Rosanna Caira: You didn’t have the typical hotel trajectory in that you came from the legal field. How did you get to where you are today?
Arne Sorenson: The short answer is ‘with no plan.’ I am the son of a Lutheran preacher. Both my grandfathers were Lutheran preachers. My father-in-law is a Lutheran preacher. While I majored in religion, I didn’t get that call. I went to law school instead. I practiced law for a dozen years with a big firm in Washington and represented Marriott when Host and Marriott were separating from each other. I got to know Mr. Marriott and the team in the context of that. One thing led to another and I went there a few years later. RC: How does it feel to be the first non-family member to lead the company? AS: It’s a huge honour. Marriott has a tremendous legacy, which, in part, is driven by the family’s philosophy about taking care of people and actually putting our people ahead of our guests — something businesses seldom say. We know we can’t get to the customer except through our [employees]. That legacy is a great thing to be able to tend to and to try and maintain as we grow and evolve. Over [the] 21 years [with Marriott], I was not the putative successor to Mr. Marriott the whole time, but there were years when I think he, Bill Marriott, anticipated I would follow him. That natural transition made the shift from a Marriott CEO to a non-family member CEO fairly natural. It was certainly something that Bill Marriott wanted to have happen. He has been amazingly supportive throughout. I can’t step into that job and pretend to be a Marriott. If I had tried to, maybe that would have made it more difficult. As it is, it’s been nothing but fun.
RC: Did being a lawyer help you in this job?
AS: The big advantage is you get used to being attacked as a lawyer. I tried cases, hostile-takeover cases, basically. In that context, there are brilliant lawyers on the other side whose aim is to make you look bad, show that you don’t understand your facts or you don’t understand the law. You do that year after year for a while, you develop a certain toughness.
RC: I came across a quote from Mr. Marriott that said when he first hired you, he was a little concerned about your people skills because you were a litigator. He said, ‘litigation does not have a primary goal of making people feel good. When I think about a litigator, I don’t see someone who is putting his arms around people, coaching, counselling and loving them, supporting and promoting them.’ How did you feel about that? What kind of adjustment did you have to make from a litigator to a hotel president?
AS: In many respects, he was being deliberate about communicating in a way…he’s an extraordinarily kind man. He is a mentor to me; sort of father-like. He is a wonderful man and we have a very close relationship. He is also hesitant to be direct, face-to-face, with somebody. So, when you read about the history of Marriott … he has a book underway now. You’ll see him talking about ‘I had so-and-so and I knew they were bad, but it took me four years to …’ So, I think in some respects, this was a way of giving me encouragement to say, ‘don’t forget the people’. It’s really important.
RC: What was the biggest challenge for you, stepping into a role in a hotel company?
AS: The biggest challenge, then and today, is about priorities and allocating your time. There is so much that we can do and nothing is ever finished, literally. I love being out and seeing what is happening in the hotels and connecting with our teams. There is nothing like it because you really get connected with them and what is happening with the customers. But that [takes] a lot of time. In the midst of all that, we’ve got a day-to-day balance sheet to run and deals to do and investment communities to satisfy and strategies to set. So, how do you do that? I do average on setting those priorities, but am blessed with a team of people who take care of the places I miss it. If I’m off someplace, then there is somebody else who is going to take care of it.
RC: The topic everybody has been talking about is the acquisition of Starwood. Were you the architect of that deal? AS: Not alone, but certainly a decision like this doesn’t get made unless I am supportive of it — and I was.
RC: How long did that deal take?
AS: There are a couple of really accurate answers to that, but the facts are 25 days. Over the years that Starwood has existed, we have watched them as a competitor and we have, on a few occasions, done desktop models of whether or not this is something we would be interested in acquiring but it never really worked and they weren’t for sale. They came on the market in early ’15 formally and we, of course, were approached by the bankers, looked at it quickly and decided we were not going to pursue it.
RC: Why was that? AS: A mix of reasons, the biggest being it seemed like it was expensive and we could work like dogs and maybe make it successful, but we wouldn’t produce enough value for our shareholders. And then, over the course of the next three or four months, we saw the relative values of the company shift. So, Marriott’s value was increasing and Starwood’s was declining, which had a dramatic impact on the economic aspects of the deal. We were engaged in negotiations with OTAs and discussions with technology partners in trying to sort out the path to the future and it became clearer to us that technology and the loyalty programs, particularly, were our key distinguishing features. Those two things came together [and in] October of 2015, we said, we should do this. Twenty-three days later, we signed binding deals. RC: Were the loyalty program and technology the two driving reasons you wanted to acquire Starwood?
