In absolute numbers, Marriott International's second quarter
earnings were down significantly, as expected, due to the effects of the
Covid-19 pandemic. Yet, the company also reported steady signs of improvement,
with demand returning, hotels reopening, and Greater China leading the
recovery.
"We can't say with certainty, obviously, but with a
fairly high level of confidence, the second quarter of 2020 should be the worst
quarter we have ever seen, by far, forever, and things will get better from
here," said president and CEO Arne Sorenson on a Monday earnings call.
The company reported systemwide revenue per available room
down 84.4 percent year over year for the second quarter on a constant currency
basis. In North America it was down 83.6 percent; outside North America it was
down 86.7 percent. Still, this represents an improvement from the low point of
being down globally 90 percent in April—"the toughest year-over-year
comparison"—to a decline of 70 percent for the month of July, Sorenson
said.
Worldwide year-over-year occupancy declined 57.4 percentage
points to 18.2 percent for the second quarter. Average daily rate was down 35.3
percent to $104.97. The second quarter reported net loss totaled $234 million,
compared with reported net income of $232 million for the quarter in 2019.
Greater China continues to lead the recovery for the
company, with rapid improvements in occupancy and new bookings, Sorenson added.
Occupancies in the region have reached 60 percent, which is up from just under
10 percent in February, and is closer to the 70 percent level seen at the same
time last year. Sorenson said growth is not only in leisure, but "we're
seeing business transient as well as group picking up nicely." At the
current rate of recovery and with no resurgence of Covid-19, "Greater
China could approach 2019 levels as early as next year, even with limited
international guests," he added.
Globally, 9 percent of Marriott's hotels remained
temporarily closed as of Aug. 6, compared with 25 percent as of May 8. In the
United States, 96 percent are open, Sorenson said. The company added 11,400
rooms globally during the quarter, including about 2,000 rooms converted from
competitor brands, the company stated, for net growth of 4.1 percent year over
year.
Marriott's pipeline totaled about 510,000 rooms, with more
than 230,000, or about 45 percent, under construction. That's about 1 percent
lower than the end of the first quarter. In the first half of 2020, the company
signed 30 percent more deals in the Asia-Pacific region compared to the same
period last year. Given current trends, Marriott estimates net rooms growth of
2 percent to 3 percent for 2020.
While leisure is undoubtedly outperforming other segments,
Marriott is watching the corporate segment show improvement. Corporate is up 5
points in the last eight weeks in terms of RevPAR decline year over year,
looking at weekly numbers, Sorenson said. "Our guess is that that is
driven by business travel in the Midwest more, in smaller companies more than
bigger companies, and in aspects of business which are less dependent on flying,"
he said. "So far in the recovery, every sector has gotten better in every
month."
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