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.
The glory days of hotel and airline programs is over. Accept reality- these are businesses and I expect Hilton, IHG and Hyatt to quickly follow Marriott in cutting costs. If you want 5 star luxury and service pay to stay at a resort that offers it. Even as lifetime Titanium (and Hilton Diamond) I never expect anything. If offered or provided great but accept reality and move along
Delta would solve this
I would be pretty upset if I was a long-time owner who does everything right and doesn’t cheat guests. Not only has Marriott likely flooded my market with other competing properties since Starwood’s acquisition but they have turned a blind eye to owners who undervalue my property by cheating or not maintaining standards.
“Spending less money on alarm clocks?” What is that, .5 cents a day per room over a few years?
Hahahaha
An entire swamp of inadequate goofballs.
Once again, a perfect example of putting a CPA at the helm! The idea of “Perks” or giving anything away makes them shutter and thus you will continue to see everything related to travel become less enjoyable.
I can see cuts coming to the elite breakfast benefit in North America a la Hilton. As it already is, there are some properties in the US giving out only $15/person/day credits in satisfaction of the elite breakfast benefit, which is basically the same as Hilton. If Marriott is okay with some properties owners doing this this, I can see them just memorializing it in the program.
Marriott is really just competing against Hilton now because of the sheer scale each one has. Hyatt is too small, and IHG is for the most part disproportionately focused on the lower end of the scale in North America.
They are doing job eliminations at the corporate level
I moved away from Marriott. Why bother staying there if there’s no benefit? Points are trash, there’s no elite benefits. What incentivizes me to stay at a Marriott?
I find myself preferring InterContinental these days, and I appreciate what IHG is doing in general to focus on the higher end segments going forward.
Marriott diluted the value of loyalty by offering free status to millions of cardholders who never set foot in a Marriott property.
So I take it they have a concept of a savings plan that will be good for all Bonvoid members?
Hmmm
ok sure yeah right!
WOH Globalist has taken my ENC’s this year. The continued beatings by the Bonvoy properties and staff finally pushed me to Hyatt. The treatment at the Hyatt properties as a Globalist has been like I am long lost family…such a world of difference. Suite upgrades are automatic at check-in when available…no fighting with an FDA for benefits or having to quote T&C’s.
The footprint with Hyatt is smaller but I really don’t want more nights at FFIs, CYs, TPS, RI, etc…if I can help it.
With the crackdown on AirBnb hotel owners are making a killing even if corporate is not. No tears for them as they laugh all the way to the bank.
Marriott gutted Gold a while back so no shocker that Plat is next on the chopping block.
The problem is that most amateurs do not cancel their airline and hotel cards because they don’t see the forest, only the next free night. Until there are mass card cancellations (or another 9/11 or pandemic-type event) I don’t foresee any improvements. Even then more likely just bonus points.
I’m all in with getting rid of the alarm clocks. One of the first things I do when checking in is to unplug the clock and set it on the floor so that I have room to plug in my own bedside electronics. The hotel-provided clocks usually have the wrong time, the alarms go off at weird times in the middle of the night, and the displays are so bright that they disrupt my sleep.
But I doubt that the clocks will save $100M per year. So it’s probably more likely that guests will have to start peeling and deep frying their own breakfast potatoes. And the Keurig capsules will $3 each from a lobby vending machine.
Maybe we should make this a contest for commentators to come up with the most hideous ways for a hotel chain to save $100M.
“new … loyalty platform rolls out next year.”
will the Ambassador value remain constant? what is changing
I stayed at an Extended Stay by Marriott for 6 months. During that time the hotel changed from decent toilet paper and paper towels to really cheap versions. The hotel stopped using real silverware and started using cheap plastic ware. Breakfast was hit or miss for favored items. This hotel was run by Plamondon. Such a shame.
Maybe earnings are down because customers are realizing it isn’t worth booking an overpriced Marriott or Westin or Renaissance in any given market when a Fairfield or Four Points by Sheraton offers a comparable experience often for less money. At the premium end of the spectrum, the overall standard of your average Marriott, Westin or Renaissance is below the pre-pandemic standard. Already before the pandemic, things like room service were being eliminated.
Here’s how Marriott cuts costs:
1) Further reduce daily housekeeping. IHG is now allowing Holiday Inn and Holiday Inn Express properties to only do a full housekeeping every five days. Right now, Marriott is letting some midscale brands offer housekeeping every other day.
