BETHESDA, Maryland—Marriott International President and CEO Arne Sorenson began the company’s fourth-quarter and full-year earnings call by recognizing there’s still a lot of unknowns surrounding the impact of coronavirus (COVID-19).
However, he said he is certain that consumer confidence will return once the virus runs its course.
“Clearly this is a major humanitarian crisis, and our thoughts are with the many people impacted,” he said. “As the virus emerged in Wuhan earlier this year, our teams assisted guests and provided support for associates whose lives have been significantly disrupted. I couldn’t be prouder of our associates in the Asia/Pacific region who have worked tirelessly.”
Sorenson said Marriott began to see impact of coronavirus on business in mid-January, with occupancy declines gradually spreading from Wuhan, China, to other markets in the Asia/Pacific region.
Leeny Oberg, Marriott EVP and CFO, said despite the unknown, impact will “not be long-lasting” following the virus.
“We enter 2020 with tremendous competitive momentum in (revenue per available room), unit growth, brand strength and an industry-leading loyalty program,” she said. “This momentum will carry us through this crisis and beyond.”
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RevPAR at Marriott destinations in Greater China declined almost 90% in February, Sorenson said, compared to the same period last year. At the end of 2019, Marriott had 375 properties with roughly 122,000 rooms across Greater China, representing 9% of its totally global rooms, he said.
Around 90 of those properties are currently closed due to coronavirus, he said.
“Obviously the weekend news around coronavirus (spreading to Italy, South Korea and Iran) was not good. We don’t have anything in Iran, so there’s no measurable impact there,” he said. “But we’re just days into it.”
Throughout the duration of the virus, he said his team has been coming together by phone and collecting performance data as well as listening to customers. Sorenson said the Chinese government is trying to ramp some things back up.
For example, in Macau, occupancy was down 1% to 2%, he said. Marriott “may now be at 17% occupancy,” in Macau, though that’s still down massively year over year.
Sorenson said he would not be surprised if some projects and hotel openings are delayed in China. However, neither he nor Oberg expect Marriott or its owners will receive business disruption proceeds.
Of the 375 hotels that Marriott opened in China as of year-end 2019, Sorenson knows of only one that is not owned by a Chinese investor, he said. Many of those hotels are Chinese government-owned, he said. There’s also a number of them owned by substantial real estate companies.
Marriott will continue to waive cancellation fees through 15 March for guests with reservations at its hotels in Greater China, as well as for guests in Greater China with reservations at Marriott destinations globally, Sorenson said.
Financial performance, highlights
During the fourth quarter, Marriott reported 2019 worldwide comparable systemwide RevPAR rose 1.1% on a constant collar basis, North American RevPAR grew 0.9% and RevPAR outside of North America increased 2.2%, according to a company earnings release.
Looking specifically at the Asia/Pacific region, RevPAR increased 0.3% in Q4 to $107.28, Oberg said.
For full-year 2020, Marriott is anticipating comparable systemwide RevPAR on a constant-dollar basis will be flat to up 2% worldwide, while RevPAR growth in North America is expected to range in the middle of that. This outlook does not reflect impact of coronavirus, Sorenson noted.
Adjusted earnings before interest, taxes, depreciation and amortization totaled $901 million in Q4, which is a 4% increase compared to the prior year, the release states. Marriott’s total debt was $10.94 billion and cash balances were $225 million at year-end 2019, compared to $9.34 billion in debt and $316 million of cash the year prior.
Marriott added more than 78,000 rooms across the globe in 2019. As of the end of 2019, the company’s worldwide development pipeline was nearly 3,050 hotels. More than 220,000 rooms in the pipeline were under construction at the end of last year.
Sorenson said the company’s development team signed 815 hotel agreements in 2019 for a record 136,000 rooms. Each of Marriott’s international regions set records in organic signings, he said.
As of press time, Marriott was trading at $119.64 per share, down 21% year to date. The Baird/STR Hotel Stock Index was down 20% for the same time period.