Marriott plans to absorb the select-service brand by August 3. The goal of this new brand is mainly to appeal to Latin American travelers and developers.
Marriott International on Monday completed its $100 million acquisition of the City Express brand portfolio from Hoteles City Express. It has begun selling its 31st brand under the name City Express by Marriott.
By August 3, Marriott plans on making the hotels bookable within its site and mobile app and aims to convert the City Express loyalty program’s points into Marriott Bonvoy points.
In the meantime, if a traveler does a search on Marriott’s site and app for a destination where there are City Express properties, the company will place ads that point to City Express’s reservation system among the listed results. It would shortly unveil a points-transfer technology as a placeholder until it can merge the loyalty programs.
Marriott said that adding City Hotels properties to its existing ones in the region nearly doubles its presence, giving the hotel group the largest count of rooms in “the Caribbean and Latin America.” It overtakes Accor by room count there. But Marriott still only has about 480 properties in the region, underscoring how fragmented the sector is and how large the growth opportunity.
Appealing to the Domestic Latin Market
Marriott has tended to have most of its guests and financial partners be based in the U.S., but this deal reflects a shift.
“Our number-one source for guests for properties worldwide has always been the U.S. travelers, but over the last 10 years, we’ve got certainly more domestic market customers in various regions,” King said. “This will propel that forward at a speed I can’t even comprehend.”
This select-service brand, with 17,000 rooms to start, is ready for new construction or conversions.
“For new builds, this brand can be built very quickly,” said Brian King, president – International Caribbean & Latin America. “Once you have a plan, the product can come out of the ground and open its doors within 13 months on average.”
“Its supply chain for FF&E [furniture, fixtures and equipment] is deeply rooted in Mexico, and that in-country model works well for hotel development in Latin America,” King said. “That gives it an edge over a lot of other brands where owners based outside the region rely heavily on Asian distribution for FF&E and other supplies.”
Investors and developers within the region and external the region may want to learn more about the new product, Marriott hoped.
“Our existing ownership basis, when we made the announcement, reached out to us at a speed that was really amazing,” King said. “Some of them are very interested in potential sites where the site would not have worked for one of our other brands. But this deal will also bring new partners to the mix.”
Some analysts have expressed mixed reactions.
“Hilton and IHG created their Americas focused mid-scale brands (Tru and Avid) organically and were able to grow them rapidly with entirely third party capital and entirely new builds — no conversions,” wrote Richard Clarke, managing director, and his analyst team at investment bank AllianceBernstein in a report. “Some of Marriott’s acquired hotels will be 20 years old. The [City Express] pipeline is just 5 percent of current supply.”
King said this occasion called for an acquisition.
“We knew we had a whitespace [in our brand portfolio] in this tier of affordable product in the region,” King said. “You really want to sprint for scale in a space like this.”
The two companies may have things to learn from each other.
“We already had a big call center — or customer engagement center as we call them — in Mexico City and so the synergies are almost instantaneous with the City Express team,” King said. “We’ve already learned a great deal from city how they speak to and market to their customers. Some things we do well today, some things we don’t, and we’re learning from each other.”
City Express by Marriott will be the master brand with extension brands City Express Plus, City Express Suites, City Express Junior, and City Centro for the foreseeable future, King said.