Marriott CEO Arne Sorenson at Skift Global Forum 2020

Hey, thank you, Tom. Great to see you.

Yeah, well, glad to be part of it, Tom. It's always such a great conference, and I'll look forward to picking through the titles on your books when we're done.

Well, for the first time in six months, my wife and I busted loose last week. So we left the Washington D.C. area on Friday, and we took advantage of being able to control our own environment and took our car. We drove from Washington to Minneapolis, so about 1,100 miles. It's the great American road trip. The principal reason, of course, is to see my wife's folks, who we haven't seen since the pandemic started, but also give us a little bit of a breath away, a little bit of a sense of change, I think, which we're all yearning for.

Well, thanks very much. It has been an interesting year and a half, of course. I got diagnosed with pancreatic cancer roughly the first of May in 2019. And the most concrete thing I can say is I'm here. I feel great. In fact, I feel strong enough to be fighting COVID-19, the disease that we're all fighting, as opposed to simply focused on my cancer battle. I've been through surgery, I've been through chemo, I've been through radiation. I am optimistic that I'm heading into the monitoring phase, which of course is an extraordinary gift. And so I feel good and really bullish about the future.

Yeah, so obviously it has been a doozy of a year. We get COVID-19 showing up in China in late January, business essentially disappears across the country as China shuts down, and our business goes to minus 90 to 95 percent by the time we hit the first of February. And while the details we're all starting to lose a little bit, there's a weekend in February where the virus shows up not just in South Korea and Iran, but shows up in Italy. And it becomes fairly clear, I think, at that point that it is going to be a global phenomenon, and of course becomes a global phenomenon. So by the time we're into March, this functional disappearance of our business has extended around the globe, and our business is down 90 plus percent. These are unimaginable kinds of figures for those of us who've been in the industry for decades and decades and decades and thought that the worst we'd ever seen would be something like what we saw in the Great Recession or after 9/11, which was sort of a minus 20 to minus 25. But what we see from there to today is a move from minus 90 to today something like minus 65. Now, it's going to vary a little bit by segment of the industry. Obviously, the more the hotels are dependent on drive-to traffic, the better they are. The more rural or suburban they are, probably the better they are. The more urban and flight-dependent and group-dependent, probably the worst they are. But everything has moved up a bit from that minus 90 to minus 65. I think a piece of that is simply about human nature, that the longer we get used to living in this pandemic world, we don't ignore it, but we start to say, how do we begin taking steps back to normal life? How do we start to see the people we love? How do we do what we've done? How do we take a great American road trip and get a little variety back in our lives, hopefully sensibly, but still step by step and in the right direction.

Well, China has come back very strongly. We're probably still down, I would say, something like 20 percent compared to 2019 levels. But think about minus 20 compared to minus 65, and you get a sense of the contrast between China and the rest of the world. That is leisure first, of course, but it includes business transit travel and increasingly includes group, because business and economic activity has come back in China quite robustly. Now, I think the only thing we ought to keep in mind here is that one of the helpful tailwinds in China is that the Chinese are not traveling abroad. So if you look at what would have happened in 2019, for example, we would have had Chinese traveling not only to other destinations in Asia Pacific, including the close ones like Macau and Hong Kong, but Thailand and Indonesia and Malaysia and Australia, but they also would be going to Europe. And by and large, they are staying home. So there is a concentration of the travel that they're taking in China, which will help those China numbers to some extent. It will not help in the same way the European or the rest of Asian numbers.

Yeah, I mean, I think the first lesson, of course, is probably hardest to apply now because we're so many months into this, but China reacted with extraordinary power when the virus first surfaced. They shut down the country. And by shutting down the country, I think they broke the curve of the virus in a way that probably hasn't been done in a number of other markets around the world. We can all debate whether that's the right thing or the wrong thing. It is what it is. But I think today, if you bring it to the American context, for example, I think politically we're not going to go back to a hard shutdown. It's just not feasible that the American society would accept that. And I think it's probably no longer clear that the kind of shutdown that they did in January and February would necessarily even deliver the same kinds of results in the United States that they appear to have delivered in China then.

