Group continues to drive Marriott performance

BETHESDA, Maryland – Led by a 10% jump in global group business, Marriott International reported third quarter 2024 results that included a 3% increase in global RevPAR (5.4% internationally and 2% in the U.S. and Canada), while ADR was up 2.3%.

Marriott President and CEO Anthony Capuano added that group business is on pace to rise 8% for full year 2024, while RevPAR for the business transient segment continued to grow nicely in the quarter. He said leisure transient RevPAR was flat year over year, but still well ahead of pre-pandemic levels.

Marriott is forecasting 2% to 3% RevPAR growth for 4Q24. For FY24, RevPAR growth guidance is unchanged at 3% to 4%, but gross fee revenues and earnings are coming down.

Through the first three quarters of 2024, Marriott signed more than 95,000 organic rooms, with greater than half outside the U.S. & Canada. More than 40% of signed rooms are conversions, and Capuano cited momentum with multi-unit opportunities.

Net rooms grew nearly 6% over the last four quarters, and Marriott’s development pipeline reached a record 585,000 rooms at the end of September. It now expects full year 2024 net rooms growth to be around 6.5%.

The company added roughly 16,000 net rooms during the quarter. At the end of the quarter, Marriott’s global system totaled nearly 9,100 properties, with roughly 1,675,000 rooms.

At the end of the quarter, the company’s worldwide development pipeline totaled 3,802 properties with approximately 585,000 rooms, including 232 properties with roughly 34,000 rooms approved for development, but not yet subject to signed contracts. The quarter-end pipeline included 1,320 properties with more than 220,000 rooms under construction. Fifty-six percent of rooms in the quarter-end pipeline are in international markets.

“Our business momentum is excellent, and we continue to evolve our business to support our numerous global growth opportunities. To that end, we have undertaken a comprehensive initiative to enhance our effectiveness and efficiency across the company,” Capuano added. “At this point in the process, we expect this initiative to yield $80 million to $90 million of annual general and administrative cost reductions beginning in 2025. In addition, we expect this work to deliver cost savings to our owners and franchisees.

Marriott returned $3.7 billion to shareholders through share repurchases and dividends in the first nine months of the year, and now expect to return approximately $4.4 billion for the full year 2024.

Deeper results

Base management and franchise fees totaled $1.124 billion in the 2024 third quarter, a 7% increase in the year-ago quarter. Marriott said the increase is primarily attributable to RevPAR increases and unit growth, as well as higher residential and co-branded credit card fees.

Incentive management fees totaled $159 million in the 2024 third quarter, an 11% increase compared to $143 million in the 2023 third quarter. Managed hotels in international markets contributed roughly 70% of the incentive fees earned in the quarter.

General, administrative, and other expenses for the 2024 third quarter totaled $276 million, compared to $239 million in the year-ago quarter. The year-over-year change largely reflects a $19 million operating guarantee reserve for a U.S. hotel, which was negotiated in connection with the company’s acquisition of Starwood, and an $11 million litigation reserve.

“The headline will read as an earnings miss, but that is due to higher cash G&A,” said R.W. Baird analyst Michael Bellisario. “Looking beyond the headline, Marriott’s operating performance was in line with to slightly ahead of expectations, in our view. Fourth quarter earnings guidance is modestly below Baird/Street expectations, and estimates (inclusive of the 3Q24 headline miss) will need to come down a bit.”

Marriott’s reported operating income totaled $944 million in the 2024 third quarter, compared to $1.099 billion a year ago. Reported net income totaled $584 million in the 2024 third quarter, compared to $752 million last year. Reported diluted earnings per share (EPS) totaled $2.07 in the quarter, compared to $2.51 in the year-ago quarter.

Adjusted operating income in the 2024 third quarter totaled $1.017 billion, compared to $959 million a year ago. Third quarter 2024 adjusted net income totaled $638 million, compared to $634 million last year. Adjusted diluted EPS in the 2024 third quarter totaled $2.26, compared to $2.11 in the year-ago quarter.

EBITDA totaled $1.229 billion in the 2024 third quarter, compared to $1.142 billion last year.