Leisure travel is ‘four times the size' of business travel: Marriott International President

Marriott International President Stephanie Linnartz joins Yahoo Finance Live to discuss a new design lab, the recovery in the travel industry, and the market for travel in China.

Video Transcript

ZACK GUZMAN: Welcome back to Yahoo Finance Live. Obviously, the pandemic has created some problems for a lot of travel plans out there. But as we move forward, a lot of the travel names are looking to entice travelers to come back and stay with them. And Marriott is certainly one of those names putting their efforts behind unveiling new technology as the company unveils at CES a new design lab to shape the future of hotels.

And for more on that, I want to bring on the president of Marriott International, Stephanie Linnartz here with us today. Stephanie, happy new year. Thanks for joining us today to discuss some of those things, because, you know, I feel like a lot of people are desperate to get back out and travel if they already haven't. So what is kind of this new initiative to really, I guess, invest in some of those new technologies going to do for maybe that decision?

STEPHANIE LINNARTZ: Well, good morning, Zack, and happy new year. Great to be with you. Yes, I am live from the Consumer Electronics Show here in Las Vegas where we announced the launch of our Marriott Design Lab, which is really the next evolution in our innovation efforts here at Marriott International.

The way I think about it is a research and development lab for the hotel industry-- certainly innovations for our company, but for the industry overall. And it starts with we have approximately 10,000-square feet of flexible, state-of-the-art lab space at our corporate headquarters in Bethesda, Maryland that we use to build, test, and explore new innovations in the hotel space with partners.

And some of the partners that we're kicking off with, which we're really excited about, include LG Electronics, Carrier, we were even working with some startups in this space to just really think about how we can continue to enhance the guest experience in our hotels. And in a very big way, technology is part of that solution.

AKIKO FUJITA: Stephanie, let's talk about how those hotels are looking. Marriott, obviously, international footprint, and you've got a pretty good pulse on how much of that recovery has happened. We've been trying to gauge how much this recent variant is disrupting travel plans. And I wonder what your sense is right now-- whether this is kind of a brief disruption or you think that this is maybe causing a lot of people to rethink their plans.

STEPHANIE LINNARTZ: Well, Akiko, you're right-- we're quite large and broad geographically. We have 30 brands, close to 8,000 hotels, and we're in 140 different countries. So the situation does vary around the world in terms of the recovery and how travel trends are going.

I will say just from a big picture perspective, 2021 was a much better year than 2020. In the depths of this downturn, our business was down 90% with 25% of our hotels closed. And in the latest earnings call that we had, we talked about our business only being down in the 20% range in terms of same-store sales versus 2019, benchmarking '19 as a more stable year.

As it relates to the variants that we've experienced, I think about it this way-- Delta is a good example to look at-- Delta did not stop the recovery of our business and the recovery of travel. It gave us some bumps along the way, but what we found is while we had some slowdown in the recovery in the third quarter because of Delta, in October, once we passed that variant, we saw business start picking up again very rapidly.

And with this latest variant, we suspect we'll see the same thing. It will not stop the recovery of travel. It may slow it down. And, again, it depends on where you are in the world. In China, they have a zero-tolerance policy related to COVID.

So the impact there is much stronger. But even in China, which is our second-largest market, we see the business bounce back very quickly once we get through the worst of any variant. So I'm still quite bullish that the recovery will continue into this year.

ZACK GUZMAN: Yeah. When we talk about the international emphasis, obviously, a lot of the travel-levered names that we've talked about similar to the airlines, those who had been kind of more dependent on international travel or business travel haven't necessarily seen as robust bouncebacks in the pandemic, as we wait for business travel to come back.

When you look at that piece of Marriott's piece of the pie, what are the expectations there for when that might even get back to normal, if it ever does? Because some people are saying, look, you know, CES being virtual in some pieces before, is that going to come back the way that you expect it to?

STEPHANIE LINNARTZ: I think it will come back. I can tell you, since I'm live here from Las Vegas, there's a lot of people here and the show is going on, which is great to see. As it relates to the recovery of the travel business, and I'll use my company as an example, the recovery has largely been driven by leisure travel.

And I think it's worth noting, Zack, that leisure as a segment is four times the size of business and was growing at a faster rate even pre-COVID. But business travel is certainly a big part of our company's business. And it depends on the hotel type and the market, of course.

And while business travel is coming back more slowly than leisure, it is starting to come back. And one of the segments that we're most encouraged about is the group and meetings segment. Many of us thought that the individual business traveler would come back for the meeting segment. But in fact, it's been the opposite.

And our group and meetings business for this year 2022 is looking quite healthy. And when we talk to our customers, I think what we hear from them loud and clear is that while these tools that we all use so proficiently these days-- Teams, and Zoom, and Webex, et cetera-- they're fantastic, in hybrid meetings have been a great tool to have during the pandemic-- nothing replaces meeting face-to-face.

And we can see that in our numbers. Again, our group and meetings bookings for 2022, 2023, 2024, they're very, very strong. So I think the segment will come back, maybe a bit more slowly than leisure, but it will, indeed, come back.

AKIKO FUJITA: Yes, Stephanie, we are certainly itching to get back to face-to-face meetings as well. I want to get your thoughts on something that I think a lot of Western brands are really trying to weigh, and that is navigating the political climate over in China. You just mentioned it's your biggest market there.

Tesla the very latest company to get kind of this backlash after opening a showroom in a place like Shenzhen, where the US has said the Chinese are committing genocide. And I know, you know, Marriott, one of your brands, has operated in the city of Urumqi as well. I wonder, as an international company that has a big footprint in China, how do you calculate the economic benefit of operating in a place like that that is highly controversial when the political risk is so significant?

STEPHANIE LINNARTZ: So let me make sure that I spoke correctly. China is our second-largest market. The United States is our largest market. But we do have quite a large footprint in China. And it's also worth noting that in the case of our business, the way our business model works, that we don't own the hotels.

The hotels in China are owned-- the great majority of them are owned by Chinese owners. So that is an interesting part of our business model. And the way we think about China is it is a really important market for travel-- not just business in China for China, but as an outbound market.

Pre-pandemic, you know, north of 100 million Chinese traveled outbound to other parts of the world, whether it was Southeast Asia, Europe, the United States, and, of course, as I mentioned earlier, we're in 140 different countries. So you know, I think, like all big multinational companies, we navigate how we do business in China in a way that is very recognizing that it's an important market for us and that we have to be thinking about our associates, our owners, and balancing all of that.

AKIKO FUJITA: And, Stephanie, when you look at how international companies have had to navigate that political climate, we've seen kind of two tracks-- you know, those who say, look, if we're operating in China we have to operate under their rules, and those who say, if it goes against what we believe in we will simply not stay in that market.

I know you mentioned that you don't directly own the hotels, but they do use the Marriott brand. Which side do you think that companies should be thinking about, how should they be operating?

STEPHANIE LINNARTZ: Yeah. I think, like all big multinational companies, we need to navigate both sides of that. We need to, of course, respect the laws and sovereignty of any country that we do business in. I mean, again, we're in 140 different countries. And we're talking about China right now, but I think the same premise goes for any country or part of the world where we do business.

At the same time, we do need to stay very true to our values as a company. And we have very strong values at Marriott International, about putting people first, and acting with integrity, and embracing change, and caring about the environment. So I wish there was one simple answer to your question. But in my view and in our company's view, we need to navigate both simultaneously.

AKIKO FUJITA: Stephanie, appreciate you joining us today. Stephanie Linnartz, Marriott International President, joining us from CES in Las Vegas.