Yeah, in fact, I could broaden it from that a little bit. When the virus seemed to resurge around the first of July in the United States, particularly, I became increasingly pessimistic. And you know, all of us, I think, go through this. We are in an uncertain time. We're in a time that's filled with emotions. Our rhythms are different. We're at home. We're seeing people face-to-face much less than we saw them in the past. We're trying to figure out how to apply these rhythms to our lives. And as a consequence, at least I've found that over the course of a given day or a given week, my level of optimism may change meaningfully. Well, first of July, when that virus was resurging, it worried me. Worried me that we were going to see folks crawl back into their holes, essentially give up the sort of preliminary steps that they took. And I, you know, I learned an old lesson again. And this is an old lesson that we've studied in history. We saw it in the Battle of Britain in 1940 and '41 when the Germans were bombing London every night. There is a resiliency to human nature, and even if there's a threat on the horizon or a threat that is present, people understand that threat, start to, not ignore it, but start to accommodate it, start to learn how to live with it. And so what we saw, I think, more in the U.S. than in Europe, but certainly to include both of them, is that notwithstanding the virus coming back, people stepped out more and more each week. They're still stepping out more and more each week, even though our caseloads remain fairly high. The dynamics are different, of course. Europe is very dependent on international travel. The United States, like China, is by and large a domestic travel market. And as a consequence, the numbers in the U.S. are better than in Europe, but in both places, they're proceeding in the right direction.

Well, that's obviously one of the things we're looking at. It was probably not the first thing that we looked at. I mean, I think our first agenda was how do we protect our people, how do we protect our guests, and how do we make sure we're working with our hotel owners to help all of them navigate through this in a way that they could be safe and that they could survive both personally and economically when we get to the other side. I think the farther we've gone into this, the more we've started to think, okay, what happens to our business, what happens to the industry, what happens to operating protocols, both short-term and longer-term. And I think one of the things that is crystal clear to us, and probably somewhat similar to prior economic crises, is that when we get to more troubled times, the power of a distribution system, the power of a loyalty program, the power of a portfolio delivers incrementally that much more than platforms that don't have that power. So if you go back to 2019, you're in the 10th year of an economic recovery, occupancies across the industry were very high, hotels were filled during the week. The relative value that we delivered, we thought, was still substantial, but I think to some extent the value has increased. And the second thing, obviously, is we will see hotels increasingly change hands. And that's probably more a 2021 story than a 2020 story, but as they change hands, that's when new owners step in and say, what's the best positioning for this asset going forward? And we've found in prior crises that that gives great conversion opportunities as well.

Absolutely, yeah. And M&A, well, M&A we'll watch, of course. M&A is much harder to predict. We did the Starwood deal a few years ago, believing then that having a broader portfolio, a broader selection of choice for customers within our own ecosystem, a strong portfolio of luxury, resort destinations, lifestyle brands, was conducive to a stronger platform. We still believe that to be the case. So if there are opportunities, we'd love to participate in them.

