Marriott International achieved record growth across the board in 2014, opening more than 46,000 rooms worldwide and having signed agreements for more than 650 hotels and 100,000 rooms. By the end of 2015, Marriott expects its portfolio of hotels either open or under development to surpass 1 million rooms. Tony Capuano, Marriott’s executive vice president and global chief development officer, anticipates that the company will continue to see an aggressive acceleration of its footprint outside of North America, in addition to robust domestic growth. So it’s no surprise that Capuano maintains a hectic travel schedule. He ticks off a list of destinations he’ll be headed to in the coming weeks: Seoul, Bali, Morocco, Dubai, London, Paris, Rome, Moscow, and Poland. “We only fly west,” he assured. “That way, we never age.” Before he jetted off, Capuano spoke to Lodging about Marriott’s plans to import Delta Hotels to the United States, where AC Hotels is headed, and more.
Marriott completed its acquisition of Delta Hotels in April. That’s a Canadian brand, but now Marriott intends to bring it to the U.S. market. Are there any key differences in how you’re implementing it here versus how it’s implemented in Canada? Generally, no. For a long time, we have wanted to have another full-service platform within our brand architecture. We’ve wanted it to be a flexible full-service platform that allows us to drive a meaningful volume of opportunities from a conversion perspective. That’s largely the way Delta has grown across Canada. But it’s also a platform that supports new builds. In fact, Delta just built a new ground-up flagship hotel in Toronto. But a meaningful portion of their growth in Canada was born from conversions, and I think that’s what we’ll see as we launch this platform around the world.
Now that Marriott has brought AC Hotels over from Europe, where are you headed next? We’re getting great traction in the Caribbean, Latin America, and U.S. and Canada. Like we do with all our platforms, we will evaluate its applications in other parts of the world. We’re in our infancy of exploring whether it’s a platform that makes sense in Asia, but for a lot of reasons that’s work that’s worth doing to see not only does it make sense but is it scalable in a way that it’s a worthwhile adventure for us.
What inspired you to introduce AC to the North American market? Among the many attributes of AC that made it so compelling for us to launch in North America is some of the flexibility the product has. We thought we would get deals from three distinct but complementary sources. We thought the brand was particularly well suited to adaptive reuse and of historic buildings, so we’ve obviously seen that in New Orleans. We thought it was a brand that could adapt to conversions, and we’ve certainly seen that early both in National Harbor and downtown Chicago, and then obviously it was a brand that would have lots of transaction in terms of ground up new build. Thankfully, at least, in the early volume of deals we’ve seen signed, we’ve seen all three of those sources produce results.
How is Autograph doing now that there are so many new players to the soft brand segment? We’ve got over 80 hotels open today. When you look at the pipeline behind that, we expect to be over 100 hotels by the end of the year, and it’s an extraordinary trajectory we’ve seen in a few short years. Obviously, some of our competitors are following suit. You’ve seen Hilton launch Curio, you’ve seen Starwood launch Tribute, and they are formidable competitors. They’ll have a couple challenges with their roll out. One of the things we’ve learned most clearly in our experience with Autograph is the easiest way to kill that golden goose is to choose deal volume over quality. So our competitors will need to balance trying to get to the same sort of critical mass that we have achieved so quickly, with preserving the quality in a way that will continue to attract the right sorts of owners. Our owners care every bit as much as we do about the quality of hotels that we add to that collection, and I’m sure both Hilton and Starwood will find a similar level of concern from the owner community.
Do you think Marriott or the hotel industry in general has too many brands? My view and Marriott’s view is there are most certainly too many new brands in the industry. I heard a statistic that over the last three years, there has been more than 150 new lodging brands launched globally. To hear a statistic like that, it’s not difficult to conclude that the industry may be over branded.
The flip side of that, when I look at Marriott’s brand architecture, I look at a couple of metrics. I look at the architecture itself, and I say, are we adding brands only when we see a gap in our brand architecture that we would like to fill. Then, in terms of validating whether we made the right decision, are those brands getting real traction in the owner community? If they’re not, then perhaps we have made a misstep and added a brand that doesn’t make sense.
In 2014, Marriott opened more rooms globally than any other international branded hotel company, and of the rooms that we opened, more than 40 percent of those were in brands that weren’t in our portfolio five years ago. I look at those statistics as a pretty powerful validation that the owner community thinks we’re being thoughtful and prudent when we add brands to our system, and we’re making good choices that resonate with them in terms of the investment proposition.
When you look at the brands we’ve added, they have been disproportionately focused on the luxury and lifestyle segment of the business. Without question, those are the hottest segments of the business from the development community’s perspective. So you look back a few years ago where our luxury and lifestyle offerings were largely Ritz-Carlton and Renaissance, and you fast forward to today at this stack of luxury and lifestyle brands we offer starting in the economy tier with Moxy, working their way up the chain through AC, Renaissance, Autograph, Edition, Ritz Carlton, and Bulgari. It’s really a broad and impressive group of offerings that we can offer both the owner community and our customers.
