How Marriott Expects to Boost Growth with 1,700 New Hotels in 3 Years – Skift

In general, Marriott International is already considered the largest hotel company in the world, with more than 6,900 hotels in more than 30 brands, but the 90-year-old company has not grown.

At an investor day Monday, the company stressed its aspirations, which consist of adding 1,700 additional hotels over the next three years and restoring some $ 9.5 billion to $ 11.5 billion to shareholders.

By purchasing Starwood Hotels & Resorts in 2016 for $ 13.3 billion, Marriott has become the largest hotel company in the world, but now that integration with Starwood is officially over, how will the company continue? to grow and, as said Marriott's president, Arne Sorenson, again? "

The strategy, Sorenson explained more or less, is to continue to follow the strategy followed by the company since 2015.

"We are about to test the theory we have followed since the beginning," Sorenson told an audience of over a hundred investors meeting at the New York Marriott Marquis in New York.

As Sorenson explained earlier, this theory should be the preferred travel company in the world and offer both superior and inferior synergies through loyalty, sales force, reservation systems and scale.

And despite the many challenges associated with integrating Starwood, from the merger of loyalty programs with massive data breaches announced last fall, Sorenson said Marriott sees "the simplicity" of its initial growth model from of 2015 "come back".

"[The year] 2018 showed us some of the bumps we could hit, "said Sorenson," but the bumps were part of the hard work of M & A [mergers and acquisitions]"And, he added, Starwood remains a" spectacular opportunity for Marriott. "

Not only that, but the company thinks "unequivocally" that its bet on Starwood, on the loyalty, on the range and diversity of brands and hotels it currently has, will equate to incredible growth over the next three years and well into the next 90 years of the future of society.

How Marriott plans to grow

Marriott already has significant advantages in terms of size, but its main approach to developing and adding these 1,700 hotels over the next three years involves both a pursuit of size and quality, as well The importance of customer loyalty and experience. . Marriott has not revealed under which brands these new hotels would be added.

In terms of growth, said the leaders, it is not about pursuing any transactions or hotel development possible. It's about attacking those who matter most, those who bring the most value to Marriott shareholders and hotel owners.

"I started today's conversation by describing the race for global growth as a war on two fronts: scale and quality," said Tony Capuano, Marriott Global Development Director. "We have chosen to compete on both fronts because of the myriad benefits of scale and the indisputable financial benefits of quality."

It's a matter of quality

As evidenced by Marriott's current hotel portfolio, it is clear that Marriott's portfolio is addressing more upmarket, at a time when more upmarket and mid-sized accommodations have taken more market share and, as Sorenson notes, "grow faster than others" and move towards urban markets. "

Although Marriott has missed its goal of adding 285,000 to 300,000 gross rooms from 2017 to 2019 – it has added only 245,000 gross rooms – Sorenson, as well as Capuano, attributed this failure to the fact that development time current is simply taking longer.

They added that more time was needed to build new hotels in more urban markets and to build hotels under more lifestyle and design-oriented brands than in previous years.

"It takes a little longer than expected," said Sorenson, adding that the company added "more urban and more valuable rooms than those offered by the company. [more] suburban model in the past. "

In short, Marriott is not content to add more hotels to create more, although the company had a record year for its portfolio of hotel development projects last year. We strive to add more quality hotels and brands and remove properties that do not meet the company's quality or brand standards.

Tina Edmundson, global brand agent and luxury portfolio leader at Marriott Global, is a recurring example: it is Marriott's current work to transform the Sheraton brand into trouble.

In 2017 and 2018, Marriott vacated 26 Sheraton properties that did not meet its new standards, and the company continues to focus on "transforming" the Sheraton brand, which is Marriott's third largest brand in terms of total number property and revenue generated by the fees. . So far, the strategy seems to work: the brand has seen an improvement of 150 basis points over 2017 compared to the consumer's intention to recommend the brand.

Stephanie Linnartz, Commercial Director of Marriott Global, also mentioned the fact that in the US, Marriott occupies about 15% of the total share of accommodation, but that the card company's customer data Visa credit suggests that Marriott accounts for 25% of hotel spending. and sharing of the house.

When asked about these statistics, Sorenson said, "We are biased towards the high end." You expect us to have more dollars. Our portfolio has a higher occupancy rate than the entire sector, due in particular to the loyalty program. Travelers who are most often on the road give us a larger share of their wallet. "

It's a matter of loyalty

Over the next three years, Marriott is equally committed to ensuring that its loyal customers fill the rooms and additional hotels it adds.

As Skift noted earlier, and Marriott executives reiterated on Investor Day, Marriott is investing heavily in its new loyalty program, Bonvoy, which combines three different programs: Starwood Preferred Guest, Marriott Rewards and Ritz-Carlton Rewards. millions of members worldwide.

The company launched the new program at the Oscars in February with a resounding new campaign, "Rewards Reimagined," but consumer response to the new program has been mixed.

Marriott said that by 2019 alone, its owners and partners had leveraged $ 5.5 billion in marketing and sales funds to market its consumer loyalty program and ensure that Bonvoy truly became "a reality." new language of travel ". primary objective.

