When asked this week about competing with technology platforms like Google, Amazon and Facebook, Marriott International CEO Arne Sorensen described the situation in battle-like terms.
“I think we are in an absolute war for who owns the customer,” Sorenson said. “It’s a long-term war, and ‘long term’ in digital space might be a few years.”
Sorensen was part of a CEO panel that was one of the most talked-about sessions at this week’s NYU International Hospitality Industry Investment Conference.
Sorensen said that while he and his hotel CEO peers will continue to compete on product and service, “I think less about Airbnb than I do about Google and Facebook and all these other digital empires who own all of us. What Amazon is doing with these digital assistants is reinventing search for voice search. They are all getting into have a profile for each and every one of our customers, so how do we use that to make sure we are monetizing that relationship as much as we can?”
“This is a battle we are going to be fighting for some time,” Sorenson noted. “Each of us is making our bets in this space.”
For Marriott, at least, the way to fight back is via loyalty, and how the company delivers value to its customers, and Sorenson predicted that the next big innovation in hospitality will take place “at the platform level.”
After the panel, he told Skift that for Marriott, innovation is about the following: “How do the loyalty programs work? How do the digital platforms work? How are they relevant to the traveling consumer? Are they relevant to our consumer? How do we use the data that we know about them to deliver value to them? Not to be unfair to them, not to steal their data, but to use it in a way that causes them to say, ‘You know what? I like what Marriott is doing with my information. It’s making my traveling a little better.”
Skift sat down with Sorenson during the conference to speak to him about how Marriott can continue to compete, and what he thinks about the overall state of the industry. Here’s what he had to say.
ON BECOMING THE ULTIMATE EXPERIENCE PLATFORM
Marriott has already demonstrated its desire to become a travel ecosystem of its own where consumers turn to the brand for more than just a hotel stay, and one prime example of that is the newly launched Marriott Moments marketplace for tours and activities. But what about when consumers aren’t necessarily traveling?
Sorenson said Marriott is primarily thinking about its consumers through the lens on the types of mobile services it can provide to them when they stay with Marriott, but also extending the brand’s engagement pre- and post-trip. He also noted that the Marriott Moments site isn’t just for travelers, but locals as well.
“Increasingly, we are also looking for ways to engage with our customers when they’re planning travel, and after travel,” Sorenson said. “Obviously telling us reviews has been something we’ve been doing for some period of time. And then, I think over time, whether we do this alone or we do it with partners, we’ll have to see. We want to make sure we have a regular series of conversations with our loyalty members. And if you’re only a traveler once a month, we need to find a way to supplement that and that could be through local food and beverage or it could be other things that we’ll continue to take notice of.”
And determining how to “build something the customers are drawn into without having to be sold to in a sense” is definitely something on Marriott’s mind. “Can we deliver something that is different from what they have available somewhere else? And obviously, there are great tech platforms all over the place. Sometimes they’re local. Sometimes they’re global. And we want to make sure we’ve got a tool to be competitive.”
ON THE HOMESHARING PILOT
During Marriott’s first quarter 2018 earnings call, Sorenson spoke at length about Marriott’s homesharing pilot in London, even suggesting that Marriott could potentially offer a better private accommodation product than the startups (ahem, Airbnb) who have dominated the space for the past decade.
So far, he said, the business has been “very encouraging” and that “customer response has been great.”
As for Marriott’s nearby London-based hotel owners, he said that for the most part, they understand why Marriott is seeing how homesharing could work for a hotel company, although he also admitted there are those with “differing points of view.”
“I think generally the owners understand that this is a space that is logical for us to be in,” he said, later adding, “These are units that exist in the market. To some extent, hotels are competing against them anyway. And it’s probably better for the Marriott to be stronger in this space as opposed to not playing at all in this space.”
But what about Marriott’s allegiance to the American Hotel & Lodging Association? Does Marriott’s participation in homesharing stand squarely opposed to what the hospitality industry is fighting against?
“No, no, no, we continue to believe that the playing field should be level,” he said. “And then it’s essential this business comply with local law. And so, where we do it, we will comply with local law. … But, in markets in which it’s prohibited or in markets in which there’s a cap on the number of nights that can be done or issues around paying lodging taxes and the rest, we intend to comply with law. And that’s one reason we’ve gotten into it now.”
He added, “And for those companies that do not comply with the law, there ought to be consequences.”
ON THE ONLINE TRAVEL AGENCIES
Two years ago, Marriott and its peers were out in force with a collective message for consumer and in Marriott’s case, that message was: “It pays to book direct.”
