Transforming Travel and Leisure with Mark Hoplamazian, Arnold Donald at CNBC Evolve 2021

Well, after a tumultuous year, travel is rebounding in a big way, hit particularly hard with the hotel and cruise industries. As the vaccination rate increases and pent-up demand turns into bookings, is this going to clear the path to recovery and smoother sailing? Let's turn to Hyatt Hotels CEO Mark Hoplamazian and Arnold Donald, he's the CEO of Carnival Corporation. They'll be interviewed by CNBC global markets reporter and our travel and hospitality specialist Seema Mody.

Hi, Seema. Hi, Tyler. Thank you. Arnold and Mark, a pleasure to have you on today. Thank you for joining us, and it is a great day to talk travel. Arnold, I'll start with you. There is so much anticipation around the return of cruising. Your first Carnival ship from a U.S. port set to sail in early July after 15 months of no sailing. From Texas, not Florida, the governor there creating some issues, we'll get to that later. But walk us through what's happening right now and how you are planning to get back to sea safely. Today, your competitor Royal Caribbean did delay another ship due to some crew members testing positive for COVID.

And we've been tracking the rebound in travel. Mark, more travelers now checking into hotels. The recovery seems to be highly confined to beach leisure destinations like Maui and Florida. Wondering when you start to see cities coming back?

Yeah, Seema, thanks for having me, and great to see you too, Arnold. I think, first of all, it's unambiguous that the resorts are back with a vengeance. We're running something like 30% above where we were in 2019 for our U.S. resorts, for example, over the July 4th, the two-week period that sort of spans July 4th. So really significant improvement. But the overall chain results for that period of time are still in sort of the 90% range of where we were in 2019. So that big gap between how the resorts are performing and what the overall performance looks like is what you just described, which is cities, and primarily cities in the north, and primarily gateway cities, that is, cities that have a lot of international travel as part of their guest base over time. So New York, Chicago, and San Francisco are primary among those. And I think that we are already seeing the signs of people starting to travel for work in a more affirmative way, in a more significant way. We're seeing, thankfully, and not surprising to me but maybe surprising to a lot of industry followers, even tech companies are talking about having mandatory office day weeks and getting back to work, and importantly, getting back to travel. Deloitte just made an announcement about bringing people back into the office but also made a comment about getting back on the road. Most of the bankers and consultants and lawyers that I'm talking to are also gearing up to be back on the road. So I think that that will really take hold in a more affirmative way in the fall. Part of that is because this is typically a weaker time for business travel every year, but also we are not back to the point where there's more of an equilibrium with people having kids back in school and therefore freeing up their time and capacity for travel.

Well, that's encouraging, Mark. I mean, I need to tell you, 2020 was the worst year ever for us hotels. I think it was one billion unsold room nights for the first time in history. I'm wondering, as you reflect on your experience leading Hyatt through that storm, what was the toughest decision you had to make?

Well, I would say by far the hardest decision and most painful decision was having to let go of so many colleagues. We let go of tens of thousands of people at the hotels around the world and also shrunk our corporate offices around the world by 35%. It was a really, really deep restructuring that we went through in May of last year, and it was excruciating. We as a company have a purpose which is around caring for people so they can be their best, and we do start with our colleagues. And so the absolute collapse in travel demand led us to a very challenging but necessary step of having to reduce our workforce, and it was very painful. We immediately turned to taking whatever steps we could to help support colleagues that were affected by this. Apart from health care coverage and the like, we also put together a care fund and distributed over $17 million to thousands of colleagues of ours around the world who weren't really receiving enough federal assistance or country-level assistance to make it through. But that was the most difficult thing.

And I know you have brought since then many of those employees back, but then there's a labor shortage because that's been challenging. Arnold, as we talk about leadership during a crisis, you know, I just look back to the cruise lines, the CDC providing little to no guidance last year, your ships were docked, you had to go to the debt market several times to raise capital. Was there a moment where you thought, 'I'm not sure if we're going to make it through this'?

