Marriott Profit Rises on North America, Europe Travel
07/11/2012| 05:35pm US/Eastern
Marriott International Inc. (>> MARRIOTT INT'A') said second-quarter earnings rose nearly 6% as room prices and occupancy rates rose, a trend the hotel brand giant said was likely to continue despite weakening growth in some overseas markets.
The results, the first for the quarter from a major hotel brand company, were driven by strong group and corporate travel in the U.S. and growth in international travel to Europe, Chief Executive Arne Sorenson said in a statement. Growth in Asia was solid, he added.
Marriott, which operates the Courtyard, Renaissance, Ritz-Carlton and Fairfield brands, as well as its namesake hotels, has posted a generally robust recovery from the recession. Much of the performance has been fueled by growing demand from corporate travelers in the U.S. and limited growth in new hotel supply.
Bethesda, Maryland-based Marriott reported a profit of $143 million, or 42 cents a share, up from $135 million, or 37 cents a share, a year earlier. The previous year's earnings were 34 cents per share after adjusting for last year's spinoff of a timeshare business.
Revenue slid 6.6% to $2.78 billion, with an impact of $367 million related to the spin-off. Analysts most recently expected $2.84 billion.
The company raised its full-year earnings per share estimate to between $1.65 and $1.75 a share, compared with its April guidance of between $1.58 and $1.69 per share. However, Marriott attributed much of the increase to proceeds from a transaction that will take place in the current quarter. Adjusting for that benefit, Marriott's predictions are about 3 cents per share lower from the April estimate, some analysts said in research notes on Wednesday afternoon.
Overall the company maintained its forecast for growth in revenue per available room at between 6% and 8%.
Marriott is increasingly dependent on international markets particularly China because of stalled construction of new hotels in the U.S. However, some of the company's planned openings in China, Mexico and the Middle East have been extended into next year.
The company expects to add between 20,000 and 25,000 rooms in 2012. That number doesn't include the planned acquisition of Gaylord Entertainment Co.'s (>> Gaylord Entertainment Company) flagship hotel brand and management operations.
Still, growth in some markets--Europe, Asia, and Latin America--slowed from the previous quarter and the company lowered its projection for growth in revenue per available room--a key industry metric--overseas by one percentage point for the year.
Laura Paugh, Marriott's vice president of investor relations, said signs of a slowdown in India, Australia, as well as concerns about a few China cities where rapid growth in hotel construction is outpacing demand, prompted the expectation of slower international growth. In particular, demand for luxury hotels in Asia and the Middle East appears to be softer than previously expected, the company said.
Revenue per available room in the Asia Pacific region in the second quarter grew 11.1% over the same time last year, compared to 14% growth in first few months of the year. Overall revenue per available room grew by 6.7% in the second quarter over the same time last year.
Shares fell 2% to $27.29 after hours. Through Wednesday's close, the stock was up 30% so far this year.
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