Marriott: Delta variant hurt corporate travel more than groups

Marriott International’s corporate transient and group business continue to show improvement during the recovery, but the former took a bit more of a hit during the third quarter, said Marriott CEO Anthony Capuano on a Wednesday quarterly earnings call.

“In the U.S. and Canada, special corporate was the segment most impacted by the delta variant during the quarter, given the delay in the return to office timelines,” Capuano said, explaining that the company identifies special corporate as business transient customers who book at pre-negotiated rates. “The [segment] gives us the best indication of business demand trends. Special corporate bookings showed steady recovery each month this year until we saw a slight pullback in the back half of the third quarter.”

Capuano added that the segment’s upward trajectory returned in October with bookings versus 2019 growing each week during the month, especially for certain verticals. “Accounting and consulting grew 35% over what we saw last month, and technology business grew about 31% versus last month,” he said. Overall, “special corporate bookings are currently down less than 40% compared to the same time frame in 2019.”

Based on conversations with corporate clients, Marriott expects a recovery in business transient to gradually continue as more workers return to the office, guest visitation policies are relaxed and a greater number of employees are permitted to travel again. 

In addition, historically, Marriott’s business transient business coming from small and midsize companies was about 60% of business transient revenue. During the recovery, SMEs have been accounting for about 75% of the company’s business transient revenue, Capuano said. As a result, some of that SME business has been in more secondary and tertiary markets, said Marriott CFO Leeny Oberg. “However, during the third quarter, we saw the best improvement in our big cities in special corporate that we’ve seen since the pandemic. So, it is absolutely moving in the right direction, including those larger cities.”

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Group business on the rise

Group business, meanwhile, “accelerated nicely” during the quarter in the U.S. and Canada. “Group room revenues for the quarter were down 46% versus the third quarter of 2019, a significant improvement compared to the second quarter’s decline of 76% versus the same time period in 2019,” Capuano said, adding that social groups were particularly strong.

Further, U.S.-managed group bookings beat 2019 levels for each of the last five months through October, as event-booking windows have shortened during the pandemic, he said. “In-the-quarter-for-the-quarter bookings in October were above [those] from October 2019 by over 30%, which is the highest percentage increase we’ve seen since the beginning of the pandemic.”

In line with other hotel company quarterly reports, group average daily rates have continued to rise, and “for full-year 2022, it’s currently pacing nearly 4% above pre-pandemic levels,” Capuano said. 

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Q3 key performance metrics

Marriott’s third-quarter 2021 comparable systemwide revenue per available room, adjusted for currency fluctuations, increased 118% worldwide, 135% in the U.S. and Canada, and 76% in all other markets year over year. Compared with 2019, RevPAR declined 26% worldwide, 20% in the U.S. and Canada, and 41% in all other markets. 

Worldwide occupancy was 58.2% for the quarter, up 23.4 percentage points from 2020. Average daily rate was $155.21, a 30.6% year-over-year increase. Both occupancy and ADR increased compared with the first and second quarters of 2021, with ADR down only about 4.4% in the third quarter compared with the third quarter of 2019, according to a company filing with the U.S. Securities and Exchange Commission. 

“We’ve been very pleased to see rate almost back at pre-pandemic levels in just 20 months,” Oberg said. “In comparison, global ADRs have lagged the recovery in RevPAR in prior downturns, taking around five years to rebound after the 2009 recession and around four years to recover post 9/11.” 

The company reported more than $3.9 billion in revenues for the quarter, compared with $2.3 billion one year ago. It also reported $220 million in net income versus $100 million in the third quarter of 2020. 

  • Related: Hilton still waiting for large corporations to get back on the road

Guestroom growth

Marriott added approximately 17,500 rooms globally during the third quarter, including more than 2,200 conversion rooms. “We’ve already added more conversion rooms in the first nine months of this year than we did in all of 2019,” Capuano said, adding that the company expects 2021 net rooms growth to be approximately 3.5%. 

As of Sept. 30, the company’s worldwide pipeline totaled 2,769 properties with nearly 477,000 rooms. More than 206,000 of those rooms were under construction as of the end of the quarter.

Source: Business Travel News

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