"It's always better the second time around," just might be Joe Lavin's credo. He began his career in the hotel industry in the early-1980s with Marriott before working for Choice Hotels for 13 years. Two years ago, he came back to Marriott as senior vice president of franchising for limited service brands - which include Courtyard, Fairfield, Residence Inn, Springhill Suites and Townplace Suites. His experience has allowed him to see all aspects of the business from franchising to brand recognition to the importance of employee training.
His tenure with Marriott has also allowed him to see a company grow not only in size but in philosophy. Recently, the company began a new strategy: Going into older neighborhoods and transforming former warehouses (as is the case with the former molasses factory in New Orleans) into Courtyard Hotels. It's all part of the continuing Marriott philosophy: to be the premium brand in all segments. If Lavin predicts correctly, Marriott will continue to score points regardless of its competitors.
NREI: Explain the new trend of building Courtyards in older neighborhoods. What are some of the rewards vs. the risks?Lavin: Courtyard is a brand that has b een extremely successful in suburban environments in primary, secondary and smaller markets. We have more than 400 Courtyards plus a pipeline that will put us over 500 properties within the very near future. As such, Courtyard is well represented in many markets. In order for us to continue to grow Courtyard, we needed to tap into the more central business district markets. Most markets tend to be limited with respect to their inven-tory in the upper moderate segment which is where Courtyard resides. So there's a market opportunity with respect to the type of customer who is going to these cities. There are no Marriott Courtyards in those markets. It's a great opportunity for us to continue to grow our company in places where we're not and our customers are going.
The financial challenge is like any other project. We need to get the RevPAR necessary to cover the cost of investment. It costs more to develop and refurbish older buildings. We're actually experiencing very good success thus far in this strategy. Many of these [renovated Courtyards] are franchised hotels, so it's not just Marriott doing it; it's our franchisees with their investment dollars pursuing these opportunities as well.
NREI: Why has the Courtyard concept been so successful?
Lavin: Courtyard was born out of Marriott's operating philosophy; we built the first 100 Courtyards ourselves and operated them - and still do. So, they were very consistent. Not only were they consistent from a physical standpoint, but they were consistent from an operating perspective - more consistent than any of our competitors. Courtyard also tapped into (what continues to be) a hot segment - that upper moderate price point. Today it's $90; when it was launched, it was $50. But there was a gap of quality products that was servicing that customer. So, we put together the Marriott know-how - development and the consistency - and we applied it to that market gap. That's the reason we've been so successful.
We've been able to sustain all of those elements even as we've franchised because our franchisees share the same operating philosophies that we [Marriott] do, or else they don't get to be franchisees. So, Courtyard has been growing - not only with our company development - but with substantial franchise activity in the last several years, and continues to widen its share premiums vs. the competition.
NREI: As the millennium approaches, does Marriott have plans for new brands? What can the industry expect from Marriott?
Lavin: In the last two years, we've introduced two new brands: The first one was Townplace Suites. At the time it was introduced, it was the earliest entry of any major chain into the moderate, extended-stay market. Since then, there have been others that were introduced, but Townplace - because it was relatively early into the game in that segment - has had a good lead.
One of the great things that Marriott has that virtually no other chain can deliver is that we can introduce new brands to the marketplace, and with the Marriott endorsement and the marketing infrastructure that can be applied, it is almost instantaneously capable of competing in the market. The other guys don't have that.
The second brand we introduced last November was called Springhill Suites. Springhill is a moderate to upper moderately priced all-suite product. It is largely in the same price segment as Courtyard, but has a different twist to it, in that because of the suite configuration, it has a tendency to attract more leisure travelers and more female travelers. As you know, the female travelers segment is becoming a larger and larger part of the traveling public, and the Springhill brand seems to appeal to that trend, more so than Courtyard.
I can't say that we're contemplating any new brands in the near future because there aren't too many more segments to be in. Arguably, we could go into the economy segment, but to date, there doesn't seem a lot of desire to do that. With two new brands we introduced, we have enough to do to make sure those are as successful as we need them to be.
NREI: What are some hot issues hoteliers should be concerned about?
Lavin: As with any hospitality or service business, the key to success in the long run is having qualified associates run those hotels. It is a big challenge for us to be able to attract and keep the talent we need. This is not just in the hotel industry; this is across the board. The biggest challenge is making sure you have the training programs in place and the culture associated with excellence that is instilled in each associate in a very consistent way to ensure that there's a consistent delivery of service at the property level. We're really good at that, even though it's really hard to do.
We believe that, in the long run, we'll continue to have an edge over the competition, albeit it's still a struggle to attract and maintain qualified people. We think we're better at it than our competition.
Q: Along the lines of training, tell me about the new high school in Washington, D.C., that is designed to introduce young people to the hospitality industry.
Lavin: At Marriott, we recognize there's a need to seed the talent pool in the lodging industry earlier than traditionally has been done. Washington, D.C., is our hometown, and we have a lot of hotels here. This is strategic for us to be able to tap the labor pool in this area just for our own hotels. It puts something back into the community which is part of our culture. We think it's very important to be a fabric of the community in which we reside and do business. And Washington, D.C., is also the hometown of the founder of Marriott.
This [the high school] is an interesting template for us. It marries the needs of the community with better educated high school students who either need to learn a trade or may continue on to a 2-year or 4-year program.
Q: What cities do you see as the hottest markets for hotels and why?
Lavin: I think most major cities in the central business districts are ripe opportunities for new development. From an occupancy perspective and a rate perspective, they tend to outperform the nation in general. The good news is the performance is usually pretty strong, and the bad news is that if you're a developer, it's really hard to get into these cities. Of course, that's why the performance is so good. If you can get into some of these markets, the returns are pretty good. We like Chicago; we like San Francisco; and we've got a substantial development in Philadelphia. There also are a lot of new properties going on in Washington, D.C. - of course, that is our backyard. Portland, Ore., also has been a very popular market for Marriott and our franchisees.
In general, those types of markets are strong because the barriers to entry are high. It takes skilled developers and operators to get in, plus you have to have fairly deep pockets because some of these deals can take three or four years to complete, and it's not for the casual investor, which we are not. We like the urban markets a lot. They're challenging, but the rewards are great. In New York, we opened two Courtyards last year, both of which are doing very well, but they both took a fairly long time.
Q: How do you think technology is going to affect the hotel industry?
Lavin: It's already starting to. Approximately 2% of all Marriott room bookings occur over the Internet. It was 0% two years ago. It's expected to be over 10% over the next few years. That distribution channel will be a substantial one, especially as technology gets easier and faster and the databases become more accurate and user friendly. We are in the process of revamping our whole Internet strategy to be more user friendly, and we'll be rolling that out in the next six to eight months.
The thing that's great about it for us is that our brand name has such power. If you are looking for a hotel, the first name you're likely to pencil into your search engine is Marriott, so we're going to get first crack at a lot of consumers.