What is Marriott doing to make most of this recovery phase?

Marriott is forecasting global RevPar to increase 6-8 percent in both the fourth-quarter and full year 2011.

Published: 08 Oct 2010

Marriott is forecasting global RevPar to increase 6-8 percent in both the fourth-quarter and full year 2011.

The company expects 2011 to be even better than 2010 as demand and pricing continue to strengthen. It also expects to open 25,000 to 30,000 rooms worldwide in 2011.

Marriott revenues totalled over $2.6 billion in the 2010 third quarter compared to approximately $2.5 billion for the third quarter of 2009. Reported net income totalled $83 million in the third quarter of 2010 compared to the reported loss of $466 million in the year-ago quarter.

J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, “We are having an outstanding year. Corporate and leisure demand continues to strengthen, and we are leading the U.S. industry in pushing retail price increases. For the Marriott Hotels and Resorts brand in North America, nearly 90 percent of hotels raised corporate retail rates in the quarter and, overall, such retail rates rose 9 percent.”

According to the company’s president and COO, Arne Sorenson, both business transient and leisure travel remained strong, group RevPar has been slower to recover in part because of business booked in 2008 and 2009 that was generally booked at low rates, but group is improving as well.

As per the Q3 Earnings Call Transcript (posted on Seeking Alpha), Sorenson mentioned how the company is going about certain critical issues:

“Our marketing strategies were devoted to putting heads in beds. We reduced costs and found better ways to do things by leveraging our size. We pulled back spending and reduced debt substantially. Just as important, we took care of our associates. We waived minimum hour requirements to maintain health benefits, and worked to keep as many of our associates on the job as possible so they can take care of our guests, and be ready for the recovery.”

“The recovery is here, and we are doing things differently. First, we are reducing discounting and improving our mix. For example, in the third quarter, the Marriott Hotels and Resorts brand reduced the availability of rooms at discount in transient rates such as packages, wholesale, government and other similar programmes. While we reduced these rates by 16% in the quarter, they were more than replaced by a 16% increase in corporate and special corporate guests, paying $57 more on average than the discounted business. We expect to continue to improve our mix in 2011, and we’re raising room rates.”

“In the Marriott brand, company-operated hotel room rates in the corporate and above segment rose 9% in the quarter. In fact, nearly 90% of Marriott Hotels raised retail corporate rates. Two in five hotels raised such rates more than 10%, and one in eight raised rates more than 20%. Pricing at our limited service brands is lagging a bit, but we are starting to see compression in some markets, as strong urban demand pushes more price sensitive guests to suburban markets.”


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