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Marriott Sees Strong Growth in Revenue and Hotel Development in 2023
02.11.2023 - 14:57 / skift.com / Anthony Capuano / Sean Oneill / Marriott International
Marriott International‘s executives reported strong revenue growth in the third quarter on Thursday. They forecasted a steady pace of revenue expansion that would return it to its historical 10-year average after the pandemic disruption.
Revenue-per-available room, or RevPAR, is a key industry metric. In the third quarter, Marriott’s third-quarter comparable systemwide constant dollar RevPAR rose 4.3% in the U.S. and Canada and soared 21.8% in international markets compared to a year ago.
“Both occupancy and rate contributed to global RevPAR gains in the third quarter, and cross‐border travel continued to rise,” said president and CEO Anthony Capuano.
Executives said they expected the hotelier’s revenue per available room to grow between now and 2025 at a pace of between 3% and 6% a year.
“Interestingly, that growth guidance is higher than the 3-year growth rate of between 1% and 3% that Marriott gave in 2019, despite the current macroeconomic concerns,” wrote UBS analyst Robin Farley in a pre-earnings report. “But Marriott points to further revenue per available room growth due to recovery in the Asia Pacific region and lower global supply growth compared to 2019.”
“Investors may not fully embrace a RevPAR outlook with no room for recession in it,” Farley noted.
Yet data released on Wednesday for the U.S., Marriott’s most significant market, showed that America is booming economically — with no recession in sight. The Bethesda, Maryland-based company — which runs brands ranging from The Ritz-Carlton to City Express by Marriott — expected a strong quarter ahead thanks to stable trends in demand.
“We’ve got basic strong fundamentals [in U.S. and Canada], such as low supply growth,” said Kathleen Oberg, chief financial officer, during an earnings call. “We do expect another year of strong growth in corporate rate … and in our group bookings pace with both strong room growth and rate growth in the U.S. … and in luxury property performance was above 2% year-over-year.”
Generating fees from owners through management and franchise contracts is critical to Marriott’s model.
“Marriott says they have the highest global fee revenue per room at $2,745, $100 higher than Hyatt, and $350 higher than Hilton, followed by IHG and Accor,” Farley noted about company presentations.
Keeping distribution costs under control is another factor in the company’s algorithm for growth.
Marriott said 73% of its bookings come from direct channels — 31% via the property itself, 38% from its direct digital channels, and 4% from call centers), with online travel agencies accounting for another 12%, and the global distribution systems Amadeus, Sabre, and Travelport contributing the remaining 15%.
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