Skip to content

Marriott’s eye-popping profitability rides on European recovery and group business

Aug. 02, 2022
6 min read
exterior of courtyard by marriott hotel
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

There was a widespread expectation that the CEOs of all the major, publicly traded hotel companies would flash signs of strength and tout their ability to charge high room rates during the ongoing second-quarter earnings season.

However, the current arc of financial reporting arrives amid fears a global recession is on the horizon — or already here — on top of inflation and geopolitical tension around the world. One couldn’t help but wonder if the expected chest beating would feel a little like the “This is fine” meme.

Alas, Marriott International’s $678 million profit for the months of April, May and June this year shows a company not filled with delusion but one gaining in its recovery momentum. It is the highest profit reported thus far during hotel earnings season. Hilton came in second with a $367 million profit reported last week.

For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.

Marriott's earnings

The broader industry’s financial strength this earnings cycle, which includes the beginning of peak summer travel demand, is impressive, even if the world is facing a recession. After all, it was only two years ago that people were wondering what kind of travel industry would exist following the ongoing global pandemic.

However, Marriott leaders Tuesday indicated that, while they aren’t ignoring the economic climate, they aren’t as spooked by any potential downturn, either.

“While we are closely monitoring consumer and macroeconomic trends, we have yet to see signs of a slowdown in global lodging demand,” Marriott CEO Anthony Capuano said on an investor call. “On the contrary, the pent-up demand for all types of travel, the shift of spending towards experiences versus goods, sustained high levels of employment and the lifting of travel restrictions and opening borders in most markets around the world are fueling travel.”

Marriott reported its revenue per available room, the industry’s key performance metric, was only 3% off 2019 levels in the second quarter — an impressive feat considering China and other parts of the Asia-Pacific region were still under varying degrees of lockdown and travel restrictions. The company’s performance in the U.S. and Canada — the geographic region with Marriott’s largest concentration of hotels — was up 1.3% during the same time frame.

Capuano and Leeny Oberg, Marriott’s chief financial officer, both indicated they expect the performance recovery to continue through the end of this year. More summer and holiday travel, higher-than-expected group travel demand and additional increases in international travel amid loosening restrictions provide further runway for recovery, they believe.

Sign up for our daily newsletter

The group travel sector saw the greatest surge in the U.S. and Canada during the quarter, Capuano said. Performance of this sector was only off 2019 levels by 1% during the month of June, and there are strong booking trends for the back half of this year.

“We expect additional short-term bookings will further bolster group revenues, which could lead to second-half group [performance] in the U.S. and Canada to being even to even up slightly compared to 2019,” Capuano added.

The strength of the group travel recovery also gives Marriott’s leaders optimism amid some uncertainty in the broader economy.

“As we think about going forward, it has been very encouraging to see the strength of group and the strength of group [room] rate,” Oberg said. “So, as we think about all the possible outcomes for the economy over the next couple of years, that strengthening group [performance] is quite encouraging.”

The European moment

U.S. cities and European markets performed well during the second season — a further sign the industry recovery is entering a new phase. Earlier in the pandemic, the late Marriott CEO Arne Sorenson noted China and the U.S. would recover the fastest in light of their strong domestic travel bases while Europe, which relies more on international tourism to fill up hotel rooms, would be the laggard.

China did momentarily recover the fastest for Marriott, but its stringent containment policy against new coronavirus case spikes stunted the rebound and eventually spiraled hotel performance. Marriott’s performance in the country was down more than 52% for the quarter due to lockdowns in Shanghai, Beijing and other Chinese cities.

Marriott’s recovery darlings of the moment appear to be large U.S. cities as well as Europe; tourism in both places is likely benefiting from the U.S. dropping coronavirus testing requirements on those entering from international countries.

“In June, U.S. and Canada [hotel performance] more than fully recovered across all market types — primary, secondary and tertiary — for the first time since the pandemic began. It has been very encouraging to see demand come back so powerfully in major cities like New York, where [performance] increased 7% versus June 2019,” Oberg said. “When borders opened in Europe, the room nights from international guests more than doubled in the region from the first quarter to the second. With this strong return of international travel, Europe has experienced the swiftest [performance] recovery of all of our regions this year.”

Don’t expect any discounts

Meditation and calming exercises are almost a necessity before booking a hotel room these days. The high hotel prices aren’t for the faint of heart.

