Marriott CEO: Short-Term Mtgs. Illustrate Corp. Comeback

Marriott International CEO Anthony Capuano detailed the contours of the
rebound in business travel demand from hotel company’s corporate clients,
particularly their willingness to pay a premium for in-person meetings with
little lead time. This is the second part of Capuano’s discussion with BTN
editorial director Elizabeth West during a virtual Business Travel Show Europe
kickoff event; click
here to read the first part. Edited excerpts follow. 

BTN: Did I understand correctly from the
earnings call that Marriott’s business travel has recovered?

Anthony Capuano: Well, almost—if you look at business
travel in aggregate. In the fourth quarter and the third quarter as well, we
were about 90 percent recovered to where we were in 2019, but if you go a layer
deeper and you look at small and medium-sized companies versus the larger
multinationals, small and medium-sized company demand has actually exceeded
where we were in 2019. In fact, in the fourth quarter, that demand was up about
6 percent. The larger multinationals are still down a bit more, but on a
blended basis we’re about 90 percent recovered.

BTN: Is that on a room-night basis or on a
revenue basis?

Capuano: That’s a room-night basis.

BTN: On a revenue basis, I would imagine, given
the rate increases, that you’re doing well.

Capuano: In many markets we’re meaningfully
ahead, but again you know all markets are not created equal.

BTN: Groups and meetings have been a real
high point for Marriott and quite a challenge for buyers. Do you foresee any
pullback on meetings coming in 2023? Do you have any visibility for trends in
2023 on the groups and meetings side?

Capuano: Meetings have been a real bright spot
in the recovery story. If you rewind a couple years, all the industry experts
predicted leisure would lead the recovery followed by business transient, and
eventually group business would limp across the threshold, and those last two
segments have inverted a bit. As we mentioned on the earnings call, group revenue
in the fourth quarter was up over 10 percent [year over year]. What was more
compelling, if you look at our forward bookings into 2023, group revenue is up
over 20 percent year over year. We continue to see strong group booking.

Now the interesting dynamic in the group sector, we’re seeing a much
shorter booking window. I get the opportunity to talk to lots of our corporate
and association meeting planners, and what we hear from them is, “We see
and crave the value of in-person interaction. We want to meet with our
customers. We want to meet with our colleagues, so we want to hold these
meetings. We’re not canceling those meetings in the face of some of the
economic headwinds that exist. What we are doing is pushing out our booking
decision much closer to the date than we did pre-pandemic, with full
recognition it’s going to be more expensive.”

What we hear from lots of meeting planners is, right now, it’s important
enough for [them] to maintain that flexibility, given uncertainty in the
economic environment.  [They’d] rather
pay a bit more for the flexibility of booking closer to the event.

BTN: Can you talk a little bit about the dynamics
between corporate and group? You mentioned these different mixes inverted, as group
recovered faster than business transient. When there’s so much group, and late group
bookings that are more expensive, is it harder to get corporate nights?

Capuano: It varies by quality tier, by
property type and certainly by destination. What I will tell you is, not to be
overly simplistic, but compression drives pricing power. If big groups are coming
in relatively close to the event, that does have a ripple effect on transient—whether
it be business or leisure—pricing.

BTN: I understood that smaller and midsized
groups were coming in, and larger groups have been slower to return. Have you
seen that trend?

Capuano: We see larger [groups] accelerating. If
you look at our group business in aggregate, the average number of attendees up
[about] 10-plus percent. The size of the groups is growing a bit. With that
said, I’ve had the pleasure to speak at some enormous events with 1,400 people
in the audience. We hosted The Exchange [customer conference] in New York,
where we had about 500 corporate and association meeting planners, so we are
seeing a pretty steady pickup in the big meetings.

BTN: Marriott put
about 1,500 North American properties on the Groups360 meeting instant-booking
platform. Why is instant meeting booking important right now? 

Capuano: Two reasons. No. 1, as we recover
from the pandemic, our guests, whether group, business transient [or] leisure
transient, want as little friction as possible. I think Groups360’s platform
eliminates a lot of friction that frustrated some of our group customers,
especially small groups prior to the pandemic. Secondly, it’s a one-stop shop. It’s
the ability to enter the platform and look with tremendous transparency at not
only room block availability but also space availability. 

What we hear from our group customers is some combination of “thank
you” and “what took you so long?” It’s exactly what they’ve been
looking for, and it removes a lot of that friction from all of our guests.

BTN: Marriott also has a big
investment in Groups360 that was that was done a number of years ago, maybe
in opposition to being on the Cvent platform? Tell me what’s going on with that.

