In a wide-ranging interview, Anthony Capuano said Marriott is testing adding buttons to its mobile app that would let guests choose their room assignments electronically or tip staff with online payments. The improvements couldn't come fast enough for many travelers.
Marriott International plans to expand the online tools it gives guests, such as possibly letting guests pick rooms and tip staff via its mobile app.
“We’re in the midst of a pretty big technology transformation,” said CEO Anthony Capuano during a talk on Thursday.
Capuano said his company has been testing adding buttons to the Bonvoy app that would let guests choose their room assignments electronically or tip staff using online payment methods.
The top boss of the world’s largest hotel group didn’t give a timetable for the functionality because he said the concepts are still in testing and may vary by brand.
Capuano made the comments as part of a fireside chat with David Rubenstein, co-founder and co-executive chairman of The Carlyle Group, at the Economic Club of Washington, DC. In the chat, he covered Marriott’s performance, its most profitable brand, why now is a good time to be a hotel investor, and the company’s diversity efforts.
Capuano said integrating new technology can be tricky.
“You have so many players in the lodging industry testing new technologies every day, which I think is great, but sometimes we get over our skis a little bit,” Capuano said, noting that he’s checked into non-Marriott hotels and had trouble figuring out how to use some tablet-based systems with non-intuitive controls.
“It’s one of the reasons in our new headquarters we’ll have working mock-up rooms of our concepts,” Capuano said. “We can bring guests in and say, ‘Try our new Residence Inn prototype,’ and listen to their feedback if they say, ‘I couldn’t figure out the TV’ or ‘I couldn’t figure out the light switches.'”
“When I talk about that in certain forums, people say, ‘That’s fantastic. Your margins are going to go way up and you’ll eliminate all these jobs,'” Capuano said. “But for me, technology is an enabler. If we execute correctly, it will free up capacity for our associates to engage with our guests.”
Hotels Stay Strong Despite Inflation
Marriott’s CEO said the company continues to see a strong performance despite rising U.S. and European talk of a possible recession.
“The confluence of a rising environment of interest rates, inflation, and fuel prices would suggest that we start to see a slowdown, but we just haven’t seen it in the data yet,” Capuano said. “The summer numbers look extraordinary, both here at home and outbound into Europe.”
“The recovery has been led by leisure, clearly,” Capuano said. “But business transient is now down only 10 to 15 percent [from pre-pandemic levels], while it was down 30 percent at the end of last year. And group has really surprised us because it has come roaring back.”
Capuano said that demand for stays on Thursday and Sunday nights has come back more rapidly than demand for Mondays, Tuesday, and Wednesdays, suggesting that folks are tacking on leisure parts to their business trips.
Marriott International only has 97 hotels closed, while at the trough of the pandemic it had more than 2,000 of its 8,000 hotels closed.
The hotel giant had 29 hotels in Russia before the Ukraine war. Roughly half were managed and half were franchisees.
“After roughly July 1 we won’t be in business in Russia,” Capuano said.
Reduced Housekeeping May Be Here to Stay at Some Brands
Marriott International is still trying to decide whether the pandemic-level suspension of daily housekeeping at most of its brands is here to stay, Capuano said.
The topic is contentious. Earlier this week, Los Angeles mandated daily hotel room cleaning under many circumstances — in response to lobbying from the U.S. hotel union Unite Here.
Marriott’s highest-end brands, such as Ritz-Carlton, will keep daily housekeeping, but the pace may vary at other brands.
“I think in our self-service hotels, we’ll do a daily refresh but maybe not a full clean,” Capuano said. “At our select service hotels, such as Fairfield, it will probably be every other day.”
In a related but environmentally driven change, as of January 1, all Marriott International hotels worldwide will eliminate individual plastic bottles of shampoo and other toiletries, replacing them with large multi-serve dispensers.
Good Time to Buy Hotels
Marriott International owns 20 hotels but wants to sell them, Capuano said.
Another part of its business is having some of its approximately 100,000 employees manage hotels on behalf of owners.
“In the managed system, we earn incentive fees off top-line revenue, and we participate in the profits,” Capuano said. “So in an upmarket, the managed model is quite profitable.”
The third model is franchising. It licenses its intellectual property, revenue engines, and loyalty program to third parties, whose employees manage the property.
“On the surface, the franchise model delivers a higher margin,” Capuano said.
When pressed to guess, Capuano said Residence Inn must be the group’s most profitable brand on average.
“That has an extraordinarily compelling economic model if you can find a market that has a high percentage of extended-stay guests,” Capuano said.
Capuano, a former business development executive, said it was a great time to invest in hotels.
“Our pipeline of future hotels has about 500,000 rooms in it, but even over the last couple of years we’ve seen a historically low level of fall out from that pipeline,” Capuano said. “What that suggests is that our owners and franchisees believe in the resilience of travel. Many of them are long-term holders and may own these assets for decades.”
The company’s Bonvoy loyalty program should generate just the right amount of revenue to pay for the program rather than be a profit center or loss-making enterprise, “if it operates the way it should,” he said.
But the program does face the challenge of some guests trying to game the system.
“If you go to some of the big consulting firms, the McKinseys and BCGs of the world, especially their young consultants, some have built these extraordinary algorithms to try to maximize their Bonvoy points,” Capuano said.
Labor Woes Reman
Marriott International let go of about 30 percent of its workforce in the depths of the pandemic and hasn’t fully restaffed to the same level despite booming business.
The median income of a Marriott employee, not including the CEO, was $36,505 last year, compared with about $15,080 a year for full-time workers earning the minimum wage. Housekeepers and other hotel staff earn “meaningfully above minimum wage,” Capuano said.
But hiring remains a challenge because confidence in the sector was shaken, he said.
Some of the hires lack hospitality experience, which can lead to errors and gaps in service.
“We’ve restarted a bunch of our accountability metrics,” Capuano said. “Guest satisfaction scores, brand standard audits, and other data that helps us know when hotels are falling short.”
Addressing Diversity Issues
On Thursday Capuano also helped announce the winners of the first Arne M. Sorenson Excellence in Leadership Awards, whose recipients were not confined to hospitality. A separate Marriott family foundation has chosen to honor Sorenson’s memory by helping to fund a Marriott-Sorenson Center for Hospitality Leadership at Howard University, the historic black college in Washington, D.C.
Marriott International has continued to pursue diversity, equity, and inclusion in its upper ranks of management.
“Of my direct reports in the C-suite, two-thirds are diverse,” Capuano said. “As for our senior leadership, roughly the top 1800 positions, we’re at about 45 percent female and 21 percent people of color. As great as those statistics are compared across American business, none of those are satisfactory.”
Photo credit: A deluxe king room at the AC Melbourne Southbank, a hotel that opened in May in Australia and that's part of Marriott International's network. Source: Marriott International.