While details are limited as of now, Marriott is planning some cost cutting… and that can’t be good for hotel guests (thanks to View from the Wing for flagging this).
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Marriott plans corporate & hotel cost cutting
Marriott has announced its Q3 2024 results, and the company missed its profit estimates, and lowered its earnings guidance. But worry not, the company has a plan to improve that!
Marriott CEO Anthony Capuano announced plans to enhance effectiveness and efficiency across the company, which is expected to result in savings of $80-90 million, starting in 2025. As Capuano explains, “it felt like the right time to look across the enterprise and figure out what adjustments we can make to enhance and improve our efficiency.”
The claim is that much of the cost cutting will be focused on general and administrative expenses, but there aren’t any details of what that entails. We have reason to believe there’s more to this, though — the company also plans to deliver cost savings to hotel owners and franchisees. For hotel guests, this is the most concerning part:
“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.”
I’m curious to see what changes come from this
There’s often misunderstanding among consumers about the economics of the hotel industry for the mega hotel groups. The major hotel groups don’t own a vast majority of their properties, but rather just have management or franchise contracts for them. They get a cut of the revenue generated. In reality, Marriott’s “customers” are the hotel owners and investors, and guests are just the product that they can sell to them.
So it’s important to frame any cost cutting in that context:
- Marriott centrally plans to cut $80-90 million in costs, which wouldn’t be on the hotel level
- At the same time, Marriott is looking to deliver savings to its hotel owners, which is separate from that $80-90 million in savings (since those savings are for Marriott corporate, and not the individual hotels)
Simultaneously cutting costs centrally while also providing opportunities for hotels to cut costs isn’t a good combination. Presumably it’ll have to come at the expense of us guests, at least in some way. Could we see changes to Marriott Bonvoy, cuts to service and amenities, or lowering of brand standards?
Marriott’s CEO has long made it clear that he believes Bonvoy doesn’t need to be the best program, because the company can make up for any shortcomings there with the breadth of its portfolio. And he’s not totally wrong, because Marriott’s footprint is so large that it can sometimes be tough to book away.
Bottom line
While details are limited as of now, Marriott’s CEO is promoting how the company will cut $80-90 million in costs in 2025. Not only that, but the hotel group is also looking for “efficiencies” that give clear benefits to hotel owners, to provide additional savings opportunities.
We’ll have to stay tuned, but it sounds like us Marriott Bonvoy members should expect less rather than more from the company in 2025 and beyond.
What do you make of these vague Marriott cost cutting comments?
Marriott’s guiding principle of “Take Care Of Your People and They Will Take Care Of Our Guests.” Has not held true for a very long time. So it is no surprise that these cost savings measures are at the cost of the very people they are supposed to be taking care of and will be at the cost of the guest experience as well. Rates keep going up and services keep decreasing or mediocre at best.
I believe Anthony is "too big for his britches". He has proven to us he does not care about customers, he does not care if Marriott makes a costly mistake to a customer, and does not take responsibility for the mistake, does not attempt to take care of the problem.
Yes, that mistake is a small one within the gigantic Marriott corp. But I have seen similar happen with another giant, HSBC, and that CEO...
I believe Anthony is "too big for his britches". He has proven to us he does not care about customers, he does not care if Marriott makes a costly mistake to a customer, and does not take responsibility for the mistake, does not attempt to take care of the problem.
Yes, that mistake is a small one within the gigantic Marriott corp. But I have seen similar happen with another giant, HSBC, and that CEO not only lost his job, he also lost his off-shore account in Panama (Papers) with some insider deal money there.
So I suggest Anthony take it down a notch, and start treating customers better, THEY are what makes the huge bonus and keep Wall St happy.
One nice thing he could do, is let Starwood go and be a company again. I bet a lot of us top tiers would be returning to Starwood very quickly. That was a hotel brand !
Won’t these cost cutting measures be gobbled up due to their hack fines and expenses? I thought I read somewhere they had to spend 200 million plus to fix their security infrastructure.
Ritz & St Regis are serving God Awfull Breakfast in South East Asia now. I might just stick with Park Hyatt or even Grand Hyatt now.
I joined Starwood and was a platinum for a while back when I didn't travel much and was loyal to Hilton trying to maintain Diamond by private stays. I soon discovered it was a wonderful program at the time Bonvoy was swallowing it whole. Did manage to take advantage of their fly and stay program for a St Regis holiday in Bali.
Now lifetime silver and closing in on Gold. Sadly non of my...
I joined Starwood and was a platinum for a while back when I didn't travel much and was loyal to Hilton trying to maintain Diamond by private stays. I soon discovered it was a wonderful program at the time Bonvoy was swallowing it whole. Did manage to take advantage of their fly and stay program for a St Regis holiday in Bali.
Now lifetime silver and closing in on Gold. Sadly non of my Platinum years with Starwood were allowed because I had missed a year or something along the way.
