Tony Capuano of Marriott International speaks about his company’s latest pipeline numbers and what they mean for the company for the rest of 2020.
LOS ANGELES—Marriott International capped off 2019 with a record pipeline of 515,000 rooms globally, a figure that sets up the company for significant growth in the coming years.
In a video interview with Hotel News Now during the Americas Lodging Investment Summit, Tony Capuano, group president, global development, design and operations services at Marriott, spoke about his company’s latest numbers and what they mean for the company, brand developments and growth trajectory heading into 2020.
During the conference, Marriott announced that along with its 515,000 rooms in its global pipeline, the company also signed 815 agreements representing more than 136,000 rooms during 2019. It opened 516 properties with more than 78,000 rooms in 60 countries and territories.*
With all that growth, though, Marriott is approaching development thoughtfully, Capuano said. In some ways, the hotel industry collectively has been spoiled, he said. It has been nearly a decade of supply growth below historical averages in North America, he said. Now the industry is reaching an inflection point where supply and demand are reaching an equilibrium, he said. Marriott has a rigorous evaluation process, which includes providing owners and franchisees the opportunity to participate, he said.
“We’re a company whose model is driven on growth, but we want that to be thoughtful growth,” he said. “We’ll continue to use the framework of that impact evaluation process that we have and try to make the right decisions for both Marriott and shareholders as well as for our owners and franchisees across the country.”
Growth through conversions
Conversions are a big focus for Marriott, Capuano said. One of the ongoing challenges in development is construction delays, the causes of which vary significantly by market. Conversions help mitigate the effect of those delays, he said.
“We’ll try to do as many conversions as we can,” he said. “We converted nearly 100 hotels last year and will try to accelerate that pace of conversion activity.”
Conversions have always been part of the Marriott growth story, he said. The company has now a better, more compelling stack of conversion-friendly brands than it’s ever had before, he said. Its soft-brand collections top out the higher end of the chain scale segment with the Luxury Collection, Autograph and Tribute, he said. The company also has the Delta Hotels brand it acquired to offer a flexible full-service conversion platform.
“When you look at that set of offerings that we can make available to our owners and franchisees, we feel really bullish about the prospects to accelerate conversions,” he said.
Marriott’s move into the all-inclusive resort space is an exciting time for its development partners and guests, Capuano said. There was a lot of thought involved in the decision over whether to create an all-inclusive-specific brand or make extensions of its already established and recognized brands, he said.
By extending Marriott’s already existing brands, it would help cut through some of the murkiness in the all-inclusive space that new brand names would create, he said. They would hear the names and not know what to expect, whereas with a brand extension in the all-inclusive space, the guest would have a better idea, he said.
“At the luxury end of the segment, we will have Ritz Carlton all-inclusive resorts,” he said. “It should be crystal clear to that customer what the expectations should be in terms of product offering and, maybe more importantly, in terms of service delivery.”
On a global basis, select-service hotels continue to be the biggest contributor to Marriott’s rooms growth, Capuano said. In North America, some of the company’s older legacy brands, such as Courtyard and Residence Inn, are well-established and well-distributed, he said. There are others that are better characterized as being in the infancy of their growth, such as Aloft and Element, and have lots of runway in front of them, he said. There is also increasingly strong appetite for a lifestyle-focused select-service product, such as Moxy and AC, he said.
Outside of North America, one of the most compelling parts of Marriott’s growth story is its acceleration of select-service hotel development internationally. The company signed nearly 200 select-service hotels outside of North America in 2019, and the company expects to sign multiples of that in the coming years, he said.
In terms of luxury development, the company has a significant lead over other global hotel brands in terms of its luxury breadth and distribution, Capuano said. The company opened 34 luxury hotels globally and signed another 42 in 2019.
“We are seeing different pockets of demand open up for luxury,” he said. “As you know, there's not nearly as much luxury demand as we've seen earlier in the cycle domestically, but in many international markets, there is still strong developer demand for our luxury brands.”
*Correction, 11 February 2020: This story has been updated to clarify the scope of Marriott's pipeline.