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Trade war, weaker US economy hurt Marriott in Q2, CEO says

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Trade war, weaker US economy hurt Marriott in Q2, CEO says

A weaker U.S. economy combined with the effects of trade disputes in China hurt Marriott International Inc.'s global business in the second quarter, executives said.

With lodging demand in the U.S. up less than 2% year over year, according to STR Inc., Marriott's North American systemwide revenue per available room rose by 0.7% in the quarter. Demand was down about 50 basis points from recent quarters, President and CEO Arne Sorenson said on an earnings conference call.

Sorenson said STR data indicates that the top 25 U.S. markets have been weaker for lodging than the rest of the country, partly as a result of high levels of new construction. Though he called new supply the main driver of big-market weakness, Sorenson also said it is possible — though uncertain — that more international travelers may be opting for destinations outside the U.S.

Marriott expects North American RevPAR to grow by 1% to 2% in both the third and fourth quarters, with growth toward the lower end of that range toward the end of 2019.

In China, where Marriott has a strong presence relative to industry peers, RevPAR rose by 2.6% in the quarter, reflecting slower growth in manufacturing markets and corporate destinations as a result of the ongoing U.S.-China trade tensions, Sorenson said. Political demonstrations also held back growth in Hong Kong, he added.

"Cautious" corporate demand in China is expected to contribute to low-single-digit RevPAR growth in the Asia-Pacific region in the second half, CFO Leeny Oberg said.

"I think when you get to the trade war, the biggest question there is, what does it mean for Chinese GDP growth?" Sorenson said. "Not what does it mean for exports and imports, but what does it mean for Chinese GDP growth? And that has to be evaluated in the context of a shift by China towards more of a consumer-driven economy than they have experienced in years past."

That shift should allow the travel industry to fare better than others in China despite the ongoing risks, Sorenson said, adding that the Chinese government "has got levers to pull" to stimulate the country's economy.