Corporate ‘steadily improving,’ says Marriott

Marriott Headquarters
Marriott International CFO Leeny Oberg said that lenders are adopting a “wait and see” approach in Caribbean, Latin America and Europe that is affecting the pace of deals. Photo credit: The Bernstein Companies

According to Marriott International CFO Leeny Oberg, that the group is selling twice as many business nights as it was in April and May in the U.S., but still is looking to a vaccine to push demand. In addition, Oberg said that lenders are adopting a “wait and see” approach in Caribbean, Latin America and Europe that is affecting the pace of deals.

Oberg added: “Deals are getting done, but they are taking longer to get done. I don't sense that it's a fundamental view that there's hotel deals not wanting to get done, but just more about the pace of them. In North America, it also depends on how the lenders are feeling and there is a slow but steady demand, but still some cautiousness as lenders think about new deals.”

Commenting on conversions, the CFO said that she expected the company to get “at least our fair share,” but cautioned “even a small conversion cost can, in today's world, feel more momentous than it does in a normal environment.”

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Corporate demand was described as “higher on the drive-to than on the flying, but steadily improving” with Oberg adding that “there's actually the possibility of additional corporate demand from remote work and the fact they want to get folks together who are working more remotely.”

Negative Cash Burn

Oberg confirmed that the company was still looking at a negative cash burn.

In relation to net rooms growth, Oberg said that it would depend on the speed at which there was “comfort about travel, and the banking system feeling good about putting the money out, because as you've seen, the pipeline we've still [is] strong [with] almost 50 percent of rooms under construction.

“There is no reason to think that we wouldn't be able to get back towards mid single-digit net rooms growth, but whether that [comes in] ’21, ’22, or ’23, I think again all depends on the pace of how quickly globally people feel comfortable traveling.”

Looking at current performance, Oberg, who was speaking on the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum, said that the company had seen a 90 percent decline for global revenue per available room in April to a 63 percent decline in August.

In China, occupancy reached 65 percent in August. Oberg said Marriott International is seeing a “slow, but steady improvement in the comfort level of folks being able to travel, albeit still nowhere near back to normal, and again all around the world, it does vary tremendously.”

Oberg said that the group is not seeing a drive to cut rates. She said: “Unlike some of the classic economic recessions, it's not like you can take price to necessarily drive additional demand. Clearly, there will be pockets where demand is so low that there it's going to result in a different special corporate rate next year, but I would say in general that what you're seeing towards the upper end is that rates have held better than you might expect given the incredible drop in RevPAR.”

Oberg added: “If you're a luxury hotel that's in the middle of a large city, that's not seeing great business demand, what's the point of driving down rates, it's not like you're going to drive a lot of extra business to your hotel. So I think there's been decent discipline across the industry because the reality that it's not going to add 10 points to your occupancy if those travelers aren't traveling.”

This article originally appeared on Hospitality Insights. To read the full story, please sign up to a 60-day free trial here

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