Bonvoy is basically the bottom of the Hilton, IHG, Hyatt groups so this does not surprise me.
It's all kind of short sighted - owners are complaining that the revenue environment isn't as strong as they wanted it to be, and costs (labor, food and beverage, interest rates, etc) remain high, so they ask Marriott to help them cut costs by doing things like reducing brand standards, or reducing the costs of things like the loyalty program and reservation systems. However, the more you cut costs, the less pricing power you do...
It's all kind of short sighted - owners are complaining that the revenue environment isn't as strong as they wanted it to be, and costs (labor, food and beverage, interest rates, etc) remain high, so they ask Marriott to help them cut costs by doing things like reducing brand standards, or reducing the costs of things like the loyalty program and reservation systems. However, the more you cut costs, the less pricing power you do have (outside of conventions and such).
One of the biggest culprits here may be these companies focus on adding more rooms... If revenues are kind of lackluster, maybe Marriott should dial back development until current hotels become more profitable
How much can Marriott cut?
As of December 31, 2023, Marriott only manages Marriott manages 23.28% of its properties across all brands. The remaining 76.72% of properties are franchised or licensed and operated by the franchisee/licensee or a third-party management company.
Marriott collects a fee between 4-7% of revenue and then at some full-service properties gets 4% of F&B revenue. That's it.
The only other revenue is if Marriott handles revenue management, event...
How much can Marriott cut?
As of December 31, 2023, Marriott only manages Marriott manages 23.28% of its properties across all brands. The remaining 76.72% of properties are franchised or licensed and operated by the franchisee/licensee or a third-party management company.
Marriott collects a fee between 4-7% of revenue and then at some full-service properties gets 4% of F&B revenue. That's it.
The only other revenue is if Marriott handles revenue management, event sales, or the property buys a lot of optional services. For example, Marriott charges a property to update the website of that property. That's why so many properties have websites on Marriott.com with basic information.
To achieve the kind of savings Marriott is talking about, I guess the following are options:
1) Restructuring franchise and license agreements to reduce fees (unlikely).
2) Reducing brand standards but this would only save Marriott money at the properties that Marriott manages. Remove coffeemakers, eliminate wired in-room phones, cheaper linen or towels, etc.
3) Implementing things like kiosks to check-in at limited-service brands. You see this in Europe at hotels comparable to City Express, Four Points by Sheraton Express, Fairfield, Moxy, etc.
4) Outsourcing reservations and customer service.
5) Restructuring the Bonvoy program, eliminating the $100 compensation benefits.
Outside restructuring fees, I just don't see how Marriott achieves the savings since Marriott doesn't manage 76.72% of its properties.
The only other thing I can think of is completely exiting the managed side of properties and fully franchising and licensing. That would take a lot of employees off the Marriott payroll.
They have given a lot of the Corporate VP's severance packages. Starting this week they are "restructuring". Basically - they are finding savings by reducing head count. They still have 1 person doing 2 people's job since Covid - this is going to make things unbearable. For a year the people who didn't get laid off will be grateful. After that - they will realize they are doing more work then they are being paid for and will start to leave.
The is some part of this which does not seem possible. Sure some hotels are losing money yet hotels in big cities are charging the highest prices ever AND they appear to be full very often. Why penalize the guest experience at hotels charging close to $1k per night?
These are corporate cost reductions - layoffs.
As you say, we don't know. But cutting free breakfast or eliminating or reducing Lounges would be a biggie. Marriott has been cutting lounges for a while now. If these get cut - some people will start booking for most convenient hotel and avoid staying mostly at Marriott.
Perhaps they really are too big to care, but perhaps those losses are because customers are noticing the decline in quality and benefits, and are booking elsewhere. I know I am. I was ambassador two years ago, actively looking to stay at Marriott brands and reach the top Bonvoy threshold. This year, a quick tally says I will have 95 nights in hotels, almost all of them in luxury international properties, and only nine of...
Perhaps they really are too big to care, but perhaps those losses are because customers are noticing the decline in quality and benefits, and are booking elsewhere. I know I am. I was ambassador two years ago, actively looking to stay at Marriott brands and reach the top Bonvoy threshold. This year, a quick tally says I will have 95 nights in hotels, almost all of them in luxury international properties, and only nine of them at Marriotts.
If there are others out there like me, Marriott’s powers-that-be might consider whether cost- and benefit-cutting really is the road back to profitability, or whether a more guest-centric approach — in which, among other things, we get the benefits we are promised — would be more lucrative for them and their hotel owners.
I am much like you. Marriott has 4 properties near my company's HQ and a random assortment of other brands. I routinely stay at Marriotts because I'm lifetime Platinum after this year and I appreciate the room upgrades I receive outside of the US. I receive few within the US, though. I also often work late such that I eat dinner (and/or breakfast) at the M Club lounge thus saving my company money, albeit indirectly....
