Marriott International, Inc.
Q1 2010 Earnings Call Transcript
April 22, 2010 10:00 am ET
Arne Sorenson – President and COO
Carl Berquist – EVP and CFO
Felicia Hendrix – Barclays Capital
Bill Crow – Raymond James & Associates
David Loeb – Robert W. Baird
Ryan Meliker – Morgan Stanley
Steve Kent – Goldman Sachs
Chris Woronka – Deutsche Banc
Joe Greff – JPMorgan
Jeffrey Donnelly – Wells Fargo
Good day and welcome to this Marriott International first quarter 2010 earnings conference call. Today’s call is being recorded.
Previous Statements by MAR
» Marriott International, Inc. F4Q09 (Qtr End 01/01/10) Earnings Call Transcript
» Marriott International, Inc Q3 2009 Earnings Call Transcript
» Marriott International, Inc. Q2 2009 Earnings Call Transcript
And now at this time for opening remarks and introductions, I would like to turn the call over to the President and Chief Operating Officer, Mr. Arne Sorenson. Please go ahead, sir.
Thank you. Good morning, everyone. Welcome to our first quarter 2010 earnings conference call. Joining me today are Carl Berquist, our Executive Vice President and Chief Financial Officer; Laura Paugh, Senior Vice President, Investor Relations; and Betsy Dahm, Senior Director, Investor Relations.
As always, before we get into the discussion of our results, let me first remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties, as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments.
Forward looking statements in the press release that we issued earlier this morning, along with our comments today, are effective only today, April 22, 2010, and will not be updated as actual events unfold. You can find definitions of the terms we refer to this morning in our earnings release on page eight; you can find a reconciliation of non-GAAP financial measures referred to in our remarks on our website at www.marriott.com/investor.
As many of you know, today is the 40th Anniversary of Earth Day. We've worked hard over the past several years to address environmental issues through our Spirit to Preserve program, which addresses the environmental impact of our operations and new hotel development. Taking another step, just two weeks ago, our headquarters was certified LEED Gold by the U.S. Green Building Council. We've transformed our more than 30 year-old building into one of the greenest headquarters in our industry and we are very proud of that.
Speaking of green, you may recall considerable discussion last year around green shoots in the economy. There were a few signs of improvement in the economy then. In this beautiful April, where harvest season is still a ways off, not only do we see the green shoots in our first quarter results, but in many cases, those shoots have started blooming.
Our first quarter worldwide RevPAR came in meaningfully better than we anticipated and earnings per share exceeded the high end of our expectations. In January and February, North American RevPAR demonstrated solid improvement from recent trends, but March was even better.
For example, for the Marriott brand in North America, company-operated hotel RevPAR declined 8.5% in the first period, declined 3.1% in the second period, and rose 7.1% in the third period. And Ritz-Carlton is ramping even better with their January down 2.4%; February up 7.6%; and March, which is in our second fiscal quarter, up 15.7%.
Corporate business travelers are returning to our hotels and in some numbers. For the Marriott brand, room nights sold to corporate travelers rose 16% year-over-year in the first quarter. To give you a sense of the momentum, looking just at period three, corporate room nights rose 21%.
Premium rooms, including suites, club level and water views sold well with room nights up 17% for the quarter. Looking just at period three, premium room nights rose 28%. For the Marriott brand, group business also showed dramatic improvement late in the quarter, largely due to better attendance. Group room nights increased 1% in the first quarter, but they increased 10% in period three. While corporate business remains soft, association meeting attendance took off. Association room nights increased 15% for the quarter and rose 50% in our third period.
On the leisure side, vacationers continued to check in during the quarter. For the Marriott brand in North America, weekend room nights increased nearly 6% in the first quarter. Another good trend, particularly for gateway markets, was that more international travelers arrived in the U.S. with room nights up 14%.
Overall, the pricing environment in North America is gradually improving. For the Marriott brands, company-operated hotels, room rates declined 8% in the quarter, but they got progressively better as the quarter went on. Year-over-year room rates declined nearly 14% in the first period, fell 7% in the second period, and declined only 3% in the third period. Hotels are benefitting from stronger corporate trends in business, increasing sales of suites, club level and other premium rooms and rising prices at a few hotels. The recovery is clearly occurring faster than we anticipated.
Outside North America, results are also good. International RevPAR increased 1% in January, 2% in February, and 10% in March. As a reminder, the March numbers are in our fiscal second quarter. Business in the Europe and the U.K. continues to strengthen with improving business trends and group demand. Year-to-date through March, constant dollar RevPAR in London rose 16% and Paris was up 6% with stronger economic growth.
In Asia, occupancy rates rose over 12 percentage points in the first quarter, which include January and February and rose 18% in March, dramatically exceeding our expectations. Stronger RevPAR in our hotels in China reflected better-than-expected domestic corporate demand and maturing of our newer hotels. For Marriott International, China is a very significant market. We have 47 hotels open as of the end of the quarter, with 13 more opening in the remainder of 2010 and 15 more in the pipeline.