‘We are firing on all cylinders': Marriott CEO says business is solid despite corporate layoffs

• Marriott's third-quarter earnings showed a 3% increase in worldwide RevPar — or revenue per available room — despite an 8% drop in RevPar in China, the company's second largest market.
• CEO Anthony Capuano said he does not believe lackluster domestic demand in China will be a long-term problem, pointing to a record-breaking number of hotel signings in early 2024.
• Corporate layoffs are estimated to save the company $80 million to $90 million per year, and are not a "traditional cost-cutting measure" but a decision to push decision-making from the U.S. to other continents, said Capuano.

Marriott International's business operations and growth are solid, CEO Anthony Capuano told CNBC Monday, amid layoffs of more than 800 corporate employees and continued sluggishness in China's tourism market.

"We are firing on all cylinders in every geography," he said.

The company's third-quarter earnings showed a 3% increase in worldwide RevPar — or revenue per available room — despite an 8% drop in RevPar in China, the company's second largest market.

Capuano said he does not believe lackluster domestic demand in China will be a long-term problem, pointing to a record-breaking number of hotel signings in early 2024.

"We signed more deals in the first half of 2024 than in any six-month period in our history in China. And so to me, that suggests that both public and private real estate entities in China are betting on the long-term viability of the travel and tourism space," he said.

Domestic tourism in China is slowly gaining steam, he said, while inbound travel outperformed pre-pandemic levels in the third quarter of 2024.

"Pre-pandemic, about 18 to 19% of our total room nights were cross border travel," he said. "Through Q3 we were already over 20% and that's with more to come in terms of restoration of airline seat capacity in Greater China. So we think there's more and more upside for that international inbound."

Marriott International reported net room growth of 6% year-on-year and room rate growth of 2.5%, driven by a strong return of group travel, which Capuano called the "bright, shining star" for the business today.

The company raised its year-end guidance for net room growth, and added 9 million new Bonvoy members in the third quarter. Marriott's loyalty program now has 219 million members, which Capuano credited to the work of hotel front-desk employees and new partnerships Marriott has inked with companies like Uber and Starbucks.

Layoffs 'not a traditional cost-cutting measure'

During Marriott's third-quarter earnings call on Nov. 4, Capuano alluded to an "enterprise-wide process to enhance our effectiveness and efficiency," a move Chief Financial Officer Leeny Oberg later estimated would reduce company costs by $80 million to $90 million a year, starting in 2025.

That measure turned out to be corporate layoffs, first reported by the travel media company Skift on Nov. 14, which later linked to a notice of "mass layoffs" of 833 Marriott employees posted on a Maryland government labor website.

Capuano denied that the company — which doubled in size during the past decade — grew too big, too fast, at least in terms of corporate employees, instead calling the move a much-needed "reorganization" of its global corporate structure.

"This is not a traditional corporate cost cutting measure," he said. "In [the past] decade, the continent teams have matured; we've grown dramatically. We're in 60 new countries. And so we looked at this exercise to try and shift more decision-making to the continents."

Decentralized decision-making means the layoffs will be felt most acutely at its global headquarters in Bethesda, Maryland, Capuano said.

The majority of job cuts are at the "above property" level — the corporate office — which means that they will "absolutely not" affect service levels at any Marriott-branded hotels, he said.  

Rather, the cuts "should make us more nimble and allow us to make decisions through the local market lens in real time."

Marching into the midscale market

Capuano said occupancy levels and average rate growth are strong across most of Asia-Pacific, most notably in Japan, where Marriott opened its 100th hotel this week — a Four Points Flex by Sheraton (previously known as Four Points Express by Sheraton).

The brand is leading Marriott's push into the midscale market in Europe and Asia-Pacific, alongside City Express in North America, in an effort to capture budget-conscious consumers who want simple, comfortable rooms that come with modern-day wants likes Wi-Fi. 

The company plans to open a dozen more Four Points Flex by Sheraton hotels in Japan in the next six weeks, according to a press release published Monday.