The Covid-19 pandemic and the subsequent shift in the macroeconomic environment has made things more challenging than ever for the big hotel brands. Getting ground-up developments going is tricky, hence the rise in conversions. The key to overcoming all this remains an open dialogue with all stakeholders.
We recently heard from Marriott's Satya Anand, president, Europe, Middle East & Africa, to find out how the firm was navigating the new hotel landscape.
Hospitality Investor: How are you dealing with the challenges of the cost inflation on hotel development, are you seeing a bigger interest on conversion brands?
Satya Anand: Clearly the cost of developing a new build hotel has been impacted by inflation but our owner partners have a long-term view and don’t necessarily try to time development on cost factors in a given year. Conversations have been a key part of our development strategy for several years and they remain an important driver of rooms growth for Marriott International. Globally, conversions represented nearly 30 percent of signings and 25 per cent of openings in the first quarter of 2023. In EMEA, we see strong interest from independent hotels in Europe, looking to leverage the company’s powerful distribution, sales and loyalty platforms. Our Collection brands – Autograph Collection, The Luxury Collection and Tribute Portfolio – off independent hotels the opportunity to access our distribution channels whilst maintaining their independent spirit. We believe that these brands have a tremendous opportunity to grow, especially in Europe where the ratio of independent hotels still outweighs branded properties.
Hospitality Investor: Are you seeing any impact from the tightening of lending on your owners? Is this a worry for development?
Satya Anand: Given rising interest rates, the financing environment in Europe and the US has been challenging, especially for new build projects that are yet to start construction. However, we do expect the tightening of hotel financing to be short‐term and we are yet to see an impact on our global development pipeline. Marriott’s worldwide development pipeline totalled more than 3,050 properties and approximately 502,000 rooms (including more than 21,000 rooms approved, but not yet subject to signed contracts) at the end of Q1 2023 and over 50 percent of the global pipeline is now outside the US. Here in EMEA, we signed a total of 126 deals last year - 73 deals in Europe comprising of over 11,000 rooms and 53 deals in Middle East and Africa comprising of over 10,000 rooms. We certainly aren’t seeing a slowdown in owner and developer interest for our brands and remain optimistic for our growth potential in this part of the world.
Hospitality Investor: Which of your brands is having the most traction across Europe right now?
Satya Anand: We have a few drivers of our growth in Europe. Firstly, Luxury. Marriott International boasts eight luxury brands across nearly 500 hotels globally spanning 67 countries and territories. In 2022, Marriott International signed 42 luxury hotel deals and the company has by far the largest global pipeline of hotels in this segment with over 200 properties in the pipeline comprising of over 43,000 rooms. In Europe, we have opened 3 new luxury hotels to date this year - JW Marriott Madrid, JW Marriott Berlin and The Rome EDITION. We plan to open a further 7 new luxury hotels in key European destinations over the rest of 2023 including new W Hotels in Budapest, Prague, Milan and Edinburgh as well as the debut of The Luxury Collection in Tbilisi, Georgia with the opening of Freedom Square, a Luxury Collection Hotel, Tbilisi.
The second segment that is spearheading our growth in Europe is select-service. Our select-service brands account for more than 50 per cent of the company's current signed pipeline of hotels in the Europe region. Moxy Hotels has a strong pipeline of 15 hotels slated to open in the rest of 2023 and 2024, including Moxy Hotels in Barcelona, Budapest, Venice Airport and Pompeii.
We also see great opportunity in the extended stay sector. The extended-stay segment remains extremely resilient in Europe, especially with the rise of multi-purpose travel. We opened four Residence Inn by Marriott Hotels in EMEA last year and expect to open 5 more in city hotspots like Manchester, Vienna and Paris across the rest of 2023.
Finally, Fairfield by Marriott is expected make its European debut this year with the launch of the Fairfield by Marriott Copenhagen Nordhavn (Denmark) in Q4. Two further Fairfield by Marriott Hotels are slated to debut in 2024 - the Fairfield by Marriott Badhoevedorp Amsterdam Schiphol Airport, and
Fairfield by Marriott Karlsruhe (Germany). Fairfield by Marriott is Marriott Bonvoy’s second largest brand with a global distribution of more than 1,250 hotels. We see great opportunity for this brand to grow here in EMEA.
Hospitality Investor: How is demand shaping up for Europe over the summer, particularly on the leisure side?
Satya Anand: We had a great start to 2023 with first quarter worldwide RevPAR up 34 per cent year over year, with meaningful gains in both occupancy and average daily rate. We continue to see solid booking trends in the second quarter including here in Europe where booking pace for the summer is looking strong. We are confident that we will have another good summer, especially in key European resort destinations. While the global economic picture is uncertain, demand remains robust illustrating that people are willing to prioritize spending on travel after the restrictions of the last few years.
Hospitality Investor: Has business travel bounced back?
Business travel across EMEA has continued to improve this year, which shows that although business travel may look and feel slightly different to a few years ago, nothing will ever be able to replace bringing people together face-to-face. In terms of volume, we aren’t quite back at 2019 levels for business travel room nights as yet but we are seeing good rate growth in the segment, which offsets the lag in volume.
The group segment continues to improve as well. Q1 group revenue pace in EMEA was just a fraction below 2019 but is pacing up 15-25% for the next two quarters, which is great news.
It's worth noting that we continue to see a rise in blended travel where people are mixing business and leisure stays and we believe that this is a trend that is here to stay. It’s all linked to flexibility, now people can work from anywhere, guests are adding a couple of days onto business trips to explore a new city or relax round the pool before heading home. Our job is to ensure that our guests have a flawless experience – whether travelling for business, leisure or for both!
Hospitality Investor: What are the key ways Marriott differentiates itself against its competitors in the EMEA region?
Innovation has always been a part of our DNA at Marriott. We adapt and bring new concepts to market with consumer needs and preferences as our guiding force — we listen to our customers. We want to have a product for every type of customer and every type of trip.
Marriott Bonvoy, our award-winning travel programme and marketplace, sits at the heart of everything we do. We see Marriott Bonvoy as a significant competitive advantage, and we use the travel platform to connect with and inspire affluent travellers across the globe.
Members can earn points for stays at hotels and resorts, including all-inclusive resorts and premium home rentals, as well as through everyday purchases with co-branded credit cards. Members can then redeem their points for experiences including future stays, Marriott Bonvoy Moments, or for luxurious products from Marriott Bonvoy Boutiques.
Giving our 182 million loyalty members access to money-can’t-buy experiences through Marriott Bonvoy Moments is one of the most valued elements of the travel programme. These Moments enable our guests to make memories, forge new connections and enjoy some incredible once-in-a-lifetime experiences. In addition to hotel events, Moments also include unique experiences through long-standing Marriott Bonvoy relationships with the NFL, Mercedes-AMG PETRONAS Formula 1 Team, Manchester United and the O2 Arena in London.
We also believe that to maintain a competitive advantage, it is more important than ever for us to lead in the digital space. The key to success is technology coupled with empathy and human touch. Our goal is to further the spirit of innovation and use technology in a way that allows us to deliver a personalised guest experience from start to finish. Functions within our Marriott Bonvoy app help free up our associates for more meaningful interactions and time with our guests – high tech and high impact. We’ll never forget the importance of in-person service, and we see technology as an enabler, ensuring our teams deliver a service that is built on empathy and a deep understanding of the desires and needs of our guests.