Marriott International, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Comparisons are with Q1 2021 unless noted.
Business context
Marriott operates, franchises, and licenses hotels and related properties, with most lodging properties owned by third parties. Its reportable segments are U.S. & Canada and International. COVID-19 continued to affect results, although lodging demand recovered substantially during the quarter. At March 31, 2022, the system comprised 8,048 properties and approximately 1.488 million rooms.
Financial and operating results
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $4.199 billion | $2.316 billion |
| Net fee revenue | $791 million | $428 million |
| Operating income | $558 million | $84 million |
| Net income (loss) | $377 million | $(11) million |
| Diluted EPS | $1.14 | $(0.03) |
| Operating cash flow | $398 million | $27 million |
| Capital and technology expenditures | $49 million | $30 million |
Total revenue includes $3.146 billion of cost-reimbursement revenue, largely offset by $3.179 billion of reimbursed expenses. The resulting operating margin on reported revenue was approximately 13.3%, versus 3.6% a year earlier; this comparison is affected by those pass-through amounts. Higher fee revenue reflected recovering demand, higher incentive fees, co-brand card fees, and system growth. Owned, leased, and other revenue net of direct costs was $65 million, compared with a $27 million loss.
Worldwide systemwide comparable RevPAR increased 96.5% year over year to $89.18, with occupancy of 54.5% and ADR of $163.56. Relative to Q1 2019, worldwide RevPAR remained 19.4% lower; occupancy was down 13.6 percentage points while ADR was 0.8% higher. U.S. & Canada segment profit was $454 million, up from $143 million; International segment profit was $131 million versus a $23 million loss.
Balance sheet, debt, and liquidity
Cash and equivalents were $1.042 billion at quarter-end; cash, cash equivalents, and restricted cash totaled $1.067 billion. Total debt was $9.469 billion, including $731 million current, down from $10.138 billion at December 31, 2021. The company repaid $250 million under its credit facility during the quarter, leaving $800 million outstanding and $3.7 billion available under the $4.5 billion facility. It repaid a further $400 million in April 2022. The facility’s leverage covenant resumed for the March 2022 quarter; Marriott said it was in compliance. The current ratio was 0.5x. Management said cash, facility capacity, and capital-market access were adequate for liquidity needs.
Outlook, commentary, and material risks
- Management expected 2022 gross rooms growth to approach 5.0% and net rooms growth to be 3.5%–4.0%. The development pipeline exceeded 489,000 rooms.
- Expected 2022 capital expenditures and other investments were approximately $600–$700 million, including about $250 million for maintenance capital and the new headquarters.
- Management cited strong leisure demand and improving business transient and group trends, while noting that recovery varied by region. Greater China was particularly affected by renewed COVID-19 restrictions. COVID-19’s future financial impact remained uncertain.
- The board declared a $0.30 per-share quarterly dividend on May 2, payable June 30, 2022. No shares were repurchased in Q1; management expected to resume repurchases in 2022 if demand improved and leverage was within its target range.
- Labor shortages were creating hiring and retention challenges in some markets. Marriott reported increased compensation and recruitment efforts.
- Starwood data-security litigation and regulatory investigations remained ongoing. The company said additional losses were reasonably possible but could not estimate any amount or range beyond amounts already incurred; future legal, regulatory, cybersecurity, and compliance costs were expected. The company stated the incident was not expected to affect its long-term financial health.
- Guarantees had a maximum potential future funding amount of $219 million and a recorded liability of $121 million. Separately, the Sheraton Grand Chicago put-option liability was $300 million; the exercise period had been moved to the first half of 2024.
- German government COVID-19 assistance subsidies contributed $29 million to Q1 results at certain leased hotels.
Important facts for investors to verify
- Whether lodging recovery—especially business, group, and Greater China demand—supports the stated rooms-growth and conditional capital-return expectations.
- Credit-facility covenant compliance and debt reduction after the additional $400 million repayment in April.
- Actual investment spending against the $600–$700 million outlook and the timing and conditions for share repurchases.
- Developments in Starwood-related litigation and investigations, including potential losses and unquantified future costs.
- The sustainability of reported operating improvement, considering cost-reimbursement pass-throughs and the government subsidies included in Q1 results.