Marriott International and Alibaba Group have formed a new joint venture specifically developed to help Chinese travelers see the world. The partnership leverages Marriott’s portfolio of 30 hotel brands spread out over more than 6,200 properties worldwide, combining it with Alibaba’s digital retail expertise to provide a suite of travel services to more than half a billion Chinese travelers.

Alibaba is often compared to as the “Amazon of China” and rightly so. The new partnership between Marriott and the e-commerce giant will focus on Marriott’s storefront on Fliggy, Alibaba’s travel service platform which was formerly known as Alitrip, and will include targeted marketing campaigns to Alibaba’s customer base. They will also link to both both companies’ loyalty programs.

Marriott hotels around the world will also receive content, programs, and promotions customized for the Chinese traveler.

How the Joint Venture Came About

Reaching the Chinese traveler market is something nearly every global travel brand is hoping to do, and Marriott is no exception. The company has been experimenting with a variety of different digital and marketing strategies specifically tailored to the Chinese market as far back as 2012 and had already established the use of Alipay as a form of payment at select hotels in China and throughout Asia in 2015.

“Marriott and Alibaba have been working together for some time now as partners in the travel space,” Stephanie Linnartz, Marriot’s global chief commercial officer, told Skift. “Of course, we have our inventory on their website thru Fliggy, which is their travel services platform. We’ve had a relationship for some time with Alibaba, and this was quite a nice and quite a natural evolution to take this partnership to another level. We know each other well and work well together and we respect and understand our respective strengths and what we each bring to the table.”

Marriott CEO Arne Sorenson, speaking during a second quarter earnings call, noted that a targeted marketing program that Marriott launched last year with Alibaba garnered 6,000 new Marriott Rewards members in just six weeks last year.

Likewise, Alibaba has been eager to work with established travel companies to form partnerships that allow the company to grow its travel division, Fliggy, which competes against Ctrip and Qunar. Most recently, the company announced a partnership with Norwegian in May in an effort to reach the China cruise market.

Sherri Wu, Alitrip’s former chief strategy officer, told Skift in 2016 that partnerships between Alibaba and U.S. travel companies can be mutually beneficial. “[The Chinese travel market is] a huge market but it’s not easy market to crack,” she said. “We have seen so many large U.S. merchants try and they’re not very successful. Luckily, Alitrip is a very different model than the other models. We’re not traditional OTA, we’re a marketplace platform. Essentially, we provide a technology platform, marketing platform, a billboard for their outreach.”

Linartz added that while Marriott does have some partnerships with Alibaba’s main travel competitors such as Ctrip and its Qunar unit, the strengths that Alibaba has as an e-commerce giant made this joint venture particularly attractive for Marriott.

“We do have relationships with the other players you mentioned that are very important to us,” Linnartz said. “What makes Alibaba a particularly special partner for this joint venture is that it is the largest e-commerce platform in China and it accounts for 80 percent of China’s online travel market. The numbers, in terms of active user base, are pretty significant. We do have relationships with other Chinese players, but there’s something very powerful about the Alibaba platform and organization.”

Marriott’s 2016 acquisiton of Starwood Hotels & Resorts likewise made the company an even more attractive partner for Alibaba, given the fact that Starwood had a healthy portfolio of hotels in China — even more so than Marriott. Today, Marriott has more than 170,000 hotel rooms open or under development in China, and the company’s hotels in China represent 8 percent of the company’s worldwide rooms and 17 percent of its global pipeline.

“Why this is so interesting and so exciting — Marriott already has more than 6,000 hotels, and with our Starwood acquisition it gave us a much bigger global presence,” Linnartz said. “Starwood is bigger in China than Marriott and we now have more than 500 hotels in China alone. Our global footprint in 125 plus different countries, with 30 brands … brings global distribution and 90 years of hospitality experience. Alibaba has so much digital expertise.”

Sorenson noted, “This is a joint venture that would not have happened had we not done the Starwood transaction. I think, when the Starwood transaction was announced, Alibaba was one of the companies that saw it and said, ‘We are very intrigued by the the size of this portfolio, particularly with luxury and lifestyle and the aspirational brands in this portfolio.”

