Marriott missed profit estimates for the third quarter and lowered its full-year earnings guidance. So they went into their third quarter earnings call this morning prepared to show investors that they were going to do something about it: cost-cutting, specifically $80 to $90 million in “general and administrative cost savings” beginning in 2025, noting also that this would be translating into cost savings to owners and franchisees.
This can grow to $100 million. Now, they haven’t detailed where the savings will come from and the category of ‘general and administrative’ or ‘G&A” sounds innocuous enough – like they might all be at the corporate level and won’t affect the customer – but not so fast. Here’s CEO Anthony Capuano,
We’re looking at efficiencies and savings that we think will have clear benefits to the owners. We’re looking at every facet of our engagement with them. And we expect to have some tangible saving opportunities identified for them in the very near future.
The changes Marriott will be making involves every facet of what Marriott requires of owners. In the past Capuano has talked about driving hotel owner savings expressly in terms of giving less to the customer like spending less money on breakfast for guests and not putting alarm clocks in rooms.
When he’s spoken about the Bonvoy program being less generous than Starwood Preferred Guest used to be, he simply said but we have more rooms (“we hope that breadth of choice, whether it be brands or geography, is a bit of a mitigating factor”). Also, a new property management and loyalty platform rolls out next year.
Marriott reported that the Bonvoy program had over 219 million members at the end of September. This is not active members, and remember that people aren’t mostly joining for the points or elite benefits. Marriott ‘pays’ members with a ~ 2% discount on room rate for joining the program, so people join in order to book a room. The more hotels and rooms they have, the more people join the program, which lets them keep marketing to past customers.
They highlighted that they now have co-brand credit cards to sell in 11 countries, and that Bonvoy members can redeem for a Starbucks coffee. So there’s that.
And they’re shifting growth at the lower-scale, though the success of their most premium properties continues to drive their revenue growth (since each room night in a luxury property is worth more fees to them than in a low-end one). 30% of rooms growth in the third quarter came from conversions. Capuano also highlighted growth in low-end rooms (City Express), “we had people banging on the door saying would you please announce the name so we can start signing deals.”
Capuano once said, “When I die, they’ll put the net-rooms growth number on my tombstone.” Marriott will seemingly take a fee from any hotel, of any quality, diluting their brands in the process.
- When chains don’t own their hotels, all they have of any value is the brand.
- Diluting the brand – taking fees from hotels that don’t deliver a consistent experience or meet guest expectations – means taking revenue now, leaving guests feeling shortchanged and disappointed – and not coming back.
- Customers no longer trust the brand, and don’t remain brand-loyal. Hotel chains lose their value.
It’s the Bonvoy program and brand reputation that allows the hotel chain to deliver customers to owners. Owners call Bonvoy members “leads.” The reason they pay Marriott is for access to customers, but that only works when customers understand and trust the Marriott value proposition. So diluting the brand to goose current performance means sacrificing future profitability.
They’re making changes so that owners don’t have to spend as much, but they’ve reassured investors that this won’t come out of their end at corporate. That means coming out of the guest experience. And they’re cutting costs across their own operation, too. I don’t see Marriott getting better for guests in 2025.
Folks, it’s 2024. No one, and I mean NO ONE uses the hotel alarm clock. I am unsure how much money they would actually save by “removing” these, but if it would save money in the future by not providing useless things no one uses then I am all for it. In fact, I’d rather have the free outlet to plug in my charger than the stupid alarm clock that always has the wrong time on it that no one uses because everyone owns a cell phone.
The breakfast is harder to judge without knowing what items they are looking at removing. There is definitely *a lot* of waste at many breakfast buffets and running large scale data analytics could likely result in savings without actually affecting experience.
IHG allows you to opt out of daily housekeeping, and then reward you with something like a five or $10 credit. Each day you opt out. This makes sense because who gets their house cleaned every day and even if you hang your towels on the rack, housekeeping takes them and puts up new tiles, etc. Very wasteful for the environment.
If you need more supplies, just call and they will bring them to your room or you can pick them up at the front desk.
I wish other brands would take up this practice
The first ting Marriott should do is dump the Moxy brand….what a terrible hotel!
Lifetime Platinum, the benefits are spotty at best. I’m done arguing with front desk people about things like breakfast being for 2 people (not just one), and it being available every morning of the stay, not just the 1st one. So I stay elsewhere, Hyatt, Hilton, etc. even low end Marriott properties like FI so I know I won’t have to argue about a breakfast credit? Here is a suggestion to save some $$, specifically front desk labor- model the Marriott app based check in like Hilton. Check in online and go straight to your room using the mobile key. Why does a Marriott customer who checks in using the app and elects a digital room key have to stop at the front desk to show ID and have a credit card swiped? That’s millions of dollars a year in wasted payroll and tons of upset guests…
The mobile key is very disappointing but as I understand it many cities and states require that hotel operators check the ID and verify the guest who is checking into the room. One could argue that Marriott has already verified my ID if I’m checking into on my phone but if your phone gets stolen or your account gets hacked that wouldn’t be the case.
