Marriott International Inc joined its rival Hilton in raising its annual profit forecast on Thursday 3 November, aided by higher pricing and a strong rebound in leisure and business travel even as recession risks cloud consumer spending.
Marriott, which owns hotels like Sheraton, Westin and St. Regis, expects adjusted profit per share of between $6.51 and $6.58 this year, compared with its previous forecast of $6.33 to $6.59 per share.
"We expect continued demand growth around the world in the fourth quarter and anticipate that global RevPAR could increase 2 percent to 4 percent compared to 2019," Marriott CEO Anthony Capuano said.
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Pent-up desire to travel bolstered by a more powerful US dollar and flexible work arrangements have emboldened consumers and extended the travel season into the fall.
Upbeat earnings from Visa Inc and American Express further underscored the strength in U.S. consumer spending despite worries over inflation and rising interest rates.
Last week, Hilton also bumped its annual profit forecast.
RevPAR And Revenues
Marriott posted a 36.3% rise in its revenue per available room (RevPAR), a key measure for a hotel's top-line performance, for the quarter to 30 September, compared to a year earlier on a constant currency basis.
Marriott's revenues rose nearly 35% to $5.31 billion, falling slightly short of analysts' average estimate of $5.34 billion, as per Refinitiv data.
UPDATE 3-Marriot Shares Slide On Delayed Opening Of Some Properties In China
The above news was followed by the following update:
Marriott International Inc said on Thursday 3 November China's strict COVID-19 policies were delaying openings of some properties in the country, a key market for hotel operators, where pandemic recovery has been uneven compared to United States.
"The market in China is most certainly where we're seeing the most challenges," chief executive Anthony Capuano said during an analyst call.
Shares of the Sheraton-owner fell as much as 6% in morning trade. Revenue per available room (RevPAR) from Greater China was $64.06 in 2021 company-wide, behind US & Canada and Middle East & Africa.
US companies have had a tough time in dealing with China's zero-COVID policy this year, with some companies such as Tesla keeping workers isolated to keep factories running. Those involved in the real estate sector have also had to deal with a property crisis.
About 60% of Marriott's projects in the pipeline in China are in the luxury and upper upscale tier, which are significant money generators, Capuano said.
The company, however, continued to benefit from strong travel demand elsewhere despite economic headwinds, with Marriott joining its rival Hilton Worldwide Holdings Inc in raising its annual profit forecast on Thursday 3 November.
"Looking forward we expect that the recession will mute, but not derail, growth in the U.S. hotel industry. This may, in fact, be the first recession where GDP declines while RevPAR continues to grow," said Jan Freitag, CoStar Group's national director of hospitality analytics.
Marriott now expects 2022 adjusted profit per share of between $6.51 and $6.58, compared with its previous forecast of $6.33 to $6.59 per share.
For the quarter through September, Marriott posted a 36.3% rise in RevPAR at $120.60, compared to a year earlier on a constant currency basis.
Its revenues rose nearly 35% to $5.31 billion, falling slightly short of analysts' average estimate of $5.34 billion, as per Refinitiv data.
Adjusted profit per share was $1.69, one cent above expectations.