“Marriott now controls a much larger portion of available rooms in this market. That’s good for Marriott, tough for the competition, and perhaps tough for tourists trying to find the most competitive rate,” said Michael Farr, president of the investment management firm Farr, Miller & Washington in the District.
Whereas Marriott grew from a handful of small lodgings in the Washington area, Gaylord barreled into the market by opening a mega-hotel on the shores of the Potomac River. The Gaylord National is now a self-sustaining destination, with seven on-site restaurants and 470,000 square feet of meeting space.
Having a concentration of convention properties could give Marriott the upper hand in setting group and business rates in the region. This comes at a time when government agencies are reducing travel spending under the threat of federal budget cutbacks, a trend plaguing hotels across the region.
“We’re strong in the Washington market, and this will make us a bit stronger in what is still a competitive market,” said Richard Hoffman, Marriott’s executive vice president of mergers and acquisitions.
Bjorn Hanson, a professor at New York University’s Tisch Center for Hospitality, Tourism and Sports Management, said the deal could allow Marriott to create a two-tier model in which Marriott might recommend Gaylord National to budget-conscious meeting planners, while the Marquis is offered up as the higher-end luxury product. Hanson anticipates that Marriott will increase revenue by erasing redundancies in marketing, accounting and sales operations.
“Marriott’s revenue management models will allow it to raise prices, but that is in response to demand, not just an aggressive pricing policy,” he said.
Nashville-based Gaylord was won over by Marriott’s capacity to reduce costs through its economies of scale, central reservations and procurement services, said Colin V. Reed, Gaylord’s chairman and chief executive.
“If we merge our operations into the Marriott operations, we’re going to see huge cost synergy,” he said. “These hotels will be operated predominantly by our management team that’s in place, but give Marriott the opportunity to extend this brand up.”
Gaylord expects to save between $33 million and $40 million a year in operations expenses. Much of that savings will be derived from staff reductions in such divisions as sales and accounting, although Gaylord has yet to reach a definitive number of employees it will let go.