LOS ANGELES — Hotel brand companies need to refocus their efforts on experience instead of prioritizing unit growth, according to experts.
Speaking during the Americas Lodging Investment Summit, members of the Industry Real Estate Financing Advisory Council said finding adjacent spaces and other ways to connect with their core customers will go along way for hotel brands.
Marriott International President and CEO Anthony Capuano said his company is seeking to grow and evaluate "adjacencies" such as The Ritz-Carlton Yacht Collection's luxury cruises, short-term rental platform Homes & Villas by Marriott Bonvoy and Apartments by Marriott Bonvoy.
"Of course, we need them to be scalable and turn into new revenue streams for the enterprise, but they're also really important strategically in terms of securing the ecosystem," he said. "What I mean by that is so many of our decisions are made by what we hear from our loyalty members, from our guests."
Capuano said ideally he doesn't want the staunch users of the Marriott Bonvoy loyalty program to ever leave that system for travel.
"For certain trip purposes, they will say to us 'We need X' whatever that might be," he said. "Coming out of the pandemic, there was more and more multigenerational travel, and they said for certain trip purposes, a multi-bedroom luxury home better fits our needs. Well, to the extent we're not offering that alternative within the Marriott ecosystem, we are inviting them to leave that ecosystem."
Michael Bluhm, global head of gaming and lodging for Morgan Stanley, said it's increasingly important to investors for brands to find ways to monetize their loyalty platforms, and Marriott is the shining example of that.
"Their ability to monetize their database, their customers, the lifetime value of that customer has been incredibly impressive. Whether it's Homes and Villas, cruises, or it's experiences, that business model that public investors continue to seek out is what they continue to deliver," he said. "You think of it as the Amazon of travel in some respects."
Shai Zelering, managing partner at Brookfield's real estate group, said hotel companies have a balancing act they must perform in that regard by growing their platforms but not diluting their businesses or distracting themselves from their core focus. At the same time, he said this is a key moment to effectively retrain the market on a more sustainable growth model.
"I think it's better [to focus on] growth of revenues rather than how the C-corps have trained the market to just look at unit growth because unit growth by itself can also cause the dilution of brand equity," he said.
Zelering said focusing solely on growing fees by adding more rooms to their systems causes hotel brands to push out too many similar products in the market.
"How many more brands can you introduce that aren't on top of each other?" he asked.
Gilda Perez-Alvarado, group chief strategy officer for Accor and CEO of Orient Express, said it's incumbent on brands to take a "disciplined approach" when it comes to growth in order to not just finding ways to offer more of what already exists. But she agreed balance is key.
"There's the innovation side because we have to grow and that's what investors want at the end of the day, but there's also a lot of portfolio management that needs to be done," she said. "There's a lot of obsolescence in our sector right now. There's business models that just don't work. So we do have to spend time with owners and investors saying 'While we've done this historically, it probably does not make sense for us to be doing this in the future.'"
Zelering applauded Accor in particular for its focus on food and beverage, adding that it's a healthier growth avenue than just adding more rooms.
That is "welcome because that's how people plan their vacations," he said. "They make selections based on their culinary experiences."
Perez-Alvarado said her focus is on making sure Accor's hotels and portfolio aren't a "commoditized product that doesn't add value."
She said that's included a shift to more lifestyle and ultra luxury, but that sector requires some new kinds of thinking.
"You have to turn the business on its head," Perez-Alvarado said. "How do you define the [customer relationship management]? What kinds of systems do you need to support this type of business? How do you make sure that you really can charge what you need to charge to make up margin when providing all that experience?"