Marriott International Inc. (MAR), appears geared up to hit the European market with the launch of four new hotels in Spain. The hotels are being opened in association with Spanish hotel group AC Hotels.
In January 2010, Marriott announced that it has sealed a deal with AC Hotels, to manage and franchise a new lodging brand across Europe and Latin America. Financial terms of the deal were not disclosed.
The new lodging brand will be labeled “AC Hotels by Marriott.” By May 2011, these four hotels will join Marriott’s recently launched Autograph Collection, a portfolio of distinct, independent hotels and resorts catering to the upper-upscale and luxury segment.
Founded in 1998, AC Hotels currently has a portfolio of over 90 hotels in ownership, leasing or management, in Spain, Italy and Portugal, encompassing more than 9,500 rooms. AC Hotels, with its vast know-how about this market, delivers in accordance with European taste and liking.
Following the launch, all its hotels will be re-branded. Marriott’s management believes this strategic partnership will widen its reach in the European market, particularly in Spain, the fourth largest source market in that continent. Apart from Spain, the focus will be on Italy and Portugal.
Marriott believes that there is tremendous development opportunity outside the U.S., in places like Asia-Pacific, the Middle East and in to some extent in Europe. By 2015, Marriott plans to double its European room portfolio from the current 40,000. AC Hotels by Marriott will re-brand 86 hotels initially. The joint venture promises tremendous growth potential in terms of aggressive expansion throughout Europe.
AC Hotels by Marriott will deploy the concept and business model of AC Hotels and Marriott’s global footprint, systems, distribution, sales initiatives particularly Marriott Rewards. Starting May 2011, management expects all AC Hotels by Marriott to be bookable on Marriott.com.
Apart from Europe, Marriott plans to double its number of properties in China by 2015, which is its largest market outside the U.S. The company also expects to open 100 hotels in India over the next five years. Expansion in China, Europe and India is a strategic fit, given the slow recovery of the U.S. hotel industry.
However, competition in the industry is intensifying and each of Marriott’s brands competes with major hotel chains in national and international venues. Apart from expanding in Asia-Pacific and Latin America, Marriott’s closest competitor Starwood Hotels & Resorts Worldwide Inc. (HOT) will also increase its portfolio of 247 hotels in Europe, Africa and the Middle East with almost a dozen new hotels slated for launch in 2011.
Marriott currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
STARWOOD HOTELS (HOT): Free Stock Analysis Report
MARRIOTT INTL-A (MAR): Free Stock Analysis Report
Zacks Investment Research
