JW Marriott Goa recently debuted in India Marriott big beat in Q1; announcing midscale extended-stay brandBy Jeffrey Weinstein | May 2, 2023Share Strong RevPAR growth, especially in Asia Pacific, drives results; big beat on fees propels profitability. BETHESDA, Maryland – Led by a 34.3% year over year (YOY) increase in worldwide RevPAR, which was buoyed by the lifting of travel restrictions in Asia Pacific, Marriott International beat the Street with its 1Q23 earnings report.At the same time Marriott President and CEO Anthony Capuano announced during the earnings call that within a few weeks, Marriott will announce for the U.S. market a simple, modern, streamlined new-build extended-stay product with very basic services and amenities for consumers looking for longer stays at a midscale price point.For 1Q, Capuano stated Marriott saw solid demand across the leisure and group segments, while business transient demand continued to improve. ADR in the U.S. rose 10% YOY, aided by higher special corporate negotiated rates and 15% growth in group ADR. “Worldwide occupancy reached 65%, 11 percentage points higher than a year ago, and global ADR grew 11%, demonstrating our continued focus on driving rate,” Capuano said.Worldwide occupancy reached 65%, 11 percentage points higher than a year ago, and global ADR grew 11%, demonstrating our continued focus on driving rate.Anthony CapuanoShare this quoteInternational RevPAR for Marriott rose a remarkable 63% YOY with ADR rising 16% and occupancy reaching 64% -- an 18 percentage point improvement versus the prior year quarter. Greater China was 95% recovered to pre-pandemic levels in the quarter, and mainland China was more than recovered. “This is all the more notable given this demand of the quarter was overwhelmingly driven by domestic travelers [in China], as international airlift was still less than 20% of 2019 capacity at the end of March,” said Marriott EVP and CFO Leeny Oberg.While macro-economic uncertainty persists, Marriott said it has not weighed on travel demand to date. “In fact, demand continue to rise across all customer segments in the quarter forward bookings are solved,” Capuano added. “So, our transient booking window still has short term at around three weeks, so trends could change relatively quickly.”R.W. Baird analyst Michael Bellisario wrote, “The better-than-forecasted international performance led to a significant positive variance to incentive management fees (+$53 million vs. our model), which continues to be the upside driver in Marriott's earnings model.”Marriott’s pipeline grew to approximately 502,000 rooms (3,060 hotels), up 2.6% YOY. Conversion activity remained healthy, accounting for 29% of rooms signed and 25% of rooms opened in the quarter. Roughly 200,000 rooms in the pipeline were under construction as of the end of the first quarter. Capuano added that Marriott still expects net rooms growth of 4% to 4.5% for full year 2023.With near-term booking trends remaining robust, Marriott raised its RevPAR guidance from 6% to 11% to 10% to 13% for the full year, including 10% to 12% growth worldwide for 2Q23. Marriott added that given short-term booking windows and a high level of macroeconomic uncertainty, there is less visibility in forecasting the company’s financial performance for the second half of 2023.The news comes one day after Marriott officially brought City Express into its brand fold, adding some 17,000 rooms and what Capuano said is “meaningful opportunity to both expand the [midscale] brand further in CALA and introduce it in other regions.”More basics:* First quarter reported diluted EPS totaled $2.43, compared to reported diluted EPS of $1.14 in the year-ago quarter. First quarter adjusted diluted EPS totaled $2.09, compared to first quarter 2022 adjusted diluted EPS of $1.25;* First quarter reported net income totaled $757 million, compared to reported net income of $377 million in the year-ago quarter. First quarter adjusted net income totaled $648 million, compared to first quarter 2022 adjusted net income of $413 million;* Adjusted EBITDA totaled $1,098 million in the 2023 first quarter, compared to first quarter 2022 adjusted EBITDA of $759 million;* The company added approximately 11,000 rooms globally during the first quarter, including roughly 5,800 rooms in international markets and more than 2,700 conversion rooms.