Comment: Marriott results illustrate competence
GlobalData travel & tourism analyst Ralph Hollister looks at the recent performance of Marriott International
12 May 2020
Marriott significantly missed already lowered estimates for first-quarter profit. Alike its competitors, bookings plunged in the later stages of Q1 as restrictions on movement became more draconian around the globe. Factors that contributed to the loss that were specific to Marriott included guaranteed reserves of $148m, as well as impairment charges and bad-debt expenses.
Although adjusted earnings of $0.26 per share severely lagged estimates, a total revenue of $4.7bn beat forecasts with franchise fees coming in at $415m, which was down 8% year-on-year (YOY). Marriott now places a strong emphasis on franchising, which has allowed the company to mitigate some of the impact of COVID-19. Wyndham has also achieved damage limitation this way, its asset-light select service franchise business model has put the company in a better position to deal with the impact of COVID-19. There are fewer fixed costs associated with this model.
Marriott’s system-wide RevPAR plunged 22.5%, which is very similar to declines experienced by Hilton (22.6%), Wyndham (23%) and IHG (25%). This similarity may point to the fact that these companies have not sacrificed pricing power in order to stimulate any remaining demand that may have been present.
In terms of net earnings, Marriott reported at total of $31m, Hilton turned a profit of $18m and Wyndham announced a net income of $22m. With the lowest RevPAR decline and highest net earnings in relation to its close rivals, Marriott looks to be in a solid position to navigate through this pandemic.
Q2 results will reveal the full impact of COVID-19, all major companies advised that their Q2 numbers would look worse. It’s likely to be the worst quarter of the year due to an almost global restriction on domestic and international travel in this period. Hilton has already reported a system wide RevPAR decline of roughly 90% for April.
Ralph Hollister is an analyst in the travel and tourism division at GlobalData. He specialises in the creation of thematic reports, mainly in relation to major technology themes in the tourism industry. Additionally, he produces PR insight in regards to breaking stories in travel & tourism and outlines key trends in travel, especially in niche/emerging forms of tourism.