There are some 630 million reasons to celebrate at Marriott International headquarters this week, but even the company’s top executives note that the company’s good financial fortunes can change quickly. how quickly.
Marriott, the world’s largest hotel company, reported a third-quarter profit of $630 million on Thursday and reported its overall global performance – even as China remains subject to a host of restrictions. pandemic travel – fully recovered from the pandemic.
This is obviously very good news for the company behind brands from Residence Inn and TownePlace Suites to the Ritz-Carlton and St. Regis. After all, Hyatt only made $28 million in profit for the same timeline. Hilton, Marriott’s main competitor, reported a $346 million in third-quarter profit end of last month.
But even industry-wide profit dynamics aren’t enough to convince economists to realise: Layoffs and hiring freezes continue to hold back Silicon Valley and tech industry buffs like Amazon, Twitter and Lyft. Economists predict a recession will hold back the global economy in the coming months.
While top Marriott executives remain optimistic about the company’s performance and outlook for 2023, they acknowledged on Thursday that economic conditions could quickly change the momentum. company return.
Marriott CEO Anthony Capuano said on the investor call: “Due to rapidly rising interest rates and concerns about a possible global recession, we are closely monitoring trends. consumption and macroeconomics”. “There is no doubt that the hospitality industry is affected by economic cycles, and with an average transient booking duration of just around three weeks, trends can change relatively quickly.”
It is one of the more bleak economics the company has offered in recent months. The stock market has clearly taken notice, as Marriott’s share price fell nearly 4% Thursday afternoon despite strong third-quarter financial results.
However, Capuano reiterates that the company has yet to see any indication of travel and room spending at Marriott-affiliated hotels.
“We have yet to see any signs of slowing global demand for accommodation. In fact, we have seen the opposite,” he said. “The booking trend is still very healthy. With a high level of employment maintained, a tendency for consumers to prioritize experiences over goods, pent-up travel demand and high consumer savings, tourism spending has been able to recover. amazing return. “
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Hotel prices soar
Higher hotel prices continue to fuel Marriott’s performance recovery. The company’s global occupancy rate averaged 69% in the third quarter, but the daily rate was 10% higher year-on-year in 2019. It’s even more impressive when you break things down by region. area or type of customer.
The average group booking rate for stays this year is 17% higher than the rate of bookings of the same type made in 2019.
In the United States and Canada, the average daily price was 15% more expensive from July to September this year than it was during the same period in 2019.
“Overall performance across all hotel types, from luxury to extended stays, and in all market types, from small towns to mega-brands,” said Leeny Oberg, Marriott’s Chief Financial Officer. The largest city in the United States and Canada, “fully recovered” for the first time. office staff. Marriott leadership has also reported full recoveries for hotels in Europe, the Middle East, Africa, the Caribbean and Latin America.
Asia Pacific, led by China, continues to lag, but there is optimism surrounding Japan’s reopening.
“It is clear that there continues to be a large amount of uncertainty about a possible recession as the Fed continues to raise interest rates and economic trends continue to develop,” Oberg said. “But I think we’ve got some things in our business that really give us confidence about 2023, even though we don’t predict, of a recession.”
Suitable for loyalty and credit card customers
Marriott’s top executives may be hedging against the possibility of an economic slowdown next year, but they remain optimistic about the company’s Bonvoy loyalty program and credit card spending.
Marriott Bonvoy grew to 173 million members at the end of the third quarter, and the company is working to keep those members happy with its direct booking options. Long delay Ritz-Carlton Cruise finally docked last month, and Capuano says about two-thirds of reservations are through direct bookings. Bonvoy members comprise more than half of Ritz-Carlton yacht reservations.
There was also a record number of new Marriott co-branded credit cardholders joining the system. Marriott recommend two mid-tier credit cards in September, the Marriott Bonvoy Bevy American Express card and the Marriott Bonvoy Infinite Bonus Card from Chase – “will help drive strong future growth,” Capuano added.
Marriott credit card fees are up 20% this year from a year ago. That trend provides a nice safety net amid economic turmoil.
“Obviously, when you look at the versus [2019], those credit card fees have increased significantly compared to hotel-related charges due to COVID, and the steady growth in cardholders and credit card spending each year as we move through 2019, ‘ said Oberg. “We are looking at the growth of people who do not[hotel performance] fees in 2023, both from credit cardholders as well as from spending. “
Marriott’s pending dive into affordability
Capuano provided a little additional context on Marriott’s recent announcement that they are working on an acquisition City Express is based in Mexico, an affordable complex of 152 “medium-sized” hotels across the Caribbean and Latin America. The deal not only makes Marriott the largest hotel company in the region, but also gives it a lower-priced entry point for travelers looking to book a hotel room.
“We are fairly bullish on the mid-sized space that is priced to mid-size, with meaningful growth potential,” said Capuano.
He also confirmed that the company is exploring the potential to bring the City Express brand to other regions of the world, similar to how it turned Europe-focused AC Hotels into a global brand after first entering the world. joined in 2011.
“As with many acquisitions we have made over the years, when we closed, when we started [the Caribbean and Latin America]Of course, we will evaluate the usability of the platform to see if it makes sense to roll out some or all of the sub-brands under the City Express banner into other markets around the world.” Capuano said.
