It’s been an eventful year for Marriott International. It started in January when the Bethesda, Md.-based behemoth announced it had acquired homegrown Delta Hotels and Resorts from British Columbia Investment Management Corp. for $168 million, and it culminated with the announcement in mid-November, just as Hotelier magazine was going to press, that the company had acquired Starwood Hotels & Resorts Worldwide, Inc. in a $12.2 billion deal that would add a plethora of lifestyle-oriented brands to its portfolio.
The acquisitions inflate Marriott’s portfolio to 30 different brands, more than 5,500 hotels and 1.1 million rooms worldwide and spell out good news for the Canadian landscape, where Marriott Hotels of Canada is busily growing its portfolio of 128 units. “We have competed with Starwood for decades and we have also admired them,” Bill Marriott Jr., executive chairman and chairman of the Board of Marriott International, said in a press release. “I’m excited we will add great new hotels to our system and for the incredible opportunities for Starwood and Marriott associates.”
When the deal is complete, pending the necessary regulatory approvals, it will bring Marriott’s total unit count in Canada to nearly 200 hotels representing 45,000 rooms coast-to-coast, with the addition of Sheraton, Westin, W, Four Points by Sheraton, Le Méridien, Aloft and Element, plus several more in the pipeline set to open in the next few months.
While some pundits mused the Delta Hotels and Resorts acquisition last spring came at an inauspicious time because of a decline in oil prices and consumer confidence, Don Cleary, who assumed the role of president of Marriott Hotels of Canada this past March, just before the deal was consummated in April, is more sanguine.
“We were really interested in Delta for two reasons. First, because of its great distribution in markets we haven’t already penetrated. Delta is a very well-known brand in Canada. It’s a household name and a respected name. That enhances Marriott’s reputation here. Second, Delta is an entry-level full-service brand that we can grow, not just in Canada, but globally. Obviously we have to finalize where Delta fits in our portfolio, but I think it’s a win for Canada, for both brands.”
Several months in, Cleary says the integration of Delta Hotels and Resorts is proceeding well. A blend of Marriott and Delta executives now helms the company, with dedicated teams focused on Eastern and Western Canada, based in Toronto and Calgary, respectively.
“Delta was a well-run company to begin with and has real compatibility with Marriott’s culture,” says Cleary. “Marriott puts people first, as does Delta. We’ve done so much to reach out and welcome them into the family already. We’re putting
Delta in sales and marketing revenue engines and they’re live on marriott.com [since July] and other distribution channels. The last piece of the puzzle is the rewards program. We’re in the process of [integrating it] and it should be completed by early 2016.”
Thanks to the Starwood deal, Marriott is now poised to flourish in the lifestyle segment, where brands such as W Hotels, Westin and Aloft will complement Marriott’s strong presence in the luxury and select-service tiers. Additionally, Starwood will benefit from Marriott’s worldwide development organization to reach a broader global footprint. “The transaction will form an even stronger, more efficient global company to compete in the rapidly evolving, global travel industry,” says Cleary. “The driving force behind this transaction is growth,” Arne Sorenson, president and CEO of Marriott International said in a press release.
Marriott International’s recent acquisitions come at a fortuitous time for the hotel industry in Canada. The most recent investment report by Colliers International affirms the industry is “all grown up” and “legitimized” thanks to eight $1-billion-plus years during the past decade. “We’re now a market that is $1-billion plus in hotel investment activity in what historically used to be $500 million on average and we see that continuing,” predicts Alam Pirani, Colliers Canada’s executive managing director. “It really is a function of larger product coming to market. Operating fundamentals are strong, the cost of debt is at an all-time low and there are more debt players participating in our sector than ever before.”
With more institutional investors, REITs, non-traditional buyers and foreign institutional capital in the mix, the message is that Canada is a safe place to park your money. Somewhere down the line, Marriott Hotels of Canada is poised to benefit. “The asset-light structure of Marriott, where we operate through a management contract or franchise, is deliberate,” says Cleary. “We don’t do real estate. There’s a vibrant ownership community in Canada that invests and develops hotels. We’ve had great success working with that community, with almost 130 hotels so far.” And counting. “Marriott has a very strong development pipeline and will open over 30 hotels in 2015 and 2016. We have full-service projects under construction in Vancouver, like the JW Marriott and Autograph hotels [part of a $535-million complex slated for 2016 adjacent to B.C. Place Stadium — the largest private development in British Columbia’s history]. We also have new projects under construction at the Calgary airport and other gateway cities.”
Much of Marriott Hotels of Canada’s growth in the country, however, ultimately resides in secondary and tertiary markets with select-service brands such as Courtyard by Marriott and Residence Inn. On the other hand, Starwood’s Specialty Select Brands encompassing Aloft, Element and Four Points by Sheraton, will continue to blossom in primary and secondary markets, with a shift to central Canada as activity in Western Canada has slowed.
Expansion aside, the company also plans to pioneer major IT initiatives at branded hotels across Canada. This includes mobile check-in and check-out. “We fully intend to roll that out at Delta hotels, too,” says Cleary. “The next generation of that is mobile-service requests, the ability to view folios on mobile devices and keyless room entry.”
“Management by walking around,” is how Bill Marriott describes the hands-on style that became his trademark for more than four decades as CEO of his family’s company. This calm, measured approach seems to permeate Marriott north of the 49th parallel. Longtime industry insider Larry Mogelonsky says “Marriott is like a giant battleship. It doesn’t move quickly, but when it does, it knocks everyone out of the water.” Indeed, as Mogelonsky illustrates, Marriott entered Canada relatively late with the Toronto Airport Marriott in 1986. Three decades later, the company is perched at the top.
For Lyle Hall, a hospitality industry consultant and managing director of Toronto-based HLT Advisory Inc., the Delta Hotels and Resorts acquisition was as much about the rest of the world as it was about Canada. “Delta on its own had one of the better urban footprints across Canada. They were represented pretty much everywhere. They had great coverage in Canada’s downtown cores. The acquisition gave Marriott another leg in their product inventory across the country. It also gave Marriott International a brand they could use to do various things. It provided them with something that fits in between their brands and a platform for additional expansion.”
Because of its sheer size, the Starwood transaction marks the synergy of strong products, strong systems and strong people. Time will tell how the merger will impact the Canadian landscape, says David Larone, senior managing director at PKF Consulting Canada, a CBRE Company. “In a lot of centres there’s going to be a very significant weighting of Marriott and Starwood assets. So I am not sure how that’s going to shake out.” But, it will bring various efficiencies. “This may give the combined brand a little more strength in dealing with the OTAs and managing the distribution channels, which ultimately may be a benefit that a lot of people weren’t looking at initially.”
Of course, there’s more to Marriott’s story than mergers, acquisitions and expansion. Marriott, whose founder John Willard Marriott was inspired as a Mormon missionary to start his company, humbly, with a root beer stand in Washington, D.C. in 1927, was at the forefront of corporate social responsibility before it was de rigueur. The company enjoys a fruitful partnership with the Children’s Miracle Network, a non-profit based in Salt Lake City that funds children’s hospitals across North America. More than $4.3 million has been donated to the charity in Canada since 2001.
While it’s too soon to know how the acquisitions will play out, and what the future holds, the forecast looks bright for Marriott Hotels of Canada. Is bullish the mot juste? “Yes,” affirms Cleary. “We are bullish about Canada. The industry is coming off record occupancy and performance as a whole. We see that growth continuing.”
Written By: Jeff Kirk
Volume 27, Number 8