Chapter 11
A fanfare of fifes, a roll of drums, and a cloud of 2,000 balloons
accompanied the grand opening of the Crystal City, Virginia, Marriott hotel in January 1970. It was Marriott’s thirteenth. Three months later, three generations of Marriotts were on hand for the ribbon-cutting ceremony for number fourteen, the Dulles Airport Marriott outside Washington, D.C. Bill’s marketing people favored spectacular grand-opening ceremonies, which sometimes went awry.
For the Dulles opening, an expert archer was hired to shoot a balloon that was tethered above the hotel’s lake. Inside the balloon was a mock-up of the key to the hotel’s front door. The balloon was supposed to burst, dropping the key into the lake, signifying that the hotel didn’t need a key because it would never close. It was a stunt repeated with various themes at other Marriott openings, but this time the winds were gusting at 20 miles per hour. The archer missed four times before a hotel employee waded into the water to pop the balloon. Next came three flag-bearing skydivers jumping out of an airplane at 8,500 feet. They were aiming for the small island in the middle of the lake, but the wind carried two of them out of sight, and the third landed in mud at the edge of the lake.
The high winds were a symbolic harbinger of external factors that would seriously threaten the company’s upward trajectory in the 1970s. In just a few years, national and international crises—including war, an oil embargo, a stock-market crash, high inflation, and the downfall of a president—would send the country into the worst recession since the Depression. Without any warning of those coming rough seas, Bill Marriott entered the new decade with an optimistic business plan of expansion and diversification.
“It was the age of conglomerates,” Bill recalled. “It was a time when Wall Street expected companies to grow in different ways. I was always asked, ‘What new businesses are you getting into?’ ‘What’s the next big thing you are doing?’”
One thing Bill planned in 1970 was a proliferation of franchised “Marriott Inns,” which would soon dot the country. Although J.W. obstinately opposed franchising, the rationale behind Marriott Inns was sound. Holiday Inn was doing well with a franchised national chain, and even Hilton was building “Hilton Inns” at locations that couldn’t sustain a full-fledged hotel. This would be Marriott’s chance to get into smaller cities as well.
Gray McCullah was hired to drum up franchisees. Bus Ryan on the marketing team recalled the day McCullah arrived back at headquarters with a briefcase full of $15,000 checks from people who wanted to buy into a Marriott: “These were doctors, lawyers—anybody who had $15,000 and thought this was going to be the key to their life’s new fortune, which was the way Gray had sold it to them.” In just a few months, McCullah had collected more than five hundred checks from prospective franchisees, totaling more than $7 million.
Instead of being elated, Bill was alarmed. Who were these people? Did they have a good location for the Marriott Inn in mind? Could they manage the Inn? Not one check was to be cashed until the applicants were vetted. Only about ten passed muster in that first round. One year into the program, more than fifty qualified franchisees had been signed up, and the company was planning to open Marriott Inns at the starting rate of twenty per year.
The next “new thing” was a venture into the “specialty dinner house” market, not in hotels. The first restaurant was Port O’ Georgetown in a historic 1820 warehouse in Washington, D.C. Next was the Joshua Tree steak-and-lobster restaurant in McLean, Virginia. A few days before that opening, Bill joined other Marriott executives for a dinner to test the staff and kitchen. Future billionaire Jon Huntsman, J.W., and Dick joined Bill at his table. Between them, they sampled all the fare on the menu. Midway through dinner, a nervous waitress spilled a container of melted butter all over Bill’s new suit and tie. Huntsman never forgot Bill’s reaction. “He was not upset. He reassured the waitress that everything was just fine. He couldn’t have been more gracious or gentlemanly. Then, after Bill wiped at the spots with a wet napkin, we went right on with the meal and forgot about it.”
The third restaurant was the biggest of all—the size of a football field. For two decades, the D.C. government’s Redevelopment Land Agency had tried to revitalize the southwest waterfront along the Potomac River’s Washington Channel. But not until Marriott came along did the $25-million project get off to a running start. Marriott envisioned a 900-seat seafood restaurant giving patrons a sweeping view of the monuments upriver. The company bought the rights to the name and menu of a popular seafood restaurant nearby, Hogate’s, and tore it down. Bill’s new Hogate’s was instantly more popular than the old one had been. Several weeks after the opening, J.W. recorded that there were “200 people waiting in line.” Not only was Hogate’s one of the largest seafood restaurants in the country, but it grew into what trade publications determined was the number-one restaurant in the United States in sales volume, grossing more than $6 million annually.1
Marriott’s next venture was a charter vacation business called Marriott World Travel. It was a low-investment business from which Bill expected quick profits and a window into travel business operators abroad. At the end of its first year of operation, Marriott World Travel had moved more than ten thousand people to and from Greek and Caribbean islands.
