Marriott Pricing Spineometer: 5 of 5 Vertebrae

Marriott, a global hospitality concern operating hotels, residential communities, and timeshare, had a positive Q2 2024. Revenue rose 6.0% to $6.4 billion and earnings before interest and taxes rose 9.0% to 1.2 billion over the same period last year.

A review of Marriott’s July 31 Q2 2024 earnings call and associated financial reports provided insight regarding the challenges that impact and the importance of pricing.

• Both Anthony Capuano, CEO, and Leeny Oberg, CFO spoke at length about RevPAR (revenue per available room), touting a 4.9% increase over the same quarter last year in constant dollars.
• Marriott has three major revenue sources: Management and Franchise Fees, Incentive Management Fees, Owned, leased and other revenue.
• Marriott has operations in North America, EMEA, CALA (Caribbean and Latin America), and APAC, including China. They ceased business in Russia in 2022.
• Marriott operates 36 brands including Ritz Carlton, JW Marriott, Sheraton, Westin, Renaissance, MGM, Courtyard, Four Points, City Express, and Fairfield.
• Marriott offers the Bonvoy loyalty program and has recently created a new loyalty program aimed at small and medium-sized businesses.
• Currently, Marriott reports a slower-growing leisure segment, higher demand in the business transient segment, decent demand in small and medium business corporates (small conferences), and reduced demand for large corporates (larger conferences).
• Currently, Marriott reports weaker demand in China will likely impair RevPAR over the coming quarters.

As a hospitality concern, Marriott will rely on a price structure known as yield management also known as revenue management. With this price structure, each hotel is likely to have one or more revenue managers. Yet, as with its peer competitors, Marriott operates with a more diverse revenue stream and, with multiple brands, must include versioning in its pricing strategy along with other structures.

Industry benchmarks suggest 50 to 250 pricing professionals working at Marriot, not including the thousands suspected to be assigned to individual hotels in revenue management. Key challenges these pricing professionals would address include:

1. Applied macroeconomics and microeconomics for forecasting medium and long-term trends in demand by geography at the country and customer segment levels.
2. Brand portfolio price band management for managing price differentials and expectations across its many brands and customer experiences.
3. Loyalty program management for managing the tradeoff between reserving rooms on points versus dollars.
4. Conference price negotiation analytics for guiding sales executives in price negotiations.

Research into the investment by Marriott in pricing yielded highly encouraging results.

1. Well over 200 professionals are working in pricing and revenue management at Marriott International.
2. These professionals were globally distributed and aligned with the operations of Marriott at the area and regional level.
3. Titles ranged from Market Revenue Management, Director of Revenue Management, and Vice President of Revenue Management. Significantly, Marriott had several Vice Presidents of Revenue Management aligned with specific brands or geographic regions. It even appears they have a revenue management training program.

Given the importance and capability of pricing at Marriott as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of August 2024.

Marriott Pricing Spineometer: 5 out of 5 Vertebrae.

MAR (Marriott International, Inc.) fell from 239 the day prior to their earnings call to 215 one week later. FY 2023 revenue of $23.7 billion with a 16% operating margin and P/E ratio near 22.

For FY 2023, a 1% improvement in price would yield a 6.1% improvement in operating profits holding all else constant at Marriott.