Home Hospitality Marriott reports Q3 net income of $220M

Marriott reports Q3 net income of $220M


Marriott International Inc., in the third quarter ended Sept. 30, reported net income of $220 million, compared with net income of $100 million in the same period last year. Comparable systemwide, constant-dollar RevPAR increased 118.4% worldwide, 134.7% in the U.S. & Canada and 76.3% in international markets, compared to the same period last year.

“We were pleased to see continued meaningful improvement in global trends in the third quarter, despite the impact of the Delta variant during the second half of the quarter,” said Anthony Capuano, CEO. “For the quarter, worldwide RevPAR was down 26% compared to the 2019 third quarter, a significant improvement from the second-quarter RevPAR decline of 44% compared to the same quarter in 2019. Third-quarter occupancy topped 58%, driven largely by continued strength in leisure demand. ADR, which was only 4% below 2019 levels for the quarter, has been recovering much more quickly than in the past two downturns.”

Third-quarter highlights:

  • Comparable systemwide, constant dollar RevPAR declined 25.8% worldwide, 19.9% in the U.S. & Canada and 40.7% in international markets, compared to the 2019 third quarter.
  • Reported diluted EPS totaled $0.67, compared to reported diluted EPS of $0.31 in the year-ago quarter. Adjusted diluted EPS totaled $0.99, compared to third-quarter 2020 adjusted diluted EPS of $0.13.
  • Net income totaled $220 million, compared to reported net income of $100 million in the year-ago quarter. Adjusted net income totaled $327 million, compared to third-quarter 2020 adjusted net income of $44 million.
  • Adjusted EBITDA totaled $683 million, compared to third-quarter 2020 adjusted EBITDA of $327 million.
  • The company added roughly 17,500 rooms globally during the third quarter, including approximately 8,500 rooms in international markets and a total of more than 2,200 conversion rooms.
  • At the end of the quarter, Marriott’s worldwide development pipeline totaled 2,769 properties and nearly 477,000 rooms, including roughly 25,000 rooms approved, but not yet subject to signed contracts. More than 206,000 rooms in the pipeline were under construction as of the end of the quarter.

“Most of our regions saw considerable improvement in RevPAR in the third quarter compared to the second quarter,” said Capuano. “In our largest region, the U.S. & Canada, third-quarter RevPAR came in 20% below the same quarter in 2019, compared to down 40% in the second quarter versus the same quarter in 2019. Europe saw a dramatic rise in demand in the quarter, as many key international borders opened, with 2021 RevPAR compared to 2019 improving to down 44% from down 77% in the second quarter. ADR for the region trailed third-quarter 2019 levels by just 5%.”

He added, “Globally, leisure travel generally remained very strong throughout the quarter, while the Delta variant had the most impact on business transient demand. With the worst of the Delta variant wave now hopefully behind us, business transient demand picked up again in October, a trend we expect to continue.”

Third-quarter results
Marriott’s reported operating income totaled $545 million in the quarter, compared to 2020 third-quarter reported operating income of $252 million. Reported net income totaled $220 million in the quarter, compared to 2020 third-quarter reported net income of $100 million. Reported diluted earnings per share (EPS) totaled $0.67 in the quarter, compared to reported diluted EPS of $0.31 in the year-ago quarter.

Adjusted operating income in Q3 totaled $527 million, compared to Q3 2020 adjusted operating income of $179 million. Adjusted operating income in the 2021 third quarter and the 2020 third quarter excluded impairment charges of $11 million and $32 million, respectively.

Q3 adjusted net income totaled $327 million, compared to Q3 2020 adjusted net income of $44 million. Adjusted diluted EPS in the quarter totaled $0.99, compared to adjusted diluted EPS of $0.13 in the year-ago quarter. The Q3 adjusted results excluded a $122 million after-tax ($0.37 per share) loss on the extinguishment of debt and $8 million after-tax ($0.02 per share) of impairment charges. The Q3 adjusted results excluded $24 million after-tax ($0.07 per share) of impairment charges.