Honestly I prefer to go to the front desk so I can get a better upgrade and ask the front desk person what their favorite restaurant or local spot is. I usually get a more honest answer from them than I do the concierge or Yelp.
Improving their tech while a big up front spend would make for massive cost savings over running the multiple platforms from all the acquisitions.
It could also improve self service booking and booking change capabilities again reducing corporate cost.
Plenty of fat to cut from the core before they hurt the brand experience.
Not to harp about the ideal, but I missed the SPG benefits but I’m realistic about Bonvoy and its shortcomings, re: guest satisfaction.
It’s always the FB and labor costs that’s being cut. So leave my room upgrades alone, please.
@Mermaid: That IHG option is only available at properties under brands where daily housekeeping is not a brand standard.
Marriott has raised prices so high and reduced service and food quality to such an extent they already are eroding the value of their brands. The only place Marriott can cut back is in administrative overhead.
Heck, as a lifetime platinum member, I’d be happy if the front desk would simply acknowledge your status when you check in. I’ve only had that happen once in the last half dozen stays. I’ve given up expecting breakfast, drains that are unclogged, or sheets that haven’t been scorched.
Love your analysis of this. The other Big Brands understand customer experience keeps them coming back. I’m a meeting planner and have to laugh when I get a hotel contract that includes a no-value concession like “free local phone calls” Really? No value here! Without a good guest experience, there is no reason to choose one brand over another. Marriott is losing sight of why Bill Marriott started his company.
“I don’t see Marriott getting better for guests in 2025.”
Water is forecasted to remain wet through next year.
Back in 2016 I qualified for Lifetime Titanium. On every stay at a Marriott since them I have never gotten an upgrade and the most I have gotten was a free bottle of water. The Marriott today is no where near what it was in the 90’s. I have burned down my miles account and will be canceling by Bonvoy card.
@FNT Delta
Let’s stay classy. The franchises are not Marriott Managed. You proved my point. Keep us informed but rarely state that someone is 100% wrong, especially when you proved their point.
I have already noticed before this that the quality of the brand has decreased with individual hotels not providing what they previously did or even denying Marriot benefits. I just see all of them no longer doing breakfast for free, not giving a voucher or charging depending on the chain level.
What is driving their costs since not seeing that much investment in properties?
Terminate management and bring back Starwood leadership. This will be a great start. Marriott is like CA. Eventually they will be gone as they bleed out dying brands, features and service.
I have stayed at a few different Marriott’s- in my mind, I identify them with TVs that are too hard to use.. I don’t care about alarm clocks. Like most people I use my phone. In Ja Jolla, I decided that the Marriott is not giving value for my $$.
I’m definitely not CEO material, but I am owner material (as in very small parts through stock). The way not to impress me is to follow disappointing results with a “but here’s our cost-cutting plan.” My question is, “if there are appropriate costs to be cut, why is it only now you found them?” It comes off like a house-flipper who’s over budget and figures corner cutting is in order. The “solution” is never good in the long run.
Titanium for life here.
Bonvoy/Marriott is the last brand I check for availability when I am traveling, due to lack of significant benefits. Marriott made a choice to not cater to their frequent customers. Too bad! my 80+ nights this year so far went mostly to Hyatt and Hilton.
This article hits the nail on the head. Marriott is now just another booking agent almost entirely dependent on fees from owners to grow their revenues, so of course they don’t care if the services offered don’t meet brand standards all the time – these standards have almost completely disappeared in some select service locations and other hotels are being downgraded by brand to meet lower standards. Then there are the intermediate operators who are being squeezed by owners to deliver ever higher room yields in a competitive market and relying on fewer trained staff, so inevitably the guest is the one that suffers. I have had to stay at some truly terrible Marriott properties (across all brands) this year and as a Titanium Lifetime member of their Bonvoy programme I would have expected better. The Marriott name once stood for quality and an assured guest experience – sadly no more. My loyalty is now to other flags – in particular IHG who have much tighter control of their properties and appear to have much greater respect from their owners and respect for their guests.
8 years ago I had a terrific experience traveling with a friend who was lifetime gold (which is now platinum). I figured I could see this working out. Now with 8 years as platinum and 150 nights till lifetime I’m not seeing the same value in the lounge access as before. The last Sheraton I stayed at didn’t even have a phone or in app ordering for the kitchen/ restaurant. Let’s not go into the make up on a pig renovations that they get away with.
There is a document spelling out brand standards in build quality, but I’m not sure it’s ever enforced.
