Marriott's Middle East room revenue fell 43 percent in the quarter, and that one region was enough to turn its whole international book negative
Forty-three percent. That is how far Marriott's Middle East revenue per available room fell in the second quarter, on the company's own systemwide constant dollar basis.
It was enough to move the whole company's regional picture. EMEA RevPAR fell more than 5 percent even though Europe grew, and international RevPAR came in at minus 0.5 percent against 5.0 percent growth in the United States and Canada. Worldwide RevPAR still rose 3.4 percent. Anthony Capuano, the chief executive, attributes the international decline to what he calls headwinds from the conflict in the Middle East, which he says more than offset solid growth across the other international regions.
Elsewhere the reading is ordinary. Asia Pacific excluding China rose over 5 percent. Greater China rose over 3 percent, which Capuano puts down to the luxury portfolio and to Hong Kong, Taiwan and Hainan.
The quarter
Reported diluted earnings per share came in at $2.90 and adjusted diluted EPS at $3.19. Reported net income was $766m, adjusted net income $844m, and adjusted EBITDA $1,592m.
Franchise and base management fees reached $1,366m, up 14 percent from $1,200m. The company names higher co-branded credit card fees first among the drivers, ahead of rooms growth and RevPAR. Incentive management fees were $212m against $200m, and managed hotels outside the United States supplied more than half of them.
Owned, leased and other revenue net of the matching expense fell to $49m from $78m. Marriott attributes most of that to a $27m property-related litigation accrual, worth $20m after tax and 8 cents a share, and to lower termination fees.
Rooms
Marriott added roughly 17,900 net rooms in the quarter, taking net rooms growth to 4.5 percent year on year. The development pipeline reached a record of nearly 4,200 properties and about 629,000 rooms, with 44 percent of pipeline rooms under construction, a figure that includes hotels pending conversion.
The company repurchased 3.0 million shares for $1.1bn during the quarter. Through 29 July it had returned about $2.6bn to shareholders this year.
The raise
Full year worldwide RevPAR guidance goes up to 3.0 to 3.5 percent, with 3.5 to 4.0 percent guided for the third quarter. Net rooms growth is guided to the low end of 4.5 to 5 percent.
Full year gross fee revenues are guided at $6,025m to $6,055m, adjusted EBITDA at $5,965m to $6,025m, and adjusted diluted EPS at $11.64 to $11.81. Capital return to shareholders is put at over $4,500m.
One line under the table is worth reading before the fee growth is treated as pure demand. The outlook, the company says, includes the expected partial year incremental impact of the new terms it has agreed with JPMorgan Chase and American Express for its United States co-branded credit card programme.
