Marriott CEO hypes new platforms amid strong Q2 growth
 
Marriott CEO hypes new platforms amid strong Q2 growth
07 AUGUST 2019 8:20 AM

During the company’s second-quarter earnings call, Marriott International President and CEO Arne Sorenson addressed analysts’ questions about the company’s all-inclusive platform launch and performance in China.

BETHESDA, Maryland—At the same time it announced the company’s second-quarter earnings results, Marriott International announced the launch of its all-inclusive resort platform for its existing brands.

During Marriott’s Q2 earnings call, President and CEO Arne Sorenson said the company has signed five management agreements for new-build, all-inclusive projects in Mexico and the Dominican Republic. These five resorts will join the company’s all-inclusive project inherited in the Starwood Hotels & Resorts Worldwide acquisition.
http://hotelnewsnow.com/Articles/297494/Marriott-International-launches-all-inclusive-platform

“The all-inclusive market is growing rapidly, and our Marriott Bonvoy members would like to see us in this space,” he said. “We expect to expand our all-inclusive portfolio in popular leisure destinations in the Americas, Europe and Southeast Asia with both new-build projects and property conversions. We’ll be leveraging our well-established full-service and luxury brands.”

Marriott doesn’t have a forecast available to show how big the business will get over time, Sorenson said in response to an analyst’s question. The company knows it’s an increasingly popular option for leisure travelers, and the Caribbean is the biggest market in the world for all-inclusives, while markets in the Mediterranean and the Asia-Pacific region are growing, he said.

“We have over the last number of years looked a few M&A opportunities in this space,” he said. “I have not managed to score them really at this point in time, and I’ve decided to proceed with organic growth with some very strong partners that we’re excited about proceeding with.”

Homes & Villas update
The launch of the all-inclusive platform comes after Marriott announced an expansion of its homesharing pilot program into Marriott Homes & Villas in May.

The program has 2,500 units currently, which is tiny compared to the size of the other platforms out there, Sorenson said. However, considering the higher-end units available, those portfolios are “meaningfully smaller than the gross portfolios out there,” he said.

Feedback so far has shown that Marriott’s leisure customers have already experimented with homesharing before, and appreciate having a company with strong loyalty, brand and service behind it.

Most of Marriott’s U.S. hotel owners are interested in how the platform will grow and whether it will end up competing with their properties, Sorenson said. About 95% of the Homes & Villas units have two or more bedrooms, and that alone makes them distinct from hotels, he said. Still, he said the company is being transparent with them and explaining how the platform is growing.

Homesharing is not a temporary fad, which is why Marriott has entered into the space, Sorenson said. Expedia, Booking.com and Airbnb have millions of units available on each platform, and some of those units are “making quite decent economics” from those platforms, he said.

This is a space in the broader travel sector that Marriott and other hotel companies have been watching over the years, and it has longevity, he said.

At the same time, some of these homesharing platforms are evolving or broadening to other sectors in the travel industry, he said.

“For us, particularly the value of the Marriott Bonvoy loyalty program is to … provide an umbrella across a number of areas of travel,” he said.

The company believes it can have a presence in this space and provide solutions to its loyalty members when they travel for different purposes, Sorenson said.

“We think we can make good economics over time,” he said.

Chinese demand
Revenue per available room grew 2.6% year over year at Marriott properties in Greater China, with led by growth in its manufacturing markets and in corporate destinations, such as Shanghai, Sorenson said.

The company’s venture with Alibaba Group has been successful, he said, adding that increased direct digital bookings in China have improved by 36% in part due to Alibaba’s strong luxury and full-service portfolio in the country.

Marriott’s RevPAR numbers in China are meaningfully better than the industry overall, but the results are not as good as they were a quarter ago or last year, Sorenson said.

Headwinds, such as the demonstrations in Hong Kong, did not affect performance in the second quarter, he said. But the current situation is not a positive sign for travel in the market and results from the third quarter are expected to be weaker, he said.

Regarding China’s trade war with the U.S., the biggest question isn’t about exports or imports but rather what it will mean for Chinese gross domestic product growth, Sorenson said.

“That has to be evaluated in context of a shift by China toward a more consumer-driven economy than they had in years past,” he said.

By the numbers
Marriott’s comparable systemwide constant dollar RevPAR grew by 1.2% worldwide during the second quarter, according to the company’s earnings release. That breaks down into 2.8% growth outside of North America and 0.7% in North America.

The company’s net income totaled $232 million, a 65% year-over-year decrease. Adjusted earnings before interest, taxes, depreciation and amortization totaled $952 million, a 1% year-over-year increase.

During the quarter, the company opened 16,000 guestrooms, about 3,500 of which were conversions from competitors’ brands. Almost half of the total rooms were in international markets. By the end of the quarter, the company had approximately 2,900 hotels representing 487,000 rooms in its development pipeline. Approximately 213,000 of those rooms were under construction.

Marriott projects comparable systemwide RevPAR on a constant dollar basis will grow in the third quarter by 1% to 2% in North America, 2% to 3% outside of North America and 1% to 2% worldwide. It revised down the higher end of its full-year outlook for 2019 in each segment by one percentage point. Its current full-year guidance forecasts 1% to 2% RevPAR growth in North America, 2% to 3% outside of North America and 1% to 2% worldwide.

As of press time, Marriott’s stock was trading at $128.49 per share, up 19.8% year to date. The Baird/STR Hotel Stock Index was up 11.3% for the same time period.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.