AS: Loyalty being singularly the biggest. We now have 100 million unique members between the two programs and they are linked, so customers can get the most of the benefits of the two programs — even before the two programs have merged into one. We did [that] at midnight the night [the deal] closed. I think the other thing that was important to us was Starwood had staked out a place in lifestyle and luxury and parts of the hotel business which are most inspiring and aspirational to people. We had great brands, such as Ritz-Carlton and others — which were also the kinds of places people dreamed about staying — but we wanted to be even stronger in this part of the industry. RC: With such a large number of guests tied to their loyalty programs in different ways, how did you merge the programs? AS: From the moment we announced the deal in November of 2015, the SPG loyalists — Starwood’s loyalty program — were frightened. The Marriott rewards [members] are equally as passionate, but because Marriott was the acquiring company, they were less concerned. The first thing we did before closing was we implemented, in the Marriott rewards program, late checkout and room upgrades and a number of features that were in the SPG program, because that was actually the best way to believably communicate to SPG members that we’re going to do things to Marriott rewards, bringing it towards SPG, as opposed to the other way around. That was picked up quickly. The linking and the points-conversion formula we did the first night of close was also well-received by them and comforting. The anxiety level in the SPG ranks is much less today than it was, certainly, when we announced the deal. But it’s still there and it’s a big program. RC: How about the other synergies of this acquisition, purchasing, for example? Has that changed dramatically now that you’ve brought the companies together? Is that going to save you a lot of money?
AS: Yes, it will. Classic procurement, cost of systems and any shared services — all of those are places where we should be more efficient. The new procurement platform is being rolled out as we speak. A number of the supply contracts we had were put in place already. So, that is moving very quickly. In essentially every cost line, PNL cost line of the hotel, with the exception of the compensation of our teams, it should be more efficient as we go forward.
RC: The downside of any acquisition is sometimes people have to be let go. Did you eliminate many positions? AS: We have talked about $250 million of overhead savings — not only people, but it includes people. The fact of the matter is, those people are almost never property level. So, immediately, 95 per cent or so of the people at Starwood are safe and are continuing their jobs. In fact, the opportunities for them have increased, not decreased. You think about a market like Canada, where we now have 220 hotels, 100 full-service hotels across the country, 120 limited-service — immediately, [people] have more opportunity in Toronto to grow in their career — from the Sheraton Centre to the Delta to the Marriott. That’s really good for them. In contrast, the top-of-the-house is where the impact is most profound. Those, by and large, are folks that will, and probably already have, landed extraordinarily well and certainly have been well-compensated. There is a range in the middle, but we’re in a strong economic environment for hiring.
RC: This acquisition is going to be the biggest challenge for this company for some time. Beyond that, what is the biggest challenge for you?
AS: There are a thousand things that we are focused on. The things I worry about most … one is obvious, and that is about policy, politics, nationalism, a global concern about the movement of people and immigration. Canada has a special place in that debate. It’s one of few countries in the world that seems to continue to have its arms open. I suspect beneath that there is some internal debate within Canada about that, but it doesn’t seem to be as loud as it is in the rest of the world, obviously the United States, but the U.K. and France. People seem to be saying we want to turn back inward a little bit; we want to control our borders more. Some of that is about security issues, much of that is about immigration. Travel is not the same thing as immigration and people travelling for business or people travelling for leisure are 99 per cent of the time, simply going to see the sights, see family, meet people and have a good time. We’ve got to make sure policy evolves in a way that allows [us to do] business. RC: With the portfolio now at 30 brands, do you have a few that you are focusing on in terms of growth in expansion? AS: We will try and grow all of them. Some of the brands are easier in the sense that they don’t require redefinition or repurposing in any way. They will continue to march along. I’m thinking about some of the legacy Marriott brands, which have tremendous RevPAR index numbers. We put a lot of effort into continuing to refine and renovate the product, the core Marriott brand, the Residence Inn, Courtyard. These brands are often category killers and they are going to continue to grow in a way that is reaffirming. There are a couple of places where there is close overlap, such as Ritz-Carlton and St. Regis, and so we need to figure out what are the distinctions we want to emphasize or introduce, produce or service?
Aloft and Element are interesting to us — they are dramatically sub-scale. Aloft has about 100 hotels around the world; Element, only 20. In a sense, Element is a lifestyle version of Residence Inn and Aloft is a lifestyle version of Courtyard. It’s a bit of an oversimplification, but we know our hotel owner partners are attracted to these brands. If we can make them perform better, be both less expensive to build through efficiencies, not quality, and drive the top line, we should be able to take both of those brands to sizes comparable to Courtyard and Residence Inn. So, that is taking Element from 20 hotels to 900. There is good effort that is focused on that.
RC: What role does Canada play in Marriott International’s growth? Do you see the country as still fertile for growth?
AS: Absolutely. The most important piece for Canada is still about the Canadian economy. A local GDP is going to, by and large, drive demand growth among the local population and Canadian business is still the most important business in our Canadian hotels. When we got into the Delta deal, we thought by putting Delta and Marriott together, we actually could be stronger in both [the U.S. and Canada]. So far, that has played out pretty well — the hotels are ramping up well and performance has been improved in both sets. I’m not sure we would have bought Delta if we had done Starwood first, but I’m thrilled it came in the way it did because we now have both.
