Limited-service still core of franchising effort

As a hotel company 18 brands strong, Marriott International has built itself into a giant, having opened nearly 26,000 rooms in 2013 alone. As it stands today, the Bethesda, Md.-based lodging company has nearly 3,900 properties in 72 countries. Franchising was not a large part of Marriott’s business until the 1990s; today it has more than 700 franchise companies in North America and 95 franchise companies outside of North America. Hotel Management spoke with Liam Brown, Marriott International’s president, U.S. & Canada division for select-service & extended-stay lodging and owner & franchise services, who updated us on his company’s current franchise efforts, relationships with franchisees and today’s financing environment.

HM: Marriott International is a large and diverse company, with so many brands—many franchised. How do you select the right franchisees to work with?

LB: We value our long-term relationships with our owners and franchisees, as well as newer entrants in the industry. We look for franchise leaders who share a commitment to investing in hotels, that take care of associates and in turn provide exceptional service to guests. We work to develop the best product and service offerings that allow owners and franchisees to remain competitive while earning a return on their investment. And we rely on our owners and franchisees to execute on these priorities and derive the most value from the brands.

HM: Is there a particular Marriott brand that lends itself best to the franchise model?

LB: Our franchise portfolio is led by our select-service and extended-stay brands: Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn and TownePlace Suites. AC Hotels by Marriott, a lifestyle brand well known in Europe and now expanding to North America, has many franchised properties under development. Moxy Hotels, Marriott’s first entry into the economy tier, three-star segment in Europe, is on track to open its first hotel in Milan in August, and there is a strong pipeline of properties. We are also seeing more interest in franchising many of our full-service brands, although this varies by region. The Autograph Collection has added nearly 60 hotels since its 2010 introduction, and the majority of them are franchised.

St. Louis’ Courtyard by Marriott Westport completed a renovation of its public space/lobby area.

St. Louis’ Courtyard by Marriott Westport completed a renovation of its public space/lobby area.

 

HM: What have you witnessed in terms of financing for new-build hotels? Have banks loosened up lending terms, allowing more prospective developers an easier path for constructing new hotels?

LB: In 2013, we completed the largest number of new hotel deals in Marriott’s history, and one factor that played a role in this was our partners’ improved access to capital. However, financing for new-build hotel projects varies by segment and location. For example, for limited-service hotels in North America, franchisees are stepping up development with significant equity contributions. At the same time, obtaining financing for new-build full-service projects in North America continues to be a challenge, so the majority of deals this year will come from conversions of existing hotels to Marriott brands.

HM: Is there a particular brand Marriott is more eager to develop over another in the current state of the economy and industry?

LB: One of Marriott’s main priorities is to attract the rapidly growing segment of next-generation travelers. We are focused on gaining quality distribution for all of our core brands, as well as for newer entrants into our portfolio. We are leading these efforts with our signature brand, Marriott Hotels. Our new brand Moxy is gaining traction in Europe with its focus on the millennial traveler looking for style at attractive prices. We’ve already identified nearly 30 sites, approved a dozen projects, and we expect the first hotel to open in Milan this spring. The Autograph Collection, which harnesses the power of Marriott’s global sales, marketing and revenue engines, remains a valuable opportunity for independent hotel owners. We are also eager to grow new brands such as Edition and AC by Marriott. This business venture harnesses the power of Marriott’s global sales, marketing and revenue engines for independent hotels.

HM: Explain the differences between franchising in the U.S. versus globally?

LB: Franchising is a well-established business practice in the U.S. with very clear rules. The practice of franchising is in various stages of development around the world, and is more complicated in terms of legal jurisdictions. We do have franchise hotels outside the U.S. and we expect to see them grow in the future. 

Inside The Deal

The 378-room Courtyard and 261-room Residence Inn New York Manhattan/Central Park opened in December 2013 as the tallest hotel-only building in North America. The hotels were developed by veteran real estate developer Harry Gross and are managed by Interstate Hotels and Resorts. This property was recognized as the “Development of the Year” at the 2014 Americas Lodging Investment Summit.

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Franchise History

Marriott became more involved in franchising in the 1990s. It started with a base of six franchisees—including Ocean Properties and White Lodging, which opened Marriott’s first two franchised hotels in 1990: a Fairfield Inn & Suites in Bangor, Maine, and Merrillville, Indiana, respectively.

Regions of growth opportunity

Focus on attracting multi-unit development partners in the Caribbean and Latin America, particularly in Mexico and Brazil. A focus on growing Moxy brand in Europe. In Africa, the Protea Hospitality acquisition will nearly double its distribution in the Middle East and Africa. In the Asia-Pacific region, Marriott expects to reach 330 hotels and more than 96,000 rooms across 16 countries by 2016. 

Franchise properties currently under construction

Marriott has 184 franchise properties currently under construction, in 14 countries around the world (as of Q4 2013).

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