Westin Hotels and Resorts Worldwide History

Address:

2001 Sixth Avenue
Seattle, Washington 98121
U.S.A.

Telephone: (206) 443-5000
Fax: (206) 443-5169

Division of Starwood Hotels & Resorts Worldwide, Inc.
Incorporated: 1930 as Western Hotels Inc.
Employees: 45,000
Sales: $2.4 billion (1996)
NAIC: 72111 Hotels (Except Casino Hotels) & Motels

Company Perspectives:

Westin Hotels & Resorts is a global collection of over 110 upscale hotels, including 29 of the world's finest resorts. Located in the major business centers of the world, each hotel is distinctive in its architecture and setting, yet all are consistent in quality and service. The service extended by Westin's 45,000 associates is repeatedly recognized by leading US hospitality indicators. Westin is further distinguished by its 68-year history as a leader and innovator in the hospitality industry.

Company History:

Westin Hotels and Resorts Worldwide is the oldest hotel management company in North America and one of the most admired. Throughout its history, the company has pioneered many hotel innovations adopted by the industry worldwide. Westin operates more than 110 hotels in 23 countries.

Setting the Stage

In the late 1920s, hotel ownership in the Pacific Northwest included several key figures. Severt W. Thurston arrived in Seattle in 1903 to pursue a career as a vaudeville acrobat. According to legend, Thurston's brief career behind the stage lights came to an ignoble end when, as the top man on a human pyramid, he was thrown off balance and into the orchestra pit by one of his human supports whose sobriety was in question. Thurston quickly left show business and took a job as a porter in a local hotel. The hotel owner's son, Harold E. Maltby, became friends with Thurston and, eventually, they decided to enter the hotel business, forming the Maltby-Thurston Corporation in 1910.

At roughly the same time the Maltby-Thurston partnership was created, Nebraska native Frank A. Dupar was working in Seattle as a plumber. After several years, Dupar became the owner of Palmer Supply Co., a wholesale plumbing and supply firm, and promoted apartment houses and hotels in the area with his younger brother Harold. The Dupars initially contracted to lay the plumbing for hotels and apartments, obtaining the materials from their supply business, but then, as their work earned the esteem of the local building community, they began contracting for the construction of entire hotels. Ownership of one particular hotel, the Cascadian, fell into their hands as a result of the stock market crash in 1929. A majority of the investors who were to supply equity funds for the hotel were stripped of their assets by the collapse of the stock market, so the Dupars hired a stock promoter to sell enough shares in the hotel to meet costs, and the two brothers found themselves owning the 130-room hotel.

The following year, in 1930, Frank Dupar and Severt Thurston were seated at different tables in a coffee shop in a small town east of Seattle called Yakima. Both hotel owners were in the area looking to expand their hotel business. As competitors, Dupar and Thurston recognized each other and ended up sitting together. In the course of their discussion in the coffee shop, they talked of the advantages of pooling their efforts toward expansion and decided to include two other hotel owners in their proposed union who were also vying for expansion in Yakima, Adolph and Peter Schmidt. The Schmidts, forced to close their beer distillery, the Olympia Brewing Company, in accordance with prohibition laws, owned five hotels in the Puget Sound area. A meeting was arranged and, as a protective measure from the depressed economic climate pervading U.S. business at the time, the three groups of owners decided to unite their hotels under a single management umbrella. The joint venture, called Western Hotels Inc., was formed as a management corporation. Rather than owning the hotels, Western Hotels signed management agreements with local hotel owners and provided accounting, advertising, and referral services to the owners, as well as the hotel's personnel, whose salary was paid by the owners. As recompense, Western received one percent of the gross receipts from each of the hotels it managed. And so, with Peter Schmidt as the chairperson, Severt W. Thurston as president, Harold E. Maltby and Adolph Schmidt as vice-presidents, and Harold E. Dupar as treasurer, the odd combination of a former vaudeville acrobat, a plumber, and two displaced brewers formed the foundation of what would later become Westin Hotels & Resorts.

