Marriott International, Inc. reported first quarter 2022 results. Anthony Capuano, Chief Executive Officer, said, “During the first quarter, we saw the largest surge in global demand since the pandemic began in 2020. Worldwide occupancy1 rose dramatically from 45 percent in January, impacted by the Omicron variant, to 64 percent in March, less than 10 percentage points below pre-pandemic levels. Rates further strengthened, with worldwide Average Daily Rate for March exceeding the same month in 2019 by 5 percent.
“In the U.S. & Canada, RevPAR improved significantly in February and March, particularly across our urban markets, driven by occupancy and rate gains across all customer segments. Internationally, RevPAR gains were notable during the quarter in every region except for Greater China given the stringent travel restrictions resulting from the country’s dynamic zero-COVID policy. The Middle East and Africa region was again the furthest recovered, with first quarter RevPAR up 12 percent compared to 2019.
“Globally, robust demand trends continued in April, and going forward we expect leisure travel to remain strong, business travel to accelerate and cross border travel to gain momentum, supporting solid ADR performance. In the U.S. & Canada, we reached a milestone in April, as we estimate that RevPAR for the month was fully recovered to 2019 levels. RevPAR in the U.S. & Canada for the remaining quarters of this year is expected to be roughly flat with 2019 levels. While there is currently more volatility in our international regions, assuming no major change in the global economic environment or the behavior of the virus, we are increasingly optimistic that the global RevPAR gap compared to pre-pandemic levels will continue to narrow meaningfully in 2022.
“Owner preference for our brands remains strong. We signed over 19,000 rooms in the quarter, nearly half of which were in international markets. Our momentum around conversions continued, accounting for 22 percent of room additions in the quarter. Roughly 80 percent of those conversion rooms were in the high-value upper upscale and luxury tiers. For 2022, we still expect gross rooms growth approaching 5 percent and deletions of 1 to 1.5 percent, resulting in anticipated net rooms growth of 3.5 to 4 percent.
“I am very pleased to share that we are resuming capital returns to shareholders sooner than anticipated. Our focus on maximizing cash flow, managing expenses, and improving our credit profile, combined with strong first quarter results, has resulted in our Board of Directors declaring a $0.30 per share quarterly cash dividend payable at the end of the second quarter. Assuming the demand environment continues to improve and that we are within our target leverage ratio range, we also would expect to resume share repurchases in 2022.
“Our teams have navigated these challenging times incredibly well, and I think we can all look forward with real optimism. I believe Marriott remains extremely well-positioned to benefit from the continued recovery and to experience strong growth for years to come.”
First Quarter 2022 Results
Marriott’s reported operating income totaled $558 million in the 2022 first quarter, compared to 2021 first quarter reported operating income of $84 million. Reported net income totaled $377 million in the 2022 first quarter, compared to 2021 first quarter reported net loss of $11 million. Reported diluted earnings per share (EPS) totaled $1.14 in the quarter, compared to reported diluted loss per share of $0.03 in the year-ago quarter.
Adjusted operating income in the 2022 first quarter totaled $605 million, compared to 2021 first quarter adjusted operating income of $138 million. Adjusted operating income in the 2022 first quarter excluded impairment charges of $5 million.
First quarter 2022 adjusted net income totaled $413 million, compared to 2021 first quarter adjusted net income of $34 million. Adjusted diluted EPS in the 2022 first quarter totaled $1.25, compared to adjusted diluted EPS of $0.10 in the year-ago quarter. The 2022 first quarter adjusted results excluded $11 million after-tax ($0.03 per share) of impairment charges and a $6 million after-tax ($0.02 per share) gain on an investee’s property sale. The 2021 first quarter adjusted results excluded $3 million after-tax ($0.01 per share) of impairment charges.
Adjusted results also excluded cost reimbursement revenue, reimbursed expenses and restructuring, merger-related charges, and other expenses. These items totaled a $31 million after-tax loss ($0.10 per share) in the 2022 first quarter and an after-tax loss of $42 million ($0.12 per share) in the 2021 first quarter. See pages A-2 and A-9 for the calculation of adjusted results and the manner in which the adjusted measures are determined in this press release.
