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Sheraton to Offer Credit for Bad Service

Hotels: Starwood says the program is aimed at keeping guests, including frequent business travelers, from switching to other chains.


Aiming to improve the consistency of service at its chain of Sheraton hotels, Starwood Hotels & Resorts Worldwide Inc. will begin compensating guests who report inconveniences including missing bath soap and uncomfortable beds.

The company's new program, called Sheraton Service Promise, gives guests a $15 credit or points in Starwood's frequent guest program for minor inconveniences such as slow check-ins, billing problems or a shortage of towels or bath amenities.

Problems such as a dirty room, temperature issues or noise complaints will earn guests a $25 to $75 credit, based on the hotel's average daily room rate. The average room rate for Sheraton hotels is $131.

Larger problems such as a missed wake-up call or poor food quality will result in a free room night or meal.

Guests also can choose to receive compensation in the form of spa services or credit for future stays.

The program is designed to boost the performance at the roughly 380 Sheraton properties, which saw room revenue fall 15% in the first half of this year, analysts said.

Starwood, the world's biggest hotel owner, is spending $1 billion to renovate 66 Sheratons it owns, adding rooms designed by Ralph Lauren and Williams-Sonoma Inc. with mahogany desks and Sealy Posturepedic mattresses.

"This is no doubt a big investment for [Starwood], but it may be just the right signal to send to guests that good service is more serious than ever at Sheraton hotels," said Jason Ader, an analyst with Bear Stearns in New York.

On Friday, Starwood shares closed at $26.63, up 70 cents, in New York Stock Exchange trading.

Geoff Ballotti, vice president of North American hotel operations for Starwood, said the company hopes to make service more consistent at all Sheraton hotels, which is the company's largest brand.

Because service has varied from one property to another, many guests--including valued frequent business travelers--have left Sheraton for other chains, he said.

"Basically, this program is going to force our general managers to maintain the same top-quality service at all Sheraton properties," Ballotti said. "We're backing our product up with a promise, and if something's wrong we'll make it up to them instantly, in a way where they can feel it."

The cost of the credits, which will be paid by individual hotel franchisees, may cut hotel profit margins about 50 basis points in the beginning, Ballotti said, noting that the program will operate on a premise of "the customer is always right."

However, the cost is expected to decline over time as hotels improve their service, he said.

The Sheraton program applies to hotels in the continental U.S. and Canada. The White Plains, N.Y.-based company said similar guarantees at its other chains, which include St. Regis and W hotels, could follow.

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