President Interview: Alex Kyriakidis
Owners are set to benefit in several areas following the Marriott-Starwood merger, with Marriott International's regional president Alex Kyriakidis confident that it will translate to better return on investment and higher profit margins
Following the merger between Marriott International and Starwood Hotels and Resorts in September 2016, the ability for value creation for an owner has increased according to Alex Kyriakidis, Marriott International’s president for the Middle East and Africa region. In an exclusive interview with Hotelier, Kyriakidis mentioned the “added muscle” that the global operator now possesses, and the manner in which it helps create value for owners.
“Today with 1.1 million rooms in operation, and some 450,000 in the construction pipeline, we’re nudging the 1.6 million room mark. You can also take the view that in the next three to four years we will nudge the two million room mark in operation or pipeline, and that scale is key for us to deliver value to our investors and owners,” he tells Hotelier.
Kyriakidis indicated the three key takeaways as a result of the merger, which includes: a stronger pool of associate talent; the loyalty programme and its strengthened benefits; and the possibility of creating synergies both from an owner’s perspective and for Marriott International.
Kyriakidis explains: “In the Middle East and Africa we have 65,000 associates across our properties and by 2020 we will go up to 100,000; that’s also beneficial to an owner from a property’s perspective because if you have a far greater talent pool, chances are you can rotate that talent within the company and the region, and not lose them to competition or third parties.”
A stronger loyalty programme is also in the offing. “Marriott today has gone from 55 million loyalty members to nearly 100,000 million loyalty members, where you have the Marriott Rewards, Ritz-Carlton Rewards and the SPG loyalty programmes at play. In the near future, we will announce the ‘One Global Programme’ instead of three programmes,” he says, revealing that more than a third of Marriott’s guests come from the loyalty programme.
“Here again the value proposition is very significant for our owners. Our loyalty members today drive roughly 35% of our room nights across the Middle East and Africa region. Now that is the lowest cost per booking out there, and our mission is to expand that percentage in the future because at the end of the day it is the most profitable channel to our owners. The more we can deliver through our direct channels, the more efficient and greater the margin of that business will be to our owners,” he says.
The final pillar, the synergies that Marriott is now capable of, has allowed the operator to bargain strongly with OTAs and TAs, as Kyriakidis claims that Marriott has secured “industry leading” commission margins. “We look into the big relations we have with different industry partners — take the OTAs for example. As a result of our increased size we have been able to go back to our OTA partners and tell them, ‘we can give you more business, and we need to reflect that in a win-win’. And [as a result] we have secured industry leading commission rates for our hotels, which will reduce the cost of OTA business by two percentage points, which is huge for the industry today. This benefits our owners and our company hugely.”
He says the new environment also allows Marriott to start with a blank canvas with some owners. For example, an owner who previously had two Marriott hotels, now has five properties post-merger, and that scenario could allow hotels have consolidated teams, thus reducing costs and achieving quality results. “We are looking with our owners at a number of models to increase efficiency including shared services, complexing and bringing state-of-the-art technology to leverage scale.”
He, however, clarifies the stance and says that this will not necessarily lead to job cuts. “If a company was standing still and you have a scenario such as this, then the answer would be [that] inevitably there would be job losses. But let me come to this continent specifically — we have 55,000 operating rooms in a combined Starwood-Marriott basis, of which 30,000 roughly are in the Middle East, the other 24,000 are in Africa.
“However, we have 45,000 keys under construction. That means my associate pool, which today stands at 65,000 associates, needs to grow to 100,000 to cope with that growth in new hotels. So, you have efficiency coming through in an individual hotel because we are going to need each and every man and woman to support us in the growth. This year alone we are opening 27-odd hotels, and we will need 5,000 people for those hotels on average,” he clarifies.
Representatives in the owners’ camp have previously challenged the necessity of loyalty programmes, and questioned their existence. Owners want a justification behind the cost of loyalty members — while redeeming their rewards points against stays at their properties and the cost of signing up guests at a given hotel.
Kyriakidis explains: “The cost of a booking to a property coming from a Marriott.com, Starwood.com or RitzCarlton.com platform is the lowest in the industry, period. There is no other lower cost, and if you compare that with other channels — OTAs and TAs — there is a commission cost that is a multiple of that direct channel cost of booking. We live or die by our owners continuing to invest in our brands.”
“The second key consideration is if the booking is coming from a loyalty programme member and what are its implications to the property: the property will be charged a cost by the loyalty programme, but again it’s the most competitive in the industry. And the interesting bit here is, that pull of guest stays drives the base 35% occupancy across all hotels in the region. This is an enormous foundation and insurance, given everything else that can happen in our region,” he says.
Finally, Kyriakidis believes in the trust that is generated from a customer with multiple stays. “If I [as an owner] incurred the cost of a guest signing up for one of the three loyalty memberships, to get free Wi-Fi [to use an example presented by Hotelier Middle East] staying at my hotel, why is it not unfair? And the answer lies in the fact that if we encourage that guest to book a second stay at any of our 30 branded hotels, our data shows you that it is then highly probable that the guest will move to stay a third, fourth, fifth, sixth stay in our hotels and become a very loyal, loyalty programme member.”
He also tells Hotelier about the investment Marriott made to understand trends in F&B in the region. “Last year, pre-merger, we invested in conducting a significant amount of research in ‘what’s driving the consumer’s taste in restaurants and bars now and into the future’. Given the specific demographics of the UAE, from an inbound tourism perspective and a resident perspective, [the study addressed] how we manage to turn that into a successful restaurant and bar strategy for the types of concepts that we need to launch in our pipeline hotels. And also use that data to refresh some of the existing concepts at our hotels,” says Kyriakidis about the F&B scene, and reveals the operator has 1000 restaurants and bars across its properties in the Middle East and Africa region.
Post-merger, people wondered if some brands would be folded. The argument presented was that brands such as Four Points by Sheraton and Courtyard by Marriott were ‘too similar’ by some asset managers. Kyriakidis, however, asserted that no brands will be made redundant and competition between two hotels will continue regardless. “There are absolutely no plans for Marriott International to do anything with the 30 brands other than support the growth of the 30 brands. A lot of work has already began to improve the performance, which is music to the ears of all our owners. Today every open and operating hotel is competing in the market, so the fact that you have a Four Points and Courtyard by Marriott [to use an example by Hotelier Middle East] remains the same pre- and post-merger. They still continue to compete in the market individually, but the difference is what do, following the merger, [and that is] to enhance the returns for our owners of the Four Points and Courtyard. Which boils down to the use of our added muscle with every respect — cost base, synergy, driving top line etc.”
Adding to the value that is created for owners following the merger, Kyriakidis adds: “Looking at the UAE as an example, today we have 47 hotels and about 15,000 operating rooms, 33 in the construction pipeline. So in the run up to 2020 we will have 80 hotels and nearly 23,000 rooms. This makes Marriott International the biggest partner to Dubai’s Expo 2020.”
“This scale allows each and every one of our hotels to benefit because through scale we are able to compete for business that’s coming into Dubai in a way that frankly none of our competitors can. I can now compete for conferences for 4,000-5,000 people because we have the Marquis with 1,600 rooms, and the Al Habtoor City with 1,600 rooms. I can also make sure every RFP that we pitch for, we give more reasons for that conference organiser to us than to go to our competitors because I am able to offer them different price points,” he concludes.