During Marriott International’s Q2 2018 earnings call on Tuesday, CEO Arne Sorenson was asked, with NH Hotel in play, is Marriott ready to consider another acquisition? “Our share of the global hotel business is not that huge,” Sorenson said. “There’s plenty of opportunity.”
The message: don’t count out giant Marriott as a merger and acquisition player as it moves further down the path toward more fully absorbing its Starwood Hotels & Resorts acquisition.
Sorenson added that Sheraton is making progress with three-quarters of the properties on their way to meeting brand standards. For the other quarter, the company is in discussions with owners about investment. “We feel good about momentum to get renovations completed and see the average experience move materially,” he said.
In addition, a London pilot in home sharing has been well received. The portfolio there involves 200 homes that are larger than the studio apartments typical in home sharing. “The loyalty customers like it, and it’s a leisure buy,” Sorenson said. The average stay at five nights is longer than anticipated.
Adjusted for one-time items, Marriott second quarter earnings per share rose 56% to $1.73 per from $1.11 a share in the year-ago quarter. The company raised its forecast for full-year adjusted profit to $5.81 to $5.91 from $5.43 to $5.55 previously.
Revenues increased to $5.35 billion but fell short of Wall Street’s estimate of $5.84 billion, which sent shares lower by nearly 3% in trading Tuesday. SunTrust Robinson Humphrey analyst C. Patrick Scholes said in a research note that the market overreacted to the miss on revenues, which was due to cost reimbursement revenues, a largely profit-neutral line item.
In the quarter, RevPAR rose 3.8% worldwide, 5.7% outside North America and 3.1% in North America. The company kept its full-year forecast for worldwide RevPAR to increase 3% to 4% worldwide, including 2% to 3% in North America and 5% to 6% outside the continent.
In response to further analyst questions, Sorenson said the property deletion rate of 2% this year is higher than usual as it completes workouts of legacy Starwood properties. In the second quarter, the company removed 18 older properties as contracts expired and reinvestment didn’t make sense. Of those, 30% of the rooms were damaged by hurricanes and earthquakes and could be reinstated later. He expects the company to return to a 1% to 1.5% deletion rate—“2% is not the new expectation,” he said.
The other big talking point for Marriott surrounded its soon-to-be combined loyalty program, which launches August 18.
Marriott anticipates members will earn 20% more points for every dollar spent. CEO Arne Sorenson said members will find it easier to redeem points, achieve elite status and book stays across the portfolio.
All 6,700 properties will be available on a single platform and searchable through Marriot apps, “so travelers will no longer have to toggle back and forth,” Sorenson said. The three names (Marriott, Ritz-Carlton and Starwood) will remain for now, but will be replaced by a single name in early 2019, Sorenson added.
Credit card partners JPMorganChase and American Express are offering updated co-branded credits cards, offering more perks and ways to earn points. Marriott expects to receive an increase in contributions from credit cards, Sorenson said.
When the Starwood merger closed, loyalty members were concerned about protecting their benefits, such as late checkout. “We added that that benefit to the Marriott side,” Sorenson noted, which gave confidence to the Starwood members. “The community is responding well to it.”