By Adam Pagnucco.
On July 13, the executive branch sent a report to the county council on the status of its conditional grant to Marriott. The grant dates back to 2017, when the state and county governments agreed to $62 million in subsidies for Marriott’s relocation from Fernwood Road in Bethesda to Downtown Bethesda. In return for the county’s share of $22 million, Marriott agreed to annual average employment through the end of 2022 of at least 3,250 permanent employees plus at least 250 part-time or contract employees at its new headquarters. If it met those goals, Marriott would be entitled to keep its subsidy. Otherwise, it would be treated as a loan at 3% interest.
At the time that the conditional grant was made, no one inside the company or the government imagined that there would be anything like the COVID pandemic. When it hit, teleworking spread throughout the nation and endangered Marriott’s employment goals. According to the executive’s letter to the council of July 13, here is what happened to Marriott’s headquarters employment.
Marriott Employees: Goal of 3,250
2017: 3,982
2018: 4,232
2019: 4,346
2020: 2,883
2021: 3,039
2022: 3,039
Average: 3,587
Contractors: Goal of 250
2017: 226
2018: 512
2019: 449
2020: 127
2021: 430
2022: 353
Average: 350
Marriott met the goals of its agreement with the county, so its grant will not convert to a loan. But its problems suggest issues for employers in Bethesda and other downtowns. When combining permanent employees and contractors, Marriott’s headquarters employment shrank by 1,403 between 2019 and 2022, or 29%. And while combined employment rebounded nicely in 2021, it actually declined slightly in 2022.
This data point is consistent with rising MoCo office vacancy rates which we reported in July and with the battered condition of Downtown D.C. If Marriott cannot fill its offices, who can? And office owners have yet to face new regulations heading to the council on building efficiency performance standards and all-electric buildings. Marriott’s experience and rising vacancies suggest that caution is warranted in imposing new costs on owners. Whether county leaders will pay heed is an open question.
The county executive’s letter on Marriott’s grant can be downloaded below.
Partial Satisfaction of Economic Development Fund conditional grant to Marriott International, Inc.