More Than Managing in the 1930s

In its first year of operation, Western Hotels operated 18 hotels containing 3,137 rooms. All of the hotels were located in Washington, with the exception of one in Boise, Idaho. The following year, in 1931, Western assumed the management of its first property outside U.S. borders by adding Vancouver, British Columbia's Georgia Hotel to its consortium of hotels. That year, Western concluded a pivotal deal with the Multnomah Hotel in Portland, Oregon. The Multnomah, a prestigious 500-room hotel, was suffering severe losses during the early 1930s, losing up to $20,000 a month. For the first time, Maltby, Thurston, Dupar, and the Schmidts entered into a joint purchase of the property. Under Western management, the lobby and the rooms were refurbished, and the failing hotel began producing profits within 90 days.

News of its success with the Multnomah earned Western the reputation as a management team that could produce profits for properties even during the harsh economic times of the Great Depression. Capitalizing on this reputation, the company assumed managerial control of six additional hotels by the end of the decade, one of which, the Baronof in Juneau, extended Western's presence into Alaska. Western's dramatic turnaround of the Multnomah also showed those in charge of the company that success could sometimes be achieved quickly. Often, Western managed a hotel for only a short time, reviving a floundering property, then withdrawing its control. The company maintained this fluid method of managerial control well into the future, constantly acquiring new contracts to replace those that were dissolved. Contracts were terminated with six of Western's original 18 hotels by the end of the decade, and more than half of the properties managed by the company in the 1930s would operate in the 1940s without Western's assistance.

Growing During and After WWII

In its first decade of business, Western achieved considerable success in the Pacific Northwest. With the exception of the three hotels in Idaho, Oregon, and Alaska, all of Western's hotel concerns were located in Washington. As the company entered the 1940s, it sought to expand its interests outside of the region and, in 1941, an opportunity arose in California. Conrad Hilton owned the Sir Francis Drake, a 438-room hotel in San Francisco, but when Hilton settled a local strike, the city's businessmen became enraged, causing the hotel's clientele to shrink, so Hilton decided to sell the hotel. He sold it to a local industrialist and financier, E.B. Degolia. When Degolia attempted to get a mortgage for the property, his insurance company suggested he hire a professional hotel management firm to operate the hotel. The insurance company recommended Western, and DeGolia began negotiations with Thurston and Dupar (the Schmidts had returned to brewing beer when prohibition was repealed in 1933). Thurston and Dupar agreed to manage the hotel, provided they receive an equity share in the hotel. DeGolia agreed and, by the end of the year, Western had assumed managerial control over the Sir Francis. Additional California properties came under control of Western later in the decade. In 1949 Western gained the stewardship of the Maurice Hotel in San Francisco and the Mayfair Hotel in Los Angeles.

As the expansion of the 1940s increased Western's territory of operations to Los Angeles in the south and Utah to the east, issues of lasting importance were being discussed among the company's senior management. In 1941 managers at a meeting in Seattle began to precisely describe the role of Western in relation to the hotels it managed. Virtual autonomy of the various hotels was decided as the best stance to assume. Managers were to be given full responsibility and authority in their particular hotel, guided generally by the operating policies of Western. Western's influence over the hotels was to be downplayed in all publicity, with the hope that the individual hotels would not be perceived as units of a hotel chain--a modern, corporate concept many found distasteful.

By 1946, however, Western had begun a gradual shift toward assuming a more prominent image within its hotels. During another manager's meeting in Portland, Oregon, the first such meeting since the gathering in Seattle five years earlier, Western's strategists decided to hire an advertising firm and to produce an employee handbook and publication. The company also decided to affix its logo on stationery, matchbooks, soap wrappers, and other items.

The decision to adopt a more visible role was consistent with several innovative services Western introduced that hinted of a larger administrative structure than an individual hotel would likely possess. In 1946 the company issued the first guest credit cards, enabling patrons of Western hotels to charge their rooms, food, and beverage bills to a single account. The introduction of the paper cards was followed the next year by the establishment of "Hoteltype," the industry's first reservations system. Before the implementation of Hoteltype, reservations were booked by mail, telegram, or telephone, and often resulted in lost or forgotten reservations. The new teletype machines, however, enabled instantaneous confirmation of reservation requests.

