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Speaker 1: Demand is sustainable and is going to continue. We see

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Speaker 1: just a structurally higher level, particularly of leisure demand. You

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Speaker 1: know a couple of reasons for that. One hybrid work

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Speaker 1: makes every weekend a holiday, gives people more time. If

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Speaker 1: you're working in the office three days a week, you

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Speaker 1: have more time to travel. I also think coming out

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Speaker 1: of COVID it's spending two years on lockdown, people take

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Speaker 1: will no longer take for granted their ability to travel

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Speaker 1: and experience.

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Speaker 2: Executives in the travel and leisure experience sector have been

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Speaker 2: incredibly happy recently. That was Scott Kirby, United Airlines CEO

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Speaker 2: speaking with Guy Johnson over at his temple at the

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Speaker 2: IADA General Meeting.

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Speaker 3: Everyone is a bull there.

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Speaker 2: Also, everyone is a bull when you look beyond at

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Speaker 2: the other related.

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Speaker 3: Industries, including lodging.

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Speaker 2: With me today is Peter Shearer of Academy Securities.

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Speaker 3: Tom and John both off today.

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Speaker 2: We were just talking about how you've been traveling a

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Speaker 2: lot more and that people want to see you.

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Speaker 3: That hasn't faded, has it, No, not at all.

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Speaker 4: So I think I'm traveling for two or three days

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Speaker 4: a week for the next four to five weeks, and

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Speaker 4: I like that. We go to see clients somes by train,

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Speaker 4: some's driving. Definitely flying, but we're out on the road

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Speaker 4: and I love it. Clients like it.

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Speaker 2: And basically the person sitting next to you is just

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Speaker 2: starting to smile bigger and bigger as you speak, saying,

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Speaker 2: all right, this is what I like to hear. It's

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Speaker 2: Tony Capuano, President and CEO of Marriott International. Things have

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Speaker 2: been pretty upbeat. Does it continue or does it sort

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Speaker 2: of see an end date? Do people start pushing back

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Speaker 2: against the cost?

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Speaker 5: I don't think so. I mean, what we've really seen

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Speaker 5: the last couple of years is the resilience of travel,

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Speaker 5: and we've seen it across segments and across borders. When

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Speaker 5: we reported earnings at the end of the first quarter,

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Speaker 5: we saw recovery across every segment. Of course, leisure continued

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Speaker 5: to be strong. It was the leisure segment that brought

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Speaker 5: us out of the pandemic. But group has been remarkably strong.

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Speaker 5: In fact, when we look at the remaining three quarters

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Speaker 5: of the year, we're up twenty six percent year over

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Speaker 5: year in group revenue and business transient. Many had predicted

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Speaker 5: sort of the demise of business travel, but you made

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Speaker 5: the point. Increasingly folks are recognizing or reminding themselves to

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Speaker 5: the power of getting in front of their clients, the

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Speaker 5: importance of immersing new employees in their company culture. And

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Speaker 5: as a result, we're seeing steady quarter over quarter improvement

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Speaker 5: in business transient demand as well.

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Speaker 2: Is it everywhere for business or places like say San

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Speaker 2: Francisco not seeing any kind of revival because of some

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Speaker 2: of the outflow there.

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Speaker 5: Well, certainly markets like San Francisco are seeing slower recovery,

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Speaker 5: but even there, I was listening during the break to

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Speaker 5: Scott Kirby's comments this phenomenon of blended trip purpose I

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Speaker 5: think serves markets like San Francisco really well, This idea

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Speaker 5: that through the pandemic, more and more travelers learned they

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Speaker 5: can work from almost anywhere where. We really saw this

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Speaker 5: in the datas we look at recovery by day of

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Speaker 5: the week, and what was remarkable was that two days

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Speaker 5: of the week that were covered most rapidly, we're Sunday

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Speaker 5: and Thursday, which pre pandemic were really shoulder days. And

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Speaker 5: what that tells us is with increasing frequency is business

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Speaker 5: and group travelers are tacking on a couple leisure days

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Speaker 5: pre and or post trip, and that really has the

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Speaker 5: potential to help markets even like San Francisco, which have

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Speaker 5: some leisure appeal.

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Speaker 3: Peter, I see you nodding if you do that too, Yeah.

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Speaker 4: I think that makes perfect sense. I mean I try

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Speaker 4: not to quote unquote take many days off, because you

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Speaker 4: can work from your hotel room for an hour or two.

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Speaker 4: We've done some Bloomber interviews from hotel rooms, been on

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Speaker 4: the road, so you can do a lot. I think

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Speaker 4: you set up and you get these extended days, and

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Speaker 4: especially with the air travel, as you point out earlier,

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Speaker 4: sometimes is a bit painful. It's much easier if you're

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Speaker 4: going to go somewhere for four nights instead of just

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Speaker 4: two nights or these day trips. So we try and

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Speaker 4: do it much of that. I think it makes perfect sense.

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Speaker 4: And I was interesting without the Sundays and Thursdays.

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Speaker 2: Well, but how much are you able to increase pricing then,

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Speaker 2: based on the cost all in of traveling, which has

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Speaker 2: gotten so.

