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Marriott's next CEO won't get to celebrate the new job for long. The company faces continued uncertainty in its recovery timeline due to sporadic virus surges around the world, even in the most successful mainland Chinese market.

The world’s largest hotel company hit a financial roadblock in its pandemic recovery at the end of 2020, yet another sign positive momentum is hard to maintain in the ongoing health crisis.

Marriott International, still reeling from the passing of its CEO Arne Sorenson Monday, posted a $267 million loss for 2020 — its first annual loss since the 2009 financial crisis — and $164 million loss for the fourth quarter. The financial loss is a setback for the company, which managed to achieve a $100 million profit in the previous quarter.

Rising case counts around the world over the winter and heightened travel restrictions — even in China, the country leading the recovery for Marriott and the greater hotel industry — led to the decline. It is a reminder Sorenson’s successor is facing years of recovery efforts on day one of the job.

A decision on the next CEO, widely expected to be one of the two people currently sharing acting CEO duties, is expected within the next two weeks.

Like many of its competitors, Marriott is banking on better times in the months ahead as vaccine distribution hits more of a critical mass in the 133 countries and territories it operates.

“While the timing of a full recovery is unpredictable, we are optimistic we will see notable progress over the course of this year,” said Leeny Oberg, Marriott’s chief financial officer, on an investor call Thursday.

Marriott leaders continue to be optimistic on China being their model for how the company can recover, despite the country facing its own surge in new cases over the winter.

Occupancy rates hit 60 percent in Mainland China last year, leading company leaders to repeatedly say they were on track to return to 2019 performance levels there sometime in 2021. Marriott’s revenue per available room, the hotel industry’s key performance metric, was only 12 percent off 2019 levels in the fourth quarter for Mainland China.

Rising case counts in northern China have since hampered that recovery momentum. Travel restrictions and new lockdowns brought down the average occupancy rate for Marriott’s Mainland China portfolio to 40 percent so far for 2019.

The winter surge around the world similarly impacted some of Marriott’s top competitors. Hilton posted a $720 million loss for 2020 on Wednesday, and Hyatt reported a $703 million loss.

But China continues to impress Marriott leaders. Occupancy rates in cities like Qingdao jumped from 20 percent to 60 percent only two weeks after travel restrictions were once again lifted.

“The good news is once these temporary shutdowns are lifted, we have seen demand return quickly,” said Stephanie Linnartz — Marriott’s group president for consumer operations, technology, and emerging businesses and who is sharing chief executive responsibilities until Sorenson’s successor is announced.

An Evolving Company

The travel industry is still battling the catastrophic financial impact of the virus, but hotel leaders have to find ways to adapt and find what demand exists in the current climate.

Marriott, like most companies, continues to signal leisure travel will lead the recovery for years to come.

The company recently inked a 19-hotel deal for all-inclusive resorts in a partnership with Toronto-based Sunwing Travel Group. The move positions Marriott to capture a significantly higher market share of the growing all-inclusive resort sector in the Caribbean and Latin America.

“On the transaction side, as we talked about when we launched into the all-inclusive space, it was frustrating for us to see the pace of growth in the all-inclusive space, certainly in [the Caribbean and Latin America] but even in Southeast Asia and some of the Eastern European resort markets, and not have a platform to compete for those opportunities,” said Tony Capuano — Marriott’s group president of global development, design and operations services and who is sharing leadership responsibilities with Linnartz.

But one of Marriott’s most significant growth stories surrounds its ongoing push into the vacation home rental space.

Homes & Villas, Marriott’s luxury short-term rental division, now was more than 25,000 listings — up from roughly 16,000 in December and significantly higher than the 2,000 properties available when the product launched in 2019.

Marriott leaders previously downplayed the Homes & Villas brand as a very small part of the greater company, but Linnartz indicated on the investor call Thursday that there are “a couple million homes in the segment we play in.”

Homes & Villas is still not expected to become an eye-to-eye competitor to Airbnb. It is a closed platform where Marriott only works with professional management companies on listings and has strict standards surrounding amenities, design aesthetic, and security.

Despite the push into new travel segments, Marriott continues to bank on its traditional business lines. Group business booking inquiries for dates in 2022 and later were up significantly in January, a signal the segment — widely expected to be the last to fully return — is beginning its recovery.

“The story on the group front just underscores the point there will be a return to group meetings and business,” Linnartz said. “It may be slower than we like, but we’re seeing the demand.”

A Tribute to Arne

The late Marriott CEO’s legacy was both felt and honored throughout Thursday’s call. Oberg, Linnartz, and Capuano all shared personal stories of their years working with Sorenson and his care for Marrriott employees.

Capuano reflected on an eight-day world tour with Sorenson and other members of the leadership team following Marriott’s 2016 Starwood acquisition. Sorenson wanted to see as many hotels and meet as many of the incoming Starwood staffers as possible, and he also wanted to build a sense of camaraderie.

“He wanted to build a cohesive team that, while not afraid of some spirited debate, truly liked and respected each another,” Capuano said. “It worked. Our jobs are infinitely easier because we’re all rowing in the same direction.”

Both Oberg and Linnartz reflected on Sorenson’s love of running and how that connected him to his associates. When on the road, Sorenson would lead an early morning group run with staffers and take time to meet with every member of the group.

“He’d ask about their families, their goals at Marriott, and their points of view about their markets,” Oberg said. “You could tell he fed on these connections with people and that he cared about them deeply. I learned so much from him, and I’ll miss him tremendously.”

Linnartz also noted Sorenson’s friendly competitive streak still came out during these runs, as “he would always beat me. Always.”

But she also paid tribute to Sorenson’s mentorship and careful attention to developing the careers of those around him. Linnartz attended the World Economic Forum in Switzerland for the last six years with Sorenson, and, by the second year, he was encouraging her to take her own meetings and conduct her own interviews.

“That’s what true leadership is: believing in your team and helping your teammates believe in themselves,” Linnartz said. “I am honored to have worked with him, and we are all committed to building on his legacy.”

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Tags: Arne Sorenson, coronavirus, coronavirus recovery, marriott

Photo credit: Marriott faces a winding road to recovery due to flare-ups of the virus around the world. VisitPlano / Flickr

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