CFO & Executive VP of Development, Marriott International Inc
Marriott CFO on How the Company Grew to Become the Largest Hotel Chain | WSJ
Marriott—by many measures—is one of the largest hotel chains. With over 30 brands including the Ritz-Carlton and Marriott Bonvoy and a presence in 139 countries and territories, the company still sees room for future growth.
WSJ sat down with CFO and EVP of Development Leeny Oberg, who shares why this is just the beginning of growth for the hospitality giant and what amenities have the highest returns on investment for its hotel owners.
Chapters:
0:00 Marriott’s size
0:31 Role as a brand company
2:51 Power of branding
9:41 Where the industry is going
#Marriott #Hotels #WSJ
About Kathleen Oberg
Kathleen Oberg, CFO and EVP of Development at Marriott International, has discussed the company's growth strategy and operational model in media appearances. In a 2024 interview with the Wall Street Journal, Oberg stated that Marriott was the first hotel chain to separate real estate ownership from management, a model she said allowed the company to focus on building brands and growing more quickly. She noted that the company holds only about 7% of global market share and sees "lots of opportunity for future growth." Oberg cited the StudioRes brand as an example of Marriott entering the mid-scale extended-stay segment based on customer research and feedback from owners and franchisees. She also said that returns on investment for hotel owners are driven by efficient costs and revenue from customers, and that amenities such as multi-use bar and lounge spaces have shown "tremendous returns." In a 2021 interview with Bloomberg, Oberg addressed the impact of the COVID-19 pandemic on Marriott, describing it as "a shock" and "a kick in the butt." She said the furloughs and layoffs the company implemented were "necessary to survive." Oberg noted that Marriott had hired 40,000 people since the beginning of the pandemic and emphasized the importance of technology, such as mobile key entry, in improving productivity for both customers and owners. She described the CFO role as having broadened beyond financial oversight to include communicating strategy and value to all constituencies. Oberg also stated that over 60% of her global finance team are women and over a third are people of color, which she said makes the company better in terms of ideas and performance.
Transcript (21 segments)
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Narrator0:11
It got here by being one of the first hotel chains to sell off its real estate to outside owners and instead focus its business on its brands. CFO and EVP of Development Leeny Oberg sat down with the Wall Street Journal to discuss why the company's operating model works and where it's going next.
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Interviewer0:30
How does the Marriott experience differ from its competitors?
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Kathleen Oberg0:33
We are the largest, we're the global hospitality leader, but with only 7% of market share, one of the best things is we see lots of opportunity for future growth.
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Interviewer0:43
What is that strategy that you're betting on?
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Kathleen Oberg0:45
We were the first ones to really do the concept of separating the real estate from the management, which allowed us to be better at building brands, allowed us to be better at growing, allowed us to listen more to our owners. But then moved into hotels. And one of the things we realized as those hotels got more and more popular is that by building them all on balance sheet and dealing with economic cycles, we were constrained. Our growth was constrained. So by being able to split the real estate from the management and the brands, we were able to not only tap additional sources of real estate investment capital, we were able to focus on the brand, the service, the systems, the processes, to make sure the brands were as strong as possible, and then to grow faster. When I think about the size of our system, that could be almost over half a trillion dollars of value of real estate. We could never do that on our books, on our own balance sheet.
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Interviewer2:10
With that shift in the industry?
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Kathleen Oberg2:11
Oh, I think for sure. When you think about the types of hotels, even as recently as 40 years ago, we had very, very few international hotels, and we are now almost 40% international, outside the US. That has happened so much more quickly as a result of this asset-light model. That is all a function of being able to go and find capital in all these different markets. Take our brands, which are proven brands, demonstrate that they deliver good returns for the owners, but also deliver great experiences for the customer, which then engenders more growth.
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Interviewer2:50
Why do you think that there is a rise in brands across the industry?
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Kathleen Oberg2:54
Remember that branding hotels has really evolved. The power of the brands and what they can deliver to the top line, and then the economies of scale that allows you on the cost side to help deliver results to the bottom line, I think has really demonstrated that having a branded hotel can really help a real estate investor get the best returns on their asset possible. I think also similarly for the customer, having this range of brands gives us the ability to appeal to our customer for every experience and location that they want. And that is really important for Bonvoy. When you think about our overarching loyalty brand of Marriott Bonvoy, the ability to say, 'Listen, whatever you need, wherever you'd like to go, we've got a place, and also a great way to communicate with us.' So I think you put those all together to come up with what gives us a great long-term sustainable growth story.
