It's been a tough year for hotels, and Marriott International Inc (NASDAQ: MAR) is no exception. In April, occupancy at Marriott properties dropped to just 11%, and as of early August, it was only at 34%. And its second-quarter revenue plunged to $1.5 billion from $5.3 billion a year prior.
Meanwhile, it doesn't look like the travel industry will be opening up anytime soon. With coronavirus cases surging domestically and worldwide, occupancy is likely to be sluggish even through the holidays and wintertime school break.
It's not surprising, then, to see Marriott getting creative in an effort to drum up business. Its latest idea? Positioning itself as office space.
Fulfilling a clear need
Since March, millions of Americans have been working remotely due to the pandemic -- an arrangement many people are growing increasingly tired of by the day. But a lot of companies aren't letting workers back into the office for fear of liability as the coronavirus pandemic continues to rage, leaving employees cooped up at home and miserable.
Enter Marriott. More than 2,000 hotels in its extensive network are now offering guests the option to check in 6 a.m. and check out at 6 p.m. the next day. These hours are designed to let guests rent out rooms as temporary offices, and it's a strategy that may very well work.
Of course, Marriott isn't the only hotel chain to try this tactic. Hilton (NYSE: HLT) and Hyatt (NYSE: H) also have tried marketing rooms as temporary offices. But Marriott is trying out a few different offerings in an effort to attract guests and take in some much-needed revenue. One program involves giving guests a discount if they check in during the morning and check out later that day without staying the night. Another involves letting parents work from private, quiet rooms while hotel staff members supervise children who don't have school and keep them entertained with activities.
Will Marriott's efforts pay off?
All told, positioning itself as a temporary office and escape from the monotony of home is a strategic move for Marriott, but whether its efforts pay off is another story. Many people have lost income in the course of the pandemic, and it's only the well-off who will be in a position to spring for hotel rooms to use as offices.
Still, the fact that hotels like Marriott are getting creative in their guest offerings should be a point of encouragement for investors in hotel REITs, many of whom are inevitably shaking in their boots over the events of the past seven months. With an estimated 25% of hotels at risk of foreclosure, the industry needs to bide its time until travel opens up and the economy improves, and positioning guest rooms as offices is a good way to do it.
But will enough desperate workers bite? And will Marriott and other hotels price their office space offering in a manner that encourages repeat bookings? Or will renting rooms as offices be a one-time luxury for the typical guest, thereby minimizing the positive effects of such an initiative? Only time will tell, but with many companies making plans to keep workers remote until well into 2021, it'll certainly be interesting to see how successful Marriott is.