Marriott International Reports Third Quarter 2020 Results

BETHESDA, Md., Nov. 6, 2020 /PRNewswire/ --

• Third quarter 2020 comparable systemwide constant dollar RevPAR declined 65.9 percent worldwide, 65.4 percent in North America and 67.4 percent outside North America, compared to the 2019 third quarter;
• Third quarter reported diluted EPS totaled $0.31, compared to reported diluted EPS of $1.16 in the year-ago quarter. Third quarter adjusted diluted EPS totaled $0.06, compared to third quarter 2019 adjusted diluted EPS of $1.47. Third quarter 2020 impairment charges related to COVID-19 impacted reported and adjusted diluted EPS by $0.07;
• Third quarter reported net income totaled $100 million, compared to reported net income of $387 million in the year-ago quarter. Third quarter adjusted net income totaled $20 million, compared to third quarter 2019 adjusted net income of $488 million. Third quarter 2020 impairment charges related to COVID-19 impacted reported and adjusted net income by $24 million after-tax;
• Adjusted EBITDA totaled $327 million in the 2020 third quarter, compared to third quarter 2019 adjusted EBITDA of $901 million;
• The company added more than 19,000 rooms globally during the third quarter, including roughly 1,400 rooms converted from competitor brands and approximately 7,600 rooms in international markets. Net rooms grew 3.8 percent from the year-ago quarter;
• At quarter-end, Marriott's worldwide development pipeline totaled nearly 2,900 hotels and more than 496,000 rooms, including roughly 25,000 rooms approved, but not yet subject to signed contracts. Approximately 228,000 rooms in the pipeline were under construction as of the end of the third quarter;
• As of the end of the third quarter, the company's net liquidity totaled approximately $5.1 billion, representing roughly $1.5 billion in available cash balances, and $3.6 billion of unused borrowing capacity under its revolving credit facility, less $30 million of commercial paper outstanding.

Marriott International, Inc. (NASDAQ: MAR) today reported third quarter 2020 results, which were dramatically impacted by the COVID-19 global pandemic and efforts to contain it (COVID-19).

Arne M. Sorenson, president and chief executive officer of Marriott International, said, "While COVID-19 is still significantly impacting our business, our results for the third quarter showed continued improvement in demand trends around the world.  Worldwide RevPAR¹ declined 66 percent in the quarter, a nearly 19-percentage point improvement from the decline in the second quarter.  Greater China continues to lead the recovery and demonstrates the resiliency of travel demand, with third quarter occupancy of 61 percent and RevPAR recovering to down 26 percent, a 35-percentage point improvement compared to the decline in the second quarter.  Third quarter occupancy at our hotels in North America reached 37 percent, nearly double occupancy in the second quarter, primarily driven by leisure, drive-to demand, with business and group recovering more slowly.  Globally, 94 percent of our hotels are now open and welcoming guests.

"The Asia Pacific region led deal signings in the third quarter, accounting for more than half of all rooms signed globally, with the vast majority of those rooms in Greater China.  During the third quarter, we added more than 19,000 rooms to our system, nearly 70 percent more than were added in the second quarter, achieving 5 percent gross rooms growth in the last 12 months.  At quarter-end, approximately 228,000 rooms of our more than 496,000-room pipeline were under construction.  Progress on projects under construction largely continues apace around the world, although we have designated a slightly higher number of projects on hold given macroeconomic uncertainty and discussions with our owners.  For full year 2020, we now expect 2.5 to 3 percent net rooms growth, including terminations of 1.5 to 2 percent.  Assuming progress is made in containing COVID-19, we would expect gross room additions in 2021 to accelerate compared to our expectations for 2020.

"Although the timing of a full recovery remains unpredictable, we are pleased with the significant progress we have made in restructuring and repositioning the company to successfully manage through these challenging times.   Financially, we have strengthened our liquidity position, realigned our cost structure, and minimized our cash burn.  We have also remained keenly focused on working with our hotel owners and franchisees to significantly reduce hotel level costs and help preserve cash in this extremely low revenue environment.  Operationally, we have elevated our health and cleanliness standards to establish trust and credibility with travelers and to enhance the safety and wellbeing of our associates and guests.  

"We still have a long road ahead, but this crisis will come to an end, and I believe travel will rebound quickly.  I am confident that the many steps we have taken this year, combined with our unrivaled global portfolio, the strength of our brands, and the power of Marriott Bonvoy position us very well now and for the future."

