President and CEO Tony Capuano talks to the media about growth and how he still sees plenty of runway to drive better results in 2023.
Marriott International’s scorecard for 2022 included signing
two new deals a day, and the leadership team used the Americas Lodging
Investment Summit (ALIS) in Los Angeles as a moment to thump their chest about
it.
Now President and CEO Tony Capuano hosted a breakfast at
ALIS to talk about the 726 management and franchise agreements added last year,
an increase of 21% over 2021 signings, representing nearly 108,000 rooms. About
20% of those rooms are coming in the form of conversions and half were in international
markets led by India, Saudi Arabia, Mexico and the Caribbean. He also talked
about the state of performance and what’s ahead.
Capuano made specific reference to the growth in Marriott’s
residential business in 2020 and 2021, perhaps the toughest years any hotelier
had to weather. “That’s a business that continues to grow and thrive, and maybe
is reflective of something I hope you’ll see from us in the coming years –exploring
adjacencies that we think are complementary to our core business that are appealing
to our guests and can ultimately grow into profitable incremental revenue
streams,” he said. “Residential is a clear example of that.”
With respect to the ongoing performance recovery, Capuano said
that pricing power has been extraordinary. “If you look at the last two big
shocks to our industry – the post-911 environment and the Great Recession, it
took the industry close to five years to see rate recover. We saw rate recover
in less than two years in this instance,” he said. “Our view is that it
reflects the depth of pent-up demand.”

It is demand and compression that drive pricing power, and based on the forward-looking data we’re seeing, we continue to be optimistic about our ability to continue to drive pricing.
Tony Capuano
Having just returned from Saudi Arabia and asked about the
potential of the market as a global destination, Capuano said the leadership
there has the luxury of investing extraordinary amounts of capital to develop
the infrastructure necessary to support the growth and reposition the
destination the way they want.
The question is, however, will people start to view Saudi
Arabia as an appealing and interesting destination? Capuano believe the
physical product and the diversity of the product that’s being developed is
fascinating with Marriott having some 30 to 40 operating hotels in the Kingdom
and about the same number in its pipeline. But what struck Capuano on his
recent visit was the pace of social change. “My first trip to the Kingdom was
probably eight years ago. I remember arriving at the Ritz-Carlton and we didn’t
have a single female associate in that hotel,” he said. “Today, about 40% of
the associate base in that hotel is female. We’ve started a developmental
program identifying students that have a passion for hospitality, and 58% of
the graduates are female. You go to some of the retail and restaurant
developments around Riyadh, and you think you are in a Western city. So, the
pace of social change, while there’s still admittedly a great deal of work to
be done, is pretty amazing every time I go back.”
The conversation then turned to potential pricing power this
summer and Capuano said Marriott doesn’t think it has tapped all of the pent-up
demand. The caveat, he said, is continued historically short booking windows. “But
obviously, it is demand and compression that drive pricing power, and based on
the forward-looking data we’re seeing, we continue to be optimistic about our
ability to continue to drive pricing,” Capuano said.
Capuano added that he is elated at the pace at which group
demand has recovered and said special corporate negotiations, while at first
slow to drive rate, is starting to look more encouraging and more reflective of
the current demand environment.
Among other highlights in 2022, Marriott announced its
planned entry into the affordable midscale segment. Under an agreement with
Hoteles City Express, S.A.B. de C.V., Marriott plans to acquire the City Express
brand portfolio. As of October 19, 2022, the portfolio was comprised of 152
hotels, including around 17,000 rooms across 75 cities in Mexico and three
additional countries in Latin America, and five under-construction projects,
representing an additional 676 rooms.
Upon closing, the transaction is expected to make Marriott
the largest hotel company in the Caribbean and Latin America. Given the
high-growth nature of the affordable midscale segment, the company sees
opportunities to further expand the City Express by Marriott brand in the
Caribbean and Latin America region, as well as in other locations.
Capuano added that whether or not City Express comes to the
U.S. and Canada is still a question mark. “But we are certainly looking at ways
across segments where we don’t play today and trying to assess whether there’s
a place there for us to grow going forward. And if we’re going to do it, we
obviously want to be able to do it at scale.”