Sorenson told Skift that Marriott was spending "tens of millions of dollars" on marketing Bonvoy.

And no matter what Bonvoy's critics say, Marriott sees "greater occupancy" and a slight increase in "rush hour leisure bookings," Linnartz said. "We are adding 1.5 million members each month," she added, and "loyalty exchanges grew by 8% in 2018".

One region, in particular, where Marriott is experiencing considerable growth in loyalty is that of the Asia-Pacific region, where one-third of Bonvoy's 125 million members live, of which 24 million live in China alone.

Linnartz pointed out, however, that even though the number of members of the hotel loyalty program was the highest, the Bonvoy program was more than a loyalty program.

"Bonvoy is an important moment for our company," she said, noting that this represented a "shift from loyalty to a travel program." In short, Linnartz said, "We want to be the preferred travel company in the world.

It's a question of customer experience

And to be the preferred travel agency in the world is to offer more than a place to stay for consumers.

That's why Marriott recently invested in shared housing experiences and is looking to invest more in on and off-property experiences, as well as in car rentals.

Regarding the Marriott Home Sharing pilot project with Hostmaker, Sorenson said, "Stay tuned. You will see how we continue this activity in the short and long term. "

Raymond Bennett, Marriott's global operations manager and managed by Marriott Select Brands, also said the new Marriott Bonvoy application added new features that would appeal to loyal members and non-members alike.

These new features include mobile restore functionality, which will be rolled out at over 200 hotels in North America this year, seamless Wi-Fi connectivity and the ability to track airport shuttles. In the same vein, non-Marriott Bonvoy members may soon use the Bonvoy app to register in a hotel and benefit from a mobile kiosk option.

Marriott has also dedicated a portion of its investor day to showcasing the company's investment in restaurants to develop attractive concepts not only for customers but also for locals.

"F & B [food and beverage] Business is huge at Marriott, "said Dave Grissen, president of the Marriott group. According to Grissen, Marriott is not only the largest hotel company in the world, but also one of the largest catering companies in the world, and this activity is "inseparable from its DNA."

It's about pleasing the owners

Of course, all these combined strategies rely on Marriott's openings to hotel owners, without which the company would not be able to grow and develop all these new hotels according to its business model based on minimal fees.

Just as Marriott focuses on the "quality of its brands and products" with investors and consumers, so does it with its owners. The company said that 70% of its portfolio of open and signed hotel-pipeline projects are owned by owners owning several Marriott-branded hotels; about one-third of these projects are done by a Marriott hotel owner with at least 10 Marriott hotels.

Working with a hotel company like Marriott, that is, trying to provide the hotel guests with the greatest value possible at the best possible price, is part of Attractiveness of working with a hotelier such as Marriott. Digital, Distribution, Revenue Management and Global Sales Brian King.

No Marriott executive commented on ongoing negotiations between the company and its online travel agency, but King and other Marriott executives said the company's dependence on bookings from The line remained unchanged – and direct bookings for hotel owners remained at the center of the company's concerns as these customers are more valuable and profitable to Marriott hotel owners.

"Customers who book directly on digital channels are 6-9% more profitable than a direct booking by the OTA," said King, describing Marriott's "net revenue method." According to him, direct bookings allow homeowners to save between $ 18 and $ 26 per booking.

As Skift has already pointed out, Marriott is rolling out a new reservation system in more than 6,900 hotels, which promises to help hotels maximize revenue and better package and sell their room inventory by allowing consumers to choose the stay or experience that matters most to them.

Profitability first and foremost

Although the hotel sector has always focused on indicators such as the net growth of units (total number of hotel rooms added or subtracted from the portfolio of a hotel company) and the revenue per room available ( RevPAR), the presentations that Marriott executives gave at the day investor company seemed to indicate that these are not the only parameters that matter most in the hospitality industry today.

Instead, it really is about profitability in the end.

"For better or for worse, we are competing in a sector where RevPAR for existing hotels is the most available metric. RevPAR is not a net profitability, it is a gross income. And where net unit growth, with no idea of ​​value, is the easiest measure to master. Both are pretty inadequate because if you drive your top-line by driving RevPAR with two expensive rooms in terms of cost, you risk actually harming the hotel's profitability. "

He added that Marriott hotel owners are particularly concerned about "increasing the profitability of their hotels" and "we think it's much better to say how much does this business cost us?" Let's give in to the most expensive channels when we do not need this business. Maximize profitability. "

And the same applies to how Marriott is approaching growth and eventually becoming a hotel company with more than 8,600 hotels by 2021.

"It's the same thing with net unit growth," said Sorenson. "Let's not add any coins if they do not bring us any value."

So, yes, it's all about making those numbers, but making sure those numbers matter the most and bring the most value.

Sorenson concluded the Investor Day presentation by stating, "We believe the business model is powerful and the scale of the brands we have is strong. The loyalty program, Bonvoy, is the kind of brand that allows us to go to the market in the way that our customers understand. "

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