Arne M. Sorenson, president and chief executive officer of Marriott International, said, “Worldwide RevPAR increased 1.2 percent in the second quarter with higher leisure transient demand in Europe, the Caribbean and South America, and the Asia Pacific regions.  Showing great momentum, our worldwide RevPAR index increased 110 basis points in the quarter, the strongest single quarter performance since our acquisition of Starwood in late 2016."

“Our owners and franchisees continue to sign new hotel deals at a rapid pace.  Our development pipeline increased 3 percent in the second quarter, reaching a record 487,000 rooms, including roughly 213,000 rooms under construction.  Today, our pipeline includes five new all-inclusive resorts to be built over the next several years, which will be part of our newly-launched all-inclusive platforms, " he continued.

"Recognizing the growing demand for all-inclusive lodging, our platform will create distinctive vacation experiences while leveraging existing brands in our luxury and full-service portfolio.  We expect the platform will grow through both new-build properties and conversions of existing resorts, offering travelers yet another option for earning and redeeming Marriott Bonvoy points."

“Our results in the second quarter highlight the resiliency of our business model and the growing strength of our brands.  Year-to-date through August 2, we have already returned $1.9 billion to shareholders.  For full year 2019, we expect cash returned to shareholders through share repurchases and dividends could approach $3 billion.”

HIGHLIGHTS

• Second quarter reported diluted EPS totaled $0.69, compared to $1.87 in the year-ago quarter. Second quarter adjusted diluted EPS totaled $1.56, compared to second quarter 2018 adjusted diluted EPS of $1.73.  Reported and adjusted diluted EPS for the 2018 second quarter included $0.26 of asset sale gains;
• Second quarter 2019 comparable systemwide constant dollar RevPAR rose 1.2 percent worldwide, 2.8 percent outside North America and 0.7 percent in North America;
• The company added more than 16,000 rooms during the second quarter, including nearly 3,500 rooms converted from competitor brands and approximately 7,500 rooms in international markets;
• At quarter-end, Marriott’s worldwide development pipeline totaled roughly 2,900 hotels and more than 487,000 rooms, including approximately 40,000 rooms approved, but not yet subject to signed contracts. Roughly 213,000 pipeline rooms were under construction at the end of the second quarter;
• Second quarter reported net income totaled $232 million, a 65 percent decrease from prior year results. Second quarter adjusted net income totaled $525 million, a 15 percent decrease from prior year adjusted results;
• Adjusted EBITDA totaled $952 million in the quarter, a 1 percent increase over second quarter 2018 adjusted EBITDA;
• Marriott repurchased 3.8 million shares of the company’s common stock for $500 million during the second quarter. Year-to-date through August 2, the company has repurchased 12.1 million shares for $1.6 billion.

Second Quarter 2019 Results

Marriott’s reported net income totaled $232 million in the 2019 second quarter, compared to 2018 second quarter reported net income of $667 million.  Reported diluted earnings per share (EPS) totaled $0.69 in the quarter, compared to reported diluted EPS of $1.87 in the year-ago quarter.

Second quarter 2019 adjusted net income totaled $525 million, compared to 2018 second quarter adjusted net income of $619 million.  Adjusted diluted EPS in the second quarter totaled $1.56, compared to adjusted diluted EPS of $1.73 in the year-ago quarter.  Adjusted results for the 2018 second quarter include $119 million pre-tax ($0.26 per share) of asset sale gains in gains and other income, net and equity in earnings.  See page A-3 for the calculation of adjusted results.  Adjusted results exclude merger-related costs and charges, cost reimbursement revenue, and reimbursed expenses.  Adjusted results for the 2018 second quarter also exclude an increase to the gain on the sale of Avendra.

Base management and franchise fees totaled $834 million in the 2019 second quarter, an 8 percent increase over base management and franchise fees of $775 million in the year-ago quarter.  The year-over-year increase in these fees is primarily attributable to unit growth, RevPAR growth, and higher branding fees.

Second quarter 2019 incentive management fees totaled $165 million, a 6 percent decrease compared to incentive management fees of $176 million in the year-ago quarter.  The year-over-year decrease largely reflects lower net house profits at North American managed hotels, and unfavorable exchange rates, partially offset by higher net house profits at International managed hotels.

General, administrative, and other expenses for the 2019 second quarter totaled $229 million, compared to $217 million in the year-ago quarter.  The year-over-year change largely reflects an increase in administrative costs.

In the 2019 second quarter, the company incurred $22 million of expenses and recognized $22 million of insurance recoveries related to the data security incident it disclosed on November 30, 2018.  The expenses and insurance recoveries are reflected in either the reimbursed expenses or merger-related costs and charges lines of the Income Statement, which have been excluded from adjusted net income, adjusted EPS and adjusted EBITDA.

The company also recorded a $126 million non-tax deductible accrual in the second quarter for the fine proposed by the U.K. Information Commissioner’s Office in relation to the data security incident.  Marriott has the right to respond before the amount of the fine is finally determined and a fine can be issued.  The company intends to respond and vigorously defend its position.  The accrual is reflected in the merger-related costs and charges line of the Income Statement, which has been excluded from adjusted net income, adjusted EPS and adjusted EBITDA.

Gains and other income, net, totaled $1 million, compared to $114 million in the year-ago quarter.  Gains and other income, net, in the 2018 second quarter largely reflected $109 million of gains from asset sales.

Interest expense, net, totaled $96 million in the second quarter compared to $79 million in the year-ago quarter.  The increase is largely due to higher debt balances.

Equity in earnings for the second quarter totaled $0 million, compared to $21 million in the year-ago quarter.  The 2019 second quarter included a $4 million asset impairment.  The 2018 second quarter included a $10 million gain on the sale of a hotel in a North American joint venture.

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See also:

Get to know Sean Hunt of Marriott International

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