BETHESDA, Maryland — Marriott Worldwide’s chief monetary officer will not be within the enterprise of predicting recessions. Her job, nevertheless, does embody ensuring Marriott is ready for any financial scenario, good or unhealthy.
Throughout a go to to Marriott’s new headquarters in Bethesda, Maryland, Resort Information Now sat down with Leeny Oberg, Marriott’s CFO and government vp of enterprise operations, to debate her outlook on the business throughout difficult financial instances, the corporate’s relationship with franchisees, and visitor loyalty and experiences.
In hospitality, the love folks have for journey has been strengthened through the pandemic, Oberg mentioned, as has the cyclical nature of the business.
Within the occasion that the economic system does enter a recession, demand for journey, notably on the leisure aspect but in addition for teams and enterprise vacationers, will assist the hospitality business climate its results, she mentioned.
Oberg mentioned leaders within the resort business are all the time ready for the ups and downs of financial cycles. She mentioned she likes to remind those that whereas Marriott appears huge, it’s 8,100 small companies.
What normal managers and their groups can do on the property stage in their very own communities has by no means been extra obvious than through the pandemic, she mentioned. Although they weren’t in a position to get by means of all of it pain-free, they confirmed unbelievable ability maneuvering by means of the challenges.
If a recession does occur, it’s essential to recollect every financial recession is totally different with totally different fundamentals at play, Oberg mentioned.
Whereas unemployment did barely enhance from 3.5% to three.7% within the U.S., that’s nonetheless a low share, she mentioned.
“We’ve acquired a sturdy labor market with loads of good jobs for folks available in the market for work, and that can have some impression on how issues go ahead mixed with the [Federal Reserve’s] strikes on each the U.S. stability sheet in addition to with rates of interest,” she mentioned.
Through the first and second quarters of 2022, Marriott had file signings for brand spanking new administration and franchise agreements, Oberg mentioned.
“There’s nothing higher than folks voting with their contractual commitments to say who they need to be with and their perception within the enterprise and their perception within the hospitality enterprise,” she mentioned.
Super conversion exercise additionally has added to the corporate’s progress outlook, she mentioned.
All through the pandemic, resort homeowners and operators needed to work diligently to maintain their properties afloat because the lack of journey demand considerably reduce into their income whereas they nonetheless needed to cowl bills.
As a franchisor, Marriott has constraints on the way it can immediately have an effect on franchisees’ operations, Oberg mentioned. To assist deliver down bills, Marriott can modify its franchise charges for applications and providers. These charges are primarily based on the income produced on the property stage, which is closely reliant on charges and occupancy.
“If the revenues come down in a recession, which means a giant chunk of the fees come down as effectively,” she mentioned. “Meaning I must be prepared for each eventualities, each revenues going up and revenues taking place.”
Marriott has realized and handed alongside 1000’s of finest practices to groups within the area, she mentioned. The corporate can also be gaining effectivity in the way it manages labor at inns and controls prices by means of economies of scale.
“That’s all a part of the way you assist them work by means of downturns,” she mentioned. “Throughout COVID, we clearly did greater than we usually would do when it comes to having to essentially reinvent how you use a resort on dramatically decrease occupancy and nonetheless break even.”
The energy of Marriott Bonvoy, its loyalty program, and what it delivers to the highest line in addition to the underside line for inns has been clear over the previous few years, Oberg mentioned. The scale of this system and the in depth participation by members in its full choices, together with bank cards and journey insurance coverage together with the extra conventional makes use of with inns, builds the facility of this system and drives different price efficiencies.
For instance, the prices related to utilizing on-line journey businesses have been diminished as Bonvoy grows and drives extra direct bookings, she mentioned.
When folks couldn’t journey as a lot through the pandemic, their use of Marriott-branded bank cards allowed them to earn factors they might use for future stays, she mentioned. Using these playing cards and the variety of folks signing up for the playing cards proceed to develop.
“All of that’s engagement with our clients throughout a time when the lodging part was notably weak, however within the meantime, we continued to construct and develop this terrific group of shoppers that we hope to have for the remainder of their lives,” she mentioned.
As traveler behaviors and priorities have modified through the pandemic, Marriott has intently watched the evolving demand segments, notably the mixing of leisure and enterprise journey demand, often called bleisure.
“Motels have executed a terrific job of adapting, and albeit, the development in bleisure progress has been occurring earlier than COVID,” she mentioned. “It was sort of inexorably seeming to get greater and greater every year, so it’s clearly been a giant focus of ours to ensure that we’re working inns in a approach that meets their wishes.”