Marriott International CEO Tony Capuano sat down with Yahoo Finance's Brian Sozzi to discuss the company's Q1 earnings, outlook for the travel and leisure industry and the importance of getting workers back into hotels.
Video Transcript
BRIAN SOZZI: Marriott is out this morning with better than expected first quarter earnings. But shares are under a little pressure, as the company stopped short of providing some full-year guidance. Company did say, though, it's seeing improved demand for travel, most notably out of China. Marriott CEO Tony Capuano joins us now.
Tony, good to see you, as always, here. So you talk a lot about, in the earnings release this morning, about significant pent-up demand. Does that mean you are-- we could likely see a summer travel boom?
TONY CAPUANO: Thank you, Brian. Yes, we're seeing really strong rebound in demand in our biggest markets. As you heard on the earnings call this morning, we talked about the fact that in March we saw stronger demand recovery month over month than we've seen in any other month since the pandemic began. And in markets like China, we're seeing demand levels that are actually well above pre-pandemic. And the really exciting thing about that for us, it's not just leisure. In fact, in March we saw business travel in China 5% above where it was in March of 2019.
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BRIAN SOZZI: Tony, what about the US?
TONY CAPUANO: In the US, US was our second strongest set of markets. In March, we got to nearly 50% occupancy. And to your earlier point, it is largely driven by leisure. But again, one of the interesting phenomenon we've seen over the last year or so is this blending of trip purpose. So it's not as easy as it was pre-pandemic to determine that's a business traveler, that's a leisure traveler. I think folks have learned they can work from almost anywhere. And as a result, they're blending their trip purposes. But we expect a very strong summer of leisure demand.
BRIAN SOZZI: How long do you think before the whole, the entire travel industry goes back to pre-pandemic levels in terms of sales, travel, you name it?
TONY CAPUANO: Really hard to say. I wish we had more visibility. But there are so many variables that are going to factor into the answer to your question. Pace of vaccination, return to work. I read this morning that the TSA tracked an all-time high level of passenger volume over the weekend. Return of air travel, I think, as well. But we are feeling quite optimistic about the return of demand. Precisely when is to be determined. But as we look at our business trends around the world, it really feels like a when, not an if question.
BRIAN SOZZI: That's certainly a green shoot you mentioned there, the return of corporate travel. Who is booking these trips? How far out are they going? Are they renting conference spaces?
TONY CAPUANO: All great questions. I think it is traditional business travel. The booking window continues to be quite short, which creates some challenges for us. But I think it's really a few factors. As I mentioned earlier, I got my second vaccination last week. I'm feeling a bit more invincible. I think as more and more business travelers get vaccinated, they're anxious to get on the road, see their business partners, see their clients.
I also think return to the office is going to be a big, big catalyst for business travel. I'm here at our headquarters in Bethesda today. I think there's probably more associates here in the building than I've seen since the pandemic began. And I think that's going to be a powerful motivation for business travel.
BRIAN SOZZI: And Tony, since you now have been fully vaccinated, you're 76 days into the top job there at Marriott. Are you back out on the road traveling?
TONY CAPUANO: I am. I'll be on the road this week. I'll be on the road next week. I'll be in Europe in the fall. And so yes, it's not quite business as usual, but my travel calendar is getting quite full. And I can't get wait to get on the road to visit with our business partners and visit with our associates around the world.
BRIAN SOZZI: You mentioned Europe, Tony. I would think some investors perhaps a little surprised, European occupancy at 13%. How long do you think it will take before Europe recovers?
TONY CAPUANO: Again, visibility into precisely when is challenging at this point. We've got about 20%, 25% of our hotels in Europe that are still closed. But even there, we're seeing some encouraging signs. The EU Commission came out a week or two ago with the notion that borders will start to open for US long haul inbound travel. I think Greece was the first country to come out and definitively open the borders.
And one of the nice things about our business, we have access to real time travel. As soon as the EU Commission made that announcement, we saw a big spike in call volume. The minute Greece was more definitive on their timeline for opening, we saw high call volume for reservations in our Greek hotels. And so, you know, I'm cautiously optimistic that the summer is certainly not lost in Europe and that as those borders open, we'll see a big spike, particularly in US inbound travel.
BRIAN SOZZI: Tony, before we let you go, we've been having a pretty large discussion here about labor shortages. How hard is it to get workers back to working at hotels? And are you raising wages to get them back into the hotels?
TONY CAPUANO: We have had some labor challenges in those leisure destinations where we've seen demand spike so quickly. So South Florida, Texas, Arizona. We're running job fairs. We're providing some one-time hiring incentives to get the hotels staffed. But it has been a bit challenging in markets. And one of the challenges you touched on earlier, which is this notion of a short booking window, with a short booking window, scheduling from week to week becomes a bit more challenging. And that's just one more challenge.
I think school openings, the lack of clarity on whether schools will be in person in the fall, all of those contribute to some of the challenges we've seen with staffing.
BRIAN SOZZI: Marriott CEO Tony Capuano, always good to see you. Good to see you're vaccinated. Good to see you back out there on the road. Stay safe. We'll talk to you soon.