“They deeply understand the Chinese consumer, and they have 500 million active monthly users on their site,” Linnartz noted, of Alibaba. “That’s a staggering statistic — it’s significantly larger than the entire U.S. population. Their amazing digital capabilities and insights on Chinese consumers, and lots of retail experience on their platform, coupled with our strengths will lead to great things for both companies.”

In a post written for LinkedIn, Sorenson described the opportunities a partnership such as this affords:

“Globally, the middle class is forecasted to see an increase of three billion people by 2031, with China leading the way,” Sorenson wrote. “While travel is already booming in China, it is estimated that less than 10 percent of Chinese nationals have passports. Imagine the potential for major growth that lies ahead as more Chinese join the ranks of the middle class and choose to travel.

“In fact, Chinese President Xi Jinping expects 700 million Chinese visits overseas in the next five years. China continues to lead global outbound travel, after registering double-digit growth in tourism expenditures every year since 2004. Spending by outbound Chinese travelers in 2016 alone reached $261 billion, as the total number of outbound travelers rose to 135 million. That’s why our partnership with Alibaba was a priority for both companies — together, we want to make travel smarter.”

How the Joint Venture Makes Travel Smarter for Chinese Travelers

As part of this new partnership, both companies will develop new technology solutions that make it easier for Chinese consumers to plan, book, pay, and manage a trip, including in-destination activities such as shopping, dining, and sightseeing.

“From the Marriot side, we’ll develop and operate Marriott’s storefront on Fliggy. This joint venture will be its own entity and will draw on staff from both companies,” Linnartz said. “Over time, we’re planning to have the joint venture also manage the Chinese language versions of the Marriott sites and the mobile apps. We’re starting with the joint venture running the storefront on Fliggy, formerly known as Alitrip, and then moving toward it running our websites and mobile apps. We very much recognize that it’s mobile, mobile, mobile. We’re seeing that in our own numbers — the growth in mobile is very significant.”

There’s also a significant tie-in for loyalty members. Both companies will also curate specially customized experiences for Chinese consumers that are offered through its Starwood Preferred Guest (SPG) Moments and Marriott Rewards Moments programs. These experiences include access to private concerts, family focused experiences, and courtside seats at sporting and other events.

Eligible members from Alibaba’s loyalty program will also benefit from personalized hospitality programs and Marriott’s award-winning SPG ambassador program. In celebration of Alibaba’s Members day on August 8, Alibaba members will be able to enroll in one of Marriott’s loyalty programs – Marriott Rewards, The Ritz-Carlton Rewards or SPG – and book exclusive discounted member rates through one of Marriott’s digital channels, beginning immediately. Special offers will also be available only on August 8 for members on Marriott.Fliggy.com.

Alipay will also be accepted at Marriott hotels in select global markets with further expansion expected around the world.

When asked if Marriott was considering other partnerships of this nature, Linnartz said, “At this time, this is what we’re focused on. There’s something unique about the partnership with Alibaba and the Chinese market and this is the one we’re focused on now for the foreseeable future.”

Sorenson did not rule out the possibility of Alibaba forming similar partnerships with other hotel companies in the distant future but did say, “There are some features of exclusivity in this deal for a period of time. That’s as far as we can go.” He also noted that the most important benefit of the joint venture was to increase hotel demand at Marriott hotels, especially within the growing Chinese travel market.

While he noted that Chinese outbound travelers make up a “tiny” portion of travelers visiting the U.S. currently, Sorenson said, “But In most of these markets [the number of outbound Chinese travelers] is going up 25 percent year over year, and has been for some period of time, and we see that essentially in all markets around the world. So, it’s a bit of a small base in some markets but he growth is fabulous and I think it’s going to be that way for many years to come.”

Marriott Posts Solid Second Quarter

Marriott had a positive second quarter for 2017. Second quarter reported net income was $414 million, a 68 percent increase over prior year results. Second quarter adjusted net income was $432 million, a 30 percent increase over prior year combined results.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter was $834 million, representing a 69 percent increase over the same period last year.

Worldwide revenue per available room (RevPAR) increased 2.2 percent in the second quarter, while North American  RevPAR rose 0.9 percent.

Photo Credit: Marriott International has formed a new joint venture with Alibaba Group to grow its business in the global Chinese travel market. Pictured are the Fliggy and Marriott logos together. Marriott International