2) Reduce front desk staffing and go to kiosks at certain brands, like Fairfield, Four Points by Sheraton Express, City Express, etc.
3) Reduce brand standards at lower-end full-service brands like Sheraton and Marriott for full-service restaurants or services. Allow more buffets and allow concepts like Holiday Inn’s Toast to Toast that is essentially a bar/coffee counter with food.
4) Reduce fees charged to franchised and licensed brands. Right now, Marriott is charging a property to update the website. That’s why many properties have information unchanged since the pandemic.
5) Eliminate the compensation guarantees on certain benefits for elites.
6) Waive requirements to renovate and replace furnishings. There are already quite a few properties that were up for a renovation before the pandemic that still haven’t been renovated. Marriott doesn’t want to de-flag, even as Hyatt does it.
7) Further outsource reservations and customer service.
I’m troubled by the growing number of conversions, even at brands like Ritz-Carlton that were NEVER conversions.
I’ve stayed in Marriotts like 170+ nights in the last year. A dozen times in Hiltons, maybe 10 BNB. Marriott keeps me coming back…hard to not like their perks. I hope they don’t degrade them too much. Face it a traveler like me doesn’t steal linen, towels, make a mess, tear up stuff.
Multiple years platinum Bonvy member, SPG employee for 4 years and Marriott employee upto last year, total 16 years in Hospitality and I call this BS!
These BS and their distance is the reason they are loosing franchise hotels to other brands like Sonesta and even Hilton, ownership are fed up with how distance and unpersonal their treatment has become especially after SPG Marriott merge.
Corporate America had lost it’s way. Hope Marriott crashes and burns. I’m NOT a mindless drone that will just give you my hard earned dollar. If you have no value for the customer then the customer should NEVER do business with you. CEO is so proud of his asinine epitat…..he’ll just in fact be remembered as an asshole who cared nothing for his fellow man. Must have no conscience.
I currently have 2.4 million points with Marriott and am a lifetime platinum elite. Since covid, the customer service has been horrible. I’ve even been denied rooms e en trying to use my 48 hour guarantee. I have also been denied using my free upgrades and free nights. When I was an ambassador level, I was denied your 24 access and late checkout of 4pm multiple times. I have 9 free upgrades and STILL can’t use them as they are ALWAYS denied.
This confirms my decision to not go for titanium elite this year. I think when the credit cards come up for renewal I will dump them too. Free night certificates impossible to use. Not worth it. Marriott is absolute garbage. Good riddance.
If Marriott starts skimping on Bonvoy perks, it would only reinforce the undeniable charm of the Four Seasons. After all, one doesn’t seek out the Four Seasons expecting a budget experience or cut corners! Four Seasons has, thankfully, resisted the temptation to compromise quality in the name of cost-efficiency. The Marriott Bonvoy program has already faced some heat for inconsistent elite benefits, so any additional cost-cutting would likely turn off those already on the fence.
Four Seasons, with its tailored luxury and personalized service, doesn’t just offer points – it offers an experience that transcends spreadsheets and budget reports. While others may be trimming down, Four Seasons stands as the unwavering gold standard.
Cost cutting is nothing new. The cost of labor has increased dramatically since Covid. Marriott gets revenue from fees charged to hotel owners and hotel management companies. Hotel owners get revenue from guests – when a guest’s credit card is charged, those funds go to the hotel owner’s bank account typically.
Keep in mind that Marriott typically does not own or operate its hotels. They enforce brand standards upon hotel owners and operators.
As a Marriott Bonvoy Platinum member, I will go elsewhere. I don’t want any more cutting of services like breakfast, housekeeping, renovations. Enough!
They could re coup this amount in a few months by just reducung the size of the free soap
@ FNT Delta Diamond…that Marriott owner you just described no longer exists.
This probably won’t turn out good for Mariott at all
@Bonvoyage: That is not true. Marriott operates almost 99.9% of its properties under certain brands like St. Regis, Edition, W., Bulgari, and Ritz-Carlton. Internationally, a plurality, if not a majority, of full-service properties across all brands are still managed by Marriott. Within the USA, a majority of all properties at all levels and in all brands are operated directly by the owner under franchise or license or by a third-party management company for the owner.
