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Home >> Opinion
UPDATED: 14:11, April 02, 2005
"Our model copied by other big hotel companies": Interview
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Photo:Mr. Edwin D. Fuller, Marriott International's President and Managing Director for International Lodging
Mr. Edwin D. Fuller, Marriott International's President and Managing Director for International Lodging
Marriott International, Inc., is a leading worldwide hospitality company. Its heritage can be traced to a root beer stand opened in Washington DC, in 1927 by J. Willard and Alice S. Marriott. Today, Marriott International has more than 2,600 lodging properties located in the United States and 65 other countries and territories including China. Our People's Daily Washington-based correspondent Yong Tang recently conducted an exclusive interview with Mr. Edwin D. Fuller, Marriott International's President and Managing Director for International Lodging.

Yong Tang: We all know that Marriott International, Inc., is a leading worldwide hospitality company. But one of my Chinese friends just did a survey about the degree of prestige of Marriott Hotel in China. The survey shows that Marriott is not as famous as Hilton and Shangri-La. Is this survey a surprise for you?

Fuller: Yes, absolutely (laugh). I don't know what methodology he or she used to do his or her survey. Quite frankly, Shangri-la has been in China much longer than Marriott. Marriott International began operations in China in 1989 with the opening of the 602-room JW Marriott Hotel Hong Kong, our first hotel in the Asia Pacific region. But our first hotel came into mainland Chinese market in 1997 so we are relatively new in the Chinese market.

We are new but we are a strong competitor in China today. So far we have 25 hotels and resorts and 9,921 rooms in China. We have seven lodging brands represented in China today. These brands include JW Marriott, Marriott Hotels & Resorts, Renaissance, New World, Courtyard by Marriott, and Marriott Executive Apartments. They are located respectively in Beijing, Chongqing, Guangzhou, Hong Kong, Sanya, Shanghai, Shengyang and Tianjin. Marriott International has been ranked by the highly regarded trade publication, Travel Weekly China, as "Best Hotel Chain in China" for 2004.

We expect to be the largest full service hotel operator in China by the end of next year. I am sure profits and customer awareness will follow at that time.

Yong Tang: Marriott has over 2,600 lodging properties and 480,000 rooms located in 66 countries and territories all over the world. However only 0.3% of the properties are owned by Marriott. Among all the hotels in the Marriott International portfolio, half of them are hotels licensed by Marriott while another half is run by Marriott. The profit of Marriott comes from the management charges. Can we understand this way: Marriott is not a hotel owner in real sense. It is a company specializing in managing hotels. It makes profit from offering hotel management expertise and experience, doesn't it?

Fuller: Very well defined! We will operate, by the end of 2006, 2641 hotels in the world. Among all these hotels, we own less than 10 hotels. Most hotels are franchised and managed by us.

When you look at Ritz Carlton, there are no franchised hotels. When you look at Marriott hotels, franchise is less than 35%. When you look outside the United States, Marriott has less than 20% of franchised hotels. So what happens is that the larger hotels we manage. It is smaller hotels, like Fairfield Inns, that are virtually all franchised. When you look at that number, you have got to look at the type of hotels. But your analysis is correct. We are primarily a company working as a manager of hotels.

Yes, we were a hotel owner in the past. At one point we split the hotels we owned from the hotels we managed. So we created two different companies. We are listed on the New York Stock Exchange. We have found that in the American stock exchange system of stock ownership, we make better performance and achieve better returns for our stockholders by not owning the hotels. Many of the indicators the stock market uses look at the returns on the investment and other factors in which ownership is a disadvantage.

Our management approach has been a great advantage. Our stock today probably closed around 64 dollars while the companies with hotel ownership closed at much lower stock prices. So all of our focus has been on how to improve stockholder value and that comes in the formula we developed: we basically do not own hotels.

Our model is copied by other big hotel companies. A lot of hotel companies are trying to do the same thing like us today.

Yong Tang: Marriott has operated so many hotels in so many countries and regions. All these hotels should have a fundamentally common trait while in the same time hotels in different areas should be managed with differing local characteristics. How could Marriott strike a balance between the two tasks?

Fuller: First, each of our brands has its own personality, culture and values. When you go to the Renaissance hotels, they have a completely different approach than Marriott hotels. Renaissance really absorbs the local culture and market into its design. You could see this very clearly in our Renaissance Hotel in Shanghai Pudong. It is very unique. It very much brings the culture of China into the hotels.

Marriott hotels are more consistent hotels which are really designed with a more traditional customer approach. The sleeping room is very similar but in public places we bring in the local culture and design. The Canton Tea Room in the JW Marriott Hotel Hong Kong is an example. There are a lot of different ways in which you can deliver a "sense of place" while maintaining the brand integrity.

Yong Tang: As far as I know, Marriott has 14 distinct lodging brands. How does Marriott manage so many affiliated brands and companies? Do you encourage them to compete with each other?

