Marriott's Feeling Fine About the Future

Marriott International (MAR) said it sees strong profit growth -- around 20% annually -- over the next several years.

On Thursday, the hotel company predicted that earnings per share would grow at a 17% to 22% annual rate through 2008. The forecast assumes that revenue per available room, a key lodging industry metric also known as revpar, will increase 4% to 8% a year from 2006 through 2008. Marriott also reiterated guidance for 8% to 10% revpar growth this year.

Those predictions, which exclude profits from the company's synthetic fuel investment, suggest that 2008 EPS will be $3.75 to $4.50. Marriott also said hotel management and franchise fees would range from $1.37 billion to $1.6 billion in 2008.

The company issued the forecast in a news release as management prepared for a Miami Beach gathering with Wall Street analysts and institutional investors.

Shares fell 33 cents, or 0.5%, to $67.47.

"We have an exciting future," said J.W. Marriott Jr., the company's chairman and CEO, in the release. "Across all of our brands, our expanding distribution, scale, culture-driven guest service and ongoing product renewals position us to be the unquestioned leader in our industry."

Wall Street analysts aren't surprised by the company's latest forecast. Bear Stearns analyst Joseph Greff, for example, writes that it's in line with his own estimate for core EPS growth of 19% in 2005 and 22% in 2006.

There were some clouds in Marriott's latest guidance. The company said the initial adoption of an accounting rule for time-share real estate transactions will result in a one-time noncash pretax charge of $150 million to $175 million in 2006.

Like other large hotel companies, Marriott is riding a strong cyclical lodging recovery. That has enabled it to generate significant cash that it has put to work buying back its own stock. In Thursday's release, Marriott said it has repurchased 11.3 million shares of common stock at a cost of $716 million so far this year. The company also expects continued strong cash flow -- totaling $3.0 billion to $3.5 billion from 2006 through 2008 -- will allow it to keep making repurchases.

Marriott wants to increase its market share by adding 75,000 to 90,000 hotel rooms to its worldwide system between 2006 and 2008. About 20% of those additions will come from conversions from other brands, while 25% will be outside the U.S.

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