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Interviewer4:20
So this shift to the asset-light model is what allowed this sort of rise in brands.
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Kathleen Oberg4:25
I would say yes, the rise in brands, but most importantly the growth. Because if you think about what you'd be able to do if you were building all these hotels yourself and having to go and borrow every time you were building a new hotel and dealing with all of that construction, if you really think we're leveraging capital all over the world for our owners and franchisees for them to be building or buying hotels and putting our brands on them, so it's really like multiplying what you can do.
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Interviewer5:10
How do you decide which new brands to launch?
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Kathleen Oberg5:10
Well, like most businesses, first studying the market. Where's the customer going? What changes are we seeing in travel patterns? What are we thinking that customers want, what they don't have? StudioRes is a great example of our entry into the mid-scale space in the US that really demonstrates that. Came from a combination of working on our customer research, but also talking to owners and franchisees who were saying to us, 'You've got great expertise in extended stay. We see a lot of demand and would love to invest in properties that are in your system at the lowest cost per key that you have on any of your products, but also meet this customer demand for extended stay in a really super sleek and modern operating model.'
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Interviewer6:10
What does this loyalty program allow the company to do and offer?
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Kathleen Oberg6:14
One of the best things is really helping people understand the wide, wide range that they have of choice, while at the same time managing this relationship where you don't have to repeat over and over again that I really like this kind of pillow or I really like to know that I'm gonna be able to check in on my mobile phone and walk in the door. So having that ability to tailor your experience for you and what you like, but at the same time have the widest range of possible choices we think makes us particularly competitive.
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Interviewer6:49
And when you talk about that wide range, there are so many hyper-specific brands these days. Is it important that the customer know all of the different niche brands?
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Kathleen Oberg7:11
I'd like to find a great extended stay product like Residence Inn or Element, et cetera. In that respect, the wide variety is important, but also knowing consistency. One thing that really came out of COVID is that customers do appreciate knowing what they're getting and being able to go and say, 'I'm staying at this kind of brand and I know it's gonna have this set of amenities and this kind of price point, while if I go somewhere else, it'll be a different kind of experience.' And being able to count on that and enjoy the variety, I think has again proven to be a really good competitive advantage.
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Interviewer7:53
What amenities in hotels have the highest return on investment?
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Kathleen Oberg7:56
Hotels are long-lived assets. For many years. That means that that hotel has constantly got to be thinking about what investment does it need to stay current. You think about it, you go to a hotel that's 40 years old and if you can't plug in your phone next to your bed, I know you're not happy. In every single hotel room, you've gotta make sure that you're making it easy and accessible for people to manage their lives, which now is so much more technology-enabled than it was 15 years ago. Then I think from the overall hotel experience, I think the public space and the way the public space makes it comfortable and enjoyable for people to just be there, I think has become an increasingly important part of the investment. And where we see tremendous returns is in the public space. And that is where really in all kinds of our hotels, we have seen the returns on that particular space. You think probably 15 years ago, it was kind of dead space. You'd walk in, you'd really go to your room, and now it has become much more of a community space that has meaning and ROI for how it is laid out. Those are the kinds of things that we, as part of a business of the brand company, work with our owners to make sure we're picking the hotspots for them to reinvest in.
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Interviewer9:41
Where is the hotel industry going in the next 10 years? What are the main challenges?
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Kathleen Oberg9:45
The good news is travel is powerful, and as we talked about our purpose in connecting people. I think coming out of COVID, you've definitely seen that people don't take travel for granted anymore and want to be even a bigger leader. Critically, we need to provide adequate returns on these real estate investors' capital and be efficient on the cost side, but also drawing in as much revenue from the customer. That's the critical equation to making sure that we are driving the returns on investment that our owners expect. So I do see a lot of great potential for the hotel industry. Also, the adjacencies that we're playing in, whether it's Ritz-Carlton Yacht or the co-branded credit cards or travel insurance, again, allow us to really try to make you feel like all of your travel can really be done within Bonvoy. Collaborating with associates, owners and franchisees, customers and shareholders at the end of the day is what drives the long-term success of our business.