“Guest safety and associate safety were the absolute priority and understanding what we needed to do to ensure their health and wellbeing” said Cameron Read, chief financial officer, Europe, Middle East & Africa reflecting on the initial response from Marriott International to the outbreak of COVID-19.
Talking to Hospitality Insights, Read admits that Marriott “were probably caught a little more flat-footed than we should have been. I was on calls in January with my counterpart and he was talking about hotels in China that were closing because of this virus. It felt remote, re-enforced by prior outbreaks, such as SARS and it felt like sort of an ‘over there’ problem. In EMEA, we had our strongest performance in January than we had had in years, off the back of a very strong 2019, so we were truly blindsided.”
Having addressed human health, the focus shifted to the health of the organisation and support for owners. Read confirmed that, at the peak of the outbreak, around 75% of Marriott hotels across EMEA were closed. With approximately 75% of affiliate costs tied to revenue, Read and his team focused on the 25% of owners costs that were fixed and put into place relief practices such as suspension (until the end of 2020) of contributions to the FFE escrow fund as well as an invitation to utilise monies within that fund should owners need to. “The reality is, on my side, those are not flexible costs. There are all sorts of infrastructure, people, networking. We’ve looked very hard in our business at what are fixed costs, what are variable costs and have gone through an exhaustive review in order to help flex the business.”
“It was all about survival. We needed to cut fixed costs, find some owner relief and do whatever we could to support during the crisis. One of our reactions was to increase the cadence of communications with owners which we did through regular webinars. Interestingly, the participation rate at the most recent webinar was the lowest during the whole crisis which I take to be a good sign as owners are back to running hotels and not needing to listen to us talking about global market trends.”
On lessons learnt, Cameron said: “Flexibility was key as is understanding the power of flexibility and due to size of our organisation it’s hard to be flexible. There has never been a situation, certainly in my lifetime, where information has been less perfect and the environment more opaque but being able to make decisions in that environment was crucial. Communication is a big lesson learnt. Making sure you have active and healthy communications from the ground up so we have as much information as possible is vital, as is talking to each other. The comms piece, and all that it entails – sideways and up and down – has been a big lesson learnt.”
On the role of brands in the future and their place in the recovery of the sector, Read said: “Brands are brands because there is an underlying consumer promise and reliability but it all comes down to the effectiveness of implementation. Brands have a real opportunity to separate themselves because we can come out with a very overt promise in terms of cleanliness. It becomes high risk and high reward because if you fail that will impact you across the portfolio. A few bad apples and the whole brand promise crumbles. There is both opportunity and risk from the brand side. The cornerstone of our recovery plan is around cleanliness and new operating guidelines because that is what the customer is expecting.”
Read spoke of a rise in bookings across the EMEA portfolio but with demand for city centre hotels remaining low. He anticipated a plateau of reservations until the widespread availability of a vaccine. Marriott depend heavily on group business as well as international travel, both of which will take time to come back and Read feels as a result they may be slower to recover than other local brands.
“Marriott Bonvoy, our loyalty programme, is how we’re engaging with customers. It becomes the way we communicate with our guests and incentivise them. It will be a big part of our recover plan.” On the $920m in cash raised through its credit card partners, including $350m through the pre-selling of loyalty points and whether there was any fall out from owners, Read said: “A big piece of our reaction to the crisis was liquidity. We knew we needed liquidity for an extended period of time. All of our stakeholders have a vested interest in Marriott’s survival so raising that money virtually ensures that we’re absolutely in this for as long as it takes. There was widespread support that we have a very solid balance sheet from a liquidity perspective to ride this thing out.”
On his hopes for the sector in a post COVID-19 world, Read said that the experience had highlighted the need for human interaction. “We all found ways to keep our businesses moving at some cadence but we have also realised the value of reconnecting. I think business will come back, it will take longer for bigger groups and there will be a dip in business travel as it’s connected to underlying business health but I think the premise that the world has forever changed and people don’t want to stay in hotels anymore is a little bit dire. It may be slower and longer than we would like but business will come back.”
Cameron will be speaking during The AHC Reimagined: Reconnecting UK Hospitality on Thursday 8th October. For more information, visit: https://www.hospitalityinsights.com/ah