You look longer term and Canada has a real opportunity in global travel, particularly out of Asia and the Canadian West. We have had at least a handful of instances already in which we have heard global groups saying ‘we’re not going to go to the United States, we’re going to Canada because we worry less about our global audience being able to come in and be welcomed.’ That is a near-term opportunity. It may not be an opportunity long-term, but all of that is an exciting upside for the Canadian market.
RC: Corporate culture has always been a big part of Marriott’s success. How can you inculcate the right environment to succeed, especially as you have gotten so much bigger now?
AS: You remind people that it’s important and you permit it. You empower people; give them the ability to run their own business. You tell them, of course, you are going to pay attention to what their culture looks like. Our culture is as strong as it has ever been — not because of what I do or what Don [Cleary] does in Canada — but because of what the team at this hotel will do for each other.
RC: What is the most important issue when it comes to staffing?
AS: It’s really about building careers for people. You want to take care of them on a day-to-day basis and a [company] of this size has a huge community of associates. For them to feel good about their work is about being compensated fairly, of course, but more than that, it’s about being respected as an individual by the team. You immediately see the way this can work, and when it works well, it makes all the difference in the world.
RC: Do you think the industry has gotten better at taking care of its people?
AS: We have always been better than we have sometimes been given credit for. These are hard jobs — I talk about housekeepers often as my biggest heroes. They are almost always women; they are almost always immigrants; they are often physically small and are doing big, physical jobs. Collectively, we are not at our best when we stay in hotel rooms. We leave our clothes on the floor and we may not clean up after ourselves very well and that leaves a burden for the housekeepers. They are not becoming millionaires through this work, but if their work is appreciated and they are paid fairly, so many of them can transform their lives and their families lives.
RC: What advice would you offer to people considering a career in hospitality in terms of what they should be doing to achieve success in this industry?
AS: It’s the greatest business in the world for a lot of reasons. The people piece is one of the really attractive parts of the business. In terms of careers, seize the opportunities that are available to you; be curious about your work; be curious about what is happening in other departments; ask people why we’re doing things the way we’re doing them and try and understand the business; and don’t be fearful about coming out and saying, well, can we do something differently? You want to make sure you continue to grow in your career, obviously, but seize the opportunities that are available.
RC: During last year’s election campaign, you wrote an impassioned letter to President Trump and put forth your views on the importance of keeping immigration as strong as it has been. How do you think this current administration is going to impact the hotel business in the U.S., but also in Canada?
AS: My personal point of view is relatively left on these issues, relatively welcoming. People should globally be able to pursue opportunities and pursue a better life. In many respects, the developed world has a role to play in that, and a role that is compassionate and respective of the resources that we have. Having said that, when you listen to the debate happening in places like the U.K. and the U.S., people are broadly saying we don’t understand how immigration works; we don’t understand what the rules are; we don’t know how many people are permitted to come; we don’t know how they are selected. There is no consensus around how immigration should be done. It is perfectly reasonable for [Trump] and this administration to say, okay, what are our rules going to be on immigration? What are the numbers we’re going to admit? What is the process that we go about? Until political leadership of both parties in a two-party system — or of a mixed government in a multi-party system — start to build a consensus around ‘where should we go with immigration,’ we’re going to have risk here because we’re going to have strong disagreements where we polarize things, and where there is a risk that that conversation about immigration actually does bleed over into travel or into commerce. How do you separate those issues, travel and immigration, while the debate is happening and how do you also try and get to a place where the debate can be resolved in some way, maybe not permanently, obviously, because this will continue to evolve, but resolved in some way so that risk is then behind us?
RC: Does Marriott have a role in terms of trying to influence this dialogue?
AS: Yes. The role is to use the relationships we have to articulate what we think is the right outcome. Secondly, it would be to martial the facts. We will speak up more as the facts become apparent. Hopefully, the facts can lead to some influence on the outcome. RC: Are you a little daunted by the fact that you are now the leader of the biggest hotel company in the world? AS: I am daunted by the amount of work we have to do. I don’t really think about being [the] biggest because I don’t think being [the] biggest makes that much difference. We’re the biggest, but we’re not that big — we are seven or eight per cent of the global lodging business. There is nothing about our platform that allows us to act as if biggest somehow gives us unique privileges. It’s a highly competitive business with really transparent data. RC: How would you define yourself as a leader? AS: Hopefully, open-minded and curious first. The business is evolving quickly and one of the risks for all of us as leaders is you convince yourself that the decisions you have made and implemented must have been right, and therefore you resist changing any of them. Empowering, even to the point of letting some things happen which I may not think are exactly right, [is also important]. The first instinct has got to be to say, ‘okay, let’s see how it works,’ as opposed to, ‘why the hell did you do that?’ Because it makes a difference in the way people feel ownership about their work. RC: What have you learned from mistakes that you have made?
AS: We have made a few. You have to have some mistakes or you are not pushing it hard enough, but you have also got to look at these and say, okay, what did we do wrong? We fell in love with our own wisdom and thought, okay, we know what this is. Hopefully it teaches you over time.