Two years later, industry consensus seems to suggest that those direct booking campaigns have helped the brands gain more direct bookings overall, and brought more of a sense of “equilibrium,” as Expedia CEO Mark Okerstrom described recently.
Marriott, in particular, is renegotiating its commission rates with Expedia in the late fall and while Sorenson didn’t want to “speculate about what comes out” he acknowledged “We’re in preliminary discussions with them now and some other companies.”
Sorenson described the current hotel distribution landscape as “a very fluid space where things happen quickly” and one where “there are players with real power in this space, especially so many technology platforms” such as Google or even Airbnb.
Of those many players, he said, “We’re working with many of them. They are not just threats or competitors but they are also partners in some areas.”
And although the space keeps evolving, Sorenson said, “We have seen more and more business shift to our direct channels. We’ve seen loyalty continue to drive a higher share of the business that is coming into our hotels. And we think we’re competing or we compete against these platforms quite well.”
And to continue to compete, Marriott will continue investing in its loyalty programs and its digital platforms.
As for whether Marriott would ever see its hotels advertised on Airbnb, he said, “I don’t think it’s likely we’ll advertise hotels on Airbnb.” And as for Google? “What we do with Google will evolve over time. We obviously already do some business with them around search and we want to make sure that we are using those tools in a way that benefits our business.”
ON THE STARWOOD INTEGRATION
On August 1, when Marriott unites all three of its loyalty programs, the company will reach a major milestone in the integration of Starwood Hotels & Resorts and, nearly two years after Marriott acquired Starwood for $13.3 billion, Sorenson said things are going very well.
Starwood Preferred Guest (SPG) member reaction to the combination of the loyalty programs, he said, was very important to Marriott, and that so far, response to the upcoming unification in August has been “very, very positive” but “there’s still a lot of work between now and then.”
That work involves making sure the 1,300 to 1,400 hotels from Starwood are seamlessly transferred onto the same technology platform that supports Marriott’s hotels.
Sorenson also said that rather than making Marriott a target, the scale afforded by the Starwood deal, making Marriott the world’s largest hotel company, has been and will continue to be a huge advantage and that, in some cases, he’s seen “a lot of our competitors trying to emulate pieces of it.”
And as for adding a new brand to the 30 that Marriott already has, Sorenson said, “I think it’s more likely we’ll add more brands than we’ll subtract brand.” When Skift spoke last month with Marriott’s global development officer, Anthony Capuano, he hinted that Marriott may soon enter the all-inclusive resort space.
Earlier this year, Marriott made the mistake of using a third-party vendor to put together an online customer survey that listed Hong Kong, Taiwan, Macau, and Tibet as separate countries, angering Chinese authorities and leading to a temporary shutdown of Marriott’s website and app in China.
Sorenson detailed what really happened in a fourth quarter earnings call in February, but said that, looking back on the first quarter, that incident luckily did not have a negative impact on the company’s business in the region.
“Gratefully, the impact to our business in China was not measureable,” Sorenson said. “I think, by and large, customers continued to stay with us. Owners continued to develop with us. I think in both instances they saw this as what it was, which was a mistake — not an intended political statement. And as long we move quickly to fix that mistake, I think human beings, being what they are, said ‘OK, as long as Marriott’s doing what it should be doing, we’re fine with it.'”
He noted that Marriott’s partnership with Chinese e-commerce giant Alibaba has also helped the company “welcome more and more Chinese travelers around the world and sign up hundreds of thousands, if not millions, of additional loyalty members in China.”
As for the possibility of a looming trade war with China, he said, “Well, we don’t know where it’s going yet. And, I don’t think the Chinese want a trade war. I’m hopeful that the Americans don’t want a trade war. But, it’s not clear at this point exactly what the strategy is around trade. And we need to get some clarity.”
ON POLITICS AND TAX REFORM
Sorenson said that in the short term, he hopes that corporate tax reform does act as a “stimulus” both for the optimism of the American consumer but also for the economy in general. In the long term, however, he does wonder how the economy will evolve over time.
He also lamented how the “language around security, the language around immigration, the language around trade collectively make the U.S a little less welcome a destination for international travelers today than it could be.”
“That does not mean that they’re aren’t issues around security or issues around immigration that should be addressed,” Sorenson added. “But there should be a way for us to focus on addressing those while also extending welcome to travelers around the world to come and take their vacations with us or to do business with us. And that’s one place where we are trying both individually and through the industries to say don’t lose sight at the economic opportunity that exists for the United States to create jobs, to create tax revenue, create economic growth by welcoming travelers from around the world.”
This article has been republished from www.skift.com