When you’re talking about the past few years for Marriott International and its CEO, Arne Sorenson, it may be easier to talk about what hasn’t happened than what has. A $13 billion deal—the largest in the company’s history—for rival Starwood? Check. A cyberhack that resulted in unauthorized access to hundreds of thousands of customers’ data—and acres of painful headlines? Check. A series of labor strikes across the U.S.? Yup, that too.
That’s not all. There’s Airbnb, which is fast disrupting the travel business; the rise of anti-globalism, anathema to a company with hotels in 131 countries; and, of course, an endless series of highly public brushfires that come along with welcoming guests of every stripe, such as the LGBT community erupting in protest at the President of Brazil hosting an event at a Marriott in New York’s Times Square (he ultimately cancelled), to name just one.
The worst news came on May 3, when the company announced Sorenson, 60, had been diagnosed with stage 2 pancreatic cancer and would soon begin treatment.
All this would be enough to tank even the toughest CEO. Yet, on Sorenson’s busy watch, Marriott International has exploded in value. Revenue jumped from $12.7 to almost $21 billion over the past five years (through the end of 2018), while adjusted earnings per share were up 178 percent during that time. Total shareholder return? 154 percent versus 60 percent for the S&P 500.
Sorenson—who spends some 200-plus days on the road each year—is also one of the most high-profile and outspoken CEOs today. He’s put himself on record advocating for infrastructure investment, tax reform, LGBT rights, immigration, diversity—and simple decency (political and otherwise). Yet, somehow, he’s largely avoided the public tar-and-feathering that keeps many CEOs on the sidelines in these bruising times.
Taken together, it’s a bravura performance that led our selection committee (see p. 8) to name Sorenson Chief Executive’s 2019 CEO of the Year. “Marriott’s exceptional EPS growth track record in a rapidly changing sector is a testament to the leadership and strategic vision Mr. Sorenson has provided throughout his tenure,” said CEOY selection committee member Dan Glaser, CEO of Marsh & McLennan Companies.
“The complexity and globality of his business—with a major acquisition—demonstrated his leadership,” said Bob Nardelli, CEO of XLR-8 and former CEO of Home Depot. “His presence among other CEOs and recognition among peers was a real standout. Arne is a real role model for all CEOs.”
That’s especially true in this disruptive era. Trained as a lawyer, Sorenson had an unusual path to the corner office. He was personally recruited into the company in 1996 by Bill Marriott (our 1988 CEO of the Year) after representing Marriott in a lawsuit a few years earlier. By 1998, he’d been named CFO (“a risky move even in a pre-Sarbanes-Oxley world,” he says) and was named CEO in 2012—the first nonfamily member to hold the job in the company’s history. We sat down with Sorenson in late May at the company’s headquarters in Bethesda, Maryland, to hear more about how he takes on the turbulence—and maybe how the rest of us can do it better, too. What follows is edited for length and clarity:
It starts with a great team. Almost none of these things do you face alone. If you’re facing them alone, you’re probably in a dangerous place. Some of them, I think, require more of a singular decision, maybe, and some of them less. So, as an example, if you think about the last three years, we jump into trying to buy Starwood in October of 2015, that was a very intense period where the leadership team of the company was gathered around the table. But, ultimately, a decision had to be made. It had to be made by me. Now, the board, of course, approves everything, but was I going to present to the board the biggest transaction by far that the company had ever done? The prior deal would have been $1 billion. This was $13 billion and change.
The conversation around the table was robust, transparent—but not uniform. In that kind of classic circumstance, the CEO ultimately has got to say, “Okay, how am I going to resolve this less-than-totally-synthesized bit of input I’m getting and decide what kind of bet the company should make?”
Contrast that to the fall of 2018. We get a cyber hack that surfaces in September. We really couldn’t confirm that anything was taken until November. So, you’ve got a period of six weeks or so where you’re working like dogs to try and figure out as much as you possibly can and, then, ultimately, get to a place where you decide to disclose and what the strategy is around disclosure. There, in some respects, I am involved in the conversations daily but not necessarily bringing more expertise to that set of challenges and questions than a whole bunch of people at the table.
In both circumstances, you’re bred first to listen. So, even when the decision, ultimately, has to be made where the buck stops, if you haven’t gotten input from a team that feels like they can be transparent with you, you’re going to be supremely harmed in the decision that you make. So, in that sense, there’s a similarity, but the decisions made in the cyber context, the ones that I felt closest to, were more philosophical. We’re going to be transparent with our customers. We are not going to pay attention to the short-term ramifications of this because the name of the game is to maintain the trust that we have, and maybe even build on the trust we have by telling them what we know, by telling them as we learn more, what more we learn. Very different kinds of decisions, but every one fundamentally dependent on the right team around the table.
