Marriott sees fast growth in China

As Marriott International Inc. expands internationally, it plans to focus on continental Europe, while predicting accelerated growth in China and India, its chief financial officer said on Thursday. Marriott will add about six or seven hotels in China annually over the next few years, but growth could be much faster, CFO Arne Sorenson said at the Reuters Hotels and Casinos Summit in Los Angeles.

“It is not inconceivable we could have hundreds of hotels in China over a relatively short period of time,” he said, adding that could be within 5 to 10 years.

China’s economy is expanding quickly and real estate is a popular investment in the country, Sorenson told reporters at the Summit. Marriott now has about 30 hotels in China.

Sorenson said he expected the hotel operator’s expansion in India would be slower than in China, at about two to three hotels per year for the foreseeable future. But both markets are “very important” to the company’s future growth plans, Sorenson said, because of their rapidly growing population and available capital.

Marriott, which owns the Ritz Carlton and Courtyard brands along with flagship name properties, suffered a three-year downturn in travel following the Sept. 11, 2001 attacks. But the chain, along with rivals Starwood Hotels and Hilton Hotels, begain raising room rates in mid-2004 — as a recovering economy put more travelers into hotels.

Bethesda, Maryland-based Marriott is a hotel operator and chiefly buys hotels in order to convert them to its brands and get management contracts. It typically then resells the properties to real estate investors.

Sorenson said the company prefers a process where real estate partners buy the assets and then sign a management or franchise contract with them. “We will only look at buying a hotel if we can buy at a price we can resell at, and retain essentially for free a 30-year-plus fee string,” he said.

Calling Europe one of the areas of priority, Sorenson said Marriott has been adding about 10 hotels per year in Eastern and Western Europe and would like to expand “significantly higher than that.”

Marriott will likley buy about one to three hotels in Europe per year, about the same number as in the United States but a much higher proportion of company properties, he said.

When asked if the company would consider buying new brands, Sorenson said small regional chains and unbranded properties in Western Europe are “very attractive properties” to Marriott, but declined to comment further.

Separately, vice president of hotel relations at corporate travel services provider Carlson Wagonlit, David Witham, told reporters at the Summit that 70 percent of hotel rooms in Europe are not branded.

Marriott shares, which have risen 36.5 percent in the past six months, closed at $62.58 in Thursday trading on the New York Stock Exchange.

February 28, 2005   Posted in: China