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China's economic malaise and a slowdown in domestic leisure travel demand made business conditions less hospitable for Marriott (MAR) in 3Q24 as the hotel chain operator missed EPS expectations and issued downside EPS guidance for Q4. The company's soft results and outlook add to a string of disappointing earnings reports from the hotel industry, including those from Hilton (HLT) and Wyndham Hotels & Resorts (WH) on October 23, further illuminating the more challenging environment.

• RevPAR, one of the closest watched demand metrics for hotel operators, increased 3.0% worldwide for MAR in Q3, but that was down from the 4.9% increase the company posted last quarter. The main drag came from China where RevPAR decreased by nearly 8%, partly offsetting strength in MAR's other international markets. Led by strength in EMEA and Asia Pacific (excluding China), international RevPAR was up a solid 5.4%.
• Just as the airline industry has experienced a cool down in demand in the domestic leisure travel category, MAR is also seeing demand moderate a bit on the home front. In the U.S. and Canada, RevPAR increased by 2.1% in Q3 compared to last quarter's increase of 3.7%. Within the U.S. and Canada market, RevPAR for the leisure category was flat on a yr/yr basis, while Group remained the strongest customer segment at +10%.
• A major component of MAR's growth strategy rests in its new property development plans. In that regard, the company had good news to share as the company added 16,000 net rooms in Q3, lifting its net room growth to nearly 6% over the past four quarters. Furthermore, MAR raised its FY24 net rooms growth guidance to approximately 6.5% from its prior forecast of 5.5-6.0%.
• Lastly, MAR announced a new cost-savings initiative that it expects to generate $80-$90 mln of annual savings in general and administrative costs, beginning in 2025. For some context, General, Administrative, and Other expenses increased by 15% in Q3 to $276 mln. 

The main takeaway is that while business is still relatively healthy overall, a couple pockets of weakness, most notably including China, are dragging MAR's results down. An ambitious property development plan and its new efficiency and cost-savings initiative should help to bolster MAR's top and bottom-line growth amid these headlines but generating growth has become more challenging for hotel operators compared to the past few years.