occupancy, 2020 was the worst year of record for U.S. hotels.

Marriott has been particularly hard hit, recording its first

full-year loss in more than a decade. But the rollout of

vaccines and signs of pent up travel demand has led to a

renewed sense of optimism for the hotel operator.

In the second quarter of 2021, Marriott reported net income of

$422 million compared to a net loss of $234 million a year

earlier.

Most hotel companies are expecting a strong spurt of

leisure demand this summer, some call it revenge travel; people

who have been putting off their vacations and such. And that has

been to the point where many hotels who cater to those summer

crowds are seeing business comparable to pre-Covid levels.

We're actually seeing really strong recovery of demand in a

variety of our largest markets. And it's not just leisure

demand, which is the thing that's really encouraging for

us.

The company was also impacted by the death of its longtime

leader. In February 2021, Marriott CEO Arne Sorenson, the

third chief executive in the company's history and its only

non-family member, passed away. Later that month, 25-year

company veteran Tony Capuano was named CEO.

Marriott International is one of the world's largest hotel

operators with 7800 properties in 138 countries and

territories, including the Ritz Carlton, Sheraton and Courtyard

by Marriott.

From a stock perspective, our strategy has been to remain

bullish, broadly so. And even when we feel like valuations

seem foolish, which they do, but, you know, each week that

we've waited, the news flow has gotten more positive,

An estimated 48 million Americans took to the roads and

skies during the busy Fourth of July weekend. Like its

competitors. Marriott has instituted new cleaning

procedures and cut back on offerings like its breakfast

buffet and in-room dining services in an effort to return

to profitability

But is it enough? And with the rise of video conferencing, will

business travel return to pre-pandemic levels for Marriott

and its rivals Hilton, Intercontinental and Hyatt?

Marriott got its start as a simple root beer stand in

Washington DC.

In the summer of 1927, J. Willard Marriott and his wife

Alice open an A&W franchise to serve thirsty patrons. A few

months later, to cater to winter diners, the couple offered tacos

and tamales; The Hot Shoppes restaurant was born

In 1928, The Marriott added new locations and by the late 30s

were expanding into the burgeoning field of inflight

catering, delivering box lunches for passengers on Eastern and

American Airlines.

But a shift in the late 1950s away from the restaurant

business changed the trajectory of the company and the

hospitality industry. In 1957, under the management of J.

Willard Marriott's son, Bill, the company launched its first

hotel in Arlington, Virginia

By 1964, the Marriott Hot Shoppes, as it was known, had

grown to four hotels and 45 restaurants. Over the next six

years, the company more than tripled in size.

Bill Marriott Jr, took the reins as CEO in 1972. During the

1970s, Marriott oversaw the company as it spent more than $3

billion building airport hotels and convention hotels. He also

began shifting the company from a business model of hotel

ownership to one of property management and franchising. In

1983, the company entered the mid-price hotel market for

business travelers with its Courtyard hotels, and in 1987

moved into the economy lodging segment, opening the first

Fairfield Inn.

The following year, Marriott opened its 500th hotel in

Warsaw, Poland.

Marriott has been one of the more aggressive growth companies

in the hotel sector. It's also grown in a number of different

ways. So it's grown by expanding the number of brands that it

represents. It's grown by both developing them in-house and

acquiring through M&A other hotel companies. And then it's

also been very active in growing internationally in a way that's

spread it's base of brands around the world.

In 1993, the company divided its operations into Marriott

International, the hotel management and franchising

company headed by Bill Marriott, Jr. and Host Marriott

Corporation, a hotel ownership company run by his brother

Richard.

Moving into the luxury market, the newly renamed Marriott

International acquired a 49% interest in The Ritz-Carlton in

1995, with sales topping $10 billion by 1997. But it was a

2016 acquisition that cemented the brand as the world's leading

hotel company.

Led by former CEO, Arne Sorenson, Marriott acquired

Starwood Hotels and Resorts bringing together Marriott,

Courtyard, Ritz-Carlton, Sheraton and St. Regis

properties all under one roof.

There are a lot of other companies which are seeking to

position themselves through, to grow and join the sort of the

upper echelon if you will, either through acquisitions, new

brand development and those sorts of activities,

I think Marriott in general has been, you know, one step ahead,

has been on the leading edge of, you know, evolving lodging

companies across the industry. And you point out the Starwood

acquisition, which really did you know, firmly put them in the

lead in terms of size. In terms of Breath of brands.

However, it may have been a global pandemic in 2020, that

proved to be one of the biggest challenges for hotel operators

With hotels nationwide closing, in September 2020, the iconic

Hilton Times Square hotel announced it was shutting its

doors. That same year, more than 670,000 hotel industry jobs were

lost. According to Sorenson, Covid-19 caused more pain to

Marriott International's business, than 9-11 and the

financial crisis combined.

The global hotel industry was a more than $530 billion business

in 2019 and included brands like Hilton, Intercontinental, Hyatt,

Wyndham and of course Marriott. U.S. hotels set multiple records

in 2019, including having more than 1.9 billion room nights

available, and roughly 1.3 billion room nights sold.

Profitability was high. Unit growth was high, and in general,

the business was doing quite well.

For like much of the travel industry, the coronavirus

pandemic has wreaked havoc on hotels. According to STR, 2020

was the worst year on record for the U.S. hotel industry, with

more than a billion hotel rooms unsold and revenue per available

room hitting an all-time low.

But with an increasing number of people getting their vaccines,

travel demand has surged. In the second quarter of 2021. Hilton

had net income of $128 million, compared to a net loss of $432

million the year earlier.