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Speaker 5: I mean compression drives pricing. And so what we see

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Speaker 5: is in leisure day destinations and some of the urban

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Speaker 5: destinations that have a strong leisure orientation, like New York,

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Speaker 5: we see a lot of compression and as a result

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Speaker 5: of that, compression, we see strong pricing power in a

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Speaker 5: market like a Chicago or a San Francisco, where there's

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Speaker 5: less compression, the pricing power is not as strong.

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Speaker 2: Are there markets that you're seeing expand much more dramatically?

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Speaker 2: I know that we were talking about, for example, in Florida,

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Speaker 2: how much hotel prices, And I know experience from experience

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Speaker 2: that when I've tried to go visit family down there,

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Speaker 2: it's a new experience when it comes to the cost

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Speaker 2: of it. I'm wondering, though, is that continuing. Are you

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Speaker 2: starting to see in leveling off there?

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Speaker 5: You're seeing a bit of leveling off, but to the

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Speaker 5: benefit of some of the international destinations. So just this

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Speaker 5: morning I was reading some statistics. If you look at

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Speaker 5: outbound US to Europe airline bookings for the summer, they're

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Speaker 5: up nearly fifty percent year over year. And what that

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Speaker 5: suggests is a lot of US travelers who might have

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Speaker 5: gone to destinations like South Florida or southern California last summer,

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Speaker 5: with increasing frequency, they're going to France and Italy and Greece.

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Speaker 5: And so that's maybe eliminating a little of that compression

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Speaker 5: pressure in South Florida, which will moderate pricing a bit,

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Speaker 5: how much.

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Speaker 2: You're trying to cater to the high end, which has

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Speaker 2: been perhaps recovering even.

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Speaker 5: More so, luxury has been exceedingly strong. But we have

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Speaker 5: a portfolio of thirty one brands across multiple price tiers

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Speaker 5: and price points. So in the luxury tier we continue

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Speaker 5: to see pretty strong pricing power. But that's just one

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Speaker 5: tier that we operate in. In fact, just last month

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Speaker 5: we acquired a brand called City Express, which signaled our

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Speaker 5: entry into mid scale for the first time, which is

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Speaker 5: now the lowest price tier that we operate in.

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Speaker 2: Peter, I'm wondering from your perspective if you've been seeing

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Speaker 2: a drop off.

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Speaker 3: With perspect to the.

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Speaker 2: Housekeeping some of the other amenities around the experience of

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Speaker 2: saying I have not.

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Speaker 4: Actually I've really enjoyed it. I think we'll continue. I

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Speaker 4: had a great trip down in Argentine. We did stay

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Speaker 4: at one of your hotels on those other places, and.

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Speaker 3: Did you pay him off before coming in?

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Speaker 4: What does strike mean we've been talking about, is are

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Speaker 4: you seeing resurgents in Asia? Travel to or travel to Asia?

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Speaker 4: That's something I've been hearing a little bit about.

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Speaker 5: Yeah, we are the and you almost have to look

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Speaker 5: at it China and the balance of Asia mainland China

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Speaker 5: is fully recovered, but again driven largely by domestic Chinese travel.

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Speaker 5: International airline seats into mainland China are only about forty

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Speaker 5: percent recovered to where they were pre pandemic, but the

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Speaker 5: balance of Asia Pacific, particularly markets like Japan Thailand, are

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Speaker 5: booming right now. In fact, I was looking at some

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Speaker 5: statistics somebody asked me a question about what are the

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Speaker 5: most popular summer destinations and the list that I looked at,

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Speaker 5: some of the destinations you would expect Italy, France, Greece,

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Speaker 5: but Japan was in.

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Speaker 3: The top five. Are there any markets you're getting out.

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Speaker 5: Of, Well, we suspended all our operations in Russia a

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Speaker 5: couple of years ago, but other than extreme circumstances like that, no,

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Speaker 5: We operate in one hundred and thirty eight countries today

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Speaker 5: and in our five hundred thousand room pipeline there are

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Speaker 5: another twenty new countries to build.

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Speaker 2: On Peter's question, there is this issue of doing business

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Speaker 2: in China, and we talked to every executive about how

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Speaker 2: complicated that is as an American company going into the

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Speaker 2: biggest rival right now. Economically, how much can you operate

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Speaker 2: freely there. How much conviction do you have in the

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Speaker 2: fact that the Chinese Communist Party will allow you to

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Speaker 2: do your business?

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Speaker 5: So our business model I think serves us well. There

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Speaker 5: we have eighty five hundred hotels globally, we only own

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Speaker 5: twenty of those physical assets. So our business model is

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Speaker 5: one of principally managing enfranchising hotels. Of the roughly five

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Speaker 5: hundred hotels we have in China today, almost the entirety

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Speaker 5: of that portfolio is owned by Chinese companies, and so

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Speaker 5: I think that serves us well, even against the backdrop

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Speaker 5: of some of the complexities of doing business.

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Speaker 2: Before we let you go, how much longer can this

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Speaker 2: trend of yolo and let's travel around the world really last?

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Speaker 5: You know, I don't see it ending anytime soon. I

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Speaker 5: think there was pre pandemic, a shift away from consumption

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Speaker 5: of hard goods towards investment and experiences, and if anything,

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Speaker 5: the pandemic served as an accelerant and caused that trend

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Speaker 5: to spread. A call across generations.

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Speaker 2: Tony Capowano of Marriott, thank you so much for being

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Speaker 2: with us.

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Speaker 3: I really appreciate it. BA