Marriott: Q3 Corp. Transient Growth Slowed, Group Business ‘Accelerated Nicely’

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Marriott International’s corporate transient and group
business continue to show improvement during the recovery, but the latter took
a bit more of a hit during the third quarter, said Marriott CEO Anthony Capuano
on a Wednesday quarterly earnings call.

“In the U.S. and Canada, special corporate was the segment
most impacted by the delta variant during the quarter, given the delay in the
return to office timelines,” Capuano said, explaining that the company
identifies special corporate as business transient customers who book at
pre-negotiated rates. “The [segment] gives us the best indication of
business demand trends. Special corporate bookings showed steady recovery each
month this year until we saw a slight pullback in the back half of the third
quarter.”

Capuano added that the segment’s upward trajectory returned
in October with bookings versus 2019 growing each week during the month,
especially for certain verticals. “Accounting and consulting grew 35
percent over what we saw last month, and technology business grew about 31
percent versus last month,” he said. Overall, “special corporate
bookings are currently down less than 40 percent compared to the same time
frame in 2019.”

Based on conversations with corporate clients, Marriott
expects a recovery in business transient to gradually continue as more workers
return to the office, guest visitation policies are relaxed and a greater
number of employees are permitted to travel again. 

In addition, historically, Marriott’s business transient
business coming from small and midsize companies was about 60 percent of
business transient revenue. During the recovery, SMEs have been accounting for
about 75 percent of the company’s business transient revenue, Capuano said. As
a result, some of that SME business has been in more secondary and tertiary
markets, said Marriott CFO Leeny Oberg. “However, during the third
quarter, we saw the best improvement in our big cities in special corporate
that we’ve seen since the pandemic. So, it is absolutely moving in the right
direction, including those larger cities.”

Group on the Rise

Group business, meanwhile, “accelerated nicely”
during the quarter in the U.S. and Canada. “Group room revenues for the
quarter were down 46 percent versus the third quarter of 2019, a significant
improvement compared to the second quarter’s decline of 76 percent versus the
same time period in 2019,” Capuano said, adding that social groups were
particularly strong.

Further, U.S.-managed group bookings beat 2019 levels for
each of the last five months through October, as event-booking windows have
shortened during the pandemic, he said. “In-the-quarter-for-the-quarter
bookings in October were above [those] from October 2019 by over 30 percent,
which is the highest percentage increase we’ve seen since the beginning of the
pandemic.”

In line with other hotel company quarterly reports, group
average daily rates have continued to rise, and “for full-year 2022, it’s
currently pacing nearly 4 percent above pre-pandemic levels,” Capuano
said. 

Q3 Key Performance Metrics

Marriott’s third-quarter 2021 comparable systemwide revenue
per available room, adjusted for currency fluctuations, increased 118 percent worldwide,
135 percent in the U.S. and Canada, and 76 percent in all other markets year
over year. Compared with 2019, RevPAR declined 26 percent worldwide, 20 percent
in the U.S. and Canada, and 41 percent in all other markets. 

Worldwide occupancy was 58.2 percent for the quarter, up
23.4 percentage points from 2020. Average daily rate was $155.21, a 30.6
percent year-over-year increase. Both occupancy and ADR increased compared with
the first and second quarters of 2021, with ADR down only about 4.4 percent in
the third quarter compared with the third quarter of 2019, according to a
company filing with the U.S. Securities and Exchange Commission. 

“We’ve been very pleased to see rate almost back at
pre-pandemic levels in just 20 months,” Oberg said. “In comparison,
global ADRs have lagged the recovery in RevPAR in prior downturns, taking
around five years to rebound after the 2009 recession and around four years to
recover post 9/11.” 

The company reported more than $3.9 billion in revenues for
the quarter, compared with $2.3 billion one year ago. It also reported $220
million in net income versus $100 million in the third quarter of 2020. 

Guest-Room Growth

Marriott added approximately 17,500 rooms globally during
the third quarter, including more than 2,200 conversion rooms. “We’ve
already added more conversion rooms in the first nine months of this year than
we did in all of 2019,” Capuano said, adding that the company expects 2021
net rooms growth to be approximately 3.5 percent. 

As of Sept. 30, the company’s worldwide pipeline totaled
2,769 properties with nearly 477,000 rooms. More than 206,000 of those rooms
were under construction as of the end of the quarter.

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