Experiential / Reality-based Learning / April 28, 2016

CEO@Smith: Arne Sorenson, Marriott

In the face of hotel industry disruption, Marriott International’s answer is to grow, the company’s president and CEO said April 26, 2016, at the University of Maryland’s Robert H. Smith School of Business. The Bethesda, Md.-based hospitality giant is poised to become the world’s biggest hotel company later this year with the acquisition of Starwood Hotels & Resorts, allowing it to create more connections with middle-class travelers worldwide.

“One of the big reasons we are doing this Starwood acquisition is to make sure we’ve got a bigger loyalty program that really allows us to create that direct relationship with our customers,” said Marriott’s top executive, Arne Sorenson, who spoke to a packed auditorium of students, faculty and alumni as part of the school’s CEO@Smith speaker series.

Sorenson talked about how strengthening ties directly with customers will help Marriott compete with disrupters in the hotel space such as newcomer Airbnb, online travel agents Expedia and Priceline and, on the horizon, Google, Amazon and Apple.

Sorenson said Airbnb is probably the least threatening. Though a big player, he said Airbnb is increasingly selling nights at dedicated spaces rather than homestay experiences with part-time host families. This will allow Marriott to compete with Airbnb the same way it already competes with other hotel chains — on location, price, room quality and other traditional standards.

He said the big looming threat — and one that poses a different kind of competition — is if Google or Amazon decides to use their “nearly monopolistic power” in their spaces to essentially extract as big a “tax” as possible from businesses that depend on the Internet to connect with customers. “They have these extraordinary technology platforms and the ability to monetize them in ways that are pretty profound,” Sorenson said.

“Google can make sure they provide only (search) results that someone has paid them to show. And that’s not a world that is good for our business to be in,” he said.

In a conversation moderated by Smith School Dean Alex Triantis, Sorenson also talked about leading at Marriott, his proudest accomplishment — following in the footsteps of founder J. Willard Marriott and his son, Bill, as the company’s third CEO.

Sorenson also highlighted the “old-school” skills that business leaders need to succeed. These include strong communications skills and insatiable curiosity to continue to learn and grow.

“People need to be able to communicate, particularly if they are going to take big jobs,” Sorenson said. “They need to understand how to think, they need to understand how to write, they need to understand how to speak.”

At Marriott, Sorenson has created an environment where the leadership team respects each other enough to be able to collaborate, debate and disagree to push the company forward. And with its tremendous growth, Marriott has also empowered leadership teams throughout the globe to make key decisions.

“The bigger we get, the more we have to break down the business into smaller units and empower people to make the decisions that have to be made in those units, because it’s hopeless to think we can make them from the center,” Sorenson said.

Sorenson talked about the negotiations in acquiring Starwood and Marriott’s bidding war with Chinese Anbang Insurance Group Co. He said Marriott is still trying to figure out how to integrate Starwood’s 11 brands in the acquisition. He says the biggest challenges are figuring out the senior leadership of the combined company and merging the technology, loyalty programs and brands of the two companies.

“It will be work that consumes us for some time,” Sorenson said.

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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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