Midscale Chains Set To Spring Up Around The Globe
Facing the prospect of saturated U.S. markets, large midprice hotel chains have aggressive international expansion plans in place for 2004 and 2005. Building international distribution will enable the chains to meet their growth objectives for their brands and strengthen the chains' positions in negotiations with travel buyers who are eager to conduct a single negotiation and have negotiated rates in as many of their travelers' global destinations as possible. Critical to the strategy's success is that enough U.S. business travelers recognize the brand and choose to book its global outposts, overlooking local competition.
"International markets continue to be a tremendous opportunity for Courtyard," said Chad Waetzig, Marriott International senior vice president for select service brand management. "Our company's strategy has been to lead in new markets with full service brands, which makes sense because you want to establish the Marriott name with your flagship brands in these countries. In the same way, the level of decorative finishes will be relative in quality to a full service in that community but comparable to the local competition."
Out of an inventory of about 615 Courtyards, roughly 10 percent are international. "Courtyard provides an opportunity for secondary or tertiary alternatives in certain markets where we wouldn't consider a full service Marriott," Waetzig said. "We now operate in over 14 countries, opening in 2003 our first hotels in Poland, Kuwait and the Dominican Republic." Marriott last month named Harrell Hotels Europe as its master developer for the brand in the United Kingdom, where there already are 11 Courtyards.
Similar to the Marriott situation, international development at Four Points by Sheraton tracks the inventory of its parent, Starwood Hotels & Resorts Worldwide. "As we increase the Four Points footprint, we often look for markets where our sister brands exist," said Hoyt Harper, senior vice president of brand management. "We then define for our owners the synergies that come from having more than one flag in a market. We can collaborate on sales and marketing initiatives, which can mean exciting opportunities." Other Starwood brands include Westin, Sheraton, St. Regis and W. Of the 144 hotels in the Four Points portfolio at year-end 2003, 25 were international. Seven new builds are scheduled to open in 2004 in Europe, the Middle East and Latin America.
Still, a brand's positioning can change when it gets transplanted to foreign soil. "We have an agreement in place to develop 12 Wingate Inns in Ireland, including five to open by the end of this year," said Keith Pierce, president of the brand, which is part of Cendant Hotels Group. The deal with Premier Hotel Management Ltd., announced in February, is Wingate's first foray outside of North America. "The approach, however, is different than what we're used to because we're positioning the brand as more upscale and full service," Pierce said. "We made the decision to go after the top European cities, whether London, Dublin or Madrid, and the positioning reflects that. While the international strategy differs from our domestic system, we feel it complements it. In the United States, after all, we're designed for a high amount of corporate business, and that won't change internationally."
Brands that are primarily new construction in the United States can emphasize conversions elsewhere. "As the international piece has become more significant, we've moved from being just new builds to including select conversions, which will accelerate the growth even further," Harper said.
Sites for new construction can be harder to come by. "Given the downtown locations we're targeting, many buildings are historic locations, simply because of the age of the cities, so adaptive reuse becomes more common," Cendant's Pierce noted.
Service levels also can vary by market, so the hotels are hardly carbon copies of each other in different parts of the world. "We have different standards between the North America business and hotels in countries outside of the United States," Marriott's Waetzig said. "Customer expectations regarding service and amenities in Asia are very different, for example, than in Europe, so we have a different approach in those countries. We work with our experts in these countries to determine the right approach for the brand."
Pierce cited high-speed Internet access as a case in point. "In Spain, high-speed access is commonplace; in Ireland, it's not," he said. "We realize, though, that we need to provide the same level of services that we provide in the states. Otherwise, our frequent guests won't see the connection when they get here. Consequently, we've focused on the business-type amenities to reinforce the connection, so you'll find high-speed access, a business center and all-inclusive pricing. We've taken a suite of amenities and applied it to the international products."
Service adjustments may make sense, given the local economy. Hilton Garden Inn, for instance, operates three hotels in Mexico and has five more in the pipeline. "Physically, these properties are identical to the U.S. hotels," said Adrian Kurre, senior vice president of brand management. "In Mexico, however, labor costs tend to be so reasonable that owners might add more people to the staff than we have in the states. Mexico hotels might have a doorman, for example. Local market conditions just make it possible."