Marriott’s new CEO sat down with TPG to talk Bonvoy benefits, hot breakfast and more
Long before he was interested in hotels, Anthony “Tony” Capuano wanted to be a fighter pilot.
Capuano obtained a congressional nomination to the U.S. Naval Academy, but his eyesight wasn’t good enough to fly.
Then, his father's carpool buddy — who happened to be the head lobbyist for the American Hotel and Lodging Association — suggested he look at Cornell University’s School of Hotel Administration. That hadn’t even been a consideration.
“I was an insolent, little kid and I said: Yeah, that's fine. But we went up there and I fell in love with it,” Capuano recalled the other day. “So I stumbled into it, but thank goodness.”
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Today, Capuano, 55, finds himself at the helm of the world’s largest hotel chain as major industrialized nations emerge from the coronavirus pandemic and others desperately wait for vaccines.
He was appointed to lead the company in February, following the death of long-time CEO Arne M. Sorenson from pancreatic cancer at age 62.
Marriott’s headquarters in Bethesda, Maryland, is one of those places where folks work for decades. Long before it was popular for Fortune 500 companies to speak about “families,” the folks at Marriott did.
Capuano’s rise couldn’t come at a more challenging time. Staff members were working remotely. Many were furloughed. And the hotel industry was coming out of the worst year in its history.
Related: What your hotel stay will look like in a world after coronavirus
Getting back to business
Marriott International got its start in 1927 when founder J. Willard Marriott and his wife, Alice, opened an A&W root beer store in Washington, D.C. They soon added warm meals and called it (and future locations) Hot Shoppes. Next was inflight catering. It wouldn’t be until 1957 when their son, Bill, opened the company’s first hotel.
Today, there are more than 1.4 million rooms under Marriott’s 30 brands. And it’s a business that's much more complicated than most would expect.
We might all dream of sitting on the beach at The Ritz-Carlton in Maui or watching the lights of Paris from the Marriott Champs Elysees Hotel. But what really pays the bills for Marriott are all the conferences at large city hotels or the business travelers spending the night at its network of Courtyards, Sheratons and Fairfield Inns.
To complicate matters more, Marriott has 7,600 hotels around the world but owns just a dozen. The rest are owned by real estate developers, investors or individual families. Marriott is paid to manage some and franchises others. It then gets a percentage of the revenue.
But all these hotels are united by brand consistency. If you show up at the Renaissance in Allentown, Pennsylvania, or the Renaissance in Reno, Nevada, you pretty much know what to expect.
And then there's the loyalty program.
The ability to earn points on business trips that can be redeemed for a future vacation is central to Marriott’s scale. It’s what leads somebody to pick a dated Four Points for one night, hoping they can leverage their points and elite status later for an amazing getaway to a brand-new St. Regis.
A history of dealmaking
When Bill Marriott — Mr. Marriott, as he will always be called by company insiders — was preparing to retire in March of 2012, I sat down with him for a lengthy retirement interview.
CEO transitions are never easy, but handing the company over to Sorenson was different. He was about to become the third CEO in the company’s then 85-year history and the first who wasn’t named Marriott.
That was OK, Marriott told me, because after 15 years at the company, Sorenson understood the culture, “accepts it and buys into it.”
Sorenson and I met many times over the years, including on the day six years ago when Marriott acquired Starwood, catapulting it back to the top of the hotel industry. Capuano worked closely with Sorenson on that deal.
I first met Capuano earlier that year in April of 2015. There was a lot of talk that day about Starwood being for sale. But Capuano was announcing something else: Marriott had just acquired the Canadian chain Delta Hotels.
Marriott has a history of dealmaking, and for decades, Capuano has been at the forefront.
In 1987, Marriott acquired extended-stay brand Residence Inn. In 1995, it purchased 49% of The Ritz-Carlton – later taking on full ownership.
Capuano had just started at Marriott that year, but was still asked to help with the deal. Two years later, Sorenson asked him to work on Marriott’s next acquisition: Renaissance.
By 2009, Capuano was the man responsible for Marriott’s growth as its new global chief development officer. He oversaw the purchase of Gaylord Hotels to get into ultra-large conventions; AC Hotels to gain a foothold in Spain; and Protea Hotels to expand Marriott's presence in Africa.
