Marriott’s earnings soar, however bother may very well be lurking across the nook

There are about 630 million causes to have a good time at Marriott Worldwide’s headquarters this week, however even the corporate’s high executives observe how rapidly the corporate’s good monetary fortune might change.

Marriott, the world’s largest lodge firm, reported a $630 million third quarter revenue Thursday and reported its general international efficiency — even with China nonetheless below an array of pandemic journey restrictions — had absolutely recovered from the pandemic.

It’s clearly superb information for the corporate behind manufacturers that vary from Residence Inn and TownePlace Suites all the best way as much as Ritz-Carlton and St. Regis. In any case, Hyatt solely squeaked out a $28 million revenue for a similar timeline. Hilton, Marriott’s chief competitor, reported a $346 million third quarter revenue late final month.

However even the momentum of profitability throughout the business isn’t sufficient to dissuade financial realists: Layoffs and hiring freezes proceed to grip Silicon Valley and tech business darlings like Amazon, Twitter and Lyft. Economists extensively anticipate a recession to grip the worldwide financial system within the coming months.

Whereas Marriott’s high executives stay extremely optimistic concerning the firm’s efficiency and outlook for 2023, they admitted Thursday that financial situations might rapidly alter the corporate’s restoration momentum.

“Given quickly rising rates of interest and rising considerations a few doable international recession, we’re carefully monitoring shopper and macroeconomic tendencies,” Marriott CEO Anthony Capuano mentioned on an investor name. “There isn’t any doubt that the hospitality business is impacted by financial cycles, and with transient reserving home windows averaging solely about three weeks, tendencies might change comparatively rapidly.”

It’s among the many extra somber financial takes the corporate offered in current months. The inventory market clearly seen, as Marriott’s inventory value was down almost 4% Thursday afternoon regardless of the robust third quarter monetary displaying.

However Capuano reiterated the corporate isn’t but seeing any indicators of a slowdown in journey demand and spending on rooms at Marriott-affiliated inns.

“We’ve got but to see indicators of a slowdown in international lodging demand. Actually, we have seen simply the alternative,” he mentioned. “Reserving tendencies stay very wholesome. Given sustained excessive ranges of employment, shopper tendencies prioritizing experiences versus items, pent-up journey demand and a excessive degree of shopper financial savings, journey spending has been extremely resilient.”

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Hovering lodge charges

Increased lodge charges proceed to gasoline Marriott’s efficiency restoration. International occupancy charges for the corporate averaged 69% within the third quarter, however every day charges had been 10% larger than throughout the identical interval in 2019. It will get much more spectacular once you break issues aside by area or sort of buyer.

Common group reserving charges for stays this yr had been 17% larger than the identical sort of bookings made in 2019.

Within the U.S. and Canada, common every day charges had been 15% dearer from July by way of September of this yr than the identical time in 2019.

Total efficiency throughout all forms of inns, from luxurious to prolonged keep, and in all forms of markets, from small cities to the largest U.S. and Canadian cities, was “extra absolutely recovered” for the primary time, mentioned Leeny Oberg, Marriott’s chief monetary officer. Marriott’s management crew additionally reported greater than full recoveries for inns in Europe, the Center East, Africa, the Caribbean and Latin America.

Asia Pacific, led by China, continues to lag, however there may be optimism surrounding the reopening of Japan.

“There clearly continues to be a good quantity of uncertainty concerning the doable recession given the Fed’s continued rise in charges and financial headwinds that do proceed to develop,” Oberg mentioned. “However I feel we have some issues in our enterprise that actually do lead us to confidence about 2023, though we aren’t predicting, per se, a recession.”

Tailwinds from loyalty and bank cards

Marriott’s high leaders is perhaps hedging in opposition to the potential of an financial slowdown subsequent yr, however they remained bullish on the corporate’s Bonvoy loyalty program in addition to bank card spending.

Marriott Bonvoy had grown to 173 million members by the top of the third quarter, and the corporate is working to maintain these members proud of choices to e book straight. The long-delayed Ritz-Carlton Yacht lastly hit the seas final month, and Capuano mentioned roughly two-thirds of reservations are coming by way of direct bookings. Bonvoy members comprise greater than half the bookings of the Ritz-Carlton Yacht.

There was additionally a report degree of latest Marriott co-branded credit score cardholders coming into the system. Marriott launched two mid-tier bank cards in September, the Marriott Bonvoy Bevy American Categorical Card and the Marriott Bonvoy Boundless Bountiful Card from Chase — “which ought to assist drive robust progress going ahead,” Capuano added

Marriott’s bank card charges are up 20% thus far this yr from a yr in the past. That sort of development presents a pleasant security web amid all of the chatter of financial uncertainty.

“Clearly, once you have a look at in comparison with [2019], these bank card charges have grown meaningfully greater than hotel-related charges due to COVID and the regular progress in cardholders and bank card spend every yr as we have moved by way of 2019,” Oberg mentioned. “We’re taking a look at progress of non-[hotel performance] charges in 2023, each from credit score cardholders in addition to spend.”

Marriott’s pending dive into affordability

Capuano offered a bit added context on Marriott’s current announcement it was working to accumulate Mexico-based Metropolis Categorical, an reasonably priced mixture of 152 “mid-scale” inns throughout the Caribbean and Latin America. The deal wouldn’t solely make Marriott the most important lodge firm within the area, however it might additionally give the corporate a lower-priced entry level for vacationers seeking to e book a lodge keep.

“We’re fairly bullish on the reasonably priced mid-scale area, which has significant progress potential,” Capuano mentioned.

He additionally confirmed the corporate is exploring the potential to take the Metropolis Categorical model to different components of the world, just like the way it made the extra European-focused AC Lodges a worldwide model after first taking a stake in it in 2011.

“As with many acquisitions that we have finished through the years, as soon as we shut, as soon as we begin rolling in [the Caribbean and Latin America], we’ll, in fact, consider the applicability of this platform as as to whether it is sensible to roll out some or all the sub-brands below the Metropolis Categorical banner into different markets world wide,” Capuano mentioned.

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