Marriott, Hotel Owners Furlough Thousands of Workers, Cut Staff

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Marriott, Hotel Owners Furlough Thousands of Workers, Cut Staff

Coronavirus impact worse than post-9/11 attacks, financial crisis combined, Marriott CEO says


Corporate furloughs follow Marriott’s decision to begin furloughing what the company expects to be tens of thousands of hotel staff.

PHOTO: EFE/ZUMA PRESS

By

Craig Karmin and

Esther Fung

Updated March 22, 2020 7:47

  Marriott International Inc., the world’s largest hotel company, and a growing number of hotel owners are furloughing tens of thousands of workers or slashing staff in an effort to steer their companies through the coronavirus pandemic.

Hilton Worldwide Holdings Inc. and Hyatt Hotels Corp. are also furloughing many employees, the hotel companies said in statements on Sunday, as most travel plans world-wide grind to a halt.

A spokeswoman for Marriott confirmed to The Wall Street Journal that the company is furloughing about two-thirds of its 4,000 corporate employees at the company’s Bethesda, Md., headquarters. Marriott is also furloughing about two-thirds of its corporate staff abroad, though the spokeswoman said she couldn’t immediately provide the number of Marriott corporate overseas jobs.

Those actions follow Marriott’s decision to begin furloughing what the company expects to be tens of thousands of hotel staff—from managers to housekeepers—while it ramps up hotel closings across the globe.

The hospitality industry has been upended by the collapse in global travel as governments imposed travel restrictions in response to the pandemic. Companies have halted business trips, conference organizers have called off events and vacationers have put plans on hold. Hotels are suffering the brunt of this sudden evaporation of travel, which is wiping out in a matter of weeks all the profits many companies had piled up over the past few years.

Some lodging companies are taking even more drastic steps than Marriott, furloughing or letting go more than 9 in 10 employees in some cases.

Ashford Inc., the Dallas-based firm that owns 130 hotels across the U.S., is laying off or furloughing 95% of 7,000 employees, Chief Executive Monty Bennett said. He expects about one-third of those employees probably won’t be coming back.

An immediate concern is Ashford’s $4 billion to $5 billion in debt. Some payments are due next month, Mr. Bennett said, and he doesn’t expect to be able to pay all of them.

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“Every single U.S. hotel will default on its debt in the next 30, maybe 60 days,” he said. “It’s a disaster that’s snowballing.”

Another hotel owner, Pebblebrook Hotel Trust, is furloughing about 90% to 95% of its 8,000 employees, CEO Jon Bortz said. He has closed about half the company’s 54 hotels; occupancy levels at the ones that remain open have dwindled to the single digits.

“This is incredible hardship,” Mr. Bortz said. “Any industry where human contact is involved has been decimated.”

With so little business, it makes no sense to keep operating, executives say. Mr. Bortz said he expects most of his hotels that are still open to suspend operations over the next five days.

Lodging owners across the country are being forced to make similar calculations. With occupancy levels plunging by the day, it is a challenge for hoteliers to make payroll, let alone pay other expenses and meet debt obligations, they said. And as they opt to close more properties with no known reopen date, they feel they have little choice but to reduce staff and hope the company can remain afloat.

On Sunday, Rick Takach, CEO of Vesta Hospitality, owner and operator of 17 hotels, said he has concluded that cuts to his hotel-management company haven’t been enough. “So, deeper cuts are needed,” he said. “That means either much lower salaries and hours or the elimination of personnel. That is a decision I am trying to make today or tomorrow.”

Hotel workers have been stunned at the suddenness with which they have been sent off. Shelby Halpin, who worked as a guest-services specialist and a guide in a ski resort in Big Sky, Mont., said she was told on Tuesday that she no longer had a job after the resort closed.

“The next day I put everything I owned into my jeep and left,” said Ms. Halpin. “We were kicked out of the place. It was so surreal.”

Marriott Chief Executive Arne Sorenson said in a video message to his employees on Thursday that Marriott business is now running about 75% below normal levels, making this period more devastating than any other in the history of the nearly century-old hotel company. He said that the financial impact was worse than the post-Sept. 11 period and financial crisis combined.

Marriott told The Wall Street Journal that the corporate-staff furloughs would begin early next month and estimate that they will last 60 to 90 days. During that period, furloughed U.S. corporate employees will receive 20% of their salary toward health-care and other costs, the spokeswoman said. Corporate employees who stay on are subject to 20% pay cuts and reduced workweeks, the spokeswoman said.

Marriott is the world’s largest hotel company with nearly 1.4 million rooms world-wide, 30 brands and about 7,300 properties, but rivals like Hilton and Hyatt have also resorted to staff reductions and cost-cutting.

Hilton has furloughed “tens of thousands” of employees, a spokesman said. “Our immediate focus is on doing what we can for our hotels and those team members.”

A Hyatt spokeswoman said the company is “temporarily furloughing many hotel managers and reducing hours for most colleagues. U.S. colleagues’ eligibility for health care and other benefits will not change, and colleagues may also file for unemployment benefits.”

Hotel executives aren’t going unscathed. Mr. Sorenson and board Chairman Bill Marriott have stopped receiving a salary during this period, the CEO said in the video. His executive team will take a 50% cut in salary. Hyatt CEO Mark Hoplamazian and chairman Tom Pritzker are also forgoing salaries though May, the Hyatt spokeswoman said.

At Hersha Hospitality Trust, which owns nearly 50 hotels, the CEO and chief operating officer said they are reducing their salaries by 50%, and the board of trustees will take all payments in stock for the remainder of 2020.

Mr. Sorenson and other hospitality and travel executives met with President Trump in Washington on Tuesday, when they asked for $250 billion in financial aid for the beleaguered industries. Hotel owners say they can’t wait much longer for assistance.

“I feel the government has turned its back on us,” said Ashford’s Mr. Bennett.

Write to Craig Karmin at craig.karmin@wsj.com and Esther Fung at esther.fung@wsj.com

WSJ News Exclusive | Marriott, Hotel Owners Furlough Thousands of Workers, Cut StaffMarriott and a growing number of hotel owners are furloughing tens of thousands of workers or slashing staff in an effort to steer their companies through the coronavirus pandemic.www.wsj.com