Marriott International reports record quarter Higher room rates boost earnings


July 09, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Marriott International Inc. reported yesterday that its earnings in the second quarter rose to the highest level in the company's 41-year history, thanks to gains in room rates and additions to its portfolio.

The Bethesda-based company's net income of $101 million, 37 cents per share, was 20 percent higher than in the comparable period a year ago, further evidence of the strong U.S. economy and the hotel industry's continued strength. Marriott's total sales in the three months that ended June 19 also increased significantly, to $2.5 billion, a 16 percent gain from the corresponding period in 1997.

"The U.S. lodging industry remains robust," said J. W. Marriott Jr., the company's chairman and chief executive, echoing statements from each of the past two quarters.

"Our brands continue to lead their segments in occupancy growth and profitability."

In the first half of 1998, Marriott generated net income of $190 million, 70 cents per share, a 24 percent gain from the first six months of 1997.

Revenue in the first two quarters totaled $4.7 billion, a 15 percent increase. But even as Marriott's earnings soar, the company's results also show some of the first signs that the robust hotel industry may be cooling.

Unlike in past quarters, occupancy in Marriott's five brands -- ranging from the luxury Ritz-Carlton to the moderately priced Fairfield Inn -- dropped slightly in the second quarter and in the first six months of 1998.

The biggest decline was at Ritz-Carlton, where average occupancy fell 2 percent in the first half of the year, to 77.2 percent. On average, Marriott's nearly 1,600 hotels had an average occupancy of 80 percent.

In all, Marriott controls more than 310,000 rooms and 3,600 time-share villas.

"Demand growth is tapering off," said Robert LaFleur, a Bear, Stearns & Co. lodging industry analyst. "We're not troubled by it. We've been expecting it for some time. But Marriott is fairly insulated, and their growth rates are still two times the market. We're very encouraged."

To shield itself from a further potential downturn, Marriott is continuing to add rooms -- nearly 26,000 in the past year -- and raise room rates and consolidate its ownership position.

In March, for instance, Marriott invested $90 million to buy the nearly 50 percent of Ritz-Carlton's management arm that it didn't own. In 1995, the company spent $200 million for a 49 percent share of the Atlanta hotelier.

Its biggest gains are expected to come from further room rate increases, though. In the second quarter, Marriott boosted room rates 7 percent. The largest increase was at Ritz-Carlton, where average room rates surged nearly 10 percent, to $216.42 per night.

Marriott's stock rose $1.12 per share on news of the earnings, to close at $32.94 a share.

"The company is on track to achieve its earnings growth targets for the full year," Marriott said.

"We also are making tremendous strides toward our long-range development goals. Our pipeline of approved lodging and senior living community projects is at an all-time high."

Pub Date: 7/09/98

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