Fuller: In some cities in the US, we have over one hundred Marriott hotels in one city. In Washington DC, 22% of the hotels in the city represent one of our lodging brands. We have for years been working with various hotel brands in the same location. What we do is that each of our brands has its own significant customer base. They have a specific need they are trying to meet for their customers. And they are looking for different segments of the market. So there is minimal overlap between our various hotel products. Even Renaissance which shares the same customer segment tier as our Marriott brand, the Renaissance customer has different needs and interests from the Marriott customer.

Of course, occasionally there is some overlap. When the economy gets soft, people who normally would stay in a four-star hotel tend to "trade" down to the three star hotels. That is going to happen all the time. But in a perfect world, each segment is perfectly segmented and each customer chooses a product because that product meets their specific needs. We have designers who created the Courtyard brand. They worked for years to take care of that special customer. Quite frankly, they succeeded. They created a brand that is built around the needs of the business traveler.

We avoid competition among our hotel brands by using different pricing strategies. For instance, Courtyard customers might pay 75 dollars a day for the rate; Marriott customers might pay 110 dollars a day. JW Marriott customers might pay 140 dollars a day. Ritz Carlton customers might pay 200 dollars a day. One customer may expect service and elegance while another customer is just looking for a space. Different hotels are for different needs.

Often there are companies who come to us and say: we want to put our technicians into the Courtyards while putting our sales executives into Marriott and our senior executives into Ritz Carlton. That means we could meet the needs of the companies by being able to offer the right product at the right price point for the right trip purpose.

Yong Tang: To franchise is an ideal way of expanding business in the hotel industry? What standards do you set for those hotels being franchised by Marriott? What qualifications should they meet if Chinese personal investors want to join Marriott or to have their hotels franchised by Marriott?

Fuller: Franchising works in certain markets. It is one way to expand business but it is all about having good franchise companies who are willing to do that and who are capable of maintaining the hotel.

First you must have very high qualified franchise operators. We have a number of those operators in the US. You do not find a lot of tremendously skillful franchise operators outside the US. To consumers it doesn't appear it is run by franchisers. It is just Marriott or Renaissance.

There is a long list of standards for those franchised hotels. If they fail those standards, they will be kicked out.

For Chinese investors who wish to cooperate with us, the key is what their current operations look like and the structure of their organization. Right now we are primarily focused on managing hotels in China, not franchising hotels. We have not found anyone who has approached us on franchising. We don't know any Chinese company that is ready to go in this direction. We just have not met one yet.

Yong Tang: We all know that hotel service is characterized by trivialism. It is something like manufacturing precise equipment. In the manufacturing sector, there is a standard quality control system known as Six Sigma. It is a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest specification limit) in the manufacturing process. Is there any similar quality control system available in the hotel industry? For instance, as far as Knight Service is concerned, has Marriott installed any applicable guidelines in this regard?

Fuller: Yes. Ours is called Quality Assurance. We have many ways of measuring it. We have outside and inside inspectors who constantly check the hotels and look for problems. We are focused on a problem solution program. We have extensive customer service improvement programs in place.

For each hotel there are clear guidelines. The checklist of guidelines? It is internal. We do not want to give this to other people. We spend a lot of money developing our systems. If you pay me maybe 6 million dollars, I could give you this checklist. (laughing)

Yong Tang: Since 2003 Marriott has set up a computer register system known as At Your Service. The system is able to record the most minute requirements of a customer into a database. For example, if you were a Marriott customer and you once said to the hotel receptionists that you prefer sponge pillow or you didn't like the noise on the street, all these preference and complaints would be recorded into this computer system. Next time when you check in again at any of Marriott hotels in the world, the hotel would be able to book you a room and guarantee you one hundred percent satisfaction. Are innovations like this coming out all the time in Marriott? Usually who will be responsible for putting forward and implementing such innovative initiatives?

Fuller: Not all the time. We first developed this computer register system at the JW Marriott Hotel in Mexico City. I cannot tell you what we are going to do without telling you what our competitors are going to do. But we have done a great deal of work recently in the area of customer check-in. Automated check-in is being tested. We work on a lot of things all the time. Ideas for innovation then go to the hands of brand executives who develop various brand strategies. I am not one of them. I am the operator in charge of operations. However our hotels often come up with ideas too.

Yong Tang: It is said that Marriott has a core management value: If we are able to take good care of our employees, they would be able to take good care of their customers or guests. Marriott has been ranked by Fortune as 100 Best Employers for seven consecutive years. What experiences does Marriott have in encouraging its employers to do better?

Fuller: The culture is throughout the entire company. We often survey our associates how satisfied they are. Every year we ask them to tell us what they like and what they don't like. We require managers to follow up with the likes and dislikes. We also spend a lot of time requiring our senior management team to look at people who report to them and to look after the associates. We find we have greater loyalty and support from our associates who stay in the company for long years.

