Balanced Scorecard and Strategy Map – Part I

The Balanced Scorecard approach has been pioneered by Prof. Robert Kaplan and Dr David Norton. At the highest conceptual level, it helps organizations translate strategy into a set of linked operational objectives that drive both behavior and performance. The Strategy Map is the blueprint that guides users through the process of developing the right set of strategic initiatives, measures, and targets, and communicates the strategy simply and powerfully to your organization and to your stakeholders. I will give you a brief example.

Starwood Hotels & Resorts Worldwide, Inc.

Starwood is a hotel and leisure company. The Company conducts its hotel and leisure business both directly and through its subsidiaries. Its brand names include St. Regis (luxury full-service hotels, resorts and residences), Westin (luxury and upscale full-service hotels, resorts and residences), Le Meridien (luxury and upscale full-service hotels, resorts and residences), Sheraton (luxury and upscale full-service hotels, resorts and residences), Four Points (select-service hotels), Aloft (select-service hotels), and Element (extended stay hotels). The Company is organized into two business segments: hotels and vacation ownership and residential. In January 2013, the Company opened its second Westin hotel in Panama. In January 2013, it sold Aloft and Element Lexington to Rockwood Capital. In April 2013, it completed the sale of W New Orleans – French Quarter to Chesapeake Lodging Trust.

1. Market Description.

The hotel market is constantly changing, with properties being renovated, changing affiliation, or being repositioned to attract a wider source of demand, while others are retrofitted, closed, demolished, or converted to other uses. New properties are developed to follow demand generators or capture growth during economic expansion and when capital is available to developers. More recently, office buildings have been acquired, sold, and retrofitted as mixed-use projects that may include office, residential, and hotel uses. A property’s affiliation, or “flag” (operating brand name), can change and with it the segment of the lodging market that it attracts.

The hotel market is segmented by price, location, amenities, and available services. Niche products abound. Resorts can cater to a single demand driver- proximity to a beautiful beach, a spa, a championship golf course, ski slopes, a nearby national park, or an exclusive pristine area. Typically, a resort developer would complement the single attraction with multiple recreation opportunities, such as a beachfront resort with its own golf course, tennis, facilities, and trails for horseback riding. Some travelers want to be pampered, while others want to wander and discover an authentic local experience. Also, brand loyalty is an increasingly important factor as travelers choose to stay where they can earn rewards or use their rewards from the various frequent-traveler loyalty programs. Online reservation services, hotel chain Web sites, discount room aggregators, and tourism promotion groups have eclipsed the travel agent as a source of booking hotel rooms, with online bookings growing by double digits from 1998 through 2007.

2. Peculiarities of the market.

· Hotels are the only type of property that is rented by the night rather than leased by the year, or
multiple years in the case of retail, office, and industrial buildings.

· For many hotels and resorts, business is seasonal; occupancy and achievable room rates fluctuate from month to month.

· A sudden downturn in the economy will have a negative effect on hotel occupancy long before
its impact is seen in the apartment or office space market.

· A special event, such as a sports team’s championship season, can substantially affect hotel occupancy and food sales.

· Hotels have various revenue generators-not only room sales but also meeting space and
banquet rentals, restaurants, parking garages, and leased shops.

· Hotel corporations provide property branding, reputations, marketing resources, and operations expertise to individual properties for fees.

· Franchises backed by single or multiple investors can brand a hotel, but the management of the hotel must be approved by the hotel brand.

· Hotels are labor-intensive. Successful hotel management companies focus on controlling fixed and variable costs, as well as programs to maintain or increase occupancy, average daily rate (ADR), and other income-producing categories.

3. Brief history of product development.

In the first half of the 20th century, most hotel development occurred in downtown areas where businesses were concentrated and where convention centers generated demand for thousands of room-nights. This segment continues to offer development opportunities as older properties are demolished or converted to other uses, and as tourism increases, commercial demand grows and convention centers expand. As highway systems expanded and suburbanization spread, demand for hotel rooms followed the outward movement of employment and population- and continues to do so. A wide range of products, from budget to full-service hotels, can be found at key interchanges along the interstate highway system. New entertainment venues and outlet malls also draw limited-service hotel projects to the suburbs; suburban convention and exhibition facilities are yet another source of demand. Hotel development around airports has proliferated, catering to short-on-time business visitors and other travelers in transit. Including a hotel in a large business park is commonplace. Medical centers and universities often work with hotel developers to provide convenient rooms for their visitors and short-term teaching staff.