There are about 630 million causes to have a good time at Marriott International’s headquarters this week, however even the corporate’s high executives observe how shortly the corporate’s good monetary fortune might change.
Marriott, the world’s largest lodge firm, reported a $630 million third quarter revenue Thursday and reported its general international efficiency — even with China nonetheless underneath an array of pandemic journey restrictions — had totally 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. After all, Hyatt solely squeaked out a $28 million revenue for a similar timeline. Hilton, Marriott’s chief competitor, reported a $346 million third quarter revenue late final month.
But 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 broadly count on a recession to grip the worldwide economic system within the coming months.
While Marriott’s high executives stay extremely optimistic concerning the firm’s efficiency and outlook for 2023, they admitted Thursday that financial circumstances might shortly alter the corporate’s restoration momentum.
“Given rapidly rising interest rates and growing concerns about a possible global recession, we are closely monitoring consumer and macroeconomic trends,” Marriott CEO Anthony Capuano stated on an investor name. “There is no doubt that the hospitality industry is impacted by economic cycles, and with transient booking windows averaging only about three weeks, trends could change relatively quickly.”
It is among the many extra somber financial takes the corporate supplied in current months. The inventory market clearly observed, as Marriott’s inventory value was down almost 4% Thursday afternoon regardless of the robust third quarter monetary displaying.
But Capuano reiterated the corporate isn’t but seeing any indicators of a slowdown in journey demand and spending on rooms at Marriott-affiliated lodges.
“We have yet to see signs of a slowdown in global lodging demand. In fact, we’ve seen just the opposite,” he stated. “Booking trends remain very healthy. Given sustained high levels of employment, consumer trends prioritizing experiences versus goods, pent-up travel demand and a high level of consumer savings, travel spending has been incredibly resilient.”
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Soaring lodge charges
Higher lodge charges proceed to gasoline Marriott’s efficiency restoration. Global 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 whenever you break issues aside by area or sort of buyer.
Average group reserving charges for stays this yr had been 17% greater than the identical type of bookings made in 2019.
In the U.S. and Canada, common day by day charges had been 15% dearer from July by way of September of this yr than the identical time in 2019.
Overall efficiency throughout all forms of lodges, from luxurious to prolonged keep, and in all forms of markets, from small cities to the largest U.S. and Canadian cities, was “more fully recovered” for the primary time, stated Leeny Oberg, Marriott’s chief monetary officer. Marriott’s management workforce additionally reported greater than full recoveries for lodges in Europe, the Middle East, Africa, the Caribbean and Latin America.
Asia Pacific, led by China, continues to lag, however there may be optimism surrounding the reopening of Japan.
“There obviously continues to be a fair amount of uncertainty about the possible recession given the Fed’s continued rise in rates and economic headwinds that do continue to grow,” Oberg stated. “But I think we’ve got some things in our business that really do lead us to confidence about 2023, although we are not predicting, per se, a recession.”
Tailwinds from loyalty and bank cards
Marriott’s high leaders is perhaps hedging towards the potential for 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 proud of choices to e book immediately. The long-delayed Ritz-Carlton Yacht lastly hit the seas final month, and Capuano stated roughly two-thirds of reservations are coming by way of direct bookings. Bonvoy members comprise greater than half the bookings of the Ritz-Carlton Yacht.
There was additionally a report degree of latest Marriott co-branded credit score cardholders coming into the system. Marriott introduced two mid-tier bank cards in September, the Marriott Bonvoy Bevy American Express Card and the Marriott Bonvoy Boundless Bountiful Card from Chase — “which should help drive strong growth going forward,” Capuano added
Marriott’s bank card charges are up 20% thus far this yr from a yr in the past. That type of pattern affords a pleasant security web amid all of the chatter of financial uncertainty.
“Obviously, when you look at compared to [2019], those credit card fees have grown meaningfully more than hotel-related fees because of COVID and the steady growth in cardholders and credit card spend each and every year as we’ve moved through 2019,” Oberg stated. “We are looking at growth of non-[hotel performance] fees in 2023, both from credit cardholders as well as spend.”
Marriott’s pending dive into affordability
Capuano supplied a bit added context on Marriott’s current announcement it was working to accumulate Mexico-based City Express, an reasonably priced mixture of 152 “mid-scale” lodges 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 seeking to e book a lodge keep.
“We are fairly bullish on the reasonably priced mid-scale area, which has significant progress potential,” Capuano stated.
He additionally confirmed the corporate is exploring the potential to take the City Express model to different components of the world, just like the way it made the extra European-focused AC Hotels a worldwide model after first taking a stake in it in 2011.
“As with many acquisitions that we’ve done over the years, once we close, once we start rolling in [the Caribbean and Latin America], we will, of course, evaluate the applicability of this platform as to whether it makes sense to roll out some or all of the sub-brands under the City Express banner into other markets around the world,” Capuano stated.