In a conference call with investors on March 19, Arne Sorenson said that the COVID-19 pandemic is “the most significant event to impact our business, including the 12 month period following 9/11 and the financial crisis of 2009.”
To that end, Marriott is joining other brands in implementing swift and far reaching cost cutting measures to help owners and franchisees in addition to the brand itself. Marriott will be delaying all regular cycle renovations due in 2020 for one year and delaying all FF&E reserve funding for six months. It will also be putting all initiatives on hold and suspending all brand audits for the time being. It is also working closely with owners to close hotels on a temporary basis.
“While owners are responsible for maintaining adequate levels of working capital we are working to ease their burden,” Sorenson noted.
CFO Leeny Oberg also discussed how the brand is working to cut costs for hotel owners. Since marketing funds and loyalty charge outs vary with hotel revenue, Marriott is working to reduce the costs associated with running these programs by hundreds of millions of dollars to better align those costs with expected revenue reduction.
Additionally, at the corporate level, Marriott will be suspending the salary for Mr. Marriott and Arne Sorenson for the balance of 2020, reducing salaries for the senior executive team by 50%, hiring only for essential positions, implementing temporary leaves in North America as well as shortened workweeks around the world, and pulling back on all non-essential spending. Oberg estimates the cost cutting measures now in place will reduce G&A costs by $140M. The company also reviewed all investment spending and decided it could eliminate or defer one-third of the $700-800M it had originally anticipated in 2020.
Marriott, of course, isn’t the only brand to be implementing such measures.