As of July 2021, the hotel brand had more than 6600 properties in

119 countries and territories. During that same period, Hyatt

had a net loss of $9 million dollars compared to a net loss

of $236 million a year earlier. And in its latest financial

filings, IHG, which includes Holiday Inn, Crowne Plaza and

Intercontinental reported a total operating profit in 2020

of $117 million, compared to $816 million in 2019.

In the first half of the year was the most challenging the

travel and tourism industry has ever seen, when you saw social

distancing come into play travel restrictions and borders

closing.

In the second quarter of 2021, revenue at Marriott rose to $3.1

billion, up 115% from a year earlier. In March 2020. The

hotel operator furloughed two-thirds of its corporate

staff, 10s of 1000s of employees and enacted cost cutting

measures. It also implemented new procedures at hotels like

requiring facemask in public areas, cleaning surfaces with

hospital-grade disinfectant and services like mobile check-in

and mobile key.

At our low point, we had about 2000 out of 7500 hotels that

were closed around the world. We've probably reopened three to

400 of those. I think when we look at even in the United

States, we see the early signs of recovery. Although we've gone

from something like minus 90% revenue to something like minus

80% revenue

By July 2021, Marriott's occupancy rate was 51%, up 18%

from the start of the year.

And according to analysts, the hotel operators, like Marriott,

have suffered as a result of dropping travel demand, they

have found themselves in a better position than individual

hotel owners.

I would say that names like Marriott, Hilton, Hyatt, clearly

devastated by this but less so than the owners themselves.

Remember, these companies tend to take fees off the top line

and in some cases, the bottom lines of the hotels. But all the

costs of operating a hotel are borne by the actual owners of

the hotels. So those are the folks that got hit the hardest.

CNBC reached out to Marriott, but they denied our request for

an interview.

Marrott had revenue of $10.5 billion in 2020, down almost 50%

from the year earlier. According to analysts, the hotel operator

makes most of its money from its full-service hotels, like the

Ritz Carlton, and JW Marriott that offer multiple restaurants

and other amenities

In 2019, 64% of revenue came from its North American

full-service hotels, 16% came from North American

limited-service hotels like Fairfield Inn, and Courtyard

Marriott. 11% came from hotels in Europe, the Middle East and

Africa, and 5% came from the Asia Pacific region. The

remainder of revenue came from things like credit card and

loyalty programs.

Covid certainly was and has been a pivotal moment for Marriott

for a number of reasons; the most important of which is the

structure of their business where they manage hotels, and

they bear the cost of labor and other operating expenses on

behalf of the owners of those hotels that are reimbursed

through the fees that they collect, which seized up in a

way, unimaginable, you know, brought to bear a series of

issues and risks or how their business will run in the future.

So the industry is really hitting a major reset here.

Where are we thinking about what it is that person that that

sleeps in your hotel every night? What do they really want?

Do they need nightly turndown service? Do they need their beds

remade every night if they're there for three or four nights?

Like its rivals, Marriott uses an asset light business model,

meaning it typically manages or franchises hotels rather than

owning them. In 2019, 58% of Marriott's rooms were under

franchise agreements. 41% of rooms were under management

agreements, and less than 1% of rooms were owned or leased by

the company. In a bid to generate capital, in May 2020,

the company signed new deals with Co-branded credit cards

providing Marriott with an infusion of cash, $920 million.

Adding new hotels to its portfolio is another key driver

for how Marriott generates growth, usually with little or

no investment by the company.

The most important driver of is unit growth. So you want to add

additional hotels— 3%, 4%, 5%, we're actually seeing some years

of closer to 6% unit growth. Marriott has pursued that more

aggressively than say Hilton, which has preferred more of an

organic growth initiative. But if you look at, not only the

Starwood acquisition, but other acquisitions in Europe, in

Africa, it has really led to increased growth for Marriott

And while Covid-19 has impacted those growth plans, as of July

2021, the company had nearly 478,000 rooms in its development

pipeline. From the start of 2021. until April, business

travel was expected to be down 85% compared to its 2019 levels.

The expectation is that business travel recovery will lag leisure

recovery in the hotel sector and Marriott participates in both

but it certainly is well known as a corporate and upscale type

of travel and demand. So Marriott will have a challenge

in the near term as it waits for corporate travel to rebound

fully.

The thing that will be interesting to watch, I think

it's going to be less clear what the trip purpose is.

Increasingly we're seeing folks that say, I can blend trip

purpose. I can combine leisure with business travel, and we

think that's a really good news for our hotels across the

country.

Marriott hopes to bring in some of those overnight guests in

what the industry refers to as the bleisure category—travelers

who combined business with tourism

To book more rooms in April 2021, Marriott rolled out two

new programs: a contactless check-in kiosk and a contactless

food and drink vending machine.

I can tell you that Marriott is already focused on making sure

that hotels are resourced properly, so that we can stay

longer, do our work and enjoy ourselves as well. And I think

that aspect of it is going to be critically important. You know,

as we come out of this crisis and recovers as an industry.

And while Marriott has seen an uptick in drive to leisure

demand during the pandemic, particularly for its extended

state and resort hotels., the company is facing headwinds from

another segment of the market: short term rental companies.

To compete with Airbnb in 2019, the company launched Homes &

Villas, a home rental service that offers more than 10,000

luxury hotels in over 250 markets.

By the summer of 2020, bookings at Homes & Villas were up 700%

over the previous season.

When we launched Homes & Villas, it was really a compliment to

our hotel portfolio. The notion that, for very specific trip

purposes, our guests might need a whole home experience. We've

seen pretty explosive growth. I think at the end of the quarter

we had about 30,000 listings, and they are all full homes.

However, as analysts note, Marriott's Home & Villas, it's

just a small fraction of the 5.6 million listings on Airbnb.