Bill had barely begun the new enterprise when he decided to buy a cruise ship line. Others would later conjecture that Bill just wanted his own fleet of ships, but that was not the case. The new business was a natural, if adventurous, outgrowth of the direction in which the company was headed. Still, “the idea of cruise ship operation back then was pretty exciting for Bill,” recalled Harry Vincent. Donna, too, noticed an extra spring in Bill’s step as he proceeded with a fleet purchase. “The cruise ship business was doing very well at that time and Bill—loving ships—was happy to get into it.”
The best buy at the time looked like the highly reputable Sun Line, with two ships cruising the islands off of Greece: the Stella Maris (Star of the Sea) and the Stella Oceanis (Star of the Ocean). A third, much larger ship under construction was the Stella Solaris (Star of the Sun), scheduled for its maiden voyage in 1973. Holland America Line owned a big share of Sun Line and was interested in selling. That began many months of intense international negotiations with both Holland America and Sun Line owner Alex Keusseoglou.
J.W. and Allie flew to Athens to meet Keusseoglou and to inspect the ships. J.W. didn’t like the idea of having a partner, but Bill argued that Marriott needed a knowledgeable partner because he knew nothing about the business. J.W. and Allie found Keusseoglou to be a charming Greek captain on the order of Aristotle Onassis, but Allie didn’t trust him from the first. “He talked too fast,” she later said. Keusseoglou treated them to an overnight cruise to Crete. Once back in Athens, J.W. agreed when Allie pronounced: “It’s time to go home. Greece is for the Greeks.” J.W. reported to Bill that he did not feel good about going ahead with the purchase, though he conceded that Keusseoglou ran a first-class operation.
No one was more instrumental to the purchase than General Counsel Sterling Colton, who was the only one capable of dealing with the mercurial Keusseoglou. Sterling’s father, Hugh, had been an original cofounder of Hot Shoppes. Sterling had become a fast friend of Bill’s when they both attended the University of Utah, and the two had kept in touch as Sterling became a star at a Salt Lake City law firm.
Two years after becoming president of Hot Shoppes, Bill asked Sterling to uproot the Colton family from Salt Lake and come work for Bill. Sterling didn’t hesitate. After Sterling had spent two years as an assistant general counsel, Bill promoted him to the company’s top legal position in 1970, and he helmed the company’s growing legal staff with much-lauded excellence for the next twenty-five years. Bill never had a better, more level-headed and consistent adviser and friend at Marriott than Sterling Colton.
The Sun Line deal, which occurred only a few months after Sterling had been promoted to general counsel, proved to be a real baptism by fire. It was “one of the most complex legal, financial, tax and accounting problems in which Marriott has been involved,” Colton noted contemporaneously in the company’s newsletter. The first two ships had formerly been owned by a Liberian company and two Greek companies. These, in turn, were owned by the Holland America Line, a Dutch company, and Keusseoglou, a citizen of Greece.
If that weren’t confusing enough, Marriott was subject to the laws of the United States, which meant the acquisition had to be made through a new Bermuda subsidiary, so that the contracts were subject to arbitration under the laws of England. Since the investment was made overseas, it was restricted by the regulations on foreign investments imposed by the Office of Foreign Direct Investment. This also happened at a time when the international monetary markets were in a state of great confusion. In fact, the final contracts were executed two days after an additional devaluation of the dollar was announced.
Just prior to the closing, certificates of incorporation, bylaws, contracts, insurance policies, and many other documents were assembled. The closing itself took place at the offices of the Handelsfinanz Bank in Zurich, Switzerland. “That the transaction finally took place smoothly is a tribute to the skills of all involved, particularly Sterling Colton,” the Marriott newsletter article concluded.2
What was missing from that public account was an unprecedented event that occurred behind closed doors at the final board meeting regarding the deal. J.W. had finally reconciled himself to the venture, but, when it came to a vote, Allie said, “No.” J.W. looked at her with disbelief and said, “Allie, you have never voted against me before. Why are you voting no?” She said, “I do not like boats.” Harry Vincent was there and had his own theory: “There was more to it than not liking boats. Being the kind of lady that she was, that was all she would say. What she meant was, ‘I do not trust this man Keusseoglou.’”
