Marriott International, Inc. — Q1 2024 Form 10-Q
Period: Three months ended March 31, 2024; unaudited. Marriott is a global hotel operator, franchisor and licensor, primarily using an asset-light model. Comparisons below are year over year unless noted.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $5.977 billion | $5.615 billion | +6% |
| Net fee revenue | $1.187 billion | $1.112 billion | +7% |
| Operating income | $876 million | $951 million | -8% |
| Net income | $564 million | $757 million | -25% |
| Diluted EPS | $1.93 | $2.43 | -21% |
| Operating cash flow | $779 million | $887 million | -12% |
Operating margin on reported revenue was approximately 14.7%, versus 16.9% a year earlier. Total revenue includes cost-reimbursement revenue, substantially offset by reimbursed expenses; those pass-through items increased year over year, while cost reimbursements net were negative $68 million versus positive $11 million. Net income was also pressured by a higher effective tax rate (22.4% versus 10.3%, primarily reflecting a prior-year tax-reserve release) and higher interest expense ($163 million versus $126 million).
Cash and equivalents were $429 million at quarter-end; cash, cash equivalents and restricted cash totaled $448 million. Debt was $12.658 billion, including $732 million of commercial paper. Long-term debt had a 4.5% weighted-average interest rate and approximately 5.3-year weighted-average maturity. The current ratio was 0.4 to 1.0. Marriott has a $4.5 billion revolving credit facility, expiring in December 2027, and reported compliance with its covenants.
Business trends and changes
- Worldwide systemwide comparable RevPAR increased 4.2%, with ADR up 2.8% and occupancy up 0.9 percentage points. Regional RevPAR rose 1.5% in U.S. & Canada, 10.1% in EMEA, 6.0% in Greater China, 16.5% in Asia Pacific excluding China, and 11.6% in Caribbean & Latin America.
- Net fee revenue grew across all reportable segments. Segment profit increased in EMEA, Greater China and Asia Pacific excluding China, but fell 5% in U.S. & Canada to $625 million. Marriott cited higher compensation costs; U.S. & Canada results also reflected a $24 million year-over-year decrease in net cost-reimbursement revenue.
- The system reached 8,861 properties and 1.643 million rooms, up 6% and 7%, respectively, from March 2023. The quarter added roughly 46,000 net rooms, including about 37,000 through the MGM licensing agreement. The development pipeline exceeded 3,400 hotels and nearly 547,000 rooms.
- Marriott changed its reportable segment structure in Q1 2024 to U.S. & Canada, EMEA, Greater China and Asia Pacific excluding China; prior-period segment data was revised to conform.
Outlook, capital allocation and notable items
- Management expects full-year 2024 net rooms growth of approximately 5.5%–6.0%. It expects 2024 capital expenditures and other investments of approximately $1.0–$1.2 billion, including about $250 million of maintenance capital spending. The filing does not provide a clear full-year earnings or revenue forecast.
- Marriott repurchased 4.8 million shares for about $1.2 billion in Q1 and paid a $0.52-per-share dividend. It said it expects to continue returning cash through repurchases and dividends.
- In February, Marriott issued $1.5 billion of senior notes, receiving approximately $1.468 billion in net proceeds. Q1 financing included $1.144 billion of treasury-stock purchases and $151 million of dividends.
- The Sheraton Grand Chicago owner exercised a purchase put option in January. Marriott also elected to buy the underlying land; the combined expected cash payment is approximately $500 million, with closing expected in Q4 2024. A $300 million liability was recorded.
- Starwood data-security litigation and regulatory investigations remain unresolved. Marriott recorded an estimated loss accrual it described as not material, but says additional losses are reasonably possible and cannot be reasonably estimated. It expects ongoing legal and other costs; insurance may not cover all losses.
- Guarantees had a maximum potential future funding amount of $235 million and a recorded liability of $95 million. The filing says other material cash requirements had not materially changed from the 2023 Form 10-K; projected transition-tax payments totaled $243 million, including $108 million due within 12 months.
Key facts for investors to verify
- Whether RevPAR growth and pipeline conversion support the 5.5%–6.0% full-year room-growth expectation.
- Drivers and durability of lower operating income and cash flow, including compensation, working capital and loyalty-program costs.
- Debt maturities, refinancing needs, commercial-paper access and capacity under the revolving credit facility.
- Timing and final cash impact of the approximately $500 million Sheraton Grand Chicago transaction.
- Potential financial exposure from Starwood-related litigation and regulatory proceedings, for which the company cannot estimate a loss range.
- The effect of substantial repurchases and dividends on liquidity alongside planned investment spending.