have already begun to substitute a lot of the international business with domestic business. But are the domestic travelers familiar with my brand, are we able to compete effectively with the home-grown players like the Taj and the Oberois of the world? I think those are the challenges that remain significant for a company like ours and that’s why we believe bringing our 4-star brand into tier 2 markets in India is a clear priority for us.
Q. What were the lessons from the 2008 slowdown and are they going to be useful this time around?
I have worked with several Indian companies and realised that when bad times come, you suddenly scramble to cut cost, to try and become more efficient, and when good times come back, suddenly all of those strategies take a back seat. A clear example is, companies saying no more business-class travel besides cutting staff.
Similarly, in good times they say let’s get back to business-class travel and they also go for a bigger staff strength. To me, the trick is to institutionalise all those efficiencies which you bring into your operations when you are going through a bad phase, because if you are able to do that when the good times come, your margins improve. Extending that logic, companies that have the ability to institutionalise efficiencies and productivity into their hotels, are the ones that really will succeed in the long term. We continue with the initiatives we took to protect our margins in 2008-09.
Q. Hospitality as a sector is driven by people. What steps have you taken to improve hiring, retention and training of the employees?
To me the battle for market share in the future will not be over the guest; it will be fought over talent. Companies that have more robust strategies in place to acquire, retain and nurture talent are the ones that will succeed. Being a global company, one of the big opportunities we have is we can bring the best practices from all over the world into this country. With the kind of labour cost that exists in the western markets, they operate at staffing ratios that are less than half of what we operate in India. We have always wondered why we can’t operate with those ratios in India. The fact is for many years productivity levels of Indian workers was much lower than those of the Western countries.
One of the things that we do very well is not just look at hiring the best people, but seeing how we can make them more productive. Productivity is a function of training, it is a function of making sure that you have engaged employees, you have happy employees because it automatically makes the employee work harder. This is possible with the kind of tools we have today. For example, we continuously do employee satisfaction surveys in our hotels. I am not saying that other companies don’t do that. But just take this tool we have called Starwood careers. When we look at high potential employees, whether at an associate level or a management level, we actually look at the employee and say I got to make this guy grow, I got to give him a career path, make sure that his aspirations are fulfilled. So we will take him on as a high potential candidate and put him on a track that says 12 months from now these are the skills he must have acquired, 18 months from now, this is the new position he must be in, so that he can see an opportunity for growing, not just for a year or two years but across his entire career with Starwood.
So for us it is not about hiring for a particular position but it is about hiring the employee so that we can retain that talent for a long time because we invest a lot of money in training the employees. We are very proud of the fact that Starwood probably has the highest retention rates globally; most of our people have worked with us for 15-20 years. We have general managers who have worked for 15 years and have no desire to move despite being offered much better salaries by other companies/hotels. It’s just the culture of the company which is very unique. Even a house-keeping supervisor can aspire to go and work in West Asia because Starwood has more than 50 hotels there. They always look for Indians as Indians are the largest migrant population in the region. We can proudly say that we offer opportunity for career growth and enhancement not just to the management level people but even at the associate level.
Q. How have you segmented your brands and in which segment do you anticipate the biggest challenge?
Our brands are segmented based on lifestyle; so we don’t position our brands on price. As an example, if a Westin, a Sheraton or a Meridien are on the same road, chances are that their pricing would be the same. It is the traveller who decides what he is looking for in the hotel as an experience. If the traveler is someone who wants to be connected, he will probably choose a Sheraton hotel. If someone wants a stylish luxury environment, he will choose a Westin. So it could be the same traveller with different reasons and purposes to travel and he will choose the brand accordingly. All our brands are very distinct. The only common thread among our brands is our loyalty programme.
In terms which brand will see the greatest challenge, to my mind at some point in time, we will reach a point of inflection with the real luxury brand because there are limited markets where you can put those brands. For example, if you look at St Regis or W, Delhi, Mumbai, Bangalore, Chennai, Kolkata and Hyderabad might be the six markets where these brands will work. You might do one or two in each of these cities but after that what? So we want to make sure we put these luxury brands in the right locations, in the big metro markets and then make sure we aggressively pursue growth in brands like Sheraton, Meridien, Four Points.
We are among the first people to venture into putting up a 5-star brand into tier 2 markets. We opened a Meridien in Coimbatore recently. Many will ask that what are you doing with a Meridien in Coimbatore? But the fact is we have opened the hotel and it has become successful quickly because Coimbatore is a market with great potential — it is very close to Chennai and Bangalore, two large source markets, a big textile industry, an education market and it is a shopper’s point for people going to the hills in the south India. So it is a big market. What I am trying to suggest is that new hotels in new markets create their own demands. The demand may not exist today because there isn’t a hotel, but if you put up a hotel you suddenly see that the demands are coming in.