Capuano: No, I think a lot of the decisions we
make about our operating protocols, about how we interact with our customers,
about where we invest is really driven by what we hear from our customers. And
think about the two comments I just made, what we heard clearly from our group
customers, especially small groups: eliminate friction and give us a
transparent view into room blocks and space. We find that [Groups360] is a
really effective tool to do that—not to the exclusion of a variety of other
channels we use to drive group business, but a compelling opportunity for our
guests.

BTN: In 2022 we named you among our most influential people in business travel. What I think put you over the top was the Mexico-based City Express acquisition. I
know it has yet to close, but can you tell me the strategy behind that and what
business you’re looking to gain? 

Capuano: I might answer that by rewinding to
some of the [merger and acquisition] deals that we’ve done over the last number
of years. Understandably the
Starwood transaction tends to dominate the headlines just because of the
scale, but if you look at some of the deals we did prior to Starwood—the
acquisition of AC Hotels in Spain [in 2011], the acquisition
of Protea Hotels in Africa [in 2014]—all of those M&A deals tended to have
some common DNA. They established a footprint for us in a geography where we
weren’t growing organically as rapidly as we would like to accommodate the
wants and needs of our guests in a given market. Often, it was a platform that
we thought had regional and in some cases global growth opportunities for us. Mexico
is a critically important market for us. When this transaction closes, we will
be the largest operator in the Caribbean and Latin America region, and scale
matters to our customers in a significant way.

No. 2, it marks our entry into the midscale space, which is not a tier
where we’ve operated before. We think we can learn a great deal from the folks
at City Express. We’re excited to make that offering available to our guests. The
desire for midscale accommodations is not limited to Mexico or even the
Caribbean and Latin America, so I think you can reasonably expect we’ll
evaluate City Express and its opportunities for growth in other regions of the
world.

BTN: I want to tap into growth plans and
key areas for investment in 2023: Is it leisure, and at what level? Is it blended
travel? What role will business travel play in your growth plans in 2023?

Capuano: I was with Mr. [Bill] Marriott, and
any of you that have had the pleasure to spend time with him know his favorite
word is “more,” so I think my answer is all of the above. We are
doubling down on luxury. We have the largest luxury portfolio globally in the
industry and will open 35 fantastic new luxury hotels just in 2023—luxury will
continue to be a big growth focus for us. We just talked about City Express at
the other end of the spectrum. We think midscale is a really exciting
opportunity for growth, certainly regionally in the Caribbean and Latin America
and perhaps more globally.

Extended-stay really thrived during the pandemic, [and] we’ll continue to
aggressively grow extended-stay. We’re particularly excited about the Element
brand. Residence Inn is a fabulous platform, but very well distributed. Comparatively,
Element has a more modest footprint. We just opened our 100^th
Element hotel, so the ability to roll out Element more globally is quite
exciting to us.

The last would be, given the trends we
discussed earlier about the rapid pace of leisure growth, resort development.
A few years ago we entered the all-inclusive space, we’re up to nearly 40
all-inclusive resorts, and that’s another space you should reasonably expect
acceleration.

BTN: One last question from our audience: “Marriott
has 31 brands. They say it’s not easy to manage and communicate a hotel program
with this number of brands. How do you explain that to a travel manager, to a
corporate program? How can a travel buyer rationalize that for their program?’ Do
they pick a couple and say, these are the ones that we go with?”

Capuano: You asked that question very
elegantly. Sometimes I get a more crass version. I love the breadth of our
portfolio. I love the options it offers for our guests, and I love the options
it offers for our owners and franchisees as they look to grow with us. For the
most seasoned traveler, their needs in terms of hotel accommodations vary
widely based on the trip purpose. If they are in for one night, they want a
comfortable bed, a great shower and strong Wi-Fi. That same traveler redeems
their Bonvoy points to take their family on a Caribbean vacation [where] they
want extensive facilities. They want big suites, multiple food and beverage
options, multiple leisure options. I think our 177 million Bonvoy members love [that]
they don’t need to look outside the Bonvoy ecosystem for any type of trip
purpose they may have over the course of the year.

The last thing I would say is, if our strategy is to have that broader
portfolio, the obligation that falls on us is to have a very clear, distinct
and well-articulated positioning for each and every one of those 31 brands. I
will tell you I would probably grade us incomplete. I think the majority of the
portfolio enjoys that very distinct well-articulated positioning, I think there
are a handful of brands in the portfolio where we have some continued work to
do.