LOS ANGELES — Marriott International is nearly 100 years old as a company, and as such, changes over time.
The world's largest hotel brand company by property count, Marriott continues to grow both through organic hotel openings and deals, most recently with its acquisition of Postcard Cabins and partnership with Trailborn in December.
In that light, the news that Bethesda, Maryland-based Marriott would lay off 833 positions, according to a Work Adjustment and Retraining Notification filed with the state of Maryland, got some attention from the hospitality industry. Marriott President and CEO Tony Capuano foreshadowed these layoffs in the company’s third-quarter 2024 earnings call in November, saying a that a company-wide evolution was planned to improve effectiveness and efficiency. The plan was projected to save $80 million to $90 million in annual pre-tax general and administrative cost reductions starting this year.
It's a natural reflex to say this was just about cutting expenses, Capuano said in an interview with Hotel News Now at the Americas Lodging Investment Summit.
“That was certainly a facet of the exercise, but it was a much more comprehensive look at the organization than a traditional cost-cutting exercise,” he said.
Marriott looked at every part of the equation, including ways to accelerate revenue growth as well as reducing expenses, of which that $80 million to $90 million was Marriott corporate costs, he said. The company wanted to find opportunities to streamline and find capacity in system funds. That capacity is already manifesting itself.
Marriott has lowered the loyalty charge-out rate for owners and franchisees as a byproduct of finding some efficiencies in the system funds, he said. Some of the initiatives are in their infancy in terms of adjacent businesses or other areas of potential growth.
Marriott has fundamentally changed in positive ways since the launch of its continent structure, Capuano said. When that began, its portfolio had 4,000 to 4,100 hotels and operated in fewer than half the countries where it is now. The current portfolio has more than 9,000 hotels.
“We are a very different, more global, more widely distributed company than we were a decade ago,” he said.
That made it a logical time to determine whether Marriott's organization was optimized, whether it was empowering its continent teams as the portfolio continues to expand and whether it was hearing about concerns from associates, owners and guests, Capuano said.
“This was a comprehensive look at our organization to see if we could address any of those areas where we thought there was real room to improve,” he said.
Marriott’s role as a manager
Third-party hotel management executives have expressed their optimism in their segment over the last year or so as they see more opportunities to grow as brands turn more and more to outside operators, especially in international markets.
That said, that doesn’t mean the brands are pulling back. As long as Capuano serves as chief executive, he said Marriott will continue to have a large and robust management business.
“It's core to what we do,” he said. “It gives us the opportunity to create growth opportunities for our associates. In an ironic way, it makes us a better franchisor, because we understand the complexities of managing.”
Looking at all the tiers in which Marriott operates, its management expertise helps differentiate the company from competitors, Capuano said. He pointed to its luxury hotels, big-box group hotels and integrated destination resorts.
Capuano said the real shift has been driven by a willingness to consider a franchise model in a broader set of circumstances than Marriott has historically. In every deal, if the owner wants Marriott to manage, it would do so. The growth of third-party management has grown in large part due to the evolving nature of the hotel owner community.
There are yield-focused investors who have a shorter investment horizon than the typical management agreement, which tends to run decades, he said. A yield-focused investor with a close-end fund will need to recycle the hotel in five to seven years, so they need a deep pool of prospective buyers when the investor is ready to sell.
There are also owner-operators who want to handle management on their own as that’s their model, Capuano said.
“Our willingness to show flexibility in those instances and consider a franchise I think allows us to accelerate our pace of growth,” he said.
Demand expectations
In the vast majority of markets where Marriott operates, particularly in the U.S. and Canada, there’s a growing bifurcation of consumers, Capuano said. At the higher end of consumer income, they continue to prioritize and spend on travel.
At the other end of the income spectrum, lower-income households are becoming more price-sensitive, he said.
“We're growing across every brand and every quality tier where we operate, but it's not a coincidence that you see us doubling down in luxury and really accelerating our growth in midscale,” he said. “I think book-ending the portfolio in that way gives us an opportunity to take advantage of consumers at both ends of the household income scale.”
As of the end of 2024, Marriott had 658 luxury hotels, resorts and branded residences in 74 countries. It closed the year with another 266 in its pipeline.
In the midscale space, as of the end of last year, Marriott had 153 open City Express properties with another 53 in the pipeline. Its extended-stay StudioRes brand had its first groundbreaking in January with 35 hotels in the pipeline. Its Four Points Flex by Sheraton brand had 28 open properties and 33 in the pipeline.
That more families are feeling the financial pinch is something that Marriott’s team always worries about, Capuano said. The consumer spending data available through its credit card partnerships is providing the hotel brand company with useful insights how guests are spending their money.
Before the pandemic, a younger demographic of travelers was prioritizing travel and experiences over consumption of hard goods, he said. Post-pandemic, that trend has expanded across demographics.
“We really are not seeing a slowdown in that shift and that prioritization, which gives us some comfort,” he said. “But make no mistake, consumer confidence across every income tier is a really important leading metric for travel and tourism.”
The return of Starwood
When Marriott acquired Starwood Hotels & Resorts and its portfolio of brands in 2016, Starwood-founder Barry Sternlicht retained the Starwood name, Capuano said. The name sat dormant for a while on the brand side of the business, and then a year ago Sternlicht reached out to bring it back. He was already using it for his private equity company, Starwood Capital, but now wants to use it for his new collection of hotel brands.
Sternlicht’s team worked collaboratively and transparently with Marriott, Capuano said.
“I think in some ways, it’s an interesting validation of both our strategy and other big-brand company strategies,” he said. “You look for something that ties together a diverse set of brands. [Sternlicht has] evolved now. He has 1 Hotels, he has Baccarat, he has Treehouse, and so presumably he’ll use that name to try and pull together a diverse portfolio.”
Since the deal in 2016, Starwood Capital has operated and thrived, Capuano said. Marriott doesn’t really use the Starwood name anymore, so there shouldn’t be any significant customer or owner confusion.
“And you know, Barry is big owner of ours, so I think the manner in which he teed this up with us was reflective of the strength of our partnership,” he said.