Marriott International has made a significant adjustment to its full-year earnings outlook following a disappointing performance in the second quarter. The company's revised estimate indicates that it expects adjusted earnings for 2024 to be in the range of $9.23 to $9.40 per share, a decrease from the previously anticipated range of $9.31 to $9.65.
This news sparked a sharp decline in Marriott's stock, which fell by 6% during Wednesday's trading session. Analysts, on the other hand, had been predicting adjusted earnings of $9.44 per share, signifying an area of notable concern for investors. A critical metric for the hospitality industry, global revenue per available room (RevPAR), which is a key indicator of hotel performance, has also been adjusted downward.
Marriott forecasts RevPAR growth at only 3% to 4%, notably lower than the prior expectations that reached up to 5%. This unsettling forecast becomes particularly pointed when considering the impact of market dynamics in China, where Chief Financial Officer Leeny Oberg elaborated on an earnings call that the company anticipates experiencing negative RevPAR in the region for the remainder of the year.
Oberg emphasized that weak demand and pricing trends are expected to persist, particularly as the third quarter approaches, coinciding with summer travel peaks. The company is anticipating that RevPAR will remain more robust in most of its international markets compared to the US and Canada. Oberg noted that overall trends in RevPAR for these domestic markets are projected to remain stable through the latter half of the year, mirroring the performance seen in the first six months.
Furthermore, Marriott achieved adjusted earnings per share (EPS) of $2.50 for the quarter ending June 30, an increase from $2.26 in the previous year, surpassing Wall Street's expectations of $2.48. Revenue grew by 6%, totaling $6.44 billion, though it fell short of the Street’s estimate of $6.47 billion.
Notably, global RevPAR surged by 4.9%, driven largely by a substantial 17% increase in the Middle East and Africa, while a decline of 4.6% was evident in China, contrasting with a 12% rise in the Asia Pacific region excluding China. In the US and Canada, RevPAR increased by 3.9% in this quarter, and Marriott expanded its global footprint by adding approximately 15,500 net rooms during the same period.
Capuano, the CEO of Marriott, expressed confidence in the company’s future trajectory, highlighting the impressive signing activity sourced from international markets, particularly in Asia Pacific and China, which has boosted its overall pipeline to over 559,000 rooms. He noted that conversions, including multi-unit opportunities remain a vital component of the company’s growth strategy as owners continue to see significant value in Marriott’s robust brand portfolio.
Looking ahead, Marriott anticipates adjusted EPS for the upcoming three-month period to fall between $2.27 and $2.33, just below Wall Street's forecast of $2.35. The company projects worldwide RevPAR to grow between 3% to 4%. In a move to enhance customer engagement, the Marriott Bonvoy travel program recently announced an exciting partnership with Starbucks, the global coffee leader, aimed at providing additional benefits to its loyalty members.
According to Capuano, the collaboration has already exceeded expectations, with a notable number of members linking their accounts to unlock combined benefits..