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Could Marriott’s Partnership with Alibaba Be a Game Changer?

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Aug. 9 2017, Updated 3:05 p.m. ET

Marriott’s smart move

Marriott International (MAR) has entered into a joint venture agreement with China’s Alibaba Group (BABA) in an aim to provide a seamless travel experience in China. The deal will focus on developing Marriott’s Fliggy storefront. Fliggy, formerly known as Alitrip, is Alibaba’s travel service platform.

According to Marriott CEO (chief executive officer) Arne Sorenson, Marriott’s acquisition of Starwood made it the world’s largest hotel (at 170,000 rooms), and its increased its access in China made it all possible. Almost 8% of Marriott’s current capacity and 17% of upcoming capacity is in China.

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What will customers get?

Together, both companies will focus on creating new technologies. According to Marriott, users will have a seamless travel experience, from “planning, booking, paying, and managing a trip to all of the activities associated once at the destination like shopping, dining, and sightseeing.”

The new technology will also create a customized experience for Chinese players. According to Marriott, it will “offer access to private concerts, family-focused experiences, and court-side seats at sporting and other events” through its loyalty program.

Also, customers will now be able to pay for Marriott hotels using AliPay.

Why this could be a game changer

Every player in the travel industry has been trying to gain an entry into the Chinese travel market, including big online travel players like Priceline (PCLN) and Expedia (EXPE). Today, this market is dominated by Ctrip International (CTRP) as middle-class Chinese incomes are rising rapidly.

An increasing share of this move is expected to go toward travel as more people are traveling worldwide. According to Chinese President Xi Jinping, international travelers from China are estimated to reach ~700 million over the next five years. Marriott has identified this opportunity early in the game and will likely have an advantage as the industry grows exponentially.

Notably, investors can gain exposure to Marriott by investing in the PowerShares Dynamic Large-Cap Growth Portfolio (PWB), which has 1.3% of its portfolio in the company.

Now let’s discuss Marriott’s profitability.

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