BETHESDA, Maryland—Marriott International executives provided a shining outlook for both their own business and the global travel sector as a whole during the company’s fourth-quarter earnings call Wednesday.
“U.S. lodging demand is holding up, and supply remains in check,” Arne Sorenson, Marriott’s president and COO, said during a conference call with analysts.
Sorenson will assume the role of president and CEO effective 31 March, at which time the company’s current CEO, J.W. “Bill” Marriott Jr., will become executive chairman.
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Arne Sorenson
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Global travel is one factor behind Sorenson’s positive assessment of the sector. He said 1 billion people will cross international borders this year.
“Biggest number ever,” Sorenson said. “It’s a massive number, and it continues to grow.”
The big question mark facing the global tourism industry is Europe. The economy in Europe is a concern, given ongoing battles over financial austerity measures, Sorenson said.
For Marriott, 9% of the company’s total fees come from Europe. “It’s not enormously crucial to us,” Sorenson said, adding the situation bears watching nonetheless. He said 30% of Marriott’s European hotel demand comes from outside Europe.
The company expects revenue per available room for Marriott hotels in Europe to increase “modestly” by two or three percentage points for comparable hotels in 2012.
The global travel trend will help Europe’s largest cities, and the upcoming Olympic Games in London will provide a “shot in the arm” for hotels. The rollout of Brand USA, meantime, is an important development for U.S. hotels, he said.
Group business
Sorenson indicated Marriott is just as positive about its own business, particularly with how group is shaping up.
“We feel great about the way 2011 ended on group bookings,” he said.
The group revenue pace for 2012 shows a 9% gain, “overwhelmingly” the result of increased occupancy, rather than rate, Sorenson said. Group rate, for business booked during the past 12 months for the next 12 months, is showing a 3% to 5% increase.
“With each passing period, we get greater and greater strength on (group) rate,” Sorenson said.
Group rates will steadily increase as 2012 moves along, Sorenson said.
“Big group business takes the longest to come back … But building they are.”
Pipeline
Marriott opened 210 properties comprising nearly 32,000 rooms during 2011. The company’s hotel development pipeline has grown to more than 110,000 rooms as management and franchise agreements were inked with more than 320 hotels and more than 50,000 rooms.
Still, Sorenson hinted that properties will be removed from the system, though a specific number was not given.
“Pruning is just as important as planting,” he said, noting it is essential hotel companies not sacrifice quality of product for speed to market.
Marriott officials said between US$550 million and US$750 million will be invested in system hotels during 2012, up from US$400 million a year ago. While the numbers are not huge, Sorenson said it’s key the company not over commit its capital.
