Marriott International president and CEO Anthony Capuano spoke at the Skift Global Forum in New York City about the hotel giant’s strategic growth, including its expansion beyond traditional hotel offerings into areas like luxury yachts and tented lodges.
Much of the discussion focused on the Marriott Bonvoy loyalty program, which Capuano describes as a central growth engine. The company wants to shift Bonvoy from a purely transactional platform to one that offers “unique experiences” beyond hotel stays, such as the chance to attend events like the Emmys or Formula 1. It’s signing partnerships with companies like Starbucks as well to make the program “stickier” and more appealing to younger and less frequent travelers.
The interview also covered Marriott’s technological overhaul and recent deals with MGM Resorts and Sonder.
Watch the full video of Capuano’s interview below.
Interview Transcript
O’Neill: The theme of Skift Global Forum this year is the potential of a Great Renewal in travel. Or is there going to be a reckoning? And, so we’re asking executives just a couple of big questions to get a sense of what has stayed the same. What changes from the pandemic have stayed the same, and what has gone back to what was before? So I’m wondering are your Marriott customers continuing to set aside a higher percentage of their disposable income on vacations than they were pre-pandemic?
Capuano: Thankfully, we have such great credit card partners in JP Morgan Chase and American Express, and on the long list of benefits of those relationships, we get really rich, real-time consumer spending data. And in a pre-pandemic world, you saw younger consumers shifting spending towards travel and experiences. The pandemic appears to have accelerated that trend across demographics. And so we continue to see that.
And I think with increasing confidence, I believe that to be, a fairly permanent shift. I think the only thing we’ve seen, I mean, certainly in the U.S. and in many other markets around the world, you’ve got this bifurcation of the consumer today. The lower-end, lower-income consumer is feeling some real stress from some of the economic, both micro and macro, trends. But the high-income consumer continues to prioritize travel and experiences. But even that high-end consumer, they’re absolutely traveling. They’re paying premium rates and are booking luxury hotels.
In Q2, we saw just a little bit of a pullback on ancillary spend: food and beverage, spas. It was still ahead year over year, but not quite as much as we had anticipated. And so we’ll watch that over the next couple quarters to see if it was a blip. Or as they’re being a little more judicious in their spending when they’re on the road.
O’Neill: Cool. That sounds like Marriott portfolio is a little bit insulated because you’re skewing more to the upper-half of that split, if there is a split emerging.
Capuano: Although I mean, just in the last 12 months, we’ve, announced our entry into the midscale tier, in many markets around the world. And I think that opens the aperture in terms of driving the growth of our loyalty platform. And I think it offers an affordable alternative for the lower income consumer that’s a little more budget-constrained but is still prioritizing travel.
O’Neill: And coming out of the pandemic. You talked a bit about “blended trip purpose.” You saw certain booking patterns at certain points of the week. Are you continuing to see lots of business plus leisure in above 2019 levels?
Capuano: Yeah we are. And it’s I, I’ve said a few times to me it’s great for business. The only downside, if there is one, it won’t allow us to report as precisely as we have historically that were 32.3% business transient, because unless you’re a special corporate customer, we’re not interrogating you at the desk. So if you check in for four nights, you may be two nights of business and two nights of leisure. But we continue to see strength in shoulder days of the week, which would suggest both that business transient customer and the group meeting attendee is tapping on a couple days pre and or post.
O’Neill: I would like to move big picture. You know, when I think about nine, ten years ago, Marriott was just a hotel a hotel company. And that was what you did. And it was a certain range. And your loyalty program was a bit of a sideshow for your road warriors compared to today. Now, Marriott Bonvoy is like a central engine of growth. And you, when you led up global development and now as CEO, M&A has been an important part of Marriott’s game plan. And so you have this scale that has enabled you to branch into other products. So you have luxury yachts, you have vacation rentals. So what might other new products be that you might add to this or any of the ways you’ve traveled around the world? Is there anything?
Capuano: Yeah, I mean, I think, we were talking in the green room. I was, did a tour of a number of our properties across East Africa over the summer and had the chance to visit our first tented lodge on the Masai Mara in Kenya. And I think that’s a real opportunity for us. We’re active in discussions on a few dozen of those types of projects.
O’Neill: What would happen? What would that be branded?
Capuano: First one is JW. We’ve signed a couple of other JW as well as Ritz-Carlton and some branded lodges as well. But I think back. When I ran my old job. I would often get questions about our development strategy. And in some ways, I thought it was the easiest question to answer because my response was always, you know, we want to do everything we can, strategically to keep our customers and our members within the Marriott ecosystem.
