Tuesday 2 June 2020

USA: Marriott Threatens Job Losses, But Opens Hotels

Marriott has told employees in the United States that furloughs and reduced work week schedules which began in April will be extended through to October.

The decision was taken as the coronavirus pandemic continues to slow demand for travel.

The financial impact of the pandemic is more severe than 9/11 and the 2008 financial crisis combined, Marriott said.

The company is rolling out a voluntary redundancy program for on-property and above-property staff in the United States who may choose to leave.

Similar voluntary programs are being considered in other parts of the world.

Given the company’s expectation that prior levels of business will not return until beyond 2021, the company anticipates a significant number of above-property position eliminations later this year, added a statement.

The company is not able at this time to predict how many associates will be affected by these separations or any resulting charges or cost savings.

Marriott has reopened all of its hotels in China and the group says it has seen a recovery in business travel.

The world's third largest hotel chain has 350 outlets across China and says that occupancy rate is now at 40%.

Marriott gave an upbeat statement on Monday about its business in China as it emerges from coronavirus lockdowns.

Last week it said the financial impact from the pandemic has been more severe for the hotel chain than 9/11 and the 2008 financial crisis combined.

Marriott chief executive Arne Sorenson said the occupancy rates at its Chinese hotels had been as low as 7% in late January when China was at its peak of cases.

Mr Sorenson told a travel conference: It's not just leisure travel growing, but it is business travel. Chinese are flying again.

However, he warned that occupancy might not recover to pre-coronavirus levels for several years.

Marriott said demand for hotel rooms in the US is also recovering but is currently only about half the level of its China properties at 20%.

The hotel group, which owns about 30 brands including Ritz-Carlton, St Regis and Sheraton, has extended furloughs for employees and reduced working weeks until early October.

Given the company's expectation that prior levels of business will not return until beyond 2021, the company anticipates a significant number of above-property position eliminations later this year, it said in a statement.

Rival Hilton reopened all of its 255 hotels in China two weeks ago and introduced a CleanStay initiative to protect employees and guests.

The hotel and travel industry in China were among the first to be hit from the coronavirus outbreak, and look to be the slowest to recover as businesses and factories reopen across the country.

Last month, Shanghai Disneyland reopened its gates although it introduced strict social distancing rules and limited daily visitors to about 24,000, compared to its pre-pandemic level of 80,000.

Within the United States, the world’s largest hotel brand Marriott is seeing occupancy rates rise as the travel industry begins to inch toward recovery, surpassing 20% among its open properties.

Crossing over 20% occupancy is a meaningful improvement from where we were before, but it is a long way from where we need to get to, Marriott International president and CEO Arne Sorenson said today at a travel conference hosted by Goldman Sachs.

That uptick is similar to the incremental climb reported by the airline industry ahead of Memorial Day weekend, traditionally one of the busiest travel times of the year.

Sorenson said most of Marriott’s occupancy growth was from drive-to markets, which is in line with expectations that domestic local travel will return well before international travel.

Extended stay hotels have been less hard-hit than the rest of the hospitality industry, with some seeing occupancy rates in the 30% to 40% range.

The Residence Inn brand would be performing better than the Courtyard brand, and leisure markets are performing better than the others, Sorenson said. It’s a steady move forward.

Despite the inklings of recovery, Marriott announced last week that it would extend furloughs that began in April through Oct. 2. Sorenson commented on this during the conference, noting that in addition to on-site workers, the company had furloughed two-thirds of its corporate staff.

It would have been incomprehensible before Covid-19. We know we won’t be able to bring everybody back, Sorenson said.

Meanwhile, in China, where all of Marriott’s 350 outlets have fully reopened, hotels and inns are crossing 40% occupancy rates as restaurants and businesses also begin to return.

It’s a big enough country where you can’t have those numbers without seeing leisure and business travel growing, said Sorenson. We are seeing steady improvement.

Like the United States, China is a domestic travel market, and its recovery could foreshadow where the U.S. market is headed.

With occupancy down and travelers concerned about health and sanitation more than ever—Hilton has partnered with Lysol, while Marriott launched its own cleanliness council—Sorenson said the new cleaning initiatives could impact revenue.

On the cost side, we will spend more on cleaning between guest stays than we spent before Covid-19, Sorenson said.

Think about the electrostatic sprayers we’re rolling out globally, which will intensify that cleaning—there is a cost to the equipment, there is a cost the materials that are used, and there is a labor cost associated in that incremental step.

But, we think it is imperative we do it to deliver to our guests a safe room.

The initiatives may not last forever, Sorenson noted, but will be maintained as long as Covid-19 is any way relevant to decisions we’re making about travel.

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