Marriot Swings to Profit as Revenue Rises- Jesse Binder

Marriot generated more than a $500 million improvement in profits during the third quarter, led by the absence of last year’s $502 million write-down and a 7.5% increase in RevPAR(revenue per available room). The increase in RevPAR partly reflects a 1.8% increase in the average daily room rate as well as higher occupancy factors. In fact, this was the first time in two years that Marriot’s North American average daily room rates actually rose compared to a year ago. For the third quarter, the hotel reported earnings of $83 million, or 22 cents a share, compared with a net loss of $466 million, or $1.31 a share, a year earlier. Revenue rose 7.2% to $2.65 billion. The company’s profits have been helped by the increase in demand for corporate and leisure travel and a limited increase in the supply of hotel rooms. Marriot’s profit improvement has also been boosted by the expansion of its hotels outside North America, which management believes will account for a growing percentage of its future revenues and earnings.


Marriot projects fourth quarter earnings per share of 33 cents to 36 cents. The organization also estimates 6% to 8% growth in revenue per available room, or revpar, a key performance metric for hotels. Hotel companies are very dependent on the health of the economy, consumer spending, and business confidence. Due to the improving economic trends, strong economic growth in the emerging markets, and limited growth in the supply of new hotels, I believe Marriot hotels will report strong results in the fourth quarter and in 2011.


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