Shampoo

Marriott turns a surprise profit despite near-empty hotels (it's a budgeting pro)

Monday, November 9, 2020 by Robinhood Snacks |
_When you find out there's no more mini shampoo to steal_

When you find out there's no more mini shampoo to steal

Refilling the minibar Fiji bottles... with sink water. Marriott miraculously turned a profit last quarter by being extra thrifty. It's the world’s largest hotel operator with over 7K properties across 130+ countries — usually something to brag about, not so much during a world-halting pandemic. Room occupancy went the way of the "wake up call" (near-extinct):

  • Just over a third of rooms in North America were booked. European Marriotts were even emptier, at just 1 in 5. BTW: Marriott also owns The Ritz, W, and Sheraton.
  • RevPAR: A metric hotel people are obsessed with. It's the average daily room price multiplied by occupancy rate. Marriot's fell nearly 70% from last year. And yet somehow...
  • Marriott checked in a $100M profit from July to September, compared to a $230M loss in the previous quarter.

Continental Breakfast = 1 Eggo waffle... Hilton and Hyatt had similar RevPAR plunges as Marriott, but they posted losses. How? Travel demand improved a bit from the previous quarter (especially in China), but it's really about cost-slashing...

  • Marriott cut costs by 57% — that's almost exactly the same percentage that total sales fell from last year. Marriot made 57% less, but spent 57.2% less. That 0.2% extra = profit.
THE TAKEAWAY

Budgeting is a skill... that can be used to make the best of worst-case scenarios. Marriott has fixed costs like rent and insurance (just like us) — but it showed budgeting prowess by precisely cutting everywhere it could to turn a profit. Sadly, that included tens of thousands of furloughs in March and corporate layoffs in October.