Cash-strapped Marriott International is said to slow down its U.S. expansion, but is optimistic as it sees “steady signs of demand returning.”
Marriott International posted a massive drop in its second-quarter earnings, citing that the measures to mitigate the spread of coronavirus have caused a significant decline in hotel bookings as it put the travel market on a halt.
Marriott Q2 earnings fell by 84%
The hotel giant second-quarter revenue plunged to a record low of 84.4%, as per Arne Sorenson, President and Chief Executive Officer of Marriott International, during the company’s Q2 earnings call.
Its shares dropped by 3% as well, down to 40.3% this year in premarket trading.
Sorenson also noted that while Marriott’s earnings fell dramatically in the second quarter, demand is seen slowly recovering after its biggest year-on-year slump in April, with RevPAR down to 90%.
“While our business continues to be profoundly impacted by COVID-19, we are seeing steady signs of demand returning,” the chief executive officer assured the public.
Most of its hotels that were shut down during the lockdown are open now, too. However, a slice of 9% of its global properties remained closed. Its global occupancy rates climbed as much as 34% for the week ended of August 1st, too, a significant rise from April’s 11%.
Sorenson also commended the quick improvements of the hotel’s occupancy levels in Greater China as it continues to lead the hotel giant’s recovery. Its occupancy rate for the country peaked at a 60% mark.
Overall, Marriott International lost 72.4% to $1.46 billion in profit.
Hotel expansion put on pause
Despite signs of demand slowly returning, Marriott officials admit that it is still uncertain as to when its earnings could surge back to pre-pandemic levels. For that very reason, the hotel announced that it would slow down most of its development process, particularly in the United States.
“It seemed to be, but an odd time, I suppose, to be bringing in deals that we could not underwrite in a way to know that they were the kind of high probability we would want to add to the pipeline,” Sorenson explained during the company’s earnings call.
As per the data, the hotel giant has over 230,000 rooms in the pipeline that are under construction. But because of the pandemic and economic recession, most of the expansion put on a halt indefinitely.
On a lighter note, Sorenson pointed out that the hotel will stop all of its expansion plans. In China, for instance, accumulated about a third of new deal signings in the first half of 2020. Deals in the Asia Pacific have risen more than 30% as well compared to last year’s first two quarters.