Marriott International on Thursday reported a first-quarter loss, noting that corporate demand remains weak, despite some pockets of resilience, and that hotels continue to deeply discount corporate rates in the quest to gain or maintain marketshare.
Marriott, the first major chain to report first-quarter earnings and a bellwether for industry performance, posted a $23 million loss for the first three months of the year, compared with a $122 million profit for the same period last year.
Affirming trends reported by corporate travel buyers
(BTNonline, March 30), executive vice president Carl Berquist, who assumes the CFO role on May 1, during Marriott's earnings call yesterday said persistent corporate demand weakness has sparked deterioration in pricing power, noting "significant competitor discounting of room rates for corporate business in many markets."
Though he asserted Marriott would "not lead the market down on rates," Berquist said the company also would not "lose share by failing to respond." He further noted, "Room rates are likely to remain weak until the economy shows meaningful improvement."
Berquist said transient demand showed its first signs of weakness a year ago, led by the financial services industry, and continued to slip since then. Despite that weakness in corporate business persisting through the first three months of the year, Berquist said, "We saw some resilience in pharmaceuticals and defense in the first quarter, but this was only relative to the other sectors we tracked."
Failing to stimulate corporate demand through pricing actions, Berquist said, "We continue to see occupancy declines reflecting weakness" across its corporate portfolio. As such, Marriott is bolstering business from non-corporate segments, including federal government deals, AAA discounts and programs for senior citizens, "to buttress transient occupancy."
Berquist said group revenue declined by 13 percent during the first quarter, compared with the same period last year. Noting "significant rhetoric from Washington" that triggered meetings cancellations, Berquist said meeting planners are "showing a greater preference for urban and suburban hotels rather than luxury and resort locations for new business." Though Berquist noted such "rhetoric" has quieted, he said there remains "continued hesitancy on the part of meeting planners to book new meetings." However, Berquist said, "The rate of year-over-year decline has been improving for the past 16 weeks." Berquist said meeting attrition continues to be "a significant problem, but it too appears to be stabilizing."