Base management and franchise fees totaled $723 million in the quarter, compared to base management and franchise fees of $366 million in the year-ago quarter. The year-over-year increase in these fees is primarily attributable to RevPAR increases due to the ongoing recovery in lodging demand. Other non-RevPAR related franchise fees in the quarter totaled $173 million, compared to $119 million in the year-ago quarter, aided by higher credit card and residential branding fees.

Incentive management fees totaled $53 million in the quarter, compared to $31 million in the 2020 third quarter. Hotels in international markets earned $36 million of the fees in the quarter.

Contract investment amortization for the quarter totaled $21 million, compared to $48 million in the year-ago quarter. The year-over-year change largely reflects impairments of investments in management and franchise contracts related to COVID-19 recorded in the 2020 third quarter.

Owned, leased and other revenue, net of direct expenses, totaled a profit of $37 million in the quarter, compared to an $18 million loss in the year-ago quarter, and reflected the ongoing recovery in lodging demand.

Depreciation, amortization and other expenses for the quarter totaled $64 million, compared to $53 million in the year-ago quarter. Expenses in the quarter included an $11 million impairment charge.

General, administrative and other expenses for the quarter totaled $212 million, compared to $131 million in the year-ago quarter. The year-over-year increase primarily reflects higher compensation costs compared to 2020 cost reduction measures, which included reducing executive compensation, implementing reduced work weeks for many of our corporate associates and furloughing a substantial number of associates.

Selected performance information
The company added 114 properties (17,456 rooms) to its worldwide lodging portfolio during the quarter, including more than 2,200 conversion rooms and approximately 8,500 rooms in international markets. Twenty properties (5,414 rooms) exited the system during the quarter. At quarter end, Marriott’s global lodging system totaled 7,892 properties, with nearly 1.46 million rooms.

At quarter’s end, the company’s worldwide development pipeline totaled 2,769 properties with nearly 477,000 rooms, including 1,028 properties with more than 206,000 rooms under construction and 155 properties with roughly 25,000 rooms approved for development, but not yet subject to signed contracts.

“Throughout the pandemic, we have worked closely with our owners and franchisees to drive revenue and lower costs,” said Capuano. “And we’re seeing the benefits of this work in our development activity. Third quarter year-to-date room signings, nearly one-third of which were conversions, increased nearly 30% year-over-year, and our pipeline remains the largest in the industry. With more than 40% of our pipeline rooms in the luxury and upper-upscale tiers, we believe we also have the most valuable pipeline in the industry. Finally on the development front, with more clarity around our estimated full year deletions, we now expect 2021 net rooms growth will be approximately 3.5%.”

In the 2021 third quarter, worldwide RevPAR increased 118.4% (a 120.7% increase using actual dollars) compared to the 2020 third quarter. RevPAR in the U.S. & Canada increased 134.7% (a 135.4% increase using actual dollars), and RevPAR in international markets increased 76.3% (an 81.8% increase using actual dollars).

Balance sheet and liquidity
At quarter’s end, Marriott’s net debt was $9.0 billion, representing total debt of $9.8 billion less cash and equivalents of $0.8 billion. At year-end 2020, the company’s net debt was $9.5 billion, representing total debt of $10.4 billion less cash and equivalents of $0.9 billion.

In the quarter, the company issued $700 million of Series II Senior Notes due in 2033 with a 2.75% interest rate coupon.

In September, Marriott completed a cash tender offer and retired $1.0 billion aggregate principal amount of Series EE Senior Notes maturing in 2025 with a 5.75% interest rate coupon. The company used proceeds from the Series II Senior Notes offering and cash on hand to complete the repurchase of such notes, including the payment of accrued interest and other costs incurred.

Investment spending
Marriott now anticipates that full-year 2021 investment spending will total $525 million to $550 million. Total investment spending includes capital and technology expenditures, loan advances, contract acquisition costs and other investing activities.

“We’re proud of the dedication and perseverance our associates have demonstrated over the past year and a half, as they navigated the most challenging environment we have ever faced,” said Capuano. “With global trends improving, we believe we are well-positioned for growth as the global recovery continues. We are very optimistic about our future.”



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