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Arne Sorenson is a busy man these days. Not only is he busy serving as the president and CEO of Marriott International, but he’s also in the midst of closing one of the biggest — and arguably one of the more dramatic — deals to ever take place in hospitality history: the more than $12 billion acquisition of Starwood Hotels & Resorts.
Throughout Marriott’s history, and particularly, most recently under Sorenson’s leadership, the company has remained a pioneer in a lot of ways, whether it’s championing the LGBT rights or being the first major U.S. hotel company to push customers to book direct.
Skift sat down briefly with Sorenson at the annual NYU Hospitality Conference in New York at the Marriott Marquis in Times Square to ask him about what’s on his mind, the state of the industry, and what he’s looking ahead to achieving once the Starwood deal closes. Here’s what he had to say:
Skift: Marriott has often taken public stances on socially divisive issues and hasn’t suffered. What does that mean, you think, for the hospitality industry or society as a whole? And do you think other travel and hotel brands are learning from Marriott’s example?
Sorenson: I think this is really one of the most interesting things about being in a public company job, is what issues should you speak about? I think the approach we take is we should speak about issues we care about, but we should also speak about issues which are germane to us.
Obviously, we’ve spoken out on issues like the North Carolina bathroom bill for example and many LGBT issues. It shouldn’t surprise you to know that we think that’s very germane to our business. We are in the hospitality business and we welcome everybody, whether they be part of our workforce or our guest community and it’s really relevant to business. In North Carolina, for example, we think there’s a $100 million worth of business which has not been booked into North Carolina because of the bill that has been passed by that state.
That’s bad for the business. It’s not fair to the people of North Carolina who are hospitable, by and large. We think that’s a place where it’s appropriate for us to step out. That doesn’t necessarily mean that every issue that I have a personal point of view I will speak about publicly, if it’s not germane to Marriott’s business.
Have we been hurt by it? I don’t think so. By and large, these are issues of the day. As long as we are constructive in our approach to them I think we will be okay. We will not satisfy everybody, of course, but I think people understand we have a point of view that is relevant and worth noting.
If you think about that $100 million of business in bookings — that’s a big amount for North Carolina. We’ll see ultimately how that will come to pass. We want to find a way to de-escalate this and put it behind. In many respects, our comments have been not just about the many unfortunate action that North Carolina has taken as a state, but there is, as far as we know, not being any problems that had to be fixed. It ends up being a set of policies that are being created about divisiveness, and not solving any problems.
Skift: What do you think the summer travel season will be like domestically and abroad in Europe?
Sorenson: I think it should be a good travel season, generally. I think leisure travel feels healthy. Consumers are spending again. American consumers, obviously, are spending again. You’ve got reasonably good data on consumer confidence that reflects that.
You get to Europe and Europe is a big place. Some markets will still have a little anxiety because of recent events. Brussels being the prominent one. Istanbul may be another one where travelers coming from abroad may be thinking twice about going there. On the other hand, Europe is cheap. I would expect the UK to be doing very well and much of western Europe to be doing very well. I think, generally, it’s going to be OK.
Skift: Where do you think the hospitality industry is right now in the current cycle?
Sorenson: I think the cycle is sort of a basic comment. The most important cycle is not a lodging cycle. The most important cycle is a GDP [gross domestic product] cycle. Where is the economy generally and what do we expect it to do over next couple of years?
You can make two sorts of comments. We’ve been in a growing GDP environment since 2010. It’s year seven now. It’s a fairly mature cycle. On the other hand, the GDP growth we’ve experienced in the U.S., for example, has been pretty tepid over time. The total amount of global GDP growth hasn’t been that strong. When you look at macroeconomic factors, there’s no real reason to believe the GDP is going to be decidedly more negative in the next months, quarters, or years. We expect the GDP to continue to grow at a fairly modest pace.
Skift: Is the party on its way to being over for hoteliers?
Sorenson: Again, I think, overwhelmingly, you can’t think that conclusion unless GDP is going into decline. It’s not about the lodging industry. The only thing about the lodging industry is supply growth. It’s generally not an issue. In some markets like New York where supply growth has been robust in the last few year, it might be. But when you look at the U.S. as a whole, supply is not a significant actor. You end up back at the macroeconomic GDP factors.