Third Quarter 2020 Results
Marriott's reported operating income totaled $252 million in the 2020 third quarter, compared to 2019 third quarter reported operating income of $607 million.  Reported net income totaled $100 million in the 2020 third quarter, compared to 2019 third quarter reported net income of $387 million.  Reported diluted earnings per share (EPS) totaled $0.31 in the quarter, compared to reported diluted EPS of $1.16 in the year-ago quarter.  Reported results in the 2020 third quarter included impairment charges of $32 million pretax ($24 million after-tax and $0.07 per share), related to COVID-19.

Adjusted operating income in the 2020 third quarter totaled $147 million, compared to 2019 third quarter adjusted operating income of $734 million.  Adjusted operating income in the 2020 third quarter included impairment charges of $32 million, related to COVID-19.

Third quarter 2020 adjusted net income totaled $20 million, compared to 2019 third quarter adjusted net income of $488 million.  Adjusted diluted EPS in the third quarter totaled $0.06, compared to adjusted diluted EPS of $1.47 in the year-ago quarter.  These 2020 third quarter adjusted results included impairment charges of $24 million after-tax ($0.07 per share), related to COVID-19.  Adjusted results exclude restructuring and merger-related charges, cost reimbursement revenue, and reimbursed expenses.  See page A-3 for the calculation of adjusted results.

Base management and franchise fees totaled $366 million in the 2020 third quarter, compared to base management and franchise fees of $821 million in the year-ago quarter.  The year-over-year decline in these fees is primarily attributable to RevPAR declines related to COVID-19 and a decrease in other non-RevPAR related franchise fees.  Other non-RevPAR related franchise fees in the 2020 third quarter of $119 million were $26 million, or 18 percent, lower than the year-ago quarter, largely due to lower credit card branding fees.

Incentive management fees totaled $31 million in the 2020 third quarter, compared to incentive management fees of $134 million in the year-ago quarter.  The year-over-year decline in these fees is primarily attributable to lower net house profits at many hotels related to COVID-19.  Roughly three-quarters of the incentive management fees recognized in the quarter were earned at hotels in the Asia Pacific region.    

Contract investment amortization for the 2020 third quarter totaled $48 million, compared to $16 million in the year-ago quarter.  The year-over-year change reflects impairments of investments in management and franchise contracts related to COVID-19.

Owned, leased, and other revenue, net of direct expenses, totaled an $18 million loss in the 2020 third quarter, compared to $67 million of profit in the year-ago quarter as a result of RevPAR declines related to COVID-19.

General, administrative, and other expenses for the 2020 third quarter totaled $131 million, compared to $220 million in the year-ago quarter.  Expenses in the 2020 third quarter reflect the company's cost reduction efforts. 

Restructuring and merger-related charges totaled $1 million in the third quarter compared to $9 million in the third quarter of 2019.  Charges in the third quarter of 2020 reflect $40 million of costs related to the company's organizational realignment, largely offset by a $39 million reduction of the non-tax-deductible accrual for the fine imposed by the U.K. Information Commissioner's Office in relation to the data security incident disclosed in November 2018.

Interest expense, net, totaled $107 million in the third quarter compared to $92 million in the year-ago quarter.  The increase is largely due to higher long-term debt balances and higher interest expense associated with new debt issuances.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $327 million in the 2020 third quarter, compared to third quarter 2019 adjusted EBITDA of $901 million.  See page A-11 for the adjusted EBITDA calculation.

Selected Performance Information
The company added 127 new properties (19,064 rooms) to its worldwide lodging portfolio during the 2020 third quarter, including roughly 1,400 rooms converted from competitor brands and approximately 7,600 rooms in international markets.  Thirty-one properties (6,066 rooms) exited the system during the quarter.  At quarter-end, Marriott's global lodging system totaled roughly 7,600 properties and timeshare resorts, with nearly 1,414,000 rooms.

At quarter-end, the company's worldwide development pipeline totaled 2,899 properties with more than 496,000 rooms, including 1,201 properties with approximately 228,000 rooms under construction and 160 properties with roughly 25,000 rooms approved for development, but not yet subject to signed contracts.

In the 2020 third quarter, worldwide RevPAR declined 65.9 percent (a 65.9 percent decline using actual dollars).  North American RevPAR declined 65.4 percent (a 65.4 percent decline using actual dollars), and international RevPAR declined 67.4 percent (a 67.3 percent decline using actual dollars).