The best experience we had – booked several rooms for family, they gave us weekend breakfast for all at the restaurant in lieu of the lounge being closed. More recently they wanted to charge my kids for buffet breakfast. I know front of house ops are different than back of house and different revenue buckets – but it has really diluted the brand image from what it was founded on.
I’m a Marriott Lifetime Platinum and like most of you here have done the same. Taken 99% of my business to Hyatt, IHG, and individually run hotels. The current management just killed what Marriott used to stand for: standards and quality enforcement. The Marriott Way is dead and with it a reason to go out of your way to stand with the brand.
Their idea is to hoover up more hotels and brands to not give you much choice where to stay but I’ve found that where I go there plenty of choices.
That’s not much of your strategy when people who used to stay 50-75 nights now stay two or less nights per year.
Hard to disagree with most of these comments. I spent a few years as Titanium, never saw any benefit beyond higher points earning. If I’m banking on a particular benefit, more often than not, it’s an argument with the front desk. Bonvoy app is the most glitchy and consistently difficult to use of the major hotel chains. After a few years as a Marriott captive, I’ve recalculated the value of loyalty (≤$0) and am enjoying the fresh experience of branching out into new properties.
At an upscale Marriott in Ft Meyers I was handed a PLASTIC CUP of water as my amenity! I almost fell over. And at a very expensive X Motel redo into a Marriott in Santa Barbara I was giving a room facing a construction that was just yards away And no amenity at all. On top of that, the water in the room was seven dollars a bottle! Price a night? $450
@Bonvoyage –
“Cost cutting is nothing new. The cost of labor has increased dramatically since Covid.”
This comment is such crap.
Covid riffed millions of jobs that will never come back across the industry and AI is now in the process of taking even more. Most front line hospitality employees got squat during the pandemic and even if you did get a few more bucks, more than likely the management company has since clawed that back for any new hires, or you are now doing the job of two or three people to make those few extra dollars.
As an example, in 2020 if you were a housekeeper making $13 dollars an hour, chances are, you’re probably still making about $13 an hour except that now the majority of your rooms you clean everyday are only checkouts which take longer to do. You also have fewer housekeepers on staff which means your get more rooms on your board everyday than you did 4 years ago, while your manager is up your ass that even though you’re scheduled for 8 hours, you need to be done in 6 because the GM is up his ass because the Regional VP from the management company is up his ass to cut even more labor because the owner/ownership company is up his ass to outperform the budget which means more money in his/than management company’s pocket.
Where management companies and owners are getting killed is not in the cost of their labor but in the costs for things like food, insurance, utilities and brand mandated in room items to run the hotel like pillows, duvets and cleaning products. Most of those things have to come from “corporately approved” vendors – i.e. an extremely short list of vendors with very high non-competitive pricing.
It all comes down to the FRANCHISEES and 5heir management to make a property successful.
I am a lifetime Platinum with over 2M points and just under 1000 nights in my lifetime. There are certain properties that I refuse to stay in because they lack things I’m looking for in a property. What I have found is that some of the lower end properties have actually been much more comfortable and better taken care of than higher ended locations. Although you get half the points at Residence Inn, I like the newer style rooms where you have a kitchen, living, work/desk and bedroom area much like a studio apartment. When I travel I tend to look for places which have been recently built or renovated. The idea of breakfast included in the room is nice, but some locations are pretty pathetic while others are on parallel with a regular restaurant. A great example of this is the Residence Inn at San Jose North. It is a combined campus with another Fairfield. The food was delicious and the staff was great. Cooked to order eggs and traditional Mexican/Spanish breakfast items like Chiliquilles.
The management at Marriott corporate needs to inspect the properties that members rave about and see what they are doing right and then crack down on the properties which are falling way short.
I don’t feel any brands pride service as much but so times individual management does. As a lifetime titanium I see less perks and will use nightly upgrades or book the actual room I’d like and never bank on a given perk. Sometimes I’m pleasantly surprised but it’s less often than in years past. Be nice, tip and thank the staff and if you frequent an area make an effort to recognize the talent and compliment the effort of the staff who do a great job. I certainly do t need an alarm clock but do like a decent breakfast and a good cup of coffee. I’m also fine with an acknowledgment of no upgrade but we did look for you to simply acknowledge that fortunately or unfortunately I spent months out of numerous years being loyal to a brand and away from home.
I see people saying they are LIfetime Titanium. I assume they must have had status under Starwood because I do not see any place on the Marriott website where you can get LIfetime Titanium. Unless you were grandfathered in, it’s no longer a thing from what I can see. Am I wrong?
I am Lifetime Platinum, and I have travelled enough and had enough credit card “night” credit to be Titanium for the past 3 or 4 years. However, it is an effort every year, and I don’t see that it does much more than being Lifetime Platinum. I have started staying at Hyatts now. Becoming a Hyatt Globalist takes a lot of effort, but if I want lounge access, I pay for a Club floor room.