The 1940s also witnessed the emergence of Western's "specialty rooms," as management discovered the profits that could be garnered by devoting more energy and investing more money in their hotels' coffee shops, lounges, and dining facilities. During Western's early years, little attention had been paid to providing a place for hotel guests to eat and drink inside the hotel, but, as the years progressed, and after a survey of its hotels, Western discovered that the greatest earnings per square foot were gleaned from the coffee shops and cocktail lounges and the smallest profits were produced by the more formal dining rooms. Greater care was given to providing livelier and more intimate eating and drinking facilities, as Western created an assortment of distinctive motifs for each hotel. Cocktail lounges and dining areas were decorated in motifs replicating various geographical locations and historical periods. With names such as the "Matador Room," "The Outrigger," and the "Hitching Post," the lounges and dining rooms experienced increased revenues and were greatly augmented when Idaho and Washington legalized the sale of liquor by the drink in 1949.

Western continued to expand in the 1950s, adding 22 hotels located throughout California, Arizona, Colorado, Montana, and Washington. In 1956 the company began managing the massive, 1,200-room Hawaiian Village in Honolulu and, by the end of the decade, had assumed control of four hotels in Guatemala. As the number of Western hotels proliferated, further guest service innovations made their debut. In 1952 Western's "Family Plan" was introduced, allowing children under the age of 14 to stay without charge in their parents' rooms. Seven years later, the company made a long-standing promise to honor confirmed reservations, paying for the room if the guest had to be relocated to another hotel. That year, Western also made available the hotel industry's first 24-hour room service.

New Leadership for the Space Age

In the late 1950s and early 1960s, new management took the reins of Western from the company's founders. The core of this new leadership, Lynn P. Himmelman, Edward E. Carlson, and Gordon M. Bass, was drawn from inside the Western organization, establishing Western's tradition of promoting from within. The early working years of these men paralleled the modest beginnings of their predecessors, Thurston and Dupar. Himmelman, a fourth generation hotelier whose father was an early investor in the Maltby-Thurston Corporation, started his hotel career as a room clerk at the Multnomah. After serving as the manager of Seattle's Benjamin Franklin Hotel in 1946, he became Western's executive vice-president in 1960 and chief executive officer ten years later. Carlson, who would eventually become chair and chief executive officer of United Airlines parent UAL, Inc., started as a page boy at the Benjamin Franklin in 1929, then became the hotel's elevator operator and bellhop. In 1946 he accepted a position as Thurston's assistant and steadily rose through the ranks, becoming Western's president in 1960. Bass also got his start at the Benjamin Franklin, working as a cashier for Himmelman's father. After managing the Multnomah, he was named vice-president of Western in 1951, executive vice-president in 1965, and president in 1971.

With this infusion of new management, Western experienced a fantastic surge in growth in the 1960s, adding 57 hotels to its management contracts, 36 of which were located outside of the United States. The company had become a genuine international concern, with hotels in Mexico, Guatemala, Venezuela, Ecuador, Australia, Japan, and Hong Kong. To better reflect this dramatic entry into foreign countries, Western changed its name in 1963 to "Western International Hotels."

As Western's business expanded internationally, it also entered into a new arena within the hotel industry--building its own hotels. Its first such venture was the construction of the 332-room Bayshore Inn in Vancouver, British Columbia. This was followed by the construction of Calgary, Alberta's Calgary Inn, in 1964, the 800-room Century Plaza in Los Angeles two years later, and Colorado Springs' Antlers Plaza in 1967. Building projects for the decade ended in 1969 with the construction of the Washington Plaza in Seattle. These projects proved successful, evidenced by the vigorous construction Western embarked upon in the next decade. Of the 30 hotels added to Western's management group in the 1970s, more than half were built by Western.

Megamerger in the 1970s

Physical growth translated into fiscal growth over the next few years. From 1965 to 1970, the company's gross revenues doubled from $45 million to $90 million, and its net earnings jumped from $750,000 to $3 million. This success had not gone unnoticed. During the late 1960s, United Airlines had been searching for an entry into the hotel business to complement its international transportation service. Airlines had just recently begun to seek control of hotels as a solution to the sometimes limited, sometimes overcrowded accommodation facilities offered by the various destination cities the airlines served. For United, Western's chain of international hotels seemed a perfect match; 78 percent of Western's hotel rooms were located in cities served by United. To facilitate its proposed diversification into the hotel industry, United formed a holding company, UAL, Inc., in 1969, and began negotiations with Western. Carlson, Western's chairman and chief executive officer, foresaw the additional opportunities an affiliation with United would create. In 1970 negotiations were concluded and United and Western merged, with Western operating as an autonomous, wholly owned subsidiary, keeping its management and headquarters in Seattle. Five months after the merger, Carlson became president and chief executive officer of UAL, Inc. and Lynn Himmelman became chief executive officer of Western.

