Impossible Not To Be Optimistic About Indias Future: Marriott International

Hotels have been flexing their muscles in the rates they have been charging around the world. How long do you think this will continue?

I travel, too, and I'm still trying to wipe my brow about the rates that I see when I take my own holiday, but for the health of the industry, the pricing power we've seen is really good news. But pricing is based fundamentally on supply and where we see the strongest pricing power is when there is compression in a market. The world is seeing the benefits of that compression. Anybody who follows or supports the travel and tourism sector should be elated after the challenges we had for the last couple of years in many destinations and markets.

India has grown in priority for many companies of late. Is it because China has largely been absent from the global market?

I am pleased with our pace of progress here and it is our fourth largest market and as I fly out tonight, the team will be putting their heads together to figure out how to make it our third biggest market in the world. We've got 140 hotels opened in India and another close to 70 in the pipeline. If you were to take that-- our aspiration -- that by 2025 between open and pipeline, we will have 250 hotels. I had the good fortune to spend almost an hour with your Prime Minister Narendra Modi yesterday. I left that meeting thinking maybe 250 is also not enough. When we think about the secondary and tertiary market opportunities across India, we've got a very long, very compelling runway in front of us. We've got the largest footprint and there are lots of reasons and resources available to try and extend that leadership position of the country. And that's exactly what we intend to do.

What factors are contributing to India's growth as a hospitality market?

The rapidly growing middle class here in India has an even more rapidly growing appetite to explore the country. And so I think there's lots of opportunity in the lower ranked chains to grow in the secondary and tertiary markets all around the country. And in fact that it was interesting to me that Prime Minister Modi was so focused on making sure we were looking for growth opportunities and those sorts of markets, of course will continue to grow in the primary markets as well. Across all quality tiers. So I think the answer is all of the above.

The short answer is that India has been one of the most compelling sub-market recovery stories for us.

I was elated to hear your Prime Minister talk about the infrastructure investment in airports and the orders that have been placed for wide-body aircrafts. There's no question that we're excited. No matter where I travel the world, this is particularly true in India, it is impossible not to be optimistic about the future of travel here.

Post covid for a sector that heavily relied on the predictability of demand, isn't it getting harder to guess and interpret new travel patterns?

Since the dawn of lodging, travel patterns have evolved and changed. You won't find a single hotel operator complaining about the fact that Sundays and Thursdays, which used to be softer shoulder days -- are the days that have recovered the most quickly. Hotel operators are thrilled because more demand has created more compression and more opportunities to increase prices.

For a long time now, hotel companies have been struggling with their relationship with OTAs, with the heavy commissions and whatnot. Is there a sort of status quo now?

I am quite sure that there was a period in history where the big brand companies and the OTAs had somewhat of an adversarial relationship. I don't see that anymore. I spend time with the CEOs of all the big OTAs and I think our relationships are in as good a place as they've ever been. They're a relatively modest portion of our business, they give us access to infrequent travellers who we might not be able to access otherwise. Their businesses are evolving too and we want them to give us more control of the guests, the experience, the ability to offer them member-only rates etc. And they've been accommodating.

Q: You were appointed in 2021, just around the time when Covid gave quite a rollercoaster ride to many businesses. Tourism and travel were arguably one of the worst affected. What happened with Marriott during this time?

In my 28 years here, I always thought that the company had a fairly conservative balance sheet. But I can assure you that during my tenure here, not once did anybody ever show me a financial model that said, what it would look like if business dropped over 90% overnight, and so it was an extraordinarily challenging period for the company. But the last few years have taught us beyond any doubt, the resilience of travel. People crave travel, they want to explore this amazing planet of ours and being locked down for some period of time almost acted as an accelerant in that desire to explore the world.

I also learned the wisdom of our asset-light business model -- that we don't own more than 20 properties around the world -- which allowed us to weather the storm.

Q: The Starwood transaction cost you $13.6 billion. Do you think you paid the right price for it?

So I liked $12 billion better than $13.6 billion, which was our original bid. But yes, I think for a transaction that large, you need a significant period of time to allow us to fully evaluate the financial metrics, and we will continue to do that.

It was such a complex transaction and we did it so quickly. We felt that (to grow), the scale and distribution were critical. Critical because we wanted to grow our loyalty program and among the ways you can strengthen and grow a loyalty platform is to have a broad enough footprint that your members feel no need to look outside your (hotel) ecosystem to satisfy their travel needs.

We also saw non-traditional competitors whether those were intermediaries, Online Travel Agencies (OTAs), or technology companies, and we knew with great certainty, one of the things that would position us to compete with both traditional and non-traditional competitors and have industry-leading sales. Starwood was a terrific vehicle to do that.

How does Gen Z traveller travel now? Do you see that they are different from their predecessors?

Gen Z travellers want edgy and interesting spaces. But it is a flawed strategy to try and tailor your product and your operating model to a single segment. We still have lots of 50, 60, and 70-year-old travellers who are loyal, active, passionate members of our loyalty program. A hotel portfolio must suit all travellers. And so the breadth of the portfolio allows us to not have to choose which segment we want to market ourselves to, but we can really offer a set of lodging choices that, if we're doing our job right, should appeal to the full range of the travelling public.

Are hotel companies still struggling with dwindling business travellers?

So often I get asked this question, ‘Is business travel forever impacted'? And my answer is always, I don't think 'travel' is forever impacted. I think small and medium-sized businesses and then the large multinationals are more than recovered and they represent on a global basis about 60% of our business transactions. We're about 90% recovered in Q3, and for the last year we were at about 90% recovery, but again, it's been slow and steady and consistent.

In your earlier interviews, you talked about the room service model not working and that you actually lose money in serving food orders. Is that correct even post covid?

That was a US-specific comment, given some of the labour markets and wage rates there. Because of the elevated wage rates, and the complexities of operating an effective room service operation in some of those markets, we are challenged to make it a profitable operation. But that's not necessarily the case in India because of the relative wage rates. I think it will never go away, in fact, it is my favourite part of staying in a hotel.