As Marriott International continues its integration of Starwood Hotels & Resorts Worldwide brands, CEO Arne Sorenson and EVP and global chief development officer Anthony Capuano said the company isn’t slowing down when it comes to rapid expansion around the world and proving its innovation chops.
LOS ANGELES—This year marks Marriott International’s 90th anniversary, but instead of reflection, company executives are focused on moving forward faster than ever.
Marriott’s CEO Arne Sorenson and EVP and global chief development officer Anthony Capuano sat down with Hotel News Now at the Americas Lodging Investment Summit to talk about what’s next for key Starwood Hotels & Resorts Worldwide brands and how the company continues to grow at a breakneck pace.
Sorenson identified the two overarching trends that he sees powering the company’s growth around the world.
“Opportunities are really driven by the growth of the global middle class,” Sorenson said. “We have hundreds of millions of people who, for the first time, have the resources to see the world, and they want to see the places they’ve read about or seen in movies. … People really want to go out and experience that.”
That experience is the crux of the second big trend that is driving growth
“People want experiences more than they want stuff,” he said. “Younger travelers today … and even folks in my generation say, ‘You know what, maybe more important is that I get that experience I can remember forever. And I spend that time with my partner or my spouse or my family or my friends so we can build those relationships in a way that is lasting.’ Those two things are really powerful tailwinds for our business for a long time to come.”
Unit growth for Marriott in 2016 was at an all-time high—according to its data, the company opened a record 55,000 rooms in 2016, excluding the 381,000 gained through the Starwood transaction. Adding in Starwood activity, the combined company opened more than 68,000 rooms globally. Select-service hotels represented 275 hotel openings, and the luxury and upper-upscale segments represented more than 100 hotels and 27,000 guestrooms opening worldwide.
All in all, the company closed out 2016 over the one-million mark in guestrooms worldwide, according to STR, HNN's parent company.
Capuano said notching that growth while the company was going through the acquisition was a win.
“To put those numbers on the board—the biggest growth year in the history of the company—against the backdrop of all the integration going on, was huge,” he said.
Capuano ultimately hired a little more than half of Starwood’s legacy development team.
“As soon as we had them hired, we did two around-the-world trips to do some deep, immersive training so everyone would be ready to go by January 1, and we were ready to go,” he said.
He identified three areas of focus for Marriott’s development moving forward:
- Legacy brands: “We have great, established brands, and we expect them to drive growth,” he said.
- Select-service brands: “We expect to see strong select-service growth in North America, and we’ll see rapid acceleration of international select-service growth,” he said.
- Conversions: “We’re not necessarily at the peak,” he said. “When you see decelerating RevPAR in past cycles, you might see a moderation in the volume of new builds and a spike in conversions. Perhaps what my team is most excited about is that we’ve never had a better stack of brands uniquely focused on conversions.” He cited Four Points by Sheraton, Delta, Autograph Collection Hotels and the Tribute Portfolio as “tools in our toolbox uniquely tailored to conversion volume.”
While expansion within North America continues to be a big part of Marriott’s development activity, this is the first time in the company’s 90-year history that more than half of its global pipeline is outside of North America.
“Think about global travel trends,” Capuano said. “That’s exciting on a host of levels. Today we are in 122 countries, and this pipeline includes 28 incremental new countries.”
Europe continues to be a market where Capuano sees growth, particularly with select-service brands, representing what he called “miles and miles of runway in terms of future growth.”
Japan is another big Asia Pacific country for Marriott, which signed nine deals in the country in 2016. “The real estate markets are very strong there, and building on that strength is big,” Capuano said.
Having local people on the ground as the company expands is a key component to success, he added.
“Our team is living and working in their home region; we have all mainland Chinese developers, Indian developers and so on,” he said.
Still challenges exist, Capuano said. For example, in North America’s capital markets, “We’ve seen a gradual tightening in the availability of debt, particularly for new construction,” he said. “There’s a smaller pool of debt.”
Betting on innovation
Sorenson has been clear since the deal was announced that innovation around brands would continue to be a key part of Marriott’s forward motion. In January at ALIS, the company hosted an innovation lab to showcase the Aloft and Element brands, which came to Marriott via Starwood—brands Sorenson said have potential to grow.
At the end of 2016, 116 Alofts and 23 Elements were open globally, with 150 Alofts and 73 Elements in the pipeline, according to Marriott data. This year, the company expects to open 33 Alofts and 14 Elements around the world.
A big part of growing the brands will be pinpointing ways each can showcase innovation in design, amenities, technology and F&B, Sorenson said.
For example, the extended-stay Element is piloting a new design that places four guestrooms around a shared common space, allowing guests to share the kitchen, lounge area and dining room. Along with that design concept, the company is piloting a robot wine cart, which dispenses when activated by a guest’s key card.
At Aloft, changes include revamping the brand’s F&B offerings to include more healthy ingredients and customizable options.
“Our guests want more variety, more local experience … more things that are shareworthy,” Sorenson said. That trend, along with advancements in technology, design and F&B are “impacting the product as well as the services we offer,” he said. “That pace of change is as fast as we’ve ever seen it.”
Despite the speed of change and growth, Sorenson said Marriott remains focused on its main task at hand.
“The main thing next is to complete what we’ve just started,” he said. “By closing on the acquisition of Starwood, we have not proven that we can do the things that we want to do. … What we’ve got to do now is acquire our associates for our hotel guests, for our hotel owners, show that this transaction is good for them, too. And by doing that, we’ll be able to, of course, drive the results we think we can drive.”