Marriott’s 3 big challenges

Despite doubling its room count over a decade, the company remains optimistic about the company's growth potential, betting that high-margin luxury hotels and a tech revamp will help sustain fat fees

Marriott is betting specifically on the luxury hotel category because it believes it will generate fat fees that could compensate for the company’s expansion into lower-margin mid-tier brands. The company has also launched a multi-year technology revamp that should help its staff become more efficient and encourage more guests to buy more services.

Key takeaways

• Some skeptics say Marriott has put hotels in all the key cities it can by now - grasping the low-hanging fruit of prime locations. Future development may be in third-tier markets generating third-tier margins;
• One of Marriott’s most lucrative business lines is charging owners fees for managing hotels on their behalf. Yet as Marriott adds mid-tier brands, its average rates will drop - and the management fees it generates will drop in absolute dollars;
• Technology has changed faster than Marriott’s software has. Guests and employees may get frustrated and choose other hotel groups with a savvier approach. The company has launched a technology transformation that will start rolling out “within a couple of years.”

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