Marriott books lower 3Q profit, expects tough 2009
Thursday October 2, 2:23 pm ET
By Kristen A. Lee, AP Business Writer
Marriott reports lower 3rd-quarter profit and warns of tough 2009 amid economic turmoil
BETHESDA, Md. (AP) -- Hotel company Marriott International Inc. said Thursday that its third-quarter profit dropped 28 percent, compared to 2007, and it warned investors about deteriorating conditions for 2009 amid the ongoing financial crisis.
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Marriott said its revenue per available room declined in North America, and timeshare sales dried up amid the tight credit market and cutbacks in business and consumer spending. Revenue per available room, or revpar, is considered a key gauge of a hotelier's performance.
"It's ugly and getting uglier," said Susquehanna Financial Group analyst Robert LaFleur in a note to investors. "The domestic lodging business has slowed, and the pace of decline is accelerating."
Marriott is the first major hotel company to report third-quarter earnings. Thomas Weisel Partners analyst Jake Fuller said the company's gloomy projections "set a bad tone for the group."
In a sober conference call with investors, Chief Financial Officer Arne Sorenson argued that Congress should pass a financial bailout package:
"There are thousands, maybe tens of thousands of jobs at stake in our company alone, and we are typical," he said. And it is crucial "that the plan be big and enacted very, very soon."
Marriott's earnings projections came in well below analysts' expectations at 44 cents to 50 cents per share, compared to the consensus forecast of 63 cents. The company lowered its full-year 2008 earnings guidance to $1.62 to $1.68 per share, from its previous guidance of $1.77 to $1.88 per share. Analysts had forecast 2008 profit of $1.78 per share.
Marriott shares lost 93 cents, or 3.7 percent, to $24.15 in afternoon trading. The stock has traded between $22.12 and $45.10 during the past 52 weeks, and is off nearly 27 percent since January.
Sorenson said Marriott has a cushion under its $2.4 billion revolver, which is effective until 2012, to keep it comfortable until liquidity returns to the marketplace.
For the third quarter ended Sept. 5, net income slipped to $94 million, or 26 cents per share, from $131 million, or 33 cents, a year ago. Excluding a $29 million tax planning charge, the company's adjusted income from continuing operations totaled $123 million, or 34 cents per share.
Bethesda, Md.-based Marriott said revenue rose 1 percent to $2.96 billion from $2.94 billion.
Analysts polled by Thomson Reuters forecast earnings of 32 cents per share on revenue of $2.95 billion.
In North America, Marriott said third-quarter comparable company-operated revpar declined 1 percent and is expected to drop further -- between 3 and 5 percent -- in the fourth quarter.
Overall worldwide revpar gained 2.2 percent on a systemwide basis in the third-quarter, but is expected to drop between 1 percent and 3 percent in the fourth quarter.
Sorenson said Marriott's corporate group business has suffered as businesses have delayed booking events and trimmed their meeting and travel budgets.
The squeezed credit markets are also affecting the company's development pipeline, although Marriott expects nearly two-thirds of the 130,000 rooms now under construction or in the planning stages to open on schedule.
The company's timeshare business was hit the hardest.
"Tight credit, soft consumer spending and a difficult securitization market have lowered our expectations for the fourth quarter and 2009," Chairman and Chief Executive J.W. Marriott Jr. said in a statement.
The company booked no new residential sales during the quarter and said it does not expect a sale in the fourth quarter. It now expects 2008 timeshare sales to total $158 million to $168 million, down from its previous forecast of $230 million to $250 million.
Marriott's timeshare results worry investors in Wyndham Worldwide Corp., which relies more on them. Wyndham shares lost 80 cents, or 5.2 percent, to $14.49 in afternoon trading.
For 2009, Marriott said the outlook is uncertain, but the company expects the environment to remain "unusually challenging." The company expects at least a 3 percent decline in North American revpar next year.
Marriott forecast 2009 earnings between $1.48 and $1.60 per share, below analysts' consensus profit estimate of $1.85 per share.
Marriott said it will focus on cash flow by trimming investments and share repurchases.
Oppenheimer & Co. analyst David Katz said stock buybacks had been "a key positive" for the company.
