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Marriott CFO sees focus on costs continuing as bookings recover


    Marriott CFO sees focus on costs continuing as bookings recover


    Marriott International Inc.’s finance chief plans to hold the purse strings tight as the hotel operator looks to Covid-19 vaccines to help its business recover from the harsh declines caused by the coronavirus pandemic.


    “We are always looking for ways to save money," said Leeny Oberg, the company’s chief financial officer, adding that Marriott also wants to spend its funds efficiently.


    The Bethesda, Md.-based company has a portfolio of about 7,640 properties around the world, with a large chunk run by franchisees. Marriott last year slashed expenses as pandemic-related travel restrictions caused a widespread fall in bookings. The company ended 2020 with an annual net loss of $267 million, compared with net income of $1.27 billion the year before.


    “We immediately went into a cost-cutting mode," Ms. Oberg said, adding that this included savings at both the corporate and franchise levels. The company reported operating costs and expenses of $10.49 billion for 2020, down 45% from 2019, in part because of layoffs, furlough programs and reduced work hours. Marriott had 121,000 employees at the end of last year, compared with 174,000 the year before. This excludes workers employed by franchisees and certain other employees.


    The question facing the company and its finance chief now is how many of these costs will come back as the economy recovers and more people get vaccinated, analysts said. “Time will tell how much of the reduction is sustainable," said Rich Hightower, a managing director at the research arm of advisory firm Evercore Inc.


    Even though travel bookings are rising, they aren’t at pre-pandemic levels, and there are concerns whether corporate travel—previously an important revenue and profit generator for Marriott—will return fully as companies have gotten used to remote working and virtual meetings.


    Changes to operations could generate additional savings, Ms. Oberg said, pointing to a new labor-management system used in some of the hotels Marriott manages itself in the U.S. The system helps to better predict staffing levels depending on the level of bookings and will be rolled out further in the coming months.


    Marriott is evaluating whether to expand it internationally to markets such as Canada or Europe, as well as to its franchise hotels, according to a spokeswoman. “The full intention is to bring back as many people as possible," Ms. Oberg said.


    Analysts said the company also could take a closer look at its brand standards, for example the frequency of cleaning when guests stay for several nights, to bring down costs. “Labor and technology have been key levels of cost reduction. It’s tough to know what may be left to cut," said Dan Wasiolek, a senior equity analyst at Morningstar Inc.’s research division.


    Ms. Oberg said the company is watching bookings daily and frequently updating its forecasts based on changes in demand. “U.S. occupancy levels are rising with vaccination rates," Ms. Oberg said. “We have seen the pace of bookings steadily increase."


    Still, the fact that customers often only book a week in advance, compared with the pre-pandemic average of three weeks, makes it harder for Marriott and its hotel owners to gauge interest, Ms. Oberg said.


    Fewer than 500 Marriott hotels globally are closed at the moment, many of them in Europe.


    This story has been published from a wire agency feed without modifications to the text.

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