When I interviewed Bill Marriott for Travel Weekly's Preview 2012 issue in December, he made a point to note that his eponymous hospitality company had recently spun off its timeshare business and had become "totally a lodging company. We only own six or seven of our 3,700 hotels and will be continuing down the road of a management, franchise and branding company."
Last week, I had a long conversation with a partner in a small hotel management company that is headed in the opposite direction. He has decided that the key to his company's future will be to go from a hotel management-only strategy to a blend of management and property ownership. And a key partner that enables him to pursue this course is none other than Marriott International.
That two polar-opposite strategies work not only simultaneously but in concert might be indicative of a broader movement that reshapes the industry in this decade.
The portfolio of the smaller hotel management company, Gemstone Resorts and Hotels, comprises 14 properties, including a 500-room ski resort in Utah, the 300-room Carlton in New York, a golf resort outside San Diego and a 50-room boutique in Beverly Hills.
It might have diversity, but that diversity means that it realizes even fewer economies of scale than a similarly sized company with a more homogenous mix.
Gemstone also faces a relatively high rate of churn in management contracts, which is inhibiting the company's ability to grow. Company co-founder Jeff McIntyre said Gemstone will often bring a property to a point where it can be sold, but there's a strong possibility that the buyer will be tied to a different management firm.
So, by owning some of the properties he manages, McIntyre hopes to reduce turnover. And by selectively enrolling properties in Marriott's Autograph Collection, he can essentially rent Marriott's scale. With Autograph, he'll have access to Marriott's GDS code, Rewards program, traveler database and group network yet remain free to pursue a property's unique identity.
What does Marriott get? In addition to bringing competitors into their tent, they get paid handsomely. "Marriott is not a cheap alternative," McIntyre said. "They don't have to be. They know they have something very special, and you pay for it. But we anticipate returns to be extraordinary."
Bill Marriott's recognition that his company is a "management, franchise and branding company" is quite different from the conventional belief that he's a hotelier. It permits him to focus on and exploit those competencies, and his scale, on behalf of anyone willing to meet his terms and conditions.
Offering scale and services to independent hotels is not a new concept. In fact, before joining Autograph, the Carlton was in Preferred Hotels' program. McIntyre has nothing but positive words for Preferred, but the increasing popularity of the Carlton's location in midtown Manhattan presented both more competition and, he believes, the opportunity to raise rates, and "Marriott will be the engine behind revenue growth."
It's important to understand that Autograph, which launched in 2010, is much more than a "frenemies" strategy whereby companies try to partner with competitors opportunistically. Rather, it's a reflection of defining one's company by its core strengths and growing by leveraging those strengths without regard to traditional labels and paradigms.
Other examples reflective of this thinking have popped up in the early years of this decade. In 2011, some online travel agencies (OTAs) realized that one of their greatest strengths is negotiating volume net rates with hotels, and they subsequently opened up access to those rates to traditional travel agency groups. This, in turn, also gives the OTAs greater volume, and even more negotiating strength.
As MLT Vacations President Ken Pomerantz observed in his Preview 2012 interview, "I'm not sure my segment is fully defined anymore. What we think of as traditional labels -- tour operators, ethnic consolidators, home agents, traditional agents -- they're all bleeding across channels. ... Consortia are negotiating with wholesalers. Consolidators are working with corporate agencies. ... Everyone's participating in many channels, and I think that will only grow."
While such directional change can be disruptive, I see this as a very positive trend. Unlike many shifts in business paradigms, this holds the promise to grow the travel pie for everyone. It's an inclusive competitive strategy, a term that just a few years ago would have seemed oxymoronic.
Email Arnie Weissmann at [email protected] and follow him on Twitter.