Biggest Hotel Chain in the World is Getting Bigger

Marriott International is growing by all measures—revenue, number of rooms and franchise fees—just not as quickly as last year, all things considered, and 2020 earnings could be affected by slow-downs from coronavirus.

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Fourth quarter results released this week showed that the hotel brand continued to increase in revenue per room (RevPAR) and added 78,000 guest rooms, with another 3,050 hotels and 515,000 rooms in the pipeline. RevPAR rose 1.1 percent, with more growth outside North America (1.5 percent) than inside Mexico, the United States and Canada (1.1 percent).

During the last three months, the company reported net income of $279 million, a 12 percent decrease from the previous year, but when adjusted for depreciation, amortization and other expenses, that number went up to $517, a 4 percent increase. The adjustment included $7 million of insurance recoveries related to the Starwood data security breach disclosed in November 2018.

Arne M. Sorenson, Marriott International president and CEO, pointed to rooms growth of nearly 5 percent, higher guest satisfaction scores and RevPAR index gains in a low RevPAR growth environment as proof that the business model is working. “Our fee-driven, asset-light business model and successful asset recycling continued to generate significant excess cash, allowing us to return a total of $2.9 billion to shareholders during the year,” he said.

Focus on Loyalty

Sorenson singled out the company’s new, unified loyalty and experience program as part of the reason for the growth. “Marriott Bonvoy is driving market share at our hotels by leveraging our industry-leading distribution and powerful brand portfolio,” he said. Loyalty members accounted for 52 percent of occupied rooms in 2019, a 250-basis point increase year over year.

A Cautionary Note

Sorenson warned that impacts on Asia-Pacific properties from coronavirus restrictions could lead to flat to 2 percent RevPAR growth for the year. “I am particularly proud of our Asia Pacific team as they assist affected customers and fellow associates,” he said.

He speculated that low occupancy rates there could reduce the projected $4 billion estimate (a 5 percent increase) for total 2020 franchise fee revenues by $25 million.

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