Marriott pleased with 'significant' progress during Q3

Marriott Headquarters
Marriott’s reported operating income totaled $252 million in the third quarter. Photo credit: Bernstein Companies

Marriott International reported its third-quarter 2020 results, which were “dramatically” impacted by the COVID-19 global pandemic and efforts to contain it.

“While COVID-19 is still significantly impacting our business, our results for the third quarter showed continued improvement in demand trends around the world,” said Arne Sorenson, president and CEO of Marriott International. “Worldwide [revenue per available room] declined 66 percent in the quarter, a nearly 19 percentage point improvement from the decline in the second quarter. Greater China continues to lead the recovery and demonstrates the resiliency of travel demand, with third-quarter occupancy of 61 percent and RevPAR recovering to down 26 percent, a 35 percentage point improvement compared to the decline in the second quarter."

Third-quarter occupancy at hotels in North America reached 37 percent, nearly double occupancy in the second quarter, primarily driven by leisure, drive-to demand, with business and group recovering more slowly, according to Sorenson. Globally, 94 percent of the company's hotels are now open. 

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“The Asia Pacific region led deal signings in the third quarter, accounting for more than half of all rooms signed globally, with the vast majority of those rooms in Greater China. During the third quarter, we added more than 19,000 rooms to our system, nearly 70 percent more than were added in the second quarter, achieving 5 percent gross rooms growth in the last 12 months," according to Sorenson. "At quarter-end, approximately 228,000 rooms of our more than 496,000-room pipeline were under construction. Progress on projects under construction largely continues apace around the world, although we have designated a slightly higher number of projects on hold given macroeconomic uncertainty and discussions with our owners." 

For full-year 2020, Marriott expects 2.5 to 3 percent net rooms growth, including terminations of 1.5 to 2 percent. Assuming progress is made in containing COVID-19, it expects gross room additions in 2021 to accelerate compared to its expectations for 2020.

“Although the timing of a full recovery remains unpredictable, we are pleased with the significant progress we have made in restructuring and repositioning the company to successfully manage through these challenging times. Financially, we have strengthened our liquidity position, realigned our cost structure and minimized our cash burn," Sorenson said. "We have also remained keenly focused on working with our hotel owners and franchisees to significantly reduce hotel level costs and help preserve cash in this extremely low revenue environment. Operationally, we have elevated our health and cleanliness standards to establish trust and credibility with travelers and to enhance the safety and wellbeing of our associates and guests.

“We still have a long road ahead, but this crisis will come to an end, and I believe travel will rebound quickly.”

Third-Quarter 2020 Results

Marriott’s reported operating income totaled $252 million in the third quarter, compared to 2019 third quarter reported operating income of $607 million. Reported net income totaled $100 million in the 2020 third quarter, compared to 2019 third quarter reported net income of $387 million. Reported results in the 2020 third quarter included impairment charges of $32 million pretax ($24 million after tax), related to COVID-19.

Adjusted operating income in the 2020 third quarter totaled $147 million, compared to 2019 third quarter adjusted operating income of $734 million. Adjusted operating income in the 2020 third quarter included impairment charges of $32 million, related to COVID-19.

Third-quarter 2020 adjusted net income totaled $20 million, compared to 2019 third-quarter adjusted net income of $488 million. These 2020 third quarter adjusted results included impairment charges of $24 million after-tax, related to COVID-19. Adjusted results exclude restructuring and merger-related charges, cost reimbursement revenue, and reimbursed expenses. 

Base management and franchise fees totaled $366 million in the 2020 third quarter, compared to base management and franchise fees of $821 million in the year-ago quarter. The year-over-year decline in these fees is primarily attributable to RevPAR declines related to COVID-19 and a decrease in other non-RevPAR related franchise fees. Other non-RevPAR related franchise fees in the 2020 third quarter of $119 million were $26 million, or 18 percent, lower than the year-ago quarter, largely due to lower credit card branding fees.

Adjusted earnings before interest, taxes, depreciation, and amortization totaled $327 million in the 2020 third quarter, compared to third quarter 2019 adjusted EBITDA of $901 million. 

Development

The company added 127 new properties (19,064 rooms) to its portfolio during the quarter, including roughly 1,400 rooms converted from competitor brands and approximately 7,600 rooms in international markets. Thirty-one properties (6,066 rooms) exited the system during the quarter. At quarter-end, Marriott’s global lodging system totaled roughly 7,600 properties and timeshare resorts, with nearly 1,414,000 rooms.

At quarter-end, the company’s worldwide development pipeline totaled 2,899 properties with more than 496,000 rooms, including 1,201 properties with approximately 228,000 rooms under construction and 160 properties with roughly 25,000 rooms approved for development, but not yet subject to signed contracts.

In the third quarter, worldwide RevPAR declined 65.9 percent (a 65.9 percent decline using actual dollars). North American RevPAR declined 65.4 percent (a 65.4 percent decline using actual dollars), and international RevPAR declined 67.4 percent (a 67.3 percent decline using actual dollars).