Rising Chinese occupancy rates fuel Marriott’s recovery

Nanning Marriot China

China appears to be leading hospitality major Marriott’s recovery. Occupancy rates in China have gone from single-digit lows in February to just over 30% currently,

“China does appear to be recovering and holding. I know there is lots of debate on if there’s a resurgence of the virus in China,” Marriott President and CEO Arne Sorenson said on Monday during the first quarter earnings call. “By and large, what we hear there is reassuring.”

Coronavirus first impacted Marriott’s China portfolio in January before ramping up elsewhere in March. Marriott properties in Chinese resort markets saw close to 70% occupancy rates over the recent Labour Day holiday. A strong domestic traveller base should continue to fuel the recovery in China, Sorenson said.

A quarter of Marriott’s hotels around the world are temporarily closed due to depleted occupancy and limited revenue per room in the coronavirus era not justifying continued operations. The hotel giant’s worldwide revenue per room was down 90% in April.

About 16% of Marriott’s North American portfolio is temporarily closed while more than 75% of the company’s European hotels have suspended operations.

“The glimmer of good news is negative trends appear to have bottomed in most regions in the world,” Sorenson said.

US occupancy rates have increased by about a percentage point a week in recent weeks, Sorenson said. While that is not enough to say there is a full recovery underway, he added it does show pent-up travel demand is out there.

“Europe, unlike China and the U.S., is more meaningfully dependent on long-haul travel,” Sorenson said. “Because of its dependence on air and long-haul travel, it will probably be the slowest to return to levels we enjoyed before Covid-19.”

Marriott’s reported revenue per room, or RevPAR, was down nearly 23% in the first quarter. Outside North America, RevPAR dropped 30% while the metric was down nearly 20% in the company’s North American portfolio. Marriott’s first quarter profit was $31 million, down from $375 million reported in the first quarter of 2019.

Given April’s 90% global RevPAR decline, Marriott is almost certainly in store for an even more turbulent second quarter.

“The word of choice to describe what is happening around the world today is unprecedented, and the pandemic that has the world in its grip is certainly that,” Sorenson said. “For a company that is 92-years-old and has borne witness to the Great Depression, World War II, and many other economic and global crises, that is saying something.”