@FNT Delta
I work in hospitality for the past 25 years in both operations and corp offices of hotel management companies. I worked at hotels from Marriott Residence Inn to Four Seasons.
Marriott does not manage or operate many of its properties. Please google hospitality management companies. These companies operate hotels for hotel owners, and there are 1000s of hotels being operated by hotel management companies.
I don’t fault you for thinking Marriott operates 99.9% of hotels.
Having watched the value in the Marriott brand decline over the past 15 years or so I just get tired of the BS and service failures.
There are so many brands, diluted standards, with no enforcement, junk fees with no value, lack of customer focus and the list goes on. You need a database and spreadsheet to determine if there might be benefits at some property.
Executive lounges with a good breakfast reliable business support are vaporware in the US.
Taking a hit in points/nights when I need rooms in two locations for basing and out and back trips is frustrating. Drives business away.
With nearly 4K Marriott nights, LTE and Titanium equivalent for many years. Regular upgrades to good suites were the norm. No longer. Full service hotels now resemble FFI rooms after Marriott standard cheap room renovations.
For the most part, value for the $$ is just gone. With the exception on one US property, I’m mostly disappointed every time and I’m going to hit 150 nights or so this year.
The DTW Westin jr suite was nice, but they no longer have feather pillows and end result was the worst nights sleep this year before a 16 hour flight. And they still have the lounge closed with no benefit replacement. Breakfast, give up the welcome points.
A recent Conrad visit was great and cost Marriott several future stays.
Treatment and the hotel experience used to be consistently great, now, just the opposite. Marriott is starting down a slippery slope.
Rant over.
We stayed at the Marquis in Manhattan last Christmas. The fellow at the desk told me 80% of the guests that weekend had status. I am lifetime platinum. Not the highest but pretty darn good. They only allowed two in for breakfast. $50 for my son. Breakfast was a buffet shared with the non lounge guests. Just a separate room. Uninspiring. A friend with lifetime titanium is also unimpressed.
EVEN with compensation for elite perks in place, many mid range hotels (Westins, Marriott hotels in airport areas, Sheratons) wear you down until you give up. The Westin LAX is a perfect example. During the week, the lounge is open. On Sundays, it isn’t. Response? “Oh. Yeah. Sorry. No breakfast.”
Agree with all above. I’m lifetime titanium and while still a fan of Marriott, it’s relative. The whole industry is shifting, as is “customer service” as a whole in US post-lockdown.
I’ve become more of a free agent based in my needs.
OK – I have to say it….after Bill Jr stepped down, it’s been downhill. We all yearn for the days when Bill Jr’s book really showed the way of Marriott success, and Danny Meyer’s philosophy embedded in Union Square Hospitality Group, the world has changed and my expectations are at the all time low. I relish my stays in independent service focused hoteliers in Germany and Switzerland, who demonstrate that the US services declines are not inevitable or destined. It is choice. And the next time I hear “oh, we’re having staffing challenges. Sorry for the wait.” I’m going to start suggesting they pay their staffs a decent wage.
Sorry for the rant but this topic triggers me.
The Marriott San Jose was so bare bones minimum. No drawers, just 2 ledges, 1 under TV and 1 tiny one between the beds. 1 bottle water, no clock, 1 chair at the ledge and 1 tiny upholstered chair for a little person. Surprising!
This kind of response to an earnings hit always concerns me. My question is: “so, you wouldn’t roll out $80 million in savings if the current earnings were up?” I understand the PR “need” to appear to do something. But, if there is $80 million to be saved, why wasn’t that already being rolled out? “We would have been happy to waste $80 million if the bottom line looked better.” Could you imagine a BRK-owned company doing this?
Curious how much they spend on electricity to leave the lights and TV on in the rooms. Why? Have I turned into my father?
@Bonvoyage:
Again, that’s just not true. You are 100% wrong.
Marriott literally files an annual statement every year. It’s called the 10-K statement. They disclose the properties they own, the properties they operate [manage], the properties they franchise, and the properties they license. By brand. And by locality (USA or international).
According to Marriott’s own filings at the end of 2023:
Marriott directly manages 2,046 properties; 624 in the USA and Canada and 1,422 internationally. That accounts for 575,963 rooms.
Marriott franchises or licenses 6,563 properties, 93 timeshares and 1 yacht; 5,259 in the USA and Canada and 1,210 internationally. That accounts for 994,354 rooms.
