Marriott International expects to grow its global portfolio to 1.8 million rooms within a few years. To do so, the Bethesda, Maryland-based company will invest in the midscale segment by launching its newest brand, Four Points Express by Sheraton, to target development in Europe, the Middle East and Africa.
Three-Year Plan
As part of its new three-year growth plan, Marriott maintains its performance outlook shared in August as the company seeks to add 230,000 to 270,000 rooms to achieve nearly 1.8 million rooms by the end of 2025, according to a news release. The plan assumes a three-year compounded annual growth rate for net rooms of 5% to 5.5%.
Paired with that, Marriott’s model assumes global revenue per available room growth at a two-year CAGR of 3% to 6% from 2023 to 2025, following growth of 12% to 14% this year.
“With global travel poised for continued robust growth, our strategy is to deliver the best brands and experiences for consumers, to attract and retain the most loyal guests and to be in more places around the world,” Marriott President and CEO Tony Capuano said in a news release. “These are our three paths to win.”
The assumptions of the three-year model could result in total gross fee revenue growing 16% to 18% year over year in 2023 and by a 6.5% to 9.5% two-year CAGR to reach $5.4 billion to $5.8 billion in 2025, according to the news release. Adjusted earnings before interest, taxes, depreciation and amortization is projected to increase 18% to 21% year over year in 2023 and at a 7% to 10% two-year CAGR to reach $5.2 billion to $5.7 billion in 2025.
“We expect to produce significant free cash flow and earnings growth over the next few years and create meaningful value for our shareholders,” said Leeny Oberg, chief financial officer and executive vice president of development.
Marriott’s development strategy in part will continue to focus on expansion in the affordable midscale segment, according to the release. Results of that focus have included its acquisition of the City Express brand portfolio, its launch of extended-stay brand StudioRes and its newest brand, Four Points Express by Sheraton. The extended-stay segment is also a priority for the company, which recently launched Apartments by Marriott Bonvoy.
The company is also heavily invested in its luxury and leisure accommodations. Marriott has nearly 500 open luxury hotels, roughly 17% of the market. It has another 225 luxury properties in its development pipeline.
Conversions remain an important part of Marriott’s overall growth strategy. Through the first half of the year, conversion projects represented 63% of new room signings — or 25% excluding the MGM Resorts International deal.
Marriott expects its branded residential business, co-branded credit card offerings and other adjacencies, such as the Ritz-Carlton Yacht Collection, will contribute to the company’s fee growth.
A New Brand Extension
The new Four Points Express by Sheraton brand is a midscale offering designed to meet growing demand for such accommodations in the EMEA region, according to the news release.
The midscale hotel segment comprises nearly 1.2 million rooms in the EMEA region, of which 68% are unbranded, Satya Anand, president of EMEA at Marriott International, said in the release. The affordable conversion brand with a light operational design model will be connected to Marriott's distribution and loyalty program.
“This new brand has been thoughtfully researched, designed and localized to deliver midscale travelers the fundamentals of a stay that meets every trip purpose at the right price point,” Anand said.
The brand will offer guests comfortable rooms, breakfast and free Wi-Fi, the release states. Its design will have a recognizable, localized aesthetic.
Marriott has signed three deals for the new brand in the United Kingdom and Turkey. It has signed letters of intent for future projects in Poland and Belgium as well as more in the U.K.
The 201-key Four Points Express by Sheraton London Euston, located near Euston Station, will be the first hotel affiliated with the brand to open. Its opening is scheduled for 2024.
The other two signed hotels are the Four Points Express by Sheraton Antalya Lara and the Four Points Express by Sheraton Bursa Nilüfer, both in Turkey.