Marriott CFO on How the Company Grew to Become the Largest Hotel Chain | WSJ

Summary

Marriott's asset-light business model has enabled the company to grow rapidly, with over 8,700 properties across 139 countries. By separating real estate ownership from hotel management, Marriott tapped into global capital, accelerated brand development, and expanded its reach. The company emphasizes its ability to cater to diverse customer needs through its wide range of brands and its loyalty program, Marriott Bonvoy. Looking ahead, Marriott aims to continue its global growth, adapt to changing travel patterns, and enhance customer experiences, while ensuring strong returns for investors.

Takeaways

• 😀 Marriott's success is attributed to its asset-light model, where real estate ownership is separated from hotel management, allowing for faster growth and greater flexibility.
• 😀 The company now operates over 8,700 properties in 139 countries, a significant achievement fueled by global capital investment and strategic brand management.
• 😀 Marriott's focus on building strong hotel brands, rather than owning the properties themselves, has allowed them to scale rapidly without being limited by real estate constraints.
• 😀 With only 7% of the global market share, Marriott sees tremendous opportunity for growth, particularly through its expansion into international markets, now accounting for 40% of its portfolio.
• 😀 The rise of branded hotels is linked to their ability to deliver proven returns for real estate investors while offering customers consistent, high-quality experiences.
• 😀 Marriott’s loyalty program, Bonvoy, enhances customer engagement by offering a wide range of brand choices, tailored experiences, and added value through rewards and services.
• 😀 The introduction of new hotel brands, like StudioRes, is driven by market research and customer feedback, ensuring that Marriott addresses emerging travel trends and consumer demands.
• 😀 The company has observed that customers value consistency, especially in the wake of the COVID-19 pandemic, preferring to know what to expect in terms of service and amenities across various locations.
• 😀 Investment in hotel amenities such as mobile check-ins, tech-friendly rooms, and versatile public spaces (like bars and lounges) has proven to provide the best return on investment.
• 😀 Marriott’s ability to leverage capital from owners and franchisees worldwide allows for more rapid expansion and an ability to meet customer needs without bearing the full cost of property ownership.
• 😀 Looking ahead, Marriott plans to capitalize on post-COVID travel recovery, focusing on expanding its core business and exploring adjacent opportunities such as luxury yachts and co-branded credit cards.

Q & A

What has been the key factor in Marriott's success in growing its global presence?

Marriott's success in expanding globally has been driven by its decision to sell off real estate to outside owners, adopting an asset-light model. This allowed Marriott to focus on growing its brands and accessing capital worldwide, which in turn facilitated faster expansion and the development of a large global network.

How does Marriott differentiate itself from its competitors in the hospitality industry?

Marriott differentiates itself by being the largest global hospitality company, despite having only 7% market share. Its asset-light model allows it to scale quickly, build strong brands, and form strong relationships with owners, franchisees, and customers, providing a broad range of experiences across multiple price points.

What role did separating real estate from management play in Marriott's growth strategy?

Separating real estate ownership from hotel management allowed Marriott to reduce financial constraints tied to ownership, tap into additional sources of investment capital, and focus on enhancing its brands, customer service, and operational efficiency. This model enabled faster expansion and growth globally.

How has Marriott's global footprint evolved over the years?

Marriott's global presence has expanded rapidly, with nearly 40% of its hotels now located outside the U.S. This international growth was made possible by the asset-light model, allowing Marriott to access capital in various global markets and quickly scale its brands.

Why is there a rise in branded hotels, and how does it benefit both investors and customers?

The rise in branded hotels is driven by the ability of strong brands to generate higher returns for real estate investors due to economies of scale and the power of branding. For customers, branded hotels offer consistency, quality, and a range of experiences, making it easier for travelers to find reliable options at different price points.

How does Marriott Bonvoy enhance the customer experience?

Marriott Bonvoy, the company's loyalty program, provides customers with a wide range of choices in terms of hotel types, amenities, and price points. It also personalizes the customer experience, offering tailored preferences such as room features and mobile check-ins, enhancing convenience and customer satisfaction.

What is Marriott's approach to adding new brands to its portfolio?

Marriott's approach to adding new brands is driven by market research and customer demand. For instance, the creation of StudioRes came from insights into customer preferences for extended stay hotels and feedback from owners and franchisees seeking a modern, cost-effective model for this segment.

What changes in hotel design have had the highest return on investment for Marriott?

Investments in hotel public spaces have yielded the highest returns. Features such as multi-functional bars that allow both work and dining experiences, as well as modern amenities like easily accessible phone charging stations, are key to ensuring guest satisfaction and long-term value for the property.

What challenges do you foresee for Marriott and the hotel industry in the next 10 years?

Challenges for Marriott and the hotel industry in the coming decade include maintaining adequate returns for real estate investors, managing operational costs, and ensuring growth amidst increasing competition. Additionally, the industry must adapt to changing travel patterns and the evolving expectations of customers.

What makes Marriott's approach to customer engagement and loyalty effective?

Marriott's customer engagement strategy is effective because it offers a wide variety of branded hotel options to meet diverse needs, while its loyalty program, Marriott Bonvoy, enhances the customer experience by allowing personalization, ease of communication, and offering valuable perks and rewards for frequent travelers.