Hotel chain Marriott International (MAR) posted a solid second quarter on Wednesday after the market close. News headlines have emphasized how the firm's revenue was down 6.6% year-over-year for the second quarter, but if the numbers are adjusted for the company's timeshare spinoff, revenue was actually up by a similar pace. Adjusted earnings per share grew 26% to $0.42, which was in-line with the consensus estimate.
The firm also saw comparable hotel international REVPAR (revenue per available room) grow 6.6% system-wide. REVPAR and occupancy growth specifically stood out in Asia, where REVPAR grew 10.9% and occupancy increased 5.6%, to 74.7%. Though occupancy in Europe fell 0.6%, REVPAR actually grew 2.6% on the heels of higher average room prices. We suspect tourism in the European Union could actually accelerate if the Euro continues to fall. Traveling abroad looks much more attractive for Americans if the exchange rate is closer to 1:1 rather than the 1:1.5 or 1:1.4 that Americans have seen over the past several years. International luxury also saw strong REVPAR growth of 11.3% compared to last year.
Not surprisingly, domestic luxury is also performing well. For the 12 weeks ending on June 15, comparable REVPAR grew 6.7% year-over-year at the Ritz-Carlton hotel brand, in spite of occupancy growing only 0.3%. Comparable domestic REVPAR was actually up across all segments, growing 6.3% in the full-service segment, 6.4% in the full-service luxury segment, and 6.7% in the limited-service segment. Though system-wide occupancy only grew 1.6%, it seems like travelers are willing to pay higher prices for rooms and spend more on nicer rooms and extras.
Ultimately, we don't think the results from Marriott were that negative. The firm guided to earnings per share of $1.65-$1.75, and it doesn't expect travel spending to decline. In fact, the firm is extremely bullish on travel growth by Chinese consumers both within China and in the US. Though we think shares are fairly valued at current levels (click here for our valuation reports), we're encouraged to see that the travel industry is not be doing so poorly.