Marriott International's third-quarter business transient revenue increased at a "slow and steady" year-over-year pace, executives said Thursday during an earnings call. Meanwhile, Marriott expects "to see another year of strong growth in our special corporate rate on top of very strong growth in that rate in 2023," CFO and executive VP of business operations Leeny Oberg said.
Revenue from the business transient sector, which accounted for one-third of the hotel company's global room nights in the quarter, increased about 4 percent year over year in the U.S. and Canada, Marriott president and CEO Anthony Capuano said.
Small and midsize enterprises have continued to "show strength" in the business transient sector, according to Capuano, but large managed corporate accounts have yet to fully recover.
"There are a number of factors that are impacting some of the big corporates," he said, citing macroeconomic conditions and sustainability goals. "Whatever it might be, it is having some impact on the pace at which their travel volumes recover."
Still, Capuano added, "I absolutely don't think travel is permanently impaired. I just think it's going to look a little different."
While day-of-the-week numbers and travel segments may look different—i.e. SMEs, group or blended travel offsetting business—"overall volumes are encouraging," Capuano said.
A standout performer for Marriott in the third quarter was group business, a sector which Capuano said has been "remarkable" coming out of the pandemic and is "expected to continue to be a meaningful driver of revenue growth going forward," he said, but at a more normalized pace, executives said on the call.
According to Marriott, group room night-share stood at 23 percent in Q3, and global group revenue increased nearly 9 percent year over year. Group revenue in the U.S. and Canada increased 5 percent year over year, also representing a sense of seasonal normalization, according to Marriott executives.
Group business is back to approximately the same percentage of Marriott's business that it was pre-Covid, Oberg said.
Q3 Results
Overall, third-quarter travel demand "remained strong," for Marriott. Systemwide revenue per available room was $129.73, up 8.8 percent year over year. Worldwide average daily rate was $179.84, up 4.1 percent. Systemwide occupancy increased 3.2 percentage points to 72.1 percent.
In the U.S. and Canada, Marriott's Q3 RevPAR was $133.92, up 4.3 percent year over year. ADR was $183.28, up 2.7 percent. Occupancy was 73.1 percent, up 1.1 percentage points.
In Q3, Marriott reported $5.93 billion in revenue, up 11.7 percent year over year. The hotel company's net income was $752 million, up from $630 million in 2022.
Looking Ahead
Marriott executives remain optimistic about travel demand, citing the company's "record-high pipeline" in the quarter, totaling nearly 557,000 rooms, excluding MGM rooms. Capuano pointed to "real momentum" with its City Express brand and "global opportunity" for midscale.
With that said, Marriott's strategy going forward is "to continue to strengthen our leadership position in luxury and upper upscale, while expanding our growth potential in a new segment for us, which is midscale," Capuano said.
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