- Marriott, by many measures, is one of the largest hotel chains. But reaching over 8,700
properties in 139 countries and territories didn't happen overnight. It got here by being one
of the first hotel chains to sell off its real
estate to outside owners and instead focus its
business on its brands. CFO and EVP of Development Leeny Oberg sat down with the Wall Street Journal to discuss why the company's
operating model works and where it's going next. How does the Marriott experience differ from its competitors? - We are the largest, we're
the global hospitality leader, but with only 7% of market share, one of the best things is
we see lots of opportunity for future growth. - What is that strategy
that you're betting on? - We were the first ones
to really do the concept of separating the real
estate from the management, which allowed us to be
better at building brands, allowed us to be better at growing, allowed us to listen more to our owners and franchisees and customers. And I think that innovative style really puts us at the front. We started as a developer,
owner, and operator of hotels. Actually, of course, we really
started with Hot Shoppes, but then moved into hotels. And one of the things we realized as those hotels got more and more popular is that by building them
all on balance sheet and with dealing with economic
cycles, we were constrained. Our growth was constrained. So by being able to split the real estate from the management and the brands, we were able to not only
tap additional sources of real estate investment capital, we were able to focus on the brand, the service, the systems, the processes, to make sure the brands
were as strong as possible, and then to grow faster. When I think about the size of our system, that could be almost over half a trillion dollars
of value of real estate. We could never do that on our books, on our own balance sheet. So it's really important to
be able to access capital around the world locally to be able to have all
the hotels that we have to then deliver these experiences. - And what changes can the customers see with that shift in the industry? - Oh, I think for sure when you think about the types of hotels, I mean, even as recently as 40 years ago, we had very, very few
international hotels, and we are now, you know,
almost 40% international, outside the US. That has happened so much more quickly as a result of this asset-light model. That is all a function of being able to go and find capital in all
these different markets. Take our brands, which are proven brands, demonstrate that they deliver
good returns for the owners, but also deliver great
experiences for the customer, which then engenders more growth. - Why do you think that
there is a rise in brands across the industry? - Remember that branding
hotels has really evolved. We're now probably where about 50% of the hotels
in the world are branded. And with the evolution of
the way that media works, that advertising, marketing,
all of those things, the power of the brands and what they can deliver to the top line, and then the economies of scale that allows you on the cost side to help deliver results
to the bottom line, I think has really demonstrated
that having a branded hotel can really help a real estate investor get the best returns on
their asset possible. I think also similarly for the customer, having this range of
brands gives us the ability to appeal to our customer for every experience and
location that they want. And that is really important for Bonvoy. When you think about our overarching loyalty brand of Marriott Bonvoy, the ability to say,
"Listen, whatever you need, wherever you'd like to
go, we've got a place, we've got the kind of price
point you're looking for, we've got the level of amenity and service that you're looking for, and we've got a Bonvoy program that's gonna offer you tremendous value and also a great way to
communicate with us." So I think you put those
all together to come up with what gives us a great long-term sustainable growth story. - So this shift to the asset-light model is what allowed this
sort of rise in brands. - I would say yes, the rise in brands, but most importantly the growth. Because if you think about
what you'd be able to do if you were building all
these hotels yourself and having to go and borrow every time you were building a new hotel and dealing with all of that construction, if you really think
we're leveraging capital all over the world for
our owners and franchisees for them to be building or buying hotels and putting our brands on them, so it's really like
multiplying what you can do. And as you know, growth
kind of feeds on itself, and the more customers
know you and like you, it allows you more opportunities. We've just been able to
grow much faster this way. - And how do you know when to add a brand? - Well, like most businesses, first studying the market, right? Where's the customer going? What changes are we
seeing in travel patterns? What are we thinking that customers want, what they don't have? StudioRes is a great example of our entry into the mid-scale space in the US that really demonstrates that. Came from a combination of
working on our customer research, but also talking to owners and franchisees who were saying to us, "You've got great
