Time to Check Out of Marriott International

| About: Marriott International, (MAR)

One name that appears toppy in this volatile environment is Marriott International (NYSE:MAR) ($35.96).

The global hotel chain posted earnings a couple of weeks ago (see conference call transcript here) and although it beat estimates, the numbers were not exactly blowout. In fact, the unadjusted quarterly earnings fell 8% year over year. Although occupancy improved, room rates were down noticeably.

This was one of the reasons why revenue per available room (REVPAR) was down approximately 2% in the company’s largest market (North America). Marriott also reported expenses were up 3% year-over-year (adjusted basis) to $2.5 billion. The rise in occupancy and fall in room rates caused margins to remain under pressure.

According to earnings reports, worldwide comparable company-operated house profit margins fell 110 basis points (bps). Marriott also saw total debt increase to $3.3 billion by the end of the reported quarter, nearly $1 billion more than reported at year-end 2009. This debt is up nearly 50% from a year ago. The debt was attributed to securitized Timeshare costs.

During its earnings call, the company promoted its expansion in Europe to investors. Europe Marriott expects to open 25,000 to 30,000 rooms in 2010. The company said it plans to double the number of its properties in Europe by 2015. The company already has 174 hotels in Europe.

I believe the recent bailout and the current debt crisis unfolding in Europe provides a challenge for all major firms looking to that area of the world for business growth, particularly the luxury hotel market.

Additionally, there has been hefty insider selling by the Marriotts themselves --- more than 1 million shares in the past six weeks. Insider selling is not always indicative of a fall in a stock’s price, but coupled with all the other factors figured into this stock's price and it becomes a bearish indicator. I would short the stock here with a stop/loss at 38.50. I believe the stock will break 30 at some point in the next 3-6 months.

Disclosure: Author holds a short position in MAR

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