ATLANTA—Marriott International is positioned to include just about any hotel in the U.S. in its portfolio. Almost. There is one void. Liam Brown, the company’s COO for select-service and extended-stay hotels for the Americas region, wouldn’t mind seeing filled: a brand specifically for conversion properties in the select-service segment.
“We have looked at that, and we continue to look at it,” Brown said during an interview conducted during last month’s Hunter Hotel Investment Conference. “Part of our challenge is you have to clearly define what that space is. We’ve looked at the budget place, and it’s a tough business.
“But I would never say never,” he added. “When we deflag a hotel, we essentially create some of our competitors, and if we can figure out a way to keep that in-house that would be a good thing. But that has to be a good value proposition; there has to be a good brand-equity piece. It has to make meaningful sense from a consumer perspective and a brand perspective. … We continue to look at it and try to see where the opportunities are.”
Regardless of the outcome of that exploration, there are plenty of other opportunities for the portfolio of hotels, according to Brown. He oversees approximately 2,300 hotels containing approximately 247,000 guestrooms in the select-service and extended-stay segments. Marriott manages more than 500 of those properties.
“The picture’s very good,” he said, noting Marriott had a good 2011, increasing demand and seeing minimum supply growth. The picture continues this year, he said. “We had a very strong January, pretty good February and March is shaping up to be pretty strong as well.”
Brown is a believer in the adage that as the first quarter goes, so goes the year.
“Where our opportunity (lies) is to drive more revenue (through) rate increases,” Brown said.
Despite the optimism, Brown said Residence Inn, a 30-year-old extended-stay brand, is among those brands with challenges. With at least seven generations of prototypes in the market, the brand must maintain consistency and continue to provide owners with top-notch returns on investment, he said.
“We have a number of owners who are looking to take down a portion of those individual buildings, build a new hotel, get it open and then take down the other half,” Brown said. “When you look at many of these hotels, they have six, seven, eight acres underneath them. You’d never be able to build them today. There’s even some underlying better use there if you could figure out a way to parcel it up a little bit differently even a little bit of mixed-use in terms of restaurant pads, a little bit of office space and the hotel.
“… that’s the big challenge for us as a brand company, given that we’re 30 years in the select-service and extended-stay business now, how do we make sure that every one of our hotels is relevant?”
A reinvention for Courtyard
The company’s Courtyard by Marriott brand is another brand reinventing itself, according to Brown, who was a GM at a Courtyard property more than two decades ago.
“It was a category killer, right? You opened the Courtyard, they ran 80% occupancy, dominate in terms of index, guest satisfaction,” Brown said. “As you fast-forward through the years, a lot of competition out there … caused our space to be somewhat eroded. We took a hard look at where we were from a lobby-experience perspective of food-and-beverage experience, a room experience and said back to the point: Is it relevant today to the customer? And how do we make sure that it continues to be relevant? So we came up with Courtyard Refreshing Business (program).”
Properties such as the Courtyard by Marriott in Decatur, Georgia, which is owned by Noble Investment Group, are the backbone to Marriott International’s select-service and extended-stay division.
That renovation program is deployed in more than 50% of the system, and about three-fourths of the brand’s approximately 900 hotels will be completed by the end of 2012, he said.
“(It’s) a significant investment by the owners,” Brown said. “You’re talking $750,000 to $1 million per hotel and a different way of doing business.”
A big contributor with a bright future
The select-service and extended-stay division of Marriott generates approximately $7.5 billion in revenue and approximately 40% of Marriott’s earnings before interest, taxes, depreciation and amortization, he said.
“It’s a very powerful, very compelling economics for the big M,” Brown said.
The business unit’s goal is to continue working with the right business partners that understand what Marriott is trying to accomplish, Brown said, citing a partnership with developer Gary Tharaldson as one that epitomizes the philosophy.
“The first ever interior-corridor Residence Inn was built by Gary Tharaldson in Appleton, Wisconsin, and we had a belief that as a brand company that they really liked these exterior corridors, more residential, all that sort of stuff,” Brown said. “But Gary said, ‘Look, seven acres to build an 80- to 90-room hotel? It’s not feasible long term.’ … Working with him we figured out the gatehouse and interior corridor,” and from a growth perspective, they were off to the races.
A company-wide challenge for Marriott is lassoing the runaway bandwidth problem, Brown said. Consumers are carrying more devices than ever, and they use more and more bandwidth, which drives up costs for hoteliers.
“We want to be able to provide robust, free service that will enable productivity, let the customer logon and do their email, do their presentations, be productive from a work perspective,” he said. “If they want entertainment, downloads, streaming movies and all that sort of stuff, we can put a cap on the bandwidth and potentially maybe down the road we can charge extra for that entertainment piece. We’ve got to figure that out.”
Above all else, hotels must provide reliable Internet access regardless of the pricing structure or face negative guest-satisfaction scores, he said.
The pipeline for Brown’s division includes adding approximately 15,000 rooms, he said.
The bulk of Marriott’s future development in the select-service and extended-stay segments is still new build, Brown said. Included in that will be a partnership with PDG Realty, a Brazil-based real-estate company that is on board to add 50 Fairfield Inn & Suites in that country during the next few years. Marriott also has 10 Fairfield Inn & Suites underway in India and nearly 70 properties under various flags in the pipeline in China.
All of this adds up to a bright future, but one with potential speed bumps, Brown said.
“It’s a very competitive environment. We’ve got to be continuously on our game,” he said. “As a brand company because of that competitive threat, our challenge has got to be always, where is the value-add, not just for guests but also for owners and franchisees.”