There are two things I would say. One is a great cultural legacy. Some of these crises obligate us to reach into a well of goodwill built up over decades and decades. There are a lot of folks who say, “Marriott is a good company. They’ve been in business a long time. They seem thoughtful.” That well of goodwill that’s been built up over the years is helpful.
The second thing is to be transparent and not just to say, “Here’s why we’re defending our decision, but here’s why we reached the decision we did.” I woke up five years ago to 5,000 emails that had come in the last three hours. That one was about folks objecting to the CAIR, Center for American Islamic Relations, meeting at a hotel in Crystal City near Reagan Airport. There was a group that basically decided that [CAIR] was too Muslim a group to meet in our hotels, and we should ban them. Within a month, we had a group from the left complaining about a much smaller group who believed in reparative therapy. There was the LGBT community basically saying, “How on Earth could you have these people show up?”
In both instances, what we said was, “We can’t stand in judgment on the people who meet in our hotels. You wouldn’t want us to stand in judgment on them. We are in the hospitality business. We welcome everybody.”
You travel more than 200 days a year, but still, how do you bring this company together when you’re trying to lead it? There are a lot of people in a lot of places.
Very deliberately. There are a whole bunch of tools used. The most important is probably to stress that the principal responsibility is not Bill Marriott’s. It’s not mine. It is the [hotel] general managers who have got to pull through the culture. So we tell them. We pull them together. We measure what their people say about their work, do a global associate satisfaction survey every year where we get a department-by-department, hotel-by-hotel input into the way our associates feel about the work that they’re doing, the way they’re paid, about opportunities and about inclusiveness.
It’s an important question, and it’s part of the compensation plan. Last week, we had an Awards of Excellence event, our sort of internal Academy Awards, where we bring in about 15 associates from around the world and honor them with an award and a video that tells their story, and they speak for a couple of minutes. Most of them have never been in the U.S. before, maybe never been on an airplane before. It’s simulcast around the company, and it is to tell stories of folks who have made a powerful impact, typically both with guests and with associates, and typically in hotels. You keep pushing those.
One of the reasons I travel so much—and Bill Marriott traveled so much before—is that even though it’s the general manager’s responsibility, we get out there and the senior team gets out there, and they can see us interacting with our people. Every single hand in a hotel, I will shake. Kitchens, housekeeping, wait staff, front desk, and half the time I think they are looking at me like, “Who the hell is this guy?”
Overwhelmingly people will say, “You know, he looked me in the eye and shook my hand, and I’m a housekeeper.” If you treat people like they deserve to be treated, as human beings with the same kind of dignity that you would treat senior people, it will flow through the organization.
The measurement system is going to tell us something about it. You can look at the associate satisfaction directly, but you can also look at the results of the hotel. Turnover is going to be way down if you’ve got somebody who is able to build teams that really work. The guests will tell you it’s a much, much better run hotel because, ultimately, when people feel good about their work, they will welcome you better than they would if they were sour.
I guess this is a place where I’m more optimistic, although it depends on exactly how the question comes in. Because if you think about policy, about reading the news, about trade wars or conflict in the Middle East, or the rise of nationalism around the world, it’s easy to get distressed. But if you think about people traveling, people wanting to explore the world, people eager to collect experiences, maybe a bit more than stuff, new members of the global middle class who, for the first time, have the ability to get around and see things, I think there’s a lot more to be optimistic about than pessimistic about.
In 1979, I went to Beirut. My father was a churchman, and he came back and said, “There’s this group getting together in Beirut next summer. You should go.” It was in Lebanon, [when], of course, the U.S. was a great ally of Israel. But everybody who was there was as welcoming as could be. Some of them occasionally would say, “I hate America, but I love Americans.” I think today you pick up some of that in some places, but when you get to a hotel—hopefully, a Marriott hotel—people are still interested in seeing the globe. People are interested in working in the business.
We’ve got lots of technology threats and opportunities, obviously. Technology has helped us a great deal in the way we interact with customers, apps and .com sites.
And we’re selling a massive amount of rooms online through our own digital channels, which has been huge both in terms of ability to know customers and ability to service them cost effectively. So there are real positives here. There are also folks that either are directly disruptors—Airbnb would come up first in that—and folks that have been partners but complicated partners for a while—Expedia,
Booking.com or folks that are juggernauts for whom the relationship is still evolving. Think of Google maybe as the easiest example of that, but there are a few others around the world. They all present different issues.
We’ve had one advantage, but it’s not ironclad, and that is, unlike a lot of retail, you can’t ship a trip to somebody in a box. We own the stay, we would say, and that’s a positive thing. I say it’s not ironclad because if you’re Expedia and you can get yourself in the middle of our relationship with our customer and extract a tax in order to deliver that customer to us, we might still own the stay, but we’ve just changed the economics of our model. Now, of course, Expedia has a home rental platform. Booking.com has a home rental platform. There are some smaller players, but Airbnb is the first one to take technology and deliver a different product and, to some extent, invent the so-called shared economy in the hospitality space.
