Marriott International posts 24% earnings rise Economy bolstered lodging chains

September 26, 1995|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

Marriott International Inc. said yesterday its profits jumped 24 percent during the 12 weeks that ended Sept. 8, the third quarter of the Bethesda hotel management giant's fiscal year.

The company said it was helped by a strong economy that also has helped other hotel chains.

"All of our lodging brands are benefiting from favorable conditions in the U.S. hotel industry," company Chairman J. W. Marriott Jr. said. The company said it expects to continue strong earnings gains into 1996.

Through July, the U.S. hotel industry had filled 66.3 percent of its available room nights this year, compared with 65.2 percent for the same period last year, said Randy Smith, president of Smith Travel Research Inc. in Hendersonville, Tenn. The average room rate also has risen 4.4 percent, to $66.64, a performance that Mr. Smith pointed out exceeds inflation by a wide margin.

"Five or six years ago, we were running no more than about 60 percent [occupancy]," he said. "The industry has improved dramatically over the last three to four years."

Marriott earned $46 million during the third quarter, up from $37 million for the same period in 1994. That worked out to 35 cents a share, a penny more than the consensus Wall Street estimate and up from 28 cents a share in last year's third quarter.

"That's three quarters in a row with 25 percent earnings gains," said Schroder Wertheim & Co. analyst John Rohs. "They were very, very solid numbers up and down the line, driven especially by the hotel group. The fundamentals of the hotel business continue to be very strong."

The fundamentals are these: Marriott boosted occupancy slightly and boosted room rates by 6 percent to 9 percent, with the Fairfield Inn economy chain posting the biggest price increases, while Marriott and Courtyard by Marriott hotels raised prices 6 percent and Residence Inn rates rose 8 percent.

The chain also added 95 new properties with 12,600 new rooms.

Because the hotel business has high fixed costs but spends little money to serve each additional guest, Mr. Rohs said, chains quickly get much more profitable when they add new business to an already profitable operation.

The effect works even faster when the extra revenue comes from higher prices instead of higher room occupancy rates, he said, explaining how 6 percent more revenue for Marriott International boosted the company's profits 24 percent.

Marriott International is the arm of the old Marriott Corp. that continued to manage hotels after the 1993 breakup of Marriott Corp. The hotels that International manages belong to other companies, with 84 belonging to Host Marriott Corp., which also was part of Marriott Corp.

Marriott International also owns the old company's contract services business, which gained 27 percent in the quarter.

Marriott International ... ... ... ... Ticker ... ... ... Yesterday's

... ... ... ... ... ... ... ... .. ... Symbol ... ... ... Cls. ... Chg.

... ... ... ... ... ... ... ... .. ... MAR .. ... ... ... 37 1/2 .. .. + 1/2

Period ended

Sept. 8 ... ... ... ... 3rd Qtr. ... ... ... Year ago ... ... ... Chg.

Revenue ... ... ... ... $1,926,000 .. .. ... $1,813,000 .. .. ... +6.2%

Net Income ... .. .. .. $46,000 ... .. .. .. $37,000 ... .. .. .. +24.3%

Primary EPS .. .. .. .. $0.35 ... ... ... .. $0.28 ... ... ... .. +25.0%

... ... ... ... ... 36 weeks ... ... ... Year ago ... ... ... Chg.

Revenue ... ... ... $6,051,000 .. .. ... $5,711,000 ... .. .. +6.0%

Net Income .. .. .. $157,000 ... ... ... $128,000 ... ... ... +22.7%

Primary EPS ... ... $1.19 ... ... .. ... $0.96 .. ... ... ... +24.0%

Figures in thousands (except per share data.)

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