Marriott International released its fourth-quarter and full-year earnings with some positive numbers for the end of 2021 and cautious optimism for 2022.
CEO Tony Capuano started the call with investors recognizing the one-year anniversary of late CEO’s Arne Sorenson’s death, recognizing the impact his predecessor had on the company and the industry at large.
Turning to the issue at hand, Capuano said the company finished the year “on a real high note,” with the omicron coronavirus variant having a “limited impact” on results in the fourth quarter. For example, in December, Marriott’s global average daily rate was 3 percent above 2019 levels and occupancy for the month gained further ground compared to December 2019, driving global revenue per available room to an 11 percent decline versus 2019. “This was a 53 percentage point improvement from the RevPAR decline in January of 2021,” Capuano said.
In the fourth quarter, worldwide RevPAR increased 124.5 percent (a 124.9 percent increase using actual dollars) compared to the 2020 fourth quarter. Global RevPAR was 19 percent lower than prepandemic levels, and global occupancy for the quarter was 58 percent, 12 percentage points below 2019. ADR was 2 percent below 2019 levels.
RevPAR in the U.S. and Canada declined 15 percent compared to 2019 but increased 143.6 percent (a 143.9 percent increase using actual dollars), and RevPAR in international markets increased 83.3 percent (an 84 percent increase using actual dollars).
Income and Expenses
Marriott’s reported operating income totaled $635 million in the 2021 fourth quarter, compared to the 2020 fourth quarter reported operating loss of $128 million. Reported net income totaled $468 million in the 2021 fourth quarter, compared to 2020 fourth quarter reported net loss of $164 million.
Adjusted operating income in the 2021 fourth quarter totaled $578 million, compared to 2020 fourth quarter adjusted operating income of $148 million. Adjusted operating income in the 2020 fourth quarter excluded impairment charges of $44 million.
Fourth-quarter 2021 adjusted net income totaled $430 million, compared to 2020 fourth quarter adjusted net income of $39 million.
Adjusted earnings before interest, taxes, depreciation, and amortization totaled $741 million in the 2021 fourth quarter, compared to fourth quarter 2020 adjusted EBITDA of $317 million.
Development
Despite preconstruction and construction delays, labor shortages and supply chain issues, Marriott added a record 86,000 gross rooms in 517 properties, leading to 6.1 percent gross rooms growth for the year. “Our global net rooms growth was 3.9 percent—above our previous expectation, given deletions were toward the low end of those expectations,” Capuano said. “Our deletion rate for 2021 was 1.2 percent, excluding the exit of 88 Service Properties Trust hotels.” In 2021, around 15 percent of all global new-build rooms opened under Marriott’s brands, compared to the company’s year-end room share of 7 percent.
During the fourth quarter, the company added 120 properties with 20,440 rooms to its worldwide portfolio, including more than 3,500 conversion rooms and approximately 10,000 rooms in international markets. Twenty-three properties (4,955 rooms) exited the system during the quarter.
At year end, Marriott’s global lodging system had 7,989 properties with more than 1,479,000 rooms, and its worldwide development pipeline had 2,831 properties with roughly 485,000 rooms, including 1,008 properties with more than 202,000 rooms under construction and 98 properties with approximately 19,000 rooms approved for development, but not yet subject to signed contracts.
Luxury projects account for 10 percent of the pipeline, while conversions were 21 percent of room additions and 27 percent of signings.
Looking Ahead
While CFO Leeny Oberg noted that the industry is still facing “too much uncertainty and volatility” to give specific RevPAR or earnings guidance, Marriott anticipates that full-year 2022 investment spending will total $600 million to $700 million. Total investment spending includes capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities.
For 2022, Capuano said the company expects gross rooms growth to approach 5 percent and deletions of 1 to 1.5 percent, leading to anticipated net rooms growth of 3.5 percent to 4 percent. “While signing activity’s been picking up nicely, 2022 gross room additions are expected to be impacted by the diminished construction starts the industry experienced throughout the pandemic, particularly here in the U.S.,” he said.
Oberg noted that construction for a limited-service hotel takes approximately two years, while a full-service project takes longer. “So as you start to think about 2020 and recognize that as you get into Q3 of 2020, we were in the depths of the pandemic and starting to really see the impact on construction starts,” she said. “That will start to have an impact as you go into 2022.”
And while omicron did not have a substantial effect on the Q4 and full-year 2021 numbers, it did impact global group and business transient demand in January—“historically the lowest occupancy month of the year,” she said. “Global RevPAR for the month declined 31 percent compared to January of 2019, primarily due to lower occupancy as rate was just 4 percent below 2019.”
The company expects to see the recovery pace improve in February and March, and Oberg noted that weekly bookings across customer segments have returned to pre-omicron levels. “However, with some countries reinstituting strict travel restrictions earlier this year, we could see first quarter 2022 RevPAR compared to 2019 levels,” she cautioned. “We then expect significant forward progression in the global recovery each quarter through the end of the year.”