Although Western had aggressively expanded almost throughout its history, its expansion during the 1970s was unique. Instead of managing hotels with 300 or 400 rooms, Western assumed control of much larger hotels, many of which were constructed by Western, such as the 1,500-room Hotel Bonaventure in Los Angeles. Although the company continued to manage smaller hotels, it had begun to focus on the massive hotel complexes that were becoming popular in the industry. Expansion also took the Western name to new areas of the world during the company's fifth decade of operation. In 1970 a 525-room hotel was opened in Bangkok and, a year later, a hotel of similar size was opened in Singapore, both of which were constructed by Western. Two other Western-built hotels brought the company into South Africa and Norway, with the opening of Johannesburg's Carlton in 1972 and the Hotel Scandinavia three years later in Oslo.

Westin in the 1980s and 1990s

In 1981 Western changed its name to Westin Hotels, and then four years later to Westin Hotels & Resorts. The company continued to aggressively pursue additional management contracts during the early 1980s to counterbalance the termination of contracts with hotels no longer deemed profitable. By the late 1980s, however, Westin's capability to expand or even to plan for the future was in doubt. United Airlines' strategy to develop a vertically integrated travel empire, which had begun with its merger with Westin, had proved unsuccessful and, by 1987, United was looking to divest the hotel chain. An interested party, the Aoki Corporation of Japan, began negotiations with United and, in 1988, Aoki Corp.--a diversified international corporation with major lines of business in engineering, construction, and hotels--purchased Westin for $1.53 billion. The acquisition proved mutually beneficial; Aoki Corp. constructed the hotels, and Westin assumed the management of the new buildings. Three years after the acquisition, Westin became the operating company for all the hotels owned by Aoki Corp., including Caesar Park Hotels, the Hotel Vier Jahreszeiten in Hamburg, Germany, and The Algonquin Hotel in New York.

Westin planned to double its size during the 1990s and intended to aggressively pursue international properties, especially in Europe where the company's presence was limited. Asia was another prime focus. A massive restructuring in 1991 consolidated Aoki's hotel assets with the Westin operating company. It also created four new regional divisions: North America, South America, Asia/Pacific, and Europe.

It was soon apparent, however, that the boom years of the 1980s were over. The industry as a whole was left with excess capacity, particularly in the United States. Westin adopted the Total Quality Management system to make itself more competitive. Westin also was innovative in cutting costs. Its bar code-based Automated Uniform Distribution System halved associated labor costs at one hotel.

To differentiate itself, in January 1993 Westin launched the Service Express program as well as Westin Royal Vacations. Service Express was a kind of in-room telephone concierge service. Westin redesigned its front counters to make them less imposing to guests than the traditional check-in desk. It trademarked the title "Director of Romance" for its wedding specialists.

Starwood: Mid-1990s

By 1993 Aoki was planning to sell Westin North America. The parent company felt it alone did not have the resources to expand those operations. A group led by Starwood Capital and Goldman, Sachs bought the chain for $537 million in cash and debt in late 1994. Juergen Bartels was brought on as CEO and the company went on a buying spree, acquiring 22 hotels in one 12-month period. Bartels also invested heavily in marketing, launching Westin's first TV ads, which soon blossomed into a $25 million national campaign. Improved sales validated this strategic vision.

In the mid-1990s Westin pondered developing a limited service corporate-type brand extension similar to Courtyard by Marriott. It also was conceptualizing a combination hotel/health club chain for suburban markets.

In September 1997 Starwood Lodging Trust announced that it would buy Westin from the group (including Starwood Capital) that bought it in 1994. Starwood Lodging paid $1.6 billion in stock, cash, and assumed debt for the "flagship" brand of four-star resorts.

Westin was one of the few groups building resorts in the late 1990s. It opened nine new properties in 1999 "from Texas to Taiwan." The Rio Mar Beach Resort in Puerto Rico and Westin La Cantera Resort at San Antonio, Texas together cost about $280 million to build. They were dwarfed, though, by Westin's new flagship property: the $1.2 billion America World City: The Westin Flagship. The ship, scheduled to be launched in 1999, would be the largest in the world and would carry 6,200 passengers and 2,400 crew members.

Westin Hotels and Resorts Worldwide History

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