Marriott Lagged Behind Hilton in Select Service Partnership Deal and Targeted Fewer Openings (Select Service Growth in China, Part 1)

In March 2017, Marriott Executive Vice President and Global Development Officer Tony Capuano told investors that international select service might be one of the most compelling opportunities for the company in terms of future rooms growth.[1] Marriott’s ability to grow select service in China, the world’s most populous country, is a key component of international select service growth.

In 2016, Marriott signed a deal to grow its select service Fairfield brand in China. The use of a local partner with hospitality experience mirrored a similar deal made by Hilton for its Hampton brand. However, Marriott’s deal came two years after Hilton’s, and the number of proposed Hilton properties outnumbered Marriott properties more than 2-to-1.

What does this gap signal about Marriott’s prospects for select service growth in China?

Swift growth of Hampton brand through partnership with largest Chinese economy brand

In October 2014, Hilton announced that they had signed a licensing deal with Plateno Hotels Group to develop the Hampton brand in China.[2] According to Hilton, Plateno had a portfolio of over 3,000 hotels in 300 cities across China, as well as China’s largest hotel loyalty program including 80 million members.[3] A 2016 press release indicated that the company planned to open the 400 Hamptons over a decade.[4]

Hilton’s Hampton growth has been swift: since opening their first property in December 2015,[5] Hilton now lists 29 Hamptons in China on their website.[6] In March 2018, Hilton and Plateno announced that they had signed their 200th hotel deal in China.[7] Hilton announced that it expected to open nearly 50 additional Hampton hotels in China in 2018.[8]

Screenshot of Fairfield by Marriott properties in China, 5/31/18 [9]

Screenshot of Hampton by Hilton properties in China, 5/31/18. [10] The numbers indicate the number of Hampton hotels in each location.

Marriott’s partnership to build Fairfield brand echoed Hilton deal, but with less ambitious target

In February 2016, Marriott announced a development deal with Dossen International Group (formerly Eastern Crown Hotels Group) to bring the “FairfieldSM by Marriott®”brand to China. The agreement targeted having 140 hotels signed in five years, of which 100 are expected to be opened by 2021.[11]

The first Fairfield Inn opened in July 2017.[12] In December, Marriott stated that 8 more Fairfield properties were scheduled to open in China in 2018.[13] As of May 2018, Marriott listed 3 open Fairfield properties in China on its website, along with another opening in June.[14]

Fairfield properties lagged behind Hamptons – what is the plan to bridge the gap?

Based on the brand targets announced by Hilton and Marriott, Hampton will continue to have a greater presence than Fairfield in China.

Investors should be asking the following questions about Marriott’s select service growth in China:

  • Why did Marriott wait two years to create a partnership similar to Hilton’s?
  • Why is Marriott’s projected number of Fairfield properties so much lower than Hilton’s projected number of Hamptons?
  • Will Marriott pursue a similar partnership agreement for another one of its select service brands in China?

 

[1] Transcript of 2017 Security Analyst Meeting, Marriott International, 3/21/17, p. 37. http://files.shareholder.com/downloads/MAR/4828073936x0x935483/44036211-62F7-4112-80D6-E1218E591E06/MAR_SAM_Transcript_FINAL_3-21-17.pdf.

[2] “Hilton Worldwide Signs Exclusive License Agreement for Major Expansion Of Hampton By Hilton Hotels In China,” Hilton Worldwide, 10/30/14 (from Google Cache, page cached 5/28/18). http://webcache.googleusercontent.com/search?q=cache:NRE0BAqa8MgJ:newsroom.hilton.com/index.cfm/news/hilton-worldwide-signs-exclusive-

[3] “Hilton Worldwide Signs Exclusive License Agreement for Major Expansion Of Hampton By Hilton Hotels In China,” Hilton Worldwide, 10/30/14 (from Google Cache, page cached 5/28/18). http://webcache.googleusercontent.com/search?q=cache:NRE0BAqa8MgJ:newsroom.hilton.com/index.cfm/news/hilton-worldwide-signs-exclusive-

[4] “Hampton by Hilton Expands in China” [Infographic], retrieved 4/23/18. http://newsroom.hilton.com/assets/HAMP/images/newsroom/2016/Q1/Mar/HamptonChinaInfographic_HR.jpg. Infographic accessed from “Hampton By Hilton Opens Flagship Hotel In China,” Hilton News Room, 3/25/16. http://newsroom.hilton.com/index.cfm/news/hampton-by-hilton-opens-flagship-hotel-in-china.

[5] “The Hampton By Hilton China Story,” Hampton by Hilton Global Media Center, retrieved 4/23/18. http://news.hampton.com/index.cfm/misc/china.

[6] Profiles of Hampton China properties, retrieved 5/31/18. http://newsroom.hilton.com/hampton/properties.

[7] “Hilton and Plateno Reach Major Milestone for Future Hampton by Hilton Hotels in China,” PR Newswire, 3/21/18. https://en.prnasia.com/releases/apac/hilton-and-plateno-reach-major-milestone-for-future-hampton-by-hilton-hotels-in-china-205286.shtml.

[8] “Hampton by Hilton Begins 2018 Welcoming Seven New Properties; Announces More Than 580 Hotels in the Global Pipeline,” Hampton Global Media Center, 2/23/18. http://news.hampton.com/index.cfm/news/hampton-by-hilton-begins-2018-welcoming-seven-new-properties-announces-more-than-580-hotels-in-the-global-pipeline-.

[9] Hotels in China filtered by brand: Fairfield Inn and Suites (map view), Marriott.com, retrieved 5/31/18. http://www.marriott.com/search/filterSearch.mi.

[10] Hampton by Hilton properties (map view), retrieved 5/31/18. http://newsroom.hilton.com/hampton/properties

[11] “Marriott International and Eastern Crown Partner to Launch “Fairfield by Marriott®” a New Affordable Mid-range Hotel for Travelers Across China,” Marriott News Center (press release), 2/17/16. http://news.marriott.com/2016/02/marriott-international-and-eastern-crown-partner-to-launch-fairfield-by-marriott-a-new-affordable-mid-range-hotel-for-travelers-across-china/.

[12] “The Fairfield by Marriott Brand Premiers in China with Fairfield by Marriott Nanning Nanhu Park,” Marriott News Center (press release), 7/11/17. http://news.marriott.com/2017/07/fairfield-marriott-brand-premiers-china-fairfield-marriott-nanning-nanhu-park/.

[13] “Marriott International’s Select-Service Hotels Tier Are Primed For Unprecedented Growth In Asia-Pacific With Exciting New Openings In 2018,” Marriott News Center (press release), 12/13/17. http://news.marriott.com/2017/12/marriott-internationals-select-service-hotels-tier-primed-unprecedented-growth-asia-pacific-exciting-new-openings-2018/

[14] Hotels in China filtered by brand: Fairfield Inn and Suites, Marriott.com, retrieved 5/31/18. http://www.marriott.com/search/filterSearch.mi.