Marriott Corp. said yesterday it plans to invest more than $2 billion over the next five years in two new hotel concepts as the company pushes to increase its share of the lodging market.
Bethesda-based Marriott, which owns 147 hotels and resorts worldwide, plans to build 40 smaller hotels along with 40 all-suite hotels aimed at business travelers who prefer multi-room suites over conventional hotel rooms.
The international hotel, entertainment and food company said it plans to serve smaller cities with smaller hotels. The first three are planned to open in two years in Atlanta, North Carolina and northern New Jersey.
The all-suites venture is designed to compete directly with other companies already in that luxury market, which represents 1 to 2 percent of the total hotel-room market. Ground was broken yesterday in suburban Atlanta for the first Marriott Suites Hotel, which will open in 1987.
"The new [smaller hotels] and suite hotels, when coupled with our traditional hotels and resorts, and our rapidly growing 'Courtyard by Marriott' hotels, give us one of the broadest product ranges in the lodging industry," said J. W. Marriott Jr., chairman and president of Marriott.
The new venture marks Marriott's second move into specialized hotel markets. Last year, the company opened its moderate-priced Courtyard hotels with rates of $45 to $65 a night.
The company plans to spend more than $3 billion in developing the Courtyard hotels and is continuing to expand its traditional hotels and resorts.
The smaller full-service Marriott hotels will have 220 to 280 rooms and rates in the $60-to-$90 range, while Marriott's traditional hotels have 350 rooms or more with rates in the $70-to-$100 range.
"There are many communities that can't handle the larger Marriotts," said Joseph J. Doyle, a hotel financial analyst with Smith Barney in New York.
"Marriott may think that with smaller hotels they can get into smaller and medium-sized cities and compete with Holiday Inns, Ramada Inns and smaller franchises of Hilton and Sheraton," said Doyle. "They can build these for something like 20 percent less than a large Marriott."
While the smaller hotel rooms are the same size as rooms in traditional Marriotts, they have less public space than the traditional Marriotts and require less land.
"The difference for us is that the smaller hotels will allow us both to serve our customers in markets where we cannot build our existing full-service hotel product and to take advantage of development opportunities in smaller cities as well as selected trade areas in some larger cities," said Marriott.
Marriott Suites hotels will have 200 to 250 suites, each consisting of a living room, bedroom, bath and space for small meetings. Designed for upscale business travelers, their rates will be in the $70 to $100 range, the same rates as the traditional Marriotts.
The current leader in that market is Holiday Corp., whose Embassy Suites Inc. subsidiary is the largest all-suites hotel chain, with 50 hotels built and 23 more under construction. Embassy Suites, which acquired the Granada Royale hotel chain last year, is currently building two luxury hotels in Northern Virginia.
"The occupancy rates at the Embassy Suites have been running above the industry average," said Doyle. "Marriott is getting into this market late but it's a new enough category that I don't think they've missed the boat."
Last year, Marriott announced that it planned to open its first all-suite hotel last spring, but the company said it delayed construction because it was unable to find "the best possible sites."
Marriott plans to have several all-suite hotels under construction next year, and up to 40 in operation by the early 1990s in major regions, including Chicago, California, New York City, Arizona and other major regions.
Marriott stock closed yesterday at $104, up 2 1/2 on 69,700 shares.