Why Marriott is chasing ‘affordable’ midscale in the US, Canada

BETHESDA, Maryland — With its expansion into the midscale space after acquiring City Express last year, Marriott knew it was seeking a new kind of customer. That also meant the world’s largest hotel company needed to create a new kind of hotel.

When asked about what the company has learned from that experience, Diana Plazas-Trowbridge, SVP and global brand leader, Select Brands for Marriott International, said it might be more about what the company has unlearned.

“We had to really deprogram ourselves from the traditional Marriott ways and some of the programs that we have to offer… and some of the systems and tools that the hotels use when they have such a limited, smaller operating model,” she said. “You can’t expect them to do what you would normally have at a hotel with 10 FTEs.”

On Tuesday, Marriott announced it was expanding the City Express brand, which currently is in the Caribbean and Latin America, into the U.S. and Canada. Marriott acquired City Express, which has approximately 150 hotels in 75 cities across Mexico, Colombia, Costa Rica and Chile (it’s also expanding soon into Bolivia, Brazil and Nicaragua), in May 2023 for $100 million.

Plazas-Trowbridge, who was heavily involved in acquiring City Express, said serving a different kind of customer requires a lot of different thinking.

“It was really about learning that it’s a very different customer we may not have in our ecosystem today… They are enticed by different benefits of loyalty, outside of what normally we offer with our loyalty program,” she said.

Plazas-Trowbridge cited an example of customers wanting smaller rewards (say a $5 discount) versus building up more points for free nights later. She said the company has also learned to give owners access to the company’s revenue management and sales tools as easily as possible.

“It came down to a lot of simplification of our normal approach of coming into a hotel and the customer,” she said.

Marriott is looking for a customer they call the “efficient traveler” who is a mix of business and leisure.

“They’re looking for something convenient, something comfortable, but an affordable stay,” Plazas-Trowbridge said. “We are making sure that they have some of those practical, easy-to-use amenities — the free breakfast, for example, is a key fundamental piece there — but a lot of it is really streamlining the entire hotel experience, with some nice touches of design elements and bringing a little bit of the ethos of that City Express brand from CALA that has proven to be so successful.”

Marriott acquired City Express for $100 million in May 2023.

Marriott noticed a growing interest in this space, especially post-COVID, and thought the time was right to get into the “affordable midscale transient” space in the U.S. and Canada. “We knew that we needed to have the right proposition for that customer and for the owners as well,” Plazas-Trowbridge said.

Unlike previous brand entries (Plazas-Trowbridge mentioned Courtyard starting as a brand for business customers and evolving from there), Marriott knows it is going to have a mixture of business and leisure with City Express from the start.

“You may have that business traveler that just wants the convenience and the ease next to the location that they’re going to, but you may also have a family that is looking for an affordable stay,” she said. “So we may have some in much more high-leisure destinations. Then you may also have some of these hotels in more suburban and business parks type of places.”

Details of the brand

At the NYU International Hospitality Industry Investment Conference in June, the company offered up details of the brand (it was then called “Project Mid-T by Marriott”) like an average ADR in the $90-100 range and a conversion cost between $15,000 to $30,000 per guest room (depending on the age of the hotel and the PIP required).

Marriott also disclosed a “low bundled fee” of 10.5% — including franchise, marketing and loyalty fees, among other charges. (It is offering a similar lower bundled fee, 9%, for its midscale extended-stay brand, StudioRes, which was announced last August.

The average size of a hotel will be around 100 rooms and have many fewer FTEs than a typical Marriott. Plazas-Trowbridge said the average length of stay is 1.2 nights for City Express, and she anticipates it is staying in that range for U.S. and Canada properties as well. She thinks the properties will skew heavily to the U.S. (she estimates a 90%-10% split).

While Plazas-Trowbridge didn’t want to commit to any number of targets, she said the company is seeing “great energy” from owners and the investment community and anticipates having signed deals in the coming months. She said the company is hearing a mix of interest from current Marriott owners but also thinks the low bundled fee will draw in owners the company hasn’t worked with before.

The brand will be conversion-only at first and is being designed to be as streamlined as possible (Plazas-Trowbridge thinks a typical conversion will take around six months, with hotels that don’t need as much FF&E and renovation work having the ability to finish sooner.)

In terms of markets for City Express, Plazas-Trowbridge said she anticipates quite a mix in terms of market size and geography.

“What has been coming through my desk has been all over. It’s been quite a few secondary, tertiary markets that are much more on the suburban side, but then also quite a few in some major cities,” she said.  “So while they may not be downtown locations, they’re still within enough of that convenient location in the metro area.”