Thursday October 2, 2:23 pm ET
By Kristen A. Lee, AP Business Writer
Marriott reports lower 3rd-quarter profit and warns of tough 2009 amid economic turmoil
BETHESDA, Md. (AP) -- Hotel company Marriott International Inc. said Thursday that its third-quarter profit dropped 28 percent, compared to 2007, and it warned investors about deteriorating conditions for 2009 amid the ongoing financial crisis.
ADVERTISEMENT
Marriott said its revenue per available room declined in North America, and timeshare sales dried up amid the tight credit market and cutbacks in business and consumer spending. Revenue per available room, or revpar, is considered a key gauge of a hotelier's performance.
"It's ugly and getting uglier," said Susquehanna Financial Group analyst Robert LaFleur in a note to investors. "The domestic lodging business has slowed, and the pace of decline is accelerating."
Marriott is the first major hotel company to report third-quarter earnings. Thomas Weisel Partners analyst Jake Fuller said the company's gloomy projections "set a bad tone for the group."
In a sober conference call with investors, Chief Financial Officer Arne Sorenson argued that Congress should pass a financial bailout package:
"There are thousands, maybe tens of thousands of jobs at stake in our company alone, and we are typical," he said. And it is crucial "that the plan be big and enacted very, very soon."
Marriott's earnings projections came in well below analysts' expectations at 44 cents to 50 cents per share, compared to the consensus forecast of 63 cents. The company lowered its full-year 2008 earnings guidance to $1.62 to $1.68 per share, from its previous guidance of $1.77 to $1.88 per share. Analysts had forecast 2008 profit of $1.78 per share.
Marriott shares lost 93 cents, or 3.7 percent, to $24.15 in afternoon trading. The stock has traded between $22.12 and $45.10 during the past 52 weeks, and is off nearly 27 percent since January.
Sorenson said Marriott has a cushion under its $2.4 billion revolver, which is effective until 2012, to keep it comfortable until liquidity returns to the marketplace.
For the third quarter ended Sept. 5, net income slipped to $94 million, or 26 cents per share, from $131 million, or 33 cents, a year ago. Excluding a $29 million tax planning charge, the company's adjusted income from continuing operations totaled $123 million, or 34 cents per share.
Bethesda, Md.-based Marriott said revenue rose 1 percent to $2.96 billion from $2.94 billion.
Analysts polled by Thomson Reuters forecast earnings of 32 cents per share on revenue of $2.95 billion.
In North America, Marriott said third-quarter comparable company-operated revpar declined 1 percent and is expected to drop further -- between 3 and 5 percent -- in the fourth quarter.
Overall worldwide revpar gained 2.2 percent on a systemwide basis in the third-quarter, but is expected to drop between 1 percent and 3 percent in the fourth quarter.
Sorenson said Marriott's corporate group business has suffered as businesses have delayed booking events and trimmed their meeting and travel budgets.
The squeezed credit markets are also affecting the company's development pipeline, although Marriott expects nearly two-thirds of the 130,000 rooms now under construction or in the planning stages to open on schedule.
The company's timeshare business was hit the hardest.
"Tight credit, soft consumer spending and a difficult securitization market have lowered our expectations for the fourth quarter and 2009," Chairman and Chief Executive J.W. Marriott Jr. said in a statement.
The company booked no new residential sales during the quarter and said it does not expect a sale in the fourth quarter. It now expects 2008 timeshare sales to total $158 million to $168 million, down from its previous forecast of $230 million to $250 million.
Marriott's timeshare results worry investors in Wyndham Worldwide Corp., which relies more on them. Wyndham shares lost 80 cents, or 5.2 percent, to $14.49 in afternoon trading.
For 2009, Marriott said the outlook is uncertain, but the company expects the environment to remain "unusually challenging." The company expects at least a 3 percent decline in North American revpar next year.
Marriott forecast 2009 earnings between $1.48 and $1.60 per share, below analysts' consensus profit estimate of $1.85 per share.
Marriott said it will focus on cash flow by trimming investments and share repurchases.
Oppenheimer & Co. analyst David Katz said stock buybacks had been "a key positive" for the company.
