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Marriott RevPAR to Decline Sharply in Q1 Due to Coronavirus
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Marriott International, Inc. (MAR - Free Report) recently provided an update on its business and initiatives that it is undertaking in response to the coronavirus pandemic. Despite dismal RevPAR and occupancy, the company’s shares have gained 5.9% as investors’ sentiments were boosted by the announcement of a new $1.5-billion revolving credit facility as well as a leverage covenant waiver for its existing credit facility.
The travel industry is experiencing the worst phase in the past several years. While Marriott has been noticing early signs of improving demand in Greater China, the negative trends in the rest of the world are yet to be stabilized. In the first week of April, occupancy increased 20% in Greater China.
Compared with February levels, occupancy and RevPAR have declined significantly in March across all regions except Greater China. Notably, the company expects worldwide systemwide RevPAR to decline approximately 23% in the first quarter 2020. RevPAR in North America is expected to fall 20%. The company stated that current occupancy in North America is nearly 10%, but in Europe it is below 10%.
Given that the pandemic is becoming worse with each day, the company anticipates further hotel closures and erosion in RevPAR performance and does not expect to see a material improvement until the spread of the virus is checked.
Other major hoteliers like Wyndham Hotels & Resorts, Inc. (WH - Free Report) , Hyatt Hotels Corp. (H - Free Report) and Marriott Vacations Worldwide Corporation (VAC - Free Report) have also been impacted by the coronavirus outbreak.
Other Updates
To mitigate negative financial and operational impact of the outbreak, the company has undertaken certain actions to reduce its operating expenses as well. This includes pay-cuts of executive staff, deferred renovations and delayed payments for certain systemwide programs as well as services. Notably, 25% of the company’s more than 7,300 hotels are temporarily closed due to the pandemic. Earlier, the company withdrew its 2020 guidance and suspended dividend payout due to the pandemic.
Moreover, to help its customers navigate through this crisis, the company has extended the transient reservation cancellation window until Jun 30. It is allowing cancellations without charge until 24 hours before the scheduled arrival for new reservations made between Mar 13 and Jun 30.
Although this deadly severe acute respiratory syndrome has claimed too many lives so far, the company shows enough resilience to fight the current calamity. We believe that it will continue to monitor the COVID-19 crisis and adjust its business contingency plans to emerge out of this situation.
So far this year, shares of the company have plunged 45.4% compared with the industry’s fall of 43.1% and the S&P 500’s drop of 14.4%.
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Marriott RevPAR to Decline Sharply in Q1 Due to Coronavirus
Marriott International, Inc. (MAR - Free Report) recently provided an update on its business and initiatives that it is undertaking in response to the coronavirus pandemic. Despite dismal RevPAR and occupancy, the company’s shares have gained 5.9% as investors’ sentiments were boosted by the announcement of a new $1.5-billion revolving credit facility as well as a leverage covenant waiver for its existing credit facility.
The travel industry is experiencing the worst phase in the past several years. While Marriott has been noticing early signs of improving demand in Greater China, the negative trends in the rest of the world are yet to be stabilized. In the first week of April, occupancy increased 20% in Greater China.
Compared with February levels, occupancy and RevPAR have declined significantly in March across all regions except Greater China. Notably, the company expects worldwide systemwide RevPAR to decline approximately 23% in the first quarter 2020. RevPAR in North America is expected to fall 20%. The company stated that current occupancy in North America is nearly 10%, but in Europe it is below 10%.
Given that the pandemic is becoming worse with each day, the company anticipates further hotel closures and erosion in RevPAR performance and does not expect to see a material improvement until the spread of the virus is checked.
Other major hoteliers like Wyndham Hotels & Resorts, Inc. (WH - Free Report) , Hyatt Hotels Corp. (H - Free Report) and Marriott Vacations Worldwide Corporation (VAC - Free Report) have also been impacted by the coronavirus outbreak.
Other Updates
To mitigate negative financial and operational impact of the outbreak, the company has undertaken certain actions to reduce its operating expenses as well. This includes pay-cuts of executive staff, deferred renovations and delayed payments for certain systemwide programs as well as services. Notably, 25% of the company’s more than 7,300 hotels are temporarily closed due to the pandemic. Earlier, the company withdrew its 2020 guidance and suspended dividend payout due to the pandemic.
Moreover, to help its customers navigate through this crisis, the company has extended the transient reservation cancellation window until Jun 30. It is allowing cancellations without charge until 24 hours before the scheduled arrival for new reservations made between Mar 13 and Jun 30.
Although this deadly severe acute respiratory syndrome has claimed too many lives so far, the company shows enough resilience to fight the current calamity. We believe that it will continue to monitor the COVID-19 crisis and adjust its business contingency plans to emerge out of this situation.
So far this year, shares of the company have plunged 45.4% compared with the industry’s fall of 43.1% and the S&P 500’s drop of 14.4%.
Zacks Rank
Marriott International currently has a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Today's Best Stocks from Zacks
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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