Marriott Beats as Business Travel Picks Up

| About: Marriott International, (MAR)

Marriott International (NYSE:MAR) has reported fourth quarter earnings of 32 cents per share, 6 cents ahead of the Zacks Consensus Estimate of 26 cents. Results were also above the company’s guidance of 20 cents to 23 cents issued at the time of the third quarter earnings release back on October 8, 2009, but were down 3% year-over-year.

Results reflected higher-than-expected revenue as a result of sustained leisure demand driven by promotional activities. Additionally, business travel showed signs of improvement, mainly in international markets. Marriott also continued to experience the benefits of several cost-control initiatives implemented over the last few quarters.

Including restructuring costs and other charges, Marriott reported a quarterly income from continuing operations of $106 million, or 28 cents per share, compared to a loss of $10 million or 3 cents a share in the year-ago quarter.

For full year 2009, Marriott reported adjusted operating earnings of 93 cents, ahead of the Zacks Consensus Estimate of 88 cents but down 38% from the prior year. The reported loss from continuing operations was $346 million or 97 cents per share, compared to income of $359 million or 97 cents a share a year earlier.


For the first quarter, Marriott expects earnings from continuing operations of 15 cents to 21 cents, with comparable system-wide hotel revenue per available room (RevPAR) expected to decrease 7% to 8% in North America and 2% to 3% in all the other regions.

For full year 2010, the company anticipates earnings from continuing operations of 82 cents to 94 cents, with worldwide comparable system-wide hotel RevPAR projected to be up 2% to down 2%. The earlier range was flat to down 5%.

Marriott projects North American comparable system-wide RevPAR to be flat to down 3% in 2010, while RevPAR at comparable system-wide hotels outside North America is expected to be flat to up 5%.

Inside the Headline Numbers

Marriott’s total revenue was $3.4 billion, down 10.5% year-over-year. While the company continued to experience declines in RevPAR across all its brands, the rate of decline has somewhat moderated.

Base management and franchise fees declined 12%, while incentive management fees were down 28% from the prior year. Owned, leased, corporate housing and other revenues decreased 11% and adjusted Timeshare sales and services revenue declined 3%.

Worldwide comparable company-operated properties RevPAR decreased 12.2% (12.4% on a constant-dollar basis), while worldwide comparable systemwide properties RevPAR fell 12.3% (12.5% on a constant-dollar basis).

International company-operated RevPAR fell 11.1% (11.7% on a constant-dollar basis) including an 11.6% decline in average daily rate (12.2% using constant dollars).

In North America, comparable company-operated RevPAR declined 13.1% (10.7% on a calendar quarter basis). RevPAR at the company's comparable company-operated North American full-service and luxury hotels was down 11.8%, driven by an 11.0% decline in average daily rate.

However, adjusted expenses were down 13% year-over-year to $3.2 billion. Results reflected the cost reduction initiatives implemented across the organization. The company has also reduced its total debt by nearly $800 million to $2.3 billion at year-end 2009.

Business and leisure travel have decreased significantly in the past several quarters due to the stressed economic conditions as business units and consumers have abstained from traveling to conserve savings.

However, with some early signs of economic recovery and promotional campaigns from hoteliers, we have seen moderate declines in RevPAR in the quarter. Nevertheless, we believe significant top-line growth will be restricted in the next couple of quarters, given a sluggish recovery of the economy in 2010 and a high level of unemployment.