Balance Sheet and Liquidity
At quarter-end, Marriott's net debt was $9.4 billion, representing total debt of $11.0 billion less cash and cash equivalents of $1.6 billion.  At year-end 2019, the company's net debt was $10.7 billion, representing total debt of $10.9 billion less cash and cash equivalents of $0.2 billion.

In the third quarter, the company issued $1.0 billion of Series GG Senior Notes due in 2032 with a 3.5 percent interest rate coupon.

The company's net liquidity was approximately $5.1 billion as of the end of the third quarter, representing roughly $1.5 billion in available cash balances, and $3.6 billion of unused borrowing capacity under its revolving credit facility, less $30 million of commercial paper outstanding. 

The company halted share repurchases in February of this year and suspended its quarterly dividend beginning in the second quarter.

COVID-19
Due to the numerous uncertainties associated with COVID-19, Marriott cannot presently estimate the financial impact of this unprecedented situation, which is highly dependent on the severity and duration of the pandemic and its impacts, but expects that COVID-19 will continue to be material to the company's results. 

The company expects to provide additional information about the current impact of COVID-19 on its business on its call later this morning.

Marriott International, Inc. (NASDAQ: MAR) will conduct its quarterly earnings review for the investment community and news media on Friday, November 6, 2020 at 8:30 a.m. Eastern Time (ET).  The conference call will be webcast simultaneously via Marriott's investor relations website at http://www.marriott.com/investor, click on "Events & Presentations" and click on the quarterly conference call link.  A replay will be available at that same website until November 6, 2021.

The telephone dial-in number for the conference call is 706-679-3455 and the conference ID is 5783987.  A telephone replay of the conference call will be available from 2:00 p.m. ET, Friday, November 6, 2020 until 8:00 p.m. ET, Friday, November 13, 2020.  To access the replay, call 404-537-3406.  The conference ID for the recording is 5783987.

Note on forward-looking statements:  All statements in this press release and the accompanying schedules are made as of November 6, 2020. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise. This press release and the accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements related to the expected effects on our business of the COVID-19 pandemic and efforts to contain it (COVID-19); future performance of the company's hotels; RevPAR, occupancy and demand estimates and trends; our development pipeline, room additions, terminations and net rooms growth; our liquidity expectations; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous evolving risks and uncertainties that we may not be able to accurately predict or assess, including those we identify below and other risk factors that we identify in our Securities and Exchange Commission filings, including our most recent Quarterly Report on Form 10-Q. Risks that could affect forward-looking statements in this press release include the duration and scope of COVID-19, including the location and extent of resurgences of the virus and the availability of effective treatments or vaccines; its short and longer-term impact on the demand for travel, transient and group business, and levels of consumer confidence; actions governments, businesses and individuals have taken or may take in response to the pandemic, including limiting or banning travel and/or in-person gatherings or imposing occupancy or other restrictions on lodging or other facilities; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the ability of our owners and franchisees to successfully navigate the impacts of COVID-19; the pace of recovery when the pandemic subsides or effective treatments or vaccines become available; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps we and our property owners and franchisees take to reduce operating costs and/or enhance certain health and cleanliness protocols at our hotels; the impacts of our employee furloughs and reduced work week schedules implemented during portions of 2020, our voluntary transition program and our other restructuring activities; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; the extent to which we experience adverse effects from data security incidents; and changes in tax laws in countries in which we earn significant income. Any of these factors could cause actual results to differ materially from the expectations we express or imply in this press release.

Marriott International, Inc. (NASDAQ: MAR) is based in Bethesda, Maryland, USA, and encompasses a portfolio of more than 7,500 properties under 30 leading brands spanning 132 countries and territories. Marriott operates and franchises hotels and licenses vacation ownership resorts all around the world. The company offers Marriott Bonvoy™, its highly-awarded travel program.  For more information, please visit our website at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com.  In addition, connect with us on Facebook and @MarriottIntl on Twitter and Instagram.

Marriott may post updates about COVID-19 and other matters on its investor relations website at www.marriott.com/investor or Marriott's news center website at www.marriottnewscenter.com. Marriott encourages investors, the media, and others interested in the company to review and subscribe to the information Marriott posts on these websites, which may be material. The contents of these websites are not incorporated by reference into this press release or any report or document Marriott files with the SEC, and any references to the websites are intended to be inactive textual references only.

¹ All occupancy and RevPAR statistics are comparable systemwide constant dollar and include hotels that have been temporarily closed due to COVID-19.  Unless otherwise stated, all changes refer to year-over-year changes for the comparable period. 

IRPR#1
Tables follow