Marriott International executives and institutional investors gathered last week at the new Marriott Marquis Washington, DC to discuss industry trends, the company’s financials and prospects for international growth. Here are four trends to watch as the Bethesda-based hotel giant continues to adapt to changing customer preferences:
1.More hotels — and presumably higher profits — in coming years.
Marriott last week announced plans to open 1,300 hotels — or more than six properties per week — by 2017. That would bring the company’s total number of properties to more than 5,000.
The aggressive growth plan, executives said, is fueled by economic growth and a rising middle class, particularly in Africa and Asia, where Marriott is focusing its expansion efforts.
“Around the world, this is a golden age of travel,” Arne Sorenson, chief executive and president of Marriott, said in a statement. “In 2012, international trips topped a record 1 billion, and we would like to see that double over the next 10 years.”
Carl Berquist, chief financial officer at Marriott, told investors last week that he expects revenue per available room — a closely watched industry metric — to rise between 4 percent and 6 percent each year until 2017. Given that level of growth, he predicted profits could rise 19 percent to 23 percent to as much as $1.1 billion in the same period.
“Our investment facility is straightforward: Our principal focus is growing our management and franchise business,” Berquist said.
2.A changing international model. When Marriott began expanding to other countries nearly five decades ago, the company’s focus was on catering to American tourists. New locations tended to be in places such as Acapulco, Amsterdam and Toronto.
In recent years, the company has adjusted its strategy to attract more locals around the world.
“There has been a big shift in global growth,” Sorenson said in an interview. “Today, we are in a position where we’re opening as many hotels outside the U.S. as in the U.S. And the bulk of the business of those hotels is about local business or regional business. It’s not about long-haul American travelers anymore.”
As a result, hotels and guest rooms are changing to accommodate cultural nuances. In India, for example, Fairfield Inn hotels serve three meals a day and are simply called “Fairfield.” (“The word ‘inn’ as understood in India does not adequately convey the high quality of the product, so we dropped the word from the brand name,” said Stephanie Linnartz, Marriott’s chief marketing and commercial officer.)
In Brazil, where 90 percent of Fairfield Inn customers are domestic business travelers, rooms are sparse and come with large desks and small TVs to accommodate working guests.
“We are becoming very market-specific,” Anthony G. Capuano, Marriott’s global chief development officer, said in an interview. “It’s very customer-driven.”
3.More technology-fueled changes.
Perhaps the most sweeping change to hit the hospitality industry, executives said, is the rise of technology.
“We have a world in which technology is much more profoundly integrated into everyday life,” Sorenson said. “If you go back even 10 years ago, you’ll find that technology was part of our economy, but today you see technology everywhere.”
As a result, Marriott is introducing mobile apps to help guests check in and out of their rooms. Another interactive app helps meeting planners request more coffee and pastries without leaving the conference room.
More broadly, the company’s rooms and common areas are also being revamped to include more gadget-friendly nooks and WiFi capabilities.
“We’re putting in the rooms what guests want: More technology, more electrical outlets, more style,” Linnartz said, adding that the company was increasingly doing away with heavy furniture and large closets in its guest rooms.
The company is also looking to social media to drum up interest for its hotels, particularly among younger guests who are expected to account for a large portion of business travelers in coming years. Before the company’s recent opening of a Moxy Hotel in Milan, for example, the brand took turns profiling employees and their quirky hobbies (martial arts, butterfly collecting, ballet) on its Instagram account. The hope, Capuano said, was to show customers that Moxy was a hip line of boutique hotels unlike anything else under the Marriott banner.
“It helps to articulate to the user that ‘This brand is different. It’s not like the Fairfield Inn I stayed in in Iowa,’” he said.
Added Linnartz: Social media “is a very cost-effective way for us to reach Gen Y.”
4. New hotel brands.
For decades after its founding, Marriott had just one brand: its full-service namesake line of hotels. That began to change in 1983, when the company introduced Courtyard, the country’s first mid-priced chain designed for business travelers. Fairfield Inn and Marriott Suites followed four years later.
“In the ’80s and into the ’90s, we established these ‘category killers’ like Residence Inn and Courtyard and Fairfield — brands that played in a different space from a price perspective, sometimes from a location perspective,” Sorenson said. “That was a huge change for the business.”
That trend continues today. Marriott now includes 18 brands, nearly double the number it had in 2000. Company executives last week did not rule out the possibility of adding new brands to Marriott’s line-up, which currently includes the Ritz-Carlton, Renaissance and Moxy Hotels.
“I don’t think there is a specific answer to ‘What is the exact right number of brands?’” Linnartz said. “When we think about new brands, it’s when there’s a new customer segment to reach or when there’s a new market to enter.”
More from Capital Business: