July 12 (Bloomberg) -- Marriott International Inc., the largest publicly traded U.S. hotel chain, fell the most in almost eleven months in New York trading after lowering its outlook for hotels abroad on weakening demand in Asia and the Middle East.
The shares dropped 6.4 percent to $35.58 at the close, the biggest decline since Aug. 18.
The hotelier, whose brands include Ritz-Carlton, said it expects international revenue per available room to grow 5 percent to 7 percent this year, lower than its April forecast of a 6 percent to 8 percent gain in all regions before currency adjustments. The forecast for revpar, an industry measure of occupancies and rates, was included with Bethesda, Maryland-based Marriott’s second-quarter earnings statement, released yesterday after the close of regular U.S. trading.
“It was a bit of a softer quarter for them,” Nikhil Bhalla, a senior lodging analyst at FBR & Co. in Arlington, Virginia, said in a telephone interview after results were released. “North American revpar was below the midpoint of their guidance and international revpar guidance for the full year is now 5 to 7 percent.”
Marriott said comparable revpar rose 6.5 percent at hotels systemwide in North America in the second quarter. It had forecast growth of 6 percent to 8 percent.
International revpar increases are being tempered by “softer demand growth” in the Middle East and Asia, particularly in the luxury segment, Marriott said.
“In India it’s the slowing economy, and in China you have oversupply in some cities,” Bhalla said. “And, of course, not to forget the problems Europe is facing. That’s not very good for Starwood either because they have a lot of exposure abroad.”
Starwood Hotels & Resorts Worldwide Inc., owner of the luxury St. Regis and W brands, will report second-quarter earnings on July 26. Its shares tumbled 5.3 percent to $48.66.
Marriott’s second-quarter net income climbed to $143 million, or 42 cents a share, from $135 million, or 37 cents, a year earlier. The results matched the average estimate of 11 analysts in a Bloomberg survey.
“Our business performed well in most markets around the world,” Arne Sorenson, Marriott’s president and chief executive officer, said in yesterday’s statement. “In North America, strengthening group business, more travel by our special corporate customers, especially in the technology and consulting industries, and the impact of modest supply growth, drove our occupancy and room rates higher.”
Earnings met the company’s own forecast from April. Marriott had projected earnings of 39 cents to 43 cents a share for the quarter.
Revenue climbed to $2.78 billion from an adjusted $2.61 billion, which excludes results from the timeshare business that Marriott spun off in November. Without the adjustment, revenue fell 6.6 percent.
“With robust group bookings in North America, including Washington, D.C., we expect strong revpar and room-rate growth in the second half of the year,” Sorenson said.
Group revenue on the books is up 10 percent for the second half of this year and 8 percent for 2013, according to Sorenson. Marriott’s planning an increase of almost 10 percent in corporate rates for hotel stays scheduled for next year, he said.
Marriott expects third-quarter earnings of 39 cents to 41 cents a share and 2012 earnings of $1.65 to $1.75. That’s higher than its April forecast of $1.58 to $1.69. Marriott’s full-year estimate doesn’t include the impact of its planned $210 million acquisition of Gaylord Entertainment Co.’s hotel brand and management company, announced in May.
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