Management -- No Room For Doubt -- Westin Embraces Total Quality As Way To Stay In Hotel Game

Van Beard peels carrots.

That's not all he does, of course, working in the kitchen at the Westin Hotel here, but it is one of the things he does best, using his own technique to produce good, tasty, fresh - indeed quality - carrots to customers at the hotel's restaurants.

Peeling carrots may not seem to have much to do with the billion-dollar business of running a hotel chain. But these days, Beard is among the workers Jim Treadway, president of Westin North America, points to when he talks about the future of Westin.

Treadway has embraced quality, total quality, as the only way Westin can make it in an increasingly competitive and overbuilt industry. Experts say a million hotel and motel rooms sit empty every night in the United States.

Beard's devotion to his carrots is an example of the kind of quality that Treadway is trying to introduce into Westin's corporate culture. No detail is too small.

"Anyone can fold the toilet paper into a point when they make up a room," Treadway said. "Quality has to go deeper than that."

So far, at least, it has. Westin, now a subsidiary of the Aoki Corp. of Japan, no longer publicly reports its financial results. But Treadway said the company made a profit last year on gross revenues of about $1.5 billion.

Westin may be one of the few profitable chains around. Reeling from a recession that has cut deeply into business travel and convention attendance, the industry has been coping with the consequences of a mid-1980s construction binge that produced many more rooms and beds than there are travelers to fill them.

The overbuilding was set off by federal tax breaks a decade ago and fueled by the growth of suburban office centers, a near doubling of airline travel from 1980 to 1990 and the invention of new kinds of hotels - from all suites to economy lodging.

The fallout has produced bargain room rates for travelers, but it has cost the industry and the economy billions.

As the economy slowly begins to recover, the hotel business is picking up as well. But it has a long way to go, and some hotels will do better than others. That puts additional pressure on the movement to quality that Treadway is trying to achieve at Westin.

Westin has been through a fair amount of management angst in recent years, something Treadway has spent some time putting behind him. He points out that in reality the company has had the same chief executive over the past few years in the Aoki Corp., its parent company. Still, change at the top has occurred.

In January 1989, after just four months on the job, Helmut Hoermann, formerly Hilton International's chief executive, resigned as president of Westin. Larry Magnan, a longtime Westin executive, was swiftly named president. Chieko Aoki, wife of the chairman of Aoki, was named chief executive, succeeding Harry Mullikin, who retired. A month later that all fell apart when she suddenly resigned for health reasons.

"There is no question that turnover at the top in senior positions took its toll," Treadway said. "To what extent, you never know. I like to think that's all behind us now."

Treadway said Westin is doing better than the hotel industry averages, with occupancy rates of 66 percent in 1991 and 68 percent in 1992. The industry average is about 60 percent.

But like the industry, average room rates remain at or below 1990 levels. As an upscale hotel company, it does not want to improve occupancy only at the expense of room rates.

Treadway said Westin can increase room rates only "by improving the quality of the guest experience."

Hoteliers pay attention to occupancy and rates because of the way their business works. Once fixed and some variable costs are covered, marginal revenue drops to the bottom line very quickly.

Treadway said a hotel with occupancy in the the low 80 percent range and rates of $120 to $130 a night is quite successful.

Treadway continually returns to the role of quality in Westin's future. "Every day we have to be better than the day before just to maintain that position," he said.

Given the market Westin caters to - frequent business travelers - that may be a challenge. After one too many nights on the road, regular travelers often forget the names of more hotels than he or she remembers.

Many hotels not only look alike but have service more reminiscent of a large government agency in the former Soviet Union than an enterprise dependent on happy customers who keep returning because of the way they are treated.

Hotels, in general, are stepping up to that challenge. The Malcolm Baldrige National Quality Award was presented last year to the Ritz-Carlton Hotel Co., a significant event for the industry.

The company is one of five Baldrige winners. But this is the first time a hotel operator has ever won the prestigious prize, which the federal government awards annually to U.S. companies that deliver on their promises to offer products or services of outstanding quality to their customers.

