Global View: Industry pays tribute to Arne Sorenson, evaluates recovery

Arne Sorenson J.W. Marriott Jr.
Arne Sorenson [left], Marriott International president and CEO, and J.W. Marriott Jr., executive chairman and chairman of the board of Marriott International, in New York City's Times Square. Photo credit: Marriott International

The biggest hospitality news of the week was tragic: Arne M. Sorenson, president and CEO of Marriott International, died unexpectedly on Feb. 15. He was 62 years old.

“Arne was an exceptional executive—but more than that—he was an exceptional human being,” said J.W. Marriott Jr., executive chairman and chairman of the board. “Arne loved every aspect of this business and relished time spent touring our hotels and meeting associates around the world. He had an uncanny ability to anticipate where the hospitality industry was headed and position Marriott for growth.”

Many in the industry spoke out to celebrate Sorenson’s life and legacy, remembering his kindness and generosity as well as his business acumen. Sébastien Bazin, chairman and CEO of Accor, said he “admired and respected” Sorenson on many levels. “His business acumen was second to none, but beyond that he was a remarkably empathetic man who cared deeply about our industry and the people in it. I will deeply miss his leadership, his wit and the passion he brought to our industry.” 

Industry Recovery

European hospitality companies have highlighted the importance of local markets to fuel recovery in 2021. Owner/operator PPHE reported the majority of its revenues in the U.K., Germany and the Netherlands came in summer 2020 from local travel, and anticipated that strong domestic demand would return first, followed by international leisure and business travel. Scandinavian owner and operator Pandox similarly benefits from its strong regional position in Northern European markets, which are less dependent on international travel.

Almost four in 10 of all the U.S. jobs lost since February of last year have been in the leisure and hospitality industry, according to the latest numbers from the U.S. Bureau of Labor Statistics. The 39 percent of jobs lost is triple the number of the next-hardest-hit industry, according to Travel Agent. In addition, January marked the second month in a row that the leisure and hospitality sector lost jobs despite overall U.S. employment gains.

U.S. Travel has shared with Congress and the Biden administration its relief priorities and recovery strategies to help accelerate the onset of a travel recovery. Among them were calls to extend and enhance the Paycheck Protection Program to provide a third draw for businesses that continue to face difficulties due to COVID-19; provide $2.25 billion in U.S. Economic Development Administration grants to promote safe and healthy travel practices; and to provide $17 billion in additional relief for commercial airports and airport concessionaires.

Separately, The World Travel & Tourism Council released a new social impact paper focusing on the travel and tourism sector. It has been compiled to showcase the sector’s importance as a driver of economic growth and in enhancing social progress across the world. Further, Travel Agent reports, the paper says that raising awareness and understanding the social impact of travel and tourism has always been tremendously important, but it is much more critical in light of the effects of COVID-19 on the sector globally.

On a positive front, executives with Los Angeles County-based CTA Travel expects travel to be back in “full force” by summer, they told Luxury Travel Advisor for its latest cover story. Justin Dolan, director of sales for the agency, and Cathie Fryer, president and owner of CTA Travel, expect clients to want intimate, hosted luxury vacations, as well as care, concern and careful travel planning from travel professionals.

Last week, New York City reopened restaurant dining rooms at 25 percent capacity, several days earlier than scheduled. The city’s dining rooms have been closed since December, and the decision to reopen is a result of declining COVID-19 cases and related hospitalizations across the city. New York City operators have long been critical of the governor’s reopening strategy and have been pushing to join the rest of the state at 50 percent occupancy, despite indoor dining being categorized as a high-risk scenario by the Centers for Disease Control and Prevention. In response, 74 New York City restaurants have filed an emergency motion to allow them to reopen at half capacity, the latest in a string of lawsuits, including a $2 billion class-action lawsuit and a $500 million class-action lawsuit that was dismissed in November.

Despite the controversy, New York’s reopening could signify a major change for restaurants around the country. John Kelly, CEO of Zenreach, a walk-through marketing company, has analyzed the data and feels cautiously optimistic about the future. COVID-19 cases have been declining for over a month, and several of the country’s largest states—including California, Illinois, New York and Michigan—have begun easing their dining restrictions. After a year of navigating the coronavirus, Kelly also sees that venues now understand the formula for surviving this challenging period—many have already set up their online ordering and home delivery services, and customers are accustomed to virtual experiences.

Q4 and FY 2020

Last week also saw the start of hospitality companies’ Q4 and full-year 2020 earnings reports. Hotel Management reported that despite the overall gloom the hotel industry is mired in, there was some positive news in Wyndham Hotels & Resorts' results. The company generated strong adjusted earnings before interest, taxes, depreciation and amortization and free cash flow in the worst year the industry has ever experienced, said President and CEO Geoffrey Ballotti in a statement delivered before the company's earnings call with investors. During that call, Ballotti noted that approximately 97 percent of the company’s nearly 9,000 hotels are open today. “Our fourth quarter continued to demonstrate that our drive-to, nonurban franchise business model can deliver in any environment,” he said. The leisure-focused hotels in this segment produced sequential revenue per available room improvements and domestic market share gains for the company.

In its results, Hilton reported net loss of $225 million for the fourth quarter and $720 million for the full year. Adjusted earnings before interest, taxes, depreciation and amortization was $204 million for the fourth quarter and $842 million for the full year, while systemwide comparable revenue per available room decreased 59.2 percent and 56.7 percent for the fourth quarter and full year, respectively, from the same periods in 2019. The company approved 18,700 new rooms for development during the fourth quarter, bringing its development pipeline to 397,000 rooms as of Dec. 31, and opened 22,900 rooms in Q4, reaching the 1 million room milestone and contributing to 47,400 net additional rooms in Hilton's system for the full year. The company reported approximately 5.1 percent net unit growth from Dec. 31, 2019. 

Choice Hotels International, meanwhile, reported U.S. RevPAR of around 25 percentage points better than rivals in the fourth quarter. The gap between the second and third quarters in 2020 was around 20 percentage points, widening at the same time as RevPAR numbers improved across the board. Choice’s domestic RevPAR declines were running at around 60 percent as the pandemic first hit in March last year—while peers were down 80 percent. Choice revenues recovered to be down around 25 percent in the fourth quarter while competitors were down around 50 percent. In the current year to date, RevPAR has declined approximately 18 percent compared to the same period in 2020.