Yong Tang: Before the interview I read your resume. I have noticed that you served in the U.S. Army as a captain in Germany and Vietnam, and were awarded the Bronze Star and the Army Commendation Medal. This reminds me of a business trend unfolding today in the world. The industry is calling for their managers to learn from the army. Does your experience as a soldier really help in your managing career? What impressed you most during the time when you were a serviceman?

Fuller: The army helped me work in a large organization. In reality the army does not play a very large role in Marriott's philosophy. In fact, Mr. Marriott has drawn a lot of strength from the late British Prime Minister Winston Churchill and some of his writings. There is a very small percentage of former servicemen(less than 400)working at Marriott out of the 128,000 employees. So I am a novelty, not a norm or consistency.

What impressed me most? It is a tough question. I was shot at when I was a serviceman. And I shot back.(laughing) I think the ability of the army to make so many things happen with so many people impressed me most.

Yong Tang: The global aviation and hotel industry had suffered from heavy blows since after 911 terrorist attacks. Almost all the people in the world know that one Marriott hotel in Jakarta, Indonesia was bombed in 2003 by terrorists. What kind of qualities should a leader have in order to face such challenges and danger and bring the industry out of recession?

Fuller: I think our general manager in Indonesia is a model of success because he acted in a quick and decisive fashion. The three security guards saved the hotel from being severely damaged.

We are always concerned about the safety of our hotels. Quite frankly I am very sad about the Indonesian bombing. The good news is that since the market fell in 2001 it has come back strongly. We have already exceeded our 2000 numbers. And we continue to ensure that our hotels are as safe as possible.

The global hotel industry is out of recession. Last year was a record year. In the international division, we are far above the year of 2000, which was our previous record.

Tang: Have you ever been to China? How do you think of the future of the hotel industry in China?

Fuller: I've been to China for 20 times. I have been traveling there since 1994. We think the Chinese hotel industry is going to be a tremendous success. We have 20 new hotels in China which are under construction or development now.

Yong Tang: Since its entry into Chinese market in 1997, Marriott has witnessed an extremely rapid expansion of business. As far as I know, at the opposite of Chaoyang Park, which is not far away from my newspaper headquarter, there is a well-known international apartment named Palm Spring Executive Apartment. One of the managers of the apartment is Marriott. Marriott has seven of different brands under its flag. Do you think what kind of hotels is better suited to Chinese market?

Fuller: Of course we are not going to put Ritz-Carlton in every Chinese city. But our Courtyards hotels can go to almost every city in China. So we are going to tailor our brands for different cities. Palm Spring Marriott Executive Apartments is for long-term stay guests-people who stay there for at least six months or a year. Instead buying an apartment, they stay there. We have Marriott Executive Apartments all over the world. Residents pay on a monthly basis.

Yong Tang: According to the WTO agreement, foreign hotels or hotels invested solely by foreign investors will be allowed to operate in China this year. I know that Chinese hotel industry professionals are quite worried about the possibility of increased competition in the near future. In what fields does Chinese hotel sector lag most far behind world hotel giants like Marriott? How could Chinese hotel industry catch up with its foreign rivals?

Fuller: I can not do that comparison for you because I don't know what companies you are talking about. I know where we stand with Shangri-la. We compete with Shangri-la every day in a number of different ways. We have a stronger marketing organization and an unparalleled global distribution reservation system. We have Marriott Rewards for our most loyal guests. With more than 21 million members, the people in this program contributed about 45% of all our room-nights last year. But I just don't know of any Chinese hotel companies that we compete against.

Yong Tang: How about Shanghai Jinjiang Hotel?

Fuller: I am not aware of this hotel. I focus on the competitive sets of each of our hotels.

Yong Tang: Maybe Chinese hotels are too small?

Fuller: Once again, I can't make this judgment because I focus only on the competitive sets of each of our hotels.

Yong Tang: Does Marriott have any plans in China?

Fuller: By 2007, the Marriott International portfolio in China will grow to 31 hotels, offering 11,947 rooms. Currently under construction are Shenzhen Marriott Hotel, opening 2005; Renaissance Wuhan Hotel, opening 2005; Courtyard by Marriott Nanchang Hotel, opening 2006; Shanghai Pudong Marriott Executive Apartments, opening 2006; JW Marriott Beijing Hotel, opening 2007.

Yong Tang: What is the biggest challenge Marriott International is facing in China today and how does it cope with the challenge?

Fuller: Our biggest challenge today in China is finding additional opportunities. We recently expanded our Beijing development office and are continuing to work with potential owners to identify the ideal hotel brand in our portfolio that meets their needs and interests.

Another challenge we face is to build strong awareness among the Chinese public so that when they travel in China and to other countries where we have hotels, they will think of one of our lodging brands. As a result, we recently launched a Chinese-language internet site and have active sales offices in Shanghai and Beijing.

By Yong Tang, Washington-based correspondent of People's Daily

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