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Marriott Lifts Lodging Sector

The hotel company posts stronger-than-expected earnings.

Updated from 10:49 a.m. EDT

The lodging sector got a boost Thursday after

Marriott's

(MAR) - Get Marriott International, Inc. (MAR) Report

third-quarter earnings beat estimates and the hotel operator gave an upbeat forecast for next year.

The company's overall profit fell to $141 million from $149 million a year earlier. On a per-share basis, earnings rose to 33 cents from 32 cents due to fewer shares outstanding.

Adjusted earnings from continuing operations, which exclude the impact of the company's synthetic fuel business, rose 12% to $144 million, or 34 cents a share. Analysts polled by Thomson First Call anticipated earnings of 30 cents a share.

Revenue per available room, or RevPar, a key hotel metric, increased 9.4% worldwide. Comparable North American RevPar rose 8.6%, driven by higher room rates.

For fiscal 2007, Marriott projects a RevPar increase of 7% to 8% and earnings from continuing operations of $1.78 to $1.88 a share. Analysts, on average, predict earnings of $1.87 a share.

Marriott closed up 6.6% to $40.85 Thursday.

Starwood

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(HOT)

rose 4.6% to $60.64, and

Hilton

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added 4% to $28.90.

"We believe a better-than-expected forecast, as well as the likelihood of improving RevPAR results in October (as we cycle through difficult comps) should bode well for near-term appreciation in the group," wrote Calyon Securities analyst Smedes Rose in a research note Thursday.

Arne Sorenson, Marriott's chief financial officer, said the company's conference call that he continues to see very little supply growth of luxury hotels in U.S. urban locations. That lack of new supply will benefit Marriott and other full-service hotel operators.

"The supply growth in the United States is primarily limited-service brands, primarily suburban, and secondary markets," he said.

Fears about the direction of the overall economy and gas prices have both caused volatility in the sector lately. Sorenson said the one factor Marriott is least likely to predict is overall corporate profits.

If they remain healthy, then Marriott will especially benefit on the transient side of its business, where business travelers books only weeks ahead of arrival.

Sorenson said group bookings from conventions are up from last year. Next year, he expects corporate rates to grow in the high-single digits.

Marriott expects its margins to improve 150 to 200 basis points next year. However, margins could come in even higher than expected if oil prices continue to decline, the company said. Management projects a 10% increase in heating, lighting, and power expenses next year.