Plan includes 2,500 City Express rooms; focus on Ibis brand investors, independent groups

07/18/2024

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Vanessa Martins — Foto: Gabriel Reis/Valor

The Marriott International hotel chain is moving with its plan to enter the economy and midscale segments with the arrival of the City Express brand in Brazil. According to Vanessa Martins, top executive of Marriott Brazil, the chain has three letters of intent signed and 10 more projects under negotiation. The plan is to achieve 2,500 rooms under this brand in Brazil in the medium term—between two and four years.

Marriott’s move increases competition in the segment, currently dominated by French chain Accor with its Ibis brand.

In May, the Hilton chain also announced plans to bring its new brand Spark to Brazil and become an alternative to Ibis hotel owners when contracts for properties currently in operation are approaching their renewal period.

“The midscale and economic segments are growing not only in Brazil. In the region, Marriott entered this category with the recent acquisition of City Express. It is a 20-year-old brand, which is strong in its markets,” Ms. Martins said, in an interview with Valor. City Express currently has 150 hotels, with 10 others in its pipeline—in total, there are five brands added. The operation is focused on Mexico, Colombia, Chile, and Costa Rica.

Marriott announced the chain acquisition in October 2022 but the deal was only completed in the second quarter of 2023, after regulatory approvals.

With the deal, Marriott added 17,500 rooms to its portfolio and became the largest company in the Caribbean and Latin America region, with almost 500 properties, rivaling Accor, with around 450. In Brazil, however, Accor is the leader.

According to data from the Forum of Hotel Operators of Brazil (FOHB), the economic segment is the largest in the domestic hospitality industry, accounting for 46% of properties. The midscale segment represents 36%, while the upscale segment has 16%, and resorts account for 2%.

Accor is the market leader, with 332 hotels in Brazil, 240 of which are part of the Ibis family (including the Ibis, Ibis Budget, and Ibis Styles brands). That means 72% of the French company’s portfolio is in Brazil.

Despite leading in the region, Marriott currently has only 12 hotels in Brazil, with a total of 3,197 rooms and eight brands.

Ms. Martins said the group is more attentive to opportunities in Brazil and seeks to grow in all segments. She points out that central cities like São Paulo still have a lack of room supply, especially in the luxury segment. The company launched its first luxury hotel in São Paulo, the JW Marriott, only in 2022.

“We see many brands arriving. There is demand in the midscale market, Other brands could arrive and bring innovation. We want to be an alternative for building owners and customers,” she said.

The strategy involves expanding City Express in the country’s fastest-growing markets, including primary destinations, such as São Paulo, and secondary and tertiary destinations, which are seeing strong tourism growth—the countryside of São Paulo, for example, has been on the industry’s radar.

Low competition in the segment prompted Hilton to seek to gain ground with Spark, the group’s conversion brand. The project has been adapted for the Brazilian market. While in the United States, the average size of a Spark room is 24 square meters, in Brazil it will be 16 square meters, which is in line with the Ibis portfolio.

In the same direction, City Express rooms will start at 16 square meters but the expected average is between 18 and 22 square meters.

Marriott also sees an opportunity to use the City Express brand to attract independent hotel owners, a strong segment in Brazil. “One of the tools we have for making hotels enter our portfolio is the [Marriott Bonvoy] loyalty program. We have more than 200 million members. In Brazil alone there are 1.1 million,” she said.

Conversion is a strong strategy, especially at a time of high interest rates, which makes the construction of new buildings more expensive. Last year, 35% of Marriott’s pipeline in Latin America and the Caribbean resulted from conversion. “We are very strong in markets sought by Brazilians, like Miami and Orlando. It’s a well-known portfolio,” the executive pointed out.

The group is also advancing in other segments, with openings in the luxury sector with the W São Paulo and W Residences São Paulo—at the end of 2024—, and the Westin São Paulo (premium segment), in 2025. Globally, Marriott posted net earnings of $564 million in the first quarter, a drop of 25% year-on-year amid higher operating costs.

After the strong impact of the pandemic, the business is now favorable. The group does not disclose further details but the executive says the operation has recovered from the pandemic levels. “It’s encouraging to see the market situation today,” she said, pointing out the strong increase in the number of events, such as the Madonna concert, which took place in Rio, and the G20 scheduled for the end of the year.

*Por Cristian Favaro — São Paulo

Source: Valor International

https://valorinternational.globo.com/