Marriott's 3rd-quarter earnings climb 45%

Gains tied to increase in business, leisure travel

October 08, 2004|By BLOOMBERG NEWS

BETHESDA - Marriott International Inc., the largest U.S. hotel company, said yesterday that its third-quarter earnings climbed 45 percent, the biggest gain in almost two years, as business and leisure travel picked up.

Net income increased to $133 million, or 56 cents a share, from $92 million, or 37 cents, a year earlier. Revenue in the quarter that ended Sept. 10 rose 9.2 percent to $2.3 billion, the company said. It was expected to earn 55 cents a share.

Marriott, the first major U.S. hotel company to report quarterly results, charged higher rates and added 6,000 rooms as business and leisure bookings, particularly from the United Kingdom and China, rose at its North American hotels. The number of international travelers staying at Marriott hotels increased 21 percent, the company said.

"It reflects the economy is emerging from a soft patch and international economic growth is picking up," said Alison Porter, who oversees $1 billion in U.S. stocks, including about 42,000 Marriott shares, at Britannic Asset Management in Glasgow, Scotland. "It does bode well for other travel-related stocks."

Gains of $43 million included $19 million from a synthetic-fuel joint venture and $13 million from the sale of the company's interest in a Two Flags joint venture, which owns the trademarks and licenses for the Ramada and Days Inn lodging brands in the United States.

Marriott's shares fell 80 cents to close at $53.02 yesterday on the New York Stock Exchange. They have risen 15 percent this year.

"Investors had possibly bid up the stock looking for a more positive surprise," said Ivan Feinseth, research director at New York-based Matrix USA.

Incentive fees, which owners pay based on the profitability of their hotels, rose 17 percent, Marriott said.

"Incentive fees are their operating leverage," said Joseph Greff, an analyst with Fulcrum Global Partners LP in New York. "Occupancy levels are high enough that they can shift to higher paying customers, and they're improving the quality of the group business to those that will spend a little bit more on food and banquet business."

Marriott said it expects a fourth-quarter profit of 72 cents to 75 cents a share. Analysts estimate the company will earn 72 cents. The company forecast a 2005 profit of $2.74 to $2.84, compared with analysts' average estimates of $2.76.

Revenue per available room, a measure of average occupancy and room rate, rose 7.7 percent in the quarter. Occupancy increased 2.6 percentage points to almost 75 percent.

Higher-than-expected group meetings spurred an 11 percent jump in revenue per available room at full-service Marriott- branded hotels.

Revenue from Marriott's timeshare business rose 1 percent to $299 million. The company's synthetic-fuel business, which produces cleaner-burning coal in exchange for tax credits, added $31 million to net income, $10 million more than a year earlier.

The company owns few of its 2,800 hotels, preferring to manage and franchise on behalf of other owners.

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