Marriott's first quarter was driven by a strong international performance, even as U.S. hotel demand growth showed signs of moderation.
"After January and February results were stronger than we expected, demand in the U.S. did soften in March, primarily due to a 10% year-over-year decline in U.S. government RevPAR [revenue per available room]," said president and CEO Anthony Capuano during a Tuesday earnings call.
In the quarter, the world's largest hotel operator saw RevPAR increase 4.1% worldwide. International markets were strongest. RevPAR in India rose 16%, and in Japan, it rose 17%.
"March had almost a bit of a one-time impact from the shock of government layoffs, as well as a lot of tariff announcements," said CFO Leeny Oberg. "We're not assuming a recession scenario."
The company saw the most strength in full-service luxury hotels and resorts and the most weakness at its limited-service properties. Executives chalked that up to economic uncertainty weighing on middle-class consumers rather than high-income travelers trading down to cheaper hotels.
Easter impact. Many hotel analysts have been puzzling over how to make year-over-year comparisons for the quarter when the Easter holiday shifted from March to April. Marriott estimated Easter to have contributed about "250 basis points" to the company's performance.
If you excluded Easter's absence, in March, RevPAR went up 1% in the U.S. and Canada and more in Europe, and in April, it went up even more, according to the company's first estimates.
Changed 2025 Outlook
Marriott trimmed its full-year outlook, projecting worldwide RevPAR to grow between 1.5% and 3.5%, citing "somewhat softer expectations" in the U.S. and Canada.
A main factor was an expected reduction in U.S. government spending on hotels. Last year, U.S. government travel spending contributed around 4% of room nights at American and Canadian hotels.
The hospitality giant's outlook adjustment was "significantly smaller than Hilton’s," according to analysts at Bernstein Research, who noted that "Marriott now expects to lead its U.S. asset-light peers for 2025 RevPAR growth."
Recession sensitivity. Marriott said its outlook assumes there is no recession. But even a recession happens, executives thought their business was more insulated from a sharp downward swing than in the past, partly because of shifting demographics.
About 30% of the U.S. population is now over 55 years old, and this group has broadly benefited from a rise in household net worth.
"Household net worth held in that age group has gone up to 73% [since 2004," said Oberg. The CFO believes that the over-55 group may be less sensitive to a recession and more resilient in their travel spending than in the past.
Marriott's Expanding Empire
Marriott is banking on its recently announced acquisition of CitizenM brand for $355 million to boost net rooms growth, lifting its forecast for this year to "approaching 5%" for this year, pending regulatory clearance of the deal.
"We added more rooms in the first quarter than any first quarter in our history," Capuano said.
The hospitality giant's expansion strategy gained momentum, with its development pipeline swelling 7.4% to 3,800 properties. International markets drove growth, contributing 7,300 net rooms and accounting for a third of recent signings and openings.
"Our first quarter signings were up 35% year-over-year," Capuano said. "A record. Our global signings have been excellent so far this year despite uncertainty around construction costs and the challenging financing environment in the U.S. and Europe."
No tariff impact yet. Marriott reported steady construction activity in the U.S. and Canada despite remaining below 2019 levels. The company remains cautious about potential construction cost impacts because of the tariffs.
"For the moment, it's steady as she goes in the U.S. and Canada for new construction," Oberg said.
Chinaopportunity. China is Marriott's second-largest market, with 600 hotels open and more than 400 in the pipeline, but recent U.S.-China tensions have raised questions about whether Chinese travelers might patriotically choose not to stay at Marriott hotels.
Capuano said he had "a lot of confidence" in the company's business in China, partly because the near-entirety of its portfolio is owned and run by local Chinese entrepreneurs and workers.
"I don't think there's a view in the market that we are just a big American company," Capuano said.
Robust Quarter
The Marriott Bonvoy loyalty program continued its robust expansion, approaching 237 million members by March's end. The company expects its growing membership base to bolster bank-issued co-branded credit card revenues.
In the quarter, the company posted a 4% increase in net income to $665 million, generating $1.6 billion in adjusted revenue after franchisee and other distributions.
Total debt climbed nearly 5% to $15.1 billion since December but remained within the company's range of being under 3.5 times annual EBITDA.
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What am I looking at? The performance of hotels and short-term rental sector stocks within the ST200. The index includes companies publicly traded across global markets, including international and regional hotel brands, hotel REITs, hotel management companies, alternative accommodations, and timeshares.