So how do you do that? You make sure you have the right product everywhere they want to go for every trip purpose. And I think that that fundamental philosophy has guided a lot of our thoughts about growth. You talked about M&A, which has certainly been an important part of the company’s growth story for the last decade or two. But I would like to think we’ve done a good job striking the right balance between organically developed platforms and M&A.
Thank goodness we have the appetite for M&A. It’s added iconic brands from Residence Inn to the Ritz-Carlton. But I’m equally pleased with the results we’ve had with some of the platforms we’ve developed organically, like Moxy and Autograph, for instance.
O’Neill: Just as some of the other competitors and players in the market, they sometimes do prefer to do their brands organically, and you feel you have the strength of being able to have to do both, right? So I think that scale plus loyalty offers an opportunity, or, like a gravitational pull of opportunities you may not have had before. One of them was the MGM Resorts deal, you know, with [CEO] Bill Hornbuckle, who we’ll hear from on-stage tomorrow. He gives a call to Marriott. He has a conversation about The Cosmopolitan, and, next thing you know, you’re talking about this deal. So, how has the partnership worked out for you?
Capuano: You know, it’s early, but I hope you’ll hear from the same from Bill. I think it’s exceeded our expectations, really, from almost every facet of the deal. Number one, I think we had a sense there was great cultural compatibility between the two companies, and it’s even better than we had anticipated. I think there was a strong expectation from both parties that the power of our revenue engines and the reach of the loyalty platform would drive meaningfully more valuable transient bookings. And if you listen to Bill on their call, that seems to be the case. It’s a pleasant surprise.
From MGM Resorts’s perspective, has been the power of our group sales network. And we had Cosmopolitan, obviously, which is a terrific hotel. But when you think about how we and all the big brand companies sell group, you’re selling multi-year rotations, and a majority of those groups have Las Vegas as a destination in the rotation. And with the stroke of the pen of that deal to all of a sudden have 5,000,000ft² of state of the art meeting space, 500 food and beverage outlets, and the access to entertainment and content that MGM controls given their respective scale. I think it’s been a real win on the group side as well.
O’Neill: You mentioned their assets on the entertainment side, so another component I think it’s less appreciated is for your Marriott Bonvoy Moments. You offer more than like 20,000 of these moments that are not stays at a hotel, but they’re experiences. So we do have a little bit of video. So what happened at the Bellagio?
Capuano: Yeah. So we had a Marriott Bonvoy Moments experience. And, this came from Bill, and we had one of our members who, with his fiancé, was able to program the entertainment of the music at the Lake Geo. And they had a beautiful dinner sitting lakeside. And, I think there may have been a proposal involved. Oh, wow. You know, but these sorts of experiences, whether it’s during the Las Vegas Formula 1 race, our partnership with the NFL, I was at the Emmys Sunday night in Los Angeles, and we had a number of Bonvoy members with us. They were able to to walk the red carpet.
Those are good indications of where we want to take the loyalty platform. I think most of the big travel companies, when they started in loyalty, it was a very transactional platform. It was intended for the earning and redemption of points for hotel stays. And while that’s still a critical pillar of the program, the ability to grow that program and offer these unique experiences, I hope will ultimately evolve the relationship with our members from a more transactional relationship to a more emotional relationship.
O’Neill: Yeah, I think that I think it makes sense to move away from just a points-based transactional to sort of educate customer engagement touches their interests.
Capuano: And really at all levels as well. As I tour around the world and I talk with our teams, one of the questions I’ll often ask, if somebody comes to the desk and they’re not a Bonvoy member and you offer them the chance to enroll. You know, it’s not like a credit card that you get, approached with at retailers. Why would somebody not sign up? And often the answer you get, particularly for younger or less frequent travelers, is it’s going to take me forever to earn enough points for a free stay. It’s just not worth it.
And so I think even at that level, trying to find partnerships that allow for more immediate gratification, as you will. And that was really the catalyst for the deal we did with Starbucks. So now you’ve got Starbucks’ 40 million [customers] linking accounts with Bonvoy and after a single stay, having earned enough points for free coffee. And so I think we’ll continue to look to leverage those sorts of partnerships. If you talk to Peggy Roe, who’s our chief customer officer, the phrase she uses is “you want the program to be stickier and stickier.” And I think these partnerships allow us to achieve that.
O’Neill: Yep, that makes sense. And that echoes what we heard earlier from my colleague Seth Borko when he was talking. Skift Research worked in partnership with McKinsey & Company on a report about putting experiential into travel and at the intersection. So mentioning loyalty and then scale, I mean, I think you’ve changed sort of the game. Marriott has set an example that all the other hotel groups have now sort of like cottoned on to about the power of loyalty. You have the largest, 210 million Bonvoy members. It’s almost less of a loyalty program and more like a small country. But, I think it’s interesting that scale. Plus it’s just giving you opportunities for, like, getting business development deals you couldn’t before. So in luxury. So let’s talk about in luxury how what are you feeling good about about to develop here at about 520 properties now.
