Only about 17% of the hotel giant’s franchised owners come from diverse backgrounds.
In 2009, the Biagas family made an investment that the faint of heart likely couldn’t stomach. In the wake of the financial downturn, John and his siblings Mark, Randy and Evette (along with four other investors) put down $3.8 million to build their first Marriott-brand hotel in Lake Charles, Louisiana. The SpringHill Suites by Marriott would be the family’s first venture into the hotel business.
“Our father was an entrepreneur and he taught us not to put all of our eggs into one basket, so we’ve made a number of different investments,” John told Fortune.
Five years later, the Biagas’ bet paid off. In fact, the family is so satisfied with its investment with Marriott that they are breaking ground on a second hotel with the same ownership group. In 2015, the siblings and their partners will open a Residence Inn in the same town in Louisiana.
Yet the Biagas’ family stands out not just because of their courageous investment in the wake of the Great Recession. Of Marriott’s more than 4,000 hotels worldwide, only 660 – or 17% – have what the company defines as “diverse” franchise owners. That category includes women, African-Americans, Hispanics, Asians, members of the LGBT community, veterans or people with disabilities. Now, Marriott is pledging to increase their numbers.
By 2020, the hotel giant with $12.8 billion in 2013 revenue is working to grow the number of diversely owned hotels to 1,000. Marriott wants new blood to consider its hotel chain a good investment for building long-term wealth. To qualify as being a diversely owned hotel, members of one of Marriott’s defined diverse groups have to own at least 51% of the hotel collectively.
The value proposition behind owning a hotel is not widely known by most people, says Julius Robinson, Marriott’s head of diversity ownership. Historically, large financial institutions, pension funds and private equity firms have owned a vast majority of hotels. So getting a greater diversity of ownership will require active campaigning on the company’s part.
The shortage of diverse owners also has as much to do about education as it does with access to capital, says Robinson. Qualifying to franchise out a Marriott-branded hotel could mean putting down as much as 40% of the total cost of the project. Yet as more women and minorities gain access to capital, Robinson says the pool of qualified candidates is growing.
“Diversity is a big part of who we are as a company,” says Robinson. “We have diverse associates and diverse customers and we want to make sure diversity is exhibited in every level of the organization.”
Roughly 25 years ago, Marriott was the first big hotel company to formalize a diversity and inclusion program. In 2005, the hospitality giant was also the first to launch a formal initiative to encourage diverse hotel ownership. Still, Marriott has a shortage of diverse talent at the top of its organization: There are only three women on Marriott’s 15-person executive leadership team and just one member is from Hispanic descent.
The business strategy behind the new ownership initiative is not lost on Robinson, either. Women and minorities are becoming a larger percentage of business travelers every day, he says, which means having diverse owners could mean more successful hotels. In June, the hotel chain also championed a marketing campaign geared toward the LGBT community. Its #LoveTravels ads feature prominent members of the community sharing their stories and staying at Marriott hotels. A second phase of the campaign focusing on African-Americans launched in August. The company knows that if it can corner the market on diverse travelers, it will be at an advantage in the long-term.
Like any investment, however, opening up a hotel is not without its risks. Alexandra Martinez signed her first agreement with Marriott to open a hotel 12 years ago. Now, her family has invested more than $150 million with Marriott and they collectively own four hotels in Mexico. It’s all about locations, says Martinez, and it can take up to eight years to see a return on your investment.
“It is a very rewarding business, but you have to be patient,” says Martinez. “It is a solid investment and I find it is not as sensitive to financial crises.”
Today in New York, Marriott MAR will kick off an event geared toward recruiting and retaining more female hotel owners. A small group of current women hotel owners will come together with women exploring hotel development as part of their investment strategy.