Marriott International President & CEO Tony Capuano Talks Consumers
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HE IS WITH MARRIOTT. HE IS MARRIOTT. HIS LEADERSHIP THERE WITH A LOT OF STRESS HAS BEEN WONDERFUL. ARE YOU BEYOND -- TONY CAPUANO, ARE YOU BEYOND COVID? IS YOUR WHOLE SHOP REMOVED FROM 2020? YES. YEAH. AND WITH INCREASING FREQUENCY, WE'RE NOT MAKING THOSE 2018, 2019 COMPARISONS. RIGHT. REALLY LOOKING FORWARD. WE'RE TALKING A BARBELL ECONOMY. YOU GUYS -- YOU'RE THE EPITOME OF IT. EXPLAIN --

how you're moving seats and beds in venice at the gritty palace versus a marriott that's really low and low budget in some state in the middle of nowhere what's that barbell look like right now so certainly in the u.s but in many markets around the world we see this bifurcation of the consumer and so we're trying to leverage both ends of the of the chain scales

We have the industry's largest luxury portfolio, including your favorite, Gritty. I'm well aware of this, yeah. And we continue to double down and accelerate our growth, and that consumer has this ravenous appetite for travel. In fact, in Q1, the luxury tier saw the strongest occupancy growth.

At the other end of the income spectrum, that lower income household still has an appetite for travel, but at a much lower price point. And that's why over the last two years, you've seen us push into mid-scale. I think on your last earnings call, you talked about the kind of shock and awe that the travel industry felt during the first few months of this administration. Situate your business in what we're all experiencing here, the uncertainty about where this trade war is headed,

what deals might get done, where just the effect that that's having on consumers as well when it comes to sentiment just about the economy more broadly. So actually January, February, exceedingly strong. We had very high hopes. That shock and awe, if you will, was really March. Our industry thrives in times of stability and high consumer confidence. And so when you see the U.S. hit a 52-year low in consumer confidence, it's worrisome to be sure.

I think what's offsetting that a bit for our business is this shift we saw begin pre-pandemic but accelerate post-pandemic, and that's a consumer preference to spend disposable income on travel and experiences versus consumption of hard goods. Had you a year ago said to me the U.S. is going to hit a 52-year low and that we'd still see 4% plus REVPAR growth,

That would have been hard to reconcile, but that's what we're seeing in the business. What are you seeing in the confidence data yourself? So I mentioned the uncertainty. Are there indications here that consumers are seeing through this madness surrounding tariffs that they're feeling more confident enough perhaps to book a few months out? So you really need to look by demand segment. The segment that has the longest lead time is the group segment, and that's where we're seeing the deepest strength. In Q1, Revpar globally in group was up 8%.

In our two transient segments, leisure and business transient, that has a much, much shorter booking window, sub 21 days. We saw about 2% Revpar growth in both of those segments. So a little harder to look too far into the future in those segments. The Chief Executive Officer of Marriott is with us right now, Tony Capuano. It's a lovely visit once, even twice.

A year, the persistency of the stock performance over the last 10 years, Marriott has enjoyed, ready for this, 14.7%.

per year. And that's a lot of Bonvoy points. I'm impressed with that. Might get you one full night at Gritty Palace. Good morning, Mrs. Keynes. Don't listen to young Capuano. Help me here with 155,000 employees, and I assume you've got a lot more in leases and all that. The labor dynamic across America, forget about Venice.

How hard is it to retain, to employ and retain labor, right? I actually think we're in a better place than we were a couple years ago. I remember coming in to speak to you as the recovery had just started, coming out of the pandemic. The pandemic had rattled the labor base, who prior to the pandemic viewed the travel sector as a bit of a safe harbor, that there'd always be jobs, there would always be growth. You saw a lot of folks leave that sector.

Most of them have come back now. When you look across our U.S. business, we're never at full employment, given the nature of our business. But the number of vacancies we have is actually slightly below where we were back in '18 and '19.

Tom's joking about the Bonvoy points, but let me ask you about what the magic of those are. And so being here and traveling for work, it's funny, I'll go out with crews who are just such loyal adherents to that. I'll stay at one hotel, they'll stay at another because they're so keen on it. What is the magic of Bonvoy? How has it been as successful as it has been? It's evolving. I think for all the travel companies, when they started these loyalty programs, they were pretty rudimentary. You earned points for a stay. Ultimately, you redeemed those points for a redemption stay.