If you replayed every step that Airbnb took and said, “Imagine instead Marriott took that step,” we would have been crucified, right? The taxing authorities in these jurisdictions would have said, “The hell you’re not paying taxes. Of course, you’re paying taxes.” We would have had to comply with laws that Airbnb never had to comply with early on because they were a new shared-economy platform. And politicians love that, and nobody really knows where it’s going.
I met with the Airbnb founders very early in this process and was thinking about it in these ways in the first conversation probably six years ago. We couldn’t do this. Nobody would let us get away with what they’re doing. So, we’re watching, trying to figure it out. Maybe we can be blamed for moving too slowly, but, ultimately, what we decide is there is a place in the home rental market for quality. I want something where a brand is going to stand behind it. If it doesn’t go well, I want to be able to call somebody. It’s not going to be selling the cheapest room—which is never where our business has been—but it’s probably going to be in the middle of the market and a whole-home product. We think we can deliver the technology solution, the loyalty linkage and a branded experience in a way that will allow us to offer a product that is different.
It’s not hard. People want to be involved in change. People can be threatened by change, of course, particularly if it’s about contraction. The bulk of our change has not been about contraction. It’s been about the opposite. In that context, you see people just drawn to it. The bigger challenge is ensuring that you get the right people drawn to it and not too many people drawn to it. Because we’ve still got a core business, and you can’t all run off and get after the new shiny penny.
People like innovative change. They like to win. Everybody likes to win.
Probably the more you tell them directly you think you’re winning, the more damage you do. We are deliberately fairly humble in the way we talk about what we’ve accomplished. For example, when we closed the Starwood deal, there was a lot of self-congratulation. We had general managers’ meetings in every market, and we said, “We have not done anything to be congratulated for. We paid more for Starwood than anybody else would pay for it. That is not victory. Victory is what we do with this deal, and that work is just starting.”
One of the things that the Marriotts have talked about for decades is success is never final. The more you convince yourself that you’ve really gotten good enough, if you really think that, you’re probably [in trouble].
It’s not a temptation for me, maybe sometimes to the frustration of some. I’m convinced we can always do better. I’m not really wired to do a commercial. I was just having a conversation with the folks about our next board meeting, and I’ve been saying for years, “We don’t go into the board with an advertisement of how well we’ve done on something. We go into the board with the things that we’re worried about.” There are always things we’re worried about. Because that’s where the risk is, that’s where our emotional energy is focused, that’s where their counsel is going to be most relevant. It’s who I am, but I think it’s who the company is, too.
We’re sort of old fashioned in some respects. We meet only four times a year. They are fairly efficient. It’s a 24-hour, maybe a little longer, thing. We’ve got a board of 14. When I became CEO, I said to Mr. Marriott, who is still the chairman, “I’d like my entire team at every board meeting because I think the board needs to know who they are, which you only get from repeated interaction with folks, give them the ability to always have a line towards succession, which is the board’s fundamental responsibility. And give them their own read about the way the team is working and a chance at the dinners or lunches or wherever to hear more.”
Bill Marriott said to me 25 years ago, “The board’s job is to hire and fire the CEO, period. There’s nothing else that they can do for you.” He doesn’t think that anymore. I think today he would say, “The board, they are smart people. They have got good breadth. We should be getting their counsel.” That doesn’t mean you go to them and say, “What should we do about this problem?” We should say, “Here’s what we’re worried about and working on, but here’s also what our strategy is,” or, “Here’s when our strategy will be ready.” So that you’ve got the ability to get some input and reaction without pretending that the board will have a better set of solutions.
I focus on people, on strategy and on the decisions that usually, obviously, would need to be made by the CEO. They’re not always obvious because sometimes the decision is not that big, but there’s something about it which is controversial enough that the organization is going to have sort of built-in biases that conflict with each other. So, those decisions might need to percolate up. Sometimes they’re like the Starwood example, which is sort of an obvious decision that needs to get made. But the focus on people is a big deal. There’s another story with Bill. The Marriott transition for Bill Marriott was moving much more authority outside of this building because you can’t make the kind of decisions here that were made here even 15 years ago.
We were [opening] 20,000 rooms a year or something like that. We’re now doing 120,000 rooms a year. We’re opening about one room every 14 or 15 hours, but we’re signing even at higher volumes than that. Bill Marriott might have been able to say, “I want to approve designs, not necessarily of the Fairfields but of the full-service hotels.” Today, you couldn’t do it if you wanted to do it. By the way, you shouldn’t want to do it because if you’ve got one person approving designs, you will have a sameness across the system that you really don’t want—and you’ll end up without the breadth of leadership that you need to have spread around the world.
