With increasing vaccination rates and an eagerness among consumers to return to normalcy, many of the biggest names in the hotel, restaurant and leisure sectors have begun to rebound in Forbes’ annual ranking of 2,000 the world’s largest public companies.
Fast-food chains have weathered the pandemic better than the rest of the restaurant sector, largely thanks to drive-thru service and digital ordering. Two prime examples are McDonald’s, the world’s largest fast-food chain, and Starbucks, which are the only restaurant companies in the top 500, at no. 222 and no. 301, respectively. Our rankings are based on a composite score calculated from revenue, profits, assets and market value.
Consider that roughly 95% of McDonald’s restaurants in the U.S. and over two-thirds worldwide offer drive-thru service, a critical feature during months of social distancing. Moreover, the investments McDonald’s made in its digital channels during the pandemic have been reaping dividends. In the first quarter of 2022, McDonald’s reported $5.67 billion in revenue, up 10.5% over the same period last year. Digital sales – including mobile app, delivery and kiosk sales — have jumped a whopping 60% compared to just a year ago. Sales through the new app-driven MyMcDonald’s Rewards loyalty program accounted for over 30% of total systemwide sales in McDonald’s top six markets. Looking forward, McDonald’s is doubling down on off-site dining. Last October, the company entered a strategic partnership with IBM to develop AI technology to automate drive-thru lanes.
Similarly, Starbucks also plans to accelerate growth with 90% of new locations featuring drive-thru lanes, interim CEO Howard Schultz said on a recent earnings call. Drive-thru and mobile ordering accounted for 70% of US sales in the last quarter and delivery was up 30%.
The biggest mover in the sector was Darden Restaurants, which jumped an impressive 638 places to break into the top 1,000 at no. 980. Darden’s stable of full-service eateries includes Olive Garden, LongHorn Steakhouse and half a dozen others. Interestingly, while Darden’s chains are sit-down affairs, off-premise sales accounted for 30% of total sales at Olive Garden and 16% at LongHorn Steakhouse. Digital transactions accounted for 63% of all off-premise sales during the quarter and 12% of Darden’s total sales, according to the company’s latest financial report.
Hotels and resorts were pummeled in the earliest days of the pandemic, but the sector seems to be back on a path to a full recovery. In March, U.S. hotel gross operating profit per available room (known as GOPPAR) reached its highest level since November 2019, according to P&L data from STR. The Baird/STR Hotel Stock Index increased 3.1% in the first four months of 2022.
The largest hotel company in the world, Marriott, rose to no. 611 on our 2022 Global 2000 list, leaping up more than 250 spots in the last year, though still landing 200 spots shy of its pre-pandemic 2019 ranking of no. 411. Marriott reported first-quarter net income of $377 million, on par with the $375 million reported in the first quarter of 2019 and a huge improvement on the reported net loss of $11 million in the first quarter of 2021.
The casino sector is also bouncing back, having generated more revenue in 2021 than any other year in the industry’s history, according to the American Gaming Association. Gross revenue hit a record-breaking $53 billion, besting the previous record of $44 billion, set in 2019, by more than 20%. MGM Resorts catapulted over 500 spots to land at no. 743 and Caesars Entertainment rose 200 spots to no. 1172.
And for cruise lines, what a difference a year has made. This time last year, cruising was still on hold after an abrupt halt to sailings in early 2020 due to the pandemic. Earlier this year, the Centers for Disease Control and Prevention ratcheted down its Covid-19 recommendations for cruising and eventually lifted all health warnings in late March.
Still, a full recovery for cruise lines will take time. The industry leader, Carnival Corporation, fell over 100 spots to no. 1219, a far cry from its pre-pandemic perch among the top 500. At the close of the first quarter of 2022, 75% of Carnival’s fleet was back in operation, with occupancy at 54% across the ships in service, according to the cruise line’s most recent earnings call. Those metrics should improve significantly by the end of the year. The company expects to start turning a profit in the third quarter of 2022 but forecasts a net loss for the full year.
Of course, if Covid-19 has taught us anything, it is to be very wary of prognosticators who prematurely break out the confetti. This time last year, Pollyannas were crowing about the end of the pandemic, only to see the delta and omicron variants bring even bigger surges in the second half of last year and through the holiday season.