Marriott: USA Will Bounce Back Faster Than Other Countries

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Marriott: USA Will Bounce Back Faster Than Other Countries

By Michal Christine Escobar - 05/15/2020

During Marriott’s Q1 2020 earnings conference call, President and CEO Arne Sorenson discussed the resiliency of demand for travel, hotels and vacation as well as what Marriott is doing to capitalize on that demand and drive it via loyalty campaigns.

In the opening comments, Sorenson stated that RevPAR in April fell 90% worldwide, and in North America as well. Currently, about 25% of Marriott’s hotels worldwide are temporarily closed with 16% of its North American portfolio temporarily closed. Europe has just over three-quarters of its hotels closed.

“To state the obvious, we are operating in a very challenging environment,” Sorenson said. “However, the glimmer of good news is that overall negative trends appear to have bottomed in most regions around the world.”

CHINA PROVIDES POSITIVE PREDICTIVE DATA

Looking to China for direction in how demand might rebound, Sorenson said that new bookings “continue to pickup with demand driven primarily by domestic travelers.”

Currently, occupancy levels in China are just over 30% and throughout mainland China, leisure demand was strong for the Chinese Labor Day holiday weekend in early May.

“Occupancy for that weekend was over 45% with resort markets close to 70%,” Sorenson noted.

But China isn’t the only source of good news. Sorenson pointed to Santa Barbara and Hilton Head where hotels there are expected to reach approximately 50% occupancy based on reservations on the book. And limited service occupancy in the USA has increased incrementally each week “showing the most meaningful improvements in drive-to destinations.”

DOMESTIC TRAVEL TO RECOVER FIRST

Sorenson remained optimistic about both China and the United States’ ability to recover more quickly than Europe due to the fact that they’re both domestic markets.

“Even in normal times, the U.S. is about 95% to 96% U.S. travel with the rest dependent on in-bound travel from the rest of the world,” he explained. “Looking at the U.S., we obviously see the drive-to markets as being the strongest. [..] I think that’s both leisure and to some extent it is sort of local or regional business, but business that is dependent on the car. And I think that will come back the most.”

Sorenson also noted that there are positive signs within the U.S. of travelers beginning to “tiptoe out of their homes.”

“We’re probably seeing occupancy click up a point a week or something like that the last few weeks,” he noted. “That’s not enough to put a stake in the ground and declare that we’ve got momentum towards a recovery, given how low the numbers actually are. But it does tell you that the early travelers are interested in sort of getting out there and reliving their lives.”

RELYING ON LOYALTY MEMBERS

As governments begin to restart their economies, Marriott is working with its owners to analyze potential market demand. Region-specific marketing strategies are being developed that will roll out in phases as different customer segments and levels of demand return, Sorenson noted.

“A key component of our marketing plans will be leveraging our powerful Marriott Bonvoy loyalty program and focusing on reaching our highly engaged member base and our many Marriott Bonvoy credit cardholders,” he added. “Throughout this crisis, we have continued to communicate with our loyalty members, including with special promotions on our co-brand credit cards in the US, such as our offer for six times points on groceries.

We have also extended elite benefits, and today, to help spark demand, we will announce a new promotion to buy gift cards for future hotel stays at a 20% discount.

“In Greater China, our joint venture with Alibaba has been very helpful in rebuilding demand,” he added. “A recent spring sale run by Alibaba’s Fliggy travel site was very successful and generated terrific near-term bookings. Bookings from Ctrip have also grown significantly over the past few weeks and are up over 15% for the first week of May versus the same time last year.”

COMMUNICATION IS KEY

Sorenson also noted that Marriott will rely heavily on communicating to guests the brand’s focus on health and safety in order to give them “the confidence they need to travel and stay with us.”

While this includes announcements around its global cleanliness guidelines, it also includes implementing technologies that will reduce staff interaction with guests such as mobile check-in, mobile key and no-contact room service.

“The recovery is not going to happen uniformly across all regions and it is not going to occur overnight,” Sorenson added. “It may take longer than any of us would like and we will likely operate a bit differently going forward, but we have taken the steps necessary to position the company to manage through this crisis successfully, and travel will rebound. Our people, our solid financial footing, our 30 industry-leading brands and our number one Marriott Bonvoy loyalty program continue to point toward a brighter future.”