You have to let go, but you have to let go in a way that doesn’t suggest you don’t care. One of the things I’ll get traveling or when the team comes back here is a deep conversation, including about individual hotels. You hear the way the decisions are being made, I get a chance to have input into them. It doesn’t mean I’m making those decisions necessarily, and it doesn’t mean that I’ll be engaged with the next one that comes along the next month. But it does communicate that the details are still really important. And I think that works fairly well.
I’ll say a couple things, particularly about gender. I’ve gotten more credit and more attention for the number of women on my direct report team than maybe I deserve, or we deserve, and maybe more than is really important. We were 50/50 until January, when one of our senior women execs retired. We’re now 60/40 basically, six men and four women, and that’s good inclusiveness around the table. But much more powerful is that 42 percent of our 873 senior executives—a bunch of VPs—are women. We’re global where gender actually can be sometimes more difficult in many other markets around the world. We’ve got a real shot at gender parity for a community that’s that big.
We are literally a community of people from everywhere, welcoming a community of people from everywhere. To do that well, we’ve got to be that as well. I actually think the smaller you get—this gets me into maybe more dangerous space—but the more you start to say, “Okay, but around your [leadership] table 50/50, or 60/40, don’t you get more diversity of view because of that inclusiveness?” I actually think in the smaller group, there is no similarity of the points of view of the women, no similarity of the points of the view of men. I don’t see our chief commercial officer, Stephanie Linnartz, as expressing a woman’s view about a particular issue any more than I see David Rodriguez, our HR lead, communicating any Hispanic view.
They are fundamentally creatures of their own sets of talents, capacity and points of view. Yes, some might be influenced by who they are or their gender, but none are coming with that agenda to the table. They’re coming with the agenda of, “What is the CFO’s role? What’s the right thing for us to do?”
When you get to a bigger community, I think you start to see the power of those different voices coming together.
The real power is in making sure that you can deliver a fair expectation of people that they can grow, no matter where they come from, and that the opportunity is available for them. It didn’t require them to look a certain way. It didn’t require them to go to a specific school. It didn’t require them to have a particular background. Everybody has got a fair shot at it. If you get that and it’s about substance leading, you will get diversity in the ranks because people will be drawn to it. Then you’ll get those voices, too, that are there because when you get to a bigger community, particularly, those voices will come in. This diversity of experiences will come in. And you’ll make sure that you’re not blinded to some things that you might be blinded to otherwise.
I don’t have a real sense of that. We traveled. Even when we came to the U.S., my father was on the road all the time around the world and with people in the house from around the world. There is one thing that I know to be the case—I love travel. I love seeing what’s happening around the world. I love seeing the cultural differences. I love all the food. There are folks who are in international business who hate to travel. You can see it. They’ll get to India or they’ll get someplace else, and you can just sort of see the scowl on their faces, and you know they’re not having a good time. I’m the opposite.
I think the faith thing, it was comforting to the Marriott family that we were traditional in that sense. My wife and I have four kids. We’ve been together all our lives. There’s comfort in knowing that maybe the lifestyle is not too far towards the edge, and faith is a piece of that.
Again, I’ll apologize for sort of self-analysis here, but I think there is a bit about faith that keeps us in our place, which prevents us somehow from thinking that we are uniquely gifted, that we deserve credit for so many things that happen. It’s not as if I feel passive. I’m intensely competitive and put a whole lot of effort into trying to make sure we do as good a job as we can.
But I don’t think it’s my work alone. I’m not suggesting for a second that I mean it’s the divine hand that’s working on it. But I do think there is a strong recognition that a whole bunch of people are engaged in this and things happen that you can’t necessarily take credit or even blame for.
The youngest is 24, and the oldest is 31. I think probably more important is what happens earlier in life. What do they see you doing? How do they see you balancing your work with your attention to them? How do they see your relationship with your spouse or partner, and what lessons do they pick up from that?
I’ve always been a hard worker. I [was] when I was practicing law, and I’ve been traveling here a lot. But when I wasn’t working, I was basically with them. I wasn’t off on the golf course on weekends without them when they were growing up. I worried that they would think, “Well, you weren’t around enough.” They don’t have that sense at all. Their sense is, “Yeah, he was hardworking, and he proved something about the importance of effort and discipline. But he was also there for us.”
It’s been just about a month since the diagnosis came in, so it’s still early to take much on board as lessons. I’m certain that it’s about looking forward. I’m certain that I’d like to keep doing what I’m doing. It’s too soon to know whether there will be lasting changes to the approach I take.
I’ve probably directly heard from 5,000 of our associates, something like that, with prayers in every faith and picture postcards and little videos that come in with hotel teams singing, various things like that. It’s really gratifying to know that a whole bunch of people are fighting with me.
Something about the company, too. Something about who we are.
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