Capuano: It’s well over 600. And about another 250 in the pipeline. Okay. And loyalty has there are so many facets to the importance of importance of luxury within the Marriott, ecosystem. I think, number one, just from a pure economic lens, it punches way above its weight. Our luxury portfolio represents about 10% of our global room inventory, but generates about 20% of our rest par related fees. So it’s a powerful economic driver.
Beyond that, when we talk to our guests and we talk to our members in many ways, that the breadth and the quality of that luxury portfolio is the payoff for that loyalty. You might have a road warrior who is spending 100 nights a year in our select brands, and the payoff is to take their family to the new St. Regis along key or the newly renovated, Ritz-Carlton Naples, or the soon-to-be St. Regis Pelican Hill.
And then I think the third facet is that luxury consumer is so focused on travel and experiences. Luxury is a great platform to start to, to develop these brand extensions. You mentioned The Ritz-Carlton Yacht Collection. The first yachts been in the water for two years. The newest ship, Ilma, just launched on its maiden voyage in Europe. And some of the statistics are early. Again, it’s two years.
O’Neill: I think we have some video of the Ilma. We can maybe run that.
Capuano: It’s, you know, you look at it, the the average age of our passengers is about ten years younger than the cruise industry at large. About 50% of the passengers we’ve accommodated to date have never been on a cruise or a luxury yacht. And that to loyalty. 75% of those that have booked are Bonvoy members. And so again, luxury. That’s one of the really intriguing facets is the ability to do these extensions.
O’Neill: And so but I would highlight out there in with all of those statistics that what was sort of a misnomer for me is like in the classic luxury hotel section, it’s less than 10% of booked room nights are loyalty redemptions. Your luxury hotels are bringing in business from pure luxury consumers?
Capuano: We are. And as I’m sure most of the folks in the room experienced, particularly as the pandemic started to ramp up, pricing power was one of the really compelling attributes of the recovery. And that pricing power was particularly strong in the upper upscale and luxury tiers.
O’Neill: Right now, you and other hotel groups have really maintained pricing power. And and in the luxury segment, occupancies, if you look at [CoStar’s] STRÂ [data] across the sector, I think this is below where they were like in 2019. If you’re, if that is going to be sort of like the ongoing strategy, do you expect luxury hotels to sort of get smaller because it doesn’t make as much sense [to have empty wings of rooms]?
Capuano: It depends on the brand. Ritz-Carlton tends to be a higher key count. They tend to lean a little more heavily on the group segment. A brand like St. Regis or Bulgari tends to be more transient-focused, so it’ll depend on the brand. But, you know, to me, what’s encouraging. I mean, you talk about the occupancy trends, but you look at our Q1 and Q2 statistics, with the exception of Greater China in Q2, every geography that we operate in saw strong red park growth, and that RevPARÂ revenue per available room]Â growth was a good and healthy mix of both occupancy and rate growth. And we saw RevPAR growth in every segment we saw, you know, group continues to be kind of a bright shining star. We saw 10% growth in group. Lots of folks had forecasted the dismal end of business trends in travel. Maybe it’s been the tortoise and the tortoise in a hare, but with steady improvement, small and medium-sized business demand recovered several years ago. The big multinationals are moving. But we saw 4% RevPAR growth in business, transient and even in leisure, which led the recovery and has seen 40% growth in RevPAR since 2019. We still saw an incremental 2% RevPAR growth in leisure, and so that continued strong growth trends and the mixture of that growth coming from both occupancy and rate, I think, is really encouraging.
O’Neill: And it’s really encouraging about the resilience. So you’re doing a major tech overhaul, three core systems. On the particular issue of being able to get better at selling more than just a hotel room: what makes you optimistic?
Capuano: Yeah, I think as you mentioned, we’re replatforming our central reservation system, our property management system and our loyalty platform. And on central, as you think about the long list of products and services that we want to make available to our guests, of course, rooms by food and beverage spas, residential, in some cases, experiences, all of those things on today’s platform require a bit of of searching right to find. And the the travel consumer has become so much more sophisticated. Our friends at Amazon have done a terrific job training them, and they are accustomed to going to a shopping site, selecting from multiple categories and dropping them in a single basket. And this new reservations platform will allow the consumer to do exactly that. So many of the observations folks have had about the positive impact of this technology overhaul has focused on margin enhancement, and to be sure, there will be margin enhancement. But I think there’s not enough conversation about the revenue upside that exists from, in a seamless way, being able to showcase and merchandise all of the products and services we make available.Â
O’Neill: Cool. We have an audience question. Marriott has a target to be net zero by 2050. How close are you to getting there?
