How Marriott Became The Biggest Hotel In The World, And What’s Next For The Hotel Giant - バイリンガル字幕
With massive job losses, hotel closures and historically low occupancy, 2020 was the worst year of record for U.S.
hotels.
Marriott has been particularly hard hit, recording its first full-year loss in more than a decade.
But rollout of vaccines and signs of pent-up travel demand has led to a renewed sense of optimism for the hotel operator.
In the same Second quarter of 2021, Marriott reported net income of $422 million compared to a net loss of $234 million a year earlier.
Most hotel companies are expecting a strong spurt of leisure demand this summer.
Some call it revenge travel.
People who have been putting off their vacations and such.
And that has been to the point where many hotels who cater to those summer crowds are seeing business comparable to pre-COVID levels.
But we're actually seeing really strong recovery of demand in a variety of our largest markets.
And it's not just leisure demand, which is the thing that's really encouraging.
for us." The company was also impacted by the death of its longtime leader.
In February 2021, Marriott CEO Arnie Sorensen, the third chief executive in the company's history and its only non-family member passed away.
Later month, 25-year company veteran Tony Capuano was named CEO.
Marriott International is one of the world's largest hotel operators with 7,800 properties in 138 countries and territories,
including Ritz Carlton, Sheraton, and Courtyard by Marriott.
From a stock perspective, our strategy has been to remain bullish, broadly so, even when we feel like valuations are still there.
foolish, which they do.
But, you know, each week that we've waited, the news flow has gotten more positive." An estimated 48 million Americans took to the roads and skies during
the busy 4th of July weekend.
Like its competitors, Marriott has instituted new cleaning procedures and cut back on offerings, like its breakfast buffet.
effect and in-room dining services in an effort to return to profitability.
But is it enough?
And with a rise of video conferencing, will business travel return to pre-pandemic levels for Marriott and its rivals Hilton, Intercontinental and Hyatt?
Mariette got its start as a symbol root beer stand in Washington DC.
In summer of 1927, Jay Willard Mariette and his wife Alice opened an A&W franchise to serve thirsty patrons.
A few months later, to cater to winter diners, the couple offered tacos and tamales.
The hot shops restaurant was born.
In 1928,
the Mariette added new locations and by the late 30s were expanding into the burgeoning field of in-flight catering,
delivering box lunches for passengers on Eastern and American airlines.
But a shift in the late 1950s away from the restaurant business changed the trajectory of the company and the hospitality industry.
In 1957, under the management of J.
Willard Marriott's son, Bill, the company launched its first hotel in Arlington, Virginia.
By 1964, the Marriott Hotchops, as it was known, had grown to four hotels and 45 restaurants.
Over the next six years, the company more than tripled in size.
Bill Marriott, Jr.
took the reins as CEO in 1972.
The 1970s Marriott oversaw the company as it spent more than $3 billion building airport hotels and convention hotels.
He also began shifting the company from a business model of hotel ownership to one of property management and franchising.
In 1983,
the company entered the mid-price hotel market for business travelers with its 1987 moved into the economy lodging segment, opening the first barefield in.
The following year, Marriott opened its 500th hotel in Warsaw, Poland.
Marriott has been one of the more aggressive growth companies in the hotel sector.
It's also grown in a number of different ways.
So it's grown by expanding.
the number of brands that it represents.
It's grown by both developing them in-house and acquiring through M&A other hotel companies and then it's also been very active and growing internationally
in a way that's spread its base of brands around the world.
In 1993 the company divided its operations into Merritt International, the hotel management and franchising company headed by Bill Merritt Jr.
and hosts Merritt Corporation, a hotel ownership company run by his brother Richard.
Moving into the luxury market,
the newly renamed Merritt International acquired a 49% interest in the Ritz Carlton in 1995, with sales topping $10 billion by $19.
1997, but it was a 2016 acquisition that cemented the brand as the world's leading hotel company.
