By Xiumei Dong
Medill News Service
Recent terrorist attacks around the world are hurting the travel industry, but Marriott CEO Arne Sorenson said that hasn’t stopped the growth of the hotel industry.
Following a bidding war in the past few months with China’s Anbang Insurance Group, Marriott International Inc. sealed a deal in April with Starwood Hotels & Resorts Worldwide Inc. for more than $12 billion. The merger between the two companies will create the world’s largest hotel operator by room count.
“We (hotel industry) started growing again really in 2010,” Sorenson said Friday at the SABEW 2016 annual conference.
Sorenson said the hotel business is mainly driven by macroeconomic conditions. Although the tourism industry is hurting in countries like France and Belgium, by in large the business is performing well because the U.S. and Chinese economies are improving. That’s good for Marriott because those are its fastest-growing markets.
“We live in the consumption part of the Chinese economy, [and] the Chinese government (is planning) to grow the consumption,” said Sorenson, showing interest in expanding Marriott’s footprint in developing countries.
Most of the hotels acquired by Marriott are not owned by Marriott but instead are managed, franchised, or licensed. However, the wide network of loyalty memberships that are connected through the chain is a big factor that drives revenue, another reason that Marriott is expanding its brands, Sorenson said.
“The bigger the hotel company — this is me generalizing — the loyalty program is not necessarily as generous because you have much more options,” said moderator Scott Mayrowitz, travel reporter with the Associated Press.
Although online travel agencies may be appealing to travelers, hotels dislike them because they have 10 to 30 percent commission rates, Sorenson said. Travelers are better off having and using hotel memberships because they provide broader access to hotel brands and help consumers save money, he said.
Furthermore, while emerging digital platforms like Airbnb that allow travelers to book private homes for stays are also taking a share of the economy, Sorenson said they haven’t threatened the hotel business because the pie is getting bigger for the travel industry.
“There are two demographic trends which are really positive for us,” Sorenson said. “One, the boomers essentially have more time to travel. The second is the global demographic trend which is the growth of the middle class around the world, particularly in developing countries.”
According to Sorenson, because of the upsurge of baby boomers and middle class travelers, the demand for leisure travel is expected to grow, which would lead to more bookings for upscale hotels like Marriott.
