Marriott International reported relatively sluggish Q4 revenue growth in North America, with CEO Arne Sorenson citing group commission cuts as a contributing factor.
"The quarter was lighter than we anticipated, without a doubt," Sorenson told analysts during Marriott's full-year earnings call on Friday. Marriott's systemwide revenue per available room (RevPAR) in North America increased just 0.2% in the quarter. Worldwide RevPAR was up 1.3%.
"We had moved first [on decreasing group commissions], and while many of our principal competitors have moved similarly, we were exposed to having lower commissions for much of 2018," Sorenson said. "We think that for the year, group bookings impact would have been most pronounced in Q4."
Marriott was the first of the major hotel companies to reduce commissions on group bookings at North American properties from 10% to 7% in early 2018. The cut went into effect March 31, 2018.
In addition to losing business to competitors that hadn't yet reduced group commissions, Sorenson also blamed labor strikes for the North American softness. The strikes affected eight markets in the region throughout 2018, including hotels in Boston, San Francisco and Honolulu.
"We can very easily zero in on that and see that those hotels alone caused us to lose half a point of RevPAR index in Q4," said Sorenson. "It's a pretty significant kind of impact."
Additionally, Sorenson discussed the fallout from the data breach of its Starwood network, which was first disclosed to the public on November 30, 2018.
On the cost side, Marriott said it incurred about $28 million in expenses related to the breach in Q4, plus it reported $25 million in insurance proceeds.
Sorenson was confident that the data breach isn't likely to have a long-lasting effect on customer behavior, referring to a significant drop in customer support calls to the company's dedicated cybersecurity call center. He also highlighted that the legacy Starwood reservation system is no longer in use, and that the company has implemented new network security measures.
"As we addressed customer issues, the number of calls to our dedicated call center declined from over 40,000 in December to fewer than 6,000 calls in January and less than 3,000 calls in February," said Sorenson.
He added that during American Express' earnings call in January, American Express CEO Stephen Squeri reported "that his firm had seen no appreciable spike in credit card fraud" resulting from the Marriott breach.
For 2018, Marriott's systemwide RevPAR rose 2.6% globally, with North American RevPAR up 1.5% for the year and RevPAR outside the region surging 5.5%. Net income for the year increased 38%, to $2.2 billion.