• Marriott confident after Q4 tightens

Marriott International said it had seen the market strengthen at the start of the year, after trading fell in the fourth quarter as a result of strikes in North America.
The company said that it had increased its direct digital bookings and looked to further growth in its relaunched loyalty programme.
Arne Sorenson, president & CEO, told analysts: “We’ve now seen in January and February the market strengthen. We’ve seen our corporate clients particularly get a little less fearful, a little less anxious. And therefore, in comparison to where we were before, it feels a bit better than it did a quarter ago.”
Commenting on the position in the cycle, the CEO added: “I don’t know of a turndown in the lodging business which has been caused by supply. In every instance in my 22 years, it has been driven by a weakening in the demand side of the equation. Supply growth is at average levels, we haven’t seen the kind of peak supply that we did in the last two growth cycles, which maybe means that to the extent we get a weakening demand environment, it might not be as bad.”
Commenting on last year’s data breach, Sorenson said that it had been “encouraging” to hear the CEO of American Express note on a recent earnings call that his firm had seen no appreciable spike in credit card fraud resulting from the incident. Sorenson said that Marriott International was no longer using the legacy Starwood reservation system and had implemented additional security measures on the Marriott network. He did not believe there had been any material revpar impact, adding: “We really did not see any move by customers in response”.
The now-combined and renamed loyalty system, Marriott Bonvoy, had, Sorenson said, been adding an average of 1.5 million members per month. In 2018, reward redemptions increased 8% year-on-year and room nights sold to members increased 6%, members contributing roughly half of room nights in 2018.
Sorenson said that the group had reduced the amount of discounting at legacy Starwood hotels, and across the system, increased the proportion of bookings coming from the digital channels, increasing direct digital room nights worldwide by 11%, reaching 28% of all bookings while OTA’s share of bookings remained flat.
The CEO had no update on the group’s negotiations with Expedia.
The company signed agreements for 125,000 rooms in 2018, equivalent to nearly 10% of its existing portfolio, taking its pipeline up to 478,000 rooms, with 214,000 of those rooms already under construction.
At year end, the group’s market share of worldwide open rooms was 7%, with its market share of STR’s worldwide under construction pipeline was 20%, rising to 36% in the US.
Just over 100 hotels left the Marriott system in 2018, with the deletion rate for legacy Marriott product at 1.3% of total rooms and 2.5% at former Starwood hotels. Sorenson said that deletions were expected to drop to between 1% and 1.5% of rooms in 2019, resulting in net system growth of roughly 5.5%.
Marriott’s worldwide system-wide revpar increased by 1.3% in the fourth quarter, up 4% outside North America and rising by 0.2% within, which Sorenson largely attributed to strikes at a number of the company’s properties, largely former Starwood hotels which, he said, tended to be more unionised. For the full year, the group reported revpar up 2.6% worldwide, 5.5% outside North America and 1.5% within. For the first quarter, the company expected North America revpar to increase 1% to 2%, reflecting the impact of the government shutdown offset by a favourable calendar comparison. Outside North America, revpar growth was expected to “moderate slightly” in the first quarter due to the slower economic growth outlook in the Asia Pacific region.
Adjusted Ebitda was up 11% for the full year, to USD3.47bn, with the company looking to USD3.62bn to USD3.72bn, or 4% to 7% up on 2018.
The company said that it was hopeful of further asset sales this year, with 14 hotels remaining under ownership. and was due to update further on its strategy at its analysts’ day on 18th March.

HA Perspective [by Katherine Doggrell]: Sorenson made much of Marriott International nestled safely under its new loyalty programme (although wouldn’t be drawn on the name and how it had been conjured). The company was now positioned to be marketed as a whole, so going up to 35 brands would not, he said, make any difference. Not, analysts were told, that anyone was to get any ideas about more brands being added.
For owners, the news was that Marriott was delivering direct. It would not be drawn on how much business the OTAs were still responsible for, just that the usual increase hadn’t happened. The even better news was that the cost of the programme had fallen, aided by the integration and by co-branded credit card agreements. Sorenson said that he believed the cost of the loyalty programme was “the lowest among our competitors in the hotel business while delivering the highest value to guests”.
The proof will be in the imminent downturn, because if Marriott and its 125 million members can’t make it worth, it’s hard to imagine that anyone can. The group said that over 9,900 rooms had converted from competitor brands in 2018. As conditions tighten, the success of Bonvoy should drive this figure upwards.

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