Marriott’s new luxury portfolio President Tina Edmundson outlines next steps from A (apartments) to (Gen) Z appeal to sustain 5-star sector momentum for investors and consumers.
Tina Edmundson’s Peleton is her go-to for physical fitness and destressing. But when it comes to business, virtual cycles are her “flywheels” for innovation and growth.
“Right now, the number one challenge for our team is to maintain the momentum we’ve built,” said Edmundson, who was promoted from global brand & marketing officer of Marriott International’s top-tier brands to president of this global giant’s luxury portfolio in April 2023.
That’s a tall order, especially after last year’s stellar gains. Some of the credit for 2022’s strong performance goes to sector strength that lifted results for most luxury brands into double digits and fueled pipeline gains. But Edmundson and her team made sure Marriott got more than its fair share, advancing ADR 18% from a pre-COVID $364 in 2019 to last year’s $461 and collaborating with her colleagues in the premium brand portfolio to contribute 40% of the more than 3,000 properties representing more than 496,000 rooms in Marriott’s pipeline at year’s end.
This 25-year hospitality veteran shares the majority view that the overall industry is slowing down in 2023 as business normalizes. However, she describes her near-term outlook as “pretty bullish.” Although she may be “excited” that Marriott’s luxury brands are holding onto their ADR growth this year and look likely to continue to in 2024, the real driver behind her optimism centers on evolutionary and revolutionary changes that will explode the scope of luxury hotel brands.
“To continue our momentum, we have to look at how to grow our offer in a way that’s meaningful for customers but also meaningful for our owners and investors," Edmundson said. "We have to create a super compelling product and proposition for the development and investment community so that they will develop more hotels within our brands, which will keep our brand fresh and relevant to existing customers as well as bring in new guests, which drives ROI for owners, who will open more hotels. Then it becomes a virtuous cycle, and that’s what I’m really focused on.”
So far, she has the metrics to justify that claim. Approximately 15% of the company’s luxury hotel owners globally own more than one Marriott international luxury hotel.
Repeat investment is playing a significant role in delivering 35 luxury hotels this year and contributing to a 200-property pipeline. From where Edmundson sits, these loyal customers will continue to contribute a substantial percentage of system growth going forward.
As for new owners, the market may be the usual private equity players, family offices and high net worth individuals, but the investors within the sector want something different. “They’re people who see the value of being part of a large organization but still want the benefits and personalization of working directly with a smaller team that sits within that 8,500 hotel company and is dedicated to luxury,” said Edmundson.
In this interview with Hotel Investment Today, she outlined key trends that will give them and new investors and guests reasons to keep this luxury portfolio on a fiscal and development growth track.
1. Homes away from home. Branded residences have long been instrumental in making U.S. luxury hotel projects pencil. Now, said Edmundson, watch for global growth in both urban and resort markets as well as options for co-located offers and standalones.
In addition to capitalizing on this proven model, Marriott is exploring new territory by addressing rising demand for long-stay upmarket options with the launch of Apartments by Marriott Bonvoy. Unveiled last November, the new brand draws on 26 years of experience with Marriott Executive Apartments in Asia, Europe, Middle East, Africa and Latin America to bring the upper-upscale and luxury serviced-apartment concept to the United States and Canada.
A case in point example of Edmundson’s virtuous cycle approach, the new brand broadens the target guest market from families and friends seeking more space during shared holidays to bleisure travelers who want a home and a home office when they’re on the road and young travelers looking for non-traditional accommodations as they travel.
Filling this demand gap creates new appeal for existing investors looking for complementary flags and cross-over investors from other asset classes who want to leverage this hospitality company’s brand loyalty and their own real estate expertise. “We expect this concept will spur global development opportunities,” she said.
Next up may be a club brand or brand extension. “We’ve had a lot of developer interest in clubs,” Edmundson said. “It’s something we – and a lot our competitors – are looking into. What will that look like? How will that work? Where does it work? Where does it not work? It’s interesting because it’s not a one-and-done product. It’s quite regional or maybe even city specific. What’s right for New York City won’t necessarily be right for Tampa. Clubs have to get everything right to succeed but the potential is well worth examining.”
2. The “don’ts:” OTT design, overspending and over-generalization. “By 2030, Gen Z will be a major part of the audience we’re targeting. We have to look at our brands as they are today and decide what we need to do to make them appealing to this generation seven years on,” Edmundson said.
