Marriott International expects domestic revenues to decline and international revenue growth to weaken through 2009 following today's announcement of its third-quarter performance, in which it saw profit drop by 28 percent.
Citing the weak economic environment, Marriott reported that revenue per available room in the third quarter was down 1 percent compared with 2007 levels, and the average daily rate increased by 1.6 percent. Worldwide RevPAR was up 3.4 percent, boosted by 13.4 percent RevPAR growth outside North America and double-digit growth in South America, Central America, the Caribbean and the Middle East. However, the company expects the numbers will worsen in the fourth quarter and beyond.
"Tight credit, soft consumer spending and a difficult securitization market have lowered our expectations for the fourth quarter and 2009," Marriott chairman and CEO J.W. Marriott Jr. said in a statement.
For the final three months of the year, Marriott has forecast a 1 percent to 3 percent decline in worldwide RevPAR as North American RevPAR drops between 3 percent and 5 percent. In 2009, Marriott said the business environment would be "unusually challenging" and is expecting international RevPAR to remain flat while North American RevPAR drops at least 3 percent, meaning a 1 percent overall decline in RevPAR.
These expectations coincide with a recent forecast from PKF Hospitality Research that said U.S. lodging demand is expected to drop 0.2 percent this year and an additional 1.1 percent in 2009, the first drop in two consecutive years since 1988
(BTNonline, Sept. 24). Supply growth coupled with that demand drop will weaken hotel performance those two years, although the firm expects the credit crunch will begin to cut supply growth after that point.
Marriott reported that it has opened 200 hotels in the past 12 months and expects to open 30,000 new rooms total in 2008. The company's pipeline stands at 130,000 rooms, although the company said the financial markets might cause it, its owners or its franchisees to delay or cancel some of those projects.