Base management and franchise fees totaled $713 million in the 2022 first quarter, compared to base management and franchise fees of $412 million in the year-ago quarter. The year-over-year increase in these fees is primarily attributable to RevPAR increases due to the ongoing recovery in lodging demand and unit growth. Other non-RevPAR related franchise fees in the 2022 first quarter totaled $170 million, compared to $141 million in the year-ago quarter, aided by $36 million of higher credit card branding fees.
Incentive management fees totaled $102 million in the 2022 first quarter, compared to $33 million in the 2021 first quarter. Roughly half of the year-over-year increase in incentive management fees recognized in the quarter was earned at hotels in the U.S. & Canada.
Contract investment amortization for the 2022 first quarter totaled $24 million, compared to $17 million in the year-ago quarter. The year-over-year change largely reflects impairments of investments in management and franchise contracts in Russia and Belarus.
Owned, leased, and other revenue, net of direct expenses, totaled $65 million of profit in the 2022 first quarter, compared to a $27 million loss in the year-ago quarter. The $92 million increase in revenue net of expenses year over year largely reflects the ongoing recovery in lodging demand from the impacts of COVID-19, as well as $33 million of subsidies received from international government COVID-19 assistance programs.
General, administrative, and other expenses for the 2022 first quarter totaled $208 million, compared to $211 million in the year-ago quarter.
Interest expense, net, totaled $88 million in the first quarter compared to $100 million in the year-ago quarter. The decrease is largely due to lower interest expense associated with lower debt balances.
Equity in earnings/losses for the first quarter totaled $2 million of earnings, compared to a $12 million loss in the year-ago quarter. The improvement largely reflects an $8 million gain on a joint venture’s sale of a hotel in the U.S.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) totaled $759 million in the 2022 first quarter, compared to first quarter 2021 adjusted EBITDA of $296 million. See page A-9 for the adjusted EBITDA calculation.
Selected Performance Information
The company added 75 properties (11,799 rooms) to its worldwide lodging portfolio during the 2022 first quarter, including more than 2,500 rooms converted from competitor brands and approximately 5,300 rooms in international markets. Sixteen properties (3,494 rooms) exited the system during the quarter. At quarter end, Marriott’s global lodging system totaled more than 8,000 properties, with nearly 1,488,000 rooms.
At quarter end, the company’s worldwide development pipeline totaled 2,878 properties with more than 489,000 rooms, including 998 properties with approximately 201,400 rooms under construction and 127 properties with roughly 20,800 rooms approved for development, but not yet subject to signed contracts.
In the 2022 first quarter, worldwide RevPAR increased 96.5 percent (a 95.5 percent increase using actual dollars) compared to the 2021 first quarter. RevPAR in the U.S. & Canada increased 99.1 percent (a 99.1 percent increase using actual dollars), and RevPAR in international markets increased 88.5 percent (an 84.8 percent increase using actual dollars).
At quarter end, Marriott’s net debt was $8.5 billion, representing total debt of $9.5 billion less cash and cash equivalents of $1.0 billion. At year-end 2021, the company’s net debt was $8.7 billion, representing total debt of $10.1 billion less cash and cash equivalents of $1.4 billion.
Marriott anticipates that full year 2022 investment spending will total $600 million to $700 million. Total investment spending includes capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities.
 All occupancy, Average Daily Rate (ADR) and RevPAR statistics are systemwide constant dollar and include hotels that have been temporarily closed due to COVID-19. Unless otherwise stated, all changes refer to year-over-year changes for the comparable period. Occupancy, ADR and RevPAR comparisons between 2022 and 2021 reflect properties that are comparable in both years. Occupancy, ADR and RevPAR comparisons between 2022 and 2019 reflect properties that are defined as comparable as of March 31, 2022, even if they were not open and operating for the full year 2019 or they did not meet all the other criteria for comparable in 2019. Unless otherwise stated, all comparison to pre-pandemic or 2019 are comparing to the same time period each year.