Marriott International, the world’s largest luxury hotelier, reported earnings this week that sent its share price down. But investors shouldn’t panic: the company met expectations on earnings, and only narrowly missed on revenues. Additionally, despite a drop in share price as a result, Marriott is still up by almost 20% over the course of the year. There is also an argument to be made that Marriott has been unlucky regarding revenue – and, looking forward, hopefully shouldn’t see a replay of the issues that caused the miss.
Marriott’s share price is up by almost 20% so far this year
Source: Yahoo Finance
Marriott met the Street’s expectations on profit, reporting adjusted earnings of $1.56 per share. Where it went wrong was top-line growth. Analysts had expected to see revenues stay more-or-less flat against last year’s figure, due to lower incentive management fees in North America and a fine over a recent data leak. However, the Street had hoped to see revenues of $5.5 billion – Marriott reported revenues of $5.3 billion… that’s a 2% contraction, year on year.
In the company’s press release, Arne M. Sorenson, Marriott’s president and CEO, praised “the resiliency of our business model and the strength of our brands.” He also chose to focus on the underlying strength of Marriott’s business, writing:
“Worldwide RevPAR increased 1.2 percent in the second quarter with higher leisure transient demand in Europe, the Caribbean and South America, and the Asia Pacific regions. Showing great momentum, our worldwide RevPAR index increased 110 basis points in the quarter, the strongest single quarter performance since our acquisition of Starwood in late 2016.”
He added: “Our owners and franchisees continue to sign new hotel deals at a rapid pace. Our development pipeline increased 3 percent in the second quarter, reaching a record 487,000 rooms, including roughly 213,000 rooms under construction. Today, our pipeline includes five new all-inclusive resorts to be built over the next several years, which will be part of our newly-launched all-inclusive platform. Recognizing the growing demand for all-inclusive lodging, our platform will create distinctive vacation experiences while leveraging existing brands in our luxury and full-service portfolio. We expect the platform will grow through both new-build properties and conversions of existing resorts, offering travellers yet another option for earning and redeeming Marriott Bonvoy points.”
Disclosure
Dominion holds Marriott International in its Global Trends Luxury Fund.
Author: Theo Leworthy
Disclaimer: The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Capital Strategies Limited or its related companies. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.
