Marriott’s Post-Pandemic Growth Story is Outside the U.S.

This is the world’s biggest hotel chain and it has its sights set on grabbing international market share.

Leaders at Marriott International have emphasized the growth potential in America and internationally through measures such as conversions . These deals involve owners of hotels that are already owned to take on franchise agreements for one or more of Marriott International’s brands. The company believes there are plenty of potential opportunities beyond the U.S. due to its limited exposure.

About 17 percent of U.S. hotels are owned by Marriott, compared to just 3 percent worldwide.

Leeny Oberg, Marriott chief financial officer, stated Tuesday that there is no question that the Marriott international hotel base has grown significantly faster than the U.S. because they have a large portion of the U.S. market to grow.” This trend is expected to continue.

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Marriott is looking at all areas of development potential, including China’s Mainland, Asia Pacific and Europe. Oberg stated that China will see the greatest development activity in the near future due to the fact that the bank loans used by developers are less prevalent there.

Private investors are a major source of capital to the Chinese development community.

Christopher Nassetta, CEO of Hilton, said that the attention paid to Asia echos his earlier comments . He indicated earlier in the year that a slowdown in U.S. construction could be good for the country by decreasing supply and increasing the price power hotel owners have over daily rates. Companies like Hilton and Marriott are publically traded and shareholders want growth.

On a May investor call, Nassetta stated that “I think you will see an era where the U.S. new construction numbers will be much, far lower.” This is clearly a long-term positive for the sector. The good news is that the world is a large place and there are different pressures in every place. We should also be aware of the fact that Asia is where the majority of our growth occurs.

It is more difficult to finance new-build hotels in America if they didn’t have funding secured before the pandemic. Lender hesitation makes it harder to reach the start line.

European developers also rely on traditional lenders. However, Marriott is optimistic about its growth prospects in Europe despite the additional headwind that Marriott needs more long-haul travellers to book hotel rooms than domestically-oriented markets such as the U.S. or China.

Oberg stated, “You have definitely got lenders dealing with many existing hotels and they need to work through those situations. So, from that perspective, the lending environment as well as the new-build environment is not as strong.” It is starting to show positive signs, but is still far behind. It is better now than it was one year ago.

Marriott executives expect that the company will grow between 3 percent and 3.5% this year, on top of their roughly 7,800 hotels portfolio. At the close of the second quarter, the company boasted a pipeline of nearly 478,000 rooms and more than 212,000 are under construction.

Oberg acknowledges that there are many unknown variables in the company’s future growth. Due to factors like slow construction start rates, supply chain disruptions and labor shortages it is difficult to predict the company’s growth in 2022 or 2023.

She added, “But the deals aren’t falling apart.” They’re coming.”

Business Travel Optimization

Oberg made Oberg available less than one week after Marriott CEO Anthony Capuano said at another banking conference that the company had experienced a decline in bookings last month due to the Delta variant. However, the decline soon stabilized and the company’s leaders saw improvement already this month.

Although Marriott’s business transient recovery is still in its early stages, Oberg said that the trend line does not show any signs of slowing down. Bookings for special corporate, another name for the largest hotel companies’ business contracts that are usually negotiated for an entire calendar year because of high volume travel volumes — were up 7 percent over July.

Oberg stated that while we wish it would move closer to the 2019 level, it had moved from more than 60% down in March to the 40% range [range] when we entered the summer. So I believe it is moving forward.

The entire travel industry is currently anxiously waiting how Delta might impact performance for 2021’s back half, Oberg said that there wasn’t always as much of a cliff in leisure travel between summer and winter. In 2019, business travel was responsible for 57% of bookings, while leisure accounted only 43%.

Oberg stated that it’s not as if there is only business in September and only leisure in August. While September and October have more transient business, November and December offer a great deal of leisure. It’s just important to remember that it isn’t all so disorganized.

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Publiated at Wed 15 Sep 2021, 04:05:10 +0000

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