MARRIOTT HOTELS – LOOKING FORWARD IS THE ONLY WAY By Micah Solomo, Forbes.com
(Posted 15th July 2020)
So you think you’ve had a rollercoaster year? Consider the tumultuous times of hospitality leader Arne Sorenson, the president and CEO of Marriott International. On the heels of the purchase and integration of Starwood Hotels and Resorts into the Marriott organization and a period of unprecedented growth for the combined company, Sorenson was diagnosed with Stage Two pancreatic cancer. His being a treatable type of the disease, Sorenson underwent surgery, chemotherapy, radiation treatment, and immunotherapy, all in 2019, while continuing to lead the combined operation: 30 hospitality brands operating 7400 hotel and resort properties in 134 countries and territories.
Arne Sorenson, President and CEO of Marriott International
MARRIOTT INTERNATIONAL, ALL RIGHTS RESERVED.
Then, in early 2020, the bottom began to fall out of travel, taking with it the fortunes and prospects of the hospitality industry. Sorenson felt forced to make the unprecedented move of furloughing the majority of the executive, managerial, and support staff (“above-property associates” in the industry parlance) in the very building where he works (Marriott headquarters in Bethesda, Maryland), as well as to make other painful cuts and related decisions across the company.
You could imagine certain heartless CEOs going about such cuts with ruthless abandon, but Sorenson is known for his compassionate management approach; in fact, these cuts were accompanied by a heartfelt, occasionally tearful explanation in a video that went viral earlier this year, and offered a stark sad note amongst his well-known advocacy for worker protections and immigrant and LGBTQ rights.
I had a chance to catch up with Sorenson this week to get his read on a variety of issues. Here’s his take.
Travelers who resist wearing masks are risking the recovery of the hospitality industry.
Sorenson refers to the “overwhelming science” that shows masks to be essential for protecting employees and individual guests at hotels and resort properties and goes on to make the point that they’re also essential for guest comfort–and therefore for the continued recovery of the entire industry.
This point is one that’s often overlooked: With some guests continuing to resist the mask-wearing imperative, whether because they feel concerns about COVID-19 are overblown, or they’re standing on their feelings of independence, or they dislike the aesthetics of a mask on their face in a leisure environment, the problem, says Sorenson, is that in the very same hotel, “we know from the feedback received that there are many [mask-wearing] guests who feel jeopardized by the conduct of their fellow guests and will not travel again until they believe their stay will be safer.”
When travel comes back it may come back roaring, due to pent-up emotional demand. “So many life events have been postponed: weddings, vacations, anniversaries,” says Sorenson, who made history as the first CEO of the company to not have “Marriott” for a surname. “There are no virtual replacements for these. When it’s safe, I’m confident people will begin to travel again, and I am optimistic that when travel does return, it will come back stronger than ever.”
… but a full recovery isn’t in the cards for this year, and possibly not even for the next. “It may be that we are looking beyond 2021 for a full recovery,” says Sorenson. What’s coming back first are the domestic travelers who are haltingly returning to leisure travel, particularly at drive-to destinations: “guests who join us via the nostalgic road trip.” This will be followed by domestic air travel, then international air travel, and, finally, by group travel.
Young travelers will be the leading edge of the recovery. While travelers of all ages are feeling the itch to get back, the first to get out and scratch this itch will in many cases be “our young people, who feel a great need to get back to their engaged lives, whether that’s to grow in their careers, to learn and explore, or just to get out of their homes.”
Marriott’s experience reopening in China is an encouraging bellwether:
At the nadir, Marriott closed a staggering 90 hotels in China; today, every single hotel has reopened. Sorenson takes “great pride” in this. “We are not an industry that is designed to be closed; we’re designed to be open 24 hours a day.” Even more encouraging is that occupancy is returning, reaching 40 percent in May. “While in normal times it would be hard to imagine celebrating that number, it is significant to achieve that [number] coming from a near standstill; it’s giving us encouragement and a view into the path forward.” Instructive but not surprising, Marriott’s Chinese operation is seeing the return of domestic travel first: 80 percent of the guests now staying in hotels in China are local Chinese, with millennials being among the first to return to travel. “We are watching the China recovery closely,” says Sorenson, “and using it to help inform our approach in other markets.”
The corporate furloughs carried out in April at Marriott headquarters will be extended until October, and may ultimately be coupled with outright position eliminations.
Sorenson describes the decision to furlough so many Marriott employees as of our “heart-wrenching,” only mitigated by “knowing that we’re doing everything we can to take care of those associates while navigating this crisis,” including what Sorenson describes as “a voluntary transition program for on-property and above-property associates in the U.S. and in other parts of the world who decide to leave the company to pursue other opportunities.”
Unfortunately, in light of the time it’s going to take for lodging demand and RevPAR (revenue per available room, which is a key industry indicator) to recover, “the furloughs and reduced work-week schedules which began in April for above-property associates in the United States will be extended through the beginning of October.” Furthermore, “given our expectation that prior levels of business will not return until beyond 2021, we expect to have a number of above-property position eliminations later this year. At this time we can’t predict how many associates will be affected by these separations, [although] we would expect a majority of our people will return to work with us.”
The crisis is a small-business problem, even within the Marriott family.
Although Marriott is the largest publicly traded hotel company in the world, “many of our owner and franchise partners are small business owners facing their own unique challenges, to which we need to remain responsive.” In the face of the near-term cashflow “challenges” (as Sorenson gently puts it) faced by individual hotel operators, Sorenson says that Marriott has reduced costs and deferred its requirements that they participate in investment-intensive initiatives. “We are living in complicated and challenging times. Working together, we will come up with new and creative ways to move our industry forward.”
This is the worst crisis the industry has faced–but experience gleaned from prior challenges is helpful in its navigation.
Sorenson lived through 9/11 tragedy and the absolute standstill it brought to travel, and he says that “one thing we thought we knew with certainty back then was that business would never be that bad again. Then the 2008 economic downturn hit, and we faced some similar challenges.” Having lived through both of these downturns, Sorenson feels that “today’s crisis is truly unprecedented. I think businesses have to respond with discipline. Immediately cut costs, of course, but remain innovative. Consider how you can be of service. Have empathy. Support your employees, your customers, and the communities where you operate. And remain optimistic. This crisis will pass. But not before we work together as a global community to find common solutions. As an industry, there’s no question we need each other now more than ever: for encouragement, for inspiration and for consensus on setting industry standards. We are in this together.”
Author’s disclosure: I have no financial relationship with Marriott. However, its brands, notably The Ritz-Carlton Hotel Company, have endorsed and assisted in nonmaterial ways with the content for two of my books, The Heart of Hospitality and Ignore Your Customers (and They’ll Go Away).