Skift Take
Marriott’s scale and skew to slower growing segments has actually indicated it has lagged behind its closest competitor Hilton on net unit development for several years. Whilst its direct exposure to high-end historically disadvantaged development, renewed interest in the development of high-end hotels publish Covid will likely assist Marriott in bridging the unit development gap with Hilton.
Pranavi Agarwal
Marriott is the largest branded hotel in the world with more than 1.5 million rooms, making it 35% bigger than its closest U.S. rival, Hilton. It has, however, grown its rooms and pipelines more gradually than Hilton for several years, with 3.2% Net System Development (NUG) in 2022 vs Hilton’s 4.5%, as shown in the chart listed below.
(img width=”1024″height=” 530 “alt =” “data-src=”https://skift.com/wp-content/uploads/2023/07/NUG-Growth-1-1024×530-1.jpg”src=” image/gif; base64, R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw== “/ )( img width=”1024 “height=”530” src=”https://skift.com/wp-content/uploads/2023/07/NUG-Growth-1-1024×530-1.jpg”alt =””/)This is partly due to the law of great deals– Marriott’s room count being materially larger than Hilton’s suggests that it is harder to sustain previous development rates. However it is likewise a result of Marriott’s greater skew to chain scales that have actually traditionally grown more gradually, such as high-end and upper upscale, as shown in the charts below.
(img width=”1024″ height=”472″ alt =”” data-src=”https://skift.com/wp-content/uploads/2023/07/HLT-vs-MAR-NUG-by-chain-scale-1-1024×472.png” src=”image/gif; base64, R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw = =” /)(img width=”1024″ height=”472″ src=”https://skift.com/wp-content/uploads/2023/07/HLT-vs-MAR-NUG-by-chain-scale-1-1024×472.png” alt =”” /)However, both business are now pursuing market share in the opportunistic midscale and premium economy space– sectors that have actually long been white spaces in their portfolios.
For instance, Marriott recently purchased select service midscale brand City Express and has strategies to release a prolonged stay midscale brand name.
Hilton launched its Spark brand name, which beings in the premium economy space, and also has strategies to launch an extended stay brand.
Maybe by recently tackling these opportunistic segments, we might see Marriott closing the Net System Growth gap in between itself and Hilton– with Marriott’s scale and power of its Bonvoy loyalty program potentially drawing in more owners.
In addition, while Marriott’s higher luxury mix (with high-end accounting for 9% of Marriott’s rooms vs. just 2% of Hilton’s) has historically disadvantaged its net unit development, the considerable increase in interest from developers for luxury hotels post-Covid is now likely a benefit for Marriott.
As we have written about in depth in our report Economic downturn Watch: Hotel Chain Scale Analysis 2023, luxury hotels rapidly recuperated through the pandemic, led by strong consumer demand and product prices growth– in turn seeing increased owner and developer interest. For instance, U.S. data since January 2023 shows that rooms under building as a percent of present supply was the highest for the high-end hotels vs. any other chain scale.
Marriott’s direct exposure to luxury hotels, in addition to its growth into the white area opportunities in its portfolio– particularly in midscale and economy hotels– will help future system growth.
We explore they essential comparisons in between Marriott and Hilton in our useful Marriott vs. Hilton in 20 Secret Charts Factbook, where we examine the distinctions in NUG, segment mix and revenue margins in order to help investors and owners as we enter the 2nd half of 2023.