Sluggish domestic travel weighs on Marriott (MAR)

Sluggish room revenue in the U.S. is weighing on shares of Marriott (NASDAQ:MAR) after the hotel operator said RevPAR in the U.S. and Canada increased by just 1.5% in the latest quarter compared to an 11.1% increase in international markets. However, the encouraging pace of growth for international travel prompted the company to increase its full-year earnings guidance, mitigating losses to the stock in premarket trade.

Shares are down 1.5% and are off their earlier lows but set to trade lower for a fifth consecutive day.

Q1 unadjusted results reflect the softness in domestic travel as operating income was down 8%, net income was down 25% and net profit was down 21% to $1.93 per share. On an adjusted basis, which includes a special tax item of $100M, earnings increased by 2% to $2.13 per share, missing the Street’s consensus estimate by 3 cents. Total sales increased 6.4% and beat expectations by $30M.

On the company’s balance sheet, total debt increased by 6.7% to $12.7B and cash and cash equivalents increased 33% to $400M. The company added 46K net rooms during Q1 including ~37K rooms under its agreement with MGM Resorts International (MGM). At the end of Q1, Marriott’s worldwide development pipeline totaled over 3,400 properties and nearly 547,000 rooms, including roughly 27,000 pipeline rooms approved, but not yet subject to signed contracts. More than 202,000 rooms in the pipeline were under construction as of the end of the first quarter.

For Q2, Marriott (MAR) anticipates worldwide RevPAR to increase by 4-5% while adjusted earnings are estimated at $2.43 to $2.48 per share, below the $2.51 Street consensus. Adjusted EBITDA is expected to be between $1.29B to $1.32B compared to $1.14B in Q1.

For 2024, RevPAR is expected to increase 3%-5% with adjusted earnings of $9.31 to $9.65 per share, up from initial guidance of $9.18 to $9.52 per share and straddling the $9.44 estimates. Adjusted EBITDA estimates were also increased to $4.96B to $5.09B from $4.88B to $5.01B, initially. This compares to 2023 adjusted EBITDA of $4.65B.