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Thu, 19 March 2020

Marriott Reports COVID19 Impact on Global RevPAR

Marriott International has said that RevPAR in Asia Pacific declined 24.7 percent through February, with Greater China down 52.1 percent and the rest of Asia Pacific down 8.4 percent, due mainly to the COVID19 outbreak in the region.

Today, there are very early signs of improvement in Greater China, as workers return to their jobs. The number of closed hotels in Greater China has declined from over 90 hotels a month ago to under 30 today. While occupancy levels in Greater China are still under 15 percent today, this is an improvement, and trend lines are pointing in the right direction.

In the rest of the world, where the crisis is much more recent, the trend lines are still negative. North America and Europe have seen occupancy levels below 25 percent over the last few days, compared to around 70 percent a year ago.

View of Bangkok from a room at the JW Marriott Hotel on Sukhumvit Road. Click to enlarge.

Marriott has said that it could see further erosion in performance in the weeks ahead and does not expect to see material improvement until there is a sense that the spread of the virus has moderated.

While there have been historically high levels of cancellations for stays through the first half of this year, Marriott says there have not yet been meaningful group cancellations for 2021 related to COVID19, and many group customers are at least tentatively rebooking for later in 2020.

Arne M. Sorenson, President and Chief Executive Officer of Marriott International, said, The travel industry is being impacted in unprecedented ways by COVID19. As the virus and efforts to contain it have spread around the world, demand at our hotels has dropped significantly. We are working tirelessly to take care of our associates, our guests, our owners and our other key stakeholders. The situation is changing by the day and there is still tremendous uncertainty, but we feel it is important to share an update on some of what we have seen to date and describe key measures we are executing to mitigate the impact of COVID19. While we cannot predict today how long this crisis will last, we know that it will get behind us. And when it does abate, lodging demand will rebound. We are confident that our company has the expertise and the resources to weather this crisis.

Global RevPAR growth in the first two months of the year was down 0.3 percent worldwide and up 3.2 percent excluding Asia Pacific.

For January and February, RevPAR increased 3.5 percent in North America, with full-service hotels particularly strong, up 4.4 percent.

Europe RevPAR was up 3.2 percent, while Caribbean and Latin America increased 1.2 percent and Middle East and Africa RevPAR was flat for the first two months.

MITIGATION PLANS

The company is taking numerous proactive steps to mitigate the negative financial and operational impacts of COVID19.

 At the property level, contingency plans include measures such as closing F&B outlets, reducing staff and closing floors or even entire hotels.

The company has also temporarily deferred most brand standards to help owners and franchisees, including delaying renovations due in 2020 by one year, deferring required furniture, fixtures and equipment funding and suspending brand standard audits.

At the corporate level, these steps include making significant cuts in senior executive salaries, requiring temporary leaves in North America, shortening work weeks around the world and cancelling non-essential travel and spending.

 Marriott estimates these cost cutting measures will reduce 2020 corporate general and administrative costs by at least $140 million and as additional measures continue to be implemented, this number is expected to grow.

 The company has also taken steps to dramatically reduce costs related to programs and services that hotels reimburse it for, such as marketing costs, to be more in-line with the expected decline in funding given likely lower system wide revenues.

 The company has reviewed its investment spending plans and currently expects to eliminate or defer at least one-third of its prior forecast of $700 to $800 million of spend in 2020, generally proceeding with funding only when the company was previously obligated.

BALANCE SHEET UPDATE

In the current environment, a major priority is preserving liquidity. Marriott has a $4.5 billion revolving credit facility that expires in June 2024 to provide liquidity when needed. As of 17 March 2020, the company has drawn down $2.5 billion primarily to support commercial paper maturities. The companys levers to preserve cash include reducing or eliminating share repurchases, suspending the cash dividend, reducing payroll and other costs and cutting back investment spending. The company has not repurchased shares in 2020 other than the $150 million of share repurchases reported in February, and Marriott anticipates that its previously announced first quarter 2020 dividend, payable on 31 March 2020, will be the last until conditions improve.

See latest Travel News, Interviews, Podcasts and other news regarding: Marriott, COVID19.

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