Skift Take

Marriott could do a lot worse than tying its fortunes in China to the e-commerce juggernaut Alibaba. Rest assured that this won't be the last big partnership for Marriott in the country. These are, after all, early days.

About a year and a half after Marriott established a joint venture with e-commerce giant Alibaba in China, the collaboration is enabling the hotel giant to make inroads with a relatively new customer base — leisure travelers, a majority of whom are female and younger than 40.

And an official said the joint venture’s distribution model is breaking new ground for the chain.

Marriott considers its storefront on Fliggy, Alibaba’s travel division where it sells its global hotel inventory, to be a direct-booking channel with costs that are lower than going through online travel agency distribution, said Peggy Fang Roe, Marriott’s chief sales and marketing officer, Asia Pacific. Customers can pay for rooms using Alipay after their stays.

As with Marriott’s other websites, Alibaba users who access the Marriott storefront on Fliggy can take advantage of lower loyalty rates if they are program members. They can also earn both Fliggy and Marriott Bonvoy points.

Fang Roe is coy about the business model of the joint venture, which is based in Hangzhou, China, but said, “It’s fair to assume that hotels pay a small booking fee to fund the joint venture and its strategic objectives.”

Unlike most Alibaba storefronts, which notoriously require foreign businesses to partner with third-party companies for implementation, Alibaba and Marriott International worked together using Alibaba technology to get the Marriott storefront up and running on Fliggy’s mobile app.

Most online travel agencies are preoccupied with hotel bookings. In the joint venture with Alibaba, however, Marriott is “looking at the end-to-end experience of a targeted member base and saying, How do we actually be more thoughtful about how we allow that person, that customer, to shop and book within an ecosystem they’re comfortable with?” Fang Roe said. “And how do we make the benefits more targeted and relevant to who they are?”

An Alibaba spokesman declined to comment about the progress of the joint venture.

Although numerous companies these days erroneously try to propagate the hype that their sites are platforms, in China Baidu, Alibaba, and Tencent, commonly called BAT, really are.

Working with Alibaba, which boasts of more than 650 million monthly active consumers, Marriott argues that it can target customers in new ways because it knows so much about their buying habits on the plethora of Alibaba retail offerings.

To put Alibaba’s business clout into perspective, based on the gross value of goods sold, Alibaba is roughly twice the girth of Amazon.

Platform Strategy

Marriott’s China platform strategy — in leveraging Alibaba’s expansive user base and wide-ranging data about customer behavior — stands in stark contrast to the tactics of Hyatt and Hilton in China. While all three are primarily targeting domestic travelers in the country for now, with hopes to tap into China outbound travel eventually, Hyatt is partnering to launch a Chinese brand while Hilton is trying to localize some of its existing brand.

Marriott will try to leverage all it can out of the Alibaba-Marriott joint venture, which is staffed by around 40 people, although some share their time with Alibaba or Marriott individually. The chief operating officer of the joint venture is Maxwell Sun (shown in photo, center, in the red-and-white shirt).

“If we know this group of members within Alibaba likes these types of products, then we can cross-sell them certain properties,” Fang Roe said. “We know they have kids because they buy products related to kids; we can target them for resorts that are kid-friendly. So, we have a lot of opportunity to do more targeted marketing within the Alibaba ecosystem.”

When Fang Roe refers to members in this context, to a great extent she’s talking about Alibaba+Marriott loyalty program members, meaning consumers who belong to various Alibaba loyalty plans and have signed up for Marriott’s program, Bonvoy. Although the joint venture was announced two years ago, it really got up to speed in the first quarter of 2018, and since that time Marriott has signed up some six million members who came through Alibaba.

China Drives Marriott’s Loyalty Bump

In the first quarter, Marriott International said it added 5 million members to Bonvoy globally, and some 40 percent came from China. Fang Roe said a majority of those new memberships in China came through the Marriott-Alibaba joint venture.

“It’s great seeing Marriott expanding its partnership network,” said Skift Business of Loyalty editor, Grant Martin, referring to the Alibaba deal. “It continues the legacy of Starwood and really underscores its power as the most versatile hotel loyalty program (see the Emirates-Marriott news last week). And without a lot of reach in China, this is a good wedge to build the business relationship with the Far East.”

Marriott in late June announced a points exchange where Alibaba Fliggy members could exchange 5,000 Fliggy points for 1,000 Marriott Bonvoy points. After a couple of weeks, some 10 million miles had been exchanged, Fang Roe said.

Marriott Chief Financial Officer Leeny Oberg is speaking at Skift Global Forum in NYC Sept. 18–19. Get tickets now

A New Demographic

On a global basis, Marriott’s customers skew toward business travel, but Fang Roe said “our joint member base tends to be younger and more female than our global member base: 86 percent are under the age of 40, 39 percent are under 30. The member base is predominantly booking leisure travel with us and are showing strong interest in family travel.”

That means, she said, that the learnings that Marriott can take away from this relatively new foray into leisure travel “can help us shape our future resort and leisure offers.”

The female and family-oriented travel membership base “changes the content, the packaging, everything that we offer them,” Fang Rose said. “At some point, we’ll be able to do that at the customer level, but, at least here, we’ve got more information at aggregated levels, and we can start to change how we market and the benefits that we provide.”

The tie-in with Alibaba and some of its businesses, such as the local services platform Koubei, helps drive patrons to Marriott’s bars and restaurants in China. The joint venture, for example ran a promotion where Alibaba+Marriott loyalty members were eligible to receive a 30 percent discount on dining.

Marriott isn’t detailing many financials about the joint venture other than Fang Roe saying that revenue tripled since the program launched, and that the joint venture is not trying to drive profit at this juncture. “It’s really designed to focus on the customer experience,” she added.

Marriott views the joint venture as a learning opportunity and a way to engage Chinese consumers in new ways. For example, Marriott launched a version of its storefront on the Xiao Hong Shu (Red) app.

“That was really about women exchanging advice on fashion or cosmetics and products, and 82-plus percent of that member base or social base is female,” Fang Roe said. “And that’s a place where we see a great opportunity to cultivate that community, their passion point on fashion. And then how do we sell travel through that web.”

What’s Next

Similarly, Marriott sees the leisure market, which is growing much faster than business travel in Asia Pacific, as a big opportunity. “We see families wanting to spend time together and wanting to do that when they travel,” Fang Roe said. “Whether it be short trips, or long-haul trips, we see this community as a place where we can really listen to what are the needs, what are the pain points, the opportunities, and help design together how to get to that more-targeted family experience.”

Fang Roe said China is the largest source for outbound travel in the world right now, and will likely be so for the next decade, although there is “a similar type of trajectory in India and Indonesia.”

“In China, we’re really focused right now on saying, how do we cultivate the source market for outbound travel? How do we make that experience for outbound travelers easier? And how do we follow demand, and also create demand, to locations around the world?”

Whether it’s Marriott, Hilton, Hyatt, Accor, or InterContinental Hotels Group — pick your chain — all are focused on tapping into that outbound China travel market. For Marriott, it is committed to hitching its ambitions to Alibaba for now.

Marriott Chief Financial Officer Leeny Oberg is speaking at Skift Global Forum in NYC Sept. 18–19. Get tickets now

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Tags: alibaba, bonvoy, china, distribution, fliggy, joint ventures, loyalty, marriott, marriott bonvoy, platforms

Photo credit: The W Xi'an hotel in northwest China is shown here. Marriott International has a joint venture with e-commerce giant Alibaba. Marriott International

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