Marriott International
president and CEO Arne Sorenson during the company's earnings call described
the fourth quarter of 2017 as "the icing on the cake to a terrific year."
Marriott experienced year-over-year gains in average daily rate and occupancy
and saw a positive uptick in corporate and group business during the quarter.
Fourth-quarter ADR
increased 2 percent to $157.92, and occupancy increased 1.8 percentage points
to 71 percent. Full-year ADR rose 1.2 percent to $157.12, and occupancy grew
1.4 percentage points to 73.2 percent.
Sorenson said U.S.
transient revenue per available room grew 4.1 percent during the fourth quarter.
That was on par with overall transient business growth—also 4.1 percent—"which
we take on balance to be a fairly encouraging sign," Sorenson said. Over
the past year or so, he said, "corporate traveler was a bit weaker than
the leisure traveler and the average performance of transient." Corporate
groups, though, showed increased signs of life, he said.
Where negotiations are
complete—some corporate rate negotiations have yet to close—price increase rates
for comparable corporate customers averaged in the low single digits.
Speaking about corporate
appetite for the year ahead, Sorenson said he's been "struck by how broad
the optimism is among U.S. corporate CEOs" in light of the recent tax
reform legislation. While that doesn't translate directly to increased travel
spend, he said, "if that optimism translates into better corporate
profits, more investing activity by companies, we'll inevitably see that that's
positive for corporate demand for our industry."
Group bookings for 2018
are up about 2 percent at comparable U.S. full-service hotels, Sorenson said.
He noted that near-term bookings have been growing at a lower rate than
longer-term bookings, a trend also noted by Hilton
president and CEO Chris Nassetta.
"Four years ago,
when we looked at the group booking window, we saw that business booked in the
year for the year or for the next year represented 71 percent of all group
bookings," Sorenson said. "In 2017, that is down 21 full [percentage]
points; only 50 percent of the bookings we are making now are for the next 24
months, in effect."
Last month, Marriott
announced it plans to cut commissions paid to
group intermediaries from 10 percent to 7 percent, effective March 31 at hotels
in North America. Sorenson said the move would provide Marriott's hotel owners
cost savings in 2018. Along that same line, he said the company has introduced
a new revenue management approach that "seeks to book the most profitable
business, not just the highest RevPAR business," according to Sorenson.
Loyalty Programs
The company is on track
to merge Marriott Rewards with Starwood Preferred Guest this year. The combined
loyalty programs, which also include The Ritz Carlton Rewards, reached nearly
110 million members by the end of 2017. Those members accounted for more than
half of Marriott's occupied rooms last year.
"We believe that the
loyalty program is the name of the game for the future," Sorenson said.
"We've been impressed by SPG from the moment we acquired Starwood. … And
we're making great progress, having virtually eliminated all of the restrictions
to merging these programs toward a single, unified program hopefully this year."
Marriott recently renegotiated
its co-branded credit card agreements and expects new cards to launch this year.
Sorenson said as part of the agreements, hotel owners will benefit from lower
credit card processing fees beginning in 2018.
Through the Marriott
Rewards app, the company added mobile check-in and check-out to 1,600 hotels
last year and now offers mobile service requests at almost 6,000 hotels
worldwide. Summarizing 2017 milestones, Sorenson said Marriott rolled out Guest
Voice, its guest satisfaction system, across its entire portfolio and launched
Marriott Moments, which allows guests to shop for and book unique experiences. It
also formed a joint venture with
Alibaba to drive engagement with and loyalty from to Chinese travelers.
U.S. Policy & International Inbound Travel
Sorenson, responding on
Thursday's earnings call to an analyst's question about whether U.S. inbound
travel declined last year, said the data is hard to pin down but that "a
number of data sources tell us that international arrivals to the U.S. in 2017
were down about 4 to 5 percent while total international travel around the
world was up about 7 percent. It doesn't take a genius to know we're losing
share."
Sorenson said
international arrivals to New York City decreased 7 to 8 percent in Marriott's
system last year. "We don't believe ... it is wrong to focus on security
and protecting our borders and those sorts of things," he said, "but
we do believe we can do those things politically and still communicate a
welcome to the rest of the world. ... That's the kind of encouragement we're
trying to give to our government."
Development & Additional Results
The company added more
than 76,000 rooms to its portfolio during 2017, including about 11,000
converted from competitor brands and almost 30,000 in international markets. At
year-end, Marriott's global development pipeline increased to approximately
2,700 hotels and more than 460,000 rooms, including nearly 34,000 rooms
approved but not yet subject to signed contracts.
Marriott's fourth quarter
net income totaled $201 million, down 18 percent from the fourth quarter of
2016. Its full-year net income increased 76 percent to $1.4 billion.
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