With Marriott‘s acquisition of Starwood, the largest hotel chain in the world is born. And what implications will
this have for both of their expansion strategies for Latin America?
By Gretchen Gardner
Tourism has been growing in the region, with a general increase in foreign direct investment and a strong middle class that can afford to travel for the first time. The region has seen resilience in the face of recession and both chains were positioning themselves to dominate it.
While the northern part of LatAm, like Mexico, showed stronger growth than the southern due to a fall in commodity prices and devaluation in countries like Argentina, in a sense it remains uncharted territory with a strong potential for branding. As assets, land and construction are affordable, there is no reason not to take a risk and hope for the best in the long term. Let’s take a look at both chain’s strategies in Latin America until now:
Prior to the merge, on top of its focus on the mid-market and luxury hotel sectors, with a particular focus on Mexico and Brazil, Starwood made a big announcement with the release of the Tribute Portfolio in October at the South American Hotel and Tourism Investment Conference. Starwood Senior Vice President and Chief of Latin American Operations Jorge Gianattasio explained that almost 65% of hotels in Latin America are unbranded (as opposed to 40% in the United States. “And, while not all independent hotels are in the upper-upscale category required to be affiliated with Starwood, there are many exciting independent hotels in unique and non-traditional destinations which in fact are a perfect fit, and that’s where we want to focus.”
Starwood’s goal is not to get rid of these hotels’ unique identities and re-brand them, but to incentivize independent hotels to sign on with Starwood to take advantage of the global sales network and booking channels as well as the 20 million Starwood Preferred Guests members.
Starwood has been operating 94 hotels and resorts across the region, a list that incorporated eight of the company’s nine different brands like The Luxury Collection, St. Regis, Sheraton, Westin, W Hotels and Le Méridien, as well as the Four Points by Sheraton and Aloft, which form part of Starwood’s “Specialty Select Brands,” that markets to young, cultured and tech-savvy business travelers.
Starwood has long focused on “world-class” hotels through brands like the Sheraton (with a branding focus on “bringing people together through communal experiences”) and Four Points lines, and is the largest five-star hotel operator in Brazil, with nine properties. These hotels were branded as offering personalized service to refined and well-traveled guests.
But the hotel chain has introduced new concepts into its branding with the Aloft line, which has a particular focus on competing with apartment and room rental services like Airbnb. They are modern hotels whose guests who can use their smart phones to replace physical keys. There are currently operating Aloft hotels in Cancun and Guadalajara, Mexico, Asuncion, Paraguay and Montevideo, Uruguay. Starwood is planning to open eight more SSB hotels in LatAm, which will increase their presence in the region by 45%.
Additionally, Starwood has been developing four hotels in Mexico with GH Pegasus and Hoteles Real Chihuaha, opening Aloft Tijuana, Aloft Coatzacoalcos and Aloft Poza Rica by the end of 2017. On the luxury end, the Sheraton Chihuahua Soberano Hotel was opened this month. These hotels were part of the chains big efforts to expand the Aloft brand’s presence in Latin America and the Caribbean. An Aloft in Hermosillo, Mexico will also open in 2016.
Starwood has also increased its presence in Colombia over the recent years, where there are many secondary and tertiary cities hosting domestic business travel. The chain had announced plans to increase the number of Four Points hotels, opening in cities like Bogotá and Baranquilla. Just as business has demonstrated growth in the country, so has tourism. Starwood has already opened its luxury brand W Hotel in Bogotá, and also debuted its beachfront Sheraton hotel in the colonial beach city of Cartagena.
Marriott’s branding theme for 2015 was “crossing new borders,” which is appropriate given the significant expansion that the company made into the region, especially in developing countries like Guyana and Haiti, reflecting a growing interest in developing markets and their strong middle classes. The hotel chain has also expressed interest in increasing the awareness of the diversity of Marriott’s brands in LatAm. Laurent de Kousemeaker, Chief Development Officer for the Caribbean and Latin America Region, stated at the South American Hotel and Tourism Investment Conference in October: “We will be introducing new brands in the region, to appeal to different markets, different economic levels, and to create new options for travelers – with our AC, Residence Inn, and Fairfield brands.”
Marriott has also invested heavily in expansion in the Caribbean and Latin America, with a focus on Mexico. The chain recently opened its 100th hotel in the region this month, the JW Marriott Puerto Los Cabos in Mexico.
In 2015 alone, Marriott opened eight hotels in LatAm and the Caribbean, and plans to open nine more by early 2016: the Marriott Port-Au-Prince in Haiti, the Renaissance Jaragua Santo Domingo hotel in the Dominican Republic, the Courtyard by Marriott Santiago, Chile, and the Fairfield Inn Queretaro in Mexico, to name a few.
But Marriott has also shifted its focus to Brazil, having recently announced plans to open 11 hotels across the country with an investment of $100 million. In the long term, the chain hopes to sell the hotels to locals while retaining management roles.
Marriott’s President of Caribbean and Latin America Tim Sheldon said: “Brazil’s economy, while it confronts structural and policy challenges, is still in the top eight largest economies in the world and has excellent long term prospects. The lack of reliable domestic hotel product and services represents a large opportunity for our moderate-tier brands, which we have adapted to the tastes of the Brazilian travelers — providing them both value and options.”