Anthony
Capuano discussed bifurcation, the current development environment and
challenges in China at a BofA conference.
NEW YORK CITY — All things considered, Marriott CEO
Anthony Capuano said the 30,000-foot-view for the
world’s largest hotel company “feels pretty good” despite macroeconomic and
sociopolitical uncertainty and challenges.
While the continuing trend of
bifurcation of travel consumers is creating challenges for the hotel industry
for some chain scales, Capuano said he’s most optimistic about one sign in
general.
“Within our portfolio, one of
the really encouraging signs we’ve been seeing our teams doing is an amazing
job hanging on to rate,” Capuano said while speaking this week at the Bank of
America Gaming & Lodging Conference in New York City. “There is often a
reflexive response to chase occupancy at the expense of rate. Our teams are
really working hard to maintain rate even in those chain scales that are
challenged from a demand perspective.
“That’s obviously a great
long-term strategy and also goes a long way to helping us preserve margins in
that chain scale.”
Marriott broadcast the interview on its investor relationship website. Here are some highlighted quotes from Capuano's remarks.
On where things
stand right now for Marriott. “[There are] particular
challenges for the lower-income end of the spectrum. But we’re looking at July
numbers. Global RevPAR was up almost half a point in July. It was flat in the
U.S. and Canada, as you might expect, but it’s up about a point internationally,
which is exactly where we thought we’d be at the end of Q2. So, we feel pretty
good about that.
“We’re obviously looking at some
of the demand patterns in a post-Labor Day environment. There’s a tiny little
bit of uptick in [business travel] and a little bit of an uptick in leisure
transient. But it’s early and those booking windows are so short it’s hard to
really hang your hat on it… We have better visibility into group because of the
longer booking window… [For 2026] group volume is up about 8%, which was a full
point higher than where we were a quarter prior.”
On what Capuano is seeing
in the data to explain why bifurcation is continuing to happen. “[For our credit card
partnerships], we get really great real-time insights into how consumers are
spending at the high end of the income spectrum. Those consumers continue to
prioritize spending on travel and experiences. We see it in the performance of the
luxury portfolio.
The other dynamic at play, at least in the U.S., which is our biggest market, about two-thirds of government demand that we accommodate is in the select-brand hotels and that’s down double digits.
Anthony Capuano
“At the other end of the
spectrum, it’s not that the profile or that demographic doesn’t want to travel,
but they are feeling more directly the impact of some of these economic
headwinds… The other dynamic at play, at least in the U.S., which is our biggest
market, about two-thirds of government demand that we accommodate is in the
select-brand hotels and that’s down double digits.
On comparing
bifurcation with group and company size. “It’s not a perfect analogy, but
one of the ways I think about it is you’ve got the high-income transient
customer continuing to feel optimistic and demonstrating that optimism in their
travel spend. That’s the case with the larger multinational corporate accounts
that we have. You go to the other end of the spectrum, the lower-income
transient consumer is a little more nervous and that’s reflected in the
performance in the lower chain scales. Similarly, some of our smaller business
clients have that same level of hesitation.”
On prospects for
group travel in 2026. “For our big association clients,
we’re hearing a few trends from them. Number one, they’re planning for 2026 —
most of them are in budget season now — and they’re going to the budget table
with increased travel budgets. They are hearing from their constituents…. The
front-line leaders in those organizations say I need to be on the road. I need
to be with my customers. I need to be with my colleagues from around the
country or around the world. Group meetings are a powerful vehicle to try and
achieve that.”
On development in
the U.S. “The biggest impediments to
driving historic volumes of new construction are the construction cost
environment and the nature of the construction debt that’s out there. The good
news is that deals are getting financed. They’re not at the leverage that our
partners would like and they are at higher interest rates than our partners
wish they could capture. But deals are getting done and the deals that are
getting financed, the new-build deals, have the common DNA you would expect:
They’re in great locations. They have really strong brand affiliations, and
they are with developers who have long-standing, demonstrated track records of
successful execution… We feel like we’re getting a disproportionate share of
the opportunities that are out there, but some combination of hesitancy around
desire for a more stable macroeconomic environment, the construction cost
environment and the cost of financing is resulting in not the sort of volumes
that we were accustomed to.”
The development community in Greater China fundamentally believes in the long-term prospects for travel and tourism across China and they’re trying to time those investments for the right week or month or quarter.
Anthony Capuano
On development and
performance in China. “They have some of the same
macroeconomic challenges, some of the same consumer-confidence challenges, and
that bifurcation as well… The high-income households in Greater China are
absolutely traveling, but outbound traveling, which is why you see markets like
Japan [excelling]... The lower-income Chinese traveler is
doing more domestic travel and they’re feeling that same impact from the
headwinds. It’s a tough operating environment in the short term. At the same
time, you look at our signings in the first half of the year, we’re up 20% and one
of the things that demonstrates is that the development community in Greater
China fundamentally believes in the long-term prospects for travel and tourism
across China and they’re trying to time those investments for the right week or
month or quarter. They’re making long-term investments.”