Hospitality is becoming more experiential than transactional: Marriott APAC MD

There was a time when the luxury hospitality experience was synonymous with checking into a grand property, enjoying a well-appointed room, and chilling in the pool or the spa with some good food and beverages for company.

While all of that still holds true, today’s young and well-travelled hotel guests are more “demanding” of unique experiences, over and above a comfortable stay, says Craig Smith, president and managing director, Asia Pacific, Marriott International. It is no surprise then that Marriott—the world’s largest chain of hotels since its $13.6 billion acquisition of Starwood Hotels and Resorts in 2016—is mindful of this reality as it looks to expand its footprint in India.

The Marriott group—comprising hospitality brands such as JW Marriott, Ritz-Carlton, St Regis, W, and Sheraton—operates 116 properties across India and plans to add another 20 in calendar year 2019. In an interview with Fortune India, Smith says that, encouragingly, many of the new properties that Marriott will be operating in India are owned by entities that have existing hotels being managed by it, which is an indication of a successful partnership. Meanwhile, Marriott’s patrons could look forward to earning anything from access to a Gwen Stefani concert to a drive with Formula 1 champion Lewis Hamilton via its rejuvenated loyalty programme, which will focus on experiential rewards and not just free hotel nights.

Edited excerpts:

What are Marriott’s future plans in India?

We grew pretty quickly in India even prior to the acquisition of Starwood, and after the acquisition we got access to a lot more hotels in the country. Since then the interest in India has grown further and the number of deals for new properties has shot through the roof.

One of the factors that has helped us grow in India is that most of the new hotel deals that are coming our way are from existing property owners, which is a good sign. If they are building another hotel with us, it means they are happy with the partnership.

The other factor is the talent pipeline that we have been able to build in the country as our number of properties has grown. We have a programme called ‘Voyager’ through which we recruit employees right out of school and help them grow in their careers with us. Now that we have so many hotels in the country, we have a talent base that is big and can be moved across the country.

How many hotels does the Marriott group have in India and how many more will you be adding?

Globally, we are opening our 7000th hotel in April. In Asia Pacific, we have around 720 hotels and in India we have 116. We have more hotels in India now than we had in the entire Asia Pacific region a few years ago. In 2019 (January-December) we will be adding another 20 hotels in India and my guess is we will add more than that in 2020. We will continue to ramp up in India.

Are these new hotels going to be under management contracts with the owners?

There will be management contracts and some franchise agreements as well. We didn’t do any franchise deals in the past, but we have started doing that in India with some select partners. We have a franchise agreement with ITC and a couple of other partners. In the U.S., 75% of our hotels are under franchise agreements and 25% are under management contracts. The percentage of franchise properties will also rise in India, but it won't be close to what it is in the U.S.

Technology-based companies like OYO and Airbnb have been disrupting the hospitality space. How do you view their growth in relation to your own business prospects?

We watch them. I wouldn’t say that they are our direct competitors. In some ways, they may be indirectly competing with us. They have done well and grown quickly. But we don’t play in the same space as them. A traveller booking a stay through Airbnb is probably looking to stay in an apartment and is not someone who wants to stay in a full-service hotel with all the bells and whistles. I think there is space for all of us as leisure travel is growing.

Competition is always good. It makes us work harder. Years earlier, competition pushed us to go back and work on improving our infrastructure. Since then we have invested meaningfully in direct channel sales through Marriott.com. Our mobile app is a huge piece of this strategy.

Our rewards programme, Marriott Bonvoy is also a big differentiator for us. We took the Ritz-Carlton and Marriott rewards programmes and SPG (Star Preferred Guest) and put them all together to create a loyalty programme with 130 million members around the world. These members fill up around 60% of our hotels. And the place where rewards programme is growing fastest in the world is in Asia Pacific, including in India where it is seeing double-digit growth.

How is the nature of the loyalty programme changing for hospitality companies like Marriott?

A lot of our members now belong to the new middle class and are young, affluent millennials. Earlier, a rewards programme used to be very transactional in nature. You stay at a hotel, earn points, and redeem them for free nights. The new members want something more experiential. So in Hong Kong, we had a concert for Gwen Stefani and our patrons redeemed their points to attend it. In Shanghai, we had members redeem their points to meet Lewis Hamilton during the Chinese Formula 1 Grand Prix. So we are curating these experiences for our guests, which they can't get anywhere else.

Through most of my career I have seen people buy luxury products like cars, watches and handbags. But now they are splurging on experiences. So amenities like gyms and restaurants serving local delicacies are becoming more important in hotels. In the room, people want to bring their own amenities as well. So what we are working now is a platform through which people can log into their own Netflix accounts and consume whatever entertainment they desire. While you need the basics to be in place, the size of the room is becoming less important in the overall experience.

You said that the market for leisure travel is growing fast. While Marriott has a lot of business hotels in India, will we see a greater share of leisure properties being added in the future?

Leisure travel is growing four times faster than business travel. We are trying to see how we, as a company that really started off as a business hospitality chain, adapt to ensure that we have enough resorts to help Bonvoy members spend their points, as well as cater to Indian travellers that want to vacation in locales like Goa.

While most of the new hotels that we will operate in India will be business hotels, the number of leisure properties that will get added as a percentage of overall properties will increase. So earlier, if we had something like one out of 20 new properties in the leisure space, we will have more going forward.