Marriott CEO Arne Sorenson, much like other hotel industry executives, painted a somber but hopeful picture about the state of hospitality during the coronavirus pandemic Monday – and introduced a new gift card strategy likely to entice travel-hungry consumers.
“The recovery is not going to happen uniformly across all regions, and it is not going to occur overnight,” Sorenson said in the company’s first-quarter earnings call. “It may take longer than any of us would like, and we will likely operate a bit differently going forward. But we have taken the steps necessary to position the company to manage through this crisis successfully, and travel will rebound.”
Last weekend as some beaches reopened, for example, bookings showed some signs of rebound: The Ritz-Carlton Bacara in Santa Barbara, California, and hotels in Hilton Head, South Carolina, were expected to reach about 50% occupancy, based on existing reservations.
Folks are tiptoeing out of their homes more, Sorenson said, citing data from the past few weeks. But Sorenson cautioned, “that’s not enough to put a stake in the ground and declare that we’ve got momentum toward a recovery, given how low the numbers actually are.”
U.S. hotel occupancy is down more than 58% this year, standing at about 29% for the week of April 26 to May 2, according to data firm STR. That is higher than previous weeks but represents a large decline.
Occupancy has climbed steadily since the week of April 5 to 11, when it stood at 21%.
Marriott offers 20% discount gift card promotion
Sorenson teased a new discount gift card promotion during the earnings call. Marriott spokesman John Wolf provided the details to USA TODAY: Until May 17, customers can purchase a Marriott Bonvoy gift card at a 20% discount, to be used globally this summer and beyond. Further details are available on the Marriott website, including which gift cards hold the applicable discount.
Guests can purchase the discounted gift cards only online, and they don’t apply to the Bulgari and Design Hotels, Ritz-Carlton Residences and Homes and Villas by Marriott International brands. The hotel industry is trying out this bond and gift card strategy to lure customers back to hotels during this steep demand decline.
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Sorenson also told investors that occupancy deteriorated in March but stabilized in April, but at low levels. Trends are improving in Greater China, Sorenson said, where occupancy levels are just over 30%, up from lows of under 10% in mid-February.
Revenue per available room fell 90% both worldwide and in North America in April, and occupancy for both sectors fell to just 12%. But global occupancy edged up to 15% for the week ending May 2 (and 20% when looking at hotels actually open). About 25% of its hotels across the world are closed temporarily, and 16% are closed in North America.
The company is tracking bookings and cancellations, testing and case data, and it is monitoring government regulations with an eye toward ramping up business as restrictions lift and market conditions improve. “We are consulting with our owners to analyze potential market demand and hotel level cash flow to help inform when and how to reopen their hotels,” Sorenson said.
The question is whether hotels lose less by staying open rather than closed. The general calculation, Sorenson said, is that even at 10% occupancy, there are financial benefits to staying open. Fixed labor, heating and cooling costs can’t be avoided, even with no guests. “There’s not a closing scenario that gets you instantly to a break-even level,” Sorenson said. The trend line now is toward more openings, not more closings.
In the U.S., Sorenson sees markets such as San Antonio, Texas, or Chicago, to which consumers can more easily travel by car, as strongest for leisure, local or regional business travel.
Sorenson said hotels will reopen faster than the restaurants within them. Digital check-in will be important to protect employees and guests, and he anticipated more intensive housekeeping between guests.
But some hotels may never reopen.
“I don’t think the (hospitality) industry itself has yet come to terms with the full scope of every piece of minutiae that needs to be reimagined,” Steve Carvell, professor of finance at Cornell University’s S.C. Johnson College of Business, has told USA TODAY.
Still, the industry is accommodating guests, aiding essential workers and homeless people in communities and adjusting offerings where it can as the travel industry spirals and fights for government aid to overcome the crisis.
Choice Hotels CEO talks stronger occupancy levels
Elsewhere on Monday, the parent company of hotel chains like Clarion and Quality Inn seems to have been somewhat bucking industry trends of extremely low occupancies. Across its portfolio, the average occupancy has been higher than 30% since the week of April 12, Patrick Pacious, president, CEO and director of Choice Hotels said on its earnings call.
Additionally, its 410 extended-stay hotels had a 60% occupancy level in April. About 90% of the company’s domestic hotels lie in suburban, small town and interstate areas. Pacious cited STR data, saying that these “retained higher industry-wide consumer demand than hotels in urban or resort destinations.”
Pacious believes as demand increases, the company is in a strong position to interest travelers given leisure travel makes up about two-thirds of its stays.
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This article originally appeared on USA TODAY: Coronavirus: Marriott offers one-week gift-card promotion at 20% off