Marriott International released its third-quarter 2021 earnings results, with CEO Anthony Capuano expressing optimism at improvements in revenue per available room. “The strong global RevPAR recovery momentum we experienced in the spring continued into the summer thanks to sustained robust leisure demand and impressive average daily rates,” he said as he started the earnings call with investors.
Over the quarter, worldwide RevPAR increased 118.4 percent (a 120.7 percent increase using actual dollars) compared to the same quarter a year ago. RevPAR in the U.S. and Canada increased 134.7 percent (a 135.4 percent increase using actual dollars), and RevPAR in international markets increased 76.3 percent (an 81.8 percent increase using actual dollars).
At the same time, comparable systemwide constant dollar RevPAR declined 25.8 percent worldwide, 19.9 percent in the U.S. & Canada and 40.7 percent in international markets from the same quarter in 2019.
Most of the company’s regions reported quarter-over-quarter RevPAR improvement. In the U.S. and Canada, Q3 RevPAR came in 20 percent below the same quarter in 2019, compared to down 40 percent in the second quarter versus the same quarter in 2019. Hotels in Europe reported RevPAR for the quarter was down 44 percent from down 77 percent in the second quarter compared to 2019’s numbers. ADR for the region trailed third quarter 2019 levels by 5 percent.
Performance over the quarter shifted from month to month. In July, worldwide RevPAR reached a new peak since the beginning of the pandemic, Capuano said during the call, down 23 percent compared to July 2019. Occupancy in July rose to 61 percent, an increase of more than 500 basis points from June, while ADR was down less than 3 percent compared to July 2019. In August, global demand softened, which Capuano credited to the spread of the virus’ delta variant. “However, demand stabilized in September before rising once again in October,” he said.
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CFO Leeny Oberg said that worldwide occupancy rose to 58 percent in the third quarter, and ADR was only 4 percent below the third quarter of 2019. “We've been very pleased to see rate almost back at prepandemic levels in just 20 months,” she said, noting that ADR lagged behind RevPAR recovery in previous downturns, taking around five years to rebound after the 2009 recession and around four years to recover post-9/11. The company’s third-quarter rack rate in the U.S. and Canada was essentially flat with the third quarter of 2019, she added.
While leisure travel has been the dominant occupancy driver since the pandemic began, Oberg noted that travel for smaller- and medium-sized meetings has been “relatively stronger” over the quarter, which has tended to benefit secondary and tertiary markets. “However, during Q3 we saw the best improvement in our big cities in special corporate [business] that we've seen since the pandemic,” she said.
Income
Marriott’s reported operating income totaled $545 million in the quarter, compared to Q3 2020 reported operating income of $252 million. Reported net income totaled $220 million in the quarter, compared to 2020’s third quarter reported net income of $100 million.
Third-quarter reported net income totaled $220 million, compared to reported net income of $100 million in the year-ago quarter. Third quarter adjusted net income totaled $327 million, compared to third quarter 2020 adjusted net income of $44 million. Adjusted earnings before interest, taxes, depreciation and amortization totaled $683 million in the 2021 third quarter, compared to third quarter 2020 adjusted EBITDA of $327 million.
Development
The company added 114 properties with 17,456 rooms to its worldwide lodging portfolio during the 2021 third quarter, including more than 2,200 conversion rooms and approximately 8,500 rooms in international markets. At the same time, 20 properties with 5,414 rooms exited the system during the quarter. At quarter end, Marriott’s global lodging system had a total of 7,892 properties with nearly 1,464,000 rooms.
Conversions remain a “meaningful driver” of growth, Capuano said: “We've already added more conversion rooms in the first nine months of this year than we did in all of 2019, accounting for over 30 percent of all signings.” Before the pandemic, conversions made up about 15 percent of the company’s signings.
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At quarter end, the company’s worldwide development pipeline had 2,769 properties with nearly 477,000 rooms, including 1,028 properties with more than 206,000 rooms under construction and 155 properties with roughly 25,000 rooms approved for development, but not yet subject to signed contracts. More than 40 percent of Marriott’s pipeline rooms are in the luxury and upper-upscale tiers.
For the full year, Capuano said the company expects rooms growth will accelerate to around 6 percent. “With more clarity around our estimated full-year deletions, we now expect 2021 net rooms growth will be approximately 3.5 percent,” he said.
Capuano acknowledged some delays in construction starts, some of which he said have been direct results of interruption to the supply chain. “Those feel like short-term impediments,” he told investors, and noted that in both Q2 and Q3, the fallout from these delays was the lowest the company has seen in the past three years. “So that would certainly suggest that, while we may have to struggle through a bit of these short-term delays, it actually bolsters our confidence in our ability to get back to that mid-single-digit growth rate.”
Looking Ahead
While Oberg did not feel that the company could give specific RevPAR or earnings guidance, she did share optimistic sentiments “about the pace of global recovery,” especially as more markets reopen to more travelers. “We expect to make substantial progress in closing the gap to 2019 RevPAR levels by the end of next year,” she said, acknowledging “major setbacks” in pandemic recovery could still affect forecasts.
Marriott anticipates that full year 2021 investment spending will total $525 million to $550 million. Total investment spending includes capital and technology expenditures, loan advances, contract acquisition costs and other investing activities.