China aside, APAC markets shine in 2Q24 for Marriott

BETHESDA, Maryland — Marriott International reported second quarter 2024 results with net rooms up 6% year over year and worldwide RevPAR growth of 4.9%.

International RevPAR increased 7.4% with Asia Pacific, excluding China, posting a 13% RevPAR increase from the year-ago quarter. Japan led the APAC data with a 21% increase in RevPAR, whereas China was -4% in the quarter. Marriott expects further weakness in China for the rest of 2024, especially during the third quarter.

In the U.S. and Canada, second quarter RevPAR grew 3.9% with all customer segments growing versus the prior year quarter. Group RevPAR rose nearly 10% year over year, with both rate and occupancy increasing in the mid-single digits. Overall, Marriott expects performance to be "steady" in the U.S and Canada in the second half of the year.

Marriott signed nearly 31,000 rooms in the quarter, 75% of which were in international markets. Conversions accounted for 37% of room additions in the quarter and Marriott President and CEO Anthony Capuano said their expectation for net rooms growth remains at 5.5% to 6% for full year 2024.

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In Europe, the Middle East and Africa, RevPAR grew by nearly 10%, while the Caribbean and Latin America saw 9% growth.

For the quarter, ADR increased by about 3% and occupancy reached 73%, up about 150 basis points year over year.

Marriott’s reported operating income totaled $1.195 billion in the second quarter, compared to $1.096 billion a year ago. Reported diluted earnings per share (EPS) totaled $2.69 in the quarter, compared to reported diluted EPS of $2.38 in the year-ago quarter.

Marriott’s updated outlook includes a narrowing of the RevPAR growth range for full year 2024 to 3% to 4% versus 3% to 5% previously, primarily as a result of a weaker operating environment in Greater China, as well as marginally softer expectations in the U.S. and Canada.

R.W. Baird analyst Michael Bellisario noted that Marriott reduced full-year 2024 guidance (1%-2% lower vs. prior guide) despite the 2Q24 headline earnings beat, which was driven by lower G&A and better owned/leased/other earnings. “Overall, earnings estimates will come down a bit to reflect the reduced 2H24 outlook; slower domestic RevPAR trends, Greater China, and incentive fees will be in focus, in our view,” Bellisario said.

The company added roughly 15,500 net rooms during the quarter. At the end of the quarter, Marriott’s global system totaled nearly 9,000 properties, with roughly 1,659,000 rooms.

Marriott signed nearly 31,000 rooms in the quarter, 75% of which were in international markets. Conversions accounted for 37% of room additions in the quarter and Marriott President and CEO Anthony Capuano said their expectation for net rooms growth remains at 5.5% to 6% for full year 2024.

At the end of the quarter, the company’s worldwide development pipeline totaled 3,509 properties with more than 559,000 rooms, including 208 properties with roughly 33,000 rooms approved for development, but not yet subject to signed contracts. The quarter-end pipeline included 1,127 properties with over 209,000 rooms under construction. Fully, 57% of rooms in the quarter-end pipeline are in international markets.

Marriott repurchased 1 million shares of common stock for $1 billion in the second quarter. It has already returned $2.8 billion to shareholders year-to-date through July 29 and expects to reach approximately $4.3 billion return by year end through share repurchases and dividends.

Base management and franchise fees totaled $1.148 billion in the 2Q24, a 9% increase compared to the year-ago quarter.  Marriott said the increase is primarily attributable to RevPAR increases and unit growth.

Incentive management fees totaled $195 million in the 2Q24, compared to $193 million in the 2Q23, and were impacted by weaker results in Greater China, as well as unfavorable foreign exchange. Managed hotels in international markets contributed more than 60% of the incentive fees earned in the quarter.

Owned, leased, and other revenue, net of direct expenses, totaled $99 million in the 2024 second quarter, compared to $103 million in the year-ago quarter.