Last year, Marriott International expanded its European
footprint by 70%, almost exclusively via its September acquisition of Starwood
Hotels & Resorts and its stable of luxury and upper-upscale, full-service brands.
Now the world's largest hotel company said its legacy
select-service badges will start doing the heavy lifting across the pond.
With Europe still accounting for fewer than 10% of Marriott's
nearly 1.2 million rooms, the company said last week that its expansion efforts
in Europe during the next three years would be primarily through brands that
Marriott oversaw before the Starwood purchase, such as Courtyard by Marriott,
Moxy and AC Hotels.
Specifically, Marriott would broaden its number of Courtyard
rooms in Europe to more than 22,000, either operating or under contract, from
its current 10,000.
Moxy, which Marriott launched in Milan in 2014, will have
about 19,000 operating rooms in Europe by the end of the decade, up from 1,000
at the end of last year.
Marriott outlined its Europe strategy at the International
Hotel Investment Forum in Berlin last week.
"We plan to expand our lead in the luxury and
full-service segments, to have the largest portfolio in the upscale tier and to
win with millennials in the affordable lifestyle category," said Amy
McPherson, president of Marriott's Europe region.
Even with the addition of Starwood, Marriott's market share
in Europe, which at 4.7 million rooms is slightly smaller than the 5
million-room U.S. market, is just 2.2%, compared with its 16% domestic market
share.
In addition to playing catch-up in Europe, an emphasis on
select service would balance the scales for Marriott, which is upscale-heavy in
Europe. Of its 105,000 rooms on the Continent at the end of last year, more
than three-quarters were full-service properties. That includes approximately
28,000 rooms gained through the acquisition of Starwood's upper-upscale
Sheraton, Westin and Le Meridien brands, and the 8,000 luxury rooms at Starwood's
Luxury Collection, W and St. Regis properties.
"Luxury and upscale are well serviced by both [Marriott
and Starwood] chains and well-established independents in most countries,"
said Peter O'Connor, Paris-based senior market analyst at Phocuswright. "But
as you move downward, there is much potential to displace unbranded hotel stock
with more modern, standardized products with a recognizable brand. For a hotel
chain, this is where the market in Europe is."
The strategy also signals some confidence, especially with
regard to demand among younger travelers. The European hotel market appeared to
gain momentum toward the end of 2016 after years of inconsistent performance by
a combination of economic swings and, more recently, terror attacks in Paris,
Brussels, Istanbul and Nice, France.
Last year, Europe's RevPAR fell 3% from a year earlier after
jumping 9.4% in 2015.
Marriott CEO Arne Sorenson noted in the company's
fourth-quarter earnings call last month that demand lagged in Paris, Brussels
and Istanbul, while performance in the U.K., Germany, Spain and Russia was
particularly strong. He also forecasted that RevPAR at Marriott's Europe hotels
will rise in the low single digits this year.
O'Connor said Marriott could face challenges from a
combination of established hotel operators such as Paris-based AccorHotels with its more moderate Ibis Styles chain, and
younger companies noted for their technological innovations and
millennial-targeting efforts, such as CitizenM and Zoku.
"Marriott's strength has always been strong sales and
distribution from the U.S. source market rather than product innovation,"
O'Connor said.
But he added, "In most European countries except the
U.K., most of the hotel stock is unbranded and ripe for displacement, and you
have a massive market opportunity."