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Marriott CEO: Earnings indicate the broad 'resilience of travel'

Marriott International CEO Anthony Capuano joins Yahoo Finance Live to discuss company earnings, travel demand, rising inflation, recession risks, and the outlook for growth and recovery in the hospitality space.

Video Transcript

BRIAN SOZZI: Shares of Marriott are in focus after the company reported second-quarter earnings that squashed estimates with worldwide revenue per available room rising over 70% compared to 2021. The hotel giant also resumed share repurchases in the quarter and signaled more are on the way.

Joining us now is Marriott CEO Anthony Capuano, I should say from your new headquarters. Anthony, always good to see you. Look, I think a lot of folks on the street are surprised by this market reaction-- beyond estimates. Bought back more of your stock. The earnings call seemed to have went well. What are one of your takeaways here?

ANTHONY CAPUANO: Well, there's a lot going on in the world. So I can't speak to exactly what's going on in the dynamic of the stock. But as you said, we had a terrific quarter. And it's really a quarter that illustrated the resilience of travel broadly and the resilience of Marriott's business model. With more than $1,000,000,000 of EBITDA and a stunning recovery in RevPAR around the world, it's really exciting to see the trajectory that the company has.

BRIAN SOZZI: Let's break it down by class, Anthony. Leisure travel, how did that perform as the quarter went along?

ANTHONY CAPUANO: So leisure has been the bright shining star of the recovery. We've had lots of questions about whether we're hitting the end of that runway. But in point of fact, in the quarter, leisure was up 14%.

So we certainly have not seen the end of that. And if anything, with more and more international borders opening, with the rollback of the requirement for testing for inbound international into the US, we think there's still lots of additional growth opportunity for the leisure segment.

BRIAN SOZZI: Did you see a more cautious consumer emerge in June?

ANTHONY CAPUANO: Not really, when you look at the pricing power we continued to enjoy in June across all three segments. And maybe luxury is a good bellwether for that. In the quarter, luxury ADR was up 23%. So we continue to see that really strong pricing power.

BRIAN SOZZI: You talked at length too about the-- on the earnings call this morning, Anthony, about business travel. Maybe not coming back as fast as leisure. How does that look?

ANTHONY CAPUANO: Well, again, it's slow and steady. It's not been the juggernaut that we've seen with leisure. But that said, in June, business transient was only down single digits, 9%. A quarter ago, we were down more than 20%. So the small and medium-sized businesses are already back to pre-pandemic levels. And the larger employers are starting to grow their volume of business travel.

BRIAN SOZZI: You mentioned pricing, Anthony. One thing that caught my attention was increased occupancy throughout the brands at the same time as you're pushing through higher prices. Can this continue as we go into this economic slowdown?

ANTHONY CAPUANO: We think so. What drives pricing power is compression. And with the volume of pent-up demand we see in many of these markets, we continue to see really good traction, but not just in leisure, across all three segments.

We talked about the group segment at length during the earnings call. And we gave some really compelling data about what our forward group pricing looks like. And it's quite encouraging.

BRIAN SOZZI: How strong is Labor Day demand looking?

ANTHONY CAPUANO: Labor Day looks great. We're still a little early because one of the things we've seen through recovery is a shortening of the booking window. But if memory serves, I think our forward bookings for Labor Day are up mid-teens over where we were in 2019.

BRIAN SOZZI: Let's head overseas. A lot of focus on China as we await Speaker Pelosi to land, as she gets ready to land in Taiwan. China sales under pressure here. Do you think the second quarter was the bottom?

ANTHONY CAPUANO: China has enacted this zero-COVID policy. And that continues to have an impact on travel. The good news or the silver lining is that we continue to see pretty strong domestic travel across greater China. But in the absence of meaningful cross-border travel, we think China will continue to have its challenges.

BRIAN SOZZI: Do you have to plan the business any differently, Anthony, as we get these increased tensions between the US and China?

ANTHONY CAPUANO: Well, there are a number of macroeconomic and sociopolitical factors that influence our business. As a company that has operations in nearly 140 countries, stability, transparency, diplomacy are all things that inspire traveler confidence. And our hope for the entire region, but certainly greater China, is that we'll see those govern the relationship between the two countries.

BRIAN SOZZI: Not lost on me is that you're standing in your new headquarters. A couple years--


BRIAN SOZZI: --this has taken, to get this headquarters open. It seems to be a big bet on the office. Why is that?

ANTHONY CAPUANO: Well, it's going to be interesting. We think this building is going to act as a real catalyst for return to the office. But like many employers around the world, we will use a hybrid mode. So we'll have folks sometimes working remotely.

As you might expect for the world's biggest hotel company, many of our associates are on the road quite a bit. But as we built this building, we pivoted some of the spaces and created lots and lots of collaboration space. And if the first few weeks are any indication, I think this is going to be a highly occupied new headquarters.

BRIAN SOZZI: A lot of CEOs I've talked to lately, Anthony, they're pulling out what they call recession playbook-- not my words. That's what they're doing. Do you have this playbook? And does that include just slowing hiring given everything we are seeing in the world?

ANTHONY CAPUANO: Well, it's interesting. We've obviously-- we operate in a cyclical business. We've been through a variety of recessions. I think that playbook has been well established.

But what's interesting to watch is all of the potential headwinds that are out there, whether that be the inflationary environment, the interest rate environment, fuel prices, sociopolitical instability, the combination of those factors you might expect would have a downward-- apply a downward pressure to our business. We've just not seen it yet.

We didn't see it in the second quarter. And we don't see it in the forward bookings. But obviously, we price and sell our inventory each and every day. And so we do have the ability to pivot if we start to see those headwinds impact our business in a meaningful way.

BRIAN SOZZI: Well, congrats on that new HQ. A lot of work-- I know a lot of work definitely went into it. Marriott International CEO Anthony Capuano, always good to see you. We'll talk to you soon.

ANTHONY CAPUANO: Good to see you, Brian.

BRIAN SOZZI: Appreciate it.

ANTHONY CAPUANO: We got to get you here soon.

BRIAN SOZZI: I'll be there.