Marriott International ( MAR) checked into the second-quarter earnings season with a blowout quarter, topping Wall Street expectations by 6 cents a share and boosting guidance for the rest of the year because of rising travel demand. Marriott, the first hotel to announce second-quarter earnings, announced net income of $160 million, or 67 cents a share, crushing the 61-cent Wall Street estimate and rising 27% from $125 million, or 51 cents a share, a year ago. Total revenue came in at $2.3 billion, higher than the $2.2 billion expected by analysts and up 19% from the $2 billion it had a year ago. Base management fees, which Marriott collects for managing hotels for partners, rose 20% year over year, while franchise fees, which Marriott collects for lending hotels its brand name, rose 29%, as Marriott continues to add hotels to its network. The strong top-line growth driven by rising occupancies, which have enabled the hotel operator to boost rates and the amount of revenue generated per available room, a key industry metric called revpar. In the second quarter, Marriott said that revpar at the 1,888 hotels open last year at this time rose by 9.3%, with the average daily rate rising 3.5% and occupancy up to 74% from 70% a year ago. "After three difficult years, strong demand returned to the markets most impacted by the downturn," said J.W. Marriott Jr., chairman and CEO. "We were particularly pleased to welcome back international visitors to the U.S. The number of international guests visiting our U.S. hotels increased 34% during the quarter, benefiting from favorable exchange rates, and was particularly evident in New York and San Francisco." Going forward, Marriott said that the strong growth would continue, yet another sign that the cyclical hotel recovery is entering full bloom.
Predicting revpar would grow between 7% and 9% for the rest of the year, the company said that 2004 earnings would come in between $2.32 and $2.40 a share, which is higher than the current Wall Street estimate of $2.32. In the next quarter, Marriott's third, the company said it would earn between 52 cents and 56 cents a share, in line with current expectations of a 54-cent profit. Within Marriott's business, international and luxury travel were notable bright spots. The company said that revpar at Ritz Carlton rose 16.4%, while international revpar rose 24.6% -- 33.1% using actual exchange rates -- because of an easy comparison to last year's quarter, which was impacted by SARS and the war in Iraq. Industry leader Starwood Hotels & Resorts ( HOT) reports results next Thursday.