HOLLYWOOD, Florida — In the early days of the pandemic when people were figuring out ways to fill their time at home, Marriott International CEO Tony Capuano worked through the books on his bookshelf.
Fascinated with the Roman Empire, he was reading a book about ancient Rome and came across a quote by the philosopher Seneca the Younger that he wrote down on a piece of paper that he now carries in his wallet.
The quote was, "Travel and change of place impart vigor to the mind."
Capuano, speaking to the combined Caribbean Hotel & Resort Investment Summit and Hotel Opportunities Latin America conference, said he loves that quote because it shows the appetite for travel and experiences is not something that has emerged over the last few years or even last few generations.
“That’s part of the human condition for centuries, and the fact that two years ago I was sitting in our boardroom talking about are we going to survive, and two short years later, record-setting pricing power and reinstatement of the dividend," he said. "I think it’s a great illustration of the resilience of travel.”
Meeting Everyone's Needs
Marriott’s strong recovery has been a bit of a double-edged sword, Capuano said. Investors and developers are happy to see the company’s success and that it’s nearly back to 2019 revenue-per-available-room levels, but they’ve seen billions of dollars of asset and enterprise value essentially evaporate over the last two years.
“Getting back to ’19 is a good start, but most of the expense line items have continued to grow during that two years, so we still have a steep road to recovery, and don’t forget about us, I think is their view,” he said.
Marriott tends to work with owners and franchisees who are long-term holders and vendors, so they’re not trying to time construction starts or openings by the month or even by the quarter, he said. The biggest factor affecting unit growth has been the constriction of debt markets.
“There’s plentiful debt for existing assets,” he said. “It’s less plentiful for new development. Construction costs, I’m not sure they’ve ever gone down in my life. They go up, and then they plateau and then they go up again.”
The supply-chain disruption is a major pain point, and it’s more of an issue for opening new hotels, he said. There are multiple hotels around the world where the construction is done, but the furniture, fixtures and equipment are sitting in a container somewhere waiting to arrive.
Marriott will move to its new global headquarters in July, but Capuano said he believes it could be called the field support center. Ninety-two percent of Marriott’s global associates are frontline hotel associates, so the focus has been getting its hotels staffed, particularly in markets that have had strong demand recovery.
Following the downturns caused by Sept. 11 and the Great Recession, it took the hotel industry between four and five years for pricing power to return, he said.
“Here it’s returned in less than two years,” he said. “That’s great news, but those guests reasonably expect great product and service levels to be commensurate with the pricing power we’ve achieved, so we’ve got to get those properties staffed.”
The entire hospitality industry must do a better job explaining the industry is not just a place to earn a wage but to build long careers, Capuano said. Pre-pandemic, people viewed the travel and tourism sector as a safe harbor for workers because they knew people would always travel.
“Understandably, that confidence has been shaken, and so there are likely tens of thousands of workers in travel and tourism that have left permanently,” he said. “It’s on all of us to tell a story about not just the wage you can earn but the opportunity to build careers.”
Leadership Lessons
Bill Marriott Jr. stepped down from his role as the company's executive chairman recently, stepping into the position of chairman emeritus for his “retirement.”
Capuano said he had staff meetings the week before the conference during which Marriott called in. After his flight to the conference, he had a voicemail from Marriott.
“So, anyone that’s terribly concerned that his wisdom and that deep institutional knowledge will be lost, that is an unfounded concern,” he said.
One of the main things Capuano said he learned from his time with Marriott is humility, something he believes is woven into the culture of the company.
“He is extraordinarily humble,” Capuano said. “He is a servant leader in every sense of the phrase, and I think he cares about our people more than any leader I’ve ever met.”
Among the many questions Marriott received as his retirement approached, he was asked about his proudest accomplishment, Capuano said, to which the retiring chairman answered it was the opportunities he created for people around the world.
The hotel industry has seen an increasing number of leaders come from the transactions, legal or financial sides of the business, he said. There are fewer leaders like Marriott who have the deep experience in operations.
“That expertise has been invaluable for all of us that have had the privilege to work with him,” he said.
All-Inclusive Resorts
Capuano said he’s received multiple questions about whether he was happy Marriott moved into the all-inclusive space because of the pandemic, but the company actually made that move long before COVID-19 came around. Leisure demand was growing four times as fast as business travel on a global basis, even before the pandemic, and the strength of leisure demand in the recovery has caused Marriott to double-down in that space.
Marriott has already seen extraordinary demand for all-inclusive product in Eastern Europe resort markets and Southeast Asian markets, he said. In the Caribbean and Latin America, the demand has evolved dramatically.
The expectations of product quality, service delivery, food and beverage — both in variety and quality — have expanded, he said.
“You’ve seen a heavy shift toward the American consumer, who has both high expectations and a willingness to pay for product that meets those expectations,” he said.
There are deep pockets of demand for resorts at every price point, Capuano said. The customer who has grown up working through the various quality tiers now has the means, appetite and exposure to traditional luxury to want the same product and service delivery quality in the all-inclusive environment.
In general, Marriott is bullish about the CALA region, he said. Airline capacity has returned here faster than any other region, and demand is roaring back in resort destinations. Pricing power returned ahead of other regions as well.
Mexico continues to be an important market for Marriott with a vibrant development environment, he said. The Caribbean broadly, and the Dominican Republic in particular, show a great deal of opportunity while Costa Rica is an increasingly appealing market, he said.