On the double – Marriott’s European vision

The year started with accusations of Greek accounting irregularities, the country's budget deficit being revised upwards by 9% and growing speculation that, for the first time in its history, a member state would have to leave the EU. There was soon growing concern over the situations in Portugal, Ireland and Spain; as the euro tumbled, austerity plans rolled out and protesters took to the streets.

So, when Amy McPherson announced at Berlin's International Hotel Investment Forum in March 2010 that Marriott International planned on doubling its European presence by the end of 2015, the ambition seemed somewhat counterintuitive. At a time when international operators were scrambling to limit their exposure to the eurozone, making a headlong dash for the fast-growing economies of the East, the group's recently appointed managing director and president for Europe was talking about signing an additional 40,000 rooms, launching new brands and seizing opportunities across the continent.

Fast forward a little over four years and, with some 18 months left to hit that target, McPherson is sounding bullish about Marriott's chances.

"We're almost 70% of the way there and momentum is continuing to build," she says. "When I look back at where we started from, it's quite amazing."

Redefine the rulebook

The start came in 2009, when McPherson arrived in Europe from her role as executive vice-president of global sales and marketing. Having been with Marriott since 1986, the appointment could have been interpreted as a case of the company looking to transfer business practices directly from the Maryland headquarters under the leadership of a safe pair of hands, but McPherson soon demonstrated willingness to bend - even break - established rules.

"If you're looking to double in size, it's not enough to rely on the environment creating those opportunities or new brands filling gaps in your portfolio; you have to question every aspect of how you do business," she explains. "Five years ago, we were still talking about room sizes being too small for conversion on certain brands, for example, but 70% of our guests in Europe are European, and their expectations when it comes to that sort of consistency are not the same as one finds in the US.

"Getting that message across involved a lot of education internally, having local people on the ground explaining that there were certain things we should not fall on our sword over, and it has helped us challenge every one of those norms. That doesn't mean we've thrown out the rule book, but we've certainly been a lot more flexible. It's a question of taking smart risks."

Local knowledge is a cornerstone of Marriott's new-look European organisation, a shift given added urgency by the fact that 60% of its pipeline is in the fast-growing economies of Russia and the CIS. McPherson inherited a business separated into two regional units based out of London and Frankfurt, as well as a development office in Zurich that directly reported to neither. The first step was consolidating all regions and business units into a single entity, but the work is still far from done.

"Infrastructure, infrastructure, infrastructure," McPherson replies with a hearty laugh when asked about the administrative challenges of delivering and accommodating such rapid growth. "You need to have people on the ground, local expertise, and ensure that the right individuals are in the right places and that you're able to stay on top of such a fast-changing landscape. It's a real balancing act, but we've got a great team here, and that makes things easier."

US and them

As well as restructuring the business, another thing that soon became clear to McPherson was a need to restructure Marriott's brand offering. While the business has had a European presence for just under 40 years, for the most part, it still looked like a US operator geared towards US business.

"There were certainly gaps in our portfolio, particularly in the lifestyle segment," acknowledges McPherson. "Furthermore, 50% of the lodging supply in Europe is in economy, and that's another area where we knew we needed to focus."

Marriott has gone a long way towards plugging those gaps; in just four years, it has introduced five new brands to Europe, four of which sit in the lifestyle segment. Of those five, two are global debuts with a view to worldwide roll-outs. In an example of reverse engineering, the upper-midscale AC by Marriott, a joint venture with hotelier Antonio Catalán launched back in 2011 that has added more than 70 hotels to its European portfolio, now plans to open more than 30 properties in the US and Latin America over the next five years.

"AC will keep its European characteristics upon arriving in the US because that's what's getting US investors so excited about it in the first place," McPherson insists. "Next-generation travellers, millennials, even today's business guests - they don't want 'cookie cutter'; it's about providing something lifestyle-led and unique. We're extremely proud to see something created in Europe now being exported to the US."

However, for the brand that will really drive growth over the coming years, in Europe and beyond, it's difficult to look beyond MOXY. A joint venture with IKEA, the first property opens at Milan's Malpensa Airport this summer, with plans for 150 more over the next ten years.

