31 January 2013 | InterContinental Hotel, Park Lane, London
EY Real Estate and Hotels Workshops
‘Setting a course for the future’
Case study: Marriott's two-pronged strategy: build east, brand west
With an ambitious plan to double the number of rooms in Europe operating under a Marriott flag, the brand’s European Chief Development Officer, Carlton Ervin, has a challenging year ahead. Marriott has recently “continentalized,” breaking Europe out of its EMEA division to stand on its own. This means that while the European division controls all brands and franchises in the region, it competes for capital and against the caution of many international Marriott colleagues around growth prospects for Europe.
However, the plan builds on a solid 2012 during which, from a development point of view, Marriott has exceeded expectations. This has been driven by a growth in conversion numbers in Western Europe, which, says Ervin, is not as surprising as it might seem.
“The same instability that causes the skepticism creates opportunities to convert to those brands,” he says. “Many hotel owners are feeling that insecurity too.”
Ervin says he expects the conversions trend to continue, although he observes that:
“When you look at the supply of existing hotels in Europe, only a third are branded, while in the US it’s two-thirds. People look at that and say, ‘what an opportunity,’ but it’s a challenge for us.”
There are, he says, many “wonderful hotels” that it simply doesn’t make economic sense to convert to the Marriott brand. By creating a “soft brand,” the Autograph Collection, “we can make these wonderful hotels fit without crushing them.”
“The Autograph Collection lets those owners get the benefits, such as brand affiliation, without having to convert fully,” he adds. “It also enables us to compete with boutique hotels where we didn’t really compete before.”
By contrast, in Eastern Europe, where there are fewer existing assets that would merit conversion, the opportunity is more for new build, but this becomes more difficult the farther east one goes.
“The investment appetite from the rest of the world is really dim, unless you are from that part of the world,” Ervin continues. “You’ve got new build 1,000-room hotels in the US that we can’t compete with in Europe, and it’s hard for me to bang the table for Estonia and Kazakhstan.”
He concludes: “So while in the West we’ll take existing assets and convert to our brands, in the East it’s much more new build with local investors in cities that people have never heard of.”