Marriott leaders hint at cost cuts that will almost certainly impact future hotel stays
At a time when major hotel companies like Marriott and Hilton increasingly grow by appealing to owners of existing hotels to take on a new brand affiliation, the executives of these brands have to do what they can to sweeten the deal.
Monday morning, Marriott's executive team indicated they're about to roll out a major cost-cutting initiative to appeal to hotel owners and presumably make affiliation with Marriott International, the world's largest hotel company, even more appealing. The overall cost cuts could run as much as $90 million across the organization.
The chatter on the brand's earnings call could make some assume the savings and efficiencies initiative might target Marriott at the corporate level. If you think that doesn't impact you, guess again.
"We're looking at efficiencies and savings that we think will have clear benefits to the owners," Marriott CEO Anthony Capuano said during Monday's earnings call. "We're looking at every facet of our engagement with them, and we expect to have some tangible saving opportunities identified for them in the very near future."
While Capuano and Leeny Oberg, Marriott's chief financial officer and executive vice president of development, declined to provide much in the way of specifics while they presided over the investor call, it's easy to presume the company will continue to explore ways to do more with less at the property level.
Much of the industry has moved away from full-service restaurants or even heavily staffed breakfast bars at select-service hotels in favor of grab-and-go markets in the lobby. It's logical to think further adjustments around food and beverage offerings might be in the works, as hotel restaurants often operate at a financial loss.
There could also be smaller adjustments around what are mandatory brand standards. The Marriott leadership team several years ago even hinted alarm clocks on guest room nightstands might not be as useful these days since so many people bring their own smartphones.
While we'll wait to hear Marriott leadership's official cost-cutting details, one can't help but think this could also help Marriott woo owners at a time when its competitors are grappling with similar conversations.
Hyatt's leadership team late last month noted that they had lost some hotels to competitors because owners felt it was too expensive to maintain brand standards. Meanwhile, Hilton's new Spark brand is rapidly growing thanks to hotel owners who find it easier and more affordable to convert to that brand's requirements rather than stay in their existing brand network.
But speaking of Spark, Marriott's plan to introduce the Mexico-based City Express brand it acquired last year into the U.S. is a sign the hotel giant increasingly sees an opportunity to beef up its presence in the affordably priced hotel sector.
"Our progress in the midscale space around the world has been outstanding, and we look forward to meaningfully enhancing our presence in this high-growth segment of the market," Capuano said.
Bonvoy build-up
We're humble at TPG, so we won't say we were the ones behind this. But it was interesting to note after several quarters of "Is Hilton Honors about to overtake Marriott Bonvoy?"-esque headlines, Marriott leaders spent a healthy amount of time on an investor call reminding folks how and why the Marriott Bonvoy program is bigger.
The loyalty network now has 219 million members — higher than Hilton Honors, which just cleared the 200-million-member mark. Marriott leaders typically point to Bonvoy as a program that offers just as much in the way of experiences as it does in terms of award night redemptions at your favorite hotel.
Capuano specifically called out Bonvoy's sweepstakes promotion, in which members could bid points on Taylor Swift concert tickets, and even the new linked partnership with Starbucks, where you can earn Bonvoy points with your daily latte purchase.
Further, there are newer ways to earn and redeem points, like Marriott's partnership with vacation rental platform Sonder and with MGM Resorts International.
Expect more of these creative tie-ins and brand partnerships in the future.
"Marriott Bonvoy has never been stronger, and we look forward to further expanding our presence around the world," Capuano said.
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