Marriott Earnings: Demand and Brand Advantages Remain Stout in Uncertain Macro Landscape

Marriott International’s MAR third quarter saw strong demand. Revenue per available room was up 9%, ahead of management’s 6%-8% guidance, driven by all segments and key regions. As a result, Marriott raised its 2023 revPAR growth estimate to 15% from 14%; we plan to lift our prior 14% estimate to the new target. That said, while we have been steadfast on travel demand resiliency since the summer of 2020, we expect Marriott’s revPAR growth to decelerate to 3%-4% in 2024 (compared with its 3%-6% guidance), driven by mounting headwinds like lasting inflation and depleted consumer savings. Taking this together, we don’t plan much change to our $187 fair value estimate.

Revenue grew across all types of travel, with leisure up 9% (45% of total room nights), business up 4% (32%), and group up 9% (23%). RevPAR increased across key regions, with the U.S./Canada up 4% and international markets rising 22%, aided by cross-border travel. Still, Marriott noted that U.S./Canada revPAR growth is normalizing and that it expects a 3%-4% lift in the fourth quarter. It also mentioned that it has seen some trade-down, which could portend some softening in travel demand.

Our view that Marriott possesses an industry-leading brand advantage, the source of its narrow moat, was buoyed by its development update. The hotelier’s pipeline has expanded 11% to 557,000 rooms and represents a stout 35% of its existing base. More owners are moving to Marriott, with conversions representing 30% of net unit openings in the quarter. Despite a tougher financing and building environment, Marriott still expects 2023-25 average unit growth of 5%-5.5%, which we see as achievable. The brand is also resonating with travelers, witnessed by Marriott’s loyalty program expanding by 11% to 192 million members.

Profitability remains strong. EBITDA was $1,142 million, ahead of the company’s $1,105 million-$1,140 million guidance, and Marriott expects 19%-20% EBITDA growth for the full year, near our 20.6% estimate.