With 10% revenue per available room growth for the second quarter in a row, group business is once again Marriott International's top-performing segment.
Speaking during the company's third-quarter earnings call, Marriott President and CEO Tony Capuano said group performance in the third quarter benefited from "robust increases” in both room nights and average daily rate.
At the end of September, global group hotel revenue was pacing roughly flat for the fourth quarter, due primarily to the effects of the U.S. presidential election, but it is up 8% for the full year, he said. Group revenue for 2025 is pacing up 7% by the end of the year with a 3% increase in room nights and 4% increase in ADR.
Globally, business transient had another quarter of growth as third-quarter RevPAR increased 2%, he said. Leisure transient RevPAR was flat compared to a year ago, but it was still above 2019 levels.
Overall, Marriott’s global RevPAR increased 3% during the third quarter, due to 2.5% rate growth, he said.
Hotel RevPAR grew by more than 2% in the U.S. and Canada due to ADR growth, Capuano said. RevPAR growth in luxury and full-service hotels outperformed select-service properties.
“Weekdays surpassed weekends, reflecting strength in group and business transient compared to leisure,” he said.
RevPAR grew 5% internationally, driven by 9% RevPAR growth in Europe, the Middle East and Africa and the Asia-Pacific excluding Greater China, he said. EMEA benefited from the Paris Olympics as well as special events. Strength in the APAC region was broad-based, benefiting from international travelers, especially those from Greater China.
“Cross-border travel on a global basis is now above pre-pandemic levels at just over 20% of total room nights,” he said.
Greater China hotel RevPAR declined 8% in the third quarter as macroeconomic pressures led to weak domestic leisure demand and restricted pricing, he said. It also contended with severe weather and higher-end guests traveling to other regions.
For the fourth quarter, Marriott anticipates revenue per available room growth will be higher in international markets than in the U.S. and Canada, which should generally be in line with the third quarter, said Leeny Oberg, chief financial officer and executive vice president of development. Strong leisure and business travel trends in October will offset weakness in November due to the U.S. presidential election, which is forecast to have a negative 300-basis-point impact on RevPAR in November and 100 for the quarter.
Marriott expects Greater China will post negative RevPAR during the quarter and full year due to current weak demand and pricing periods in the region, she said.
Marriott expects full-year general and administrative expenses may rise 4% to 5% year over year, Oberg said. During the quarter, the company saw general, administration and other expenses total $276 million, up from $239 million in 2023, largely due to a $19 million operating guarantee reserve for a U.S. hotel negotiated in connection with the 2016 acquisition of Starwood Hotels & Resorts as well as a $11 million litigation reserve.
Marriott forecasts full-year investment spending of $1.1 billion to $1.2 billion, as this year the company will have higher spending on technology for its multiyear transformation of its property management, reservations and loyalty systems.
“The rollout of these platforms is slated to begin later next year, and we look forward to the many benefits that should accrue from elevating three major tech platforms,” she said.
Finding efficiencies
Capuano said a company-wide evolution is in the works to improve effectiveness and efficiency, but he didn't offer specifics about what those efforts would entail.
“We want to further empower our teams closest to our markets, guests, owners and franchisees to operate even more nimbly,” he said.
Marriott expects these efforts will yield $80 million to $90 million of annual pre-tax general and administration cost reductions starting in 2025, Oberg said. These should result in cost savings to hotel owners and franchisees as well.
The initiative is anticipated to result in about $100 million of charges, primarily in the fourth quarter of this year, she said. Those will be recorded in restricting and merger-related charges and in reimbursed expenses.
The reason for this efficiency process is that as Marriott operates from a position of strength, it’s time to take a holistic view of the organization, Capuano said. It has more than doubled in size over the past decade, having entered more than 60 new countries to now operate in 142.
“So, it felt like the right time to really look across the enterprise and figure out what adjustments we can make to enhance and improve our efficiency,” he said.
Pipeline growth
Through the first three quarters of 2024, Marriott signed more than 95,000 rooms, more than half of which were outside of the U.S. and Canada, according to the earnings report. More than 40% of its signed rooms are conversions.
The pipeline stands at a record 585,000 rooms in 3,802 properties as of the end of September. This includes 232 properties with about 34,000 rooms approved for development but not yet subject to signed contracts. More than 220,000 rooms in the pipeline are under construction.
The company expects full-year 2024 net rooms growth of about 6.5%.
During the quarter, Marriott added approximately 16,000 net rooms. By the end of the quarter, Marriott’s global portfolio of open hotels included nearly 9,100 properties with about 1.675 million rooms.
Marriott announced in August its multi-unit conversion deal with Sonder for 9,000 existing rooms and a few thousand more in the pipeline, Capuano said. The deal grew Marriott’s portfolio of longer-stay accommodations in key global markets, including New York and Dubai.
In October, Marriott announced its midscale brand for the U.S. and Canada would be City Express by Marriott, an expansion of the brand portfolio it purchased in 2022.
Capuano indicated the company expects to have signed agreements "and even a few openings" over the next few months for City Express by Marriott.
By the numbers
For the quarter, Marriott reported net income of $584 million, compared to $752 million last year. Its adjusted net income was $638 million, up from $634 million a year ago.
Adjusted earnings before interest, taxes, depreciation and amortization came to nearly $1.23 million in the quarter, up from $1.14 million the year before.
Total revenue amounted to $6.255 billion in the quarter, compared to $5.928 billion in the third quarter of 2023.
Marriott reported total debt of $13.6 billion by the end of the quarter. Its cash and equivalents were $400 million. By comparison, the company ended 2023 with $11.9 billion in debt and $300 million in cash and equivalents.
Year to date through the end of the quarter, Marriott repurchased 14.2 million shares for $3.4 billion.
As of press time, Marriott's stock was trading at $254.73 a share, up 14.82% year to date. The NASDAQ Composite was up 23.81% for the same period.