Marriott International, Inc. (NASDAQ: MAR) today reported fourth quarter and full year 2022 results.
Anthony Capuano, Chief Executive Officer, said, “Our performance in 2022 was terrific. Just two years after experiencing the sharpest downturn in our company’s history, we reported record financial results. Our fee-driven, asset-light business model generated significant cash during the year, allowing us to both invest in the growth of our business and return $2.9 billion to shareholders.
“For the fourth quarter, worldwide RevPAR1 grew 5 percent compared to 2019, driven by a 13 percent increase in ADR. With the exception of Greater China, RevPAR in all regions more than fully recovered and continued to show meaningful advances in occupancy and ADR. Our international business posted RevPAR 3 percent above 2019 levels in the fourth quarter.
“In our largest region, the U.S. & Canada, RevPAR increased 5 percent over the 2019 quarter, driven by further improvement in occupancy and an 11 percent increase in ADR. Leisure demand remained robust and group demand more than fully recovered, leading to fourth quarter group revenues 10 percent above pre-pandemic levels. Business transient demand was at nearly 90 percent recovery in the quarter, while ADR was 3 percent above 2019. Our successful negotiation of high single-digit special corporate rate increases for 2023 bodes well for continued price strength.
“Owners and franchisees continue to show a strong preference for our brands. Our development team had an excellent year, signing nearly 108,000 rooms globally. We were pleased to see nearly 40 percent of those rooms in high value luxury and premium brands. With nearly 50 percent of rooms signed during the year in international markets, we look forward to further expanding our distribution and adding more options for our over 177 million Marriott Bonvoy members.
“As we look ahead, while concerns about the macroeconomic environment persist around the world, booking trends to date remain robust and we have significant momentum in our business. With our industry-leading brand portfolio, powerful loyalty program, the largest global rooms distribution, and our incredibly dedicated associates, Marriott is well-positioned for strong growth over the coming years as people around the world further embrace their love for travel.”
Fourth Quarter 2022 Results
Marriott’s reported operating income totaled $996 million in the 2022 fourth quarter, compared to 2021 fourth quarter reported operating income of $635 million. Reported net income totaled $673 million in the 2022 fourth quarter, compared to 2021 fourth quarter reported net income of $468 million. Reported diluted earnings per share (EPS) totaled $2.12 in the quarter, compared to reported diluted EPS of $1.42 in the year-ago quarter.
Adjusted operating income in the 2022 fourth quarter totaled $926 million, compared to 2021 fourth quarter adjusted operating income of $578 million. Fourth quarter 2022 adjusted net income totaled $622 million, compared to 2021 fourth quarter adjusted net income of $430 million. Adjusted diluted EPS in the 2022 fourth quarter totaled $1.96, compared to adjusted diluted EPS of $1.30 in the year-ago quarter.
Adjusted results 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 $945 million in the 2022 fourth quarter, compared to base management and franchise fees of $737 million in the year-ago quarter. The year-over-year increase in these fees is primarily attributable to RevPAR increases due to the continued recovery in lodging demand, as well as unit growth, partially offset by $16 million of unfavorable foreign exchange. Other non-RevPAR related franchise fees in the 2022 fourth quarter totaled $215 million, compared to $186 million in the year-ago quarter, largely driven by higher credit card branding fees.
Incentive management fees totaled $186 million in the 2022 fourth quarter, compared to $94 million in the 2021 fourth quarter. Fees in the quarter surpassed 2019 levels, with 60 percent earned in International markets.
Owned, leased, and other revenue, net of direct expenses, totaled $101 million in the 2022 fourth quarter, compared to $33 million in the year-ago quarter. The year-over-year increase in revenue net of expenses largely reflects the continued recovery in lodging demand and $21 million of higher termination fees.
General, administrative, and other expenses for the 2022 fourth quarter totaled $236 million, compared to $213 million in the year-ago quarter. The year-over-year change included an $18 million favorable litigation settlement in the 2021 fourth quarter.
Interest expense, net, totaled $107 million in the 2022 fourth quarter compared to $91 million in the year-ago quarter. The increase was largely due to higher interest expense associated with higher debt balances.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $1,090 million in the 2022 fourth quarter, compared to fourth quarter 2021 adjusted EBITDA of $741 million. See page A-12 for the adjusted EBITDA calculation.
Selected Performance Information
The company added 145 properties (22,589 rooms) to its worldwide lodging portfolio during the 2022 fourth quarter, including nearly 6,900 rooms converted from competitor brands and approximately 16,700 rooms in international markets. Eighteen properties (4,484 rooms) exited the system during the quarter. At the end of the year, Marriott’s global lodging system totaled nearly 8,300 properties, with over 1,525,000 rooms.
At the end of the year, the company’s worldwide development pipeline totaled 3,028 properties with more than 496,000 rooms, including 1,009 properties with approximately 199,000 rooms under construction, or 40 percent of the pipeline, and 133 properties with roughly 22,300 rooms approved for development, but not yet subject to signed contracts.
In the 2022 fourth quarter, worldwide RevPAR increased 28.8 percent (a 25.6 percent increase using actual dollars) compared to the 2021 fourth quarter. RevPAR in the U.S. & Canada increased 23.6 percent (a 23.3 percent increase using actual dollars), and RevPAR in international markets increased 45.1 percent (a 32.2 percent increase using actual dollars).
Balance Sheet & Common Stock
At year-end 2022, Marriott’s total debt was $10.1 billion and cash and equivalents totaled $0.5 billion, compared to $10.1 billion in debt and $1.4 billion of cash and equivalents at year-end 2021.
The company repurchased 8.7 million shares of common stock in the 2022 fourth quarter for $1.4 billion. For full year 2022, Marriott repurchased 16.8 million shares for $2.6 billion. Year to date through February 10, the company has repurchased 2.5 million shares for $400 million.
Company Outlook1
Results in the first quarter are expected to benefit significantly from the easier comparison to the 2022 quarter when the emergence of Omicron depressed lodging demand. Roughly halfway through the quarter, global booking trends remain robust. In January, worldwide RevPAR was up 51.6 percent year over year.
Given short-term booking windows and a high level of macroeconomic uncertainty, there is less visibility in forecasting the company’s financial performance for full year 2023. As a result, the company is providing a broad range of potential full year RevPAR and other key metrics in the following tables. The high end of the range reflects relatively steady global economic conditions throughout 2023, with continued resilience of travel demand across customer segments and markets. The low end of the range reflects a meaningful softening of the global economy beginning in the second quarter with worldwide RevPAR roughly flat compared to 2022 in the second half of the year.
[1] This outlook assumes that the $100 million City Express transaction closes in the first half of 2023.
[2] See pages A-13 & A-14 for the adjusted EBITDA calculations.
[3 ] Adjusted EBITDA and Adjusted EPS – diluted for first quarter and full year 2023 do not include cost reimbursement revenue, reimbursed expenses, restructuring, merger-related charges, and other expenses, or any asset sales that may occur during the year, each of which the company cannot forecast with sufficient accuracy, and which may be significant.
