Marriott CEO on instability, the biggest hurdle for developers

WASHINGTON, D.C. — Before April 8, Anthony Capuano hadn’t been in the U.S. for the previous 28 days, and it’s an understatement to say a lot happened in those last four weeks.

Capuano, president and CEO of Marriott International, was at an event at the Canal House of Georgetown, a Tribute Portfolio Hotel in Washington, D.C., which marked Marriott’s one-millionth room open in the U.S. He sat down for an exclusive interview with Hotel Investment Today to discuss net unit growth, tailwinds in the short term and the power of conversions the long term.

Capuano has been in India, China, Australia, Fiji, New Zealand, Germany, Denmark, Ireland and Scotland over the past month. He admitted that travel and tourism thrive in times of stability and things “feel a little unstable today.”

But the international nature of his company gives him comfort. “We’ve had nearly a century of navigating the ups and downs of the world. We compete in 144 countries today. So, there is stability and instability every day somewhere where we’re operating,” he said.

When asked what his owners and franchisees are telling him, Capuano, while cautioning he has to be careful with what he says because Marriott is a public company with its first-quarter earnings in the near future, said there are concerns about the short-term demand environment right now because of tariffs and their impacts on the stock market. (This just before Marriott's 10.55% Wednesday rally that saw the S&P 500 jump 9.5%. Like many major U.S. public hotel companies, Marriott was down double digits over the last month before the Wednesday rally.)

The biggest impediment to new builds right now is not the construction cost environment and it’s not the availability of equity. It’s all about the availability of debt — construction debt for new financing.

Anthony Capuano

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“In general, there was a lot of optimism coming into the year. Our business is so closely linked to consumer confidence and the instability that you see with the short-term hit that the public markets have taken; those are not particularly powerful drivers of consumer confidence,” he said. “I think our owners and franchisees worry a little bit about the short-term demand environment. They worry a little bit about a protracted trade war if that’s where we end up — it could have a real impact on construction costs, to be sure — and the impact on inbound and outbound international travelers. They worry about all the factors that could negatively influence consumer confidence.”

Capuano said developers’ biggest hurdle right now is tied to the challenging debt market. “The biggest impediment to new builds right now is not the construction cost environment and it’s not the availability of equity. It’s all about the availability of debt — construction debt for new financing,” he said.

The prominence of conversions in Marriott’s current pipeline is necessary for positive net unit growth (NUG). Capuano said conversions will be part of Marriott’s plans regardless of the credit environment. He said that, traditionally, conversions slide into the background in better economic times when new builds occur more. However, that cycle has shifted.

“When that debt starts to flow more freely, the thing that makes me so bullish about our growth prospects this time around is I don’t think you’ll see conversions fade into the background,” he said. “I would expect to see a big spike in new-build accompanied by continued focus and results on the conversion front.”

Capuano has been passionate about Marriott’s ability to capture as much of its customers’ travel wallet as possible, including adding brands like Marriott Homes & Villas or the Ritz Carlton Yacht Collection so it doesn’t have to send its loyalty members somewhere else. That focus also includes adding international midscale brands like City Express and Four Points Flex for markets outside of North America, based on customer feedback.

“What’s the easiest path to that objective? It’s to make sure I have the right property everywhere you want to travel for every trip because if I do that, you don’t need to look outside our ecosystem,” he said. “That drives so much of our focus on growth. It’s not growth to achieve scale. We already have an industry-leading scale. So, it’s much more thoughtful growth around where our guests want to be and for what type of trip purpose. Therefore, what sort of accommodation are they seeking?”

Growth in Greater China

When asked if the unstable nature of the last few months has affected Marriott’s pipeline, Capuano said it’s too early to tell if there’s been any material impact, but he offers an example of Marriott’s challenging environment in Greater China as a reason for optimism.

The development community believes long term in the strength of demand for travel. They believe strongly in the fact that we’ve seen a psychographic shift away from consumption of hard goods towards consumer spending in travel and experiences, and they believe that’s going to be the case long term.

Anthony Capuano

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“We’ve talked about the fact that in 2024, it was one of the most challenging operating environments we’d ever seen in Greater China, which is our second biggest market. But at the same time, we signed more deals in Greater China last year than in any year in our history,” he said.

“That suggests that broadly, the development community believes long term in the strength of demand for travel,” he said. “They believe strongly in the fact that we’ve seen a psychographic shift away from consumption of hard goods towards consumer spending in travel and experiences. They believe that’s going to be the case long term. So, they’re betting on the long term of travel, not ignoring short-term softness and demand but recognizing they’re making long-term investments.”

When asked about international development, Capuano said he’s bullish on Asia Pacific in general, notwithstanding some short-term headwinds. He said one of the reasons is because Marriott didn’t over-index on China and India at a time when other companies were.

“We didn’t over-index on those two markets to the exclusion of the balance of the region, and that’s why you see such terrific momentum in markets like Japan, Vietnam, Indonesia, Malaysia and Thailand,” he said. “I’m very bullish about the breadth of Asia Pacific. What’s interesting is if you look at APEC (Asia Pacific excluding China), the last two years running, it saw double-digit RevPAR growth and double-digit net unit growth. Those are very vibrant, promising markets.”