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

Marriott's Anthony Capuano discusses:

Differences in demand among corporate clients by size
Marriott's relationship with the Groups360 booking platformMarriott's plans for the City Express brand

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 100th 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.