With the marriage to Starwood now complete, Marriott has become the world’s largest hotel company. Rajeev Menon, COO, Asia Pacific (excluding Greater China), Marriott International, reveals what’s in store
Nearly a year after the deal was announced, Marriott International and Starwood Hotels & Resorts Worldwide are finally married, creating the largest hotel company in the world. The new, blended family offers more than 5,700 properties with 1.1 million rooms in more than 110 countries managed by 500,000-plus associates.
Now that acquisition is complete, it is up to think-tanks like Rajeev Menon, chief operating officer, Asia Pacific (excluding Greater China), Marriott International, to see that the largest hotel company in the world with the strongest loyalty programme and most comprehensive portfolio of brands makes good on its promise to be the best in their respective markets. More to the point, they need to deliver higher profits for shareholders, better results for partners, greater opportunities for associates and, yes, superior guest experience for customers.
Marriage of two cultures
Even though the InterContinental Hotels Group acquired boutique chain Kimpton Hotels and Restaurants last year, AccorHotels purchased the Fairmont, Raffles and Swissôtel brands this year and Destination Hotels and Commune Hotels have merged, these acquisitions pale in comparison with Marriott’s acquisition of its archrival chain for roughly $13 billion.
As a company, Marriott is not new to mergers but none of its past acquisitions – whether it be the history luxury brand Ritz-Carlton or the Renaissance or, for that matter, Canadian hospitality chain Delta Hotels or South African brand Protea Hotels – match the scale of this merger. In fact, nothing of this magnitude has been attempted in the hospitality industry in recent times.
By all accounts, the Marriott-Starwood merger is more than a marriage of brands; it is a marriage of cultures. While both hotel companies have a lot in common – from identical roots in the US to similar brands to similar core values and work ethos – the biggest challenge ahead lies in seamlessly integrating the two cultures to create a new one.
And this they need to do without losing the essence of each of the 30 luxury and lifestyle brands in the family even as some Starwood luxury brands like St. Regis and W Hotels will now operate in the same category as Marriott’s Ritz-Carlton, JW Marriott and EDITION, while other Starwood lifestyle brands like Aloft will co-exist with Marriott’s Moxy and AC Hotels – and, not to forget, Starwood’s Sheraton will now complement the Marriott Hotels brand.
This harmonious integration of the two brands is the key to living happily ever after. But, to be honest, this is more easily said than done, particularly in a vast country like India, with all its complexities and diversities.
JW Marriott, Jr., executive chairman and chairman of the Board of Marriott International, was not unmindful of this big responsibility ahead and said as much while announcing the completion of the acquisition. “We welcome the tremendous responsibility as the world’s largest hotel company to be a good global steward, providing new opportunities for our associates and building the economic strength of the communities we call home,” he noted.
“Combining Starwood’s brands with ours better enables Marriott to reach our goal of having the right brand in the right place to serve our loyal guests and welcome new ones,” added Arne Sorenson, president and chief executive officer of Marriott International.
Menon, for his part, is neither overwhelmed by the challenges ahead nor is he fazed by the daunting task at hand. “If anything,” he told Hotelier India, “I see a world of opportunities.” And he should know. After all, Marriott think-tanks like him have spent tons and tons of time preparing for the biggest hotel merger in years.
Given that one of the key things that attracted Marriott to Starwood was its strong rewards programme, the Starwood Preferred Guest (SPG), the former did not waste any time in announcing that customers could link their accounts to Marriott’s Rewards, which includes Ritz-Carlton Rewards, pretty much on the day of legal close on September 23, giving reciprocal benefits to members of each loyalty programme. “We did want to deliver real benefits to our customers immediately,” Sorenson said following the announcement.
“The combined programmes have 85 million members and we intend to draw upon the very best of both loyalty programmes to provide even more value to our members,” explained Menon. “Once members of both Marriott Rewards and SPG have their status matched, they will be able to transfer and redeem points at a 3:1 ratio. While the loyalty programmes are running in parallel, the Marriott team is engaged in integration, with a newly combined programme expected to be launched in 2018. Even though it has been just one month since the legal close, millions of loyalty members around the world have already linked their membership status and the feedback on social media has been overwhelmingly positive.”
The challenge now, according to Menon, is to bring together Marriott and Starwood cultures and align them. “From a business perspective, you can do lots of things right but, at the end of the day, it is all about your talent pool,” he emphasized. “Hence, our focus from day one was that we were going to bring the best of Starwood and Marriott together and, having done that, I am now in the midst of announcing my Singapore leadership team who will run Asia Pacific (excluding Greater China). In November, I will also announce the India organisation structure. Marriott has enjoyed the reputation for being the best employer in hotel industry. Now, we need to work with our Starwood colleagues to create the same results. Once we get that right, I am confident we will cross all the hurdles.”
