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Marriott May Be A Sleeping Beauty

Inside Wall Street


Hotels are on a roll, so why is Host Marriott (HMT) in limbo? For two years, shares of this chain have wobbled between 9 and 12. Not even the 1995 market surge has managed to rouse it. But lately, the smart-money crowd has woken up to Marriott.

"Marriott is one of the few remaining franchise names in hotels," says investment manager Bill Harnisch, "It's expanding through acquisitions while selling off some assets." The recovery of lodging is providing strong upward momentum to earnings, he adds. "And you're buying the stock off its lows."

That's why his New York investment firm, Forstmann-Leff Associates, has snapped up a 6% stake. Harnisch says Marriott is way undervalued, based on assets and expansion plans. He figures the shares are worth 20.

Whispers are that a major soft-drink company will go after the Host Marriott Travel Plazas unit, which operates food and gift concessions in 75 airports. The division, estimated to be worth $800 million, also has outlets at 35 stadiums and 100 toll-road rest stops.

Host Marriott was expected to spin off this outfit by yearend. But before then, the beverage maker may well buy the operation, which it sees as a logical fit with its business. The travel plazas, analysts say, produce cash flow of $100 million a year. Marriott would not comment on whether an offer for the plazas had been received. "We are considering all options," says a Marriott spokesman.

Before October, 1993, Host Marriott was called Marriott Corp. At that time, its hotel-management arm was spun off as part of a separate outfit, Marriott International (MAR). That left Host Marriott with 121 hotel properties: 45 Marriotts, 54 Courtyard Inns, 18 Residence Inns, and 4 Fairfield Inns.

"The quality of the hotels continues to improve," says analyst Camille Humphries of Alex. Brown, "as full-service hotels become a larger and larger percentage of Host Marriott's real estate portfolio." She is impressed by the company's acquisition strategy. And she says the rise in hotel property values bodes well for Marriott's stock.BY GENE G. MARCIAL

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