These tier 2 markets offer a big opportunity to set up 4 or 5-star brands; they are also a challenge as these hotels take time to ramp up and you have to make sure the developer is protected in terms of the amount of investment he is making. We have to give him some kind of commitment and confidence that these brands will work and we will be able to market and sell these brands in these cities. We are building Sheraton in Mysore, Vizag, Amritsar, Chandigarh… these are all tier 2 markets. We are clear believers that is where the future of India is.
Q. How does Starwood innovate to provide a unique experience to its customers when a whole host of global brands are coming to India?
The word is global personalisation. Personalisation in any case is the heart of hospitality. What are we doing differently today is we are recognising the fact that the whole platform of digital technology, which includes things like social media, is today changing the world. How do we then as a hotel leverage all that information about you as the customer and make sure that I offer an experience that meets your needs and expectations. In theory I can do that as I have the platform of digital technology. I can do it when you want me to do it, in your space. So it is ultimately the ability of the hotel company to recognise that you can use platforms of digital technology and social media to completely change the experience you want to give your customers.
To us, our mantra is that people are looking for a better way to experience the world and we have to be able to provide them with what they need. To remain ahead of the curve, you got to realise the impact social media has and it is very important for us to make sure we are able to leverage that, because if we don’t, we’ll get behind. It is a question of how quickly and differently can we do it.
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Q. Okay, there has been a lot of buzz around social media and its role in hospitality. Is it or is it not social media a distribution channel? What is the correct use of social media in hospitality?
Yes, definitely social media is a distribution channel. The importance lies in the ability to understand the customers. What is very important in social media is the ability to get the right kind of feedback from your customer, your TripAdvisor (a travel website that assists customers in gathering travel information, posting reviews and opinions of travel-related content). Similarly, on Facebook we are able to track what kind of feedback is coming from the people who have used our hotel. There are an amazing number of possibilities to popularise your hotel through the social media. And more so for hotels as all the travellers who use our hotels use social media. Facebook is just one channel. Like I said, the review mechanism which exist today is getting more and more powerful, a lot of people, while choosing a hotel, go on to TripAdvisor and see the ratings before finalising. The best use of social media is in marketing, making the presence of the brand felt across the platform. For us, it is essentially the next big thing.
Q. What makes India a unique market?
India is a unique market for Starwood because for every other country we operate in, there are very weak local brands, it’s all big international players. China has no local brand nor does Thailand or any part of South East Asia or Australia. But in India there are big hotel companies. So we are not just competing with the international hotels but we are competing with the likes of Taj, the Leela and the Oberoi.
Q. What is the essential leadership quality to run a successful hotel and why?
Hospitality is not for the faint-hearted. Many people look at the glamour quotient and say, I would love to be a hotelier. But they don’t have any clue what goes on behind in making that hotel. It is a industry for which you need a lot of passion to work. Your inherent DNA must be of a hotelier. When I joined the industry in 1984, most of my friends said, “Tu waiter banne ja raha hai!” (You are going to be a waiter!) — such was the perception of the industry those days.
Today the perception has changed completely, but the fact remains that you require a lot of humility and humbleness to be a successful hotelier.
At the end of the day, what we have to believe that the guest is always right. He can be a complete idiot at times, but he is always right. We have to deal with him accordingly. Great communication skills, an inherent passion for work and an appreciation for decor, an eye for detail, the interiors and, above all, food and beverages — all of this gets developed finally into defining what that leader is.
India produces the best hoteliers found across the globe. Initially, it was believed that Europeans are the best, but they are old-fashioned. Indians are contemporary and adaptable. There is a lot more opportunity for Indian hoteliers to go abroad and work. The whole profession is going to become even more sought after in the coming years.
Q. What do you think will be the biggest challenge hotel companies will face in the next five years?
Development remains the biggest challenge in India. The scale and pace of development is too slow. Government regulations and approvals, land laws, licences, permits etc make the work more difficult. We built a hotel in China in two years; in India we built one in four years. We have to increase the pace of development. Like any other business, we are impacted by the lack of infrastructure. If you don’t have good roads, airports, good airline connectivity, business will suffer.
Land acquisition remains a big challenge — first, because of its scarcity and second, the land laws in India are so old, some of them are from the pre-independence times and they haven’t changed. Some cities still have urban land ceiling, conversion of agricultural to non-agricultural land, and all these differ from state to state. If there was a common land law in India, things would have been easier. Today, if you are going to Madhya Pradesh to build a hotel, the laws are different from those in, say, Tamil Nadu and Pune. That’s why you will find a large number of hotels are being done by real estate developers as they know the land business better than anybody else. It continues to be a challenge in India. The silver lining is that it was no different in China. But they have got their act right. And I believe at some point, so will we.
The other challenge is the government and as the political class in this country. The duo don’t see a tangible value in tourism yet. But the fact is, tourism is one of the largest generators of employment in this country. Look at countries like Malaysia and Thailand that are so successful and the backbone of their economy is tourism. Thailand especially is a tiny country compared to India but gets five times more tourists than this country.