(Marriott earnings article updated with additional commentary.)
BETHESDA, Md. (TheStreet) -- Marriott International (MAR) - Get Report posted a 13.4% jump in quarterly earnings after the closing bell Wednesday, in line with expectations on a per-share basis, but mediocre results and a downwardly revised room rate outlook led investors to bid the hotelier lower Thursday morning.
"Operationally, MAR fell short of our expectations," noted Rodman & Renshaw analysts Robert A. LaFleur and Robert J. Shore. "The quarter seemed softer than expected and the EPS upside came with help from lower SG&A, a lower tax rate, and fewer shares.
Third quarter guidance is in line with us, but below consensus."
Marriott shares were 4.2% lower in premarket trading Thursday morning after closing higher by 0.9% at $37.14 on Wednesday ahead of the report.
After the closing bell Wednesday, Marriott said it earned $135 million, or 37 cents per share, on revenue of $3 billion, up from year-earlier earnings of $119 million, or 31 cents a share, on revenue of $2.77 billion. But analysts had expected the company to earn $139.1 million on revenue of $3.02 billion.
Investors paid close attention to the hotelier's all-important room revenue figures to get a sense of how the recovery is shaping up after Marriott warned earlier this year that North American travel demand was sluggish.
Marriott forecast full-year 2011 North American revPAR -- or revenue per available room, a key metric in the hotel industry that multiplies a property's room rate by its occupancy rate -- growth between 5% and 7%, lower than the guidance it gave in April for growth between 6% and 8%. Marriott attributed the revised guidance to weakness in its Washington, D.C., market due to a shorter congressional calendar and concerns regarding government budgets.
Marriott also said revised North American revPAR guidance reflected "continued strength in short-term group business, albeit at a lower pace than previously assumed."
ITG's senior leisure analyst Matthew Jacob told
ahead of Marriott's report that investors would look to Marriott's report for insight on forward booking trends. While booking windows are generally pretty short and have narrowed further in recent years, forward booking figures -- especially for group bookings on conferences, conventions and weddings, for example -- help investors determine how robust future business is likely to be.
On a global basis, Marriott forecast revPAR growth of 5% to 7% for the year.
RevPAR grew 6.8% on a worldwide basis in the recent quarter, including 7.3% in international markets and 6.6% in North America. In April, Marriott Chief Financial Officer Carl Berquist forecast second-quarter revPAR growth of 5% to 6%, with worldwide revPAR up around 7%.
Marriott's occupancy had been under pressure earlier this year, particularly in U.S. markets, Jacob said, though other hotel operators such as
Starwood Hotels & Resorts Worldwide
didn't face the same pressures.
Jacob said Marriott's first-quarter lull "was more of an anomaly than evidence of an underperforming trend" and that Marriott "will now perform more in line" with the group of hotel operators.
Average daily rates (ADRs) rose 4.5% on a worldwide basis, including 5.8% in international markets and 3.1% in North America.
Jacob had expected Marriott to booked ADR growth of 3% to 4% in the recent quarter, while Starwood, due to report its quarterly results on July 28, will probably be a bit stronger, he forecast.
Choice Hotels International
and other operators that focus more on lower-priced hotel options will show slightly softer ADR numbers, Jacob estimated.
Luxury hotels, and those deemed upper upscale, with higher price points are growing ADR at a faster clip, Jacob explained.
"It's a matter of where they have exposure. Comps for upscale hotels
such as Starwood and
are easier since revPAR really dropped during the downturn," he said. "The other end of the continuum wasn't hit as hard."
Typical luxury customers may not be feeling the same financial pressures as of late that budget-conscious travelers are facing as the industry works to recover, but trends in other segments are at a plateau, Jacob added.
Earlier this year
In Wednesday's report, CEO J.W. Marriott Jr. said that "emerging markets provide especially attractive opportunities. In the past five years, we have increased our hotel distribution in Brazil, Russia, India and China at a 12% compound annual growth rate while tripling our development pipeline in those markets."
"In the U.S., strengthening lodging demand and limited supply growth are contributing to higher occupancies and room rate growth," the CEO added.
Investors also looked to Marriott's report for an update on its news from earlier this year that
Marriott said only that its 2011 guidance "assumes that the planned spin-off of the Timeshare segment does not occur in the current year and does not include pro forma adjustments or estimates of further transaction expenses. Such transaction costs could be material in the second half of 2011."
"Marriott International expects to spin off its timeshare operations and development business as a new independent company through a special tax-free
to Marriott International shareholders in late 2011," the company said in February.
Jacob said that "any discussion of the timeshare business will carry importance."
-- Written by Miriam Marcus Reimer in New York
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