Marriott CEO says hotel group is building more digital tools for guests

Marriott International plans to expand the online tools it offers to guests, such as letting guests choose rooms and instructing staff via its mobile app

“We are in the midst of a very big technological shift,” CEO Anthony Capuano said during a talk Thursday.

Capuano said his company is testing adding buttons to the Bonvoy app that allow guests to electronically choose their room assignments or instruct employees with online payment methods.

The chief executive of the world’s largest hotel group did not provide a timeline for the job because he said the concepts are still being tested and may vary by brand.

Capuano made the comments as part of a conversation with David Rubinstein, co-founder and co-CEO of The Carlyle Group, at The Economic Club in Washington, DC. He said integrating new technology can be difficult.

“You have a lot of players in the lodging industry testing new technologies every day, which I think is great, but sometimes we go over our skis a little bit,” Capuano said, noting that he checked into non-Marriott hotels and had a hard time figuring out what to know about. How to use some tablet-based systems with non-intuitive controls.

“It is one of the reasons in our new headquarters we have workrooms typical of our concepts,” Capuano said. “We can bring in guests and say, ‘Try our new prototype from Residence Inn,’ and listen to their feedback if they say, ‘I couldn’t detect the TV’ or ‘I couldn’t detect the light switches. “”

“When I talk about it on some forums, people say, ‘That’s cool. “Your profit margins are going to go up a lot and you’re going to cut all these jobs,” Capuano said. “But for me, technology is an enabler. If implemented correctly, it will provide the ability for our colleagues to connect with our guests.”

Anthony Capuano, CEO of Marriott International, speaks on June 23, 2022, at the Economic Club of Washington. Photography by Joyce N. Boghossian of the Economic Club of Washington.

Hotels maintain their strength despite inflation

Marriott’s CEO said the company is still seeing strong performance despite mounting US and European talk of a possible recession.

“The confluence of a rising environment for interest rates, inflation and fuel prices will signal that we’re starting to see a slowdown, but we haven’t seen it in the data yet,” Capuano said. “Summer numbers look extraordinary, both here at home and abroad in Europe.”

“It is clear that leisure is driving the recovery,” Capuano said. But trans business is now down by only 10 to 15 percent [from pre-pandemic levels], while declining by 30 percent at the end of last year. And the group really surprised us because they’re back again.”

Capuano said demand for accommodations on Thursday and Sunday nights returned more quickly than demand on Mondays, Tuesdays and Wednesdays, indicating that people are dealing with the leisure parts of their business trips.

Marriott International closed only 97 hotels, while it closed more than 2,000 of the 8,000 hotels in the pandemic zone.

The hotel giant had 29 hotels in Russia before the Ukraine war. About half were managed and the other half were franchisees.

“After about July 1, we will not start working in Russia,” Capuano said.

Staying housekeeping reduction may be heard in some brands

Capuano said Marriott International is still trying to determine whether the pandemic-wide daily housekeeping suspension across most of its brands will remain.

The topic is controversial. Earlier this week, Los Angeles mandated daily hotel room cleaning under several circumstances — in response to pressure from the American Hotel Association Unite Here.

High-end Marriott brands, such as The Ritz-Carlton, will maintain daily housekeeping, but the frequency may vary for different brands.

“I think in our self-catering hotels, we’ll do a daily update but probably not a full cleaning,” Capuano said. “At select service hotels, like Fairfield, it’s probably every day.”

In a related but environmentally driven change, effective January 1, all Marriott International hotels around the world will phase out individual plastic bottles of shampoo and other toiletries, and replace them with large multi-service dispensers.

The right time to buy hotels

Capuano said Marriott International owns 20 hotels but wants to sell them.

Another part of its business is having about 100,000 employees who manage hotels on behalf of the owners.

“In the managed system, we get incentive fees from top-line returns, and we share in the profits,” Capuano said. “So in the high-end market, the managed model is very profitable.”

The third model is franchising. It licenses the intellectual property rights, revenue drivers, and loyalty program to third parties whose employees manage the property.

“On the surface, the franchise model offers a higher margin,” Capuano said.

Pressed to guess, Capuano said Residence Inn should be the group’s most profitable brand on average.

“This has an extraordinarily compelling economic model if you can find a market with a high percentage of long-stay guests,” Capuano said.

Capuano, the former executive director of business development, said it was a great time to invest in hotels.

“Our pipeline of futuristic hotels has about 500,000 rooms, but even over the past two years we have seen a historically low level of fall from that pipeline,” Capuano said. “What that indicates is that our owners and franchisees believe in travel flexibility. Many of them own these assets for the long-term and may own these assets for decades.”

He said that the company’s Bonvoy loyalty program should generate just the right amount of revenue to pay for the program rather than being a profit center or loss-making enterprise, “if it works the way it should.”

But the program faces the challenge of some guests trying to tamper with the system.

“If you go to some of the top advisory firms, McKinseys and BCGs in the world, and especially their young advisors, some have built these extraordinary algorithms to try to maximize their Bonvoy Score,” Capuano said.

Riemann work problems

Marriott International has shed about 30 percent of its workforce in the depths of the pandemic and hasn’t fully brought staff back to the same level despite booming business.

The median income for a Marriott employee, excluding the CEO, was $36,505 last year, compared to about $15,080 a year for full-time minimum wage workers. Capuano said that housekeepers and other hotel employees earn “significantly above minimum wage.”

But he said hiring remains a challenge because confidence in the sector has been shaken.

Some employees lack experience in the hospitality industry, which can lead to errors and service gaps.

“We have restarted a set of our accountability metrics,” Capuano said. “Guest satisfaction results, brand standards audits, and other data that help us learn about hotel defaults.”

Addressing Diversity Issues

Capuano on Thursday also helped announce the winners of the first Arne M. Sorenson Awards for Leadership Excellence, whose awardees weren’t limited to hospitality. A separate family organization from Marriott has chosen to honor Sorenson’s memory by helping to fund the Marriott Sorenson Center for Hospitality Leadership at Howard University, a historic black college in Washington, DC.

Marriott International continued to pursue diversity, equality, and inclusion in senior management positions.

“Of my direct reports in C-suite, two-thirds are diverse,” Capuano said. “For our senior leadership, approximately 1,800 positions, we are about 45 percent female and 21 percent people of color. As far as these stats are compared across US companies, none of these stats are satisfactory.”

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