Must-know: What drives Marriott’s segment revenue?

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Marriott’s segment revenue

So far, we discussed Marriott’s brands and business segments. In this part of the series, we’ll discuss the impact of each segment’s revenue. Two main drivers of a hotel company’s revenue per available room (or RevPAR) are:

  1. occupancy rates
  2. room rates—or average daily rates

Part6_Rev Drivers

  • RevPAR is the total guest room revenue divided by the total number of available rooms. RevPAR is also calculated as occupancy multiplied by the average daily rate (or ADR).
  • Available room is the number of rooms multiplied by the number of days in a specified time period.
  • Occupancy is the number of available rooms sold during the specified period. It’s calculated by dividing the number of rooms sold by the rooms available.
  • ADR is the average rate paid for rooms sold. It’s calculated by dividing room revenue by rooms sold.

RevPAR

There are many factors that influence occupancy rates and ADR:

  • seasonal nature of the business
  • level of services offered by the hotel
  • state of the economy
  • competition
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Marriott’s (MAR) total worldwide RevPAR was $122.32 in 2013. It was higher than Hilton’s (HLT) $98.65, Starwood’s (or HOT) $119.15, and Wyndham’s (WYN) $36. Hyatt’s (H) RevPAR was higher at $139. Click here for more details on Hilton’s revenue drivers. Investor can gain access to the hotel industry through exchange-traded funds (or ETFs) like the PowerShares Dynamic Leisure & Entertainment Portfolio (PEJ).

Among Marriott’s segments, RevPAR is highest for Marriott’s Luxury segment. This segment has a lower occupancy rate compared to other segments. This is mainly due to a higher average daily rate of $344.40. This is almost double that of North American full-service and international segments. It’s almost three times higher than the North American limited service segments.

Luxury Hotels command premium room rates. It has high rates because of the high-quality and luxurious services and amenities provided to the guests. The rooms are at the best landmark locations in the world.

Full-service hotels are mid-price, upscale, or luxury hotels. They have restaurants, lounge facilities, and meeting or conference facilities. They also offer room service and food and beverages. In contrast, limited service rooms have less services and amenities. They only have room services—no food and beverage services. As a result, the room rates are lower.

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