MAR Marriott International Inc

By Dave Sebastian 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 27, 2020).

Marriott International Inc. expects the coronavirus epidemic to weigh on its fee revenue in 2020, as the pathogen's spread outside of China stokes fears and disrupts travel.

The world's largest hotel company said Wednesday that it could have about $25 million less in fee revenue a month this year, compared with its outlook, assuming current low occupancy rates in the Asia-Pacific region continue.

Excluding the epidemic's effect, Marriott expects 2020 global room growth of 5% to 5.25%, and gross fee revenue -- or revenue that it collected for maintaining its properties and from franchise agreements -- to rise 4% to 6%, to $3.96 billion to $4.04 billion, compared with last year.

The Bethesda, Md., company, which has roughly 7,300 properties, expects earnings of $6.30 to $6.53 a share for the year.

The company predicted 2020 comparable systemwide revenue per available room, an industry metric that measures performance, on a constant-currency basis to be flat to up 2% world-wide, with its rise in North America to be in the middle of the range.

For the first quarter, when the epidemic began to trigger travel restrictions, the company expects earnings of $1.47 to $1.50 a share on gross fee revenue of $940 million to $950 million. Marriott said its overall quarterly forecast excludes the epidemic's impact, because of the outbreak's fluid nature.

"We certainly do see lower occupancies in Asia Pacific outside of Greater China, but nowhere near the same reduction in occupancy levels as in Greater China," finance chief Leeny Oberg said in an interview.

Ms. Oberg said Marriott has about 800 hotels in the Asia-Pacific region. Of those, 89 hotels in Greater China -- an area that encompasses mainland China, Hong Kong, Macau and Taiwan -- aren't accepting reservations at the moment.

Companies with high exposure to travel and tourism have borne the brunt of the epidemic, with hotels closing some operations, airlines canceling flights, cruise ships becoming incubators for the pathogen and casinos closed off for two weeks in the gaming enclave of Macau.

Originating in the central Chinese city of Wuhan, the epidemic has widened globally, with cases recently surging in South Korea and Italy and new infections diagnosed in Brazil, Spain, Germany and Switzerland, as well as elsewhere.

Ms. Oberg said Marriott isn't able to determine the epidemic's effect on the company beyond the Asia-Pacific region, though cancellations of corporate events have occurred in certain cities outside that area. Fears over the epidemic have prompted global companies to drop plans for industry gatherings, such as Facebook Inc.'s cancellation of its annual marketing conference originally scheduled for San Francisco in March.

For the fourth quarter, the company's comparable systemwide revenue per available room rose 1.1% world-wide, 1.5% outside North America and 0.9% in North America. The metric fell 5.2% in Greater China.

Marriott posted net income of $279 million, or 85 cents a share, compared with $317 million, or 92 cents a share, a year earlier. Adjusted earnings were $1.57 a share, beating the $1.47 a share analysts polled by FactSet had expected.

Revenue rose 1.6% to $5.37 billion, missing the $5.51 billion analysts were targeting. The company's net fee revenue rose to $957 million from $896 million.

The company added more than 78,000 rooms last year. At the end of 2019, it had 3,050 hotels and about 515,000 rooms in its development pipeline.

Write to Dave Sebastian at dave.sebastian@wsj.com

(END) Dow Jones Newswires

February 27, 2020 02:47 ET (07:47 GMT)

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