Whether speaking directly to this market or the young-thinking grandparents and parents who influenced the next 30-somethings, both products and services will skew younger in deluxe hotels, she predicted. She cited some general trends that should have at least a decade’s more traction such as cultural curation rather than conspicuous consumerism and immersion and experience as relevant upgrades over pricey set pieces and velvet-rope enclaves.
Most importantly for guests and owners will be brands’ one-size-fits-one shift in thinking. While operational, safety and service standards are sacrosanct, how the brand essence is expressed will be customizable to the primary guest market, locale and individual asset.
“With luxury design and services, there’s always the question, ‘Where do you stop?’ That’s easier to answer now. Amenity creep is not going to be meaningful to Millennials or Gen Z. They’ve told us they want experiences and they’ve shown with their spending patterns that the brands that bring that them to life can command higher rates,” said Edmundson. “They demand authenticity, not ostentation.”
Edmundson added that Marriott wants to grow its brands but can only do that if it can deliver a great return on investment. "We can’t just keep adding on amenities or other elements without demonstrating how they’ll drive top- and bottom-line revenue,” she said. The answer: A market-by-market approach that profit-maps the opportunities of the specific project.
“If a hotel has a great rooftop, we’ll take advantage of that. The next project may benefit from having a cool nightclub. Our brands have to flex to the opportunity at hand. That helps drive returns for our owners but I think that’s also what customers want,” she added.
3. Literal outside-the-box thinking. The launch of the Ritz-Carlton Yacht Collection in October 2022 opens up this luxury stalwart to a new community of investors and travelers, while expanding the cross-over potential for existing customers who already love or may want to experience luxury yachting. The first of the collection’s custom-built yachts, Evrima, introduced this luxury product to the travel market when it set sail October 15, 2022 for a voyage from Barcelona to Nice.
“Luxury brands have to seek out whitespace opportunities to maximize their potential,” Edmundson said. “it’s not just about hotels; it’s about adjacent spaces as well. Our customers are looking to our brands to satisfy their curiosity about new types of experiences. It’s been less than a year since we launched our first Ritz-Carlton yacht and I’m super-excited to see how well it’s doing. We also just opened our first safari lodge, the JW Masai Mara in Kenya, and signed another deal for a 30-tent lodge that will open in the Serengeti in Tanzania in 2026. The tented lodge and glamping business is a travel space we’re very excited about.”
Thinking beyond the box also informs property-level decision-making. Outdoor spaces are at the top of the list. Not only does that apply to existing hotels that can rethink or redesign their grounds to be more conducive to doubling as adjunct event, function or concert spaces, it’s also influencing site selection as developers shop for greenfield sites or conversion opportunities with undeveloped adjacent land. Depending on the parcel, that can provide the opportunity for incremental revenue drivers from F&B pop-ups to spas and golf.
4. Permanent changes, flexible solutions. Edmundson observed that luxury brands will have to take a close look at which current market “musts” are likely to effect permanent changes in luxury hotels. People’s COVID-driven need to have “thicker” connections and deeper relationships with loved ones as well as making time for themselves is likely to remain a priority. “That’s especially true for luxury resorts. There’s a huge need for 3-, 4- and 5-bedroom villas now. And we’re seeing demand increasing,” she said.
We've had a lot of developer interest in clubs...clubs have to get everything right to succeed but the potential is well worth examining.
Tina Edmundson
Design and operations will need to be nimble as economics and travel patterns shift. Group business may be a hot sector today, but as recent years have proven, there are no guarantees that it always will be. Lobbies need to provide office-away-from-office functionality for remote workers and business travelers, but will technology or corporate policies change that? “Economies and policies can be cyclical,” Edmundson said. “We just have to be prepared to pivot.”
One thing that’s pivotal in a different way is owners’ and guests’ scrutiny about value for money. And, in Edmundson’s view, that’s not going away even in a boom. “Customers will spend up for an experience. But they’re going to ask, ‘Why are you charging me x-amount?' They want to feel they are paying a price that is commensurate with the experience, so personalized and bespoke service is critical.”
The same holds true even for the deep-pocketed investors who are growing Marriott’s luxury brands. “Even high net-worth individuals are answerable to somebody at some point,” Edmundson said. “If we want them to invest in our brands, we have to be good stewards of their investment. We have to maximize our cost efficiencies, drive top- and bottom-line revenues and make sure they match the brand to the opportunity to give them the best flow-through. That’s the only way to future-proof our growth.”