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Global development going strong at Marriott

Marriott International signed a record number of rooms during the fourth quarter and the company’s global development pace is not showing signs of slowing.

There was a time not long ago when some felt Marriott International’s portfolio growth was unsustainable, the company’s President and CEO Arne Sorenson told analysts Thursday during an earnings call.

The company is working hard to put such doubts to rest, he said.

“Nothing could be further from the truth,” he said of questions about development sustainability. “Our unit growth is sustainable.”

The company signed a record 67,000 rooms to its portfolio during 2013 while its hotel development pipeline reached 195,000 rooms. Overall, the company’s total system size has grown by 20% over the last four years and today the company has more than 3,900 hotels in its portfolio comprising nearly 676,000 rooms in 72 countries.

There is a good deal of runway left for Marriott to continue along on its growth trajectory, and there’s no reason such growth shouldn’t continue for some time, Sorenson said.

“We continue to believe we are quite early in the development cycle,” he said.

Sorenson added: “The 67,000 rooms signed during 2013 portend a fabulous few years ahead for us. (But) obviously, you can’t take anything for granted.”

The fourth quarter saw positive growth in revenue per available room as the metric grew by 4.1% in actual dollars. Full-year net income grew by 9.6% to $626 million from $571 million during 2012.

Sorenson said early signs seem to indicate that 2014 is going to look a lot like 2013 from a macroeconomic perspective.

“There are some signs that the economy is stronger now than it was a year ago, but they’re not definitive,” he said.

Much of the company’s growth has been in secondary markets. In the North American pipeline, 70% of the hotels are outside the top 25 Metropolitan Statistical Areas. There’s also plenty of room to grow outside the United States, highlighted by the company’s pending acquisition of Protea Hotel Group expected to close by 1 April.

“I think when you look longer term and you look at the global travel dynamics, you look at our small share of the industry outside the United States, it’s a big world out there and we’ve got lots and lots of growth available for decades to come,” Sorenson said.

Sorenson was asked during the call about whether the company might consider adding a brand in Asia. He said the company has put a lot of thought into adding to its presence in that global region, mostly with existing Marriott brands. For instance, a lot of discussion internally at Marriott has revolved around adding the Fairfield brand in India, which occurred during the fourth quarter of 2013 in Bengaluru, and another 10 to 15 Fairfields are in the India pipeline.

And in China, much of the growth has come with top-end brands such as Ritz-Carlton, JW Marriott, Marriott Renaissance and some Courtyard properties. “None of our limited-service brands are really moving, other than Courtyard,” he said, adding that the Courtyard concept in China is more of a full-service brand.

“I think in the years ahead, we’re hopeful that in China and other places of the Asia/Pacific market, we will see opportunities to grow in some of the moderate tier markets,” he said. “Whether we do that with Fairfield or Moxy or with other brands that are already within our portfolio, only time will tell.

“There is a simplicity in doing the growth with the brands we already have, which is an advantage and there is an attraction to that. But we’re also quite prepared when opportunities arise, whether it’s through the deal market or in some other way, to work with our partners to add new brands if we think we can grow materially in those new platforms.”

Marriott, he said, will continue to carefully consider markets for expansion.

“We are not real estate speculators,” he said.


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