Ritz-Carlton, which is owned by W.B. Johnson Properties in Atlanta, operates 25 hotels in the United States and Australia. In their application for the award, Ritz-Carlton executives cited numerous ways in which the company uses a system of "continuous quality improvement" in the logistically complex and labor-intensive business of running each hotel.

It sounds much like what Treadway is trying to do with a chain of 60-plus hotels and resorts. Treadway takes it one step further with a commitment to "total quality management," a systematic approach to making customer satisfaction the No. 1 priority.

Trouble is, the task is not easy.

An all-out quality commitment requires companies to uproot entrenched habits and business methods and virtually start over. It takes time, money and a consistent example from top management. Worse, no single formula works for everyone.

Treadway knows this and has spent much of his time as the head of Westin in achieving that commitment to the total-quality-management approach. Most executives and employees have received quality training.

Treadway said that others have made commitments to quality before, but have based their decisions on opinion rather than fact or actual data that support a decision. That, to him, is the single most striking difference between saying you want quality and achieving it.

He admits companies run the risk of too much analysis.

"You still have to make the command decision," he said. "You sometimes have to make the decision first, then apply the analysis afterward to validate it."

Is it working?

It is too soon to tell, Treadway said. On a superficial level, he said, anyone can achieve quality.

"Anyone can put orchids in the toilet bowl, and that kind of thing," he said. "Anyone can do it for the short term."

Long term is different.

Part of the plan calls for changes in the way hotels operate. At Westin, for example, there is now a single department that deals with travelers' needs. No longer does a customer have to call the front desk for this or housekeeping for that.

Each department also is taught to look at the people within the company as their customer. Beard peels quality carrots because he is trying to serve his main customer, the executive chef. And customer satisfaction is the No. 1 priority.

Treadway said the company also has moved to bring its suppliers into the same fold on quality standards.

Westin is moving ahead on its strategy to grow in three different ways - acquiring management contracts, representation agreements and, new for Westin, franchising.

"Traditionally we've only been able to grow through the acquisition of management contracts," Treadway said. "I'm very encouraged that we now have additional options available in which to grow our company at a time when most U.S. markets are overbuilt with hotel rooms."

Westin took over the Doubletree Hotel in Santa Clara last February and the Stouffer Los Angeles Airport Hotel in October.

The first franchising effort is with the Biltmore Hotel in Coral Gables, Fla. The agreement went into effect last September when the landmark hotel reopened after being closed for several years in a major rehabilitation program.

A second franchise is in Providence, R.I., a hotel next to a new convention center being built there.

Representation agreements simply bring Westin's worldwide reach into the grasp of smaller hotels.

The Governor Hotel in Portland is an example. It is owned by the Salishan Corp., but Westin has rights to market the hotel.

Gone, at least in the U.S. market, is the more traditional way for hotels to grow - build them and manage them. The market simply is saturated in key areas.

Other Westin subsidiaries in South America, Asia and Europe are building hotels, however. Westin hotels in North America - the U.S., Mexico and Canada - still represent the largest percentage of hotels and revenues for Westin.

Westin also plans to use technology to help it attract and keep its customers. Rooms are becoming more able to handle the electronics that many business travelers now cart along with them - laptop computers, fax machines and cellular phones. If they don't have them, Westin will get them.

"Doing business in the '90s is like navigating permanent white water," the saying goes at Westin these days. But Westin, the oldest hotel management company in North America, has navigated many rough patches over the years and is likely to survive the present period as well.

Quality is the key. The rest is simple: Retaining existing customers is less costly than attracting new ones. Doing things more efficiently helps ensure profitability.

------------------------------------. Westin. . -- Employees: 28,000. . -- Headquarters: Seattle. . -- Business: International hotel and resort company. . -- President: Jim Treadway. . -- 1992 revenues: $1.5 billion. . -- Strategy: Keys marketing to the frequent business traveler and premiere conventions. . -- Major competitors: Four Seasons, Intercontinental, Hyatt, Marriott and other international hotel companies. . -- Parent company: Aoki Corp., Osaka, Japan. Purchased Westin in 1988. Aoki is a diversified international company in hotels and construction.