In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance
- MIXED: Q3 was solid and general commentary favorable. Q4 guidance was a little weak but understandable given MAR's exposure to the DC area. Stock buyback was a little light
- SAME: Transient and leisure trends continued to be the engines of growth in 3Q. Transient REVPAR increased 7% as business benefited from improving the mix of high rated retail business. Weekend REVPAR rose 9% at Marriott, 10% Courtyard and 12% at Ritz-Carlton.
- Leisure business was hot. Weekend REVPAR rose nearly 8% at the Marriott brand, 9% at Courtyard, and 9% at Ritz-Carlton. Overall, REVPAR increased over 7.4% in North America as the business continued to improve their mix of luxury business eliminating discounts and selling more rooms at high retail room rates.
- Transient demand is a very powerful bright spot. If we get towards the end of the fall and when we're doing our planning and continue to see transient perk along at that kind of pace, I think we will be captured by the strength of that business and will not look to group up in a way that would push some of that business away.
- BETTER: Group REVPAR rose 3%. 2014 pace for NA group bookings have increased from 2% in 2Q to 4% in 3Q. Group revenue booked in 3Q for CY2014 was up 14% YoY. 60% of 2014 group business on the books.
- We look at Q4 being actually fairly strong with group revenue on the books up about 6% from the same time last year from last year's fourth quarter. But Q3 is essentially being flattish.
- Bookings for 2014 and all future years, which were up above 18% in the quarter
- I think for the Marriott Hotels & Resorts brand in the United States, we're in the 50% [range booked]...we should be something like 65% to 70% by year-end.
- WORSE: China's performance dragged down the Asia Pac's region RevPAR performance by 3% in the Q. Austerity still having effect on business. Additional government meetings and restrictions on banquets take effect in January 2014 but comps will be easier.
- Chinese economy looks to us to be performing, maybe it's growing a little bit weaker than it did a year or two ago but still, broadly recovering with really powerful trends in domestic travel particularly in China. And so, we see, even within this quarter, we saw Shanghai, for example, I think up about 6% in REVPAR – 5%, excuse me; while Beijing, by comparison, which is more dependent on government and had a little bit of that pollution hangover, was down something like 5%. Folks have asked about supply growth in China and clearly there has been some supply growth, it varies a little bit market by market. I suspect we'll continue to see supply growth be fairly high, but we expect we'll continue to see the Chinese economy produce more and more domestic travelers as well as global inbound travel growth and still think it's an extremely exciting market to bet on long-term.
MIDDLE EAST AND AFRICA
- SAME: The Middle East and Africa segment reported a 13% RevPAR decline in 3Q. MAR expects mid-single digit RevPAR in 2014 from the region
- PREVIOUSLY: In the Middle East and Africa, across all brands, constant dollar REVPAR increased 11%, a result that is likely to reverse in the second half of the year, given the recent events in Egypt. Long-term, the region offers terrific opportunities and our pipeline today includes nearly 45 hotels.
- LITTLE WORSE: Government shutdown played a part in the lowering of North America and Worldwide REVPAR (chart above) for 4Q 2013 and caused the company to take down the upper end of guidance by 50bps. For 2014, MAR expects 4-6% REVPAR growth vs HOT's 5-7% projection.
- Our REVPAR outlook for 2013 assumes a steady-as-she-goes view of North American and European demand, and a more conservative view of demand trends in Asia and the Middle East.
- What we see is sort of expectation of REVPAR growth in the plus 5%-ish, a little over 5%, hopefully, like we've done the last couple of quarters, for the next couple of quarters. We know that we've got better group bookings on the books for the fourth quarter than the third, so there's maybe a little bit more upside in the fourth quarter. So to drive the full-year numbers to something in the 6% to 7% range to us seemed very difficult. Group business I think on the books now for fourth quarter is plus 6%
PRE-OPENING COSTS FOR EDITION
- SAME: $2 million of pre-opening costs largely related to two EDITION hotels in 3Q.
- PREVIOUSLY: Pre-opening costs for our EDITION hotel are expected to total $5 million for the year, of which we've already booked about $2 million in the first half.
- BETTER: MAR expects to return $1BN to shareholders through share repurchase and dividends.
- PREVIOUSLY: We expect to return $800 million to $1 billion to shareholders through share repurchase and dividends.
- SAME: They have identified 30 sites and approved a dozen projects. The first hote is expected to open in Milan in the Spring of 2014.
- PREVIOUSLY: I think have got a dozen or so specific MOXYs that either have already been approved or are pending committee approval. And I think we'll open our first roughly the end of the first quarter of 2014.
- WORSE: -70bps in REVPAR from government impact in 3Q. -1% REVPAR impact due to government shutdown for 4Q.
- PREVIOUSLY: Government weakness is the overwhelming cause for weakness in the greater D.C. market. You see a little bit of a difference between urban D.C. and suburban D.C. because I think when you get to urban D.C., more of that business is independent from the government, so it would be your prototypical lawyers and lobbyists and tourists coming to see D.C. and folks doing business with D.C. companies of which there are a number. But aspects of D.C. which are less reliant on government, which is why there's relatively more strength there than there would be in the suburbs.
EUROPE & MIDDLE EAST
- SAME: Strong performance in Eastern Europe offset declines in London, enabling us to raise REVPAR 2%. Excluding London and Olympics impact, European REVPAR increased 4%. Unrest in Egypt reduced REVPAR in the Middle East by 3%.
- PREVIOUSLY: The third quarter will be tough because of the Olympics. The fourth quarter comparisons will be much easier and we would expect, as a consequence, Europe hopefully will strengthen as we go through the balance of the year. On the negative side, we've got Egypt, which is falling apart, and I probably shouldn't say that way, but from a hotel perspective, it's not looking very good. Our hotels are running at much lower occupancies today than they were even in the second quarter. And I think those comparisons will be tough because of that market.