Travel recovery driven by ‘continued growth in traveler confidence,’ Marriott CEO says

Marriott International CEO Anthony Capuano joins Yahoo Finance Live to discuss quarterly earnings for the company, leisure travel, and how the hotel industry is transforming amid COVID-19.

Video Transcript

BRIAN SOZZI: Travel is starting to pick back up as new COVID cases have slowed. And that showed in the latest earnings from hotel giant Marriott. Worldwide revenue per available room rose 124.5% in the fourth quarter. Occupancy levels also improved year over year. Joining us now is Marriott CEO, Anthony Capuano. Anthony, always nice to get some time with you here. Let's start on forward bookings. What are your forward bookings saying right now about demand this spring and into the summer?

ANTHONY CAPUANO: Good morning, Brian. Good to see you again. We continue to be encouraged about the pace of the recovery. At the end of December and into January, we saw a little bit of a pause related to the Omicron variant. But forward bookings pace is already now ahead of where we were before that variant emerged.

Leisure demand continues to lead the recovery and is exceedingly strong. But as we indicated in our fourth quarter earnings call, in the fourth quarter, both business travel and group travel were about 30% off where we were same quarter in '19. But for both of those segments, it was about a 10 percentage point improvement over where we were in the third quarter.

BRIAN SOZZI: Last time I saw you, Anthony, you were pretty upbeat on the outlook for this year. Do you still see some sort of travel boom happening at some point this year?

ANTHONY CAPUANO: Well, we've learned. I mean, we've been quite hesitant to provide long-term forecasts for the simple reason that the pandemic has shown itself to be so unpredictable. I talked in the earnings call a little bit about greater China, wherein the second quarter business was fully ahead for every segment of where we were in 2019. By the fourth quarter, it was the one major region of the world that had not experienced sequential RevPAR growth.

With that said, we absolutely are anticipating leisure to continue to strengthen, particularly because so much of the leisure demand we've seen over the last few quarters has been almost entirely domestic. And as more and more borders open, we expect that cross-border travel to strengthen leisure demand. And our hope and expectation is that the business travel and group segments will continue to strengthen steadily.

JULIE HYMAN: Anthony, it's Julie here. Good morning.

ANTHONY CAPUANO: Hi, Julie.

JULIE HYMAN: One of the things-- hi there. One of the things that you talked about-- that your CFO talked about was at least possible on the call was to see revenue per available room rise this year and perhaps get back to pre-pandemic levels. Obviously, we don't know what's going to happen in terms of further waves, et cetera. As you start to see that recovery progress, how much of that is pricing versus, say, volume, capacity, et cetera, when you look at what goes into RevPAR?

ANTHONY CAPUANO: Well, as we focus on yielding our business, we obviously try to strike the right balance between both occupancy and rate. What we've seen through the last couple of quarters is much of that RevPAR recovery being driven by the pricing power we're seeing, especially in leisure destinations. In the fourth quarter, we talked about being down about 19% versus fourth quarter of '19. But we also mentioned that average rate was just single digits short of where we were in '19. So we think rate will continue to be strong, but as I mentioned, that influx of cross-border demand, we hope will drive occupancy, even above the 58% we saw in the fourth quarter.

JULIE HYMAN: And when we talked about cross-border demand and international travel, I have to ask you about the situation in Russia-Ukraine right now. I know you do have properties there. And so I'm wondering what you're seeing, what's going on, what you're hearing from your staffs as well, for example.

ANTHONY CAPUANO: Well, as you guys have been talking about this morning and as we've all been reading, it's an understatement to say it's a fluid situation. We do have a footprint in both countries, very modest footprint in the Ukraine, and about 30 hotels in Russia. To date, we've not seen any sort of measurable or material impact.

But again, it's quite fluid. I think our broad perspective when we look at it through a macro lens, one of the things that's been driving recovery over the last two years is continued growth in traveler confidence. And sociopolitical instability certainly has the ability to impact that confidence. So it's something here at headquarters but also clearly in the field we're monitoring closely.

BRIAN SOZZI: Does this situation-- it's clearly very serious, Anthony. When you hear from developers building new hotels, new Marriott locations, are they inclined to take a pause on the locations they're opening international because of it?

ANTHONY CAPUANO: It's a good question, Brian. You and I have discussed in the past, when I've had the good fortune to talk with you about the nature of our owners and franchisees, the vast majority of them are long-term holders and long-term investors. And as a result, they don't tend to try to time construction starts or time openings to optimize performance in a given month or a given quarter. And so projects that are under construction tend to complete.

In fact, it was not lost on me a bit of the irony that as challenging a year as 2021 was in terms of demand recovery, Marriott opened more rooms globally than in any other year in our history. And I think that illustrates the fact that when these projects are under development, they tend to reach their normal conclusion and open.

Where I do think you could see some impact is we've got lots and lots of projects that are approved, signed, and ready to start construction. You could see, given what's going on in individual markets or globally, that could cause one of our partners to think about, do I want to put a shovel in the ground this quarter or perhaps pause for a month or two?

BRIAN SOZZI: One thing that caught my attention when you reported earnings, Anthony, you teased a return of, I believe it was strong capital returns in the second half of this year. Does that mean you're bringing back the dividend? I believe you suspended it, really, at the height of the pandemic in March 2020. Does that dividend come back? And if it does, how big a dividend do you think it'll be?

ANTHONY CAPUANO: Again, the specificity we might offer in more normal times, I think we've been a little more cautious, given the unpredictability of the pandemic. But I think what you heard Leeny, our CFO, say on the earnings call was, if the recovery continues to proceed as we expect, it's reasonable to assume we'll start capital return to shareholders in the back half of 2022. And I think she went on to say that that would likely start with reinstatement of the dividend. But we've not really shared any specifics. Again, we want to give a little more runtime through the balance of the first and second quarter.

BRIAN SOZZI: Good to see those things coming back, and good to see you as well. Marriott CEO, Anthony Capuano, stay safe. We'll talk to you soon.