There are about 630 million reasons to celebrate at Marriott International headquarters this week, but even the company’s top executives are noting how quickly the company’s financial fortunes could change.
Marriott, the world’s largest hotel company, reported third-quarter profit of $630 million on Thursday and said its overall global performance – even with China still under a series of pandemic travel restrictions – had faltered. fully recovered from the pandemic.
This is obviously great news for the company behind brands that range from Residence Inn and TownePlace Suites to Ritz-Carlton and St. Regis. After all, Hyatt only made $28 million in profit for the same schedule. Hilton, Marriott’s main competitor, reported third-quarter profit of $346 million late last month.
But even the boost in profitability in the industry isn’t enough to deter economic realists: layoffs and hiring freezes continue to grip Silicon Valley and tech industry darlings like Amazon, Twitter and Lyft. Economists widely expect a recession to hit the global economy in the coming months.
While Marriott’s top executives remain highly optimistic about the company’s performance and outlook for 2023, they admitted on Thursday that economic conditions could quickly alter the company’s recovery momentum.
“Given rapidly rising interest rates and growing concerns about a potential global recession, we are closely monitoring consumer and macroeconomic trends,” Marriott CEO Anthony Capuano said on a call to the media. investors. “There is no doubt that the hospitality industry is affected by economic cycles, and with transient booking windows averaging around three weeks, trends could change quite quickly.”
It’s one of the company’s darkest economic gripes in recent months. The stock market clearly took notice, as Marriott’s stock price fell nearly 4% on Thursday afternoon despite strong third-quarter financial performance.
But Capuano reiterated that the company is not yet seeing signs of a slowdown in travel demand and room spending at Marriott-affiliated hotels.
“We have yet to see any signs of a slowdown in global accommodation demand. In fact, we have seen the exact opposite,” he said. “Booking trends remain very healthy. Sustained high levels of employment, consumer trends prioritizing experiences over goods, pent-up travel demand and high levels of consumer savings, travel spending has been incredibly resilient.
Subscribe to our daily newsletter
Soaring hotel prices
Rising hotel rates continue to fuel Marriott’s performance recovery. The company’s global occupancy rates averaged 69% in Q3, but daily rates were 10% higher than the same period in 2019. It gets even more impressive when you break things down by region. or by type of customer.
Average group booking rates for stays this year were 17% higher than the same type of bookings made in 2019.
In the United States and Canada, average daily rates were 15% more expensive from July to September this year than the same period in 2019.
Overall performance in all types of hotels, from luxury to extended stay, and in all types of markets, from small towns to the largest US and Canadian cities, was “more fully recovered” for the first time, said Leeny Oberg, CFO of Marriott. officer. Marriott’s management team also reported more than full recoveries for hotels in Europe, the Middle East, Africa, the Caribbean and Latin America.
Asia-Pacific, led by China, continues to lag, but there is optimism around Japan’s reopening.
“There obviously remains a fair amount of uncertainty about a possible recession given the Fed’s continued rate hikes and economic headwinds that continue to build,” Oberg said. “But I think we have some things in our business that really make us feel confident going into 2023, although we don’t, per se, anticipate a recession.”
The tailwinds of loyalty and credit cards
Marriott’s top executives could hedge against the possibility of an economic slowdown next year, but remained bullish on the company’s Bonvoy loyalty program as well as credit card spending.
Marriott Bonvoy had 173 million members at the end of the third quarter, and the company is working to satisfy those members with direct booking options. The long-delayed Ritz-Carlton yacht finally set sail last month, and Capuano said about two-thirds of bookings came from direct bookings. Bonvoy members represent more than half of Ritz-Carlton Yacht bookings.
There has also been a record number of new Marriott co-branded credit cardholders entering the system. Marriott launched two mid-tier credit 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 credit card fees are up 20% so far this year compared to a year ago. This kind of trend provides a nice safety net amid all the chatter of economic uncertainty.
“Obviously, when you look in relation to , these credit card fees have increased significantly more than hotel related fees due to COVID and the steady growth in cardholders and credit card spending each year as we let’s move forward in 2019,” Oberg said. “We envision a growth of non-[hotel performance] fees in 2023, both from credit card holders and from expenses.
Marriott’s impending dive into affordability
Capuano provided a bit of additional context on Marriott’s recent announcement that it was working to acquire Mexico-based City Express, an affordable mix of 152 “midscale” hotels across the Caribbean and Latin America. The deal would not only make Marriott the largest hotel company in the region, but it would also give the company a low-cost entry point for travelers looking to book a hotel stay.
“We’re quite bullish on mid-tier, moderately priced space, which has significant growth potential,” Capuano said.
He also confirmed that the company was exploring the potential to expand the City Express brand to other parts of the world, in the same way it made the more European-focused AC Hotels a global brand after y taking a stake in 2011.
“As with many acquisitions we’ve made 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 to determine whether it makes sense to roll out some or all of the sub-brands under the City Express banner in other markets around the world,” Capuano said.
#Marriott #profits #soar #trouble #corner #Points #Guy