Marriott International, Inc., (NASDAQ: MAR) today reported third quarter 2022 results.
Anthony Capuano, Chief Executive Officer, said, “We are very pleased to report another quarter of outstanding results. Global RevPAR1 more than fully recovered, rising nearly 2 percent above 2019. In the third quarter, RevPAR compared to 2019 improved sequentially from the second quarter in every region around the world.
“In the U.S. & Canada, our largest region, RevPAR exceeded 2019 levels by 3.5 percent in the third quarter. Occupancy in the region has been rising throughout the year, reaching 72 percent in September, just 2 percentage points below the same month in 2019. Leisure transient demand remained very robust, and group RevPAR more than fully recovered to 2019 levels in the quarter. Business transient demand, though still lagging in recovery, continued to improve.
“Our EMEA and CALA regions posted nearly 10 percent and 18 percent third quarter RevPAR growth over 2019, respectively. Demand in these regions was boosted by the strong U.S. dollar and the ramping of cross-border travel.
“In mid-October, we announced that we signed an agreement to acquire the City Express brand portfolio, marking our entry into the affordable midscale segment. We see meaningful opportunities to further expand the brand in the CALA region and globally, as we have successfully done with other brand acquisitions. Upon closing, we look forward to offering our guests more stay options and our owners and franchisees new opportunities to grow their portfolios.
“Our award-winning loyalty program, Marriott Bonvoy, hit 173 million members at the end of September. During the quarter, Bonvoy member penetration achieved record highs, reaching 60 percent in the U.S. & Canada and 53 percent globally. Co-brand cardholder acquisitions and total card spending worldwide have continued to grow meaningfully, increasing our third quarter co-brand card fees more than 20 percent compared to the year-ago quarter.
“While we are carefully monitoring macroeconomic trends, bookings across all our customer segments remain strong, contributing to the ongoing momentum in our business. We expect continued demand growth around the world in the fourth quarter and anticipate that global RevPAR could increase 2 percent to 4 percent compared to 2019.
“With our solid financial results and strong cash generation, we have already returned $1.9 billion to shareholders year-to-date through October 31. For full year 2022, we now expect to return more than $2.7 billion to our shareholders through dividends and share repurchases.”
Third Quarter 2022 Results
Marriott’s reported operating income totaled $958 million in the 2022 third quarter, compared to 2021 third quarter reported operating income of $545 million. Reported net income totaled $630 million in the 2022 third quarter, compared to 2021 third quarter reported net income of $220 million. Reported diluted earnings per share (EPS) totaled $1.94 in the quarter, compared to reported diluted EPS of $0.67 in the year-ago quarter.
Adjusted operating income in the 2022 third quarter totaled $815 million, compared to 2021 third quarter adjusted operating income of $527 million. Adjusted operating income in the 2021 third quarter excluded impairment charges of $11 million.
Third quarter 2022 adjusted net income totaled $551 million, compared to 2021 third quarter adjusted net income of $327 million. Adjusted diluted EPS in the 2022 third quarter totaled $1.69, compared to adjusted diluted EPS of $0.99 in the year-ago quarter. The 2022 third quarter adjusted results excluded special tax items of $30 million ($0.09 per share) and a $2 million ($0.01 per share) gain on an investee’s property sale. The 2021 third quarter 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.
Adjusted results also excluded cost reimbursement revenue, reimbursed expenses and restructuring, merger-related charges, and other expenses. See pages A-3 and A-12 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 $953 million in the 2022 third quarter, compared to base management and franchise fees of $723 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, as well as unit growth. Other non-RevPAR related franchise fees in the 2022 third quarter totaled $192 million, compared to $173 million in the year-ago quarter, largely driven by higher credit card branding fees.
Incentive management fees totaled $106 million in the 2022 third quarter, compared to $53 million in the 2021 third quarter. Roughly two-thirds of the incentive management fees recognized in the quarter were earned at hotels in international markets.
Owned, leased, and other revenue, net of direct expenses, totaled $44 million in the 2022 third quarter, compared to $37 million in the year-ago quarter. The year-over-year increase in revenue net of expenses largely reflects the ongoing recovery in lodging demand, partially offset by $23 million of lower termination fees and a $19 million accrual related to a portfolio of 12 leased hotels in the U.S. & Canada.
