Asia Pac rebound highlights Marriott’s earnings

BETHESA, Maryland - Marriott International posted solid 1Q24 results with a 4.2% worldwide gain in RevPAR driven by 11% increases international, including 17% year-over-year (YOY) growth in Asia Pacific, excluding China, and continued improvement in group business.

“In the U.S. & Canada, demand has normalized, with RevPAR increasing 1.5%, said President and CEO Anthony Capuano. “The group segment was the stand-out in the quarter. Group RevPAR in the region rose nearly 5% year-over-year, with growth in both rate and occupancy.”

Marriott is projecting 4% to 5% worldwide RevPAR growth for 2Q24 and 3% to 5% growth for the full year. Net rooms growth for the year stand at 5.5% to 6%. Gross fee revenue is projected at $1.340 to $1.355 billion for 2Q24 and from $5.180 to $5.280 billion for the full year.

In the U.S. & Canada, demand has normalized, with RevPAR increasing 1.5%. The group segment was the stand-out in the quarter. Group RevPAR in the region rose nearly 5% year-over-year, with growth in both rate and occupancy.

Anthony Capuano

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During the earnings call, Capuano highlighted that ADR increased around 3% in 1Q24 and occupancy reached almost 66%, up nearly 100 basis points year over year.

Group business, which comprised 24% of global nights in the first quarter was again the strongest customer segment. Compared to the year ago quarter group revenue rose 6% globally. For full year 2024, worldwide group revenues were pacing up 9% year over year at the end of the first quarter, with a 5% increase in room nights and a 4% rise in ADR.

Leisure transient accounted for 42% of worldwide room nights and Capuano said leisure demand and ADR growth have remained remarkably resilient, driving leisure RevPAR 4% year over year. Business transient which contributed the remaining 34% of global room nights in the first quarter had a 1% increase in RevPAR.

As a result of the resilient performance, Marriott is raising its full-year earnings guidance and now expect to return between $4.2 billion to $4.4 billion to shareholders in 2024.

Capuano also highlighted the nearly 37,000 rooms joining the system with the official launch of MGM Collection with Marriott Bonvoy. He said they have seen outstanding initial booking pace and loyalty point redemptions across the collection.

In full, the company added roughly 46,000 net rooms (including the MGM Collection) during the quarter and its pipeline totaled over 3,400 properties and nearly 547,000 rooms, including roughly 27,000 pipeline rooms approved, but not yet subject to signed contracts. More than 202,000 rooms in the pipeline were under construction as of the end of the first quarter. Net rooms growth in 1Q24 was +7.1% YOY, driven largely by MGM. At the end of the quarter, Marriott’s global system totaled nearly 8,900 properties, with more than 1,643,000 rooms.

Capuano added that Marriott will launch a conversion-friendly midscale brand in about a month. He also said in the U.S. and Canada, Marriott has commitments for about 140 Studio Res extended-stay properties and are actively working on deals for over 100 more. 

R.W. Baird analyst Michael Bellisario wrote that Marriott's 1Q24 results were in line to somewhat mixed versus expectations given several moving pieces in the P&L; softer-than-forecasted U.S. RevPAR growth (+1.5%) and better international RevPAR growth (+11%) were not unexpected outcomes. "Positively, better gross fee revenues were the fundamental upside driver for the quarter, but higher SG&A (-$21MM vs. our model) held back earnings versus Baird/Street expectations," he said.

Base management and franchise fees totaled just over $1 billion in the 1Q24, a 7% YOY increase. The increase is primarily attributable to RevPAR increases and unit growth.

Incentive management fees totaled $209 million in the 1Q24, a 4% YOY increase. Managed hotels in international markets contributed nearly two-thirds of the incentive fees earned in the quarter.

Marriott’s reported operating income totaled $876 million in the quarter, compared to $951 million a year ago. Reported net income totaled $564 million in the quarter, compared to $757 million a year ago. Diluted earnings per share totaled $1.93 in the quarter, compared to $2.43 in the year-ago quarter.

Adjusted operating income in totaled $952 million, compared to $941 million a year ago. First quarter 2024 adjusted net income totaled $620 million, compared to $648 million last year. Adjusted diluted EPS in 1Q24 totaled $2.13, compared to $2.09 in the year-ago quarter. The 2023 first quarter adjusted results excluded a special tax item of $100 million ($0.32 per share).

Adjusted EBITDA totaled $1.142 billion in 1Q24 compared to $1.098 million a year ago.