Covid-19

Corporate ‘steadily improving’, says Marriott

Marriott International CFO Leeny Oberg said that the group was selling twice as many business nights as it was in April and May in the US, but was still looking to a vaccine to push demand.

Oberg said that lenders were adopting a “wait and see” approach in Caribbean, Latin America and Europe which was affecting the pace of deals.

Oberg added: “Deals are getting done, but they are taking longer to get done. I don't sense that it's a fundamental view that there's hotel deals not wanting to get done, but just more about the pace of them. In North America, it also depends on how the lenders are feeling and there is a slow, but steady demand, but still some cautiousness as lenders think about new deals.”

Commenting on conversions, the CFO said that she expected the company to get “at least our fair share”, but cautioned “even a small conversion cost can, in today's world, feel more momentous than it does in a normal environment”.

Corporate demand was described as “higher on the drive-to than on the flying, but steadily improving” with Oberg adding that “there's actually the possibility of additional corporate demand from remote work and the fact they want to get folks together who are working more remotely”.

Oberg confirmed that the company was still looking at a negative cash burn.

In relation to net rooms growth, Oberg said that it would depend on the speed at which there was “comfort about travel, and the banking system feeling good about putting the money out, because as you've seen, the pipeline we've still [is] strong [with] almost 50% of rooms under construction.

“There is no reason to think that we wouldn't be able to get back towards mid single-digit net rooms growth, but whether that [comes in] ’21, ’22, or ’23, I think again all depends on the pace of how quickly globally people feel comfortable traveling.”

Looking at current performance, Oberg, who was speaking on the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum, said that the company had seen a 90% decline for global revpar in April to a 63% decline in August.

In China, occupancy reached 65% in August. Oberg said Marriott International was seeing a “slow, but steady improvement in the comfort level of folks being able to travel, albeit still nowhere near back to normal, and again all around the world, it does vary tremendously.”

Oberg said that the group was not seeing a drive to cut rates. She said: “Unlike some of the classic economic recessions, it's not like you can take price to necessarily drive additional demand. Clearly, there will be pockets where demand is so low that there it's going to result in a different special corporate rate next year, but I would say in general that what you're seeing towards the upper end is that rates have held better than you might expect given the incredible drop in revpar.”

Oberg added: “If you're a luxury hotel that's in the middle of a large city, that's not seeing great business demand, what's the point of driving down rates, it's not like you're going to drive a lot of extra business to your hotel. So I think there's been decent discipline across the industry because the reality that it's not going to add 10 points to your occupancy, if those travellers aren't travelling.”

 

Insight: If those travellers aren’t travelling and, as Oberg commented, a lot will depend on the state of the economies in which the company has hotels and, for Marriott International, that’s a fair few. The shape of lockdowns and government support will prove key to appetite to travel and ability to keep hotels open.

What became apparent at last week’s STR call is that the sector is finding a level after the leisure enthusiasms of the summer start to dwindle and, with a vaccine not yet on the horizon, a new normal was being found.

Marriott International was hoping to lean on its loyalty programme, Bonvoy, and was using it to target customers and maintain relationships by communicating direct with potential guests. As with other angles, such as meeting space for remote workers, all these angles will have to be dialled up in the coming months.