Marriott directly owns 50 properties; 13 in the USA and Canada and 37 internationally. That accounts for 13,115 rooms.
Marriott also has 126 residential properties. Of the 126, 69 are in the USA and Canada. 57 are international. That accounts 13,948 rooms.
In total, Marriott manages 23.28% of its properties. In some brands like Ritz-Carlton, St. Regis, W., Bulgari, and Edition, that works out to nearly 99.9% of those properties.
https://marriott.gcs-web.com/static-files/e15046a3-f3e5-413a-bb4b-51238b71cb95
@Kilo Sierra:
As a platinum or higher at a Westin, you get a choice of 1,000 points, a restaurant breakfast or an amenity. The lounge access benefit at a Westin is separate from the restaurant breakfast. While you don’t get a replacement benefit if the lounge is closed, you still get the elite welcome gift choice of 1,000 points, a restaurant breakfast or an amenity. If they fail to offer all three options, you are entitled to $100 cash compensation.
Let’s just be clear here. We can all whine about perks being cut, food service being awful and alarm clocks. But what they are really saying here is a reduction in force. People are going to lose their jobs. And it’s the people at the bottom who will lose them. So just keep that in mind.
@Doug:
Unfortunately, feather pillows are a victim of the new Westin bedding. View from the Wing wrote about this in December 2023. See here: https://viewfromthewing.com/westin-invented-heavenly-hotel-sleep-now-theyre-changing-the-product/
Some Westins still have the feather pillows by request. Others have kept the old linen. I’ve been told by multiple properties that they receive a lot of complaints about the new Westin bedding; not just the awful pillows.
That aside, the Detroit airport Westin is Marriott-managed and is, frankly, one of the better domestic Marriott properties. They let platinums and higher order room service breakfast with their breakfast vouchers. That alone is worth it.
As Steve Jobs once said, “no matter how great your product is something will go wrong, it’s at that point the customers will judge your entire firm“.
Maybe that’s why the experience management framework with customer service is gaining so much popularity. It’s about how you make the customer feel and that’s how they will judge your entire firm for a long period of time. This could have long lasting effects on Marriott. And as a lifetimeTitanium and many years of Ambassador with Marriott, I hate to see them downgrade quality of service to customers who will be making the judgement!
I have a Titanium designation. Been staying for a number of weeks at a Marriott with free breakfast. It’s disgusting including the cheap coffee they use. I grab some of the fruit at the buffet and walk somewhere for coffee…..I have gotten room upgrades which are appreciated.
Making stays even crappier is supposed to entice guests to spend more money at Marriott? Talk about oblivious.
The guest is no longer the customer of Marriott, the hotel owners are their customers, and that’s who they cater to now. We guests are just a necessary evil, and so long as we keep coming through the door, they’ll keep cutting back on benefits, services, and quality because that helps their customers – the hotels – make more money and keeps them happy.
They may have lots of room, maybe more than others, but most of the places I travel to have a choice of a Hyatt, Hilton, IHG and Marriott. My mix of stays has shifted away from Marriott as I get more value form Hilton or Hyatt. So degrading the customer experience does have a cost.
I was Titanium 3 years ago but saw little value in loyalty as they cut Bonvoy benefits and hotel quality. i cancelled my Bonvoy card and will stay at Marriott properties maybe 5 days this year. Hope it was worth it for them
The only ones laughing are the ones who built spg and now run World of Hyatt .
@Ashlea:
I said that earlier. I predict we will see low-end brands from City Express to Fairfield transition to kiosks at the front desk. Comparable brands in Europe already have this.
I also anticipate no more daily housekeeping or even a room refresh at low-end brands. At IHG, Holiday Inn, which is comparable to Marriott’s Delta, Courtyard and Four Points by Sheraton brands, properties can go five days without cleaning a guest’s room. Currently, a Courtyard or Fairfield is every two days as I understand it.
I could also see Marriott lowering the quality of towels, eliminating the requirement for wired phones in the room, removing coffeemakers, etc.
@Mike Sherman:
The problem, much like Delta, American and United, is the hotel chains all largely copy each other, not least because many big owners and management companies have properties in all of the chains. There are few owners or operators, besides corporate itself, that only exist within one brand’s ecosystem.