It’s really more than the net unit growth, but at a Marriott
press breakfast during ALIS, the Marriott CEO joked about his epitaph and talked
about ecosystem expansion to capture 100 cents of guest dollars.
LOS ANGELES – If CEO Tony Capuano has his way, Marriott International will
leave no stone unturned to keep its guests inside the company’s ecosystem,
offering whatever type of accommodation they need whenever they need it. That is his unending growth strategy,
plain and simple. “NUG (net unit growth) will probably be on my tombstone one
day,” he joked during a press breakfast on January 23 during ALIS in Los
Angeles.
“I want to capture from our guests as close to 100 cents on
the dollar of their travel wallet as possible,” he said. “The easiest way to do
that is to make sure we have the right product everywhere our guests want to
travel, for every trip purpose.”
So, when he talked 2023 growth numbers that included a 52%
increase in organic growth volume with 164,000 rooms signed (91,000 in the U.S.
and Canada) and a 4.7% increase in net rooms growth that brought the company to
some 1.6 million rooms globally, Capuano said the signings that amounted to 2.5
deals per day went a long way to achieve Marriott’s ultimate objective.
We acquired the W Union Square in New York on balance sheet, and we have done an extraordinary reinvention of that product, which we will unveil in a pretty meaningful way the NYU conference [in June].
Tony Capuano
Some of that growth came via new brands that stretch the
ecosystem, including The Ritz-Carlton Yacht Collection and Homes & Villas
by Marriott. Marriott also stepped into the midscale segment with the acquisition of
Mexico’s City Express for the CALA region and StudioRes for the lower midscale,
pure extended-stay space. ‘“It’s not because we felt like we didn’t have enough
brands in the portfolio; it’s because what we heard from our guests is for
certain trip purposes, having accommodations within the Marriott system in
those areas would allow them to continue to demonstrate their loyalty within
the umbrella,” Capuano continued.
By the way, conversions accounted for 25% of Marriott
openings in 2023 and about 40% of signings.
Capuano was deliberate in his comments stating that the move
into midscale by no means represented a pivot away from luxury and lifestyle. “They
can coexist and grow and thrive in parallel,” he said. “We continue to extend
our sizable lead in luxury with over 600 luxury hotels open around the world
and nearly 250 in the pipeline. Another 20 luxury hotels will open this year.”
He also expressed excitement about a brand that he admitted he
didn’t truly understand when it was acquired from Starwood in 2016, W Hotels. “We’ve
bet on W with our balance sheet,” Capuano said. “We acquired the W Union Square
in New York on balance sheet, and we have done an extraordinary reinvention of
that product, which we will unveil in a pretty meaningful way at the NYU
conference [in June].”
Hot topics
During an ensuing Q&A session, the Marriott development
team in attendance noted that one Apartments by Marriott Bonvoy, its version of
an upper tier extended-stay product, is open in Puerto Rico, has another two
deals signed in the U.S., and a number of other deals are under discussion.
At the opposite end of the spectrum, StudioRes is clearly
positioned as a lower midscale extended-stay – not transient – and the
development team was eager to discuss its points of differentiation.
“I think our design [for Studio Res], both economic and
actual design for the customer, is unique,” said Leeny Oberg, Marriott’s CFO
and EVP of development. “The operating model is arguably the best in that
space. When you put it together with the actual experience for the customer, we
think it’s going to do extraordinarily well.”
Our competitors are growing more towards chasing TownePlace Suites. We’re looking squarely on that bottom half of midscale and think that’s where the sweet spot is today.
Leeny Oberg
Oberg added that because of its clear positioning, the
operating model is very streamlined and digitally heavy. “Quite frankly, it’s
good and simple, and will allow for profit margins on what is our most
affordable price per key to build of any of our products,” she said.
In response to a question about the segment being crowded,
Oberg added that there isn’t a lot of quality product at the lower midscale
end. “There’s only one real competitor that’s been able to get the volume in
that space,” she said. “Our competitors are growing more towards chasing TownePlace Suites.
We’re looking squarely on that bottom half of midscale and think that’s where
the sweet spot is today.”
Capuano also pointed to the affiliation cost model for
StudioRes as another important point to differentiate. Marriott will bundle its
fees at 9%, whereas competitors, depending on the size of the property, will
sit between 12% and 14%, he said. “It’s significant and makes it easier to
underwrite,” he said. “There’s less volatility in fees.”
Lastly, with Marriott being in the extended-stay space for
almost 40 years with products like Residence Inn, the development team said it
better understand what the customer wants and how to organically sell the
customers. “That’s going to be the real key to the success of these hotels,”
Oberg said. “Otherwise, if you just plug them into your res system and flip the
switch, they’re going to operate as transient hotels and destroy your margins. Your
guest who really wants an extended-stay experience is going to have a very
different experience.”
The other hot topic during the discussion surrounded food
and beverage, which Capuano called a tremendous opportunity. “More and more
guests are making their booking decisions based on the food and beverage
reputation of the hotel,” he said. “I think that’s becoming a global
phenomenon. “So, creative thinking about how we execute food and beverage is
going to be an increasingly important part of our strategy.”
As an example, Capuano points to the Fairfield Suites brand
in India that have “amazing three-meal restaurants because maybe more than any
market in the world that Indian consumer is 90%-plus domestic and makes their
booking decision based on the food beverage reputation of the hotel. We even
have great food beverage at the airport hotel there.”
He also pointed to a partnership Marriott did with Chef Jose
Andres at the Ritz-Carlton South Beach in Miami Beach, which he said might have
the highest F&B volume of any Ritz-Carlton in the world. In Tampa, Florida,
at the new Edition hotel, chef-partner John Fraser at the Lilac restaurant already
has a Michelin star. “It’s really put that hotel on the map,” Capuano said.
“So, the power of well-executed food and beverage to accelerate the visibility
of new hotels is not lost on us.”