Capuano: But we’re about where I would expect to be 26 years out. I think, but we have made some significant reach, some significant milestones, not the least of which was having our science-based targets, approved by the SBTI, which I think was a really important but we have made some significant reach, some significant milestones, not the least of which was having our science-based targets approved by the SBTI, which I think was a really important threshold because of that model, you know, this involves bringing our partners along on this journey. The good news is, every constituent that we serve, our associates demand a focus on climate. Our own, our community demands a focus on client climate and our customers. You know, 15 years ago, there might have been a handful of group customers that would want some information on our progress as part of the booking process. Today, there’s a handful that don’t insist, not only on seeing our goals, but on seeing tangible progress against those goals.
O’Neill: I think it’s got to be motivating when, like you associates are actually interested. I have a question about your recent deal with Sonder. So when I talked to some people and I think maybe in the audience today might be in two camps, people who are really into hotel development. Several of them have said, to me,”It’s like a genius-level deal, like they’re getting this franchise and they’re only paying like about $2,000 a key or something, which means it’s very affordable. And Sonder has a footprint that gives [Marriott] really great locations.” But then there’s another group of people who look at Sonder, and they’ve left them on the side of the road for dead because they had trouble, like, putting together a quarterly income statement. I personally, I think Francis as a CEO is, you know, sort of like a generational leader, but the company has had some struggles. How should we think about this Sonder deal?
Capuano: I mean, to me, I think both of those perspectives have some merit. We did lots of diligence, not just about the space and the customer segment that really gravitates towards that sort of product. What about the financial health? And as I’m sure you read in the press, there was lots of financial engineering that moved in parallel to our transaction. That gave us confidence about the financial viability of Sonder. I really think about it as just the next step in what has been a pretty remarkable story in Marriott’s history, in the extended-stay space dating back to our acquisition of Residence Inn decades ago. We’ve developed that expertise. We’ve expanded that expertise across multiple price points, multiple products, multiple length of stay. And I think this is part of that natural evolution.
O’Neill: Tony, I have a personal question. I’ve always been curious. So when your parents like, travel around and they go to a Marriott hotel, do they ever go to the front desk and sort of say like, you know, “Tony’s our son. Can we get a little something special?”
Capuano: I hope not. You know, but I’m named after my father. And so, years ago, my daughter had an internship in New Orleans. And so we took my parents down to visit for a few days, and we stayed at the Ritz Carlton, right there on Canal Street. And my parents arrived a day early. And so when we arrived, we went into the club lounge, and my dad was sitting there like the king of the world drinking Sazeracses. And he said, ‘Boy, they are so nice to me.” And maybe they thought he was me, so. But no, they are, avid travelers. And, we try to get them around to see as much of our product as we can.
O’Neill: That’s wonderful. We have an audience question. What is the largest untapped opportunity for Bonvoy to drive growth?
Capuano: It’s a good question. I say, you know, I think it’s just recognizing that it is our umbrella brand. We’ve got a portfolio of more than 30 brands and Bonvoy. Is this this really powerful platform that allows us to expose travelers who are at a wide variety of, of the stages of their traveling lives to help them understand the breadth of the portfolio.
And so enrollment is, of course, critically important, getting those members active and getting that second and third and fourth stay, I think is a huge opportunity. But really, it’s driving Bonvoy penetration. In the second quarter earnings call, we talked about the fact that both globally and in the U.S., our biggest market, we reached all-time high levels of penetration. We’re now 65% globally and 71% in the US. And I had an analyst ask me once. “What’s your target?” I said, why would I put a cap on it? Right. It’s such a powerful driver. I was in, South Korea a few months back, and I visited maybe the most beautiful J.W. Marriott I’ve ever seen. It’s a resort on Jeju Island.
And as I and, was preparing for the visit, I was looking at the operating statistics of the hotel, and everything was off the chart except Bonvoy enrollments. And so I went to the general manager, and I said, the hotel’s doing fabulous, but is there is there some impediment to driving enrollment volume? And he got a big smile on his face. He said, “We’re trying, but we’re running a 97% Bonvoy penetration.” So virtually everyone that shows up at the hotel is already a member. And, you know, in some ways that should be our aspiration.
O’Neill: Cool. Well, Tony, I learned a lot from this. Thank you so much.Â
Capuano: My pleasure. Thanks for having me.
