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Despite stalled growth in China, Brazil and Russia, a wave of newly middle-class travelers from the BRICs and beyond will start visiting international destinations in the coming decades — dwarfing the numbers we’ve seen thus far.
Rebounding travel demand is encouraging travel companies across all sectors, but Marriott’s early expansion into high growth markets of the Middle East and Africa is what will set its revenue growth apart from other global hotel companies.
Marriott International Inc., the world’s second-largest publicly traded hotel chain, said expansion into new Africa markets and a global economic recovery may boost revenue by as much as 10 percent this year.
“We would see the existing hotels grow their top line by something between 4 and 6 percent and should add another 4 to 5 percent new hotels,” Chief Executive Officer Arne Sorenson said by phone from Cape Town today. “If you combine those two, you get revenue growth for us that’s in the 10 percent range.”
The owner of brands including Ritz-Carlton and Renaissance is benefiting from an increase in both business and leisure travel worldwide as the global economy improves. The number of individual cross-border journeys could increase to 2 billion by the end of the decade from 1.1 billion in 2013, according to Sorenson. Marriott revenue increased 8 percent to $12.8 billion in 2013.
“It’s both the burgeoning middle class around the world and it’s growing economies,” Sorenson said. “So you look at the United States for example, we continue to see GDP growth in the 2 to 3 percent range broadly. Europe is stronger than it has been in a number of years, hardly robust but still at this point firmly positive.”
Marriott is boosting its presence in Africa and the Middle East on the back of the acquisition of Cape Town-based Protea Hospitality Holdings for about $200 million in April. The Bethesda, Maryland-based company will open as many as 50 new hotels in the region over the next three years, Alex Kyriakidis, the chain’s president for Middle East and Africa said in the same interview. That will bring the total to more than 200.
“Today we have 45” new hotels in the pipeline, Kyriakidis said. “We will probably add several more over the next two or three years. Some of which will be construction. Some of which will be conversions.”
Hilton Worldwide Holdings Inc., the biggest hotel chain, Radisson Hotels International Inc. and InterContinental Hotels Group Plc are also expanding in Africa to take advantage of booming business travel and economies that are growing faster than their domestic markets. Marriott will enter seven new African countries including Ethiopia and Ghana as part of its growth strategy, and will invest about $3 billion in new builds alongside developers.
Security concerns in Kenya and Nigeria, triggered by a series of deadly bomb attacks by Islamist rebels, won’t deter Marriott from further investment in those countries as the company is planning for the long term, Sorenson said.
“Many of the long-haul travelers that come to Nigeria are doing business,” he said. “They will be less sensitive in some respects to security issues than a vacationer. And when you look at Nigeria from a tourism perspective, much of the tourism in Nigeria is Nigerians living abroad.”
Marriott shares have rallied 29 percent this year, valuing the company at $18.7 billion. The stock advanced for a seventh day, rising 0.1 percent to $63.83 rand as of 12:21 p.m. in New York, the highest level since March 1998.
With assistance from Nadja Brandt in Los Angeles.
To contact the reporter on this story: Kamlesh Bhuckory in Johannesburg at firstname.lastname@example.org To contact the editors responsible for this story: Simon Thiel at email@example.com John Bowker, Andrew Blackman.