NEW YORK— Mezzanine financing has become the buzz phrase in the industry, as more and more hotel companies put together formal bridge-loan programs for developers signing up to build their brands. Cendant Hotels has put a systemwide program into place, and other hotel companies, like Choice, Starwood (see story, page two) and Wyndham, have recently put the carrot out to developers to encourage more brand distribution growth. But not all hotel companies are jumping on the bandwagon. Marriott International has opted not to have a formal mezzanine-loan program, Arne Sorenson, CFO, told HOTEL BUSINESS®. “Our plan is to put as little capital as possible into our programs,” he said. “We aspire not to have a dollar in a hotel, anywhere in the world.” Realizing that that goal may not be easily achievable, Marriott does participate financially in some hotel projects with mezzanine lending “with the projects that are harder to finance,” said Sorenson. “A good generalization would be that they are the more valuable, higher-end, longer-development cycle types of projects. “Typically, when we are doing mezzanine lending, people often ask, ‘Are you doing that to get the types of rooms that you want to have, and have you stepped up that level of mezzanine lending?’ And the answer is really ‘no,’” said Sorenson. “Those are the projects that have always been the hardest to get financed over decades because of development risks. The long time it takes to get those developments off the ground provides a greater pro forma risk than would otherwise the case,” he noted. “But we think we can underwrite them pretty well,” he added. “We can play a role as a mezzanine lender and get a very long-term management contract, and really get exciting new products in the brands. “But it’s not as if somebody can call us and say, ‘I want to do a Courtyard in Poughkeepsie, we’ll have the 15% mezzanine debt.’” While Sorenson noted that some of Marriott’s competitors have indeed “taken a programatic approach” to mezzanine loan financing he’s “not very concerned about it,” he said. Sorenson also addressed the issue of selling rooms over the Internet. Marriott has taken a strong position on using all forms of distribution to sell its rooms: it is a founding member of Orbitz, and recently inked a deal with Priceline that gives it a higher visibility on that site. Marriott’s revenue and yield management systems, said Sorenson, give the hotel company the ability to protect its pricing integrity throughout all of the distribution channels it chooses to use. The use of single-image inventory, which provides a two-way communication pipe with every Marriott hotel, allows the company to have last-room availability in every single channel, and prices rooms similarly across every channel, said Sorenson. “So if we put rooms in Travelocity or Marriott.com, or through the GDS system or our 800 number, they’re all going to show up with the same pricing aided by this yield management system, so we don’t have to allocate rooms to separate systems.” Priceline, however, works differently, said Sorenson, because that on-line service sells rooms at the last minute. “For us, Priceline is a useful way to sell rooms that we are certain will not be sold. If the manager knows that they’ll have 10 rooms that will go, they make make those rooms available.” Commenting on Marriott’s failed bid for Compass Group’s Le Meridien chain (which went instead to Nomura), Sorenson said that his company hasn’t closed the book on future acquisitions. “We think there will continue to be consolidation in the lodging business for the foreseeable future, maybe forever, and we want to, and expect to be, a part of that consolidation. What we would prefer are portfolios of hotels that convert to our existing brands, preferably our higher-end existing brands, like Marriott, Renaissance and Ritz-Carlton, and preferably outside the United States,” said Sorenson. ”All of those things being equal, w
