The integration of the Sheraton brand into Marriott International’s portfolio creates synergies, according to brand leader Brian McGuinness. And there is definitely room for improvement from the brand, according to president and CEO Arne Sorenson.
BETHESDA, Maryland—Imagine two fierce, long-time competitors joining forces to further differentiate themselves from other competitors. That’s how Brian McGuinness views the Sheraton Hotels & Resorts and Marriott Hotels & Resorts brands after Marriott International’s third-quarter 2016 acquisition of Starwood Hotels & Resorts Worldwide.
McGuinness, a 20-year Sheraton veteran who now serves as senior VP and global brand leader for Marriott Hotels, Sheraton and Delta Hotels, sees the marriage of Sheraton, which is celebrating its 80th anniversary in 2017, and Marriott as one that will only make both brands stronger.
“As a competitor to them we never really knew the playbook—we were wondering what the next play was going to be,” McGuinness said during a phone interview. “Now we know that. Aligning our playbooks and aligning our strategies has been awesome.”
McGuinness compared the two upper upscale brands with a pair of current athletes dominating the professional tennis circuit.
“That playbook … we’re sort of like the Williams sisters (Serena and Venus) of tennis,” he said. “We practice together, strategize and at the end of the day we go to a match. It’s good to collaborate and look for synergies.”
The competitive aspect of deal has caused both brands to raise their games, McGuinness added. It has been particularly beneficial for Sheraton.
“That sharing of the playbook has helped us in a number of areas—it allows us to focus on service levels at Sheraton and drive guest experience in a meaningful way,” McGuinness said.
That doesn’t mean the brands are baring their souls where it matters most—on the street corners in the markets where they compete.
“Anywhere it’s appropriate we’ll look for synergies and reduce costs but at same time we’re looking to be innovative by brand to further differentiate ourselves,” McGuinness said. “Let’s be competitors. It pushes us.”
Improvements on the horizon
Arne Sorenson, Marriott International’s president and CEO, said during the company’s fourth-quarter 2016 earnings conference call on 16 February that Sheraton is a big topic within the company and it has some improvements to make.
Sorenson said Marriott gathered its U.S. full-service owners during the fourth quarter and “a big chunk of that conversation was about the Sheraton brand, and particularly with the owners of the Sheraton assets, to engage with them about where that brand should go.”
He also had a direct assessment of Sheraton’s performance.
“The Sheraton (revenue per available room) index is a bit lower than fair share, not massively but a couple of points maybe below fair share,” Sorenson said. “And we're going to try and move those numbers steadily from here, including hopefully, some progress in 2017. Obviously, our fee contribution from those hotels will rise, not just with market RevPAR performance but with whatever index growth we can take. Offset, however, by whatever loss of fees we will experience by the deletion of hotels that don't meet that standard. So, we'll work through that.”
The bright spots of the megadeal that was completed in September 2016 have been evident from the start, according to McGuinness.
“Things are going well,” McGuinness said. “On Day 1 having integrated (Starwood Preferred Guest) and (Marriott Rewards) was amazing and welcome by the market.
“As we continue to merge the two companies, our associates are loving it because it provides more opportunity for travel,” he added. “(And) our owners are loving it because we’re looking at more synergies going forward.”
The brand is currently in the midst of implementing Sheraton 2020, a 10-point plan designed to make Sheraton the global hotel brand of choice. At the end of 2016, the company had 449 hotels comprising 158,824 guestrooms in its system, according to the company. At the end of the third quarter of 2016, the Sheraton brand had 79 hotels (20,260 guestrooms) in its pipeline.
McGuinness said Sheraton’s repositioning efforts will continue, and bringing Marriott’s operational knowledge to the table will only help the efforts go faster.
“I’m pleasantly surprised by the willingness to look at the business differently,” McGuinness said. “It’s not the culture shock I had anticipated. It was more openness and willingness to learn, understand and demonstrate that the new company is continuing to reimage the experience. That marriage of visions has been pretty seamless.”
Implementing and adhering to brand standards is essential for the brand’s success, Sorenson said during the earnings call.
“Implementation means that for hotels that don't meet those standards, we move with due speed, to either get them on to brand standards, or to get them out of the Sheraton brand,” he said. “Due speed, I think, means not that you can publish a brand standard and then a month later start to have a public execution because that would not be fair to our partners in this. … They need to have some time to understand those standards to assess whether or not it is economically rational for them to meet them.
Sorenson, however, suspects to see renovations come up in 2017 for hotels that have been at the bottom end of a brand, or those properties may leave the system entirely, he said. Regardless, Sorenson is expecting progress.
The access to Marriott’s infrastructure could help some owners make the necessary adjustments, according to McGuinness.
“I’m also pleasantly surprised there’s an infrastructure at Marriott that we didn’t necessarily have at Starwood,” McGuinness said. “There are resources to get things done. If you have an upstart idea, you have resources that can get it done very quickly.”
McGuinness said the completed acquisition is another compelling chapter in Sheraton’s history of firsts, which includes the first brand reservations system, the first brand toll-free reservation number and the first brand to conduct major business in China. The brand will launch a new marketing campaign during the second quarter that celebrates its associates and service.
“When you have a legacy of 80 years it presents itself a huge opportunity to reinvent yourself,” McGuinness said. “The biggest challenge we have is our global nature … that’s like moving a battleship and that’s not easy.”
The transformation includes new uniforms and amenities.
“It sounds like an easy program but when you do it at 450 hotels in 75 countries, it’s not like you just go out and buy a white shirt at Brooks Brothers,” McGuinness said.
It also means that it will look to further add to its status as Marriott’s most globally represented brand, he said.
“We (are) absolutely continuing with the way we’ve been operating,” McGuinness said, adding Sheraton will continue to do more franchising in the U.S. and more management contracts elsewhere in the world. “I don’t see that changing.”
The brand is targeting all regions for growth. The toughest part of that is introducing the first property into a region, he said.
“That’s your first need—a property in the market where you can bring developers to it,” McGuinness said. “Our pipeline is going to be strong. We are doing the transformation work here in the Americas … we’ll continue to grow and be the flagship in Asia/Pacific and the rest of world.”