And, of course, he worked closely with Sorenson on the Starwood deal.
By the end of 2020 – yes, the year of the pandemic – Marriott had 498,000 rooms in its development pipeline. More than half of those were outside of the U.S. Many were thanks to the relationships Capuano and his team forged with major developers over the years.
The rise of Marriott's new CEO
This is all a long way of asking: How does a boy who once dreamed of being a fighter pilot but ended up crunching numbers on hotel mergers and acquisitions now lead the world’s largest hotel company?
Capuano met with me for an hour last week for a wide-ranging interview about the state of the industry and his vision for Marriott. What follows are some of the highlights, with minor edits for clarity.
We started with his days at Cornell, which requires all its students to spend hundreds of hours working in actual hotels. The summer after his sophomore year, Capuano had the night audit job at the Hyatt Regency Baltimore.
“This was a 500-room hotel. So, your shift started at 11 p.m. and you left when you would balance the books, which was all done manually — the bane of your existence,” he recalled.
This was in a time before cell phones and guests would be charged for each call from the room.
“There was this huge dot matrix printer in the back office,” Capuano said. “Every time someone made a phone call, it spit out this little chit and you'd tear them off and drop them in the bucket for that room. And if you had a big business person staying in the hotel, they might have 300 phone calls that you had to hand post.”
And that, he said, was the easy part. If a sink broke in the middle of the night, “you’d go up there and figure out how to fix it because there's probably not an engineer working.”
Opportunities for growth
Sitting in a 40th-floor suite at the Times Square Edition, I noted to Capuano that we could also see the iconic Marriott Marquis, the W New York - Times Square and that a half dozen other Marriott properties were around the corner.
“At what point," I asked, "are there just too many brands and you are competing against yourself? How much of that is for developers versus the actual guests?”
First, Capuano told me, it gives Marriott’s employees opportunities. You can start out working at a limited-service hotel and work your way up to a luxury brand.
It also gives travelers choices. On some trips, you just need a clean bed and fast Wi-Fi. On others, you want to be pampered.
And finally, there are the owners. If Marriott provides value for them, they want to develop more hotels, but often there are restrictions as to how many properties from one brand can be in a specific area. Having 30 brands allows owners to get around that.
“But the one thing I will say to you: I have never, nor will I, advocate to add a brand just ... for growth's sake,” Capuano said. “And when you look at the brands we've added over the last decade, or so, there are some common threads. Sometimes [like with AC and Protea] they have given us a foothold in a market where we struggled mightily to grow organically.”
The return of 'brand standards'
We each have our own habits when arriving for the first time in a hotel room.
Some check the bed to make sure it is clean. Others ensure that the shower works and is warm (that’s the last thing you want to discover first thing in the morning). And others want to see that housekeeping turned off the alarm clock from the last guest.
“The first thing I do," Capuano said, "is plug in all my devices." “So, my iPad, my phone, my Surface because I've probably burned through the batteries on the plane or the train. And then I tend to walk every corner of the room and look at cleanliness and ... areas that require maintenance. Also, I turn on every light to make sure all the light bulbs are working.”
During the pandemic, most hotel companies relaxed what they've required of individual properties. That means elite breakfasts haven’t been offered, restaurants have been closed and even capital updates, such as replacing televisions or mattresses, have been delayed.
Now that travel is coming back — extremely strong in some leisure destinations — guests expect all the normal services. But some hotel owners are resisting. So, how does Marriott balance that out?
“It's the right question to ask. It's top of mind,” Capuano said. “I just spent two days with my leadership team talking through a bunch of these issues. I've described this phenomenon as the friction that exists between the short memory of our guests and the long memory of our owners.”
Once Americans got that second vaccine shot and let two weeks pass, they felt invincible and were ready to get back on the road.
“And because of our short memories, you want everything to be the way it was. You want the restaurant open the hours that it was open before. You want the spa open with all the treatment rooms and all the technicians available. You want full service at the pool. You want daily housekeeping. You want all those things. And, in a way, that's good because it means our consumers are anxious to get back."
“At the other end of the spectrum, our owners and franchisees have borne a disproportionate weight, from the impact of the pandemic," Capuano explained.
