Skift Take
Can Marriott hold onto hotel owners and SPG elites? That was the underlying question on many analysts' minds during Marriott's second quarter earnings call. After all, the bigger you are, the harder you have to fall, right? But the world's largest hotel company, not surprisingly, doesn't see things that way.
Two years after Marriott's $13.3 billion purchase of Starwood Hotels & Resorts, the work of integrating the acquisition is still proving to be a challenge, and still raising concerns among investors and analysts.
After seeing Marriott's second quarter results Monday night, investors and analysts were most concerned with net unit growth — the number of hotels being added to and subtracted from the Marriott portfolio — as well as with recent reports from various hotel owners and real estate investment trusts expressing some displeasure with Marriott-branded hotel performance.
Shares were off 4 percent on Tuesday.
In compiling its guidance for the year, Marriott reduced its outlook for net unit growth to 5 percent for the full year 2018, with gross room additions being 7 percent. Following the first quarter, Marriott had given an outlook within the range of 5.5 to 6 percent. That reduction — just 0.5 to 1 percent shy of previous estimates — raised some concerns.
Speaking to investors on Tuesday, Marriott CEO Arne Sorenson said that the company saw a "higher level of deletions this quarter than we did [in the first quarter]" and adjusted its outlook accordingly.
But the removal of those hotels from the Marriott system, he said, were more about Marriott bring more aggressive about ensuring the product quality of its brands, in addition to the loss of some hotels because of hurricane-related damage.
"I think this is a mix of pushing product quality issues," Sorenson explained. "I think it is a mix, to some extent, of dealing with some unresolved legacy workout issues that were within the Starwood portfolio when we closed the transaction. Some of those deals have not been resolved, and we're working our way through them toward resolution."
Quality issues plague nearly all major hotel companies, and culling problematic hotels from their respective brands is an ongoing process. And for Marriott, the Starwood deal not only added a number of marquee hotels to its portfolio but also a number of hotels that likely should have been removed from S
