Anthony Capuano, President and Chief Executive Officer, said, “With continued momentum in demand for global travel, we posted another quarter of outstanding results. Second quarter worldwide RevPAR increased 13.5 percent, aided by significant growth in all of our international regions, where RevPAR rose 39 percent. Greater China rebounded quickly once travel restrictions were lifted in January, with second quarter RevPAR surpassing pre-pandemic levels.
“In the U.S. & Canada, RevPAR increased 6 percent, with many urban markets showing impressive growth in the second quarter. Within customer segments, group once again performed extremely well, with revenue rising 10 percent above 2022. Business transient revenue also saw strong year-over-year growth, driven by solid average daily rate growth. Leisure transient revenue rose as well, albeit more slowly, as more travelers from the region chose to visit overseas destinations.
“Our growth strategies are proving successful. During the quarter, we added approximately 33,100 rooms to our system, including 17,300 City Express rooms in the Caribbean & Latin America region, and our industry-leading pipeline grew to nearly 547,000 rooms, with more than 240,000 global rooms under construction. In June, we announced our planned entry into the affordable midscale extended stay space in the U.S. & Canada. Initial owner interest in our new offering has been tremendous.
“Just a few weeks ago, we announced our long-term strategic licensing agreement with MGM Resorts International and the creation of MGM Collection with Marriott Bonvoy. This transaction is consistent with our strategy to pursue deals that meet customer needs, increase our distribution, and enhance the value of Marriott Bonvoy, our powerful loyalty platform. We are excited to have 17 iconic MGM Resorts properties available on our robust digital channels beginning later this fall and to dramatically increase our footprint in Las Vegas, an important, high-barrier-to-entry U.S. market. With this deal, our 2023 full year net rooms growth expectation is now 6.4 percent to 6.7 percent.
“While conditions could change rapidly, booking trends remain solid. We are raising our full year rooms growth and earnings guidance and now expect to return $4.1 billion to $4.5 billion to shareholders in 2023.”
Second Quarter 2023 Results
Marriott’s reported operating income totaled $1,096 million in the 2023 second quarter, compared to 2022 second quarter reported operating income of $950 million. Reported net income totaled $726 million in the 2023 second quarter, compared to 2022 second quarter reported net income of $678 million. Reported diluted earnings per share (EPS) totaled $2.38 in the quarter, compared to reported diluted EPS of $2.06 in the year-ago quarter.
Adjusted operating income in the 2023 second quarter totaled $1,043 million, compared to 2022 second quarter adjusted operating income of $857 million. Second quarter 2023 adjusted net income totaled $690 million, compared to 2022 second quarter adjusted net income of $593 million. Adjusted diluted EPS in the 2023 second quarter totaled $2.26, compared to adjusted diluted EPS of $1.80 in the year-ago quarter. The 2022 second quarter adjusted results excluded $13 million ($11 million after-tax and $0.03 per share) of gains on investees’ property sales and a $2 million ($2 million after-tax and $0.01 per share) gain on an asset disposition.
Adjusted results also excluded cost reimbursement revenue, reimbursed expenses and merger-related charges and other expenses. See pages A-3 and A-11 for the calculation of adjusted results and the manner in which the adjusted measures are determined in this press release.
Base management and franchise fees totaled $1,057 million in the 2023 second quarter, a 13 percent increase compared to base management and franchise fees of $938 million in the year-ago quarter. The increase is primarily attributable to RevPAR increases and unit growth.
Incentive management fees totaled $193 million in the 2023 second quarter, a 43 percent increase compared to $135 million in the 2022 second quarter. Managed hotels in international markets contributed 61 percent of the fees earned in the quarter.
Owned, leased, and other revenue, net of direct expenses, totaled $103 million in the 2023 second quarter, compared to $83 million in the year-ago quarter. The year-over-year change largely reflects improved performance at owned and leased hotels. Results in the 2022 quarter included a $12 million expense accrual related to a portfolio of 12 leased hotels in the U.S. & Canada.
General, administrative, and other expenses for the 2023 second quarter totaled $240 million, compared to $231 million in the year-ago quarter.
Interest expense, net, totaled $141 million in the 2023 second quarter, compared to $89 million in the year-ago quarter. The increase was largely due to higher interest expense associated with higher debt balances.
