Travel

Marriott, Booking Holdings see drop in demand from coronavirus

Key Points
  • Marriott Chief Financial Officer Leeny Oberg told CNBC on Wednesday that it is seeing a notable drop in demand for hotel rooms in China.
  • Marriott is the world's largest hotel operator, and China is its fastest growing market.
  • Meanwhile, Booking Holdings is estimating a 3% to 7% drop in first-quarter revenue due to an increase in cancellations, lower average daily rates and fewer room nights booked.
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Marriott International and Booking Holdings are bracing for a pullback as consumers think twice about that spring break getaway.

Marriott Chief Financial Officer Leeny Oberg told CNBC on Wednesday that it is seeing a notable drop in demand for hotel rooms in China.

"Occupancies are currently quite depressed in Greater China and are depressed to a lesser extent in the rest of Asia. We have yet to see a significant impact in other markets around the world yet, but the situation remains fluid," said Oberg.

Marriott is the world's largest hotel operator with 800 properties in the Asia Pacific region and roughly half in Greater China. Travel restrictions enacted in the past three weeks to contain the virus have led to a sharp drop in occupancies across the mainland for a number of travel operators.

China is also Marriott's fastest-growing market, where it is building a number of new hotels. Oberg said openings could slow down due to the virus.

"Room openings could be delayed, but it is really too early to fully know how this will impact our hotel pipeline in the region," said Oberg.

However, Oberg was positive on the U.S. market holding out in the first quarter.

"To date, we have not yet seen a significant impact in the U.S., and our first quarter is off to a solid start, but again, the situation is fluid. We have seen a handful of citywide cancellations," said Oberg.

The lack of certainty as to how travelers are going to respond to the growing epidemic was also referenced by Booking Holdings CEO Glenn Fogel.

"While this is certainly having an impact, the extent is hard to predict. The difference between what we saw happening six weeks ago, three weeks ago, and even over the last few days, with new outbreaks popping up outside of Asia, illustrates the uncertainty. No one can predict the trajectory, so it's not possible to predict what the overall impact to travel will be," Fogel told CNBC.

Booking Holdings is estimating a 3% to 7% drop in first-quarter revenue due to an increase in cancellations, lower average daily rates and fewer room nights booked.

On the company's post-earnings conference call Wednesday, Fogel said the outbreak in Italy will likely disrupt travel across Europe.

In after-hours trading Thursday, shares of Marriott, which has a market cap of about $40 billion, were up slightly, while shares of Booking Holdings, which has a market cap of nearly $70 billion, were down about 1.1%.