Marriott International reported second quarter 2024 results with net rooms up 6 percent year-over-year and a worldwide RevPAR growth of 4.9 percent. Group business was a "stand out" in the quarter, according to Marriott CEO and President Anthony Capuano, with group RevPAR rising nearly 10 percent year over year, with both rate and occupancy increasing in the mid-single digits.
“Within the business transient segment, demand from small- and medium-sized corporates, which now account for nearly 55 percent of business transient room nights, has grown significantly over the last few years,” Capuano said.
Marriott reported growth in all regions of its business except China, as well as a lower year-end revenue prediction due to slower performance in China and the U.S.
International RevPAR increased more than 7 percent, with Asia Pacific, excluding China, leading the way, posting a 13 percent RevPAR increase from the year-ago quarter. In the U.S. & Canada, second quarter RevPAR grew 3.9 percent, with all customer segments growing versus the prior year quarter.
The company added roughly 15,500 net rooms during the quarter. At the end of the quarter, Marriott’s global system totaled nearly 9,000 properties, with approximately 1,659,000 rooms.
Conversions, including multi-unit opportunities, remain a significant driver of growth in Marriott’s system, Capuano said. During the quarter, conversions represented 37 percent of its openings and 32 percent of signings.
“This conversion activity has been broad-based, with hotels converting into 23 different Marriott brands over the last 12 months,” he said.
While below 2019 levels, Marriott is pleased with the continued upward trend in monthly construction starts, Capuano said. During the quarter, construction starts in the U.S. and Canada rose 40 percent year over year.
Marriott signed three marquee luxury conversion deals in the U.S.: the Resort at Pelican Hill in Newport Beach, Calif., the Luxury Collection hotel in Manhattan, Midtown and the Turtle Bay Resort in Hawaii, which joined the Ritz Carlton brand, Capuano said.
"Those deals were signed this year and opened this year," said Leeny Oberg, CFO and EVP of development. "So from that perspective, we do continue to feel really good about the demand for the brand."
At the end of the quarter, the company’s worldwide development pipeline totaled 3,509 properties with more than 559,000 rooms, including 208 properties with roughly 33,000 rooms approved for development, but not yet subject to signed contracts. The quarter-end pipeline included 1,127 properties with over 209,000 rooms under construction. Fifty-seven percent of rooms in the quarter-end pipeline are in international markets.
“Owner preference for our brands remains strong," Capuano said. "We signed nearly 31,000 rooms in the quarter, 75 percent of which were in international markets. Our momentum around conversions continued, accounting for 37 percent of room additions in the quarter. We continue to expand our industry-leading global portfolio, and our expectation for net rooms growth remains at 5.5 to 6 percent for full year 2024."
Marriott’s reported operating income totaled $1.195 billion in the second quarter, compared to $1.096 billion a year ago. Reported diluted earnings per share totaled $2.69 in the quarter, compared to reported diluted EPS of $2.38 in the year-ago quarter.
Marriott’s updated outlook includes a narrowing of the RevPAR growth range for full year 2024 to 3 percent to 4 percent versus 3 percent to 5 percent previously, primarily as a result of a weaker operating environment in Greater China, as well as marginally softer expectations in the U.S. and Canada.
Base management and franchise fees totaled $1.148 billion in the 2024 second quarter, a 9 percent increase compared to base management and franchise fees of $1.057 million in the year-ago quarter. The increase is primarily attributable to RevPAR increases and unit growth. Non-RevPAR-related franchise fees in the 2024 second quarter totaled $234 million, compared to $206 million in the year-ago quarter. The increase was largely driven by a 10 percent increase in co-branded credit card fees, as well as $13 million of higher residential branding fees.
Incentive management fees totaled $195 million in the 2024 second quarter, compared to $193 million in the 2023 second quarter, and were impacted by weaker results in Greater China, as well as unfavorable foreign exchange. Managed hotels in international markets contributed more than 60 percent of the incentive fees earned in the quarter.
Owned, leased and other revenue, net of direct expenses, totaled $99 million in the 2024 second quarter, compared to $103 million in the year-ago quarter. General, administrative and other expenses for the 2024 second quarter totaled $248 million, compared to $240 million in the year-ago quarter. Interest expense, net, totaled $164 million in the 2024 second quarter, compared to $141 million in the year-ago quarter. The increase was largely due to higher interest expense associated with higher debt balances.