Bill assumed his mother was acting on intuition more than business analysis, and once Sun Line was under Marriott ownership, her misgivings seemed to have been misguided. For the first eighteen months, Sun Line profits rolled in and it looked like smooth sailing ahead for Bill’s fleet.
In February 1971, Forbes magazine did a cover story on Bill, describing the trajectory of the company from root beer stand to conglomerate, with most of the growth under the direction of the second generation. In only “six years since Bill took over, Marriott has almost quadrupled in size and had a sales volume of $315 million in its latest fiscal year.” At the same time, with the company’s unique profit-sharing program, Bill’s piloting of the corporate ship had lifted his participating employees with that rising sea. At the end of a thirty-year career, a $3-an-hour dishwasher retired with $577,000. An executive after the same thirty years retired with about $2 million. “We have at least a dozen millionaires who have retired from this company,” Bill told Forbes—and that didn’t count his three uncles, who had retired with substantial fortunes.3
J.W., though not yet ready to retire completely himself, turned seventy-one in September and was “depressed over his age,” according to Allie. An incident aboard the U.S.S. John F. Kennedy two weeks later accentuated that. As a representative of his Church, J.W. was invited by the chief of navy chaplains to join a chaplains group meeting on the aircraft carrier. “I climbed about ten flights of stairs to the bridge to watch the maneuvers of the carrier [when] I got sick. The medical officer thought I was having another heart attack, so they put me on a helicopter and took me to Portsmouth Naval Hospital where I had at least ten doctors work on me,” he wrote in his report to Church leaders.4 The navy doctors found nothing more serious than overexertion.
Whereas 1971 had been a relatively balmy year between Bill and his father, 1972 was often cloudy with recurring storms. On New Year’s Day, Allie recorded that the two “had a session—1 hour—both worn out after.” Two weeks later, she arrived for a board meeting only to discover that the run-up executive committee meeting had been a knock-down, drag-out experience for her husband and son. “Stormy session,” she recorded. “Went one hour over time—[J.W.] and Billy at odds—they both looked awful when the Board Meeting began—Billy shaking all over—[J.W.] flushed. Too bad they get each other so upset.”5
J.W. knew he was driving his son crazy, but he just couldn’t help it. In a speech to Marriott managers on January 17, he said, “I wish I had been born under another star instead of Virgo, which makes one orderly and particular. My wife says I make myself and everybody else miserable. I guess misery loves company. In my youth, my father was everything but orderly. He let the chickens run through the house; I had to chase them off with a broom. Dirty clothes were piled up on the staircase, which is one of the reasons our house burned down and for six months we slept in tents, sheds and with the neighbors. I was brought up in an environment which was anything but orderly, and yearned for such a life.”6
It wasn’t just his obsession with cleanliness and perfection, but J.W.’s desire to keep the business neat and tidy, that was splitting him and his son. Bill’s dizzying expansion and diversification were unsettling to J.W. He began to feel like an anachronism. The Los Angeles Times profiled Bill’s impressive reign as the company’s president, while minimizing his father’s foundational role. Although J.W. penned a complimentary note to Bill about the article, it had a rueful twist. “Congratulations—keep it up, [but] it makes the ‘old man’ look like a third-rater.”7
In March, Bill opened the St. Louis Marriott, followed by the New Orleans Marriott. He had earned a respite at Lake Winnipesaukee that summer, where the Marriotts were joined by twenty-five-year-old Mitt Romney, his wife, Ann, and their two small boys. Mitt was on his way to Boston to attend Harvard graduate school. The Marriotts were impressed with Mitt and his family, and the Romneys fell in love with the lake. Years later, they would build a home there, and, like his dad, Mitt would announce a run for the presidency from the lake.