Marriott’s average daily rates in the U.S. and Canada exceeded pre-pandemic levels by 9% in June, Oberg said. Rates in the Middle East and Africa were up by more than 21% compared to 2019 for the entire second quarter. Marriott’s hotels in the Caribbean and Latin America charged rates that were 16% higher than the same time in 2019.

How much further can this go? U.S. inflationary data last month suggested hotel rate inflation was still a thing, but it wasn’t as high as the spikes seen earlier this year.

Marriott’s leadership team indicated there is still some room to go even higher, especially since cross-border travel isn’t fully back to pre-pandemic levels. China’s international borders still aren’t open, and Chinese travelers are a massive source of demand, particularly in the world’s largest cities. Further, many expect there is more room for recovery in the business and group travel sectors.

“We expect the global [performance] recovery to continue each quarter through the end of the year, driven by improving occupancy and [average daily rates] compared to 2019,” Oberg said.

Featured image by Mark Compton
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Top offers from our partners

How we chose these cards

Our points-obsessed staff uses a plethora of credit cards on a daily basis. If anyone on our team wouldn’t recommend it to a friend or a family member, we wouldn’t recommend it on The Points Guy either. Our opinions are our own, and have not been reviewed, approved, or endorsed by our advertising partners.
See all best card offers

TPG featured card

Best for the well-traveled foodie
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review
Apply for American Express® Gold Card
at American Express's secure site

Rewards

3 - 4X points
4XEarn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S.
4XEarn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
3XEarn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.

Intro offer

60,000 bonus points
Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.

Annual Fee

$250

Recommended Credit

670-850
Excellent/Good
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

Why We Chose It

There's a lot to love about the Amex Gold card. It's been a fan favorite during the pandemic because of its fantastic rewards rate on restaurants (that includes takeout and delivery in the U.S.!) and U.S. supermarkets. If you're hitting the skies soon, you'll also earn bonus points on travel. Paired with up to $120 in Uber Cash (for U.S. Uber rides or Uber Eats orders) and up to $120 in annual dining statement credits at eligible partners, there's no reason that the foodie shouldn't add this card to their wallet. Enrollment required.

Pros

  • 4x on dining at restaurants and U.S. supermarkets (on the first $25,000 in purchases per calendar year; then 1x)
  • 3x on flights booked directly with the airline or with Amex Travel
  • Welcome bonus of 60,000 points after spending $4,000 in the first six months

Cons

  • Weak on travel outside of flights and everyday spending bonus categories
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and each month automatically get $10 in Uber Cash for Uber Eats orders or Uber rides in the U.S., totaling up to $120 per year.
  • $120 Dining Credit: Satisfy your cravings and earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, Milk Bar and select Shake Shack locations. Enrollment required.
  • Choose the color that suits your style. Gold or Rose Gold.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.
  • See Rates & Fees
Apply for American Express® Gold Card
at American Express's secure site
Terms & restrictions apply. See rates & fees
Best for the well-traveled foodie
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

4XEarn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S.
4XEarn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
3XEarn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • Intro Offer
    Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.

    60,000 bonus points
  • Annual Fee

    $250
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent/Good

Why We Chose It

There's a lot to love about the Amex Gold card. It's been a fan favorite during the pandemic because of its fantastic rewards rate on restaurants (that includes takeout and delivery in the U.S.!) and U.S. supermarkets. If you're hitting the skies soon, you'll also earn bonus points on travel. Paired with up to $120 in Uber Cash (for U.S. Uber rides or Uber Eats orders) and up to $120 in annual dining statement credits at eligible partners, there's no reason that the foodie shouldn't add this card to their wallet. Enrollment required.

Pros

  • 4x on dining at restaurants and U.S. supermarkets (on the first $25,000 in purchases per calendar year; then 1x)
  • 3x on flights booked directly with the airline or with Amex Travel
  • Welcome bonus of 60,000 points after spending $4,000 in the first six months

Cons

  • Weak on travel outside of flights and everyday spending bonus categories
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits
  • Few travel perks and protections
  • Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months of Card Membership.
  • Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
  • Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and each month automatically get $10 in Uber Cash for Uber Eats orders or Uber rides in the U.S., totaling up to $120 per year.
  • $120 Dining Credit: Satisfy your cravings and earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, Milk Bar and select Shake Shack locations. Enrollment required.
  • Choose the color that suits your style. Gold or Rose Gold.
  • No Foreign Transaction Fees.
  • Annual Fee is $250.
  • Terms Apply.
  • See Rates & Fees