Post Starwood merger, Marriott hotels rolls out Chinese menus as it eyes further expansion
Imagine waking up in your favourite London hotel and going to the restaurant for breakfast, expecting to see a full English menu of scrambled eggs, toast and bacon — but you spot something new in the dining hall: noodles, steamed buns and deep fried Chinese bread sticks.
Chefs at western luxury hotels such as Marriott International are planning to add more Chinese-style dishes to their breakfast menus in the battle to entice some of the millions of globe-trotting, big-spending mainland Chinese holidaymakers.
“This dynamic of being ready for the largest community of outbound travellers in the world is very important,” Craig Smith, Asia Pacific managing director for Marriott, told the South China Morning Post.
The US hotel group, renowned for its premium JW Marriott and Ritz Carlton brands and already the world’s largest hotelier, also wants to add to its scale following the US$13 billion landmark merger with former rival Starwood Hotels & Resorts Worldwide this year.
With the combination of Starwood’s W Hotels, Westin, and Sheraton, the expanded Marriott comprises 30 brands with more than 5,700 hotels. That amounts to 1.1 million rooms in over 120 countries.
Smith argues, however, that its current 4-5 per cent market share is still “nothing” given a disproportionate number of hotels in the world that are “not branded”.
Chinese tourists have become the world’s biggest spenders on outbound travel, splashing out US$215 billion on overseas tourism in 2015, a 53 per cent surge from the year earlier, according to the World Travel and Tourism Council. That outstrips the gross domestic product of Qatar, and
far exceeds the spending by US and German tourists.
“You need to have people who speak Mandarin at the front desk, but you also need Chinese breakfasts and Chinese channels on your TV,” said Smith, who now oversees as many as 124,000 employees in the region.
Affluent Chinese guests are the next growth engine Marriott and others are banking heavily on.
The new industry vision is laid out by analysts, including PwC, who have predicted the beginning of a downward cycle for the US hotel industry from 2017. In addition, political and economic headwinds, including terrorist attacks in Europe and the Brexit fallout, have put pressure on bookings in other regions.
Cuts to US business travel budgets are also blamed for lodging behemoths Hilton Worldwide and Marriott experiencing slowing revenue growth per available room (revPAR) – a key industry gauge.
The latter’s revPAR inched up a mere 0.8 per cent in the third quarter ended September 30, while Hilton, owner of the Waldorf Astoria hotel chain, downgraded its full-year forecast for the revenue metric to 1.5-2 per cent from 2-4 per cent in October.
Competition is getting stiffer too, prompting global hotel chains to scramble to boost their scale via mergers in the hope of broadening their market reach.
Besides Marriott, Hyatt Hotels, InterContinental Hotels Group and Hilton were all reportedly suitors in the bidding war for Starwood.
Asked about Marriott’s interest in future mergers and acquisitions, Smith said: “It may not be as big as this one, but we are looking for more opportunities in the future to grow.
“If you look at Hong Kong, everyone thinks about Conrad, Marriott and Ritz, but they forget about all the Marco Polos and others that don’t have a huge brand affiliation.”
Credit rating agency Fitch expects the hotel M&A frenzy to continue next year, with a new focus on “under-penetrated areas” such as Latin America and Asia Pacific.
The mega deal between the world’s two pre-eminent hotel companies last year had descended into a contentious takeover battle since a Chinese consortium led by Anbang Insurance Group jumped in with a counter-offer earlier this year. However, Anbang abruptly abandoned its bid in March without giving any details.
Having spent more than half his working life with Marriott, Smith’s experience suggests the post-Starwood-merger integration may take two to three years to fully bear fruit, translating into the need for “phenomenal learnings” for both firms.
“They have different strengths than we do,”noted Smith. “We are teaching Starwood hotels on the performance side and they are teaching us on the lifestyle side.”