As long as Europe can create a strong network of travel bubbles or reopen as much of the Schengen Area without coronavirus travel restrictions, its hotel recovery timeline may surprise hotel executives like Marriott's Arne Sorenson.
The leaders of two of the world’s largest hotel companies have a different outlook on how the hotel industry will rebound from coronavirus.
The chief executives of major hotel brands like Marriott, Hilton, and Accor attended an NYU webinar Tuesday to discuss the pandemic’s impact on hotels around the world. All agreed coronavirus will likely result in the worst year in recorded history for the global hotel industry. But they had different takes on what the rebound will look like.
“Maybe it’s ironic in the sense that the U.S. and China are the most alike given how terrible the relationships are politically between the two countries,” Marriott CEO Arne Sorenson said. “They are the two big markets most dependent on domestic travel, and they will be the first to come back.”
Roughly 95 percent of Marriott’s business in China and the U.S., respectively, comes from domestic travelers. China is further ahead of the U.S. in terms of a coronavirus recovery, but Sorenson thinks both countries have the same kind of travel industry fundamentals to fuel a stronger recovery than Europe.
“Europe is inherently more complicated because if you look at the market as a whole, it’s made up of all these different countries,” Sorenson said. “They have their own borders. They have their own policies. They have their own approach to the virus.”
While Marriott saw single-digit occupancy rates at hotels in China in early 2020, its Chinese portfolio has since cleared the 40 percent average occupancy mark. The company is also pursuing a regional marketing strategy to appeal to travelers in China, including gift card promotions to drum up business and spur demand.
All of Marriott’s 350-hotel China portfolio has reopened after many temporarily suspended operations during the pandemic, Sorenson said this week during a Goldman Sachs travel summit.
“Much of the business in Europe is dependent on folks coming in from the U.S. or Asia or someplace else — real long-haul business that I think will be slow [to return],” Sorenson said during the NYU webinar.
But Paris-based Accor CEO Sebastien Bazin doesn’t expect Europe to be such a laggard.
“We are not at 95 percent in Europe in terms of domestic dependency, but we are at 80 percent,” Bazin said. “You open the borders between the nations, which is largely to be the case.”
Europe won’t be as complicated with its coronavirus recovery travel restrictions as Sorenson portrayed, the Accor chief executive argued. Many countries within the Schengen Area, 26 European countries that normally allow unrestricted movement within their borders, are on track to lift travel restrictions in June.
Countries like Austria and Finland are also part of “travel bubbles” of country consortiums intending to allow travel to each other’s respective nations.
Europe’s extensive train network could also give the continent an extra lift in its hotel industry recovery. The convenience of trains between countries and their largest cities gives Bazin reason to think drive-to and “train-to” destinations will be the first to recover.
But like Sorenson, the Accor CEO recognized the importance of domestic travel in the initial recovery and how it could be an opportunity to shift operational strategy. Local operators didn’t seek permission from Accor headquarters to reopen hotels and serve meals during coronavirus lockdowns, but Bazin said they were “damn good in doing it.”
“If you talk about domestic clientele, give them the keys. You’re going to de-nucleize much further to your local management teams in countries because they know the market better. They know the owners better, and they know the clients better,” Bazin said. “It’s really a time to be bottom-up rather than top-down as an organization. That’s a major reset not easy to do, but trust them fully all the way because they’ve been there all the time when you needed them the most.”
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Photo credit: The CEOs of Accor and Marriott disagree on whether European hotels are too dependent on long-haul travel to recover quickly from coronavirus. Jim Trodel / Flickr