• Fri. May 24th, 2024

Marriott Focuses on Efficient Design, Lower Cost To Build with New Extended-Stay Brand

Bynewsmagzines

Jun 9, 2023
Adam Sherer, senior vice president of select brands for the U.S. east region at Marriott International, explains at the NYU International Hospitality Industry Investment Conference the room types available with Marriott's upcoming Project MidX Studios extended-stay brand. (Bryan Wroten)

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Project MidX Studios is Marriott International’s answer to meet demand for midscale, extended-stay hotels.

During the NYU International Hospitality Industry Investment Conference, Marriott executives shared the upcoming brand’s story and gave more details about what owners, operators and guests can expect.

Marriott officially entered the midscale segment for the first time in early May when it closed on its acquisition of the City Express brand portfolio, said Leeny Oberg, chief financial officer and executive vice president of development. Marriott now is focused on growing that brand in the Caribbean and Latin America.
 

In the U.S. and Canada, which have the largest shares of Marriott’s hotels, the company wanted to address the growing consumer and developer brand for midscale extended-stay hotels, Oberg said. There’s outpaced demand growth for this product and less relative supply that currently exists.

“We see it as a unique opportunity to enter the space and grow, particularly in the U.S. and extended stay,” she said.

Marriott’s portfolio already includes extended-stay brands Residence Inn, TownePlace Suites, Element by Westin, Marriott Executive Apartments and Apartments by Marriott Bonvoy. Marriott’s extended-stay offerings will now span from the midscale space up to luxury, she said.

Marriott is still putting in the work on trademark research before sharing the brand’s official name, so Project MidX Studios is the working moniker for now, Oberg said.

Noah Silverman, Marriott’s global development officer for the U.S. and Canada, said the new brand also addresses the changing behavior of travelers on the road for extended periods of time.

Marriott has as many as 250 live development opportunities, Silverman said.

While the company is working with Concord Hospitality and Whitman Peterson to build the first three hotels under this brand, Marriott doesn’t have any signed agreements at this point as it is still finalizing the brand name and the disclosure documents necessary, Silverman said.

“We are in active discussions with groups in addition to Concord and Whitman Peterson on the ones that we announced this morning that we expect to be under construction before the end of this year,” he said. “We’re in active discussions with a number of other groups about multiple-unit commitments that we would expect to sign those deals before the end of the year.”

The cost of affiliation is a 9% bundled fee. In the Marriott’s news release about the upcoming brand, the company shared the expected cost to build one of these hotels is between $13 million and $14 million.

The brand’s design for 76% of its square footage to be revenue-generating guestrooms makes it a “highly, highly efficient building,” Silverman said.

Public space in this brand is downsized as well, Silverman said. The two largest public spaces are the paid guest laundry and the fitness center. Otherwise, there’s not much public space.

From an operating perspective, there’s a light staffing model and no food-and-beverage facilities on-site, he said.

“It’s both the cost to build and the ongoing operating costs that we believe are a key part of that efficiency story,” he said.

While targeting an average rate of roughly $80 with revenue per available room of $65, Marriott is primarily focusing on secondary and tertiary markets for Project MidX Studios. Along with looking at traditional hotel demand, the brand is also looking at multifamily demand. Using that data point, the company has targeted as many as 1,800 markets where the brand could succeed.

The factors that drove Marriott to enter the upper tier of extended-stay products are similar to what pushed it into the midscale space, Silverman said.

He cited increasing demand from people involved in construction work and infrastructure projects, as well as traveling healthcare workers and employees seeking other types of workforce housing.

The extended-stay segment grew faster than others before the pandemic, and since the pandemic has slowed, the segment has accelerated, Oberg said.

“You’ve got both consumer demand and economic activity continuing that,” she said. “You put those two together with the fact there’s not that much of this product out there, there’s not a ton of supply — you put all those together and you get a really strong demand picture from both investors as well as from consumers.”

There’s an attractiveness of the product because of its flexibility, Silverman said. It allows someone to stay in an area for a while without having to sign a long-term lease or put down a deposit.

The targeted ADR and RevPAR is probably a little lower than at least one of the new brands announced by Marriott’s competitors, he said. The price point is going to be attractive to guests who are price-sensitive.

“Without tooting our own horn too much, we believe we’ve nailed the sweet spot for where that customer is,” he said.

The brand offers two room types: single-queen rooms, which are a little more than 300 square feet, and double-queen rooms, which are 350 square feet, said Adam Sherer, Marriott’s senior vice president of select brands for the U.S. east region, during a walkthrough of Marriott’s display at the conference. The building is center-loaded, meaning the public spaces are at the center, surrounding by 124 units over four stories.

The public spaces include the lobby, a 350-square-foot fitness center, guest laundry, vending machines for food and guest essentials, a beverage area for ice and water dispensers and a key-accessed common room and guest corridors. There’s also a covered porch.

Under the 124-room prototype, 67% of the rooms will have single queen beds while the remainder will have two queens. The guestrooms will have a shower or shower/tub flexibility. The kitchens will have a full-sized refrigerator, sink, cooktop, microwave, an optional dishwasher and open shelving. There will also be an open closet and entry mudroom.

Many other extended-stay brands line up their amenities along one wall, he said. The Project MidX Studios room design pivoted the kitchen to give it a separate area. With the single-queen room, the desk separates the kitchen from the beds, creating a dedicated eating area. In the double-queen room type, the desk is against the wall by the TV.

For families that need more than one room, adjoining rooms connect, he said.

“We’ve been in this business a long time,” he said. “We’ve spent a lot of time researching it, and the response from our owners and franchisees has been, ‘You absolutely understand it. We think you have kind of hit it from a design, operating model and price-point perspective.’”

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