RevPAR growth will be in the range of 3% to 7% in 2012 at Marriott International, as executives said during a Thursday conference call that they have not noticed weakening demand in the company’s hotel business.
BETHESDA, Maryland—The outlook for hotels in 2012 has been largely obscured this year by the violent swings in the capital markets. But Marriott International executives on Thursday indicated the picture they see for next year is one of cautious optimism.
“For the upcoming year, we have not seen weakening demand in our business, but at the same time, we read the same newspapers and we can’t avoid the risk,” Arne Sorenson, Marriott’s president and COO, said during the company’s third-quarter earnings conference call.
Revenue-per-available-room growth is likely to be in the range of 3% to 7%, Sorenson said.
“With strong demand and low supply growth, returning to peak 2007 RevPAR is on the horizon,” he said.
Group revenue on the books for Marriott is up 7% for 2012. And on the corporate side, the company’s survey of meeting planners found that two-thirds indicated companies intend to spend the same or more on hotels in 2012.
Corporate negotiated rate likely will be higher in 2012, Sorenson said.
“Our strong book of group business gives us good negotiating leverage,” he said, adding, “We feel very good about the bookings going forward.”
Sorenson was asked by an analyst how much pushback the company is getting from its corporate clients.
“I think we’ll end up positive, but to be sure, our corporate customers read the same newspapers we do, and it’s a negotiated process,” he said. “They will use the risk of a slowdown (in the economy) any way they can.”
In other negotiation-related news, Sorenson said the company’s contract with Expedia expires at the end of this year. Marriott is working to renegotiate its deal with the online travel agency.
Sorenson declined to identify specific terms of the Expedia contract. He did say, however, that 3% of the company’s total business comes from OTAs.
Also, Carl T. Berquist, executive VP and CFO at Marriott, spoke briefly about the company’s global-distribution agreement inked with Booking.com, which utilizes a model in which hotels pay a commission after the guest’s stay at the hotel.
“While OTAs will remain a small portion of our overall business, we expect this agreement to improve (revenue) efficiencies,” he said.
Outside the United States, Sorenson said the China/Asia region “continues to perform spectacularly well.”
The residential bubble that might be forming in China has not weighed on hotel operations, he said. Of the 105,000 rooms in Marriott’s China pipeline, 90% are under construction.
“It’s all systems go for us,” he said.
Meantime, in Europe, the company is closely watching the continent’s ongoing debt struggle. “Surprisingly strong” performance in Europe this year will probably be more “modest” in 2012, Sorenson said.