The strategy is clear, and somewhat surprising: Marriott International will focus its strategy for Latin America primarily into Mexico, emphasizing select- service and all-inclusive hotels. Additionally, there will be a secondary emphasis on the Caribbean with focus on all-inclusive properties and in Brazil with a blend of mid-scale and resorts along with upper upscale segment ventures, featuring branded residences.
The element of surprise may stem from the heightened emphasis on luxury all-inclusive hotel projects within this strategy.
Bojan Kumer, Regional Vice President of Hotel Development for the Caribbean and Latin America at Marriott, elaborated on the company’s regional plans in an interview with Latin Trade.
Marriott, boasting an impressive portfolio of 31 brands, is the world’s largest hotel chain in terms of available rooms – 1,423,044 across 139 countries.
Where and how
Marriott International will focus its Latin American growth strategy in Mexico with select- service and all-inclusive hotels. “We are doubling down on developments in Mexico,” Kumer said. Select-service hotels offer the services and amenities of limited-service properties and a selection of the services found in full-service hotels.
Aside from Mexico, Marriott is concentrating its efforts on expanding the all-inclusive hotel markets in the Dominican Republic, Jamaica, and select markets within the Caribbean, Kumer stated. “Obviously, we have just opened a year and a half ago our first hotel in South America, in Brazil.”
The Brazilian operation will concentrate in the mid-scale segment, with the newly acquired City Express brand. “We acquired the City Express brand on May first, and since then, we have signed several Letters of Intent (LOI). Currently we have about 150 hotels in our portfolio. There are several hotels that are in development, mostly in Mexico.”
Outside Mexico, the biggest market will be Brazil, but Marriott has signed LOIs or spotted opportunities in Argentina, Colombia, Chile and Peru.
In the all-inclusive front, in 2021 Marriott propelled its presence in the regional market with the signing of a long term agreement with Blue Diamond Resorts. Marriott converted 19 Blue Diamond properties – around 7,000 rooms –, and grouped them under the Autograph collection flag. “We have continued to look at the conversions in both all-inclusive segment and in the select-services as well,” Kumer said.
In the luxury segment, another area of strategic importance, Marriott is moving from the regular European Plan (EP) which, according to Kumer, has been very successful across the Caribbean region and Mexico, to luxury all-inclusive hotels. “We opened our first luxury all- inclusive in the Dominican Republic. It is a Luxury Collection hotel sanctuary in Cap Cana, a private community very close to Punta Cana.”
It has been an active year for upper upscale luxury and luxury all-inclusive hotels. “Our year-to-date signings in 2023 are 1,760 rooms. Most of the signings are in Brazil, with 1,151 rooms.”
Oil and water?
All-inclusive and luxury seemed like an improbable match. Much like oil and water. However, Marriott found a sophisticated method to make the combination work very efficiently.
Prior to the onset of Covid, there was a growing demand for new experiences, the executive said. In order to understand these evolving preferences, the company undertook an extensive market study in both 2017 and 2018. This analysis identified, among other insights, the proportion of individuals staying at all-inclusive hotels who were also Bonvoy members.
Bonvoy is Marriott’s loyalty program and one of the largest loyalty programs in the industry, with approximately 180 million members. The company found that a good deal of their loyal guests were staying at all-inclusive hotels. “We are definitely missing something here,” he said. “We are not offering them something that they want.”
When the company asked for the hotels where members would want to stay, respondents talked about Marriott and Westin, but also about luxury brands such as Autograph Collection, the Ritz-Carlton and The W. “We quickly learned that this was something missing in the market. That upper upscale, border-line luxury, and luxury segments in all-inclusive.”
With this finding in hand, Marriott’s team visited luxury hotels that compete in the all-inclusive segment to find the right size for their offer. “We then set different parameters. For instance, at the Ritz-Carlton all-inclusive hotel we would never sign anything that between 200 and 250 rooms, because once you start adding more rooms you lose that luxury experience.”
Smaller boutique all-inclusive properties demonstrated their profitability as well. These establishments are managed with a slight variation from hotels boasting room inventories in the hundreds of rooms. “We said, we need a boutique brand to compete in the ultra-luxury and luxury all-inclusive space.” The company developed an all-inclusive business for its Luxury Collection.
