The Covid-19 pandemic slowed, but it couldn’t kill, the hospitality industry.
More than two-and-a-half years after the start of the outbreak, the fortunes of the world’s largest hotel company are on the rise, and Marriott International Inc. (NASDAQ: MAR) CEO Tony Capuano is bullish on the future of travel.
Capuano, who succeeded the late Arne Sorenson in late February 2021 as the Bethesda company’s chief executive, speaks from some experience. Marriott recently posted earnings that showed significant rebounds in its occupancy levels and revenue per available room, a key industry metric, as its second-quarter revenue and net income beat Wall Street forecasts.
Still, he explained more of what drives his thinking during a wide-ranging interview with the Washington Business Journal at the company’s new headquarters in downtown Bethesda.
Here’s some of what he had to say, edited for space and clarity.
What was Marriott’s pandemic pivot? I think we had a bit of an advantage, or a bit of a head start, because we are a travel company. At any one time, a significant portion of our above property workforce was on the road in a pre-pandemic world anyway. They were visiting properties around the country and around the world, visiting our owners and franchisees. As a result of that, the adoption of video technology obviously took a bit of an adjustment, but I think that was relatively quick and seamless.
What about from a personnel standpoint? The challenge for us was really reminding ourselves, while we reminded our customers, of the value of in-person interaction. If you look at the travel sector, for decades, there have been new technologies that were going to do away with the need for travel. You remember the early days of videoconferencing, where people said it’s going to be the end of the hotel industry, right? No one’s going to have to travel anymore.
But you didn’t think that? It won’t stun you that I am filled with optimism about the future of travel, and I think in an ironic way, the events of the last two years have reminded folks — the reason leisure travel has led the recovery is, being locked down for a year or two, reminded people — of that ravenous appetite they have to explore the world, to visit friends and family, to hold events, to immerse themselves in new cultures. And for businesses, they are reminded of the power of sitting face-to-face with their client or their partner.
How do you know you’re not being too optimistic? We are a data-driven company. So, certainly I have intuitions and core beliefs about the power of travel, but when I am preparing for media discussions — certainly when I’m preparing to talk to the investment community — that optimism is supported by data. And the data that we slice and dice every day gives me cause for optimism.
What do you feel has changed for good as a result of the pandemic? I think the adoption of technology. It would have come on its own, but I think that’s been accelerated. We had mobile check-in, mobile key, chat functionality when you’re on property, all of that was already embedded in our app before the pandemic. But I think early in the recovery, because of necessity or trepidation about the unknown, of the virus, you saw a rapid acceleration in adoption of those new technologies. Many of those guests determined, particularly traveling for business, “I’m by myself, I’d rather just check in on the airport shuttle, get my mobile key, skip the desk, go straight to my room. And if I need something, the chat functionality works great, it’s like texting at home.” So, I think the adoption of that technology will endure beyond the pandemic.
But not universally? We’ve got to recognize the desire to use that technology varies by trip purpose. If I’m traveling by myself, for business, I will probably use that technology. On the other hand, if my family and I are going on vacation, I want to chat with the front desk agent and say, “Where should I go running?” I want to talk to the concierge and say, “I don’t want to go to a restaurant filled with tourists. Give me a couple of places that the locals love,” right? I want to engage the team on property, and so that will vary by trip purpose as well.
What about that percentage of trip travel that’s lost to technology? There were all sorts of experts who made comments early in the pandemic that business travel was forever impaired, anywhere from 10% to 50%. My view, and the company’s view, based on the data: We don’t believe travel is permanently impaired, but we think it may look and feel a little differently.
And how are Marriott’s hotel partners holding up? What our owners will say is: “That’s terrific that your RevPAR is back to 2019 levels. That’s great because that’s a good bellwether for the industry. But remember, for us, who are most focused on the bottom line, profit, our expense-line items have continued to grow over the last two years. So while we are recovering, our recovery is not as advanced as yours.” So our partners need to continue to stay focused on revenue enhancements, but also margin enhancements and cost control.
How did you let Chris Nassetta and Hilton beat Marriott for the repositioning of the former Trump International Hotel into a Waldorf Astoria in downtown D.C.? Chris is a good friend and a worthy competitor. I think that is an interesting luxury location. It’s a beautiful building. I think we have the largest, both footprint and pipeline, of luxury hotels in the industry. We are delighted with the breadth of our luxury offerings, and we wish them well.
But did you pursue that for a Marriott-branded hotel? The first go-round we looked at it, and our view was that the lease made the economics of the deal a challenge.
And not the second? No.
Marriott suspended its operations in Russia in June due to its invasion of the Ukraine. Do you envision Marriott returning to Russia? I spent a lot of time there. We had terrific hotels, wonderful associates, many of whom we’ve placed in other hotels in Eastern Europe. Moscow was a vibrant business city. But candidly, right now, we’re much more focused on the humanitarian crisis and a hope for peace and stability in the region. You would hope that if those lofty goals are achieved, it would create opportunities for international companies to go back into that market. But our focus right now is on more significant human rights issues.
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