Marriott CEO says travel will start picking up this summer

By Mike Schneider
Associated Press

ORLANDO, Fla. — One of its hotels was destroyed in the terror attack on the World Trade Center and its worldwide business was hit hard by a drop in tourism, but Marriott International Inc. is seeing the start of a recovery.

J.W. Marriott Jr., chairman and CEO of Marriott International Inc., recently sat in a conference room at the sales center for two new hotels under construction in Orlando, Fla. Despite the business difficulties that the hotelier has faced since Sept. 11, Marriott believes the tourism industry is on the rebound. Associated Press

Washington, D.C.-based Marriott, one of the world's largest hotel companies, expects the turnaround to gain momentum this year. J.W. Marriott Jr., chairman and CEO, was in Orlando recently promoting two new hotels under construction: the 584-room Ritz-Carlton and the 1,000-room JW Marriott. He discussed the health of the tourism industry with The Associated Press:

Q: How soon are you expecting things to pick up for the hotel, hospitality, tourism industries?

A: I would expect that we'll come out of the recession some time in the late spring and I would think by fall the hotel business would be, at least, back to pre-9/11 levels. Maybe even a little bit better. I think '03 is going to be a good year and '04 is going to be a barn-burner ... I think the recession will be over by summer and people will start traveling again and companies will start loosening up their budgets. They can only stay home so long.

Q: Where is the weakness? With the leisure traveler or the business traveler?

A: Both ... Leisure is probably the best market. Suburban hotels, small hotels have not been hurt as much. Those big convention-destination hotels that rely on airline service are the ones hurt the most. Big convention, big resort areas like Hawai'i, Las Vegas, Orlando have been hurt probably more than any of the others.

Q: Do you think Washington has been responsive to the concerns of the tourism industry?

A: I think the bailout for the airlines was a necessity and it was a very good move. I think there is still a lack of understanding on the part of Washington about the tremendous industry that we have.

This is an industry that employs 18 million people. This is the first, second or third most important industry in 28 states and the District of Columbia. The industry has laid off, I would estimate, 400,000 or 500,000 people. I think the big unemployment number jumps are coming from this industry and I don't think Washington is focused on that. I don't think they understand the industry. They think we're a bunch of bed-and-breakfasts or motels or whatever.

The industry doesn't have a cohesive lobbying effort at all because you have a lot of fragmented businesses. You have rental cars. You have cruise ships. You've got airlines. You've got hotels. Taxi cabs. Retail. I've said a couple of times that you don't realize that Eastman Kodak is selling less film because people are not taking vacations and when they take vacations, they buy more film. The Big 3 (automakers) are not selling cars to the rental fleets because business is soft ... It just has a ripple effect through many segments of the economy most people don't even focus on.

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J.W. 'Bill' Marriott Jr., the top man AGE: 69 OCCUPATION: Chairman and CEO of Marriott International Inc., one of the largest lodging operators in the world. RESIDENCE: Potomac, Md. EDUCATION: B.S. in banking and finance, University of Utah. CAREER: Elected Marriott's chairman in 1985 after his father's death; succeeded his father as CEO in 1972; became president of the company and elected to board of directors in 1964. QUOTE: "I've said a couple of times that you don't realize that Eastman Kodak is selling less film because people are not taking vacations and when they take vacations, they buy more film. The Big Three are not selling cars to the rental fleets because business is soft. ... It just has a ripple effect through many segments of the economy most people don't even focus on."

A: One of the things that we've been working on with Washington was a $500 tax credit for travel, an immediate stimulus ... You have to buy an airline ticket, stay in a hotel to qualify for a credit. It's a stimulative measure. It's a stimulus and that's what we need to get us out of this recession, to jump-start travel. I'm afraid there's not a whole lot of support for this.

Q: In Orlando, there's been concern about hotels becoming delinquent on their loans since Sept. 11. Is that a problem Marriott is facing with any of its properties and do you see this as a growing problem, short-term, in the industry?

A: We're primarily a management company so we have very little invested in the industry in terms of our own capital. And most of our properties were financed quite some time ago ... Industrywide, I don't think so. The industry is forecast to make $17 billion or $18 billion in 2002 and the highest was $21 billion. It's not nearly like it was in 1991 when everybody was leveraged to the teeth. There's more equity that has been invested in hotels in the last 10 years than in previous cycles. I think the industry is going to do pretty good. There was a tremendous cutback in new hotel construction, though. They're forecasting that in 2003, there will be a less than 1 percent increase in the number of rooms in the industry.

Q: Are there any projects you put on hold because of Sept. 11?

A: Some smaller projects, our partners have put on hold. Franchises have been put on hold. A few hotels of 300 to 400 rooms.

Q: When do you expect hotel construction to pick back up?

A: It's going to be a while because financing just isn't there. There's very little financing for this industry today. The financing that is out there has to be corporate-guaranteed.

Q: How many people has Marriott laid off?

A: We laid off about 10 percent of our headquarters staff. We laid off around 350 to 400.

Q: Since Sept. 11, how reliant have you been on promotions and discounts?

A: Everybody has been discounting, and part of the problem is we're all out there trying to get occupancy. Consumers are very smart. They get on the Internet, and they figure it out ... Hopefully it won't go on very long. We'll continue discounting in 2002. Hopefully we'll stop discounting sometime.

Q: How much damage did Sept. 11 and the after-effects cause Marriott?

A: We lost a hotel in New York. Totally destroyed, an 800-room hotel. And occupancy was down in the late September area around 30 to 40 percent. In October, probably around 25 percent. November, somewhere around 20 percent. December probably around 15 percent.

Q: What kinds of trends do you see happening in the hotel industry?

A: I don't think there is going to be very much more consolidation because of the capital constraints of the industry. There may be some, but I think most of it has already taken place ... If you want to talk globally, it's very interesting to see how fast China is developing, particularly on the hotel side. It's the hottest growth market right now in the world in terms of hotels. That's because it's not very expensive to build in China. We've done a lot of business in Hong Kong.

Q: Do you see specialty areas such as timeshares and senior living centers becoming an increasingly large part of Marriott?

A: Senior living is pretty much overbuilt. Timeshare is not. Timeshare continues to grow and we'll continue to add. We just opened a timeshare in Thailand — our first Asian timeshare operation. We have a timeshare in Spain. One in Switzerland in the Alps. We're continuing to add to our Florida timeshare operation, particularly in Orlando.

Q: In the hotel business, do hoteliers buy towels with the expectation that guests are going to take them?

A: Sure. They'll steal anything they can get their hands on.