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Marriott reports RevPAR gains, reflects on coronavirus

Despite a tough revenue per available room environment, Marriott International reported growth of greater than 1 percent for both full-year and Q4 2019.

“We are pleased with our solid performance in 2019, finishing the year on a high note,” Arne Sorenson, president/CEO of Marriott International, said in a call with investors. “In the fourth quarter, we continued to add to our RevPAR index gains, increased hotel profit margins, recycled a meaningful amount of capital and signed a significant number of new hotel deals.”

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For full-year 2019, Marriott saw comparable systemwide constant dollar RevPAR rise 1.3 percent worldwide, with 2.2 percent growth outside of North America and a 1 percent increase in North America. Looking just at Q4, the metric rose 1.1 percent year-over-year worldwide, 1.5 percent outside of North America and 0.9 percent in North America.

Coronavirus Impact

Due to uncertainty regarding the duration and extent of the COVID-19 outbreak, Marriott said it could not fully estimate the financial impact the virus may have. It did, however, note that that assuming the current low occupancy rates in the Asia Pacific region continue with no meaningful impact outside the region, it could earn roughly $25 million in lower fee revenue per month compared to its 2020 base case outlook. In light of recent news about the virus spreading in South Korea and Italy, Sorenson admitted this number may not fully capture the virus’ potential impact.

“I think when all is said and done, we would have to characterize our $25 million-a-month run rate as being probably a bit light because we’re going to see some impact in Europe, we’re going to see some impact in other markets around the world,” said Sorenson.

According to Sorenson, Marriott had 375 properties with roughly 122,000 rooms across Greater China at the end of 2019, representing 9 percent of its total global rooms. Of these, around 90 currently are closed.

For February, the president/CEO reported Marriott had seen RevPAR decline almost 90 percent year over year in Greater China. For the Asia Pacific region outside of China, RevPAR declined 25 percent YOY in February. Looking at Asia Pacific overall, RevPAR was down 50 percent for the month.

Sorenson said outbound travelers from China in 2019 made up less than 1 percent of roomnights in Marriott’s system outside of Asia Pacific and around half of 1 percent of roomnights in North America. “To date, apart from a handful of citywide event cancellations, we have not seen a significant impact on overall demand outside of the Asia Pacific region, though the situation obviously remains fluid,” he said.

“We know one thing with confidence: This will pass, and when it does, the impact to our business will quickly fade,” added Sorenson.

By the Numbers

Marriott’s adjusted earnings before interest, taxes, depreciation and amortization totaled $901 million in the fourth quarter, a 4 percent increase compared to its Q4 2018 EBITDA.

In Q4 2019, the company experienced YOY decreases in reported operating income ($422 million to $274 million), reported net income ($317 million to $279 million) and adjusted operating income ($680 million to $603 million). Adjusted net income rose from $497 million to $517 million.

Base management and franchise fees rose 8 percent YOY to $799 million in Q4 2019. Marriott attributed the increase to rooms growth, RevPAR growth and higher credit card branding fees. Q4 incentive management fees increased 5 percent YOY, largely reflecting new units and higher net house profits at managed hotels in North America and Europe and despite lower net house profits in Hong Kong.

System Growth

Marriott added more than 78,000 rooms globally during 2019, including 14,300 rooms converted from competitor brands and approximately 34,000 rooms in international markets. At year end, its worldwide development pipeline totaled nearly 3,050 hotels and approximately 515,000 rooms, including roughly 23,000 rooms approved but not subject to signed contracts and more than 220,000 rooms under construction.

In Q4 2019, Marriott added 173 properties with 25,399 rooms to its worldwide portfolio. At year end, its total lodging system totaled more than 7,300 properties and timeshare resorts, with roughly 1,380,000 rooms.

2020 Outlook

As a consequence of the uncertainty surrounding COVID-19, Marriott did not factor the virus into its forecast for the year. For Q1 2020, Marriott estimated comparable systemwide RevPAR will increase 1 to 2 percent on a constant dollar basis worldwide and in North America. For full-year 2020, it estimated the metric will be flat to up 2 percent worldwide, with growth in North America around the middle of that range.

The company additionally predicted its adjusted EBITDA would total $853 million to $867 million in Q1, a 4 to 6 percent increase. For the full year, it forecasted adjusted EBITDA would come in at $3.7 billion to $3.8 billion, a 3 to 6 percent increase.

Sorenson Offers Personal Update

While on the call with investors, Sorenson, who was diagnosed with stage 2 pancreatic cancer last spring, offered an update on his health.

“On a personal note, I had surgery in November and the doctors were pleased with how it went,” he said. “As part of my treatment plan, I'm undergoing a few months of post-surgery chemotherapy and while I am now fashionably bald, I feel really good.”