Marriott International, Inc. has reported second quarter 2020 results, which were dramatically impacted by the COVID-19 global pandemic and efforts to contain it (COVID-19).
Arne M. Sorenson, president and chief executive officer of Marriott International, said, “While our business continues to be profoundly impacted by COVID-19, we are seeing steady signs of demand returning. Worldwide RevPAR[1] has climbed steadily since its low point of down 90 percent for the month of April, to a decline of 70 percent for the month of July. Worldwide occupancy rates, which bottomed at 11 percent for the week ended April 11, have improved each week, reaching nearly 34 percent for the week ended August 1. Currently, 91 percent of our worldwide hotels are now open compared to 74 percent in April, and 96 percent are open today in North America.”
“Greater China continues to lead the recovery. As of early May, all our hotels in the region are open, and occupancy levels are now reaching 60 percent, compared to 70 percent the same time last year, and a marked improvement from single-digit levels in February. While Greater China’s recovery was originally led by demand from leisure travelers, particularly in resorts and drive-to destinations, we are now seeing more widespread business demand, including some group activity,” he informed.
“Our pipeline remains strong with approximately 510,000 rooms, 45 percent of which are under construction. We are gratified to see owners continuing to choose our brands. In the first half of the year, we signed 30 percent more deals in the Asia Pacific region than we did in the same period last year. By the end of the second quarter, our rooms distribution around the world had grown by 4.1 percent, net, compared to one year prior. With the restrictions related to the pandemic slowing construction timelines, there is uncertainty surrounding future rooms growth. Given current trends, we estimate rooms could grow by 2 to 3 percent, net, for the full year,” said Sorenson.
“While the full recovery from COVID-19 will clearly take time, the current trends we are seeing reinforce our view that when people feel safe traveling, demand returns quickly. My thoughts continue to be with all who have been impacted by the pandemic,” he added.
Marriott’s reported operating loss totaled $154 million in the 2020 second quarter, compared to 2019 second quarter reported operating income of $409 million. Reported net loss totaled $234 million in the 2020 second quarter, compared to 2019 second quarter reported net income of $232 million. Reported diluted loss per share totaled $0.72 in the quarter, compared to reported diluted earnings per share (EPS) of $0.69 in the year-ago quarter. Reported results in the 2020 second quarter included impairment charges and bad debt expense of $77 million pretax ($61 million after-tax and $0.19 per share), related to COVID-19.
Adjusted operating loss in the 2020 second quarter totaled $109 million, compared to 2019 second quarter adjusted operating income of $786 million. Adjusted operating loss in the 2020 second quarter included impairment charges and bad debt expense of $60 million, related to COVID-19.
Second quarter 2020 adjusted net loss totaled $210 million, compared to 2019 second quarter adjusted net income of $525 million. Adjusted diluted loss per share in the second quarter totaled $0.64, compared to adjusted diluted EPS of $1.56 in the year-ago quarter. These 2020 second quarter adjusted results included impairment charges and bad debt expense of $54 million after-tax ($0.17 per share), related to COVID-19. Adjusted results exclude restructuring and merger-related charges, cost reimbursement revenue, and reimbursed expenses.Â
Base management and franchise fees totaled $222 million in the 2020 second quarter, compared to base management and franchise fees of $834 million in the year-ago quarter. The year-over-year decline in these fees is primarily attributable to RevPAR declines related to COVID-19 and a decrease in other non-RevPAR related franchise fees. Other non-RevPAR related franchises fees in the 2020 second quarter of $107 million declined $39 million compared to the year-ago quarter, largely due to lower credit card branding fees.
Incentive management fees totaled $12 million in the 2020 second quarter, compared to incentive management fees of $165 million in the year-ago quarter. The year-over-year decline in these fees is primarily attributable to lower net house profits at many hotels related to COVID-19. Most of the incentive management fees recognized in the quarter were earned at hotels in the Asia Pacific region.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $61 million in the 2020 second quarter, compared to second quarter 2019 adjusted EBITDA of $952 million. Second quarter 2020 adjusted EBITDA included $36 million of bad debt expense related to COVID-19.Â
The company added 75 new properties (11,407 rooms) to its worldwide lodging portfolio during the 2020 second quarter, including roughly 2,000 rooms converted from competitor brands and approximately 4,700 rooms in international markets. Eleven properties (2,669 rooms) exited the system during the quarter. At quarter-end, Marriott’s global lodging system totaled roughly 7,500 properties and timeshare resorts, with nearly 1,401,000 rooms.
At quarter-end, the company’s worldwide development pipeline totaled 2,997 properties with approximately 510,000 rooms, including 1,240 properties with over 230,000 rooms under construction and 164 properties with roughly 28,000 rooms approved for development, but not yet subject to signed contracts.
In the 2020 second quarter, worldwide RevPAR declined 84.4 percent (an 84.6 percent decline using actual dollars). North American RevPAR declined 83.6 percent (an 83.6 percent decline using actual dollars), and international RevPAR declined 86.7 percent (an 87.1 percent decline using actual dollars).
