Marriott International’s Q4 and full-year earnings call turned into an impromptu memorial for late President and CEO Arne Sorenson, who died Monday at age 62. Both leadership from the company and investors paid tribute to Sorenson, sharing memories not just of his business acumen, but of his policy of connecting with team members and making sure people with whom he worked and collaborated felt valued.
Stephanie Linnartz, group president, consumer operations, technology and emerging businesses, and Tony Capuano, group president, global development, design and operations services, who together are sharing responsibility for overseeing the company’s day-to-day operations until the board of directors appoints a new president and CEO, commented on the company’s quarterly results.
The company’s fourth quarter 2020 results were materially impacted by the COVID-19 pandemic and efforts to contain it. Full-year worldwide revenue per available room declined 60 percent, with average occupancy of just over 35 percent compared to 73 percent for full-year 2019. The company experienced the sharpest worldwide RevPAR decline on record in April, down 90 percent year over year with 12 percent occupancy.
Occupancy and year-over-year revenue per available room changes showed steady improvement from the trough in April through the summer and into the early fall, Linnartz said during the call. “However, with spikes in COVID cases in many markets around the world, we saw the global pace of recovery flatten in the fourth quarter and in the first few weeks of 2021.”
In the fourth quarter of 2020, worldwide RevPAR declined 64.1 percent (a 63.9 percent decline using actual dollars). RevPAR in the U.S. & Canada declined 64.6 percent (a 64.6 percent decline using actual dollars), and RevPAR in international markets declined 62.7 percent (a 62.2 percent decline using actual dollars).
Marriott’s reported operating loss totaled $128 million in the 2020 fourth quarter, compared to 2019 fourth quarter reported operating income of $274 million. Reported net loss totaled $164 million in the 2020 fourth quarter, compared to 2019 fourth quarter reported net income of $279 million.
Adjusted operating income in the 2020 fourth quarter totaled $148 million, compared to 2019 fourth quarter adjusted operating income of $717 million. Adjusted operating income in the 2020 fourth quarter and the 2019 fourth quarter excluded impairment charges of $44 million and $114 million, respectively.
Fourth-quarter 2020 adjusted net income totaled $39 million, compared to 2019 fourth quarter adjusted net income of $498 million. These 2020 fourth quarter adjusted results excluded $74 million of income tax benefits due to the closure of prior years’ audits. The adjusted 2020 results also excluded impairment charges of $88 million after-tax and loss on asset sales of $4 million after-tax.
Adjusted earnings before interest, taxes, depreciation, and amortization totaled $317 million in the quarter, compared to fourth quarter 2019 adjusted EBITDA of $901 million.
Marriott’s pipeline grew in Q4 to more than 498,000 rooms as of the end of 2020, with 46 percent of those rooms under construction. Capuano said the company is seeing strong interest in conversions, as demonstrated by the recent announcement of the planned conversion of 19 all-inclusive hotels with nearly 7,000 rooms to the Marriott system in the Caribbean and Latin America region during 2021.
The company added 109 new properties with 17,780 rooms to its worldwide portfolio during the quarter, including roughly 2,600 rooms converted from competitor brands and approximately 9,000 rooms in international markets. Forty-six properties with 8,011 rooms exited the system during the quarter. At year-end, Marriott’s global lodging system totaled more than 7,600 properties and timeshare resorts with more than 1,423,000 rooms.
At year-end, the company’s worldwide development pipeline totaled 2,881 properties with more than 498,000 rooms, including 1,187 properties with more than 229,000 rooms under construction and 119 properties with roughly 20,000 rooms approved for development, but not yet subject to signed contracts.
Looking ahead, the team expects gross rooms growth could accelerate approximately 6 percent in 2021. “While we have seen some delayed construction starts and could continue to see some delays in openings, 46 percent of our pipeline is already under construction,” said Capuano. The team also expects to see a “meaningful impact” from conversions this year. “If you look at the fourth quarter of 2020, about 21 percent of our signings were conversions,” Capuano said. “And that was the highest percentage contribution from conversions that we had seen since the first quarter of 2019.”
Recovery trajectories to date vary greatly by region, Linnartz said. Mainland China, where there generally has been a sense that the virus is under control, has led the recovery and “strongly exemplifies” the resiliency of demand, according to the company. Occupancy in this market reached 60 percent in July and remained above that level through the end of the fourth quarter. RevPAR in mainland China was only down 12 percent year over year. “We saw additional proof points of the ability for demand to recover quickly in other areas as well during the fourth quarter, including the Maldives and Dubai,” Linnartz said. “Occupancy in both markets jumped to over 60 percent in December after their governments eased travel restrictions.”
While vaccines are slowly rolling out, the pace is too uncertain to be able to predict when occupancy will move meaningfully higher, Linnartz added. “But as the year progresses, assuming wider distribution of effective vaccines, we are optimistic that the pace of recovery will pick up speed and accelerate throughout the year in the U.S. and Canada,” she said. The team has been encouraged by seeing some small “green shoots” of increased demand for corporate and leisure transient bookings. Group lead volume—while still down year over year—transient booking pace and visits to the company’s direct booking site have been improving recently, she added. “Occupancy over President’s Day weekend was the strongest we have had for a long weekend since the beginning of the pandemic,” she added.
Currently, more than 94 percent of Marriott hotels are open worldwide.