Marriott also considered a division between family and adults-only properties. The W became the adults-only brand. “A W all-inclusive cannot be a family. We would not accept families in the W all-inclusive.”
To allow mixed use, the company successfully tried developing smaller projects with a family and adult-only components. They would, for example, offer a JW – which would be a luxury family resort all-inclusive –, and next door a much smaller W that would cater to the adults only.
Marriott currently is the fastest growing all-inclusive company. “When we launched back in 2019, and until today we have over 30 properties in our portfolio and we have approximately the same number in the pipeline.”
What’s so enticing about luxury all inclusives?
Luxury travelers seek out exclusive, tailored experiences, yet the foremost incentive for opting for all-inclusive hotels lies in the seamless vacation booking process they offer. “Prepaying and knowing exactly what they are going to be paying for.”
They still want a personalized experience, like the one they would receive at a Ritz-Carlton EP hotel.
They would keep the personalized touch. “We have an extra employee per room or per guest.” This employee would be able to call guests by their name, and would know their preferences even before they book their stay. “We have a guest recognition program that recognizes these special guests.” These could be Bonvoy members or people that have stayed at other Marriott hotels. “They would receive an experience not available at some other volume-driven hotels.”
Luxury all-inclusive hotels are not volume-driven, but experience-driven, placed at unique locations. “We would not do the luxury in a market that is completely driven by the volume. It has to be also a market that will attract this kind of travelers.”
Yet another marketing difference. In a luxury all-inclusive hotel, managers would not try to sell additional services. “We would not be focusing on the upsell like we would in some of our other brands.” In standard service hotels, basic liquor or basic food are included in a package. There is, however, a clear possibility to upsell outside the package. In luxury all-inclusive properties all premium liquor and premium food would be included.
Branded residences, a special plan for Brazil
Marriott dedicates time and a sizeable investment money to grow in Brazil.
The strategy is now being complemented with branded residential projects tied to upper upscale and luxury hotels.
“We have noticed that Brazilians are quite loyal to the brands, especially in the urban markets such as Rio and São Paulo. This branded element for residences is very popular.”
A W hotel and branded residences is under construction in São Paulo, and plans are to develop a similar project in Miraí, right next to Rio de Janeiro, under the company’s most exclusive brand, the Ritz Reserve. Residences and a JW is also in the workings.
The proceeds from the sale of residences can be deployed in the construction of the rest of the mixed-use project, hence lowering its financial costs. But also, there is the loyalty aspect. In the United States, Bojan Kumer said, buyers of a first branded residence at say, a beach, find that having a second home in the mountains is worthwhile. The executive expects that this behavior will probably be followed in Brazil.
According to the executive, residences in a W project in Gramado, a township close to Porto Alegre that was built to resemble a Swiss municipality, are selling fast. These would be the second-residence option to buyers in the north.
Marriott is an experienced player in this market. “In the Caribbean, for example, in the last five years, out of all of the projects that we have signed, about 60% is in the luxury segment and 80% out of this 60% came as a mixed use with a branded residential component.”
Sustainable luxury in unique locations
Will Marriott operate at unique locations like the Amazon, the Atacama Desert or Galapagos?
The company will not shift its focus from Mexico; the Caribbean with all-inclusive; Brazil in the mid-scale and resort markets, but these locations offer a small pocket of opportunity. “We understand that we would never be able to develop large resorts there because these are more the eco-resort segment.”
Under the Luxury Collection brand, Marriott with the Luxury Frontiers Company, are developing luxury tents. “It is very organic, the duration of these would be between 15 to 20 years, so once you build it you know that it is going to last about 15 years before you have to change certain things, but it is much easier to get permits from the environmental agencies because they have a small environmental footprint.”
Some of these projects already exist in the Americas. “We are not trying to recreate the wheel, but trying to identify a brand in the luxury segment that will attract luxury travelers to visit these unique destinations.” It must be a small project. “We are talking about 20, 40 maybe 50 units, not more than that.”