A $12.2 billion price tag is a hefty one, but understandable when you consider what Marriott bought back in 2016 when it purchased Starwood. The combined company now boasts 30 brands, with more than 5,700 properties offering 1.1 million rooms in more than 110 countries. As mega deals go, it’s an impressive one.
As with deals of this kind there was, however, a bigger agenda. After the acquisition was agreed, Marriott chief executive Arne Sorenson explained the rationale behind it. Increasing the portfolio of properties was one thing but, he said, discussions with technology giants like Expedia, Google and Facebook had been the deciding factor in bringing two giant names together. It is easy to see why, given the leverage that the brands’ three loyalty schemes – Marriott Rewards, Starwood Preferred Guest and Ritz-Carlton Rewards – offer in terms of direct marketing.
Next year, all three will come under one name and provide Marriott with access to an astonishing 110 million members. Pote spells out just how immense a benefit all this data is to the combined company. “If our loyalty programme was a country, it would be the 12th largest by population.”
It is, she says, “not just about booking and redeeming stays”. A glance at the Marriott Moments website proves this, with experiences on offer there ranging from cooking classes, car hire and wellness to day trips, concerts and festival tickets, available for points exchange and cash purchase.
There are 100,000 options on the site and, with the new combined customer base, that will only increase. Currently, Marriott does not match hotel stays with flights, but asked if this was an ambition, Pote replies: “I would like to think so.”
She adds: “We have always had a vision to be the world’s favourite travel company with a one-stop shop. Bringing the loyalty schemes together is the glue that holds our brands together.”
This is still work in progress, with more details likely in 2019 when the combined loyalty scheme brand name is revealed. Meanwhile, there is work to be done on the physical brand assets. The merger’s impact has been felt resoundingly in Europe, where before the deal Marriott had 325 hotels and a dozen brands. After, it acquired another 176 properties and 10 more brands. There are “no plans” to consolidate and two years later Marriott boasts 560 properties in 41 countries across Europe.
Europe is Pote’s territory and she explains that another factor that attracted Marriott to Starwood was the increased reach that it brought in the region. She names Spain, Italy and Croatia as countries where Marriott immediately gained a bigger footprint, while in Germany, Poland, Sweden and Georgia, the brand doubled in size.
“It gives us a bigger presence particularly in luxury – we’re now number one in luxury and upscale full service in Europe. We have a goal to be number one where it counts,” she says. There are still gaps in Europe that need to be filled. “We have a signed pipeline of nearly 200 properties with 33,000 rooms in Europe. We feel we are almost where we need to be in most of the key markets, but we need to bulk out in some areas.”
She names Belfast, Kiev and Amsterdam as targets and says Marriott is “looking at getting back into Athens”. Marriott is also looking further east: “We’re still seeing opportunities in Russia and Turkey as the domestic market travels more. In Russia, it’s not just Moscow and St Petersburg, but also the second-tier cities. Eastern Europe presents an opportunity for new builds, whereas western Europe is often conversions.”
The upper mid-scale sector is also an area of expansion. “We have a focus on the mid-market; over 40% of our pipeline in Europe is in that tier. We call it the affordable lifestyle tier. We still have a lot of growth with Courtyard, Aloft and Element. We launched Moxy in Milan in 2014, now we have 19 properties and another 50 potential properties in 40 destinations between now and 2020.”
The Autograph Collection of boutique hotels is another growth target. Pote describes this as a ‘soft’ brand whereby owners are allowed to retain their own property’s identity while conforming to Autograph’s standards in return for Marriott’s sales and marketing might.
Also earmarked for a bigger profile is Starwood’s Luxury Collection. Pote believes it is a brand well-suited to Europe’s more historic properties and adds that there is a “lot of interest” from hotel owners. However, other parts of the world are different, with the more famous brands holding sway among owners: “In new markets, they ask for Marriott, particularly eastern Europe.”
Starwood’s iconic – but, some would say, tired – Sheraton brand is being revived. “It was the first international hotel chain; it’s a brand we love to have now. We’re working on a transformation – more collaborative spaces, more tech, more of a hosting experience that is exclusive to Sheraton.”
Globally, 25% of Sheraton properties will be renovated and new Sheratons will open in Serbia, Kazakhstan and Georgia. Marriott plans to give it a new lease of life. “We’re excited about expanding Sheraton,” Pote adds.
The Sheraton name dates back to simpler times, with none of the disrupters like Airbnb that are around today. Coping with these is another challenge that Marriott must face. This summer a pilot scheme, known as Tribute Portfolio Homes, was launched by Marriott with Airbnb management provider Hostmaker. The joint venture offers 200 short-term home rentals in London. “We’re looking at how we can potentially move into the home sharing space,” explains Pote. “This business competes broadly towards ours, but it’s skewed more towards leisure. It allows, for example, groups of families and friends to stay in London that could not otherwise do so economically in a hotel.”
The Tribute name comes from a Starwood initiative launched in 2015, bringing together a group of four-star independently owned properties with an emphasis on millennials. Under the Homes scheme, locations are selected based on Marriott’s safety and security criteria, with round-the-clock support and 24-hour in-person check-in plus rewards points accrual. For Marriott, this is very much an experiment.
“If we can find a way to tap into new customers without cannibalising our own inventory, we will look at it. It’s early days; we’ll see how it pans out,” Pote says.
Meanwhile, Marriott is also looking to spread its reach in more familiar ways. Another brand that we will hear more of is Delta Hotels by Marriott, which until now, apart from properties in Shanghai, Frankfurt and Bodrum, has been confined to North America. The official description says Delta offers ‘the bare maximum’, with free wi-fi and bottled water and a full fitness area plus trendy bar. The brand is priced ‘just below’ Marriott and elevates the small details that it is believed clients want.
“I think there’s a lot of opportunity for this brand in Europe,” says Pote. “It’s quality full service but simple, and definitely a brand that developers will be interested in.”
What clients want changes according to generation and Marriott, like all other hotel brands, has to keep up. So what’s the next big thing in the hospitality sector? Pote has a quick response: “Wellness and well-being is key when you think of the next generation,” she answers emphatically. “The young generation is particular about their fitness and health. We have to change food and beverage to suit them.”
She points to the popularity of brands like Pret a Manger plus the trend towards veganism and non-dairy diets and gives the example of Westin hotels, which now offer running kits to guests so that they don’t have to travel with their own shoes.
“It’s not just about fitness centres, but also how can we help people get more sleep with things like yoga and mindfulness sessions, so that when people travel, they don’t have to compromise,” Pote concludes.
It is with targeted marketing and branding like this that the combined Marriott/Starwood plans to grow even bigger. As it does, the number of loyalty club members will doubtless far exceed the current 110 million, as will the marketing opportunities for extras like yoga classes to those customers. If it all goes to plan, Arne Sorenson will come to regard his $12.2 million as money well spent.