Marriott 2Q16 Earnings Call Notes

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Marriott’s (MAR) CEO Arne Sorenson Q2 2016 Results

Received regulatory clearance for starwood from everyone except China so far

“The big news this year for Marriott is the Starwood Acquisition. As you know we have received all of the necessary regulatory clearances throughout the world with the exception of China. We are in the second phase of China review and we have been working cooperatively with the regulatory authorities”

US economic growth has been slower than we anticipated

“you will not be surprised that U.S. economic growth has been slower than we anticipated when the year began. In fact over the last three quarters, room sales of our nearly 300 largest corporate customers have gradually weakened from 4% growth year-over-year in the fourth quarter to 2% in the first quarter and less than 1% in the second quarter.”

Strong dollar is impacting international guests

” with the stronger dollar we are seeing fewer international guests coming to our U.S. hotels. With the impact most pronounced in a few key gateway markets. We estimate the number of room nights occupied by international guests at comparable hotels in New York and Miami declined by 10% to 15% in the second quarter.”

Strength of the economy is the biggest question mark

“Obviously the strength of the economy is the biggest question I think in terms of forecasting how we are likely to perform in the coming quarters. And to some extent is the place maybe you can see this up a little bit over the second quarter. I think as we guided a quarter ago we have an overly rosy view about the strength of GDP in the United States particularly and as a consequence we continue to stick with our 3% to 5% REVPAR for the full year that we have provided at the beginning of the year.”

But it is still positive GDP growth

“But it is still positive GDP growth, I think to some extent the question you and we could ask of ourselves is we what more solid, more confident in the kind of guidance we are giving today than what we gave a quarter ago. And I think the best answer to that is that we now are making forecast based on essentially the current face of GDP growth in the United States which is weak not on a more rosy scenario.”

The economy should continue to grow but maybe somewhat anemically

“Is it possible the U.S. economy performs worse than that, of course it is. But when you look at the range of economic data that comes out including recent employment reports and consumer confidence reports and corporate profits and some of those sorts of things, it looks to us like it’s a reasonable good bet that the economy will continue to grow, albeit grow maybe somewhat anemically.”

Seeing construction projects take a little longer to complete

“And I think in some respects that in a somewhat weaker market, somewhat more anxious market that allowing the construction to take a little longer is a rational thing that some of our partners are doing. And as a consequence we see that the construction pace has expanding just a little bit. We are not seeing cancellations of projects however and I think generally what we’re talking about is projects that formally we would have expected to open probably in the fourth quarter of the year opening some time in 2017.”

Projects in China continue to move forward but slowed in Hong Kong

“We have been pleased with China on the development side year-to-date we obviously read the same newspaper that you do and there is some anxiety there as there is in many other markets around the world but it seems that people are continuing to move forward with projects that have strength. And then, on the negative side Hong Kong has been sort of tougher market mostly because Chinese visitation has, Mainland Chinese visitation has declined. Some of that is currency driven given that Hong Kong’s dollar is essentially pegged to the US dollar and so as a consequence has become more expensive as the US dollar has continued to appreciate around the world. We wouldn’t expect that Hong Kong is going to change for the better anytime real soon”