Marriott International (MAR -1.01%), a leading hospitality company known for its diverse hotel and lodging brands, released its third-quarter earnings on Nov. 4. The results highlighted a mixed performance with revenue expanding by 5.6% to reach $6.255 billion, showcasing year-on-year growth.
Despite this, the company's diluted EPS came in at $2.07, missing analysts' expectations of $2.31. The quarter displayed robust progress in international markets with revenue per available room (RevPAR) growth of 5.4%, although the U.S. and Canada only saw a 2.1% increase.
Overall, the third quarter reflected a blend of successful international expansion set against the backdrop of domestic challenges.
| Metric | Q3 2024 | Estimate | Q3 2023 | % Change |
|---|---|---|---|---|
| Revenue (in billions) | $6.255 | -- | $5.928 | 5.6% |
| Diluted Earnings Per Share (EPS) | $2.07 | $2.31 | $2.51 | -17.6% |
| Adjusted Diluted EPS | $2.26 | -- | $2.11 | 7.1% |
| Net Income (in millions) | $584 | -- | $752 | -22.3% |
Source: Marriott International. Analyst estimates for the quarter provided by FactSet.
Understanding Marriott's Business Model and Strategy
Marriott International is a major player in the global hospitality industry, operating with an asset-light model, which means it focuses on management and franchising rather than owning properties. This model allows Marriott to scale quickly and maintain flexibility, reducing its risk associated with real estate investments. The company earns revenue through various streams, including base management fees, incentive management fees, and franchise fees, which together enhance its financial stability while mitigating costs associated with property ownership.
A key focus for Marriott has been expanding its brand portfolio and enhancing customer loyalty through Marriott Bonvoy, which now accounts for a significant portion of its bookings. With over 210 million members, Marriott Bonvoy has become a crucial driver of repeat business and brand loyalty.
Quarterly Highlights: Financial and Strategic Performance
During the third quarter, Marriott International showed resilience amid challenges. Total revenue rose by nearly 6% from the previous year, underpinned by a solid 3% gain in global RevPAR. While EPS of $2.07 missed the mark, the company's adjusted EPS stood at $2.26, up 7% from the prior year, pointing to positive underlying adjustments.
International RevPAR performance demonstrated significant strength, notching a 5.4% increase with strong showings in Europe, Latin America, and the Asia Pacific region - excluding China. However, the U.S. and Canada lagged with modest RevPAR growth of 2.1%. Despite these regional differences, Marriott continued to thrive globally due to its strong brand recognition and loyalty program engagement.
The company expanded its room capacity by adding approximately 16,000 new rooms and maintaining a robust growth pipeline, with 585,000 rooms underway, half of which are planned for international markets. Franchise and management fees rose 7%, a testament to Marriott's successful execution of its asset-light strategy.
Marriott also reported a net income decrease -- to $584 million from $752 million a year earlier -- but the hotel chain still managed to return $3.9 billion to shareholders through dividends and share repurchases, showcasing its strong capital management. Operating costs saw an increase due to higher general administrative expenses, signaling areas for cost reform in the upcoming quarters.
Looking Ahead: Strategic Outlook and Initiatives
Looking forward, Marriott projects its global room count to grow by 6.5% for all of 2024, with stable RevPAR growth expected in upcoming quarters. Despite geopolitical and economic uncertainties, the company remains optimistic about its international expansion and technological innovations aimed at improving operation efficiencies.
CEO Anthony Capuano highlighted initiatives to further reduce costs by $80-90 million annually starting in 2025. This aligns with Marriott's strategic focus on enhancing operational efficiency and adapting to the evolving market landscape. Significant investments in technology and digital platforms are expected to drive future growth, strengthening its competitive position in the hospitality sector.
