Marriott International saw the largest increase in global demand since the pandemic began, with worldwide occupancy surging from 45% in January to 64% in March, less than 10 percentage points below the pre-pandemic levels, the company said in its 1Q22 report on Wednesday. Rates further strengthened, with net worldwide ADR for March surpassing March 2019 by 5%.
Strong demand trends continued in April, with the group anticipating leisure travel to remain robust, business travel to accelerate and cross border travel to gain momentum, supporting ADR performance. In the U.S. and Canada, the company reached a milestone in April as it estimated that RevPAR during the month fully recovered to 2019 levels.
“RevPAR in the U.S. and Canada for the remaining quarters of this year is expected to be roughly flat with 2019 levels. While there is currently more volatility in our international regions, assuming no major change in the global economic environment or the behavior of the virus, we are increasingly optimistic that the global RevPAR gap compared to pre-pandemic levels will continue to narrow meaningfully in 2022,” said Marriott International CEO Tony Capuano.
Comparable systemwide constant dollar RevPAR saw a dramatic increase of 96.5% globally, 99.1% in the U.S. and Canada and 88.5% in international markets, compared to the corresponding quarter in 2021. Comparable systemwide constant dollar RevPAR fell 19.4% globally, 14.5% in the U.S. and Canada and 31.7% in international markets compared to the first quarter in 2019.
RevPAR saw a significant improvement across the U.S. and Canada in February and March, especially in the urban markets, driven by occupancy and rate gains in all customer segments.
“Internationally, RevPAR gains were notable during the quarter in every region except for Greater China given the stringent travel restrictions resulting from the country’s dynamic zero-COVID policy. The Middle East and Africa region was again the furthest recovered, with first quarter RevPAR up 12% compared to 2019,” Capuano added.
Reported operating income totaled US$558 million, compared to 2021 first quarter reported operating income of US$84 million. Net income totaled US$377 million, compared to a reported net loss of US$11 million in the corresponding quarter in the previous year. First quarter adjusted net income stood at US$413 million, compared to first quarter 2021 adjusted net income of US$34 million. Adjusted EBITDA was US$759 million in the 2022 first quarter, compared to first quarter 2021 adjusted EBITDA of US$296 million.
According to Truist Securities, the adjusted EBITDA of US$759 million was well above their pre-earnings projection of US$688 million and consensus of US$657 million.
The company added around 11,800 rooms worldwide during the first quarter, including 5,300 rooms in international markets and over 2,500 conversion rooms. At the end of the quarter, Marriott’s global development pipeline stood at roughly 2,900 properties and over 489,000 rooms, including around 20,800 rooms approved but not yet subject to signed contracts. Approximately 201,400 rooms in the pipeline were under construction at the end of the quarter.
The company signed more than 19,000 rooms in the quarter, nearly half of which were in international markets. Conversions accounted for 22% of room additions in the quarter, of which about 80% were in the high-value upper upscale and luxury tiers. For the rest of the year, the company expects gross rooms growth to reach 5% and deletions of 1 to 1.5%, resulting in anticipated net rooms growth of 3.5 to 4%.
According to analyst R.W. Baird’s forecast, net unit growth outlook for 2022 remained unchanged at 3.5 to 4%, while development pipeline ticked higher, a 1% sequential improvement and now only around 5% below the watermark reached in early 2020.
Marriott’s better-than-expected 1Q22 report will support the bullish narrative, said Baird Equity Research. The company’s first quarter earnings were much ahead of forecasts, with the primary drivers being incentive management fee upside (+US$52 million vs. Baird’s model) and owned, leased, and other (net) profitability (+US$47 million vs. Baird’s model).
“The majority of the beat was due to the receipt of US$33 million of subsidies from international governments, which we did not include in our estimates. Overall, our model continues to have an upward bias to near-term fundamental operating assumptions and earnings estimates,” Baird’s report mentioned.
Marriott’s 2022 guidancee remains limited, said Truist Securities as they viewed the company’s heavier exposure to more volatile markets in Europe and Asia-Pacific as likely leading to its lack of resuming normal guidance.