- DCH News Team
Leisure Travel Trending In The Right Direction
Marriott Rode Leisure Travel Trends to a $1 Billion Profit Last Year
By: Cameron Sperance, Skift
The U.S. recovery fueled Marriott's profitable fourth quarter and entire 2021. But weaker performance in China isn't deterring the company from wanting to have more hotels there and other international markets. Real estate is a long-term play.
Marriott managed to sidestep a major financial sting from the Omicron variant at the end of last year.
The company Tuesday reported a $468 million fourth quarter profit compared to a loss of $164 million during the same period in 2020. Marriott reported a nearly $1.1 billion profit for all of 2021, a sharp turnaround from the $267 million loss reported the year prior. Company leaders emphasized strong leisure travel demand in the U.S., higher daily rates, and even robust demand in international markets like the Middle East fueled the company’s financial performance.
Marriott still expects a small recovery setback due to Omicron’s most notable impact in performance arriving in January, but there is also widespread expectation the company will accelerate its recovery through the rest of this year as more countries reopen for travel.
“One of the strong parts is to see how quickly the bookings are rebounding, and that’s not just here in the U.S.,” Leeny Oberg, Marriott’s chief financial officer, said in an interview with Skift following the earnings release. “It’s important to note that we are now seeing countries starting to open up and, almost to the day that they announced restrictions being lifted, our reservation centers’ calls go up dramatically. It’s a great sign of the resilience of travel.”
Omicron’s impact in the first month of this year was most notably felt with cancellations by group meetings and events as well as the delayed return of business travel demand from larger companies. But leisure travel continues to be a resilient demand driver, particularly in the U.S. where there aren’t the kind of travel restrictions seen in countries like China.
The U.S. recovery through the last three months of last year fueled Marriott’s improvement over the third quarter, Oberg added. Revenue per available room — the hotel industry’s key performance metric — was 20 percent off 2019 levels in the third quarter and improved to 15 percent below pre-pandemic performance by the end of the year.
The Middle East and Africa region, led by the United Arab Emirates, was another strong point for Marriott. Performance for the region was 8 percent higher than pre-pandemic levels, driven by the fact the company was able to charge rates that were 20 percent higher. The region’s 65 percent average occupancy rate was the highest of any Marriott region.
“With relatively high vaccination rates and low travel restrictions during the quarter, the Middle East has become a safe, easy place to visit,” Marriott CEO Anthony Capuano said on the company’s investor call.
Company leaders anticipate further leisure travel growth this year due to more flexibility around remote work. But they also recognize all segments of business need to revive to make a full rebound possible.
“So much of this really depends on the global picture in terms of the pace of the recovery with things happening on all the points of business, not just leisure, but also special corporate as well as group to see us get to that delightful place,” Oberg said on the call in response to an analyst question on the possibility of a month this year where the company could fully rebound to pre-pandemic levels.
The New Booking Look of Business Meetings
Omicron’s biggest impact fell on business travel from larger companies and group meetings, but Marriott leaders also detected a new style in how major events are coming together. It isn’t the months or years of advance planning typically associated with this type of revenue driver.
Salesforce held its largest internal meeting since the start of the pandemic in New York City earlier this month, and it was booked only a month in advance, Capuano said. The event came with 25,000 room nights booked across 11 Marriott properties in the city.
Shorter booking windows have typically been associated with reservations throughout the pandemic given the uncertainty around variants and travel restrictions. Business travel was typically booked 30 days in advance prior to the pandemic and that shrank to just seven days last year, Capuano said. The number is beginning to extend out, but it still isn’t to pre-pandemic levels.
The shorter booking window for such a large event like the Salesforce meeting, however, is good news for an industry that keeps pushing back its timeline on when major conventions and events will return with significant momentum.
“We’re seeing more short-term bookings, and that’s been the trend over the last number of weeks and months,” Capuano said.
One region that didn’t see an improvement over the quarter was China, which is due to the country’s zero-tolerance approach to spikes in new cases. Lockdowns and travel restrictions in various cities kept Marriott’s Chinese portfolio performance at 27 percent below 2019 levels — basically the same level seen in the third quarter.
The weaker performance in China is particularly notable for Marriott, given the company’s early expectations in the pandemic that a full recovery would happen in that region first. While that recovery happened last spring, it was short-lived due to the emergence of new variants and China’s tough mitigation efforts against the spread.
Analyst sentiment in recent weeks has surrounded the notion of whether the stringent approach to containing the virus would eventually deter developers from building new projects in China. But Marriott leaders were quick to note this has not changed its own outlook in putting hotels in the region. Marriott has roughly 140,000 rooms in China, and the company’s development pipeline puts it on track to nearly double that figure.
“In many ways, our owners and partners in China are the mirror image of our owners and partners in other areas of the world. They don’t try to time the market for the next quarter or two,” Capuano said. “They tend to be long-term investors.”
Marriott continues to see significant opportunity to develop outside the U.S., Oberg later added to Skift. While the company has a 16 percent market share of hotel rooms in America, it is only at 3 percent internationally. Fifty-seven percent of Marriott’s development pipeline is outside the U.S.
Original article by Cameron Sperance can be found on Skift.com