Marriott International has reached an agreement with Hoteles City Express to acquire Mexico’s City Express brand portfolio, marking Marriott’s entry into the affordable midscale segment with its 31st brand.
The portfolio currently includes 152 hotels comprising 17,356 rooms across 75 cities in Mexico and three additional countries in Latin America. Upon closing of the transaction, all owned and leased hotels will enter into long-term franchise agreements with Marriott, while franchise agreements for jointly owned, franchised and operated properties will be assigned to Marriott, with the option to enter into a new agreement. Marriott will also acquire the franchise rights to five under-construction projects in the pipeline, representing an additional 676 rooms. Marriott expects to update the brand name with its “by Marriott” moniker.
Transaction Terms
Under the terms of the agreement, Marriott will pay $100 million for Hoteles City’s brand portfolio (City Express, City Express Plus, City Express Suites, City Express Junior and City Centro), associated trademarks, domains and related intellectual property, the City Premios loyalty program and other assets and liabilities related to the brand. Stabilized franchise fees are anticipated to be approximately $10 million for the existing portfolio.
Marriott expects the transaction to make the business the largest hotel company in the Caribbean and Latin America region, increasing its presence 45 percent to 486 properties across 37 countries. Given the high-growth nature of the affordable midscale segment, the company said it sees a “meaningful opportunity” to further expand the City Express by Marriott brand in the CALA region as well as in other locations. In addition, Operadora de Hoteles City Express will be designated as an approved operator, developer, project manager and construction supervisor in Latin America and the Caribbean for future properties bearing the City Express brand or other Marriott brands in the limited-service segment.
“This transaction with Hoteles City Express is a strategic win for Marriott and our customers, associates and owners and franchisees,” Anthony Capuano, CEO of Marriott International, said in a statement. “We’re excited to enter a new lodging category—the popular affordable midscale segment where we see significant potential. With City Express by Marriott, we will be providing our customers with more choice through a new, approachable, moderate-priced offering, increasing opportunity for owners and franchisees as well as associates.”
Hoteles City Express is a Mexico-based company founded in 2002 by Luis Barrios. The company’s brand portfolio includes a range of midscale properties that include urban, suburban and extended-stay offerings in Mexico, Costa Rica, Colombia and Chile.
Gaining Ground
“When we started thinking about City Express, we were convinced that a modern, efficient and affordable brand would be very attractive to the local traveler. After our first 20 years, we are very excited and honored to work alongside Marriott, a company we’ve always admired, to take the brand to the next level,” said Luis Barrios, CEO of Hoteles City Express. “After having the opportunity to work with the Marriott team, we confirmed that we share common cultural values and a similar approach to hospitality.” The relationship, he continued, will attract international travelers—particularly those from the United States—to the brand. “Additionally, the strengthening of our financial position will allow us to overcome the weight that the stock currently carries due to a possible dilution event and incorporate 676 new rooms in the coming months. All this, together with the great operational improvement that we have made during the recovery period, puts us in a solid position to continue growing and creating value for all our shareholders.”
“Our goal is to be everywhere our guests want us to be, with the right property in the right location and at the right price point,” said Brian King, Marriott's president, Caribbean and Latin America. “This transaction with Hoteles City Express will expand our ability to do exactly that—initially in CALA, with opportunity around the world. We can’t wait to welcome City Express’s customers and continue the tradition of high-quality hotels and authentic hospitality established by Luis Barrios and his team.”
The closing of the transaction is subject to various customary conditions. Marriott expects the transaction could close between the end of 2022 and the first half of 2023.
A version of this story ran on Hospitality Insights' sister site Hotel Management.