Marriott International’s business operations and growth are solid, CEO Anthony Capuano told CNBC Monday, amid layoffs of greater than 800 corporate employees and continued sluggishness in China’s tourism market.
“We’re firing on all cylinders in every geography,” he said.
The corporate’s third-quarter earnings showed a 3% increase in worldwide RevPar — or revenue per available room — despite an 8% drop in RevPar in China, the corporate’s second largest market.
Capuano said he doesn’t imagine lackluster domestic demand in China can be a long-term problem, pointing to a record-breaking variety of hotel signings in early 2024.
“We signed more deals in the primary half of 2024 than in any six-month period in our history in China. And so to me, that means that each private and non-private real estate entities in China are betting on the long-term viability of the travel and tourism space,” he said.
Domestic tourism in China is slowly gaining steam, he said, while inbound travel outperformed pre-pandemic levels within the third quarter of 2024.
“Pre-pandemic, about 18 to 19% of our total room nights were cross border travel,” he said. “Through Q3 we were already over 20% and that is with more to are available terms of restoration of airline seat capability in Greater China. So we expect there’s increasingly upside for that international inbound.”
Marriott International reported net room growth of 6% year-on-year and room rate growth of two.5%, driven by a powerful return of group travel, which Capuano called the “vibrant, shining star” for the business today.
The corporate raised its year-end guidance for net room growth, and added 9 million recent Bonvoy members within the third quarter. Marriott’s loyalty program now has 219 million members, which Capuano credited to the work of hotel front-desk employees and recent partnerships Marriott has inked with firms like Uber and Starbucks.
Layoffs ‘not a conventional cost-cutting measure’
During Marriott’s third-quarter earnings call on Nov. 4, Capuano alluded to an “enterprise-wide process to reinforce our effectiveness and efficiency,” a move Chief Financial Officer Leeny Oberg later estimated would scale back company costs by $80 million to $90 million a 12 months, starting in 2025.
That measure turned out to be corporate layoffs, first reported by the travel media company Skift on Nov. 14, which later linked to a notice of “mass layoffs” of 833 Marriott employees posted on a Maryland government labor website.
Capuano denied that the corporate — which doubled in size in the course of the past decade — grew too big, too fast, no less than when it comes to corporate employees, as an alternative calling the move a much-needed “reorganization” of its global corporate structure.
“This isn’t a conventional corporate cost cutting measure,” he said. “In [the past] decade, the continent teams have matured; we have grown dramatically. We’re in 60 recent countries. And so we checked out this exercise to attempt to shift more decision-making to the continents.”
Decentralized decision-making means the layoffs can be felt most acutely at its global headquarters in Bethesda, Maryland, Capuano said.
Nearly all of job cuts are on the “above property” level — the company office — which suggests that they’ll “absolutely not” affect service levels at any Marriott-branded hotels, he said. Â
Slightly, the cuts “should make us more nimble and permit us to make decisions through the local market lens in real time.”
Marching into the midscale market
Capuano said occupancy levels and average rate growth are strong across most of Asia-Pacific, most notably in Japan, where Marriott opened its a centesimal hotel this week — a 4 Points Flex by Sheraton (previously referred to as 4 Points Express by Sheraton).
The brand is leading Marriott’s push into the midscale market in Europe and Asia-Pacific, alongside City Express in North America, in an effort to capture budget-conscious consumers who want easy, comfortable rooms that include modern-day wants likes Wi-Fi.Â
The corporate plans to open a dozen more 4 Points Flex by Sheraton hotels in Japan in the following six weeks, in accordance with a press release published Monday.
