WEBVTT - Bloomberg Surveillance: Anthony Capuano on Travel Industry

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>The travel sector shoving a little bit more optimism. Tony Capawana,

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<v Speaker 2>the president and CEO of Marriott, saying this on the

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<v Speaker 2>latest earnings call. The demand for all types of travel

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<v Speaker 2>remained strong even as the rebound impact from the pandemic

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<v Speaker 2>has waned. A place to say that, Tony joins us

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<v Speaker 2>now and he'll be with us through the at Tony,

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<v Speaker 2>good morning to you. Good morning eighty eight hundred properties,

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<v Speaker 2>one hundred and thirty nine countries. You've got a decent

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<v Speaker 2>line of sight into the global consumer. The story we've

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<v Speaker 2>heard a lot about is US strong, rest of the

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<v Speaker 2>world not so good. Do you see it the other

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<v Speaker 2>way round in your business?

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<v Speaker 1>Yeah, I don't know that.

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<v Speaker 3>I would say the US is weak. I think the

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<v Speaker 3>US has reached a normalized environment a little more quickly.

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<v Speaker 3>If you look at the experience we had in our

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<v Speaker 3>business last year, we saw a global RevPAR revenue per

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<v Speaker 3>available room, which is the metric that we use to

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<v Speaker 3>evaluate the strength of the business increase about fifteen percent,

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<v Speaker 3>single digit growth here home in the US, strong double

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<v Speaker 3>digit growth internationally. Now, some of that is because those

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<v Speaker 3>markets opened a little more slowly, so they benefited from

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<v Speaker 3>easier year over year comparisons. But even as we look

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<v Speaker 3>into twenty four, we guide it on our earnings called

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<v Speaker 3>three to five percent global RevPAR growth this year again

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<v Speaker 3>disproportionately stronger international.

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<v Speaker 2>Let's sit in international just for a moment. So UK

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<v Speaker 2>economies contracting, Germany Agobian recession, Japan in one, China struggling.

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<v Speaker 2>You don't see it in quite the same way, and

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<v Speaker 2>I find that really really interesting. And you seeing a

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<v Speaker 2>bounce back, then what you actually see in which region

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<v Speaker 2>a more constructive on.

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<v Speaker 3>So Asia broadly is really strong from a travel perspective.

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<v Speaker 4>Right now.

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<v Speaker 3>We think about Asia in two buckets, if you will,

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<v Speaker 3>what we call APEC Asia Pacific excluding China, and then

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<v Speaker 3>Greater China. Greater China's fully recovered to pre pandemic levels,

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<v Speaker 3>although interestingly largely on the show of domestic demand. If

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<v Speaker 3>you look at cross border air airlift, it's only about

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<v Speaker 3>sixty or seventy percent recovered to pre pandemic levels. So

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<v Speaker 3>we actually think there's still a fair amount of upside

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<v Speaker 3>to the China recovery story as more and more cross

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<v Speaker 3>border travel recovers. I'll be in China in two weeks,

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<v Speaker 3>and I'm anxious to see how it feels in terms

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<v Speaker 3>of international travel. I was there maybe nine months ago

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<v Speaker 3>and it felt very domestic. I was in markets like

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<v Speaker 3>shang Sha and Shengdu and felt like I was one

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<v Speaker 3>of the few international travelers. So it'll be quite interesting

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<v Speaker 3>when you look at the Apech markets. They are booming.

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<v Speaker 3>Thailand is very strong, Singapore is very strong. I was

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<v Speaker 3>just in Vietnam, really strong, both from a development perspective

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<v Speaker 3>and an inbound travel perspective.

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<v Speaker 1>And the last.

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<v Speaker 3>Comment I would make, You've seen China create some visa

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<v Speaker 3>free travel zone across the APEC region and that's really

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<v Speaker 3>impacting demand patterns.

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<v Speaker 2>I have to go there.

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<v Speaker 1>We talk about banning iPhones. Is there a problem with

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<v Speaker 1>staying at a Marriotte hotel in China?

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<v Speaker 3>No, you know, we have It's our second largest market.

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<v Speaker 3>We just opened our five hundredth hotel in China. We've

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<v Speaker 3>got another four hundred hotels in the pipeline behind that.

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<v Speaker 3>The vast majority of our portfolio is China owned, the

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<v Speaker 3>vast majority of our workforce is Chinese, so we see

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<v Speaker 3>great strength in our.

