Skift Take

Marriott CEO Arne Sorenson knows that not everyone is thrilled with the merged Marriott-Starwood loyalty program. But at Skift Global Forum, he made the case for why they should be — and said he hopes they'll come around.

Marriott International President and CEO Arne Sorenson was in the back row of an early-morning shuttle from New York to Boston in early August when he found himself in the middle of a debate.

Also on the flight was the writer of an article for Bloomberg Businessweek about how the Marriott-Starwood merger was creating fear in points-obsessed travelers. As it turned out, actual points-obsessed travelers were there too.

“And suddenly, all around me, people are debating the loyalty program,” Sorenson said at Skift Global Forum in New York City Friday. “It is the greatest thing in the world. You cannot buy that kind of attention from customers. They were debating it because they cared about the way the program worked for them.”

When the two programs finally merged, nearly two years after Marriott acquired Starwood for $13.3 billion to create the world’s largest hotel company, the end result didn’t necessarily work for everyone.

Sorenson recalled spending time at the headquarters as teams in a “dozen different war rooms” tackled glitches on Aug. 18 as the two programs were switching to one.

“To watch that from the inside is like watching sausage being made; it’s not pretty,” he said. “We increasingly got to a place where the platform is stabilized, working for our customers. We are really interested and eager to see the results of that now over the next few months, but there’s a lot of work yet to be done.”

He acknowledged that some generous perks beloved by Starwood’s SPG members have gone away — for example, crediting users for stays separate from nights. Some motivated road warriors, during a three- or four-night stay, would check in and out every day. Marriott changed that rule, Sorenson said.

“When you look at the program from a credit card perspective or points earned or elite status, yes, there are some changes that are not loved,” he said. But, urging those who aren’t happy to “hang with us,”  he pointed out that members now have more places to earn points, a better range of products, and a bigger selection of places where they can redeem points.

“I think people are going to love this on both sides,” he said.

Sorenson was less enthusiastic about a suggestion floated Thursday at Skift Global Forum by hotelier Ian Schrager, who partners with Marriott on Edition Hotels. During a discussion about who might be fit to be president in the future, Schrager mentioned Sorenson’s name along with a handful of leaders of other big companies.

“President of Marriott,” said Sorenson, who has been outspoken on political and social issues. He added without quite addressing the possibility: “I have a very full-time job.”

Read the Full Edited Transcript of the Interview

Skift: Thanks, everyone. Arne Sorenson is obviously no stranger to the Skift Global Forum stage. This is actually his third appearance in a row as the CEO of Marriott International, which has more 6,700 hotels around the world and a total of 30 brands.

Arne Sorenson: Like a bad penny, you can’t get rid of me. I’m back again. Sorry about that.

Skift: As a gentle reminder to the audience, please feel free to submit any questions that you might have for Arne using Slido, our event app. You can also up vote questions that you really, really want us to ask him.

So, Arne, thanks so much for being here today. It’s been two years and a couple days since you closed one of the biggest deals in the hotel industry’s history — acquiring Starwood Hotels & Resorts for more than $13 billion. I wanted to ask you, if you could give yourself a grade on the integration process, what grade would you give yourself? Does your bonus reflect that?

Sorenson: Is that a trick question?

One of the things we’ve said at Marriott is success is never final and I will often say to Mr. Marriott, all that means is nothing’s ever good enough. It does sort of influence this.

When we closed the Starwood acquisition, there was, of course, a lot of celebration. It was a big deal, a very prominent deal. Even internally at Marriott, it was tempting to say, “Look at what we’ve accomplished.”

But what we said across the company was, “All we’ve done is pay the most to buy Starwood.” In a sense, we won a competition but, that doesn’t mean we’ve accomplished anything that we need to accomplish.

And I think that some of this same philosophy would cause me to say something other than the obvious answer to your question which is, of course, an A. I would say we’re doing great but, we’ve got a lot of work yet to do, still.

The last month has been consumed with our merging of the loyalty program, merging of our revenue channels and that’s a huge technological feat. On August 18th at about 11 p.m., we turned on one loyalty program and in our headquarters, I went in that Saturday to sort of see the teams getting ready to go.

There were 1,600 people in the building and a dozen different forums tackling one glitch after another to try and make sure that the data transferred well or the programs were working well. To watch that from the inside is like watching sausage being made. It’s not very pretty.

We have, over the course of the five-and-a-half weeks that have followed, I think, increasingly gotten to a place where the platform is stabilized; it’s working for our customers. We are really interested and eager to see the results of that now, over the next few months.

But there’s a lot of work still to be done. We feel really good about the progress we’ve made but, to ask us our grade, it’s kind of like asking for the grade in the middle of a test. Maybe we should wait ’til it’s over.

