LOS ANGELES — The level of demand seen over the last two years should erase any doubts about the resiliency of travel, Marriott International CEO Tony Capuano said.
In a video interview with HNN during the Americas Lodging Investment Summit, Capuano said the company continues to see strong and growing demand in most of its markets. Forward-booking data is showing encouraging signs for a strong 2023, even if the booking window remains somewhat short.
The hotel industry receives no exceptions from economic headwinds, but Marriott is more geographically diverse than it used to be and it has a lower reliance on incentive management fees as its portfolio has shifted toward a higher percentage of franchised hotels.
"We still have the benefit of what appears to us to be deep pools of pent-up demand as a result of the events of the last couple of years, and we don't see that slowing down," he said.
Accelerated Signings
Ahead of the conference, Marriott announced that its signings in 2022 accelerated, as the company signed an average of two deals a day for a total of 726 management and franchise agreements last year, which is a 21% increase over total signings in 2021. That figure represents almost 108,000 rooms added to Marriott’s pipeline. The company’s acquisition of the City Express brand will add another 17,000 rooms.
The signings are encouraging, Capuano said. Construction starts are challenging, and that’s an industrywide issue. Marriott’s partners understand the variability of construction costs, so they are certainly concerned, particularly when that’s combined with rising interest rates. The biggest impediment to new development is the constriction in the debt markets, particularly for new construction.
Roughly 60% of Marriott’s global pipeline is international, and while its market share domestically is 18% or 19%, it’s in the single digits internationally, he said.
“We think we've got a really exciting, long runway for growth outside the U.S. while we continue to build here at home,” he said.
One of the byproducts of the pandemic is that everyone involved in the hotel industry came to the same side of the table for a common cause, Capuano said. Marriott’s relationship with owners and franchisees is stronger, more collaborative and more transparent than it’s ever been.
Along with the costs and availability of debt, Marriott’s franchisees are also concerned about some of the extraordinary measures they had to put into place so their businesses could survive the effects of the pandemic, he said. As Marriott executives think about renovation cycles, they want to be thoughtful and collaborative to make sure Marriott’s requirements are balanced with the wants and needs of guests as well as the realities of hotel owners.
“I think we’re going to sort it out together, is the short answer,” he said.
While these owners and franchisees are glad to be partnered with Marriott now that revenue per available room has broadly recovered to or surpassed 2019 levels, they don’t want the company to lose sight of the fact that their expenses have grown as well.
“We’re a brand company that earns a significant portion of its fee revenue from the top line,” he said. “We’re probably in a different place on the recovery curve than our owners and franchisees, and so we need to be mindful of those differences and keenly focused on doing everything we can to help them drive profitability.”
Leadership Changes
At the end of December, Marriott announced President Stephanie Linnartz would step down from her role by Feb. 24 to serve as CEO of Under Armour. First thanking her for her work at Marriott, Capuano then said he and Linnartz are in deep discussions with the rest of the company’s leadership team about the opportunities her departure will create.
Capuano said people could expect some announcements in the coming weeks.
“She is an extraordinary executive,” he said. “Her contributions, not just over the first couple years of my tenure in this role, but throughout her 25-year career, are extraordinary and impactful. Our company, our shareholders, our associates will benefit from those contributions for years to come.”
For more of HNN's interview with Marriott CEO Tony Capuano, watch the video above.