GLOBAL REPORT—The fortunes of Marriott International’s long-stalled Edition hotel brand might yet turn brighter in the wake of the company’s $815-million sale of three of the hotels to companies under the auspices of the Abu Dhabi Investment Authority, according to analysts.
Marriott on Tuesday announced the ADIA acquired the London Edition (which opened in September) and had also signed binding agreements for the sale of two other Edition-branded hotels under development in Miami Beach and Manhattan. The hotels under construction in Florida and New York are expected to open during the second half of 2014 and the first half of 2015, respectively.
The history behind Edition, founded in partnership with Ian Schrager in 2008, is tumultuous, with analysts pointing to stalled growth as well as the highly publicized takeover and ouster of Marriott as manager of the Edition Waikiki in Hawaii. Following the issues in Hawaii in 2011, Marriott executives announced they would take a fresh approach to Edition development and that the global hotel company would fund future development itself.
Along with the recently opened London hotel, the company also has a 78-room Edition-branded hotel open in Istanbul. There are seven Edition hotels representing 1,821 rooms in the brand pipeline, according to Marriott.
Marriott representative Catherine Leitner and ADIA representative Erik Portanger each referred questions to the news release announcing the deal.
Analysts’ take
Analysts said the deal with the ADIA should help kick start the brand’s growth and provide a reason for optimism among developers.
Smedes Rose, an analyst with Evercore Partners, pointed to the strong performance of the recently opened London Edition as another talking point Marriott executives can bring up in conversations with potential developers. He expects to see more development interest in Edition hotels during the next three to five years.
Michael Bellisario, an analyst with R.W. Baird & Company, said Marriott officials were smart to focus on global gateway cities in an attempt to capture the maximum number of travelers. Marriott also has Edition-branded properties planned for Los Angeles; Abu Dhabi; Sanya, China; Gurgaon, India; and Bangkok.
Edition hotels are likely to generate strong performance in rate and revenue per available room, said Nikhil Bhalla, VP of equity research for hotels at FBR Capital Markets & Company.
“I wouldn’t bet against the brand,” Rose said.
Bellisario said the massive amount of resources Marriott can put behind any of its brands is also apt to appeal to developers.
“That’s a good selling point for them, which should give the brand a little juice,” he said.
Like Rose, he also anticipates future growth in the Edition brand. “The first few are always the hardest.”
Still, while Bhalla indicated Edition hotels are likely to generate strong rate and revenue per available room, he said future growth in the brand is not necessarily assured. Questions surrounding development potential of Edition could persist for some time.
“I think these three hotels will be a good case study on where the brand will be three years from now,” Bhalla said.
“The jury is really out on it now,” he added.