Despite corporate layoffs, Marriott CEO states that business is strong and running smoothly.

• Despite a 3% increase in worldwide RevPar, Marriott's third-quarter earnings showed a 8% drop in RevPar in China, its second largest market.
• CEO Anthony Capuano stated that he does not anticipate the issue of weak domestic demand in China to persist in the long run, citing the impressive number of hotel signings recorded in early 2024.
• According to Capuano, corporate layoffs are projected to save the company between $80 million and $90 million annually, and they are not a conventional cost-cutting measure but a strategy to shift decision-making from the U.S. to other continents.

Despite the layoffs of over 800 corporate employees and the sluggish tourism market in China, Marriott International's business operations and growth remain strong, CEO Anthony Capuano stated on CNBC Monday.

"In every geography, we are fully operational," he stated.

Despite a 3% increase in worldwide RevPar, the company's third-quarter earnings showed a 8% drop in RevPar in China, its second largest market.

According to Capuano, he believes that the lackluster domestic demand in China will not be a long-term issue, as there was a record-breaking number of hotel signings in early 2024.

In the first half of 2024, we signed more deals in China than in any six-month period in our history. This indicates that both public and private real estate entities in China are confident in the long-term viability of the travel and tourism industry.

In the third quarter of 2024, inbound travel in China outperformed pre-pandemic levels, while domestic tourism was gradually picking up, according to him.

"According to him, prior to the pandemic, approximately 18 to 19% of our total room nights were from cross-border travel. However, through Q3, we had already surpassed this percentage, with more room for growth as airline seat capacity in Greater China continues to restore. As a result, we anticipate a significant increase in international inbound travel."

The business experienced a 6% increase in net room growth and a 2.5% rise in room rates, thanks to the strong return of group travel, which Capuano referred to as the "bright, shining star" for the industry.

Marriott's loyalty program now has 219 million members, and the company raised its year-end guidance for net room growth. This growth was attributed to the efforts of hotel front-desk employees and new partnerships with companies like Uber and Starbucks, which added 9 million new Bonvoy members in the third quarter.

Layoffs 'not a traditional cost-cutting measure'

During Marriott's third-quarter earnings call on Nov. 4, Capuano mentioned an "enterprise-wide process to improve our effectiveness and efficiency," which Chief Financial Officer Leeny Oberg later estimated would save the company between $80 million to $90 million annually, starting from 2025.

The measure that was initially reported as corporate layoffs was later confirmed by Skift on November 14, which linked to a notice of "mass layoffs" of 833 Marriott employees posted on a Maryland government labor website.

The company, which has doubled in size over the past decade, did not grow too big, too fast in terms of corporate employees, according to Capuano, who instead referred to the move as a necessary "restructuring" of its global corporate framework.

"He stated that the approach being taken was not a typical corporate cost-cutting measure. Over the past decade, the continent teams have developed significantly, and the company has expanded dramatically, with a presence in 60 new countries. As a result, the company aimed to shift more decision-making power to the continents through this exercise."

The global headquarters in Bethesda, Maryland, will feel the brunt of layoffs due to decentralized decision-making, according to Capuano.

According to him, most job cuts are at the corporate office level, so they will not affect service levels at any Marriott-branded hotels.

The cuts should enable us to be more agile and make decisions based on the local market perspective in real-time.

Marching into the midscale market

Occupancy levels and average rate growth are strong across most of Asia-Pacific, with Japan being the most notable example, as Marriott opened its 100th hotel this week, a Four Points Flex by Sheraton (formerly known as Four Points Express by Sheraton).

In Europe and Asia-Pacific, Marriott is spearheading its entry into the midscale market, alongside City Express in North America, to cater to budget-conscious consumers seeking basic, comfortable rooms with modern amenities such as Wi-Fi.

A press release published Monday announced that the company intends to open a dozen more Four Points Flex by Sheraton hotels in Japan within the next six weeks.