Marriott International’s planned acquisition of the Delta Hotels and Resorts brand, management and franchise business is a signal that the Bethesda, Maryland-based hotel behemoth is serious about maximizing opportunities to expand its global footprint, according to company executives speaking during the Americas Lodging Investment Summit.

“This was a Canadian transaction,” said Tony Capuano, executive VP and global chief development officer, during a news conference on Tuesday. “We’re also excited to explore the applications this brand has in other parts of the world.”

Marriott on Tuesday announced it made an offer to acquire the Toronto-based Delta Hotels and Resorts brand, management and franchise business from Delta Hotels Limited Partnership, a subsidiary of British Columbia Investment Management Corporation for CA$168 million (approximately $135 million). The proposed deal covers 38 hotels comprising more than 10,000 rooms. 

As part of the deal, Marriott and BCIMC are entering into new 30-year management agreements for the 13 properties that the Canadian pension fund owns. Fifteen of the other hotels will be managed for third-party owners and 10 are franchised, according to Noah Silverman, chief development officer, North American full service at Marriott. There are five managed hotels comprising 1,100 rooms under development.

Rick Hoffman, Marriott’s executive VP, mergers, acquisitions and business development, said the deal is expected to close in the second quarter. Delta will then become the 19th brand in Marriott’s portfolio.

“Canada is still the most important feeder market into the U.S.,” Capuano said. “We looked for a transaction that would be transformative. There’s a lot of good compatibility from a cultural perspective.”

Marriott, which has been active as an operator in Canada since 1982, will add Delta to its existing Canadian portfolio to bring the total to 120 hotels comprising 27,000 rooms.

“Often, one of the motivating factors (of a brand acquisition) is (to enter) markets with high barrier to entry, places where we’ve broken our pick in trying to get entry,” Capuano said. “This is a great way to get into markets that were largely closed to us.”

Michael Beckley, senior vice president, lodging development for Marriott Hotels of Canada, said the acquisition will put Marriott’s footprint in 28 new markets.

“It has given us entry into markets we probably couldn’t (otherwise) have gotten into,” he said.

Brian King, global officer, Marriott signature brands & global sales, said the acquisition will help Marriott’s sales department place more group business in Canada—business it previously didn’t have the capacity to handle.

The plan is for the Delta properties to keep that flag once the deal is closed, according to Hoffman.

“We bought this because we want the Delta brand,” Hoffman said. “Those hotels will be staying as Delta Hotels.”

“We’ll have a big opportunity to drive inbound and outbound Canadian business,” King said. “It will have a strong swim lane in our portfolio.”

About 25% of all international travelers checking into hotels in the Marriott system in the U.S. are from Canada, he added.

Hoffman said Marriott will be looking for operating synergies at the senior management level, but it will keep Delta’s headquarters in Toronto.

The proposed acquisition follows Marriott’s acquisition of Spain’s AC Hotels (2010), America’s Gaylord Hotels (2012) and South Africa’s Protea Hotel Group (2013) to help grow its global portfolio. 

Capuano said the Delta deal continues that trend and called that time frame “the most prolific four-year growth run in our history.”
Twenty-five percent of the openings in Marriott’s development forecast will come from brands not in the company’s portfolio five years ago, according to the executive.

This most likely won’t be the last brand acquisition for Marriott. The company is looking for best-in-class regional brands that provide it with an entry into a market and a platform to grow globally, according to Hoffman.

“The M&A market is pretty frothy right now,” Hoffman said. “It is getting increasingly difficult for small management companies to compete.”

Hoffman added it’s especially tough for regional management chains that aren’t deriving revenue from any real estate component.

Hoffman and King downplayed the notion of potentially having too many brands.

“It’s not a question of how many brands; it’s a question of the right brands,” Hoffman said.

“You’ll have too many brands when you are unprofitable in a market,” King said. “At this point in time, there is no cap (on number of brands Marriott could have in its portfolio).”