Marriott International Management Discusses Q4 2011 Results - Earnings Call Transcript

Marriott International (MAR)

Q4 2011 Earnings Call

February 16, 2012 10:00 am ET

Executives

Arne M. Sorenson - President, Chief Operating Officer and Director

Carl T. Berquist - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Unknown Executive -

Analysts

Joshua Attie - Citigroup Inc, Research Division

Mark Strawn - Morgan Stanley, Research Division

Sule Sauvigne - Barclays Capital, Research Division

Charles Patrick Scholes - FBR Capital Markets & Co., Research Division

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Harry Curtis - Nomura Securities Co. Ltd., Research Division

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Robin M. Farley - UBS Investment Bank, Research Division

Joseph Greff - JP Morgan Chase & Co, Research Division

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

Smedes Rose - Keefe, Bruyette, & Woods, Inc., Research Division

Presentation

Operator

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Good morning. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Marriott International Fourth Quarter Conference Call. [Operator Instructions] Thank you. It is now my pleasure to turn the call over to Mr. Arne Sorenson, President and Chief Operating Officer. Please go ahead.

Arne M. Sorenson

Good morning, everyone. Welcome to our Fourth Quarter 2011 Earnings Conference Call. Joining me today are Carl Berquist, 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 last night, along with our comments today, are effective only today, February 16, 2012, and will not be updated as actual events unfold. You can find a reconciliation of non-GAAP financial measures referred to in our remarks on our website at www.marriot.com/investor.

Well, we had a terrific quarter. Adjusting for the timeshare business, we beat the top end of our guidance by about $0.02, which Carl will talk about in a moment. I know this is a confusing quarter, particularly for you modelers as our October guidance assumed timeshare would be in for the full year, when, in fact, it was spun off in late November. I know Betsy and Laura are eager to walk you through the details with you if you would like to.

All in all, we were very pleased with our results. With the spin-off of our timeshare business, we are now completely focused on lodging, management and franchising. We are also more capital efficient, easier to understand and more stable through business cycles. The transaction dramatically improves our return on invested capital and our pretax margins.

We've completed the reorganization of our lodging business, while we are leveraging reservations, marketing and the like on a global basis. Today, each region of the world has its own leadership on the ground, which puts us closer to the customer, makes us more responsive to our owners and should enhance our growth. With the benefit of this new operating structure, our development teams opened or converted 210 new properties, adding nearly 32,000 rooms to our system during the year. We also signed over 320 hotels with 50,000 new rooms in 2011. Over 1/2 of those rooms were signed for contracts outside the United states.

We introduced new designs for a Courtyard in China, Fairfield in India and a new environmentally green Fairfield design for Brazil. Roughly 1 in 5 of our room openings were conversions from competitors, and we ended the year with over 110,000 rooms in our development pipeline. Let me publicly thank our development team led by Tony Capuano for an extraordinary year.

We more than doubled the size of our Autograph brand in 2011, and that brand is now represented in 6 countries. REVPAR for Autograph hotels, which is not included in our system-wide comparable statistics, increased over 12% in 2011. REVPAR index for the new Autograph hotels grew meaningfully. This brand has an amazing resonance with new owners, and we expect to have more than 50 Autograph hotels opened by the end of 2012, doubling in size yet again.

We strengthened our brands last year. We estimate owners and franchisees invested roughly $1.5 billion in renovations and re-positionings in 2011 across all of our brands. Our great room is now in 1/4 of our Marriott and Renaissance Hotels worldwide, and over 1/2 of our more than 800 domestic Courtyard hotels offer the new Courtyard refreshing business lobby. These product innovations helped yield higher guest satisfaction scores, higher food and beverage sales, higher REVPAR and higher REVPAR index in 2011.

We removed 30 hotels with over 6,000 rooms from our worldwide system last year. Hotels need continued reinvestment and must meet high customer satisfaction metrics to both join and remain in our system. To further enhance the strength of our brands and increase our distribution over time, pruning is just as important as planting. We expect to continue to prune the weakest hotels from our system.

In 2011, we completed the transformation of our sales organization, an effort that took 5 years as we developed new systems, training and incentives programs in an organization of over 3,000 individuals. One significant advantage of this organization is the power of referrals, the pitching and catching of meeting prospects from one region to another. In 2011, we booked over $200 million in future group revenue through such referrals, almost double the prior year and significantly ahead of our expectations.

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