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President and CEO of Marriott International Arne Sorenson talks to Tom Otley about the value of its brands, potential growth and targeting travellers direct through free wifi
Marriott has announced an unprecedented expansion in recent years, and will have over one million rooms open or in the pipeline by the end of 2015. Why is that good for anyone other than Marriott?
Well you have three distinct audiences: Marriott, our hotel guests, and our owners. The advantages from the expansion to Marriott are reasonably clear. The bigger we get the more money we make and the more people are aware of our brands. When you look at the guest it starts with the brands.
We have long thought that we are best as we have a leading brand in each distinct segment of the marketplace. That started in the eighties when we added Courtyard, Residence Inn and Fairfield to the Marriott brand, and seeing in each of those a distinct place where Marriott previously competed. We added Ritz Carlton in the Nineties, Renaissance not long after that and now more recently we’ve added five or six brands in the last five or six years.
The brands need to stand for something so the customer can think about the brand as an articulation of what they should expect. At the same time customers expect to see more variety and localisation from hotel to hotel and also in food and beverage.
We want to make sure we get the right balance between that articulation of what the brand stands for and at the same time leave enough flexibility for hotel owners, designers and local market trends to influence significantly what happens in each individual hotel.
But for the individual traveller, they say “I can look quickly and see whether Marriott in its portfolio of its brands has something there that I’m interested in, or I can see if there’s a Ritz Carlton because I know that, or a Courtyard because I know Courtyard and I have a sense of where the pricing of that hotel is compared to other hotels in the market. So the guest is advantaged by this.
Beyond that you have the Marriott Rewards programme which allows these guests to earn points which are a valuable currency in these hotels which makes the programme more powerful and makes the hotels perform better.
So now you have 19 brands, how do you communicate to travellers so they know what to expect in each one.
Travellers are looking for different things. They aren’t monolithic. Some may be on business travel and for them it might be most important that they could earn Marriott Rewards points, maybe a little about what they are going to pay, maybe location will be important as well since they want to be close to whatever it is that is bringing them to market.
Others who are on vacations will want something else…. We’re not trying to confuse people. We try to concentrate on the brands and the regions they are in, based on rate potential and traveller profile among other things. Each brand has its own website for travellers to do their research, but they are also all on Marriott.com
Could you have too many brands?
It’s doubtful. In theory it’s possible and we debate it internally and we’ve been asked about externally, but there’s no sign with our customers that we have too many brands . Our customers like to have the options and our owners like to be able to grow. Of the 100,000 rooms we signed last year overwhelmingly that has nothing to do with our capital – it’s developers who are coming forward and if anything our customers are telling us to get bigger, have more brands, and have more opportunity to share more costs across more brands and hotel. Let us grow with you, whether as a guest or a hotel owner.
You now offer free wifi, but only to Marriott Rewards members, and only if they book direct.
This is a space that we’ve seen evolve over the last few years. Everybody would like free wifi and would like it at whatever speed is possible and hotels are racing to make sure they’ve got enough bandwidth to bring it in. But it’s funny. In the U.S we all expect free wifi in hotels but we all pay a lot at home. If you think about our personal telecommunications bills, we’re all paying a lot, and yet when we get to the hotel somehow it’s free. So there is some familiarity with the need to pay in some places, but no one really likes to pay. The irony is that the lower tier brands it’s been free and the higher tier you’ve paid for it.
So that’s difficult to explain.
Yes. We’ve done some consumer research and people are just confused. No one is confused about wanting it, but they’re confused about whether they get it or not. As of January 15 we now offer free wifi to Marriott Rewards members. They do need to book through our direct channels to get a qualifying rate. We want to deliver value to customers who are coming to us direct who have a potential for higher loyalty to us, so now we can do that.
What about business travellers who are forced by their organisation to book through certain channels, they won’t get those rewards in terms of points in fee wifi?
That piece will not turn out to be significant. If you are a meaningful corporate customer, if we have a corporate rate with you, which will often be the case, it will be reasonably clear that your employees are going to get free wifi. The top percentage of corporate accounts got free wifi anyway.
For quite a while in Asia, if you checked into a hotel and had to pay for wifi it was immediately free if you signed up to Marriott Rewards. That was widely regarded as a land grab for members in Asia
Yes. It worked wonderfully.
Well you got a lot of members. But does that build loyalty – do you not just have a lot of email addresses.
Email addresses are worth a lot.
Maybe, but it’s an expensive way of getting them – giving wifi away for free and then servicing all those new members
You sound like some of our employees internally. The cost of adding a few million email lists in a technologically enabled world is peanuts compared to what they are worth. If we have the ability to pull in tens of millions of new customers that we can market to, recognise when they show up at our hotels, collect data over their career so we know something about them and how he travels and we can reach out to you and say here’s a special where you like to stay or we haven’t seen you in a while here’s something to tempt you back.
The more people in the programme, the less value in the programme, surely. Where are the upgrades in check-in when there are 49 million?
As long as we’re growing our portfolio significantly as well, signing 100,000 rooms last year alone, we grow the opportunities for people to earn points and particularly redeem points. But we need to make sure we are satisfying people, and they are getting value when they stay and especially getting value when they redeem.
We are convinced that the Rewards member is the most important customer we can service and most valuable. They are the least price sensitive, the most likely to go through direct channels and so reduce the commission we pay, and they are the most profitable customers so we want to keep them happy. For the wifi, in many markets it’s a free basic level and the higher levels [of wifi] are either going to be reserved for people who pay for it or reserved for our elite customers – our Marriott Rewards gold and elite will get more benefits because of their loyalty to us.
Talking of booking direct, is your website growing in terms of bookings?
It is. Our site did 10 billion plus, maybe 11 billion plus through Marriott.com, and mobile is growing as a percentage of that.
And then the mobile device allows you to check in and out, order room service and allows us to communicate with the guest before they get there and while they are there. As for it opening doors, well it doesn’t work sufficiently well enough at the moment but it will come. It is inconvenient, to say the least, if the guest goes into the wrong room, particularly if it’s occupied. We are trialling it in a couple of hotels but we aren’t going to launch it until it’s right.
Arne M. Sorenson is president and CEO of Marriott International. He was elected to Marriott International’s board of directors in 2011 and also serves on the board of directors for Brand USA and Luther College and is a member of President Obama’s Export Council.
He is chairman of Marriott’s global diversity and inclusion council and on the Marriott board of directors’ committee for excellence, a board subcommittee focused on diversity.