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).
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?
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