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…
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.
@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.
“I don’t see Marriott getting better for guests in 2025.”
Water is forecasted to remain wet through next year.