Rooms Hotels

Marriott CEO Interested in Buying More Hotel Operators to Add Brands

Jan 30, 2014 8:00 am

Skift Take

Acquisitions give the global hotel group the opportunity to add brands outside of its expertise, like European budget chain Moxy, and is a smart road to international growth.

— Samantha Shankman

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Protea Hospitality

A balcony view at Protea Hotel Kruger Gate in Kruger National Park, Mpumalanga, South Africa. Protea Hospitality


Marriott International Inc., the owner of such brands as the Ritz-Carlton and Renaissance, would consider buying more hotel-management companies after its acquisition of South Africa’s Protea Hospitality Holdings, Chief Executive Officer Arne Sorenson said.

“We are open to buying more operators for reasons such as adding a new brand, for lack of distribution or because of the economics of a deal,” Sorenson said in an interview yesterday at the Americas Lodging Investment Summit in Los Angeles.

Marriott, the second-largest U.S. hotel chain by market value, said last week it signed a definitive agreement to acquire Cape Town-based Protea for $186 million. The transaction will almost double the Bethesda, Maryland-based company’s rooms in Africa to about 23,000 and help it expand further in the region, where a growing middle class and rising travel are fueling the fastest pace of hotel development in the world.

Marriott is “opportunistic” in its choice of possible acquisitions, and its growth strategy has changed over the years, Sorenson said. The company in March announced it would start a European budget chain called Moxy Hotels with the parent company of the Ikea furniture chain, and in 2011 formed a joint venture with Spanish lodging group AC Hotels. Marriott in June said it would introduce the brand in the U.S.

“If you had told me five years ago that we would go into the economy space in Europe, I would have not believed it,” Sorenson said of the Moxy transaction.

Economic Growth

Marriott shares have increased 24 percent in the past 12 months, greater than the 19 percent advance in the Standard & Poor’s 500 Index. Hotel companies have gained as U.S. revenue per available room, a measure of rates and occupancies, climbed 5.3 percent last year through November, according to Hendersonville, Tennessee-based research company STR.

Sorenson said he expects lodging companies to benefit from further economic growth this year because of a lesser degree of political uncertainty compared with 2013 and a modest recovery among middle-income U.S. households.

Marriott, the largest publicly traded hotel chain after Hilton Worldwide Holdings Inc., opened about 26,000 new rooms in 2013 and expects new hotel openings to accelerate this year and next, the company said in a statement yesterday. As part of this growth, Marriott earlier this month announced a second project in New York City under its luxury Edition brand, which it created with hotelier Ian Schrager.

“The sectors that still struggle the most, like construction, are typically not our customers,” Sorenson said. “The middle class is by and large employed and has been reducing household debt. A consequence of that is, there is more travel. There is greater economic strength the higher up you go.”

Editors: Kara Wetzel and Christine Maurus. To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net. To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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