Skift: When would that be though?

Sorenson: [Laughs] That’s a good follow up.

Skift: I know everything is a work in progress, obviously, but, I was wondering, have there been any sorts of disappointments along the way? Times when you’re thinking, “Maybe I shouldn’t have spent $13 billion on this company?”

Sorenson: There has never been a moment of regret. In fact, I think the opportunity was perfectly set up for us, in a way.

In the fall of 2015, when we negotiated the deal, there was considerable apprehension in the marketplace, which made non-strategic buyers a bit less interested in Starwood. There were stories with each of our principal lodging competitors that made it difficult for them to compete.

Starwood was for sale and the most profound thing about the transaction was that companies like that don’t go for sale often. And all of those forces came together in a timing that was perfect for us.

When the work is done, I think we’ll be able to look back and be really pleased with the transaction. Have there been disappointments? Of course, but, there have also been positive surprises and I think there have been more positive surprises than negative ones.

Skift: Good answer. I know you’ve spoken about this a lot but, with regard to the Starwood acquisition, you’ve said repeatedly that loyalty is really the No. 1 thing for you and I wonder, is loyalty really the best strategy, you think? Not just for ensuring Marriott is the world’s largest hotel company but also, the best when it comes to guest experience?

Sorenson: We think loyalty is a really big deal and a huge part of our future strategy. I think on one level, you’ve got to start by saying the product and service experience at each individual hotel must continue to be very strong. Every year you must try and get it better and better because fundamentally, that’s the product that is being sold, whether it connects through the loyalty program or it’s been sold through any other channel.

That’s fighting on making sure the renovation work is done, the new hotels are opened well, the food and beverage concerting is done well, that we’re delivering a localized architectural and food and beverage and service experience, that we’ve got a team of people in each of these hotels that provides the kind of authentic welcome that every guest experiences, that are engaged and motivated by their work.

All of those things are table stakes and have got to continue to be delivered really well but, above that, you take a loyalty and say, “How do we use a technology platform and how do we deliver real, clear value to our regular traveler so that they say, “It is in my interest to be a loyal Marriott guest.”

Skift: How do you avoid the point schemes of loyalty?

Sorenson: You don’t avoid a point scheme; you embrace a point scheme because the points are a keep part of that value.

If you’re traveling regularly and say, “All right, by concentrating my business with Marriott, I can get free vacation for me and my loved one, me and my family, or alone, whatever. I can go to places that would be very expensive otherwise, maybe. Or dream destinations of mine.”

That’s an extraordinary thing to engage with a customer on because so many of us are engaged in the hospitality and travel business, travel is something that turns us on. If I can dream about this experience that you’re going to help me enable, that’s a pretty powerful tool.

Skift: What would you say to SPG Elites who feel like Marriott isn’t nearly as rewarding as SPG was?

Sorenson: Hang with us.

One sort of recent story — I told this just a couple of times but, it’s only about two months ago — I was in New York for a dinner in early August and I was going to catch the last shuttle to Boston for a board meeting that night. There was a rainstorm so, the flight was canceled.

I ended up staying at the LaGuardia Marriott, which has just been renovated, so go back and stay. I stayed there and I caught the 6 a.m. shuttle the next morning. It was a mob because of the flights that had been canceled before but, I saw a bunch of my friends from Bloomberg who I’ve known for years who were getting on the flight.

Businessweek just had the cover story, “Don’t Disturb My Points,” which was an SPG-focused story and the author of the article was there so, my friend from Bloomberg introduced us and he’s following me onto the plane, talking about the various rules of the loyalty program and how it works and doesn’t work.

I’m in the last row of the plane, row 26. I sit down, he’s a row in front me, and there’re heavy travelers all around and suddenly, all around me people are debating the loyalty program.

Skift: So, you’ve had plenty of feedback to draw from.

Sorenson: It is the greatest thing in the world. You cannot buy that kind of attention from customers. You really can’t. They were debating it because they cared about the way the program worked for them.

I think when you look at the program from a credit card or the points earned or the elite status, yes, there are some changes that are not loved. One of them, for example, is that Starwood used to have the ability where you could credit stays separately from nights so, some of the road warriors would have three or four nights in New York, they would check in and out every day. O.K., so we changed that rule. Most people look at it and say, “Yeah, that’s kind of a fair thing to change.” It’s sort of silly behavior.

The other thing the SPG members get is now three times as many places to stay to earn those points, much better access, much better range of product depending on when they’re traveling, and that much bigger portfolio to redeem for free vacations. I think that people are going to love this on both sides.

