Marriott Earnings: Reservation for Profits?

(Marriott earnings report updated with results.)
BETHESDA, Md. ( TheStreet) -- Marriott International ( MAR) reported a 21.7% jump in quarterly profit but results missed expectations as travel demand in North America slowed.

Marriott said late Wednesday that its first-quarter profit jumped to $101 million, or 26 cents per share, missing expectations by a penny.

Worldwide revPAR -- or revenue per available room, a key metric in the hotel industry that multiplies a property's room rate by its occupancy rate -- rose 6.5%, below the 7% Marriott had forecast last month. North American revPAR rose 5.8% while international revPAR grew 11.2%.

The hotelier attributed to the profit miss to a slowdown in group bookings in the Washington area, where around 5% of its rooms are located.

FBR Capital Markets analyst Patrick Scholes said Marriott's results were also hampered by increased competition from other hotel operators' updated properties.

Total revenue rose 5.6% to $2.78 billion, short of the $2.86 billion analysts had been looking for.

Despite the top- and bottom-line miss, Marriott shares were 0.9% higher Thursday morning at $35.58.

In late March, Marriott warned of softer-than-expected demand in North American markets, leading hotel stocks lower the day it made the announcement.

Marriott said Wednesday that it expects revPAR to rise between 6% and 8% in North America, and between 5% and 7% outside North America, in the second quarter and in 2011.

Second-quarter earnings are expected to come in between 34 cents and 38 cents per share, lower than the 39 cents analysts had forecast.


Marriott CFO Carl Berquist, speaking at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum in Las Vegas last month, said demand in international markets has been strong but that North American revPAR has been less robust than expected, especially in large group hotels in key cities like New York, Atlanta, Orlando and Washington, D.C.

Those cautionary words led investors to bid shares of Marriott , Starwood Hotels & Resorts Worldwide ( HOT), Wyndham Worldwide ( WYN) and Hyatt ( H) much lower.

Marriott shares remain 7.4% lower since the March 28 announcement, and Hyatt remains 4.8% lower as well. Starwood and Wyndham are 0.9% and 2.4% lower, respectively.

The iShares Dow Jones US Consumer Services ( IYC), an exchange-traded fund that counts all four hotel stocks among its holdings, traded 0.1% higher Thursday morning at $72.08. The Vanguard Consumer Discretionary ( VCR) ETF was unchanged at $64.29.

Marriott's Berquist said he expected current quarter North American systemwide revPAR growth of 5% to 6%. Worldwide revPAR this quarter should increase by around 7%, at the bottom end of its guidance for growth of 7% to 9%.

International revPAR this quarter should grow around 11% year-over-year. In 2010 Marriott's international properties accounted for 65% of all incentive fees.

Berquist also reaffirmed Marriott's outlook for first-quarter earnings-per-share between 24 cents and 28 cents.

When Marriott reported its fourth-quarter results earlier this year, investors were particularly impressed with word from Marriott that it would split itself into two separate, publicly traded companies .

"Marriott International expects to spin off its timeshare operations and development business as a new independent company through a special tax-free dividend to Marriott International shareholders in late 2011," the company said in February.

Analysts from Goldman Sachs ( GS) cut its rating and price target on Marriott, citing uncertainty about the company's planned timeshare spin-off.

Goldman downgraded Marriott to neutral, from buy, and cut its price target on the stock by $10 to $38.

-- Written by Miriam Marcus Reimer in New York.

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