Construction of new Marriott HQ in Bethesda proceeding, despite company’s financial woes

Construction of new Marriott HQ in Bethesda proceeding, despite company’s financial woes

Two-thirds of Marriott’s headquarters staff to be furloughed in April

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This story was updated on March 27, 2020, to correct a reference to management of the new hotel. Kris Warner initially said The Bernstein Companies would manage the hotel, but later corrected that statement.

Bethesda is mostly a ghost town these days, but the construction site of the new Marriott International headquarters is a beehive of activity. Just after 6 a.m. Friday morning, the two levels of the parking garage across the street were filled with construction workers’ cars and trucks.

Despite Marriott’s current financial hardships as a result of coronavirus, construction of the new headquarters and adjacent hotel will go on, a Marriott spokesperson told Bethesda Beat.

The company still plans to move its headquarters in 2022 from its current location on Fernwood Road in Bethesda to the new downtown site between Wisconsin and Woodmont Avenues, according to Kris Warner of Maier & Warner, speaking on behalf of Marriott.

The project includes a 785,000-square-foot, 22-story office building, an adjacent 244-room, 12-story hotel and a plaza spanning the two buildings, according to the company.

The Bernstein Companies and Boston Properties are building the offices and the hotel, and will own the structures.

“The entire project, including both the office building and the hotel,” are moving ahead, Warner wrote in an email. “It’s really important to remember that Marriott doesn’t own the hotel. It is being built and will be owned … by The Bernstein Companies.”

The Bernstein Companies has a management agreement with Marriott to manage the hotel, Warner wrote in a separate email.

This week, Marriott revealed that it would be issuing furloughs to about two-thirds of its approximately 4,000 headquarters staff.

Brendan F. McManus, the director of media relations for the company, told Bethesda Beat that the furloughs at headquarters will start in April.

Marriott has said in a press release that its furloughed employees will keep their health benefits “and continue to be eligible for company-paid free short-term disability that provides income protection should they get sick.”

Marriott would welcome the workers back, assuming the economy rebounds and the company’s business returns, according to McManus.

In a video message to the company, CEO and President Arne Sorenson said the economic fallout tied to coronavirus disease, or COVID-19, is one of the bleakest times in the 93-year history of the corporation.

“COVID-19 is like nothing we’ve ever seen before,” Sorenson said in the video. “For a company that’s … born witness to the Great Depression, World War II and many other economic and global crises, that’s saying something. COVID-19 is having a more severe and sudden financial impact on our business than 9/11 and the [2007-08] financial crisis combined.”

Sorenson said that in previous times of crisis, the company’s worst quarterly performance was a 25% drop in hotel revenue, on average, around the world.

But when COVID-19 emerged in China in January, Marriott saw a 90% decline in revenue there. After two months, the losses have extended to Marriott markets around the world.

“In most markets, business is already running 75% below normal levels,” because of restrictions on travel and social gatherings, Sorenson said.

“Hotels around the world can’t operate without incurring substantial economic losses, risking permanently their ability to reopen when this gets behind us,” Sorenson said in the video. “This has caused hundreds of hotels to close or start the process of closing until such time as demand begins to return.”

As a result, within the company, Marriott has halted nonessential travel and put new hiring on hold, except what Sorenson described as a “small number” of employees in critical roles.

The company stopped all hotel initiatives for 2020 and stopped its brand marketing and advertising, he said.

Sorenson and Executive Chairman Bill Marriott will stop receiving a salary. The pay of other employees on the executive has been cut 50%.

Work weeks have been shortened. The temporary leaves for most employees at headquarters and elsewhere in the U.S. will last at least 60 to 90 days, Sorenson said.

Actions at hotels include closing food and beverage outlets, reducing the staff and closing floors of hotels, he said.

Sorenson said one small sign of hope is in signs of recovery in China, which appears to have stopped the spread of the virus.

Sorenson briefly got choked up in his message to employees.

“I can tell you that I’ve never had a more difficult moment than this one,” he said. “There’s simply nothing worse than telling highly valued associates, people who are the very heart of this company, that their roles are being impacted by events completely outside of their control.”

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