Marriott International has 630 million reasons to celebrate this week, but the company's top executives note how quickly the company's good financial fortune could change.
Marriott, the world's largest hotel company, reported a $630 million third quarter profit Thursday and said it had fully recovered from the swine flu.
It is good news for the company behind the brands that include Residence Inn and TownePlace Suites, as well as Ritz-Carlton and St. Hyatt made a 28 million profit for the same time period. A $346 million third quarter profit was reported byHilton, Marriott's main competitor.
Even though the industry is making money, layoffs and hiring freezes continue to grip Silicon Valley and tech industry darlings. The global economy is expected to go into a recession.
Marriott's top executives admitted Thursday that economic conditions could change the company's recovery momentum in a hurry.
Anthony Capuano, Marriott's CEO, said on an investor call that the company is closely monitoring consumer and macroeconomic trends. Transient booking windows are only about three weeks so trends could change quickly.
It is one of the more somber economic takes the company has given recently. Despite the strong third quarter financial showing, Marriott's stock price was down 4% on Thursday.
Capuano said the company isn't seeing any signs of a slowdown in travel demand and spending at Marriott-affiliated hotels.
We haven't seen signs of a decline in lodging demand. He said that they had seen the opposite. Booking trends are still very healthy. Despite high levels of employment and a high level of consumer savings, travel spending has been unaffected.
You can sign up for our newsletter.
Marriott continues to recover from higher hotel rates. Occupancy rates for the company averaged 69% in the third quarter, but daily rates were 10% higher than in the year before. It gets even better when you break it down by region.
Group booking rates for stays were higher this year than they were in the previous year.
In the U.S. and Canada, the average daily rate was 15% more expensive than it was in 2019.
Leeny Oberg, Marriott's chief financial officer, said that overall performance across all types of hotels, from luxury to extended stay, was more fully recovered for the first time. Marriott has hotels in Europe, the Middle East, Africa, the Caribbean and Latin America.
There is optimism surrounding the reopening of Japan, but Asia Pacific lags behind.
Oberg said that there is a fair amount of uncertainty about the possible recession because of the Fed's continued rise in rates. I think we have some things in our business that will lead us to confidence in the future.
Marriott's top leaders might be hedging against the possibility of an economic downturn next year, but they are still bullish on the company's Bonvoy loyalty program and credit card spending.
By the end of the third quarter, Marriott Bonvoy had grown to 173 million members, and the company is trying to keep them happy with direct booking options. Roughly two-thirds of reservations for the Ritz-Carlton Yacht are coming through direct booking, according to Capuano. The Ritz-Carlton Yacht has Bonvoy memberships.
A record number of Marriott co- branded credit cards entered the system. The Marriott Bonvoy Bevy American Express Card and Marriott Bonvoy Boundless Bountiful Card should help drive strong growth going forward.
Marriott's credit card fees are higher this year than they were a year ago. There is a nice safety net offered by that type of trend.
Oberg said that the credit card fees have grown more than hotel-related fees because of the steady growth in credit card spend. We are looking at the growth of non-hotel performance fees in the coming years.
Marriott is in the process of acquiring Mexico-based City Express, an affordable mix of hotels across the Caribbean and Latin America. Marriott would become the largest hotel company in the region, as well as a lower priced entry point for travelers looking to book a hotel stay.
The moderately priced mid-scale space has a lot of growth potential.
The company is exploring the possibility of taking the City Express brand to other parts of the world, similar to how it made the more European focused AC Hotels a global brand after taking a stake in it in 2011.
We will evaluate the applicability of this platform as to whether it makes sense to roll out some or all of the sub- brand once we close.