In August, the Marriotts were in Miami for the Republican National Convention, where Allie was serving as the convention treasurer for the third and last time. The convention nominated President Nixon as the party’s candidate. It also included a frightening moment for Allie that put her on the front page of the Washington Post. When she and others arrived at the Fontainebleau Hotel for a fund-raising dinner, they were confronted by several hundred screaming demonstrators at the hotel entrance. “They kept shouting at me, ‘Keep the rich out! Keep the rich out!’ I thought they were going to grab my handbag,” she recalled. Not one to be deterred, however, she ran to the corner of the hotel where television news trucks were stationed behind a six-foot fence. One of the newsmen gallantly handed her a box. She stood on it, hiked up her evening dress, and artfully climbed the fence to safety. Visibly trembling as she related this to the Post reporter at the gala, she added, “I was never so scared in my life.”8
In November, the greatest moment thus far in Bill’s career was tainted by a row with his father. J.W. was nursing an injury from an accident on a trail motorcycle at the lake. Adding to his physical unease was the emotional fragility he felt as board members pushed for a corporate charter change so Bill could be appointed to the new position of CEO. It didn’t help when Newsweek published a story minimizing J.W.’s contribution, writing: “Bill Marriott, Jr., has steered the Washington-based company on a decidedly different course from the one his father envisioned. [He] has transformed [a] moderately successful 45-year-old chain of 45 restaurants and four hotels into an international giant in the highly competitive food and lodging business.”9
On November 20, the day before the annual shareholders meeting where Bill was to be promoted to CEO, a small argument with his dad quickly escalated into the worst they ever had. According to J.W.’s journal, “I criticized some of Bill’s men. He tore into a rage . . . and cancelled his staff meeting and went home. I should never criticize his operation again. A terrible situation between us.”10
Bill was so furious that, for the first and only time, he left his car in the parking lot of the River Road headquarters and walked to his Kenwood home, hoping to cool off. He didn’t. Donna was shocked at her husband’s appearance. “There were some awful times—there really were—and this was at the top. His father had been so miserable to him that I thought he’d even been crying on that walk home. He was very, very upset and said he had had it. He was going to leave the company.”
Donna phoned Harry Vincent, who called Bill. “I can’t stand it any longer,” a resolute Bill told Vincent. He had considered his options and thought the prospects were excellent for a better job with much less aggravation. For the sake of his own health and his father’s, it seemed that it was time to cut the cord. Vincent realized this was not minor petulance but a reality that could well lead to Bill’s resignation the next day, so he mounted a full-court press. Marriott Corporation could not succeed without Bill at its helm.
Vincent asked Bill to meet him at the Metropolitan Club for a face-to-face discussion. He rallied other board members, who persuaded Bill to go through with the promotion the next day. If J.W. didn’t change, then Bill could resign later. Then two board members called J.W. and told him to stand down. “Bill is going to take over whether you want that or not. So please calm down and back off,” one of them said. J.W. was nobody’s fool, and, reading between the lines, he knew that the board might well vote him out altogether if he didn’t make things right with his son.
“The next day Bill’s dad was just like syrup,” Vincent recalled. Twelve hundred Marriott shareholders gathered for the annual meeting, and J.W. could not have been more complimentary of his son. Bill responded that he was “proud to be the son of Mr. Marriott” and led the shareholders in a tribute to J.W. and Allie. The shareholders approved Bill’s promotion.
Now, Bill just had to keep it up—which was not a foregone conclusion. In a matter of only weeks, the stock market would crash and plunge America into a deep recession accentuated by cataclysmic political tumult.
The decade of the 1960s was a period of remarkable American prosperity by almost every measure, including an escalating gross national product, a lower unemployment rate, and a booming stock market. The early 1970s saw occasional hiccups in the stock market, but the market kept climbing until the Dow Jones Industrial Average soared above 1,000 for the first time the week after Nixon’s reelection. On January 11, 1973, the market came tumbling down. Since the initial drop was nowhere near the single-day crash that had sparked the Great Depression, there was little alarm. Unaware of the perfect storm on the horizon, Bill went about his business as usual.
J.W. had reluctantly agreed to chair the second Nixon inauguration. The $4-million inauguration was a success and once again ended with a surplus in the budget. Most memorable for J.W. was the White House church service before the inauguration, for which thirty members of the Mormon Tabernacle Choir were flown in to provide the music. Nixon and the others in attendance rose to their feet when the choir sang its signature hymn, “The Battle Hymn of the Republic.” “I don’t think there was a dry eye in the audience,” J.W. recalled.
The Marriott Center at Brigham Young University.
Two weeks later, that proud memory was very much on J.W.’s mind when Allie, Bill, and Donna joined him for the dedication of the massive new Brigham Young University basketball and events arena, the “Marriott Activities Center.” Former Hot Shoppes executive and now BYU executive vice president Ben Lewis had approached J.W. in 1969 for a contribution to build a new sports arena. J.W.’s alma mater, the University of Utah, had just named its new library after him, in part because he had donated $1 million toward its construction. Lewis goaded his old friend: “Shouldn’t you be giving to the Church’s university?” he needled.
“Well, how would you feel if I sent you a check for $100,000?”
Lewis replied, “I’d feel much better if it was ten times that amount.”
