Marriott Second-Quarter Earnings Increase as International Properties Grow

Marriott International Inc., the largest publicly traded U.S. hotel chain, said second-quarter profit climbed 13 percent, helped by growth at its international locations.

Net income rose to $135 million, or 37 cents a share, from $119 million, or 31 cents, a year earlier, the Bethesda, Maryland-based hotelier said today in a statement. Analysts forecast earnings of 38 cents a share, the average of 14 estimates in a Bloomberg survey. Revenue rose to $2.97 billion from $2.77 billion a year earlier.

The lodging industry’s recovery is accelerating fastest in regions outside the U.S. as economic expansion spurs demand for hotel rooms. Revenue per available room, or revpar, is up more than 10 percent from a year ago in Asia and more than 20 percent across Europe, compared with an increase of about 7 percent in the U.S., said Patrick Scholes, an analyst at FBR Capital Markets. Marriott has said it plans to add at least 21 hotels in China and double its rooms in Europe to 80,000 by 2015.

“Emerging markets provide especially attractive opportunities,” Chairman and Chief Executive Officer J.W. Marriott Jr. said in the statement. “In the past five years, we have increased our hotel distribution in Brazil, Russia, India and China at a 12 percent compound annual growth rate while tripling our development pipeline in those markets.”

‘Wild Card’ Revpar

The hotelier, whose Marriott and Renaissance brands fall into the upper-upscale category, a notch below luxury, said worldwide revpar rose 6.8 percent before adjustments for currency exchange. The company’s other brands include Ritz- Carlton, Courtyard and Residence Inn.

“Their revpar results are the wild card this quarter,” Scholes said in an interview from New York before the report. “Just looking at their hotel portfolio, they should have about 8 percent revpar growth.”

Revpar, an industry measure of occupancy and rate, rose 6.6 percent for company-operated properties in North America. Outside North America, it increased 7.3 percent.

Across the hotel industry, revpar in the top 25 U.S. markets climbed 9.8 percent this year through May, according to Smith Travel Research Inc. of Hendersonville, Tennessee. For all of the U.S., it climbed 8.7 percent, the research company said.

Forecast for 2011

Marriott reiterated its April forecast for 2011 revpar growth of 6 percent to 8 percent in North America, and 5 percent to 7 percent outside North America, before currency adjustments.

For the third quarter, Marriott said it expects North American revpar to rise between 5 percent to 7 percent “reflecting strong demand in most markets, but continued weak demand in Washington.” International revpar, before adjustments for currency fluctuations, will likely climb 4 percent to 6 percent.

New York was soft in the first quarter but came back in the second and beginning of the third,” Scholes said. “Washington, on the other hand, has been soft, and since Marriott has some good presence there, D.C. isn’t going to help them out right now.”

Marriott expects earnings per share of $1.35 to $1.43 for 2011. Second-quarter results were in line with the company’s own forecast of 34 cents to 38 cents a share.

Timeshare Sales Fall

Marriott said contract sales in its timeshare segment fell to $163 million from $167 million a year earlier, excluding a $6 million allowance for fractional and residential contract cancellations.

Marriott is planning to spin off its timeshare business, which accounts for about 13 percent of the company’s total revenue. The hotelier will receive franchise fees from the timeshare company’s use of the Marriott and Ritz-Carlton brands. Marriott Vacations Worldwide Corp., as the new company will be known, is scheduled to be spun off by the end of the year, Marriott International said last month.

Marriott bought 10.6 million of its shares in the second quarter for $375 million, bringing purchases this year through June 17 to 18.5 million shares for $675 million.

The company announced earnings after the close of regular U.S. trading. The stock rose 32 cents to $37.14 as of 4:15 p.m. in New York Stock Exchange composite trading.

Marriott is the first of the major U.S. hotel chains to report quarterly earnings. Wyndham Worldwide Corp. (WYN) is scheduled to release its results on July 27, and Starwood Hotels & Resorts will announce earnings July 28. Hyatt Hotels Corp. (H) is scheduled to report on Aug. 2.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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