Marriott changes focus to development

Bloomberg News Service

WASHINGTON — Marriott International Inc., the biggest U.S. hotel management company, is focusing on growing through development after losing out in the bidding for Europe's Le Meridian hotels.

"We don't have to acquire to grow," J. Willard Marriott Jr., chairman and chief executive, said at an analyst and investor meeting in Washington. "There's nothing on the front burner now. We don't have to buy a brand. Why? We have 15 brands."

Last week, the Bethesda, Md.-based company, which owns and franchises Ritz Carlton, Marriott, Renaissance and other hotels, pulled out of the bidding for Le Meridien, a chain of luxury hotels owned by Compass Group Plc.

Marriott has been trying to expand in Europe, where 20 percent of hotels are run by chains, compared with 80 percent in the United States. Also, revenue per available room, a key industry measure of performance, is growing at an annual rate of 13 percent in Europe, more than the 4 percent rate of increase in the United States, according to consulting firm Arthur Andersen.

By 2003, Marriott has said it expects to double the number of rooms it has in Europe to about 65,000. Still, Marriott remains interested in Le Meridien if an agreement can't be worked out with high bidder Nomura International Plc.

"We remain alongside the phone and if it rings we will answer it," said Arne Sorenson, Marriott's chief financial officer.

In the United States, the company is continuing with its plan to add 70,000 new hotel rooms through 2002 even though revenue per available room rose just 1 percent in March, the slowest rate since 1998, as a decline in business travel hurt occupancy rates. Marriott's decision to expand comes as companies such as Starwood Hotels & Resorts Worldwide Inc. pull back.

Marriott, which operates 401,500 rooms, believes it's better to keep growing and grab market share from its competitors amid a slowing economy.

"The more our name is out there the better our customers know us," Marriott said.

Marriott also said the company, which had $2.44 billion of revenue in its fiscal first quarter ended March 23, doesn't plan on laying off any workers. Instead, it will cut costs by $125 million annually by buying energy in bulk from providers such as Enron Corp. and through employee attrition.

"Our single biggest cost is employees, but we are not laying people off," Marriott said.