Marriott Net Triples on Room Rates, Accounting Change19 Apr 2007 • by Natalie Aster
Marriott International Inc., the owner of the Ritz-Carlton and its namesake hotel chains, said first-quarter profit tripled on higher room rates and a year- earlier accounting change, reported The Bloomberg.
Net income rose to $182 million, or 44 cents a share, from $61 million, or 14 cents, a year earlier, Bethesda, Maryland- based Marriott said today in a statement. Excluding results from its synthetic fuel unit, Marriott earned 40 cents a share, 2 cents higher than analysts' estimates.
Average room rates rose 8.3 percent because demand increased from corporate travelers while supply was limited by rising building costs and lengthening approval times for new construction. The U.S. hotel industry has rebounded as executives and tourists seek rooms in New York, Miami and other markets where demand for hotels is outstripping supply.
``The strongest part of the average daily rate growth is from corporate travel, and you haven't seen any new supply,'' said Richard Clattenburg, a analyst with Baltimore-based T. Rowe Price Group Inc., which overseas $308 billion, including Marriott shares.
Sales climbed 7.4 percent to $2.9 billion.
Marriott said weakness among its limited-service hotels will result in North American gains in revenue per available room of 6 to 8 percent for 2007, less than the 7 to 9 percent it forecast in February. Worldwide growth will be 7 to 9 percent, it said.
Revenue per available room is a measure of rates and occupancy.
Shares of Marriott rose 21 cents to $51.87 in New York Stock Exchange composite trading yesterday. The stock has climbed 43 percent in the past 12 months, while smaller rival Hilton Hotels Corp. has climbed 39 percent.
Marriott is the largest U.S. owner, manager and franchiser of hotels with about 2,900 hotels and timeshare properties.
Marriott forecast second-quarter earnings excluding synthetic-fuel gains of 51 cents to 55 cents a share, and full- year profit of $1.84 to $1.94. Analysts surveyed by Bloomberg were estimating 49 cents for the quarter and $1.90 for the year. RevPar worldwide rose 6.6 percent for the 12 weeks ended March 23, outpacing the 5.2 percent increase in North America. Hotels in downtown markets gaining 9.1 percent, Marriott said.
In February, Marriott said it would be at ``the lower end'' of the 7 percent to 9 percent range it estimated for North America in 2007. Marriott also forecast at the time first-quarter earnings per share at between 35 cents and 39 cents.
Fewer than 4,000 rooms will be added in large U.S. cities this year as construction costs and permitting process makes the process complicated and expensive, Marriott Chief Financial Officer Arne Sorenson said in February.
Marriott had profit of 4 cents a share from its synthetic- fuel division from tax credits it receives for producing an alternative energy source. The program is being phased out by the U.S. government after this year.
Results a year earlier included an expense of $109 million, or 25 cents a share, related to new accounting rules for the timeshare industry.
Profit was helped by higher occupancy and room rates at full-service hotels such as Renaissance and Ritz-Carlton in countries including China, Qatar, India and France. Timeshare sales and service fees rose 21 percent on gains at a resort in Hawaii, and contract sales at a new resort on St. Kitts island in the Caribbean.
Marriott repurchased $451 million of stock during the quarter. Total debt was $2.42 billion at the end of the period, compared with $1.83 billion in debt a year earlier.
The company has brands including Renaissance and Fairfield Inn and also Marriott Vacation Club timeshares. Marriott has 100,000 hotel rooms in development, including 17 hotels in China. About one-third of those rooms are expected to open this year, the company said today.