Marriott flexes at ALIS breakfast

Marriott International’s scorecard for 2022 included signing two new deals a day, and the leadership team used the Americas Lodging Investment Summit (ALIS) in Los Angeles as a moment to thump their chest about it.

Now President and CEO Tony Capuano hosted a breakfast at ALIS to talk about the 726 management and franchise agreements added last year, an increase of 21% over 2021 signings, representing nearly 108,000 rooms. About 20% of those rooms are coming in the form of conversions and half were in international markets led by India, Saudi Arabia, Mexico and the Caribbean. He also talked about the state of performance and what’s ahead.

Capuano made specific reference to the growth in Marriott’s residential business in 2020 and 2021, perhaps the toughest years any hotelier had to weather. “That’s a business that continues to grow and thrive, and maybe is reflective of something I hope you’ll see from us in the coming years –exploring adjacencies that we think are complementary to our core business that are appealing to our guests and can ultimately grow into profitable incremental revenue streams,” he said. “Residential is a clear example of that.”

With respect to the ongoing performance recovery, Capuano said that pricing power has been extraordinary. “If you look at the last two big shocks to our industry – the post-911 environment and the Great Recession, it took the industry close to five years to see rate recover. We saw rate recover in less than two years in this instance,” he said. “Our view is that it reflects the depth of pent-up demand.”

It is demand and compression that drive pricing power, and based on the forward-looking data we’re seeing, we continue to be optimistic about our ability to continue to drive pricing.

Tony Capuano

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Having just returned from Saudi Arabia and asked about the potential of the market as a global destination, Capuano said the leadership there has the luxury of investing extraordinary amounts of capital to develop the infrastructure necessary to support the growth and reposition the destination the way they want.

The question is, however, will people start to view Saudi Arabia as an appealing and interesting destination? Capuano believe the physical product and the diversity of the product that’s being developed is fascinating with Marriott having some 30 to 40 operating hotels in the Kingdom and about the same number in its pipeline. But what struck Capuano on his recent visit was the pace of social change. “My first trip to the Kingdom was probably eight years ago. I remember arriving at the Ritz-Carlton and we didn’t have a single female associate in that hotel,” he said. “Today, about 40% of the associate base in that hotel is female. We’ve started a developmental program identifying students that have a passion for hospitality, and 58% of the graduates are female. You go to some of the retail and restaurant developments around Riyadh, and you think you are in a Western city. So, the pace of social change, while there’s still admittedly a great deal of work to be done, is pretty amazing every time I go back.”

The conversation then turned to potential pricing power this summer and Capuano said Marriott doesn’t think it has tapped all of the pent-up demand. The caveat, he said, is continued historically short booking windows. “But obviously, it is demand and compression that drive pricing power, and based on the forward-looking data we’re seeing, we continue to be optimistic about our ability to continue to drive pricing,” Capuano said.

Capuano added that he is elated at the pace at which group demand has recovered and said special corporate negotiations, while at first slow to drive rate, is starting to look more encouraging and more reflective of the current demand environment.

Among other highlights in 2022, Marriott announced its planned entry into the affordable midscale segment. Under an agreement with Hoteles City Express, S.A.B. de C.V., Marriott plans to acquire the City Express brand portfolio. As of October 19, 2022, the portfolio was comprised of 152 hotels, including around 17,000 rooms across 75 cities in Mexico and three additional countries in Latin America, and five under-construction projects, representing an additional 676 rooms.

Upon closing, the transaction is expected to make Marriott the largest hotel company in the Caribbean and Latin America. Given the high-growth nature of the affordable midscale segment, the company sees opportunities to further expand the City Express by Marriott brand in the Caribbean and Latin America region, as well as in other locations.

Capuano added that whether or not City Express comes to the U.S. and Canada is still a question mark. “But we are certainly looking at ways across segments where we don’t play today and trying to assess whether there’s a place there for us to grow going forward. And if we’re going to do it, we obviously want to be able to do it at scale.”