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Omicron’s rapid spread shreds budding recovery in air travel

Digital Efforts to Aid Marriott (MAR) Stock, RevPAR Dismal

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Marriott International, Inc. MAR is likely to benefit from digital efforts, the loyalty program, improved room bookings and expansion initiatives. However, a decline in revenue per available room (RevPAR) from pre-pandemic levels is a headwind.

Let’s delve deeper.

Key Growth Drivers

Digital innovation and social media are playing important roles in hotel bookings and Marriot isn’t far behind to improvise. The company re-imagined its Marriott Mobile app to meet the needs of the modern traveler. The company’s loyalty program, Marriott Bonvoy, has been playing a supporting role in its marketing strategies.

Recently, the company announced a strategic collaboration with Rakuten Group to boost travel experience for Japanese customers. The alliance focuses on delivering an integrated travel experience through leveraging the strength of Rakuten's digital expertise alongside the global scale as well as the rapid growth of the Marriott Bonvoy footprint. This apart, the company is engaging its customers with promotional offers such as grocery and retail spending accelerators on its co-branded credit cards (American Express and Chase). We believe that the initiatives are likely to generate additional revenues, going forward.

Improvement in demand has been boosting Marriott’s performance amid the pandemic scenario. During second-quarter 2021, the company reported resurgence of lodging demand in Mainland China with leisure, business transient and group room bookings ahead of 2019 levels. Growth in Mainland China is quite impressive considering the fact that international arrivals are still absent. The company reported solid leisure demand in the United States and Canada region on the back of accelerated vaccinations. The U.S leisure room nights in the second quarter increased 15% from second-quarter 2019 levels. Also, the company reported sequential improvements in demand across the Middle East and Africa, Caribbean and Latin America as well as in Europe. Given the positive trend in recoveries, the company is optimistic about full recovery across other regions. However, it is subject to normalization of the current scenario.

Nonetheless, Marriott is consistently trying to expand worldwide presence and capitalize on demand for hotels in the international markets. Moving ahead, the company plans to expand the global portfolio of luxury and lifestyle brands. At the end of second-quarter 2021, Marriott's development pipeline totaled nearly 2,750 hotels, with approximately 478,000 rooms. For 2021, the company anticipates net rooms growth to be toward the higher end of the previous expectation of 3-3.5%.

Concerns

Marriott — which shares space with Hilton Worldwide Holdings Inc. HLT, Hyatt Hotels Corporation H and Choice Hotels International, Inc. CHH in the Zacks Hotels and Motels industry — has been affected by the coronavirus pandemic. Due to the crisis, the company failed to provide earnings and RevPAR guidance for 2021. We believe that emergence of the new COVID-19 variant is likely to create volatility in demand.

The company is encountering substantial declines in RevPAR and occupancy in all regions served. During second-quarter 2021, RevPAR for worldwide comparable system-wide properties fell 43.8% (in constant dollars) from 2019 levels. The downside was primarily due to fall in occupancy and average daily rate (ADR). Occupancy and ADR declined 24.1% and 17.2%, respectively, from 2019 levels. These metrics were impacted by the coronavirus pandemic. Comparable system-wide RevPAR in Asia Pacific (excluding China) fell 69% (in constant dollars) from 2019 levels. Occupancy and ADR had fallen 39.9% and 28.2%, respectively, from 2019 levels. Comparable system-wide RevPAR in Greater China fell 16.9% from 2019 levels.


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