Depreciation, amortization, and other expenses for the 2022 third quarter totaled $50 million, compared to $64 million in the year-ago quarter. Expenses in the 2021 third quarter included an $11 million impairment charge.
General, administrative, and other expenses for the 2022 third quarter totaled $216 million, compared to $212 million in the year-ago quarter.
Interest expense, net, totaled $93 million in the third quarter compared to $99 million in the year-ago quarter. The decrease is largely due to lower interest expense associated with lower debt balances.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $985 million in the 2022 third quarter, compared to third quarter 2021 adjusted EBITDA of $683 million. See page A-12 for the adjusted EBITDA calculation.
Selected Performance Information
The company added 77 properties (14,071 rooms) to its worldwide lodging portfolio during the 2022 third quarter, including nearly 3,900 rooms converted from competitor brands and approximately 8,700 rooms in international markets. Thirty-five properties (7,440 rooms) exited the system during the quarter, including roughly 5,200 rooms in Russia. At quarter end, Marriott’s global lodging system totaled nearly 8,200 properties, with over 1,507,000 rooms.
At quarter end, the company’s worldwide development pipeline totaled 3,024 properties with more than 502,000 rooms, including 1,039 properties with approximately 204,800 rooms under construction, or 41 percent of the pipeline, and 233 properties with roughly 33,300 rooms approved for development, but not yet subject to signed contracts.
In the 2022 third quarter, worldwide RevPAR increased 36.3 percent (a 33.4 percent increase using actual dollars) compared to the 2021 third quarter. RevPAR in the U.S. & Canada increased 28.5 percent (a 28.3 percent increase using actual dollars), and RevPAR in international markets increased 66.1 percent (a 51.0 percent increase using actual dollars).
Balance Sheet
At quarter end, Marriott’s net debt was $8.4 billion, representing total debt of $9.4 billion less cash and cash equivalents of $1.0 billion. At year-end 2021, the company’s net debt was $8.7 billion, representing total debt of $10.1 billion less cash and cash equivalents of $1.4 billion.
In the third quarter, the company issued $1.0 billion of Series JJ Senior Notes due in 2027 with a 5.00 percent interest rate coupon.
Marriott Common Stock
Year-to-date through October 31, the company has repurchased 11.1 million shares for $1.7 billion at an average price of $153.21 per share.
2022 Outlook1
The change in expected gross rooms growth compared to the company’s prior guidance primarily reflects lengthened construction timelines in Greater China resulting from extended lockdowns.
Marriott International, Inc., (NASDAQ: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, November 3, 2022, at 8:00 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 November 2, 2023.
The telephone dial-in number for the conference call is US Toll Free: +1 (888) 632-3384, or Global: +1 (785) 830-7975. The conference ID is MAR3Q22. A telephone replay of the conference call will be available from 1:00 p.m. ET, Thursday, November 3, 2022, until 8:00 p.m. ET, Thursday, November 10, 2022. To access the replay, call US Toll Free: +1 (800) 695-2533 or Global: +1 (402) 530-9029.
[1] The outlook provided above assumes that the $100 million City Express transaction does not close before year-end 2022.
[2] The anticipated deletions rate includes 50bps related to the company’s suspension of its operations in Russia.
[3] See pages A-13 & A-14 for the adjusted EBITDA calculation.
[4] Adjusted EBITDA and Adjusted EPS – diluted for fourth quarter and full year 2022 do not include cost reimbursement revenue, reimbursed expenses, or restructuring, merger-related charges, and other expenses, each of which the company cannot forecast with sufficient accuracy, and which may be significant, and do not reflect any asset sales that may occur during the remainder of the year. Adjusted EPS – diluted for full year 2022 excludes impairments, gains on investees’ property sales, gains on asset dispositions, and special tax items reported in the first three quarters of 2022. See page A-3 for the Adjusted EPS – diluted calculation for the first three quarters of 2022.
[5] Assumes the level of capital return to shareholders noted above.
[6] Investment spending includes capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities.
[7] Assumes the level of investment spending noted above and no asset sales that may occur during the remainder of the year.
