There are about 630 million causes to rejoice at Marriott Worldwide’s headquarters this week, however even the corporate’s high executives observe how shortly the corporate’s good monetary fortune may change.
Marriott, the world’s largest lodge firm, reported a $630 million third quarter revenue Thursday and reported its total international efficiency — even with China nonetheless beneath an array of pandemic journey restrictions — had absolutely recovered from the pandemic.
It’s clearly superb information for the corporate behind manufacturers that vary from Residence Inn and TownePlace Suites all the way in which as much as Ritz-Carlton and St. Regis. In any case, Hyatt solely squeaked out a $28 million revenue for a similar timeline. Hilton, Marriott’s chief competitor, reported a $346 million third quarter profit late final month.
However even the momentum of profitability throughout the trade isn’t sufficient to dissuade financial realists: Layoffs and hiring freezes proceed to grip Silicon Valley and tech trade darlings like Amazon, Twitter and Lyft. Economists extensively count on a recession to grip the worldwide financial system within the coming months.
Whereas Marriott’s high executives stay extremely optimistic concerning the firm’s efficiency and outlook for 2023, they admitted Thursday that financial situations may shortly alter the corporate’s restoration momentum.
“Given quickly rising rates of interest and rising considerations a couple of doable international recession, we’re carefully monitoring shopper and macroeconomic developments,” Marriott CEO Anthony Capuano mentioned on an investor name. “There is no such thing as a doubt that the hospitality trade is impacted by financial cycles, and with transient reserving home windows averaging solely about three weeks, developments may change comparatively shortly.”
It’s among the many extra somber financial takes the corporate supplied in current months. The inventory market clearly observed, as Marriott’s inventory worth was down almost 4% Thursday afternoon regardless of the sturdy third quarter monetary displaying.
However Capuano reiterated the corporate isn’t but seeing any indicators of a slowdown in journey demand and spending on rooms at Marriott-affiliated motels.
“We’ve but to see indicators of a slowdown in international lodging demand. In reality, we have seen simply the other,” he mentioned. “Reserving developments stay very wholesome. Given sustained excessive ranges of employment, shopper developments prioritizing experiences versus items, pent-up journey demand and a excessive stage of shopper financial savings, journey spending has been extremely resilient.”
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Hovering lodge charges
Larger lodge charges proceed to gasoline Marriott’s efficiency restoration. World occupancy charges for the corporate averaged 69% within the third quarter, however day by day charges had been 10% greater than throughout the identical interval in 2019. It will get much more spectacular if you break issues aside by area or sort of buyer.
Common group reserving charges for stays this yr had been 17% greater than the identical type of bookings made in 2019.
Within the U.S. and Canada, common day by day charges had been 15% costlier from July via September of this yr than the identical time in 2019.
Total efficiency throughout all kinds of motels, from luxurious to prolonged keep, and in all kinds of markets, from small cities to the most important U.S. and Canadian cities, was “extra absolutely recovered” for the primary time, mentioned Leeny Oberg, Marriott’s chief monetary officer. Marriott’s management workforce additionally reported greater than full recoveries for motels in Europe, the Center East, Africa, the Caribbean and Latin America.
Asia Pacific, led by China, continues to lag, however there’s optimism surrounding the reopening of Japan.
“There clearly continues to be a good quantity of uncertainty concerning the doable recession given the Fed’s continued rise in charges and financial headwinds that do proceed to develop,” Oberg mentioned. “However I believe we have some issues in our enterprise that basically do lead us to confidence about 2023, though we aren’t predicting, per se, a recession.”
Tailwinds from loyalty and bank cards
Marriott’s high leaders is perhaps hedging towards the potential of an financial slowdown subsequent yr, however they remained bullish on the corporate’s Bonvoy loyalty program in addition to bank card spending.
Marriott Bonvoy had grown to 173 million members by the top of the third quarter, and the corporate is working to maintain these members pleased with choices to guide instantly. The long-delayed Ritz-Carlton Yacht lastly hit the seas final month, and Capuano mentioned roughly two-thirds of reservations are coming via direct bookings. Bonvoy members comprise greater than half the bookings of the Ritz-Carlton Yacht.
There was additionally a report stage of latest Marriott co-branded credit score cardholders getting into the system. Marriott introduced two mid-tier credit cards in September, the Marriott Bonvoy Bevy American Categorical Card and the Marriott Bonvoy Boundless Bountiful Card from Chase — “which ought to assist drive sturdy progress going ahead,” Capuano added
Marriott’s bank card charges are up 20% up to now this yr from a yr in the past. That type of development gives a pleasant security internet amid all of the chatter of financial uncertainty.
“Clearly, if you take a look at in comparison with [2019], these bank card charges have grown meaningfully greater than hotel-related charges due to COVID and the regular progress in cardholders and bank card spend every yr as we have moved via 2019,” Oberg mentioned. “We’re taking a look at progress of non-[hotel performance] charges in 2023, each from credit score cardholders in addition to spend.”
Marriott’s pending dive into affordability
Capuano supplied somewhat added context on Marriott’s current announcement it was working to amass Mexico-based City Express, an inexpensive mixture of 152 “mid-scale” motels throughout the Caribbean and Latin America. The deal wouldn’t solely make Marriott the biggest lodge firm within the area, however it might additionally give the corporate a lower-priced entry level for vacationers trying to guide a lodge keep.
“We’re fairly bullish on the reasonably priced mid-scale area, which has significant progress potential,” Capuano mentioned.
He additionally confirmed the corporate is exploring the potential to take the Metropolis Categorical model to different components of the world, much like the way it made the extra European-focused AC Motels a world model after first taking a stake in it in 2011.
“As with many acquisitions that we have accomplished through the years, as soon as we shut, as soon as we begin rolling in [the Caribbean and Latin America], we are going to, in fact, consider the applicability of this platform as as to whether it is sensible to roll out some or the entire sub-brands beneath the Metropolis Categorical banner into different markets all over the world,” Capuano mentioned.
