Following the best growth year in the company’s history, Marriott International will expand its global footprint even further once it adds Delta Hotels and Resorts, a full-service brand with 38 properties and 10,000 rooms across Canada, to its portfolio. Marriott announced on Tuesday that it signed a contract to buy the Delta brand, management, and franchise business from Delta Hotels Limited Partnership, a subsidiary of British Columbia Investment Management Corporation (bcIMC), for approximately $135 million.
The transaction, which is expected to close in the second quarter, will position Marriott as the largest full-service hotel company in Canada and increases its distribution there to more than 120 hotels and 27,000 rooms, said Marriott executives during a media roundtable at the Americas Lodging Investment Summit in Los Angeles. Marriott has been an operator in Canada since 1982.
Although it’s a Canadian transaction, Tony Capuano, Marriott’s EVP and global chief development officer, said the company will consider applications of the brand in other countries. “There will be a level of familiarity for the Canadian traveler, but I think the Marriott brand architecture will be a big stamp of approval for travelers from around the world who aren’t necessarily as familiar with the Delta brand.”
According to Noah Silverman, chief development officer of North America full-service hotels at Marriott, bcIMC-affiliated entities own 13 Delta hotels (and one under development) and will sign new 30-year management agreements with Marriott for these properties. Third parties own the other 25 Delta hotels; 15 are managed by Delta and 10 are franchised. There are also five managed hotels (approximately 1,100 rooms) under development.
In the last five years, Marriott has built its brand portfolio through a mix of acquisitions (AC, Gaylord, and Protea) and ground-up launches (Autograph Collection and Moxy). The pending Delta acquisition is representative of Marriott’s strategy to grow in attractive regions outside of the United States where it wants to gain a stronger foothold. “We try and focus on best-in-class regional brands that provide us with an entry and growth in its own market and a platform to grow globally, oftentimes in a way that the current owner cannot,” said Rick Hoffman, EVP of mergers, acquisitions, and business development.
Validation of this strategy is the fact that 25 percent of the openings in Marriott’s four-year growth forecast are in brands that weren’t in its portfolio five years ago, Capuano said. When the company pursues a brand acquisition, it’s not only for the immediate pop in distribution; Marriott also has to consider whether the brand will provide a platform for future growth. “Often, one of the motivating factors is markets with high barriers to entry, places where we’ve broken our pick over and over trying to get a flag and be able to have representation,” Capuano said.
Canada is the top feeder market for Marriott’s hotels in the United States. Once the deal closes, Delta will be integrated into Marriott’s systems, sales engines, Marriott.com, and the Marriott Rewards loyalty program, which has more than 49 million members. “By integrating Delta into Marriott platforms, it will help grow Marriott brand awareness in Canada,” said Brian King, global officer of Marriott signature brands and global sales.
The addition of Delta will bring Marriott’s total number of brands to 19. But Marriott executives aren’t concerned about having too many brands; they’re focused on identifying the right brands that will meet the needs of both development partners and consumers.
King said the Delta brand is well defined and distinct, with a separate identity from say a Marriott or Renaissance hotel. “It will have a strong swim lane in our portfolio,” he assured. Key brand hallmarks include Delta’s new guestroom design, ModeRoom, which features a work area equipped with connectivity options to maximize use of the flat-panel HDTV, bedside docking for mobile devices, free wired or wireless high-speed Internet access, and a pillow-top bed.
“We like to give our owners lots of opportunities and choices to take the land opportunities they have and put the best brand that will drive the greatest return,” King added. “It will give more opportunities for our owners to build hotels, and it will give more opportunities for our customers to stay in places they really want to explore.”