Equity in earnings for the second quarter totaled $7 million, compared to $15 million in the year-ago quarter. Equity in earnings in the 2022 second quarter included $13 million of gains on joint ventures’ sales of hotels.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $1,219 million in the 2023 second quarter, compared to second quarter 2022 adjusted EBITDA of $1,019 million. See page A-11 for the adjusted EBITDA calculation.
Selected Performance Information
Marriott added 254 properties (33,097 rooms) to its worldwide lodging portfolio during the 2023 second quarter, including 17,300 rooms associated with the City Express transaction and roughly 11,200 other rooms in international markets. The company also added more than 2,800 conversion rooms. Seventeen properties (1,995 rooms) exited the system during the quarter. At the end of the quarter, Marriott’s global lodging system totaled nearly 8,600 properties, with over 1,565,000 rooms.
At the end of the quarter, the company’s worldwide development pipeline totaled 3,149 properties with nearly 547,000 rooms, including 199 properties with roughly 31,500 rooms approved for development, but not yet subject to signed contracts. The pipeline includes 1,066 properties with more than 240,000 rooms under construction, or 44 percent, including approximately 37,000 rooms from the MGM Resorts deal.
In the 2023 second quarter, worldwide RevPAR increased 13.5 percent (a 12.7 percent increase using actual dollars) compared to the 2022 second quarter. RevPAR in the U.S. & Canada increased 6.0 percent (a 5.7 percent increase using actual dollars), and RevPAR in international markets increased 39.1 percent (a 36.0 percent increase using actual dollars).
Balance Sheet & Common Stock
At the end of the quarter, Marriott’s total debt was $11.3 billion and cash and equivalents totaled $0.6 billion, compared to $10.1 billion in debt and $0.5 billion of cash and equivalents at year-end 2022.
Year to date through July 28, the company has repurchased 13.6 million shares for $2.3 billion.
The company’s updated guidance for full year 2023 reflects relatively steady global economic conditions through the remainder of 2023, with continued resilience in travel demand. RevPAR growth is expected to remain higher internationally than in the U.S. & Canada, where there has been a return to more normal seasonal patterns, and year-over-year RevPAR growth is stabilizing.
Adjusted EBITDA and Adjusted EPS – diluted for third quarter and full year 2023 do not include cost reimbursement revenue, reimbursed expenses, merger-related charges and other expenses, special tax items, or any asset sales that may occur during the year, each of which the company cannot forecast with sufficient accuracy and without unreasonable efforts, and which may be significant. Adjusted EPS – diluted for full year 2023 excludes a special tax item of $100 million reported in the first half of 2023. See page A-3 for the Adjusted EPS – diluted calculation for the first half of 2023.
Assumes the level of capital return to shareholders noted above.
Investment spending includes capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities.
Assumes the level of investment spending noted above and that no asset sales occur during the remainder of the year.
Marriott International, Inc. (NASDAQ: MAR) will conduct its quarterly earnings review for the investment community and news media on Tuesday, August 1, 2023, at 8:30 a.m. Eastern Time (ET). The conference call will be webcast simultaneously via Marriott’s investor relations website at http://www.marriott.com/investor, click on “Events & Presentations” and click on the quarterly conference call link. A replay will be available at that same website until August 1, 2024.
The telephone dial-in number for the conference call is US Toll-Free: 800-267-6316, or Global: +1 203-518-9783. The conference ID is MAR2Q23. A telephone replay of the conference call will be available from 1:00 p.m. ET, Tuesday, August 1, 2023, until 8:00 p.m. ET, Tuesday, August 8, 2023. To access the replay, call US Toll Free: 800-839-3736 or Global: +1 402-220-2978.
All occupancy, Average Daily Rate (ADR) and RevPAR statistics and estimates are systemwide constant dollars. Unless otherwise stated, all changes refer to year-over-year changes for the comparable period. Occupancy, ADR and RevPAR comparisons between 2023 and 2022 reflect properties that are comparable in both years. Occupancy, ADR and RevPAR comparisons between 2023 and 2019 reflect properties that are defined as comparable as of June 30, 2023, even if they were not open and operating for the full year 2019 or they did not meet all the other criteria for comparable in 2019. Unless otherwise stated, all comparisons to pre-pandemic or 2019 are comparing to the same time period each year.