The Changing Face Of Marriott
New President and COO Arne Sorenson gives a glimpse into the vision for the lodging giant’s future.
-- Hotels, 5/31/2009 11:00:00 PM
BETHESDA, MARYLAND — BETHESDA, MARYLAND—Since joining Marriott International in 1996, Arne Sorenson, a former big firm attorney, has risen through the company’s ranks, starting with leading the US$1 billion acquisition of the Renaissance Hotels and Resorts brand in 1997 and being named CFO a year later.
As CFO, Sorenson led Marriott through recycling more than US$5 billion of capital through the sale of assets, the repurchase of more than 250 million shares of the company’s common stock, and the strengthening of the company’s balance sheet, which has been instrumental in driving Marriott’s growth.
In 2003, Sorenson also became president of continental European lodging, managing operations across more than 100 hotels and spearheading the launch of the Courtyard by Marriott brand there, in addition to his CFO duties. Most recently, Sorenson was named Marriott’s president and COO, effective May 1.
“[Arne’s] success across a wide scope of disciplines uniquely positions him for this role in our company at a time when both the challenges and opportunities for growth are tremendous,” says Chairman and CEO Bill Marriott. “In his new role, he’ll oversee the performance and growth of all of our brands and businesses throughout the world.”
With that in mind, HOTELS asked for 30 minutes of Sorenson’s time to talk about his new position and his ideas and plans for one of the world’s largest lodging companies.
HOTELS: Have there been any surprises in your first week in your new role?
Sorenson: No. This [change] was not something that was fully formed and developed on the day it was announced—it had been talked about before. So I had a lot of time to anticipate [the move] and the team is by and large the same as before. I look forward to slipping into the position Bill Shaw has had. I wouldn’t anticipate either big changes or surprises.
HOTELS: How will your experiences as CFO and president of European lodging inform your work as president and COO?
Sorenson: Each of them will [play a different role]. As former CFO, I expect to stay quite involved in transactions. We are in a transactional business and we are a transactional company. Tony Capuano (Marriott’s executive vice president of global development) will continue to report to me.
The global piece is a huge part of where the company is going. We have become significantly more global in the past decade, and we are going to continue to accelerate that. As we grow outside the United States, we are going to have to see our organization evolve to some extent to be reflective of that, both in terms of the global talent pool in our hotels and above our hotels, and also making sure brand management is done on a global basis. My time in Europe helps with that.
HOTELS: Given your previous role as president of continental European lodging, tell us about growth plans in that region, specifically.
Sorenson: We just opened a hotel—the Renaissance Paris Arc de Triomphe—that is our fourth Renaissance in Paris. Paris is a place that we have managed to go from four hotels three years ago to 11 today. It is one of world’s compelling destinations and a place where we’ve made tremendous progress, but there is still plenty of opportunity in that market. Going south from there, we are still underrepresented in Spain and Italy, particularly. Those are two global destinations where our brands can deliver significant value. So we want to stay focused in those markets and hope that the weak economic environment delivers some opportunities there.
HOTELS: What type of opportunities? What ideas and plans do you have to grow the company given the challenges of the hospitality business right now?
Sorenson: In the U.S. as well as abroad, we will for the next couple of years be more focused on existing assets than we will on new-build hotels. The least-developed and fastest-growing economies will facilitate more new-builds, but by and large new-builds have become less attractive in the last 18 months than they were before. That said, we will get back to economies growing again, and as that goes, we will see an impact on hotel performance, and with it we will see the pipeline begin to grow again.
HOTELS: Let’s focus on individual brands, specifically niche brands like Edition and Renaissance ClubSport. Will these brands play key roles in Marriott’s growth moving forward?
Sorenson: They are different stories. Edition is going remarkably well. We have five definitive signed management contracts. They are in Istanbul, Barcelona, Mexico City, Bangkok and Waikiki. They will begin to open in the system in the first part of next year. And in the kind of [economic] environment we are in, there will be some good opportunities in the United States and around the globe to add more [Edition] hotels. It’s a great brand; Ian Schrager is the substantive genius behind the boutique space. And in an environment in which some of our competitors are squabbling about copying documents, we are thrilled to have someone with the creative instincts and the substance we have in Ian. We think that will make the brand resonate more and more loudly.
Regarding ClubSport, we have two open in California, and while it is a very compelling brand that will play a role in the long term, near-term development depends practically on new-build hotels, so as a consequence, we may get a few done, but we probably will not see growth of that brand until we have a stronger economic environment.
I don’t think Edition suffers from that same risk. Edition—whether an existing boutique hotel or a historic city-center building—projects can make sense in this environment. Of the five deals signed, three are in existing buildings.
HOTELS: What about Marriott Vacation Club International?
Sorenson: The timeshare business has been interesting. We have never suffered as weak a demand environment as we have over the last six months or so. In the early part of this decade when the hotel business was weak, 2001 to 2003, the American consumer was stronger, so business performed well throughout those weak years. Now, with weak consumer sentiment, rising unemployment and difficulty in finding debt, a series of pressure points have caused our sales to decline significantly from a year or two ago. Obviously, we have lots of company in that.
When we look at the last month or so, we see some reasons for guarded optimism. It starts with an improvement in consumer sentiment that may be driven a bit on equity markets and how that makes people feel better. We are certain that when we get to a stronger economic environment, we’ll see demand come back for our core timeshare product, which really is sold as a pre-paid vacation versus a real estate product.
There are questions around the higher-end fractional and residential product, mostly Ritz-Carlton branded. We could see that being a little slow to come back. It depends on if folks have confidence that residential values have settled and where we are going from here.
HOTELS: You have pushed Marriott toward a leadership position when it comes to green initiatives and efforts… What is next in this area?
Sorenson: It is a fascinating area, one I care about a great deal. The first generation of those efforts was focused on managing expenses—electricity, gas and water. The second generation is just now under way—it is about embracing sustainable practices as a way of enhancing associate and guest loyalty. With generation three, we’ll have to wait and watch and see, but I suspect it may include something responsible to government actions. The U.S. government has not been active in global warming so far, except for fuel standards and heavy industry emissions. There is a lot in the works about carbon offsets—I think that could give rise to another set of developments in this area.
HOTELS: What are your key priorities moving forward?
Sorenson: Three things we are focused on now and will remain focused on for the foreseeable future—certainly the next few months and probably longer than that—are first, fighting tooth and nail to drive incremental revenue and take as much market share as we can for our hotels. We will do this using the power of our brands and all sales and marketing channels. That is hugely important.
The second thing would be around cost control: Making sure both at the hotel level—where we manage for owners—and for franchisees who have costs associated with managing, that we do everything we can to make our hotels as profitable as they can be, consistent with our brand promise in this environment.
Thirdly, around investment activity, we have already at Marriott seen a shift toward reduced investment levels to make sure our balance sheet is as strong as it can be, and a shift away from new-build projects toward seizing opportunities that a weak economic environment presents. We need to do everything we can to preserve the strength of our balance sheet and have the flexibility to jump on opportunities.
These are priorities the company has articulated for the last couple of quarters, and I think priorities that should continue over the next few quarters. They are not driven by my new title.
Direct comments to: derek.gale@reedbusiness.com
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