Arnold, with this cruise restart, I imagine Florida is testing your patience right now, being the cruise capital of the world. It's probably where you want to set sail from first. But Governor DeSantis saying that if you mandate the vaccine, you'll be subject to a hefty fine, about $5,000 per passenger. So what's the plan here? Will you follow CDC guidance and require passengers to be vaccinated and just pay the fine? What are you deciding, what are you planning to do?

You think you'll pay the fine then? If you have to pay it, you'll pay it?

The best of both worlds. Yeah, we hope you get there. One question, Mark, that we just received from the audience, Jessica Williams. We talk about the hospitality industry evolving post-pandemic. She wants to know, you know, so many consumers switched from hotels to Airbnb during the pandemic. What are the hotels like Hyatt doing to win that consumer back?

Sure, happy to address that. Look, we have adapted continuously over the course of the past 15 months to first of all understand what people really want and need and be able to accommodate that in very different ways, creating a lot of different offerings. Some of which are now digitally enabled that would not have been before the pandemic. Some of which were dining options, especially relying on outdoor dining. So we've continuously adapted, and many of the greatest adaptations came from individual hotel teams that we then understood and then scaled over time. So I feel like we're absolutely doing that on a real-time basis, including a program that we call 'Work from Hyatt,' which is to mimic actually why people are out renting houses in the wilderness or in more remote areas, which is they want a change of pace. So they want a change of venue for working from home or being in school from home, although now school's out and we have summer here. So I think that over time, that continuous adaptation with a very, very clear commitment through a structure that we put into place, a global cleanliness and care framework with a lot of outside expertise, will really provide the confidence level that people still are seeking. As Arnold just mentioned, safety and security is really high on the list of everyone's consideration. So I think that makes a big difference, and I think that will tend to win out over time in terms of people's consideration sets.

Understood. Arnold, a question for you from our audience member Clement Ching. She asks, you have said in a recent interview that you believe the cruise industry will return to pre-COVID levels not till 2023. Why will it take that long, she asks.

You know, Arnold, Mark was just talking about how the hotel experience is evolving post-pandemic. How do you think the cruise experience will evolve or change, whether it's shorter sailings, new destinations, ESG? Your thoughts there.

It is an exciting time, Mark, for the world of travel. Given what happened in 2020, how are you thinking about the use of technology, whether it's drones or robotics? How will hotel operators lean on technology going forward to change the consumer experience?

Well, I think there are many different digital tools and platforms that are being developed, and we've spent a lot of time over the past year. The one area that we did not make significant cuts in was really looking at how we could deploy more digital enablement so that we could actually provide people with a lot of choices with respect to how they get information before and during their stay, how they check in, how they order in our restaurants, and how they pay. And it extends beyond that to how they interact with our colleagues in our hotels for special requests or things that they forgot. So we've expanded significantly those offerings, but we've also looked at ways in which we can take some of the administrative tasks out of the daily lives of our colleagues so that they have more time to actually engage with our guests in an interpersonal way. Because as Arnold just made reference to, the power of human connections is alive and well. So that really is a really important thing to note, I would say, and that applies to both leisure travel and business travel. One of your prior guests, the CEO of VMware, was talking about an off-site that his team had and how everyone was so excited to be together and hugging one another and making those connections. That's what's happening everywhere. I've experienced it at Hyatt. I've been around other leadership teams that have done the same. I'm attending another large corporation here next week is having their team gathering, and I'm going to actually attend that as a sort of a guest speaker for them. But there's a huge amount of excitement. And so there's this old adage that even as things, the more things that change, the more they stay the same. The thing that's staying the same is the power of human connection, and that's what's going to drive people back to want to be together.

What do you think, Arnold? Is it time to chase a business traveler?

Well, we look forward to getting back on a cruise ship very soon here. Arnold, thank you for joining us. Mark, a pleasure to have both of you on today to talk about the state of the travel industry and how it's being disrupted and what it will look like in the future. Thank you.