Marriott Cuts Profit Forecast as Demand Weakens OverseasNadja Brandt
Marriott International Inc., the largest publicly traded U.S. hotel chain, cut its full-year profit forecast after reporting second-quarter results that were in line with analysts’ estimates.
The company expects earnings per share for the third quarter of 42 cents to 46 cents, less than the 49-cent average of 29 analyst estimates compiled by Bloomberg. Marriott projected full-year earnings of $1.92 to $2.03 a share, which would miss both the $2.04 that analysts are estimating and the company’s own previous guidance of $1.93 to $2.08.
Slowing demand from business groups and U.S. government cutbacks in travel spending weighed on Bethesda, Maryland-based Marriott’s second-quarter earnings, while weakening hotel use abroad may hamper results for the rest of the year, according to Chief Executive Officer Arne Sorenson.
“Looking at group business, we remain encouraged in terms of long-term bookings, but short-term group business weakened in the U.S. as the quarter progressed,” Sorenson said on a conference call with investors. “Our large convention hotels and our hotels in Washington and Boston were particularly impacted as group demand weakened.”
The company is “still experiencing a lingering effect from the recession” and is taking a “more conservative view” of demand trends for Asia and the Middle East, Sorensen said.
Second-quarter earnings of 57 cents a share matched the average of 17 analyst estimates compiled by Bloomberg. Net income rose to $179 million from $143 million, or 42 cents, a year earlier, the company said yesterday in a statement.
Revenue per available room, an industry measure of occupancies and rates, climbed 5.3 percent from a year earlier at company-operated hotels in North America. Worldwide, revpar increased 4.7 percent, according to the statement.
Marriott in May projected second-quarter earnings of 55 cents to 59 cents a share and said it expected revpar to increase 5 percent to 7 percent in North America, 2 percent to 4 percent outside North America and 4 percent to 6 percent worldwide.
“International revenue growth has been quite tepid,” Nikhil Bhalla, an analyst at FBR & Co. in Arlington, Virginia, said after the earnings were announced. “Softening demand in Europe and Asia will weigh on them for the remainder of the year.”
Total revenue rose to $3.26 billion in the second quarter from $2.78 billion a year earlier.
Starwood Hotels & Resorts Worldwide Inc., owner of the luxury St. Regis and W brands, last week said second-quarter earnings climbed 12 percent, helped by cost cuts and sales of vacation units at the company’s South Florida resort. Hyatt Hotels Corp., the chain controlled by the Pritzker family, yesterday said its second-quarter profit almost tripled as demand climbed at its U.S. properties.
Marriott rose 0.2 percent to $41.58 in New York trading.