Certainly at Marriott, we're evolving the platform in really meaningful ways. We're offering different adjacent experiences, whether that's Marriott homes and villas, the Ritz-Carlton yacht collection, and we're creating once-in-a-lifetime experiences. So we were a big sponsor of the Taylor Swift Eras Tour. We are the official hotel partner of the NFL. You were a direct sponsor of the tour? Yes, we were.

I'm just thinking of Amy Woo Silverman over at RBC Capital Markets. That explains why Taylor waved to her. She was staying at a Marriott. There you go. So like the NFL, it's like linking into corporate partners. Exactly. It's working? It's working really well. And so for our members, your question specifically was what drives that loyalty. In many ways, it's access to these once-in-a-lifetime experiences.

to be in the first couple rows of a Taylor Swift concert, to be on the field at the Super Bowl with the NFL, to be in the Mercedes paddock at an F1 race. And they're also not all lifetime tentpole moments,

partnerships with Uber and Starbucks give some more immediacy to redemption opportunities. Yeah, but the reality is for a lot of America, away from I got to go to the Sphere to see the Eagles, whatever, is they're out of money, they got to take the brat to college, and they need to stay in a reasonably priced hotel. Can you compete with all of those... Absolutely. ...Motel 6s out there, just to use the iconic name? How do you compete with Motel 6s? Yeah, I think that's why we moved into the mid-scale tier.

When we thought about building the Bonvoy membership, when we thought about opening the aperture to bring new guests into the Marriott ecosystem, we said today we didn't, this is two years ago, we don't compete in the mid-scale tier, and we ought to develop some platforms. So we bought City Express in Mexico, which we've brought to the U.S.,

We organically developed an extended stay mid-scale product called Studio Res. We opened the first one yesterday down in South Florida. And so we'll continue to grow that platform almost as a entry portal for folks that are just starting their travel journey or to your point, Tom, that have a much more modest budget. I got a memo in the control room from one of Gur's people. You gotta bring it up. Okay, the Nolan School of Hotel Administration high above Cayuga's Waters.

When you were in school there, I mean, is it just sort of like they're just like hotel people and they're really not in college? Come on. Well, I was arts and sciences but had a lot of envy for the hotelies because they had great internships every summer and they would go to places like Hawaii and Switzerland or wherever. The Gritty Hotel. When you go, do you stay at the Statler or do you stay at the Marietta and the Collins? Of course. No, I stay at the Statler. You do, okay. He's a loyalist still. I am a loyalist. You know, we're a two-generation hotel school family. My daughter graduated from there two years ago. Is that right? Very cool.

And we are talking about the NCAA national champion lacrosse Cornell big red. We brought that up the other day, Gur. After a 48-year wait, it was a long drought. Gur had a tantrum on that as well. What is the distinction of the Cornell academic process and hotel? I think of the people that run the Hassler in Rome and that Swiss heritage of hoteling. What is the distinction of Cornell versus the other hotel schools? There are amazing hospitality schools all over the world. I think...

Think what separates Cornell. It's much more of a business school. To be sure, it uses travel and tourism examples in the courses, but the number of students that go on to investment banking, private equity, finance, I think distinguishes the program. One financial question. What's your biggest headache now in capital deployment?

The availability of new construction debt. We've got hundreds of shovel-ready projects in the pipeline where the equity is in place, the entitlements are in place, but the relative constriction in the debt, not for existing assets, but for new construction. Can private credit and private equity play? Sure.

Would you like to make an announcement here? Not today. I got to have something to do next time I come to see you. Tony, thank you so much. Thanks for having me. And the bonus round here, Ernie June is busting out all over the Gurra family. At that corner, rum at the gritty, $8,500. How many points do I need for that? Half a million. Can you imagine the Venice taxes on an $8,500 Tony Capuano ticket? No.

It is spectacular. It is.

It's one of the best hotels in the world. You guys were up the river by the Metropole. Was it the Daniella? Daniella, yeah. You were there, and then you moved into the Gritty, right? We have the Gritty, and we also, if you go the other direction on the Grand Canal, the St. Regis, which is a spectacular hotel. Really? You just set up for it. You could go low budget for the other half of the trip. Mrs. Keene's at home. Mrs. Keene's at home. And if you want to get in a Riva boat, we'll take you over to the JW, which is on a private island. The JW is on a separate island. Beautiful, yeah. Is that working for you? It's working great. It just traded. It just traded.

What kind of tourist goes to the island away from the Rialto Bridge? Somebody that wants the ability to retreat. Right? That wants to go and fight the crowd. You mean retreat away from Bottega Veneta? Precisely. Retreat away from... Enjoy San Marco for a bit and then go back to their quiet refuge. Oh, I hate your goal. Tony Capriano, thank you so much.

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