Positive Q2 positions Marriott for further growth, profits

For the second quarter of 2022, Marriott International reported operating income of $950 million, nearly double the $486 million reported the same quarter a year ago. “There's no doubt that the recovery has accelerated faster than we had originally anticipated,” CFO Leeny Oberg said during a call with investors on Tuesday morning.

Reported net income totaled $678 million in the 2022 second quarter, compared to 2021 second quarter reported net income of $422 million. Adjusted operating income in the 2022 second quarter totaled $857 million, compared to 2021 second quarter adjusted operating income of $406 million.

“By the last month of the quarter, [revenue per available room] in all regions outside of Asia-Pacific had more than fully recovered to pre-pandemic levels, leading to June global RevPAR 1 percent above 2019,” CEO Anthony Capuano said during the call. In comparison, RevPAR was down nearly 30 percent in Q1. RevPAR in the U.S. & Canada increased 66.1 percent (a 66 percent increase using actual dollars, and 3 percent up compared to 2019), and RevPAR in international markets increased 87.8 percent (an 80.4 percent increase using actual dollars). 

Worldwide occupancy for the month rose to 70.6 percent, five percentage points below pre-pandemic levels, while global average daily rate was 8 percent over the same month in 2019, Capuano said. 

Capuano also noted that among customer segments, group RevPAR had “the most meaningful acceleration” in the quarter, down 1 percent to 2019 in June, compared to down nearly 30 percent in the first quarter. “We have not seen signs of leisure travel abating, with leisure room nights in the [U.S. and Canada] more than 15 percent higher than second quarter 2019, and ADR meaningfully outpacing pre-pandemic levels. Europe also experienced notably strong RevPAR recovery, in large part due to the return of international visitors, with June RevPAR exceeding 2019.”

Adjusted earnings before interest, taxes, depreciation and amortization totaled $1.019 billion in the 2022 second quarter, compared to second quarter 2021 adjusted EBITDA of $558 million. 

Growing the Portfolio

Marriott’s signing activity over the three months set a second-quarter record. The company signed 23,000 rooms around the world in Q2, nearly 30 percent of which were conversions from competitor brands, according to Capuano. Conversions make up roughly 25 percent of room additions in the quarter, with 4,400 rooms added.

The company added 97 properties with 16,917 rooms to its lodging portfolio worldwide during Q2, including approximately 9,200 rooms in international markets. Twenty-five properties with 3,661 rooms exited the system during the quarter. At quarter end, Marriott’s global lodging system totaled more than 8,100 properties, with over 1,500,000 rooms.

At quarter end, the company’s worldwide development pipeline totaled 2,942 properties with more than 495,000 rooms, including 1,014 properties with approximately 203,300 rooms, or 41 percent of the pipeline, under construction and 197 properties with roughly 27,400 rooms approved for development, but not yet subject to signed contracts.

During the call, Capuano noted that construction timelines in the U.S. are currently just over two years for a limited-service hotel and longer for full-service. Capuano told investors that he had recently spent time talking with the Biden Administration about assistance to resolve some of the supply chain issues that continue to slow some of the construction starts. 

H2 2022 (And Beyond)

“Looking ahead, I'm very optimistic about our future,” Oberg said. The company expects global RevPAR recovery to continue each quarter through the end of the year, driven by improving occupancy and ADR compared to 2019 in both the U.S. and Canada. “On a worldwide basis compared to 2019, we could see RevPAR flat to up 3 percent in the third quarter and down six to down 3 percent for the full year.” Compared to 2021, global RevPAR in the third quarter could be up in the mid 30 percent range, Oberg said, and for the full year it could be up around 50 percent. The company also expects adjusted EBITDA of $3.7 to $3.8 billion above the prior full-year peak in 2019. 

While Capuano said it was “a little early” to talk about how the company expected to fare over the winter holidays, he said hotels are reporting “double digit increases in ADR” for Labor Day weekend compared to pre-pandemic.

Capuano also said that gross additions to the pipeline for the full year are still anticipated to approach 5 percent.