Group bookings at Marriott International hotels showed the most meaningful improvement last year and are already pacing 20% ahead so far in 2023, according to Marriott President and CEO Tony Capuano.
During the company’s fourth-quarter and full-year 2022 earnings call, Capuano said the improved pace of group bookings for 2023 comes with room night and rate gains for each quarter.
In the U.S. and Canada, revenue from group business increased 10% in the fourth quarter, compared to the same quarter in 2019. Through the full year, roughly half of the group room nights were booked in-the-year, for-the-year compared to one third in 2019.
“Given strong lead generation and increased rate quotes, especially for in-the-year, for-the-year bookings, we expect group revenues this year to strengthen further,” Capuano said.
Hotel demand from business travelers, however, has still not fully recovered to pre-pandemic levels. During the fourth quarter of 2022, midweek occupancy — an indicator of business demand — was still down by mid-single-digit percentage points compared to 2019.
Business travel also is changing. The average length of a business trip in the U.S. has increased by more than 20% compared to 2019. Marriott reported that in the fourth quarter occupancy on shoulder nights — Sunday and Thursday — and weekend nights was down in the low single digits, which could include some of that extended business travel.
In the U.S. and Canada, day-of-the-week trends point to the continued blending of business and leisure trips.
Indicating strengthening business travel demand, Marriott has negotiated special corporate rate increases in the high single digits for 2023 after holding rates steady for the past two years, Capuano said.
Overall, 2022 was a strong year for Marriott, Capuano said. The company's hotel portfolio recovered revenue per available room to pre-pandemic levels in June, and exceeded 2019 RevPAR by 7% in December and 5% in the fourth quarter.
Global hotel occupancy and average daily rate comparisons to 2019 also improved sequentially each quarter, with Marriott's hotels in every region of the world except China more than fully recovered from the pandemic.
Leisure travel demand remained robust in the fourth quarter, with Marriott hotels reporting that room bookings from this segment were up 7% compared to 2019 and rates were up 22% over the same period.
Increasing cross-border travel also helped spur overall demand growth during the fourth quarter, Capuano said.
“We believe there’s still further upside for 2023, especially now that China’s borders have reopened,” he said. “Guests traveling outside their home country accounted for 16% of transient room nights globally in the 2022 fourth quarter, 1 percentage point lower than 2019.”
Hotel Pipeline
By the end of 2022, Marriott's worldwide development pipeline included more than 3,000 hotels with more than 496,000 rooms, according to the company's earnings release. Of those, approximately 22,300 rooms have been approved but are not yet signed in contracts. Roughly 199,000 rooms in the pipeline were in the construction phase by the end of the year.
The financing environment for new projects and hotel sales remains challenging, especially in the U.S. given higher interest rates and uncertainty over a potential downturn, Capuano said. However, conditions in the supply chain, construction costs and the availability of labor have improved. Strong global operating trends have helped improve development sentiment in 2022, he said.
Marriott’s development team signed franchise and management agreements for nearly 108,000 rooms in 2022. Upon closing, Marriott’s acquisition of the City Express brand portfolio is expected to add about 17,000 rooms to its midscale offering.
“We're excited about the opportunity to expand in this segment in the Caribbean and Latin America … as well as in other locations around the world,” he said.
Marriott is also fielding a lot of interest from owners and developers in its serviced-apartment brand, Apartments by Marriott Bonvoy, which the company announced in November, Capuano said. The brand standard is one- to three-bedroom units in the upper-upscale and luxury segments.
Momentum for hotel conversions, including multi-property opportunities, continues to be strong, Capuano said, adding that Marriott has a wide range of conversion-friendly brands. Conversions represented nearly 20% of room signings and 27% of room additions in 2022.
“The meaningful top- and bottom-line benefits associated with being part of our portfolio make these brands very attractive to owners,” he said.
Overall, Marriott added 394 properties last year, representing more than 65,000 rooms, growing its system by 4.4% on a gross basis and 3.1% net year over year. Excluding the impact of the company’s exit from Russia, net room growth last year was 3.6%.
For 2023, Marriott forecasts gross rooms growth of about 5.5%, including an anticipated 1-percentage-point increase from the addition of the City Express rooms, Capuano said. It assumes deletions of about 1% to 1.5%, resulting in net rooms growth of 4.5%.
By the Numbers
For the fourth quarter, Marriott reported RevPAR increased 28.8% worldwide, 23.6% in the U.S. and Canada, and by 45.1% in international markets compared to 2021, according to the earnings release.
Compared to the fourth quarter of 2019, RevPAR grew by 4.6% worldwide, 5.2% in the U.S. and Canada, and by 3.4% in international markets.
The company reported net income of $673 million in the fourth quarter, up from $468 million a year ago. Adjusted earnings before interest, taxes, depreciation and amortization amounted to just over $1 billion in the quarter, up from $741 million in 2021.
For full-year 2022, the company reported RevPAR grew year over year by 51% worldwide, by 46.5% in the U.S., and Canada and by 55.5% in international markets.
Compared to 2019, full-year RevPAR was down 4% worldwide, down 0.8% in the U.S. and Canada, and down 11.9% in international markets.
Marriott reported net income of $2.3 billion for full-year 2022, up from nearly $1.1 billion in 2021. Adjusted EBITDA totaled more than $3.8 billion, a 69% increase over 2021.
Marriott projects worldwide RevPAR growth of 30% to 32% for the first quarter of 2023, and 6% to 11% growth for the full year. Gross fee revenues for the full year are expected to be in a range of $4.3 billion to $4.5 billion, and adjusted EBITDA is expected to range between $4 billion to $4.3 billion.
As of press time, Marriott’s stock was trading at $175.57, up 17.9% year to date. The NASDAQ Composite Index was up 13.4% for the same period.