Michael McCormick, left, executive director and COO of the Global Business Travel Association, speaks with Arne Sorenson, president and CEO of Marriott International at the GBTA's annual convention
"We're opening a new room a little more frequently than once every 13 hours," Arne Sorenson, president and CEO of Marriott International, told the more than 7,000 attendees of the Global Business Travel Association's annual convention, taking place this week at the San Diego Convention Center. "I'm impressed by that statistic and also exhausted by that statistic," he told GBTA executive director and COO Michael McCormick in an on-stage interview yesterday. Following are some highlights of that discussion.
It has been almost two years since Marriott finalized the acquisition of Starwood. Can you reflect on what has happened since then?
Over the past two years we better have accomplished a lot, and I think we have. We linked the loyalty programs on the day of close, which I think surprised a lot of people. And we solved the "people issue" [in terms of internal roles] by the first month of 2017. Right now, we are firmly combining the loyalty programs and reservation platforms.
Marriott now has 30 hotel brands in its portfolio. Is that too many?
We're not going to get rid of any brands. Think about the relationships in this room. I think we relate on a personality basis, not necessarily on a brand basis. We want to make sure we are delivering choice within our platform. We want to offer a range of brands for different trip purposes, different lifestyles, different sensibilities. We're growing AC Hotels, a lifestyle brand that is well known in Spain but not so well known in the U.S., by about one new property a week.
What are some misconceptions about Marriott?
Well, we don't seem to have much power to move rate. As big as we are -- representing roughly 15 percent of the hotel rooms in the U.S. -- we only price about half of those rooms; the other half are priced by franchisees. We think we win by driving occupancy and by driving service.
Let's talk about that other issue: the decision to cut commissions for group intermediaries from 10 to 7 percent. What motivated that decision?
It wasn't an easy one; it was something that we debated for a long time. What we had seen beforehand was the intermediation of group business had gone from 10 percent of group business to roughly 50 percent of group business. We looked at the different platforms. Some were delivering amazing value to their customers, and some weren't delivering much value at all -- and they were all charging the same amount. Also, we were asking ourselves, how do you get to a place where a service has to be paid for by the customers? So, what we did is say, let's recognize the capital needs of these hotels and their pressure on profitability. We're going to bring the commission down from 10 to 7, and let's see if those intermediaries who are delivering value to their customers can work it out.
For the future, is this the trend? Is there a broader move to reduce the costs paid to intermediaries?
There's nothing immediate. We are in negotiations with Expedia as we speak. But we don't have a secret drawer of next steps we're going to take over the next couple of years. We'll never be perfectly aligned, but we need to be totally transparent with each other.
Where does Marriott stand on home-sharing? I understand you have a pilot program going on in London.
We've now gotten to a place where I think it's fair to say that this business exists and will continue to exist. It is competing broadly in the hospitality space. It skews overwhelmingly toward leisure travel and budget travel. But there is one place where we don't have a great response, that is in the whole-home, kind of aspirational thing. We thought, let's do a whole-home pilot in London. We used Tribute Portfolio Homes, and we have a partner there who delivers services, not just key delivering, but housekeeping and other services. We are four to five months into it now. It's all of 200 homes in London, and it's going well. I think if we can find the right code to deliver a whole-home product, that will be a successful opportunity for us.
What other trends have you noted?
We need to stay focused on local experiences and luxury lifestyle. We used to say we wanted Americans who travel abroad to have a hotel they could feel comfortable in no matter where they went, and that was Marriott. That has changed -- not that we don't want them to be comfortable. But most of us, when we go to Cairo, want to know we're in Cairo. We want to offer a real local experience that they can Instagram about and tell stories about.
Amid all this change, what hasn't changed?
One thing we've always done well is take care of our people. The first thing we've got to do is to make sure we retain that cultural legacy as a corporation.