“The good news is that there is genuine excitement on both sides,” he continued. “When we talk to existing Starwood owners and future potential owners, they all seem very positive on the strong brand portfolio that we have now, our distribution, our loyalty programmes. When we talk to our associates, particularly in India, they are very positive about things and see growth and opportunities. And, lastly, when we talk to customers, they seem generally happy with the distribution and the offerings that we have made on the rewards platform. So, overall, everyone is excited to be part of the bigger family. While things are progressing quite well, it is only a month since we completed legal close and there is a lot of work still ahead of us. Having said that, we are reasonably optimistic that we are moving in the right direction.”
Given its wide experience and understanding of the hospitality business, industry experts are confident that Marriott is indeed moving in the right direction and that people like Menon will execute the integration process to perfection.
Bullish on South Asia
“The driving force behind this transaction is growth,” Sorenson made it plain at the time of the acquisition, adding, “Today, size matters… To be successful in today’s lodging space, a wide distribution of brands and hotels across price points is critical.”
Knowing well that with great reach and penetration come greater responsibility, Menon is working closely with Neeraj Govil, area vice-president, South Asia, Marriott International, to unleash the power of the brand and spearhead its growth in South Asia. “India is the second biggest market for Marriott outside China and, recognising the potential, we will grow significantly in the country,” explained Menon. “We will grow both in the luxury and the mid-market categories here.”
He added, “The company is bullish on India as we have been witnessing double-digit growth (both in top line and bottom line) with 70 per cent occupancy levels. Another important thing to note is that nearly 70 per cent of Marriott’s occupancies are now domestic visitors. Till a few years ago, booking ratio stood at 35:65, with the bulk coming from international tourists.
“The exponential growth of the middle class, increased domestic travel, the FDI flow and the ‘Make in India’ campaign are clearly some of the factors that have bolstered the hotel industry. Marriott plans to add around 16-18 hotels to its portfolio annually for the next four years. Going forward, India’s contribution to Marriott’s turnover will also move up to double digits.”
So, going forward, which brands will he be betting on? “We have just opened the JW Marriott in Kolkata, which is the eighth JW Marriott in India,” Menon quipped. “However, the thing to remember is that there are only so many cities where JW Marriotts are going to go. Given that there are many cities in India that have a population base of over a million, we also need to put lots of Courtyard by Marriotts, Fairfields by Marriott, Four Points by Sheraton, Alofts, etc. So, when we look at our pipeline, 50 per cent or so is driven by mid-market segments, however, there is enough opportunity for upscale, upper upscale and luxury. India, as market, is ripe for growth. Only a few years ago when I came back to India, there were only 50,000 hotel rooms, today the country has 135,000 and everybody will tell you India could potentially go up to 300,000-plus hotel rooms.”
When asked whether having so many brands now competing in the same market segment poses any major challenge, Menon replied, “I genuinely see that there is opportunity from every end to grow. However, we need to make sure that each brand is able to stand against its brand in common and deliver its own distinctive consumer experience.”
Marriott is planning to expand its presence not just in India but across South Asia, which includes India, Bhutan, Bangladesh, Sri Lanka and Nepal for Marriott, adding four hotels in Sri Lanka and Nepal by next year. “Sri Lanka is one of the countries where Marriott does not have a presence now,” informed Menon. “Three hotels in Sri Lanka are coming up at Colombo, Weligama and Kosgoda, a beach town. Colombo and Kosgoda will be under the Sheraton brand, while Weligama will be under Marriott. On the other hand, a mid-market hotel under the Fairfield brand in Kathmandu, Nepal, is expected to be ready by January next year.”
Since the driving force behind the Marriott-Starwood merger was growth, Marriott will continue to grow and change and, in the days to come, perhaps, the one thing that will remain constant is the company’s core values: “putting people first, pursuing excellence, embracing change, acting with integrity and serving our world.”
After all, it is this very philosophy of its founder that has held Marriott in good stead and, no doubt, catapulted it from a nine-seat A&W root beer stand in 1927 to the behemoth it is today i.e. the largest hotel company in the world.
Of course, only time will tell whether the Marriott-Starwood merger was a marriage made in heaven. But, by the look of it, they are on to a pretty good thing.