Skift: I want to switch gears and talk a little bit about technology. I wanted to ask you, how would you describe Marriott’s approach to technology? Are you the type of company that likes to buy? Are you the company that likes to partner? Or the company that likes to build? What’s your approach?

Sorenson: We’ve had years where we would check different ones of those boxes. I think when you look at our history, the longest history in technology, think about reservations platforms, loyalty programs, etc.. historically, we tended to want to build. We wouldn’t necessarily build only with our engineers, we might hire people who would build something custom for us.

We got to a point where we thought, “Let’s look at the kind of system we’re talking about and if it is a utility that we need to run the hotels, run the system, what have you, but, is that really very strategic? Why should we be developing that ourselves? Shouldn’t we find a way to go out and essentially buy it off the shelf? Plug it in probably cheaper and we don’t need to really worry about it because it’s not strategic.” And we’ve done that for a period of time.

I think, to be fair, even when we think it’s a utility, it’s often not available on the shelf. It’s not like you can go to the … what were those old stores that used to exist in brick and mortar? Comp USA or something? Do any of them still exist? You can’t go and find a shrink-wrapped version of the software we need to run our program.

I think we end up in a world now where we want to do as little, in the utility space anyway, we want to do as little as possible that we have to invent but, we want to own the tools that are going to be the most strategic.

Skift: Speaking of software reservation systems, I sort of feel like your reservations platform seems overdue for an overhaul. How are you planning to update it or have you already updated it?

Sorenson: Again, this is a little bit the context of the merger of Starwood and Marriott.

Right now, in waves, we are putting all of the Starwood hotels on the Marriott system. That will be done at the end of the year. Then, stabilized.

We do have a new reservations platform that’s rolling out this year. There are some additional features that I think we will push.

Skift: Can you discuss those features?

Sorenson: It’s going to be the ability to identify your room when you’re booking, choose more room types than you’ve been able to do in the past are two things that’ve already rolled out.

Skift: Is there going to be some sort of attribute-based type of feature to that in terms of the rooms?

Sorenson: Oh yeah, it’ll be bed types, views, floors, all of those sorts of things that go into that.

Skift: Speaking of tech partnerships, earlier this year, you announced a partnership, or sort of a pilot, with Amazon’s Alexa for Hospitality, and I wanted to ask you if you have any early learnings yet from that. I know it’s still fairly new but, I also just wanted to ask you for your thoughts on the potential for IoT [Internet of Things] rooms or connected rooms and also on voice search and booking of hotels.

Sorenson: How many people here have got an Alexa or other voice device connected at home? How many don’t? Let’s just see, it’s easier that way. Oh, it’s actually more who don’t than do. How many will never have a voice device connected at home? These are the luddites.

I’ve got one of my kids, Esther, who is here, who I think has one of the devices I got hooked up in her apartment in Brooklyn. I’ve got a couple of the devices still in a box in my closet at home.

I start with that in part, because I think this is a tool that we collectively are figuring out how to use. I think it offers extraordinary convenience to do online through voice. I think it has obvious application in our business. You think about not just what you can do in a guest room, like order room service or make reservations someplace or get another or whatever it is you might do. I’m talking about making reservations and to do other things.

We have 10 hotels now where we’ve got Alexa in the hotel and we are experimenting with the first category of those things. But there are some customers who are wary of having that device in their room. We hear a little bit from both.

I think, as a society, we’re going to try and figure out, are these devices that we can trust? I think inevitably, we will figure that we can trust them because they offer enough convenience that collectively we’ll figure out a way to tap in to that continence and still be confident that they’re not listening to us when we don’t want them listening to us.

Skift: Not so sure about that but, we’ll see.

Another pilot that you made news with this year was your pilot with Hostmaker in London. Marriott’s first official foray into homesharing. I just wanted to see if you had any updates about that. Anything you’ve learned?

Sorenson: Nakul [Sharma] is here, the founder of Hostmaker. I saw them last when I was in Paris speaking at a tech conference in Paris and we met before, just as we did this morning, and thankfully — I didn’t ask her to ask this question, Nakul, but, I’m glad she has.

We have the one city pilot with Hostmaker, which is in London, and it’s gone great. It is small, to be fair, it’s only 200 units.

Interestingly, it is — if you look at the product we’re focused on, which is whole home product — intended to be capable of hosting a family for example. It is actually fairly big compared to some of our biggest competitors because an awful lot of their product is going to be studio product, one-room product, maybe an extra product, which is not a space we’re heading towards.

That, to us, is often, simply a lower priced alternative to a hotel room. It’s hard to brand, it’s hard to deliver any customer promise to it, it is an experience which maybe you’ll put up with if you really are directly focused on saving but, not necessarily what you want to put up with if you’re looking for something better than that.

