Skift Take

As the Chinese travel again, luxury and group bookings should rebound further worldwide. That dynamic could set up Marriott for continued performance gains, given how many luxury and business hotels it has.

Marriott International ended 2022 with a robust performance thanks to the post-pandemic resurgence in travel, the company said on Tuesday. It enjoyed record fourth-quarter average room rates, profit at its managed hotels, hotel development plans, and sign-ups for its co-branded credit cards.

“Our performance in 2022 was terrific,” said CEO Anthony Capuano of the company’s fourth-quarter earnings. “We believe there’s still further upside in 2023, especially now that China’s borders have reopened.”

The Bethesda, Maryland-based company — operator of more than 30 hospitality brands ranging from Ritz Carlton to Fairfield Inn — saw in the fourth quarter its average daily rate worldwide come in 13 percent higher than in the comparable pre-pandemic period.

Of note, Marriott — which has 598 luxury properties, up 13 percent since before the pandemic — saw its U.S. and Canadian luxury hotels command a $431 average daily rate last year, which was up 18 percent from $364 a night in 2019. The company’s luxury properties stand to disproportionately benefit from the full recovery of cross-border travel as the Chinese return to traveling in large numbers.

Group bookings — one of the slowest segments to recover from the pandemic — is another critical category for Marriott trending up. Group revenue for 2023 is already pacing up 20 percent year-over-year, with room nights and rate gains each quarter, according to Capuano.

Strong Quarter, Rate Strength

In the fourth quarter, Marriott generated $673 million in net income — a measure of profit — from $5.9 billion in revenue.

The company continued to command strong pricing in many markets. Marriott International was able to command unusually high prices thanks to strong bookings, though inflation also played a role. In December alone, worldwide revenue per available room, a key industry metric, was up 7 percent versus 2019.

Profit margins at its U.S.-managed hotels in the quarter were higher for the same period of 2019 despite wage inflation.

The profits flowed to the bottom line. Adjusted earnings before interest, taxes, depreciation, and amortization totaled $1.09 billion in the fourth quarter, up 47 percent over the fourth quarter a year ago.

Bullish Forecast Supported by Bleisure

“We have not seen signs of demand softening,” Capuano said. “Certainly, trends could change relatively quickly given that our average transient booking window is around three weeks. But one-and-a-half months into 2023, booking demand and pricing remain strong.”

Blended business and leisure travel continued to be a trend, as midweek occupancy has not recovered to 2019 levels to the same extent as weekend occupancy.

The average length of a business transient trip in the U.S. was up by more than 20 percent versus 2019, the company said. For context, see the Skift megatrend: “Blended Travel Comes of Age.”

Better Fee Growth Than Expected

Marriott posted strong fee revenues in the quarter. That growth partly represented a surge in the fees it generates on the properties it manages on behalf of owners, which are a percentage of profits at each property to incentivize Marriott. These incentive management fees came 6 percent ahead of 2019’s level in the fourth quarter, to $186 million worldwide.

“That showed strong profitability at the hotel level, particularly at the luxury full-service end of the chain scale,” said Pranavi Agarwal, senior research analyst at Skift Research.

On a call with analysts, Leeny Oberg, the chief financial officer, caveated this growth by saying that on a comparable hotel basis, incentive management fees as a percentage of total fees were still down versus 2019 levels.

“However, with two-thirds of IMFs [incentive management fees] coming from outside of North America, Oberg is optimistic on incentive fees growth in 2023, given that Asia Pacific will be recovering back to 2019 levels in demand, again led by strength in luxury — similar to what we saw in US and Europe in 2022,” Agarwal said.

Loyalty and Credit Cards

Marriott said its loyalty program, Bonvoy, has more than 177 million members, up 25 percent from 2019.

The program helps drive direct bookings, which are more profitable than ones that come through online travel agencies.

“We have made great gains in contributions from our digital platforms,” Capuano said. “In 2022, our mobile app users were up 32 percent year-over-year, digital room nights rose 27 percent, and digital revenues climbed 41 percent.”

The Bonvoy program also helps drive another category of non-room revenue, namely, fees from Marriott’s co-branded credit cards. The cards, available in nine countries, had record member acquisitions and card spending last year.

While the company didn’t break out the fees it earned from its cards, it said its non-room-related franchise fees — which are driven largely by its co-brand credit card fees — rose 16 percent year-over-year.

Hotel Development Plans

At the end of the year, Marriott’s worldwide development pipeline totaled more than 3,000 properties and more than 496,000 rooms. About 199,000 of these rooms were under construction.

The company’s net unit growth, excluding the impact of its exit from Russia, was 3.6 percent.

The company forecasted it would achieve about 3.5 percent net room growth in 2023, not counting any possible growth resulting from possible acquisitions. That net unit growth forecast didn’t include any potential acquisitions of companies. The 3.5 percent level would be below the company’s average during the 2010s. Management partly blamed construction for having not returned to pre-crisis levels.

In response to an analyst question about rival Hilton moving down the chain scale into the “premium economy” category with its new Spark by Hilton brand, Marriott doesn’t have plans right now to go below “midscale,” Capuano said.

Marriott’s strong post-pandemic recovery is being richly rewarded. Capuano will become the company’s president as well as CEO as of February 24.


Daily Lodging Report

Essential industry news for hospitality and lodging executives in North America and Asia-Pacific. Delivered daily to your inbox.

Show Me More

Have a confidential tip for Skift? Get in touch

Tags: earnings, future of lodging, hotel earnings, marriott, Marriott International

Photo credit: The lobby of the JW Marriott Hotel Berlin, which opened in January 2023. Source: Marriott International.

Up Next

Loading next stories