Marriott points to rising demand amid Covid-19 vaccine rollout

Hotel chain swung to quarterly loss, though it saw demand in leisure travel pick up momentum.

A sign marks the location of a Marriott hotel in Chicago, Illinois. The hotel chain said first-quarter occupancy declined to 37.7%. Picture: AFP

Marriott International Inc. swung to a loss for the first quarter, though it pointed to rising demand in the U.S. and Canada, its largest region, as Covid-19 vaccine rollouts accelerated.

The hotel chain, whose portfolio encompasses more than 7,600 properties worldwide, saw demand in leisure travel pick up momentum, especially in ski and beach resort destinations, Chief Executive Anthony Capuano said.

Marriott also saw green shoots in special corporate and group bookings as companies slowly began their return to offices, though bookings in the U.S. and Canada for those categories remain below pre-pandemic levels, Mr. Capuano added.

The company on Monday posted a net loss of $US11 million, compared with a profit of $US31 million in the same period last year. Adjusted earnings were 10 cents a share, ahead of Wall Street estimates.

Revenue fell to $US2.32 billion from $US4.68 billion. Analysts polled by FactSet were looking for $US2.38 billion.

Comparable system-wide revenue per available room, a closely watched industry metric known as RevPAR, fell 46.3% to $US45.68 worldwide from a year earlier. Occupancy fell 15.3 percentage points to 37.7%.

In mainland China, occupancy reached 66% in March, almost the same as in March 2019 due to demand from both leisure and business travellers, Mr. Capuano said. In Europe, meanwhile, occupancy fell 33.5 percentage points to 13.1%, according to the company.

“While recovery trajectories vary from region to region, the resiliency of demand has been most keenly demonstrated in mainland China, where occupancy is near the pre-pandemic level,” Mr. Capuano said.

The company sees demand from business travellers accelerating in the fall as businesses reopen, though leisure bookings remain the main driver of recovery in the U.S., executives said on a conference call.

Marriott is keeping an eye on rising wages as demand recovers, Finance Chief Kathleen Oberg said. The annual wage inflation would risk cutting against some of the costs the company had saved, she said.

“I’d say roughly 50% of a full-service cost structure is related to labour, and we are watching that very carefully as we see demand come back,” Ms. Oberg said.

The company also has seen increases in labour and material costs for construction, Mr. Capuano added. Various productivity measures such as adjusted staffing levels at managed hotels will remain after the pandemic and could help offset wage inflation, Ms. Oberg said.

In March 2020, as U.S. lockdowns were beginning, Marriott furloughed about two-thirds of its 4,000 staff at the company’s Bethesda, Md., headquarters. It also furloughed about two-thirds of its corporate staff abroad and tens of thousands of hotel staff, from managers to housekeepers – some of whom aren’t expected to return.

Hotels, along with the broader hospitality sector, are facing challenges in hiring hourly workers. Hotel-management companies said they have offered higher wages, sign-on bonuses and more flexible work schedules to attract workers, among other measures. Failing to hire enough workers entails the risk of having to reduce stays amid surging demand, denting the path to recovery after the lodging industry went through its hardest year ever that saw shutdowns emptying hotel rooms.

Last week, rival Hilton Worldwide Holdings Inc. posted a quarterly loss of $US108 million as its chief executive said rising Covid-19 cases and tightened travel restrictions, especially in Europe and Asia Pacific, weighed on demand in January and February, though it saw improvement in March and April. Hyatt Hotels Corp. posted a wider quarterly loss of $US304 million.

The Wall Street Journal