Updated from 8:17 a.m. EDTIf hotel earnings are any indication, the economic recovery appears to be on track. On Thursday, both Starwood Hotels ( HOT) and Marriott International ( MAR) announced earnings that easily topped Wall Street expectations and issued higher earnings guidance for 2004, telling shareholders the economic recovery was boosting lodging demand. Starwood, best known for its Sheraton and W Hotels brands, announced first-quarter net income of $34 million, or 16 cents a share, an improvement from the loss of $116 million, or 58 cents a share, it had a year ago. Excluding all items, the company announced earnings of $33 million, or 16 cents a share, easily topping the 10-cent profit expected by Wall Street and the year-ago loss of $17 million, or 8 cents a share. Revenue came in at $1.23 billion, higher than the $976.3 million expected by analysts and up 13% from the year-ago $1.09 billion. Revenue per available room, a key industry metric called revpar, was up 11.6% in stores open last year, led by a 14.8% gain in revpar for the company's St. Regis hotels. "This quarter continues the momentum we saw building in our company the past six months, especially now as the world returns to an accelerated travel pattern," said Barry Sternlicht, chairman and CEO. "It is gratifying to see the strategies and investments we have made in the recession drive our performance now." Earnings before interest, taxation depreciation and amortization, which can be a better measure of earnings since Starwood owns so much land, came in at $222 million, up 18.7% from the year-ago $187 million. The strong results were fueled by a 32% year-over-year jump in management and franchise fees. And Starwood expects this EBITDA growth to continue going forward, citing an "expectation of a sustained recovery." Unlike rivals that have largely issued conservative guidance, Starwood continues to express bullishness about not only its own business, but a broader economic recovery as well.
In the second quarter, the company said revpar would increase between 11% and 12%, with net income at $76 million, or 35 cents a share, higher than current Wall Street expectations of a 33-cent profit, according to Thomson Financial. For the full year, the company said revpar would increase between 8% and 9%, with net income at $265 million, or $1.23 a share, better than the $1.12 a share expected by analysts.
Merrily, Merrily at MarriottMarriott announced first-quarter net income of $114 million, or 46 cents a share, down slightly from the year-ago $116 million, which came in at 48 cents a share. Excluding the company's synthetic fuel operation, net income came in at 43 cents a share, up from 28 cents a year ago. Earnings from continuing operations, which is how Wall Street views the hotel company, were $114 million, or 47 cents a share, up 31% from $87 million, or 36 cents a share, last year. The number easily beats the 42-cent analyst estimate, according to Thomson Financial. Revenue came in at $2.3 billion, up 11% from last year's $2 billion and higher than the $2.1 billion expected by analysts. Revenue trends were especially strong for the company's upscale Ritz Carlton brand and its international hotels. Same-store revpar at North American hotels was up 5.4% year over year, while international revpar gained 13.4%. "Results were terrific in the first quarter of 2004, and we are especially pleased to see the increase in worldwide lodging demand. Group bookings and transient demand accelerated steadily through the first quarter and we are encouraged by the indications for the rest of the year as well," said J.W. Marriott Jr., chairman and CEO. "We are optimistic that EPS from continuing operations will increase approximately 20% this year." In the second quarter, Marriott expects revpar to grow between 7% and 9%, with earnings coming in between 59 cents and 61 cents a share. Analysts expect the company to earn 54 cents a share in the second quarter, according to Thomson Financial.
Marriott also expects revpar to grow between 6% and 8% in 2004 and boosted earnings estimates for the rest of the year. In 2004, the company expects earnings to come in between $2.24 and $2.34 a share, well above the current consensus estimate of $2.14 a share. Shares of Starwood were up 2.7% to $41.80, while Marriott shares had climbed more than 8% to $48.03.