Hotel brand bloat doesn’t appear to be a weight problem that’s going away anytime soon.
Marriott International made a surprising brand addition Wednesday by announcing a $100 million deal with Mexico-based Hoteles City Express. The deal positions Marriott to acquire the brand family of City Express, a chain of affordable midscale hotels located across Latin America. It also puts Marriott on track to become the largest hotel company in the Caribbean and Latin America, the company claims.
City Express is going to stand out from its new brand siblings like Ritz-Carlton, St. Regis and even Courtyard — all of which command higher nightly rates.
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The company’s 31st brand enables Marriott to expand further into more affordable segments of the hotel spectrum, something the bigger conglomerates like Hilton and Hyatt have tried to distinguish themselves from in recent years — especially when trying to explain why their customers aren’t so vulnerable to rising gas prices.
“We’re excited to enter a new lodging category — the popular affordable midscale segment where we see significant potential,” Marriott CEO Anthony Capuano said in a statement. “With City Express by Marriott, we will be providing our customers with more choice through a new, approachable, moderate-priced offering, increasing opportunity for owners and franchisees as well as associates.”
City Express is the umbrella for a variety of brands, which also includes City Express Plus, City Express Suites, City Express Junior and City Centro. The 152-hotel portfolio extends across Mexico, Costa Rica, Colombia and Chile. The brand names are expected to remain the same apart from now included “by Marriott” at the end.
A curious add? Maybe not
It might be a little bit of a head scratcher at first, considering Marriott CEO Anthony Capuano downplayed the idea of any mergers and acquisitions as recently as a month ago.
I still get it, though. Brands like Residence Inn and Fairfield Inn might seem like pretty affordable brands, but analysts generally see Marriott’s portfolio of brands beginning at the “upper midscale” category and above. That’s a pretty wonky term, but let’s face it: Even Fairfield Inns and Courtyards can charge rates north of $500, depending on the location and time of year.
City Express is distinctly a budget brand that operates urban, suburban and even extended-stay hotels.
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“When we started thinking about City Express, we were convinced that a modern, efficient, and affordable brand would be very attractive to the local traveler,” Hoteles City CEO Luis Barrios said in a statement. “After having the opportunity to work with the Marriott team, we confirmed that we share common cultural values and a similar approach to hospitality.”
Moving into the more economical, midscale segment of the market makes sense for several reasons and fits in with Marriott’s more narrowed scope about mergers and acquisitions following its 2016 blockbuster takeover of Starwood Hotels & Resorts.
These days, you’ll find Capuano and Leeny Oberg, Marriott’s chief financial officer, touting the idea of “tuck-in” or “bolt-on” acquisitions that provide the company with a greater presence in a certain part of the world or enhances the company’s presence in a segment of the market that isn’t already there.
On the geographic front, look to a brand like AC, which was centered on Europe before Marriott took it global. Seeing that, don’t be shocked if City Express eventually becomes a brand beyond Latin America. Additionally, Marriott already showed its interest in Latin America and the Caribbean with its recent push into all-inclusive resorts.
“Our goal is to be everywhere our guests want us to be, with the right property in the right location and at the right price point,” Brian King, president of the Caribbean and Latin America region for Marriott International, said in a statement. “This transaction with Hoteles City Express will expand our ability to do exactly that — initially in [the Caribbean and Latin America], with opportunity around the world.”
The reason to go low (in price)
There’s a strong reason to expand further into more budget-friendly price points. This is a segment of the hotel market dominated by players like Wyndham and Choice Hotels (both recently beefed up their own presence in pricier segments of the hotel market with Choice’s Radisson Americas takeover and Wyndham’s Registry Collection addition). On the loyalty front, not everyone wants to shell out for the increasingly high costs of some of the bigger companies’ brands.
There’s a saying in the industry about how the worst thing for a hotel company is to not have an option for loyal customers, so they go to a competitor’s brands, like what they see and never come back. I don’t think many Bonvoy members were fleeing Marriott in favor of Wyndham or Choice, but it’s a smart strategy to at least have some kind of offering at this price point.
It may be Marriott’s 31st brand, but this truly affordable offering will be a little easier to differentiate than all the overlapping players in the “upper midscale” brand family like Moxy and Aloft or SpringHill Suites and Fairfield Inn & Suites.
Plus, it’s not like they’ve crossed Accor’s 40-brand mark. That’s not just brand bloat — it’s brand obesity.