Well, maybe I'll take a data point that is just coming out as we speak. Obviously, one of the big issues we're wrestling with across the globe is what to do about schools. And all across the world, we've got different experiences or experiments about what we're doing with schools. Some are still virtual, some are hybrid, some are back to sort of a normal kind of rhythm. And one of the things that's interesting to me, and this is just a fresher version of what we heard early in the pandemic. Early in the pandemic, what we heard from school administrations, whether it be high schools or colleges, was how seamlessly and brilliantly their teams moved to remote work. What did we hear from students, and what do we hear from students today? It's nowhere near as good as being there in person. Almost universally, the students tell us it's not because of bad intent, they're trying hard and we're doing what we can do, and by the way, we want to protect ourselves, but this doesn't compare to being there in person. And I think to some extent we can extrapolate from that to business travel or to group travel or to leisure travel for that matter. We started early in this crisis saying, all right, Teams calls or Zoom calls or conference calls or whatever tools we were using, we were responding to the urgency of this crisis. We knew what we had to do. We may or may not have made the right decisions, but it was all hands on deck. We were losing no productivity, we were probably gaining productivity. But as each month goes along, increasingly we are faced with every institution, whether it be Marriott, other companies in the industry, or other companies in other industries, or other kinds of institutions, what are we doing for next year? What are we doing for the year after that? How are we planning for the future? What are the disruptions that are likely to come to us? And the harder those questions are to answer, let alone frame, the more imperative it is that we're together and saying, how do we define the question first before we even define the answer? And that is an extraordinarily difficult thing to do remotely. And I think over time we're going to see, as we did after the Great Recession, after we did after 9/11, after we did after the first Gulf War in the early '90s for those of us who remember that, we're going to see folks say, you know, not tomorrow, we're not bouncing back like a rubber band and going to do exactly what we did yesterday tomorrow, but within a few years, we're going to be back to a place where we say, you know what, the value we achieved by being together in our office, in that conference, when we negotiated that deal, when we were traveling, when we met with our customer, there is real value in that that cannot be replaced by something which is digital. And so I think, while it will depend on economic growth, of course, it will depend on company profitability because they'll be managing that, particularly for those that have been hard hit, but I think we will largely get back to the kinds of practices that we had before in the United States and the rest of the world. And I think some of the, on the personal side, the leisure side, if you will, we'll get back to collecting experiences just the way we were doing in 2019 and before.

Well, so let's drill into your phrase hygiene theater a little bit, because I think it's an important one. And it's not, I know you offer it a little bit tongue-in-cheek, but we shouldn't discount it too terribly much. And I think actually, if you look at what CDC has advised all of us to do in our industry and across society, one of the things is temperature checks. Temperature checks is a very dubious tool for identifying who has the virus. We know that there are many who are asymptomatic, and the temperature check's not going to tell us anything. Nevertheless, that temperature check is a visible reminder, it's hygiene theater, if you will. It is a way of communicating to folks, we care about what you feel, and we want you to stop and think about whether or not you in fact have any symptoms. And we also want to communicate to you that you're now entering a place in which we've got protocols in place which are here to protect you and to protect others that are in the environment. And you put all these things together, and you know, somebody has explained this like Swiss cheese. If you've got one slice of Swiss cheese, you're going to have holes in it, you can get through it. But if you've got four or five slices of Swiss cheese stacked next to each other, well, whatever gets through from temperature is going to be blocked from mask, or whatever gets through from mask is going to be blocked from social distancing, whatever gets through from social distancing is going to be blocked from cleaning protocols. And so you put all those things together, and A, it makes a substantive difference in safety. We have, provably, reduced the risk of spreading the virus. And second, we have collectively engaged in the theater that tells us all, reminds us all, be careful. And by being careful, we further reduce the real risk associated with it. And that's what I think the industry is doing, that's what we're trying to do across our hotels, is basically say, we're going to wear masks, we're going to have cleaning, you know, hand sanitizers liberally spread throughout the hotel, we're going to have markings of social distancing, we're going to have barriers at the front desk, we're going to have different food and beverage protocols. Any one of them you might look at and say you can be criticized for that not being enough, but collectively, when they're pulled together, we will both reduce the risk of virus and we will earn the confidence of all travelers, which we must do in order to rebuild this business.

Yeah, well, I think the guest room actually is not the riskiest part of a hotel. I think we know that they are well-conditioned as it is, right? It varies a little bit by segment of the industry, but essentially with each room being able to control its own heat and cooling, and that air turnover is fairly quick. It may not be quite as quick as the airline system because they've had historically a different set of protocols associated with it, but by and large, we know we can clean that room. We know the surface risk in that room is not substantial. Once you're in your room, that is your environment, and you're pretty darn safe. The bigger challenges are really in the public space. And there, it is how do you make sure that you're doing the safety and the mask wearing, and of course, we live in a politicized world which makes some of this a little bit more complicated. But you do everything you can do there, and then essentially rely on our guests to say, you can control your interaction with that space, and the more conservative you want to be, the more likely you may want to just go to your guest room and make sure you're staying away from everybody else.

