Why did Marriott's gross profit decline in Q4 2023?

Marriott's gross profit declined in Q4 2023 due to increased cost of goods sold, which grew at a faster rate than revenue, resulting in a lower gross margin. Here's a detailed analysis: 1. **Revenue and Cost of Goods Sold (COGS)**: - Marriott's total revenue for Q4 2023 was $17.73 billion. - The cost of goods sold (COGS) was $6.1 billion. 2. **Gross Margin Calculation**: - Gross margin is calculated as (Total Revenue - COGS) / Total Revenue. - In Q4 2023, the gross margin was 21.61%. 3. **Comparison with Previous Quarter**: - Marriott's Q3 2023 revenue was $5.93 billion, with an EPS of $2.11. - Q4 2023's revenue increase suggests improved top-line performance, but the gross margin decline indicates that the cost side of the business may have outpaced this growth. 4. **Factors Influencing Cost of Goods Sold**: - The cost of goods sold includes the direct costs associated with providing hotel services, such as food, beverages, and payroll. - Increased costs in these areas could lead to a higher COGS, thereby lowering the gross margin. 5. **Strategic Initiatives and External Factors**: - Marriott has been expanding its global portfolio, which includes adding new properties to its Luxury Collection. - The reopening of international borders and easing of travel restrictions in Europe have led to improved occupancies. - However, these strategic moves and external factors may have temporary impacts on cost management, potentially leading to a decline in gross margin if not adequately managed. In conclusion, Marriott's gross profit decline in Q4 2023 is likely due to increased cost of goods sold growing at a faster rate than revenue, despite a boost in international occupancies and revenue growth. The company's expansion efforts and external factors may have temporarily strained cost management, leading to a lower gross margin for the quarter.