What we’re focused on is, let’s deliver a product which is different from a hotel room. A place where a group or family can stay together that is curated, that has a brand promise associated with it, where there’s going to be a personal check-in at the beginning of the event. There’s going to be a set of standards around decor, around bedding, around other aspects of it and connect that to the loyalty program, but our brands on it, and we think we can be pretty successful in that space.

Skift: Speaking of brands, I know you’ve said before many, many times that Marriott is keeping all 30 brands, for now.

Sorenson: You still don’t believe me?

Skift: I’m not a betting person but will there ever be a day when Marriott has 40 or maybe 50 brands and, if so and if you get to that point, what kinds are brands are those going to be?

Sorenson: I think we are more likely to grow our number of brands than to shrink our number of brands. I don’t have a date for when we might get to 40.

I would guess the opportunities we have to add brands will be about geographic expansion than about filling gaps in our brand lineup. With 30 brands, obviously, we’re in most segments of the industry that we’d like to be in. The segments that we are not in tend to be in the budget or economy space with our business model, which is to manage a franchise and not to own real estate but, that’s a segment of the industry which is very interesting to us.

There are parts if the world in which our market share is light so, if there are deals that can be done in some regions of the world, some of those deals will bring us additional brands and if those brands have value, they’ll probably get added to our portfolio.

Two past examples that illustrate this would be Protea in Sub-Saharan Africa and AC Hotels in Spain. We acquired both because we were weak in those two geographies. We had nothing in South Africa before acquiring Protea, then suddenly became the biggest operator, but it’s a brand that’s existed for a few decades in South Africa, worth keeping, worth growing in that part of the world.

AC was again, the same story for Spain. Interestingly, after we acquired it, our U.S. franchisees convinced us that it had application outside of Spain and Italy and so we brought that brand to the United States and it’s growing wonderfully.

Skift: This last question from me was prompted by something that Ian Schrager said yesterday. He sung your praises, as he always does, and he suggested that you might make a great president someday.

Sorenson: President of Marriott.

Skift: Do you have any sort of political ambitions of your own? I know you’ve been very outspoken about the need for better, safer, more effective travel. You’re very active with U.S. Travel. You met with Trump recently along with your fellow hotel CEOs. Is that something that could be on the horizon for you?

Sorenson: I have a very full-time job but, let me talk about Ian for a second. I hope all of you got to see him, he is an extraordinary hotelier who is always entertaining, I presume he was yesterday.

Skift: Always, yes.

Sorenson: An amazing life story and extraordinarily curious about what’s happening in the world and what’s happening in our business. When you look at somebody who has, for decades, delivered product which causes all of us to stand up and say, “Did you see what he did?” or to talk about that experience, there’s nobody in our business like Ian. He’s a great friend of mine, he’s a good partner of Marriott’s but, he’s also been a great provocateur in the hotel business and all of us are better for it.

Skift: I think we only have time of one audience question and what I want to ask you about is actually, the top one is, “How do you differentiate so many sub-brands from each other and from competitors? Are so many brands really that necessary?”

Sorenson: This is back to that 30 brand point. I think in fairness, if the Starwood acquisition had not come along, we wouldn’t have been adding necessarily each of these brands.

The Starwood brands and the Marriott brands, in many instances, were competing right next to each other. I’ve used AC and Aloft as an example of this before, when we brought AC to the United States we were thinking it generally gets into the same space that Aloft was in and that is a bit more of a lifestyle upscale brand that competed at the same price point as Courtyard in our portfolio or Hilton Garden Inn in Hilton’s portfolio but, was a sort of new take on that.

I think if we had already done the Starwood deal, I’m not sure we would’ve brought AC to the United States. But we hadn’t, we brought AC to the United States and, interestingly, even now two years after the deal, what we’re seeing is that both Aloft and AC are growing.

Even though they sort of go after the same space in the theoretical way, they look very different. Aloft looks like an American lifestyle version, AC is a European lifestyle version, and there are different owners and different customers that are attracted to those different things.

They look very different and in a sense, even though I’m not sure I would’ve bet that they would have been as powerful side by side as their turning out to be, as long as we keep the appearance of those hotels and the sensibility of those hotels quite distinct, I think they can both compete and succeed.

Skift: Thank you so much.

Sorenson: Always good to see you. Take care everybody.

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Tags: loyalty, marriott, sgf2018, skift global forum

Photo credit: Marriott President and CEO Arne Sorenson, right, spoke Friday with Skift Senior Hospitality Editor Deanna Ting at Skift Global Forum. Skift

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