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Element by Marriott Charleston Airport Hotel – Image Credit Marriott International
According to Reuters, Marriott International has reduced its full-year room revenue forecast due to uncertainties caused by tariffs and federal spending cuts under President Donald Trump’s administration, resulting in decreased demand.
Impact of Government Spending Cuts
Marriott has experienced a significant reduction in bookings, particularly from the U.S. government, which has witnessed a 10% drop in nights booked due to budget restrictions and staff layoffs triggered by the funding cuts. United Airlines reported a similar drop in government-related travel bookings, which slumped by 50% as the spending cuts echoed across various sectors of the U.S. economy. This reduction in government spending is also affecting the domestic leisure market.
Marriott’s Outlook
During an earnings conference call, Marriott’s CFO, Leeny Oberg, noted signs of weaker demand within the company’s lower-priced tiers in the U.S. The short booking window has also limited visibility into the second half of the year, indicating consumer uncertainty and caution regarding travel spending. The company now expects room revenue growth to fall between 1.5% and 3.5% by 2025, down from the previously forecasted 2% to 4%. However, this cut is less severe compared to the 150 basis points reduction made by Hilton, a rival hotel operator.
Financial Performance
Despite the revised forecast, Marriott’s shares rose by 1.6% in morning trading following the company’s first-quarter adjusted profit report of $2.32 per share, surpassing estimates of $2.25. The company, which owns brands such as Sheraton and Courtyard, expects its second-quarter adjusted profit to fall between $2.57 and $2.62 per share, slightly below analysts’ estimates of $2.68. Nevertheless, Marriott reported a 5% revenue increase to $6.26 billion, beating estimates of $6.17 billion.
International Market Performance
Despite challenges in the domestic market, Marriott’s international markets, particularly in the Asia-Pacific region excluding China, have shown robust growth. The revenue per available room (RevPAR) in this region saw a significant 10.9% increase, driven by strong demand from wealthy Chinese consumers, which has offset some of the domestic market challenges.
