Marriott maps Internet, growth strategies

New York -- Marriott International unveiled its Internet distribution and company growth strategies at its investors' conference at the Marriott Marquis in New York in early November.

Marriott's "Look No Further Best Rate Guarantee" will be effective Jan. 1 and will ensure that customers receive the best available room rate at about 2,500 hotels when booking through any Marriott reservations channel. If a customer books through Marriott and then finds a lower publicly available rate within 24 hours for the same hotel, room type and dates, the hotel will match the lower rate and give an additional 25 percent discount.

"Customers should feel they don't have to work hard to find the best rate," said Amy McPherson, senior v.p. of global revenue management.

"We don't want to move guests from one channel to another," said Bruce Wolff, senior v.p. of distribution sales and strategy. "The Internet is the perfect medium for us. It's a marketer's dream. It's nonintrusive. It's the lowest cost sales channel."

McPherson said the company needed a comprehensive and holistic approach to the Internet. She said 8 percent of total roomnights are sold through the Internet, and of that 8 percent, 7 percent come from www.marriott.com. She said the best rate guarantee doesn't apply to group and corporate rates, which are already negotiated, or the Ritz-Carlton brand.

Wolff said he foresees third-party Web sites changing their model to be more acceptable and to make it cheaper for hotels to do business with them.

"As business comes back, they won't do as well as when the industry was in the worst of times," he said.

Wolff said price transparency on the Internet won't hurt business.

"We thrive in transparency," he said. "People pay rate premiums because we're worth it, not because they're not aware of other deals.

"The Internet is not commoditizing the industry. We do not choose to be a commodity and won't allow it. Everything we do is geared to making a better product. Information supports superior products. [Priceline.com] customers are ... commodity-driven customers, and that's only a sliver of the whole industry. We won't enter into an agreement [with a third-party reservation Web site] that won't increase our profits. The Internet will help us increase profitability."

On opaque sites like Priceline, consumers don't know what brand of hotel they're staying at until the room is booked.

Six days after the conference, Marriott reached an agreement with Travelocity that allows Internet users to book rooms at all Marriott-brand hotels except Ritz-Carlton via Travelocity's merchant-hotel program and two package shopping engines.

Growth vehicles

Bill Marriott Jr., chairman and c.e.o., said the company has exited its noncore businesses during the past two years, reduced capital spending and installed Internet access at more than 1,000 hotels.

Bob McCarthy, executive v.p. of North American lodging operations, said every Marriott hotel in North America will have high-speed Internet access by 2004.

"Value is what we're all about," Marriott said. "It's about taking care of associates and guests."

Marriott said distribution is important for brand preference and it allows the company to increase the number of guests staying at its properties.

"Impact issues are more of a problem now than 10 years ago," he said. "We've turned down 20 [percent] to 25 percent of development deals this year because of quality or impact issues. We're still underrepresented in many cities, such as Cabo San Lucas, [Mexico]; Tokyo; Las Vegas; [and] Madrid; and the Renaissance brand is underrepresented.

"Finding the right markets to build in is a concern," he said. "What's not a concern is our depth of management personnel and management talent. We want to add more profitable hotels so we don't need so many hotels."

Marriott has more than 2,600 properties in it's portfolio.

Marriott said he's witnessed seven economic recessions, but said the economy is strengthening, and increasing wealth throughout the world is allowing people to travel.

He said the company is able to grow quickly because it doesn't have tie-ups associated with owning hotels. Marriott owns six hotels. Marriott said the company expects a 20-percent return on invested capital by 2007.

"Satisfaction of owners and franchisees is key to our success, but success is never final," he said.

Carolyn Handlon, executive v.p. and global treasurer, said that if the company buys a hotel, the goal is to sell it a year later. If it builds a hotel, it wants to sell it by the time it opens.

Mike Jannini, executive v.p. of lodging brand management, said 30 percent of the rooms added during 2003 have been conversions.

James Sullivan, executive v.p. of lodging development, said owners decide to reflag because they think they can get a better deal, and as the economy improves, there will be more hotel sales. He said the company will get more conversions during periods when hotel transactions increase.

Jannini said a company goal is to grow more strategically with high-profile hotels in urban areas. He said 5 percent of Marriott's portfolio is in the red zone, which means hotels need improvement, and 10 percent of the portfolio is in the green zone, which means they are the top performers. He said 3,000 to 4,000 rooms leave the system annually because of quality. Marriott has about 488,000 rooms in its portfolio.

McCarthy said the company deflagged 20 hotels during the past four years for not meeting guest-satisfaction standards.

Kevin Kimball, executive v.p. of lodging finance, said labor consists of half the expenses at Marriott full-service hotels and labor scheduling helps reduce the cost.

"There will be minimal improvement in 2004 for house profits," Kimball said. "There needs to be 75-percent occupancy for significant house profits."

Bill Shaw, president and c.o.o., said that because of wage rates, insurance and health-care costs, house profits will decline this year about 2.5 percent to 3 percent.

Marriott's projected room additions * [2004-2006]

International new builds      17%
International conversions     10%
North American conversions    20%
North American new builds     53%

* Does not include Ramada International or
Marriott Vacation Club International;
90,000-95,000 rooms projected to open

Source: Marriott International

Note: Table made from pie chart.

jwalsh@advanstar.com

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