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  1. Analysis
January 4, 2012

Land of opportunity

All eyes may appear to be on the Far East, yet Europe remains fertile ground for hotel operators in spite of recent events. Ross Davies travels to Rome to talk to Marriott International’s Amy McPherson, in town for the global group’s latest opening, about ambitious plans to ramp up its presence on the continent.

By Julian Turner

"These are interesting times," my taxi driver tells me on the run from Rome’s Fiumicino Airport as we listen to live radio coverage of Silvio Berlusconi’s imminent resignation. Given the current eurozone contagion – on the day I arrive, Italy’s borrowing costs hit an unprecedented 7% – ‘interesting’ might be something of an understatement.

However, despite recent events, it’s not all doom and gloom, particularly for the European hotel industry; according to data compiled by STR Global, it continues to enjoy growth in terms of occupancy and room rates. While the Chinese hospitality sector might garner more press coverage, hotel operators don’t appear to be giving up on the vieux continent just yet.

Marriott International is a prominent example. This year alone, the global hotel group has introduced four new brands in Europe – Autograph Collection, Residence Inn, Edition Hotels and AC Hotels by Marriott – following last year’s announcement of plans to double its European portfolio of rooms from 40,000 to 80,000 by 2015.

I am in the Eternal City to meet Amy McPherson, president and managing director of Marriott’s European division. Our interview also coincides with the official launch of the Boscolo Palace Roma. Located on the bustling Via Veneto, famously immortalised in Fellini’s La Dolce Vita, the property is the latest addition to the group’s luxury Autograph Collection brand, bringing the total to nine on the continent.

While a melange of Italian celebrities and Roman socialites sup on champagne in the adjacent dining room, I find McPherson in good humour as we sit down on one of the hotel’s 19th-century terraces to discuss the group’s aforementioned European growth targets.

"We are almost halfway there," she says. "Through the Autograph Collection, we have already added 17,000 rooms to our portfolio. In addition to this, we have 40 hotels in Europe through our Courtyard brand. Europe is still very much a fertile market, arguably more so than the US."

Particularly prevalent in the fallout from the downturn has been the trend of global players partnering with unbranded European operators – which still account for 70% of the region’s hotels – as a way of entering the competitive market. In its partnership with Boscolo, Marriott has also eschewed cookie-cutter models, aware that guests are more often predisposed to buildings of architectural merit and history than red-brick affairs.

"It is really a case of better economics for potential investors," says McPherson, who joined the company in 1986. "As a conversion brand, Autograph Collection is not adding supply. Instead, we are, through our reputation and resources, helping to convert existing supply in a market where owners are looking to extend their reach and bolster occupancy. This is the difference."

Continental drift

Despite its global coverage extending to 68 countries, it is sometimes difficult to disassociate Marriott from its North American roots – a byword for the American Dream, it was founded by J Willard Marriott in 1927 as a root beer stand in Washington DC. I ask McPherson, who divides her time between Paris and Marriott’s London offices, how the group has gone about successfully assimilating a new European identity.

"Firstly, we have made use of our European development department based in Zurich to initially source potential opportunities," she says. "This team comprises guys that have an innate cultural and linguistic knowledge of the areas they are representing. For example, the Autograph Collection website now has a new Spanish-language function, while the all-day bistros found in our Courtyard properties have a robust menu tailored to local cuisines depending on the location."

"Finding franchise partners allowed us to grow big in the US. We are optimistic that this will happen in Europe as well."

While much has been written about the luxurious Autograph Collection, located in Rome, Prague and Madrid, McPherson steers our conversation onto the Courtyard brand. Geared towards business travellers, the franchise was introduced in 1983 as a means to expand into what McPherson describes as "tertiary markets" – smaller cities and satellite locations. The first two hotels to debut the new-look European design will be the 194-room Courtyard by Marriott Aberdeen and the 230-room Courtyard by Marriott Cologne, both scheduled to open in 2013.

"Business travellers make up the DNA of the brand throughout," she says. "The great thing about having a portfolio of brands is that you can alter price points so as to adapt to these secondary and tertiary markets," says McPherson. "With the new prototype [unveiled in November], we are confident we will be able to infiltrate these regions in Europe where a full-service Marriott hotel would not be economically viable for ourselves or the owner."

"It is also worth bearing in mind that the mid-tier market is vaster here than it is in the US – in fact, five years from now, I think we will see more growth in secondary markets than primary."

Courtyard also incorporates cost-saving design, which will surely be music to the ears of owners looking to bolster profit margins during hard times.

"Courtyard actually costs 20% less to build, making it an even more efficient model for owners to build and operate," says McPherson. "As the largest lodging market in the world, but with only 30% branded supply, Europe represents an opportunity for owners and investors to embrace the benefits of size and scale of a global brand like Courtyard. We always keep stakeholder expectations in mind."

Marriott’s European development also covers the major source regions of the UK and Ireland. The reopening of the St Pancras Renaissance Hotel – formerly the iconic Midland Grand Hotel – in March after an 80-year hiatus represented a significant declaration of intent. In November, it was named Hotel of the Year at HMI’s European Hospitality Awards.

"Some argue that the market is saturated, but we don’t see it like that," says McPherson. "We see great growth platforms. From the Iberian Peninsula right across to Russia and Turkey, there is real potential. As we speak, we have 13 Courtyard hotels in Russia compared with 15 in France. Eastern Europe is catching up fast and we want to be in the right position to capitalise on this.

"It is also amazing to think that 70% of our business in Europe actually comes from European travellers," she continues. "A considerable percentage of those guests come from the major source markets such as the UK, Germany, France and Italy, but Russia is also fast becoming an important market. There’s a lot of scope."

Steady growth

While she appears to be more than sanguine, McPherson describes her approach to the future as "cautiously optimistic" – the group is expecting to add an additional 30,000 rooms on the continent next year, she tells me. As our conversation draws to close, I ask whether such targets are feasible given the current economic climate.

"If you had asked me this a year ago, when we didn’t have the Autograph Collection, I might have said no," she says. "But we have been in this game for a long time and have been through a number of cycles. During hard times, one of our tricks has always been to find franchise partners, which allowed us to grow so big in the US. We are optimistic that this will happen in Europe as well."

On a 2009 visit to the continent not long after his inauguration, President Obama declared: "In America, there’s a failure to appreciate Europe’s leading role in the world." Given Marriott’s recent efforts, Amy McPherson may care to differ. Interesting times indeed.


Hotel Management InternationalThis article was first published in our sister publication Hotel Management International.


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