Led by former CEO Arnie Sorensen, Marriott acquired Starwood Hotels and Resorts, bringing together Marriott, Courtyard, Ritz Carlton, Sheraton and St.
Regis properties all under one roof.
to position themselves through to grow and join the sort of the upper echelon,
if you will, either through acquisitions, new brand development and those sorts of activities.
I think Marriott in general has been, you know, one step ahead has been on the leading edge of, you know, evolving.
involving lodging companies across the industry,
and you point out the Starwood acquisition,
which really did firmly put them in the lead in terms of size, in terms of breadth of brands.
However, it may have been a global pandemic in 2020 that proved to be one of the biggest challenges for hotel operators.
closing.
In 2020, the iconic Hilton Times Square Hotel announced it was shutting its doors.
That same year, more than 670,000 hotel industry jobs were lost.
According Sorenson, COVID-19 caused more pain to merit international's business than 9-11 and the financial crisis combined.
The Global Hotel Injury was a more than $530 billion business in 2019, and included brands like Hilton, Intercontinental, Hyatt, Wyndham, and course, Marriott.
US hotels set multiple records in 2019, including having more than 1.9 billion room nights available, in roughly 1.3 billion room nights sold.
unit growth was high and in general, the was doing quite well.
But like much of the travel industry, the coronavirus pandemic has wreaked havoc on hotels.
According to STR,
2020 was the worst year on record for the US hotel industry,
with more than a billion hotel rooms unsold and revenue per available room hitting an all-time low.
But with an increasing number of people getting their vaccines, travel demand has surged.
In the second quarter of 2021, Hilton had net income of $128 million compared to a net loss of $432 million the year earlier.
As of July 2021, the hotel brand had more than 6,600 properties in 119 countries and territories.
During that same period, Hyatt had a net loss of $9 million compared to a net loss of $236 million a year earlier.
And its latest financial filing, IHG, which includes Holiday Inn, Crown Plaza, and Intercontinental, reported a total operating profit in 2020 of $170 million.
$16 million compared to $860 million in 2019.
The first half of the year was the most challenging the travel and tourism industries ever seen.
When saw a social distancing come into play, travel restrictions and borders closing.
In second quarter of 2021, revenue at Marriott rose to $3.1 billion, up 115% from a year earlier.
In March 2020, the hotel operator furloughed two thirds of its corporate staff, tens of thousands of employees, and enacted cost-cutting measures.
It also implemented new procedures at hotels,
like requiring face masks in public areas, cleaning surfaces with hospital-grade disinfectants, and services like mobile check-in and mobile key.
Our low point, we had about 2,000 out of 7,500 hotels that were closed around the world.
We've probably reopened three to 400 of those.
I think when we look at, even in the United States, we see the early signs of recovery.
Although we've gone from something like minus 90%
revenue to something like minus 90 By July 2021,
Marriott's occupancy rate was 51%
of 18%
from the start of the year,
and according to analysts,
while hotel operators like Marriott have suffered as a result of drop-in travel demand,
they have found themselves in a better position than individual hotel owners.
Marriott Hilton, Hyatt, clearly devastated by this, but less so than the owners themselves.
Remember, these companies tend to take fees off the top line, and in some cases, the bottom lines of the hotels.
But all the costs of operating a hotel are borne by the actual owners of the hotels.
So, those are the folks that got hit the hardest.
CNBC reached out to Marriott, but they denied our Quest Board interview.
Marriott had revenue of $10.5 billion in 2020 down almost 50% from the year earlier.
According analysts,
the hotel operator makes most of its money from its full-service hotels like the Ritz Carlton and JW Marriott that offer
multiple restaurants and other amenities.
In 64% of revenue came from its North American full-service hotels.
16% came from North American limited-service hotels like Fairfield Inn and Courtyard Marriott.
11% came from hotels in Europe, the Middle East, and Africa.
Asia-Pacific region.
The remainder of revenue came from things like credit card and loyalty programs.