J.W. laughed, and soon a check for $1 million was in the mail.
In his speech at the dedication, J.W. said, “I am sure all of you know how important a good image is. Businessmen spend millions of dollars to build a good image; institutions make their greatest effort to do the same, and we as individuals make it a life’s work.” Then, becoming emotional, he reflected on a future when his descendants would likely attend the university. “I want to ask them to remember that it is the responsibility of all our family to see that their name is worthy to be more than an identification sign on this building.”11
The value of a good name was also on Bill’s mind as investigations by the media and Congressional committees tried to drag Marriott into the scandalous maelstrom spawned by a burglary the previous June at the headquarters of the Democratic National Committee in the Watergate office complex.
Although the Marriotts never did anything untoward or illegal, some shareholders were concerned about any Marriott association with the Nixon administration. During the annual shareholders meeting in November 1972, Bill was peppered with questions about possible Marriott links to the Watergate scandal, including questions about Don Nixon. Bill deflected them, but afterward he made an appointment to see Don at his California home, where Bill planned to fire him.
Even before Bill got on the plane, Don called his brother. Nixon’s secretary Rose Mary Woods then called J.W., asking him to save Don’s job. “Rose Mary said the President would appreciate it if we would hold up on Don until he got better [healthwise],” J.W. recorded.12 Father and son conferred and reluctantly agreed to give Don one more year. A month later, J.W. put together a handwritten account of what Don had done and not done for the company. He realized that in the middle of a recession, they couldn’t afford someone who wasn’t pulling his weight, so he agreed several weeks later to let Bill notify Don of an “early retirement” package. This time there was no call from the White House.
In general, the Marriott connection to the Nixon administration was of far less concern to Bill than the failing economy, which the White House had also mismanaged. On November 19, 1973, the stock market hit its lowest point in nineteen years. Marriott stock dropped to $21.50 from $41 earlier in the year. The next day, at the company’s annual meeting, Bill worked hard to reassure the nervous stockholders, particularly about energy shortages. He appointed someone in each of the company’s divisions to implement a 20 percent energy cut. Many of the company’s restaurants were located in neighborhoods where the majority of customers came from a radius of only two or three miles away, so “I don’t expect any dropoff in sales,” Bill told the shareholders meeting. As for hotels and airline catering, Bill predicted: “When gas [supply] is reduced, people drive less, fly more, and stay at our hotels.” His optimism was soon tested.
Ten days later, Marriott stock dropped to $16 a share. “We may have an energy-induced depression,” J.W. wrote with alarm in his journal. Gas stations voluntarily closed on Sundays, which decimated Marriott’s toll-road restaurants. Many states imposed gas rationing. A federal law was passed making 55 miles per hour the maximum speed limit across the country. State governments asked citizens not to put up Christmas lights.
The energy crisis and Nixon’s Watergate crisis dragged on into 1974. Bill implemented a ninety-day moratorium on new construction and adopted austerity measures. More than 500 jobs—including Donald Nixon’s—were eliminated in a two-month period, most by attrition. Both the toll-road restaurants and Sun Line cruise ships went deeply in the red. Then, in July, Turkey invaded Cyprus and began a shooting war with Greece. All Greek cruise ships were ordered to return to port so they could be used for troop transports. “Our Greek partner radioed our ships to stay at sea for another two or three days and go around in circles until the war was over,” Bill recalled. “He thought the war was not going to last very long, and it did last only a week—but that was long enough to lose all of our business.” There were 1,000 cancellations for Sun Line cruises on the invasion’s first weekend, beginning a Sun Line loss in the millions of dollars.
With the resignation of President Nixon in August 1974, the number-one American concern became inflation. New President Gerald Ford warned that if oil prices continued to escalate, there would be another worldwide depression. By Labor Day, Bill began to feel that the company might not be able to stay above water if the recession continued for another year.
After two years of decline, the stock market finally hit bottom on December 6, having lost half its value. Marriott stock, however, did not drop to its lowest point until two days before Christmas, when it hit $6.25 a share. The company had always posted fiscal year earnings increases in the double digits, but the cumulative effect of 1973 and 1974 forced Bill to report in fiscal year 1975 that the company had a double-digit (12 percent) earnings loss for the first time in Marriott’s half-century history. Bill had good reason for feeling grateful even as he reported the historic loss. The recession had caused many companies to fail, and even blue-chip firms had posted greater losses than Marriott. On the plus side, Bill had learned lessons that proved invaluable as he steered his company through future economic storms.