Marriott’s President and CEO Arne Sorenson gave a keynote address via video at the 2016 Arabian Hotel Investment Conference and spoke positively on the Starwood merger and industry’s future.
DUBAI—Arne Sorenson was asked if he thought 30 brands were enough.
“Yes, I think it is enough, but that is not to say in the fullness of time we will not do new brands or acquisitions,” replied Sorenson, president and CEO of Marriott International, which is set to close an acquisition of Starwood Hotels and Resorts Worldwide this summer. Sorenson spoke via video link from Bethesda, Maryland, during a Q&A at the Arabian Hotel Investment Conference in Dubai Wednesday.
He suggested such acquisitions could mirror Marriott’s November 2013 buy of South African chain Protea Hotel Group, but said the company had plenty currently on its plate.
Sorenson spoke about what will soon be the world’s largest hotel company—approximately 5,700 hotels with approximately 1.1 million rooms in more than 100 countries—as well as some of the major issues he saw affecting the global and Middle East hotel industries.
The industry is in constant flux, he said, so much so that last summer the Starwood acquisition did not sufficiently interest him. A few months later, that all changed.
“Between then and October when we jumped in with both feet, share prices changed, as did the continuing set of conversations we had about the issues of the days, mostly in relation to disruptors,” Sorenson said.
That led to talk on the strength and possible integration of the two companies’ loyalty programs, how to drive performance, technology efficiency and value and personalization of customers.
“There was a lot of thinking about our digital space, and (Starwood) was more compelling,” he said.
Work to be done
Sorenson said his goal is to make good on the buy, work effectively with owners and franchisees and focus on driving the right distinctions between those numerous brands.
Nick van Marken, global head of Deloitte’s travel, hospitality and leisure division, interviewed Sorenson during the conference and said the task was a weighty one, as what comes next must please shareholders, owners, customers and employees of the soon-to-be-combined company. Sorenson agreed.
“Our model at Marriott for decades has started with our teams,” he said. “It is not soft and squishy but about growing careers to deliver better performance, have lower turnover and for (employees) to have a lasting future when this merger is complete. It is a big piece of what we are doing, and (employees) understand there will be greater opportunities in a bigger company.”
As for the mega-company, Sorenson said specific targets are already in place for driving revenue per available room and margin improvements for both owned and managed hotels of both Marriott and Starwood.
“We’ve heard more from Marriott owners than Starwood owners,” he said, “but we have heard a broad and enthusiastic approach. (Owners) know that as we are bigger, there will be margin opportunities.”
Sorenson added that he has yet to receive any negative feedback from owners about the deal.
“What we have yet to see is anything resembling a selfish angle from owners; that is, ‘What will happen to my hotel in any market?’” he said. “This is what we must be sure we deliver. Owners agree with the strategy, and now we must deliver the results for their hotels.”
Sorenson underlined the advantages of scale in the industry today, and scale enhanced by having Marriott teams around the world and local partners in every destination.
The company’s global opportunities, he said, include former commodity-based countries in the Middle East and Africa needing to diversify, as well as the rise of the middle classes that desire discretionary income to be used for traveling and new destinations opening up such as Cuba and Iran.
“These (commodity) countries, which have dipped lately, see the need to expand beyond extractive industries … and in Europe, where fairly low growth has been seen for some while, we see reinvention and opportunity for our brands such as Moxy and Residence Inn,” he said.
Despite the threat of a lingering industry downturn, Sorenson said the hotel industry is a very positive story that can continue to grow for a long time.
“I remain optimistic that we have years more of growth,” Sorenson said. “There has never been a supply-induced recession. It is always about demand declines.”
While challenges still exist, Sorenson said he remained optimistic but admitted he still held two main concerns:
- The slump in oil prices and the ramifications of that on local economies and investment confidence; and
- the cheap nationalism voiced by some would-be politicians in regards to immigration, border controls, terrorist incidents and the refugee crisis.
“We need to respect human nature … and continue to tell people the importance of travel,” Sorenson said.
He encouraged hotels, airlines and other travel providers to share information so that “we can focus on the very, very few people who are a threat.”