COVID certainly was and has been a pivotal moment for Marriott for a number of reasons.
The most important of which is the structure of their business where they manage hotels
and they bear the cost of labor and other operating expenses.
is on behalf of the owners of those hotels and are reimbursed through the fees that they collect,
which seized up in a way unimaginable,
you brought to bear a series of issues and risks for how their business will run in the future.
So the industry is really hitting a major reset here.
We're rethinking about what it is that the person that sleeps in your hotel every night.
What do they really want?
Do they need nightly turn-down service?
Do need their their beds remade every night if they're there for three or four nights?
Like its rivals, Marriott uses an asset-like business model meaning it typically matters.
of franchises hotels rather than owning them.
A 2019 50%
of marriage rooms were under franchise agreements,
41% of rooms were under management agreements, and less than 1% of rooms were owned or leased by the company.
In a bid to generate capital in May 2020,
the company signed new deals with co-branded credit cards, providing Marriott with an infusion of cash.
$920 million.
Adding hotels to its portfolio is another key driver for how Marriott generates growth, usually with little or no investment by the company.
The most important driver of Marriott is unit growth.
growth.
So you want to add additional hotels, 3%, 4%, 5%, we're actually seeing some years up closer to 6% unit growth.
Marriott has pursued that more aggressively than say Hilton, which has preferred more of an organic growth initiative.
But you look at not only the Starwood acquisition but other acquisitions in Europe,
in Africa,
it has really led to increased growth for And while COVID-19 has impacted those growth plans,
as of July 2021, the company had nearly 478,000 rooms in its development pipeline.
From the start of 2021 until April, business travel was expected to be down 85% compared to its 2019 levels.
The expectation is that business travel recovery will lag leisure recovery in the hotel sector,
and Marriott participates in both, but it certainly is well known as a corporate and upscale type of travel of demand.
So Marriott will have a challenge in the near term as it travel to rebound fully the thing that will be interesting to watch I think it's
gonna be less clear what the trip purpose is increasingly we're seeing
folks that say I can blend trip purpose I can combine leisure with business
travel and we think that's a really good news for our hotels across the
country mariette to bring in some of those overnight guests in what the industry refers to as the bleaser category,
travelers who combine business with tourism.
To book more rooms in April 2021,
Marriott rolled out two new programs, a contactless check-in kiosk, and a contactless food and drink vending machine.
I can tell you that Marriott is already focused on making sure that hotels are resourced properly so that we can stay longer,
do our work, and enjoy ourselves as well.
And think that aspect of it is going to be critically important as we come out of this crisis and recover as an industry.
It will merit us in uptick in drive-to-leisure demand during the pandemic,
particularly for its extended state and resort hotels, the company is facing headwinds from another segment of the market.
Short rental companies.
To with Airbnb in 2019,
the company launched Homes and Villas, a home rental service that offers more than 10,000 luxury hotels in over 250 markets.
By this summer of 2020, book at Homes and Villas were up 700% of the previous season.
When we launched Homes and Villas, it was really a compliment to our hotel portfolio.
The notion that for very specific trip purposes, our guests might need a whole home experience.
We've seen pretty explosive growth.
I think at the end of the quarter, we had about 30,000 listings, and they are all full homes.
However, as analysts note, Marriott's home in Villas is just a small fraction of the 5.6 million listings on Airbnb.
While Marriott's business has been severely impacted by COVID-19,
it's profitable fee-based business model,
solid balance sheet, and an emphasis on corporate travel, position the brand for future growth once confidence and travel returns.
Group and business travel is expected to slowly begin in Q3 2021 and make a full recovery by 2024.
Fortunately they've made it true to the other side as have most of their owners and I think they come out you know leaner,
tighter and And, you know, in many respects, a healthier business than they went in.
And I know we've talked,
we've written about this wall of cash that's out there where consumers are putting a lot of money away in their savings accounts.
I travel could be a real beneficiary as you look to the second half of next year to 2022 as well.
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