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Marriott CEO expects ‘blockbuster summer’ for travel

Marriott International CEO Anthony Capuano joins Yahoo Finance Live to discuss the hotel chain's latest earnings results, travel demand recovery, and growth amid lingering pandemic concerns.

Video transcript

- Well, shares of Marriott getting a healthy pop in the session, up more than 2% this morning after the company posted a beat on Q1 earnings and revenue, thanks to strong travel demand. Let's bring in the CEO of Marriott International. We've got Anthony Capuano joining us, alongside Yahoo Finance's Brian Sozzi here with me at the desk. Anthony, certainly a very strong quarter for you. You said the largest surge in global demand since the pandemic began. It certainly feels like people are starting to feel a little more comfortable traveling, even with COVID in the background. But what do you think has been the biggest driver?

ANTHONY CAPUANO: Well, we've seen the recovery led by leisure. And leisure continues to be exceedingly strong. In fact, in the quarter, we were about 10% ahead of where we were pre-pandemic. But I think what's really driving these results is parallel recovery in the other two business segments, business travel and group, both of which made meaningful progress during the quarter.

BRIAN SOZZI: Anthony, how would you-- how would you characterize what we might see this summer, in terms of travel demand?

ANTHONY CAPUANO: I think it's going to be a blockbuster summer. I was in Europe just last week, and our teams are ready. When they look at the forward bookings going into that peak summer travel season, we think it's going to be a terrific travel summer for us.

- Yeah, I mean, it feels like people are just itching to travel again. But there are some headwinds we're seeing, at least on the macroeconomic front, a lot of consumers having to deal with the price pressures that have been building. How have you seen that reflected in some of your stays and the data that you have?

ANTHONY CAPUANO: Well, Akiko, one of the most fascinating things when we look at the manner in which the recovery has unfolded, if you look at the last two big shocks to the travel and tourism sector, post-9/11 and the Great Recession, across the industry, it took between four and five years for pricing power to return. We're already achieving average daily rates meaningfully ahead of where we were pre-pandemic just two short years after the start. And so I think that pricing power really illustrates the sheer volume of pent-up demand for travel.

BRIAN SOZZI: Anthony, the outlook in China, or just the business conditions in China continue to be under pressure. Not just Marriott, a lot of other big companies. Do you think first quarter was the low point?

ANTHONY CAPUANO: We hope so. The zero COVID policy that's in place in China has created tremendous headwinds, in terms of recovery. You'll recall, Brian, I think one of the last times we spoke, in the second quarter of last year, China was the bright shining star in terms of the pace of recovery. And so the current COVID policy has certainly had a significant dampening effect. The great thing about our business, as you well know, we reprice and relaunch our inventory every day. And when we see some of these lockdowns open up, in real time, we see pretty significant spikes in demand.

- I mean, even with that said, the zero COVID policy, as you well know, is-- it feels like it really comes-- you know, that there's one case, a few cases, and there's a lockdown there. There's no indication that the government is going to back off from that. So how do you navigate around that? I mean, what assumptions do you operate under when you know that policy could shut things down at any moment?

ANTHONY CAPUANO: Again, I think the advantage we have is the fluid nature of our inventory. We can modify pricing on a dime. But it is most certainly challenging. The good news is there continues to be strong domestic demand across greater China.

And I think what we look forward to with great optimism is when that country starts to open, the volume of cross-border travel, we think, is going to give us tremendous momentum. In fact, on a global basis, pre-pandemic, almost 20% of our global room nights were cross-border travel. In the first quarter, we saw about 100 basis point improvement, but we're still only at about 14%. So when we think about the runway we have in front of us for continued improvement, growth in cross-border travel gives us a lot of optimism.

BRIAN SOZZI: Last time we talked, Anthony, you mentioned or signaled, at least to me, that you were likely to bring back the dividend soon. So you delivered on that. You brought back the dividend this morning, and you hinted at share repurchase activity being the next component to driving more shareholder returns, potentially returning soon. What type of signal are you trying to send to the investor base?

ANTHONY CAPUANO: Well, I think what we're sending is we're reminding them of our commitment to getting our ratios back, our debt ratios, to between three and three and a half. We're demonstrating our confidence in the progress we've made in pursuit of that objective. And I think the reinstatement of the dividend really speaks to our confidence about the continued and sustained recovery of travel around the world.

BRIAN SOZZI: Lastly, Anthony, how long do you think before occupancy levels at most your brands resemble something like they were in, I don't know, 2017 to 2018?

ANTHONY CAPUANO: Well, the unpredictability of the pandemic has caused us to be quite thoughtful about when and if we'll provide guidance. But I think the best answer to your question, Brian, is what we saw in April, where RevPAR in the US and Canada, our largest market, was back to 2019 levels. And that was a really encouraging and, I think, milestone sign as we work through the recovery.