David Townshend of Marriott (5Q Interview)

Marriott International last year announced restructuring plans that would better establish regional presence in the Americas, Asia Pacific, the Middle East and Africa, and Europe. With the reorganization, Marriott also announced that luxury brand Ritz-Carlton--previously operated independently--would be managed by its corporate offices. Chief operating officer Arne Sorenson said there would be "significant reshuffling," but a majority of the changes would be "back of the house." In a recent interview with Management.travel, Marriott senior vice president of corporate and global sales David Townshend said Ritz-Carlton would benefit from greater leverage in the marketplace and access to Marriott's central accounting, finance, human resources and purchasing departments. Townshend also addressed some challenges Marriott faced during the last round of corporate negotiations. The following is an excerpt of the conversation.

Will Marriott's corporate reorganization affect the global sales department?

The reorganization that is underway is moving us to more of a continental structure. It has not affected sales at all, and it has not affected the way we handle accounts. The global sales organization reports to me and sells the brands from JW Marriott on down. We work very closely with Ritz-Carlton when the account has needs for that luxury product, but there really has been no disruption or change whatsoever because our focus is really on the strategic customer who buys the enterprise of Marriott. We are not going to do anything in any way that is going to negatively impact the iconic equity of the Ritz-Carlton brand. It is one of the strongest luxury brands in any industry, so Marriott has invested a great deal in that brand and has no intention of interfering with it.

What were the results of the 2010 corporate contracting season?

We have gone ahead and loaded rates for all of the accounts that we centrally price. As rates are finalized, or if there are any changes to what we have already loaded, we will make changes accordingly. At this point, we are about 85 percent through the process. We centrally price about 450 to 500 accounts, so it is quite an undertaking. There are quite a number of other accounts--what we would call local accounts with the individual hotels--but I'm not privy to the status of those negotiations. Typically, those would end earlier than the larger, more complex, centrally-priced negotiations. Rate varies from one market to the next and one account to the next. We are somewhere in the neighborhood of flat to slightly up.

What were the major challenges in wrapping up 2009?

The accounts that we centrally price, for the most part, are accounts that we have had long-term relationships with. It's not like we are just entering into these negotiations for the first time. With these accounts, we have had relationships that go back 10, 15 or 20 years. First, we understand what the needs of the customer are--which products make the best sense for them in a particular market. Also, it is our responsibility to understand what the competition is doing and what the overall demand in the marketplace is, so we don't do this in a vacuum. We work very closely with revenue management, and they are the ones that really provide us with the market intelligence. We aren't in a mode of trying to reinvent their hotel program from one [client] to the next. Customers want consistency in their programs, and that is one of the things we can provide.

Which markets are showing the most rate growth potential?

That would be New York. Also, there are some signs of strength in the mid-Atlantic region. Markets that are showing strength would be the two coasts. As you work your way into the middle of the country, it gets a bit softer because you are now dealing with manufacturing and the automotive sector in Detroit. In those areas, you're not going to see as much strength. It's not so much that a particular market would be strong and therefore all accounts would be up [in terms of negotiated rates]; it really depends on the account, the length of stay, the day of the week, volumes over an annual period and so on.

Are corporate buyers trading down with their hotel properties and using more lower-tier properties than in the past?

The role of the global account executive is to manage all of the accounts and to really understand the needs of the customer and provide the total solution. We will never come back to a customer with a full-service solution or a limited-service solution, but really a mixture of all of our brands because the needs of the account really require all of them. Some accounts have come back and want to talk about how they can increase the number of limited-service hotels in their program, and we start to generate a trial for them. Their strategy is cost avoidance, but let's not kid each other: You can still get a great deal on a full-service hotel these days. Our Courtyard brand is really a purpose-built hotel for the business traveler and really fits that bill quite nicely. The full-service hotel obviously provides additional amenities, like meetings/conference space and a variety of different restaurants, but I can honestly say--since we track to see if there is trade down from full service to limited service--we really don't see that.