Skift: We have to talk about the Starwood deal. After it closes, Marriott will dominate the industry. What does that mean for the diversity of hotel offerings out there?
Sorenson: I think, obviously, we’re not closed yet. Until we close, by necessity, there are some things we can’t know for certain and things we can’t say yet. We are really excited about the prospect of bringing these two companies together. We’ll obviously be bigger. There’s no doubt about that. That size will drive some things which we think are pretty powerful, including the loyalty program, which would be all encompassing of people’s travel needs: 1.1 million rooms, 30 brands roughly, well over 100 countries and 5,700 hotels. We would be able to offer folks a full array of places to stay, by geography and demographics. When they want to redeem, we should be able to offer them an unrivaled portfolio where they can use their points to have free vacations. We really think that’s going to be an integral piece of that.
For owners and franchisees, they are hugely important partners to us. We are absolutely committed to making sure this merger drives huge performance of them both on the top line and bottom line. As we look at it, we want to make sure it’s a win for our associates. A win for our hotel guests and a win for our hotel owners and franchisees. We think we can do that. If we do, it makes us stronger with everyone of our communities.
Skift: About the loyalty program: We won’t see any big changes until 2018, correct?
Sorenson: What we’ve said so far is we don’t think we’ll have one program before 2018, but that doesn’t mean we’ll take interim steps between now and until then. Stay tuned for that.
Skift: Is the deal still expected to close by mid-year?
Sorenson: We’re still optimistic we’ll close by mid year. Until the final approvals are in hand we can’t count on everything. The governments involved in the review process need to compete their process and make sure they feel good about how the transaction will perform longer term. We’re optimistic about that. Hoping to be closed fairly soon within the next month or so. I think the immediate thing is to deliver positive impact to associates, customers, hotel owners, and franchisees.
Skift: How do you feel about Marriott and its competitors’ efforts to push more direct bookings? Is it working? Are you concerned about jeopardizing your relationships with the OTAs (online travel agencies)?
Sorenson: Well, we’ve got Marriott Reward Member Rates which I was pleased to see being marketed in the airports yesterday when I traveled on video screens all around. On some level, what this is really about is amplifying something that has been the case for a long time. The best rates have always been available on Marriot.com.
Notwithstanding that, I think too many customers have got the sense that there are better rates somewhere else. That has to do with how other channels have marketed their own sites with marketing campaigns that seem to imply that their rates are lower. That has not been the case for a long, long time. What we wanted to do to be able to amplify our rates is to go even further: if you book with us direct, you get a discount for the rate that would be available form other channels. If they book directly with us, it’s a less expensive reservation for us. Net-net to our system is an economically attractive rate for us. It’s a chance for us to share that benefit with the customer. It’s still relatively early. Just started to market it in the last few weeks. We’re seeing increased sign-ups into the rewards program and increased volume in our channels. It’s a promising venture.
Each company obviously has to make its own decision on this. To some extent, other hotel companies have similar channels in this space, so it’s not surprising that other hotel companies are doing similar variations on this plan. I think we all want to make sure we have good direct relationships with our customers and cost-effective reservation strategies.
Skift: Any updates on Cuba?
Sorenson: Well there’s no news about signings. We have, well, obviously Starwood has signed two and has a letter of intent on a third. Marriott has been in discussions with a number of potential partners in Cuba about additional hotels. So far as I know, only Starwood and Marriott have been approved by the U.S. Treasury Department to do business in hotels [in Cuba]. That’s not so much about our worthiness as it is about but starting our application process early and figuring out how to do business in Cuba and we move quickly.
We continue to believe Cuba is unrivaled about how it captures the imagination of the leisure traveler in the U.S. which is, in part, driven by the history of Cuba in the U.S. This is a place they want to go see. We are excited about being able to being able to welcome them. Hopefully we can open, again, assuming we can get this merger done, first hotel in this company to open by late this year.
I think we would like to lead with Havana. It’s [Cuba] a destination that has a number of resort locations as well and some other cities, but Havana itself is an extraordinarily compelling destination, and I think American travelers want to see it first.