Yeah, this is obviously the most difficult part of this pandemic by far, at least in the context of Marriott and the decisions Marriott has had to make. And you know, you think about it, the layoffs now are more permanent in nature than the decisions that were made in March. But think about the number of people that were impacted in February and March and April and May when business functionally disappeared. And there you're talking really about a majority of the associates of ours and the associates in the industry who had to be put on leave, who were put on furlough. A big world out there. Some parts of the world, there are great social safety nets to help people come through. In some places, there's very, very little, and folks were very much left on their own. We're now six, seven, eight months into this. We know business, at down 65 percent, is going to be slow in coming back. I think the decisions we made, you quoted a 17 percent statistic, that is somebody's estimate, by the way, and of course we don't know well enough to know exactly how many of those folks will come back. I think over time, as business rebuilds, we'll obviously do some hiring. I suspect it'll be years, though, before we get back to the level of staffing, either at the corporate level or at the hotel level, that we had before this pandemic began.

Well, it was the first communication to our team of associates around the world. And I don't remember precisely the date, but it was, you know, late February or early March, something like that. We have about 750,000 people we thought who wore our name badge every day around the globe. And going out to communicate to those folks the severity that we believe the pandemic would present to us, to them, to our business, was a gut-wrenching kind of communication to have to give. And there was only one way for us to do it, we thought, and that was to do it personally. And of course, personally in that context meant by video. You couldn't do it with a written email or a written admin bulletin. And I think respect the kind of humanity and the kind of impact our people, that this crisis was going to have.

Well, I think the travel industry will change. I think it may change more about trip purpose, which we could talk about a little bit, than it will necessarily in what we observe in hotels as we all check in or as we operate them. I do think one thing that is notable when you compare hotels to airlines is how little keyless entry was adopted in the hotel space compared to the digital boarding pass in the airline space. By 2019, certainly overwhelmingly in the West at least, we're all traveling with our own boarding passes on our phones. We're skipping the desk at the airport, we're not printing out a piece of paper. But you look at the hotel context, and it would be a few points, and it would have been, you know, concentrated in the road warriors who were adopting technology. But by and large, this was not being used broadly, partly because travelers wanted the human experience, maybe sometimes because they wanted to work the front desk for an upgrade or, you know, a better room or some other aspect of the check-in process around which there's some myth. I don't see this as being a fundamental transformation of the hotel space, but I do think the pandemic will cause more and more hotel guests to adopt similar technology. And you know, I can understand this well. I traveled 225 nights in 2018 before I was facing some personal issues that had to change that. And you also often, when you get to a hotel late, you just want to get to your room. And so if I do that, that's good.

I see it right back to the description I wrote in that letter. And that letter, of course, is my story. So it starts with very, very modest travel. We didn't come from a lot of resources in my family, but we did manage to start life in Japan. It's where I was born and lived till I was seven, and essentially I've been traveling all my life. And traveling all my life because it is the most fascinating thing that I think people can do. We can learn about each other, and as we learn about each other, we learn about ourselves. We build experiences for each other. I've got four kids, and they love to travel with us and on their own. And as we're all together, and you know, as I mentioned at the beginning of this, I'm on the great American road trip to see my wife's folks, and we are trading stories about their lives too, and the Depression-era kids. These stories, for so many of us, even without privilege, are stories that we gleaned when we were on the road, when we were at, you know, maybe it was our wedding, maybe it was somebody else's wedding, maybe it was a vacation someplace. And I think we're going to see the same thing. I think we're going to see folks free to travel again who say, I want to go and be able, I want to post it on Instagram, or I want to be able to tell my kids about it, or I want to be able to show my kids it, or maybe I want to do it alone, but I want that mountaintop experience that allows me to reflect back on it decades later and say, remember when we were there. And that will never be replaced by anything else.

You bet, Tom. Great to see you, and enjoy the rest of the conference. Thank you all, everybody. Be well.