Marriott International President and CEO Arne Sorenson knew one of the challenges when acquiring Starwood Hotels & Resorts would be the overwhelming number of brands in the company’s portfolio.
Since the deal two years ago, the Maryland-based hospitality giant operates Marriott, Sheraton, Westin, JW Marriott, and Delta, all in the upper-upscale segment alone. Sorenson and his team have since been trying to “target each of those brands to minimize both customer confusion and, I guess, the overlap,” he said on Tuesday’s second quarter earnings call.
For Sheraton, the goal was to move the average quality of the portfolio up—a prototype for a guestroom was developed, and this June a new concept for the hotels’ public space was unveiled. So far, 75 percent of the Sheraton portfolio has been upgraded to meet new brand standards, Sorenson said.
“It probably, on average, will be a fraction lower than where the core Marriott brand is,” depending on the market, he said. “Long-term we think we're going to strengthen the brand.”
As far as the rest of the brands, Sorenson is adamant “we wouldn't want to be without any single one of these brands”
“It's an extraordinary opportunity to have this kind of distribution in an economically significant space and a space which is really important for our loyalty members and our group customers to have some choice and to have the kind of product and services that we can deliver across this portfolio.”
Don’t count out more acquisitions in the future. Sorenson noted “our share of the global hotel business is still not particularly huge. And so, I think there's plenty of opportunity to continue to grow.”
With growth in mind, Marriott has the largest pipeline of rooms under development in the world, “including more luxury and upper-upscale rooms than our next three competitors combined,” Sorenson noted. The company opened 23,000 rooms in the second quarter and has 213,000 rooms currently under construction, with 40,000 rooms signed or approved.
The other aspect of the integration, the loyalty programs — Marriott Rewards, Starwood Preferred Guest (SPG), and Ritz-Carlton Rewards — will become a single, unified program Aug. 18.
Loyalty members will be able to get credit for elite status or stays in the Marriott and Starwood Hotels. Previously, travelers had to earn status in one platform or the other. It also means that points being earned and points being redeemed don't need to be transferred between accounts.
“It means that customers will show up on our website and they will see the whole portfolio instead of having to toggle back and forth between two different portfolios,” Sorenson noted, adding the program it is used by “well over 100 million members and growing.”
To keep SPG loyalists, Sorenson said the 3:1 point conversion ratio between SPG and Marriott Rewards, adding late checkout, and credit card partnerships with Chase and American Express have all been essential.
“While it would be too much to say that every single Marriott Rewards or SPG member has stood up and applauded, I think what we’ve heard from the bulk of that community is, ‘You’ve made a collection of decisions that caused us to feel very good about that program.'”
Marriott’s net income for the second quarter was $610 million, a 25 percent increase from last year. The company also reported a solid revenue per available room (RevPAR) at 3.8 percent.