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<v Speaker 1>China business moving forward. I am curious about where you

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<v Speaker 1>see the demand coming from I know you've fit expanding

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<v Speaker 1>into mid scale. We said it sale mid scale types

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<v Speaker 1>of accommodations. Is that because you see the growth in

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<v Speaker 1>actually lower income and media income families and not as

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<v Speaker 1>much in the luxury sector.

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<v Speaker 3>That's a good question. My view is it's not binary.

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<v Speaker 3>We have the largest luxury portfolio in the industry. We

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<v Speaker 3>have more than five hundred luxury hotels globally, another two

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<v Speaker 3>h RIDD and fifty in the pipeline behind that. We

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<v Speaker 3>saw a revenue per available room in the luxury portfolio

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<v Speaker 3>actually grow ten percent. I was listening to the prior

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<v Speaker 3>segment and hearing about trade down. We're not seeing that

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<v Speaker 3>from luxury. Luxury continues to be a really strong segment

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<v Speaker 3>for us. Our entry into mid scale is really intended

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<v Speaker 3>to open the aperture. Our objective simply is to try

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<v Speaker 3>and capture as broad a segment of the traveling public

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<v Speaker 3>as possible, and entry into mid scale just allows us

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<v Speaker 3>to capture a broader segment of the traveling.

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<v Speaker 2>Can I ask you what is mid scale? Can you

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<v Speaker 2>describe that? What is the difference between sit mid scan

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<v Speaker 2>and luxury and what you call the other end of

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<v Speaker 2>the scale.

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<v Speaker 3>So luxury is obviously from a physical product perspective and

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<v Speaker 3>a service delivery perspective, everything you could hope for mid

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<v Speaker 3>scale simply put cheap and cheerful, right, simple, high quality facility,

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<v Speaker 3>but simply delivered minimal services g bed, great shower, great

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<v Speaker 3>Wi Fi, but relatively limited services.

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<v Speaker 4>When you're looking at that mid scale, your competitor IHD

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<v Speaker 4>was on yesterday and talked about ten next ten year projections.

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<v Speaker 4>US middle class will grow one hundred million, China's middle

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<v Speaker 4>class two hundred million. When you look at building out

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<v Speaker 4>the middle class around the world, where is it is

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<v Speaker 4>that in China?

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<v Speaker 3>It's everywhere. I mean, I think across Asia. You see

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<v Speaker 3>really strong growth in mid scale. You see it here

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<v Speaker 3>in the US, and that consumer we want to get

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<v Speaker 3>them exposed to the breadth of our portfolio. Early. We've

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<v Speaker 3>got nearly two hundred million members in our loyalty program Bonvoy.

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<v Speaker 3>By entering the mid scale segment for the first time,

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<v Speaker 3>it gives us the ability to show a segment of

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<v Speaker 3>the traveling public the breadth to the portfolio, who perhaps

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<v Speaker 3>isn't aware of the thirty brands that make up Marriott today.

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<v Speaker 1>All I can say is that side of the table

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<v Speaker 1>is the luxury side, and this is a fearful side.

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<v Speaker 1>See I can thank you all.

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<v Speaker 4>Yeah, exactly.

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<v Speaker 2>Sort of a question. I love it sounds not here

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<v Speaker 2>anymore of a mainstam.

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<v Speaker 1>Well, I mean I'm wrong.

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<v Speaker 3>I know I'm missed.

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<v Speaker 2>Talking about me at all. I'm not gone. Let's move on.

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<v Speaker 1>There is this question though, about what Karen Dawson was saying,

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<v Speaker 1>which is, we are seeing delinquencies tick up, we are

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<v Speaker 1>seeing retail sales come in weaker than expected, we are

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<v Speaker 1>seeing signs of cracks on the margins. Are you not

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<v Speaker 1>seeing it? I mean, yes, because you're offering a wonderful

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<v Speaker 1>product and etcetera, etcetera. But is it partly because people

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<v Speaker 1>continue to prioritize travel in a way that they just

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<v Speaker 1>didn't before the pandemic.

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<v Speaker 3>I think that's exactly right. One of the great benefits

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<v Speaker 3>of our credit card partnerships with JP, Morgan Chase and

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<v Speaker 3>an American Express is we have really deep insights into

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<v Speaker 3>that consumer spending and even prior to the pandemic, what

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<v Speaker 3>we saw, maybe with younger demographics, was a shift towards

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<v Speaker 3>or away from spending on hard goods towards spending on experiences.

