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January 23-25, 2023
JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE
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As part of the Americas Lodging Investment Summit’s Patron sponsorship program, ALIS organizers asked Marriott’s Liam Brown eight timely questions as we prepare for the 21st annual event January 24-26, 2022, at the JW Marriott/Ritz-Carlton Los Angeles L.A. LIVE. Following are his responses.
Plenty has changed for the hotel industry as 2021 is quickly drawing to a close. What have your travels and interactions taught you about the hotel owners and operators that you are visiting?
Communication with our owners continues to be more critical than ever. There’s been no playbook for this pandemic, and we’ve never experienced anything like this in our history as an industry.
Two-way communication is important as we try to figure out how we navigate through this together. I’ve been so impressed by their resilience and willingness to partner. We’re all trying to anticipate what tomorrow may bring. Our owners have been a remarkable sounding board in terms of facing the issues of today together.
How has the message you are communicating to franchisees/owners today changed from the message you were delivering to them in January? How have they adjusted to the evolving message?
In January we were talking about owner solvency and reducing or eliminating all standards in order to help the economic model. Today, there is acknowledgment that things are improving, and we are now speaking about the modifications to standards and when they will be reimplemented. We are also beginning accountability related to renovations, food and beverage, and guest satisfaction.
Leisure travel has driven our recovery, and while we’re pleased with overall recovery momentum, the conversation is now about future of business travel and group, which has typically been our hotels’ bread and butter. As an industry, we continue to be challenged by labor shortages and the supply chain issues that are putting pressure on owners. Finally, we continue to focus on encouraging and supporting vaccinations as a key element of recovery.
How do you see the hotel industry’s expansion in the U.S. and Canada shaping up through 2022, and specifically what is Marriott’s plan to grow its footprint during that time?
Leisure demand continues to lead the way into the recovery. Marriott is well positioned to continue to grow in this space with our All-Inclusive offering and strong portfolio of luxury brands. Extended-stay has been resilient over the pandemic given guests looking at longer leisure stays and the continuing trend of blending leisure and business trips. We continue to be excited this segment and feel that extended-stay hotels are here to stay, given the flexibility and extra space it provides travelers.
The pandemic has blurred the lines between business and leisure, increasing the overall lengths of trips as people extend their time away from home, thereby making extended stay hotels a very appealing option as travel patterns shift.
Some are calling this the “Age of Conversion” as the hotel industry recovers from the pandemic. How is the conversion trend resetting the hotel industry’s development landscape? How long do you expect it to last?
We are very pleased with our momentum around conversions which accounted for 30% of the rooms added in the first half of this year. They’ve been a meaningful contributor to signings and growth for us and our competitors. Conversions have the advantage of generating revenue much more quickly than new builds so having conversions in the pipeline is desirable anytime but especially in a downturn like the one we just experienced. Owners of independent hotels or third-party operators see great value in our strong distribution platform, loyalty platform, etc.
I believe we will continue to see an uptick in conversations about conversions, particularly from independents or hotels with expiring or terminable agreements for the foreseeable future. Marriott has a richer and flexible platform of conversion brands than ever before with a best-in-class operating model (Autograph Collection, Tribute Portfolio, Luxury Collection, Delta Hotels and Four Points by Sheraton) and our turnkey Marriott Bonvoy loyalty program is available on day one.
How are increasing costs—from raw materials to shipping to labor—affecting the overall industry development pipeline, and how long do you expect those higher costs to remain an issue?
Atypical delays in manufacturing, logistics and higher material costs are directly impacting timelines and construction starts. Relief at the major U.S. ports is hard to come by. In reaction to vaccine mandates, the construction industry is assessing impact of worker departures and further challenges in a depressed labor market. Overall material costs are up 6%.
There are many factors that may cause some costs to come down sooner than others. For example, lumber costs were up earlier this year and now they have come down. There are many factors at play so it is difficult to predict when costs will come down. However, there are reasons to believe things could begin to stabilize after mid next year.
What’s the one word that best describes the current hotel lending environment in the U.S., and why did you choose that word?
Cautious. Lenders are definitely lending, and the “financing challenges” for the hotel business that get talked about these days with such frequency are really limited to the area of new construction (not acquisitions of existing hotels). And even with new construction, deals are getting done and loans are closing; just not at the rate they were pre-COVID. The issue is not atypical for any downturn in the hospitality business, and we fully expect the lending environment to continue to improve. It’s simply taking time and impacting construction starts in the meantime.
Based on trends during the pandemic, how will the evolution of brand standards and amenities combined with consumer expectations affect developers and investors?
Owners/developers are economic actors, and they chase the best risk-adjusted returns for their investment dollars. To continue to be successful in growing our business, we need to ensure that the cost and operating model of hotels is attractive to those investors. We also need to ensure that the wants, needs, and desires of our hotel guests (which drives topline revenues) are measured carefully against the wants, needs, and desires of the owners and franchisees (which drives unit growth). It’s a balancing act, and factors like increased labor costs are continuing to stress the model.
At the same time, we have a lot of experience with these issues over many years, and our ongoing, direct engagement with our owners ensures that they have an active seat at the table in helping us solve the challenges. They care deeply about guest satisfaction as well, since they recognize its importance to hotel performance, so we come at the problem with the same objectives even if occasionally we differ on appropriate strategies to get there.
What’s the most relevant bit of business advice that you would give to hotel developers as they look to continue along the path to recovery?
Our business is about giving guests a great experience, attracting great talent and working really well with owners and franchisees. While travel will certainly evolve, these core principles that have guided our industry and our business through our hardest year and into recovery will not change. While the environment remains dynamic, we are hearing from our corporate clients that they are eager to get back on the road. We should all by optimistic about the future.
At the core of business travel is building relationships and “knowing” the people you do business with, and much of that happens in person. The way people connect and travel now is not about a return to “normal,” but rather the new concepts and trends that will emerge.
* Posted on November 22, 2021