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Marriott International's recent Security Analyst Meeting
provided the most in-depth discussion yet on how it will fold in Starwood
Hotels & Resorts.
Plans for Sheraton
Now the third-largest brand in Marriott's portfolio,
Sheraton suffers from "poor consumer perception" in North America,
according to global chief commercial officer Stephanie Linnartz. "With our
deep operational expertise coupled with clear accountability around renovation
cycles, brand standards audits and quality-assurance delivery, we can
significantly improve customer perception of the brand." The company has
formed a council of franchisors for feedback around brand positioning,
operations and design. Marriott also is reevaluating the brand's service, food
and beverage and quality assurance standards.
Sheraton's primary problem has been a poor quality-assurance process and inadequate accountability."
Now Sheraton owners have to decide whether to meet new brand
standards, shift to a Marriott brand in a lower tier or exit the system. To
inspire investment by property owners, Linnartz said, Marriott needs to improve
Sheraton's performance. Marriott revived its Fairfield Inn & Suites brand
in 2003 and Courtyard Marriott in 2007. Sheraton, though, "is a bit more
complicated than the Courtyard because these are, in many cases, hotels that
are much bigger, much more complex," CFO Leeny Oberg said. "We would
expect that it would take several years."
Legacy Starwood Brands
Global development officer Tony Capuano pointed to The
Luxury Collection, Tribute Portfolio, St. Regis, Aloft and Element as Starwood
brands with particular development potential. The first two, plus legacy Marriott's
Autograph Collection, comprise the company's soft brands for independent
hotels. Autograph is expected to reach 180 open hotels by 2019. Capuano said
the company sees opportunity to add hotels above and below Autograph's upper-upscale
tier via the Luxury Collection and Tribute.
For luxury, St. Regis is underrepresented globally, with
only 38 open properties and 22 in the pipeline, Capuano said. "We can see
a significant increase in St. Regis signings, in the range of about 10 deals a
year." And Linnartz said Marriott is revamping the 10-year-old Aloft brand's
guest room design to be more profitable for developers and more user friendly
for customers. It's also launching healthy grab-and-go options for Aloft's food
and beverage program.
As for Element, Marriott is pivoting the health and
well-being lifestyle brand to an extended-stay product. Capuano said the
company's success with Residence Inn indicates potential to broaden Element's
presence in that space.
Though Marriott Rewards and Starwood Preferred Guest have
been linked since the merger, Marriott doesn't expect to complete integration
of the platforms until late 2018.
Already, though, borrowing from SPG's Ambassador concept,
Marriott Rewards implemented its own Ambassador Service with a personal
concierge for members who stay more than 100 nights a year. The SPG platform
will launch Marriott Mobile features this year, including mobile check-in and
check-out and service requests. And in March, Marriott invested in PlacePass,
an online platform connecting members to local activities, Linnartz said.
Marriott anticipates a renegotiation of terms for its
branded credit cards, which could increase loyalty program contributions and
reduce hotels' card-processing costs. The Marriott Rewards Visa through
JPMorgan Chase expires in 2018, while the SPG American Express card expires in
Global Sales Organization
Linnartz said that after the merger, the sales organization
numbered 750 global corporate accounts that have "meaningful overlap."
On April 1, the company launched its new global sales organization and
redeployed sales associates for those accounts. "This streamlined sales
force should position us to increase revenue across group, extended-stay and
business travel, and we will be ready for the annual special corporate pricing
season, which begins in May," Linnartz said.
Legacy Starwood hotels in North America also
have migrated to Marriott's Expedia and Booking.com contract terms, which are
more favorable by "200 to 400 basis points," according to Linnartz.
The company expects its scale and distribution strength—only about 10 percent
of its bookings come from online travel agencies—to help it negotiate even
better terms in the future.
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