expertise in extended stay. We see a lot of demand and would love to invest in properties that are in your system
at the lowest cost per key that you have on any of your products, but also meet this customer
demand for extended stay in a really super sleek and
modern operating model." And that was a lot of the genesis of how we came up with StudioRes, which again meets customer needs as well as owner and franchisee desires. - And what does this rise of brands, this loyalty program allow
the company to do and offer? - One of the best things is
really helping people understand the wide, wide range
that they have of choice, while at the same time
managing this relationship where you don't have to
repeat over and over again that I really like this kind of pillow or I really like to know
that I'm gonna be able to check in on my mobile
phone and walk in the door. So having that ability to
tailor your experience for you and what you like, but at the same time have the widest range of possible choices we think makes us
particularly competitive. - And when you talk about that wide range, there are so many hyper-specific
brands these days. Is it important that the customer know all of the different niche brands? - As is often the case in everything, all customers are different and you've got some customers who say, "You know what, Residence
Inn is where my heart is. I just know that wherever I go, I'd like to find a great
extended stay product like Residence Inn or Element, et cetera." In that respect, the wide
variety is important, but also knowing consistency. One thing that really came out of COVID is that customers do appreciate
knowing what they're getting and being able to go and say, "I'm staying at this kind of brand and I know it's gonna
have this set of amenities and this kind of price point, while if I go somewhere else, it'll be a different kind of experience." And being able to count on that and enjoy the variety, I think has again proven to be a really good
competitive advantage. - What amenities in hotels have the highest return on investment? - Hotels are long-lived assets. We want them to be there
for many, many years, to be a part of the community
and to be welcoming guests and to really provide
returns to that investor for many years. That means that that hotel has
constantly got to be thinking about what investment does
it need to stay current. You think about it, you go to
a hotel that's 40 years old and if you can't plug in
your phone next to your bed, I know you're not happy. In every single hotel room, you've gotta make sure
that you're making it easy and accessible for people
to manage their lives, which now is so much
more technology-enabled than it was 15 years ago. Then I think from the
overall hotel experience, I think the public space and the way the public
space makes it comfortable and enjoyable for people to just be there, I think has become an increasingly important
part of the investment. And where we see tremendous returns is where you might have, you know, a bar that kind of allows people to both work and maybe have a light
bite or even a meal. So there are multiple
uses to that public space and that is where really
in all kinds of our hotels, we have seen the returns
on that particular space. You think probably 15 years ago, it was kind of dead space, right? You'd walk in, you'd
really go to your room, and now it has become much
more of a community space that has meaning and ROI
for how it is laid out. Those are the kinds of things that we, as part of a business
of the brand company, work with our owners to make
sure we're picking the hotspots for them to reinvest in. - Where is the hotel industry
going in the next 10 years? What are the kind of the main challenges? - The good news is travel is powerful, and as we talked about kind of our purpose in connecting people. I think coming out of COVID,
you've definitely seen that people don't take
travel for granted anymore and they really appreciate it. And then I think for a
company like Marriott, the size and scale we
have I think will allow us to build on those advantages
and to grow even faster and be even a bigger leader. You know, critically, we need
to provide adequate returns on these real estate investors' capital and being efficient on the cost side, but also drawing in as much
revenue from the customer. That's the critical
equation to making sure that we are driving the
returns on investment that our owners expect. So I do see a lot of great
potential for the hotel industry. Or also, you know, the
adjacencies that we're playing in, whether it's Ritz-Carlton Yacht or the co-branded credit
cards or travel insurance, again, allow us to really
try to make you feel like all of your travel can
really be done within Bonvoy. - So it sounds like a
variety of customers, not just the person that's
checking into the hotel. There's experiences, there's investors, there's a ton of different customers. - Oh, yes. I talk about our
constituencies all the time. From the standpoint of
listening, communicating, collaborating with associates,
owners and franchisees, customers and shareholders
at the end of the day is what drives the long-term
success of our business. (gentle music)