"They've lost billions of dollars of revenue. Suggestions about getting back to ‘normal,’ they look at you like you have three heads and they say, 'You've got to be more sensitive to the steep climb we have in front of us.'”
And then Capuano reminds me that, of the 7,600 global hotels in Marriott’s portfolio, the company only owns a dozen of them. In other words: It’s a balance.
For now, the approach will be to look at certain metrics around occupancy and average nightly room rate. In leisure markets such as Miami Beach, Capuano expects hotels to be offering all the normal amenities. But an urban business hotel is going to get more leeway.
“We've got to look at it on a case-by-case, market-by-market basis,” Capuano said. “Think of it as a little bit of a teeter-totter. We've got to try to strike that right balance and we won't be perfect.”
So, even though daily housekeeping — plus nightly turndown service — may be one of the great joys of travel, don't expect the service to be automatic during your next stay.
Hilton recently announced that housekeeping at all non-luxury brands would be my request only — and it sounds like Marriott is about to follow suit.
Capuano acknowledges that it looks like a money-saving move, but promises this is about guest preference.
“There are still folks who are dipping their toe back into travel," he said. "They are very uncomfortable having a housekeeper or a room service waiter or anybody else in their guest room.”
Don’t expect Bonvoy to ever be SPG
Capuano deferred any specifics about Bonvoy to the executives he has running the loyalty program. But he did share his overarching philosophy about loyalty.
Capuano said he wants guests to have a much more emotional relationship with Bonvoy. He noted that there were things, such as bonus points for grocery purchases on Bonvoy credit cards throughout the pandemic, that helped people maintain a connection when they weren’t traveling.
He's also proud to have launched new credit cards in South Korea and Mexico, plus the Uber partnership, all during the pandemic.
But nearly six years after the Starwood acquisition closed, Capuano acknowledges there's still work to be done.
“We get a bit of an incomplete,” he said. “I think we've made terrific progress. The integration of Marriott Rewards and SPG was a monumental task. And it's quite interesting. You hear SPG loyalists say, ‘My goodness, what have you done to our program?’ The program was very guest-friendly. It was less owner-friendly.”
Which all goes back to the struggle between the guests and the owners. And now that Marriott is the world’s largest hotel brand, that footprint gives it more freedom to tip the scales toward owners, compared to the much smaller Starwood brand.
Capuano said many of his big decisions are unsolvable. He needs to consider guests, associates, owners and Marriott’s shareholders to find the right balance.
Yes, Bonvoy isn’t as generous as SPG, he said, but its members now have access to a much larger pool of hotels with many more choices.
“What some of those SPG loyalists may have lost, a bit, in terms of the richness of the program, we hope that breadth of choice, whether it be brands or geography, is a bit of a mitigating factor,” Capuano said.
The future of business travel
Finally, what interview with a CEO would be complete without a look into the crystal ball?
The demand for vacations is real and Marriott, like other brands, is seeing that surge. Capuano said Marriott would continue to invest in leisure travel, noting its recent acquisitions in the all-inclusive space.
But business travel is the big-dollar wildcard that everybody is watching.
“You've seen Bill Gates say half of it will never come back. You've seen others say, you'll never notice a difference, we'll be right back to where we were,” Capuano said. “The answer is probably somewhere in between, although I'm more optimistic, as you might expect.”
Of course, those business trips will could look very different.
Capuano predicts one spouse might join another on business trips and make it into a working vacation. Or business trips will more easily bleed into the weekend or the following week. If you don’t need to be in an office, why not work from the pool for an extra day?
“That hybrid form of travel will endure long beyond the pandemic,” he said.
As for the consultants and road warriors, they are all telling Capuano that travel will be different. No longer will a team of people, for instance, fly all the way to Shanghai for a one-hour pitch meeting. Instead, there will be fewer but longer trips.
Capuano then spoke of a lunch he had with the CEO of a big consulting firm the other week. The CEO agreed that such a pitch could probably be done remotely. Then, Capuano asked what happens if their competitor flew to Asia for the same pitch and got the job.
Capuano said the CEO laughed and replied: “Then all bets are off, and we're right back to where we were before.”