"We call it economy, although it sits within our luxury-lifestyle portfolio, and it's about affordable style," McPherson explains. "When we previewed the 17m2 room at IHIF last year, people were blown away and it's affordable not just for the customer but from an investor standpoint as well. Cost per room is either competitive with or markedly below other players in this space, and we feel it's a real disruptor brand. It just ticks so many boxes."

Signing Autographs

However, in order to maximise its potential, McPherson and her team need to track down the right development partners. US operators have traditionally discovered that the franchising market in Europe is not as evolved as that found at home, and, while the situation is changing, the managing director acknowledges that a degree of handholding and encouragement remains necessary.

"You certainly find fewer qualified franchise operators running multiple hotels, and we need to go out and encourage multi-unit operators, and encourage people to become multi-unit operators, finding development partners whose goals align with ours," McPherson explains.

"It's about growing with your partners, and the select-service brands are a great place to start. I think back to my time in the US when I worked with a franchisee who started with just two Residence Inns. He now operates multiple properties and the largest JW in the country. He's made that journey with us, and it's an environment we need to create in Europe."

One brand building a lot of momentum on the back of single and multi-asset deals is Autograph Collection, a portfolio of upper-scale independent hotels plugged into Marriott's delivery and management systems. It has certainly benefitted from a growing number of distressed assets, looking to gain from the economies of scale afforded by teaming up with a global player - it is the one brand that McPherson believes has real potential for growth in southern Europe - and there are now 20 Autograph Collection hotels in operation across the region. However, building momentum took time.

"We always knew we were ahead of the curve with Autograph, that there were thousands of independent hotels, particularly in distressed times, looking to have these massive engines behind them in order to create new segments of demand, but it was difficult to get traction at first," McPherson recalls.

"I thought we'd just come in with the existing track record of 40 hotels performing brilliantly in the US and people would hop on board, but they wanted to see European examples. It was a real chicken-and-egg scenario."

"We first showed what could be done through making some of our select AC properties Autograph, but the real differentiator was the Boscolo signing [four of Boscolo's eight five-star properties signed with Autograph in September 2011]. The fact that two further trophy properties came across last year demonstrates the immense success these initial entrants experienced, and the deal played a big part in bringing others on board."

The latest edition

Leading by example and taking steps to prove to European investors the potential of its brands has also seen Marriott invest in bricks and mortar, an increasingly rare occurrence in an age of asset-light puritanism.

The London EDITION opened in Fitzrovia to great fanfare in October last year on the former site of the Berners hotel, a row of five grand Georgian townhouses in one of the city's most desirable locales. Marriott International had put forward the capital to acquire and extensively renovate the asset, a decision since proven prescient through early operational success and its acquisition by the Abu Dhabi Investment Company as part of a three-property, $815-million deal back in January.

At the other end of the scale, when McPherson and her team decided upon the need to launch a new prototype for the moderate-tier Courtyard brand in Europe, Marriott invested heavily, building the first example in Aberdeen. The property is now being expanded to accommodate a growth in demand.

"Investors want to see something in action. Sometimes you need to step up and put your money where your mouth is," McPherson declares. "Of course, we're strategic and selective with the use of our capital, but in the case of EDITION, we knew we had the right design partner in Ian [Schrager] and the right location for a successful boutique lifestyle hotel.

"It was an easy call. With Courtyard, we wanted to move away from something overtly US-based in look, style and services. In order to get owners making the necessary retrofitting investments, we needed to show them the new model in action."

Leading from the front seems to come naturally to McPherson. Theoretically headquartered in London, she admits to only spending about a third of her time in the city and is flying out to the US soon after our conversation is wrapped up: "So much of my time is spent travelling to existing hotels, meeting owners and investors, and investigating development opportunities. The job - and the continent - varies massively, and that's what makes it such an exciting place to be."

As Marriott International nears its target of doubling its European footprint in just five years, such excitement only looks set to grow.