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<v Speaker 3>It appears when we look at that data today, the

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<v Speaker 3>pandemic acted as an accelerant to that trend across demographics,

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<v Speaker 3>and as a result, now perhaps the consumer saw or

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<v Speaker 3>learned during the pandemic. I didn't buy any purses, I

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<v Speaker 3>didn't buy any watches, I didn't buy any shoes, and

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<v Speaker 3>I didn't miss it that much. But I sure missed traveling,

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<v Speaker 3>and so I've prioritized that disposable income I have, and

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<v Speaker 3>I am seeking the vacation that I missed, the family reunion,

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<v Speaker 3>the wedding, the trip with friends, whatever it might be.

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<v Speaker 3>And so we really don't see that decline in travel

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<v Speaker 3>spending in the data. We just reported fourth quarter and

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<v Speaker 3>full year earnings highest Ebadah in the history of the company.

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<v Speaker 3>As I mentioned, fifteen percent RevPAR growth, really extraordinary numbers,

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<v Speaker 3>and what was encouraging to me, the strength we saw

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<v Speaker 3>was across geographies and across demand sectors.

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<v Speaker 2>I missed the service. Can we talk about that. I'm

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<v Speaker 2>not talking about Marriott now, just for the record, I'm

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<v Speaker 2>talking about hotels in general. You go in, the towels

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<v Speaker 2>are there, they might be on the floor. I'm usually

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<v Speaker 2>good about that. I'll put that on the side, I

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<v Speaker 2>don't make too much work for people. But then there'll

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<v Speaker 2>be this little card that it will say something like

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<v Speaker 2>we're going green, so we're pulling back on washing things.

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<v Speaker 2>And I say the same thing every single time I'm

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<v Speaker 2>in a hotel room. Are we using going green as

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<v Speaker 2>an excuse to provide less service than we used to

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<v Speaker 2>at hotels? Yeah?

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<v Speaker 3>I think that would be a fair view if you

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<v Speaker 3>didn't have optionality. And so if your view is I

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<v Speaker 3>want fresh towels every day, I want my bed remade.

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<v Speaker 2>Ever, we can still go on for it.

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<v Speaker 3>You can absolutely still get them. But what we can't

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<v Speaker 3>hear from our customers more and more is they want

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<v Speaker 3>the ability to contribute sustainability and have sustainability be a

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<v Speaker 3>part of their travel.

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<v Speaker 2>At the high end. Well, the makes we stay board interesting,

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<v Speaker 2>all right. I rule myself out personally. I think that

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<v Speaker 2>when I go and you spend that much money.

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<v Speaker 4>You towels are the Saint regions.

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<v Speaker 2>No, I'm not getting too that. If you go to

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<v Speaker 2>a hotel, five star hotel, spend real money to go

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<v Speaker 2>and stay there, you want fresh towels, fresh sheets, don't you.

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<v Speaker 2>Isn't that whole part of the experience.

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<v Speaker 3>I don't need to go into how often do you

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<v Speaker 3>watch your tower home.

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<v Speaker 2>Home every couple of days, of fresh towel every couple

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<v Speaker 2>of days.

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<v Speaker 1>Honestly, I can reuse my talent because I feel like

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<v Speaker 1>I'm obligated to.

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<v Speaker 2>It's the conversation I didn't expect, But ultimately I'm getting

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<v Speaker 2>to the point about service. Don't you feel like service

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<v Speaker 2>is pulled back since the pandemic?

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<v Speaker 1>Without a doubt it has been, and it's been sort

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<v Speaker 1>of an open non secret because frankly, there wasn't the staff,

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<v Speaker 1>which raises this question of whether you can hire enough

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<v Speaker 1>people and what kind of people you can retain over

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<v Speaker 1>a longer period of time.

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<v Speaker 2>It's a good question we can get into.

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<v Speaker 3>Although one of the things that's been interesting when you've

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<v Speaker 3>watched the employment reports over the last number of quarters,

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<v Speaker 3>you see that hospitality has been a disproportionate contributor as

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<v Speaker 3>our industry sector.

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<v Speaker 2>Staff's very true, and I'll say this for the record,

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<v Speaker 2>stand at my house is not one thousand dollars a

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<v Speaker 2>night Tony caf one of International