I am much like you. Marriott has 4 properties near my company's HQ and a random assortment of other brands. I routinely stay at Marriotts because I'm lifetime Platinum after this year and I appreciate the room upgrades I receive outside of the US. I receive few within the US, though. I also often work late such that I eat dinner (and/or breakfast) at the M Club lounge thus saving my company money, albeit indirectly. If Marriott starts further removing benefits for elites, and with most of my travel work related where I'm in Marriotts, I'll gladly stay elsewhere on the company's dime. The only "downside" would be during personal travel when the upgrades are nice. But my husband and I don't particularly care about Marriotts for personal stays and prefer to stay somewhere more boutique and nicer than most Marriott properties can muster - whether an *actual* luxury chain or a local luxury property run by a local or more..."artisanal" hotelier. Marriott can pound sand.
We do a good bit of international travel. As a result of recent stays, with shortcomings and major problems too numerous to list here, we WILL NOT stay in Le Meridian or Delta hotels. We would consider Ritz-Carlton but that's about it.
Here’s yet another reason to avoid Marriott. I used to be a die-hard Marriott fan; as an international traveler, I’d go out of my way just to stay at their properties. Not anymore. Now I have top-tier status with about eight different hotel loyalty programs, and Marriott is consistently my last pick. They’ve completely let their loyalty experience fall apart, and it’s obvious they’ve stopped caring about their technology. Just open the Marriott app and...
Here’s yet another reason to avoid Marriott. I used to be a die-hard Marriott fan; as an international traveler, I’d go out of my way just to stay at their properties. Not anymore. Now I have top-tier status with about eight different hotel loyalty programs, and Marriott is consistently my last pick. They’ve completely let their loyalty experience fall apart, and it’s obvious they’ve stopped caring about their technology. Just open the Marriott app and compare it to Hilton’s—it’s like night and day. Even their so-called “luxury” brands, like The Ritz-Carlton and St. Regis, have lost their charm and become watered-down, industrial versions of what they used to be.
What blows my mind is that Marriott seems oblivious to the fact that customers have options. It’s like they’ve decided they’re “too big to care.” Customers have much easier access to way better loyalty programs now, and Marriott’s slowly dropping down everyone’s list. I don’t know who’s making the decisions over there, but it’s clear they’ve lost touch with what their customers actually want.
Ironic that the technology and loyalty program are so bad, given that Marriott is nothing but a booking platform and loyalty program these days. They've given up on hotelkeeping and hospitality. Those management fees that Marriott collects from hotel owners are not so much for providing hospitality to guests as royalties paid to use Marriott brands (the number of which has surely increased again since I started typing this message).
You have top tier at eight hotel chains, seven of them are preferred above Marriott?
I'd really like to know what are the seven. Hard to believe you prefer Wyndham or Best Western over Marriott. Or you're a Ambassador, Globalist, and 3 different Diamond. To have top-tier at eight brands you'd probably have to stay two properties per night.
I’m top (ambassador) at Marriott, diamond at IHG, Diamond at Hilton, and Globalist at Hyatt. In my opinion, I’d rank them as the following
- Hyatt
- IHG
- Hilton
- Marriott
If you factor in SLH, I’d move Hilton right below but very close second to Hyatt with the number of wonderful properties and how they treat diamonds. My wife actually dreads staying at marriotts compared to the other brands....
I’m top (ambassador) at Marriott, diamond at IHG, Diamond at Hilton, and Globalist at Hyatt. In my opinion, I’d rank them as the following
- Hyatt
- IHG
- Hilton
- Marriott
If you factor in SLH, I’d move Hilton right below but very close second to Hyatt with the number of wonderful properties and how they treat diamonds. My wife actually dreads staying at marriotts compared to the other brands. We typically redeem at higher end brands, so with Marriott no free parking, no breakfast, no upgrades, really a whole lot of nothing. But maybe a bottle of water? It’s a joke. For anyone to argue otherwise with similar travel experience would be surprising. I’d
Honestly pick Accor silver over Marriott ambassador. Then you at least get a welcome drink!
@AK
That is really impressive. Top-tiered status at eight different hotel chains? Can you share with us any advice you may have on how to achieve it?
Is it holding the right credit card to spending a lot on the credit card for the elite nights?
Status matching or lifetime status? I can see that if you already have lifetime status with chains like Hilton or Hyatt you can focus on the others. Though, with...
@AK
That is really impressive. Top-tiered status at eight different hotel chains? Can you share with us any advice you may have on how to achieve it?
Is it holding the right credit card to spending a lot on the credit card for the elite nights?
Status matching or lifetime status? I can see that if you already have lifetime status with chains like Hilton or Hyatt you can focus on the others. Though, with Accor you can earn their top tier status by spending 10,400 euros every year.
I am very curious as to your approach and hope can learn something here.