Marriott International Reports First Quarter Results
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Marriott International Reports First Quarter Results
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2008-04-17
First Quarter Highlights:
-- Worldwide company-operated comparable revenue per available room
(REVPAR) rose 6.0 percent (4.5 percent using constant dollars) for the
first quarter ended March 21, 2008;
-- Outside North America, company-operated comparable REVPAR increased
18.5 percent (11.5 percent using constant dollars) with double-digit
growth in Central and Southeast Asia, Latin America, Continental Europe
and the Middle East;
-- First quarter total fee revenue rose to $318 million, 7 percent over
the prior year;
-- The company's worldwide pipeline of hotels under construction, awaiting
conversion or approved for development increased to a record 130,000
rooms compared to 100,000 rooms a year ago and 125,000 rooms at the end
of 2007;
-- Over 5,900 rooms opened during the first quarter, including almost
1,500 rooms converted from competitor brands;
-- Marriott repurchased 6.2 million shares of the company's common stock
for $208 million during the first quarter.
Marriott International, Inc. (NYSE: MAR) today reported diluted
earnings per share (EPS) from continuing operations of $0.33 in the first
quarter of 2008, down 18 percent from the first quarter of 2007. The
company's EPS guidance for the 2008 first quarter, disclosed on February
14, 2008, totaled $0.32 to $0.36.
J.W. Marriott, Jr., Marriott International's chairman and chief
executive officer, said, "Marriott's first quarter results demonstrated the
company's strength. Leading brands and a focus on bottom line results
delivered strong, on-target earnings in the first quarter. Business and
leisure travel demand remains robust in most markets around the world.
REVPAR at our international properties expanded by 19 percent, along with
solid margin improvement and growing incentive fees.
"While performance at our U.S. hotels reflected slowing economic
growth, few markets have witnessed discounting and full service room rates
rose 4 percent during the quarter. With the U.S. on sale through a lower
dollar, international guest arrivals are energizing demand in several key
markets.
"Attendance at group meetings was on track during the quarter and group
cancellations remained lower than 2007 levels. Group meeting bookings for
the remainder of 2008 are strong. Given these trends, we remain cautiously
optimistic about 2008 demand trends.
"We expect to meet our hotel development goals in 2008. Our pipeline of
hotels under construction, awaiting conversion or approved for development
increased to over 130,000 rooms in the first quarter. Our record pipeline
of limited-service hotels demonstrates how our owners and franchisees see
great opportunity as we continue to remake these brands, generating
significant REVPAR premiums and attractive long-term owner returns.
"As a global company, we're a global neighbor. We recently signed an
agreement to help protect 1.4 million acres of endangered Amazon rainforest
in Brazil and we're taking new steps to reduce our consumption of the
earth's resources."
In the 2008 first quarter (12-week period from December 29, 2007 to
March 21, 2008), REVPAR for the company's comparable worldwide systemwide
properties increased 4.4 percent (3.5 percent using constant dollars).
REVPAR at comparable worldwide company-operated properties rose 6.0 percent
(4.5 percent using constant dollars) over the year-ago quarter and average
daily rates increased 6.3 percent (4.8 percent using constant dollars).
In North America, company-operated comparable REVPAR rose 2.3 percent
in the first quarter of 2008. REVPAR at the company's comparable company-
operated North American full-service and luxury hotels (including Marriott
Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels & Resorts)
increased 2.7 percent driven by a 3.9 percent increase in average daily
rates. REVPAR growth was particularly strong in Manhattan, Los Angeles,
Orlando and Seattle.
For North American hotels, the first quarter ended on March 21, 2008
and included the negative impact of the week preceding Easter. Excluding
this week, North American company-operated comparable REVPAR growth would
have been approximately 100 basis points higher. In 2007, the week prior to
and the week after the holiday were included in the second quarter.
In the 2008 first quarter, international company-operated comparable
REVPAR increased 18.5 percent (11.5 percent using constant dollars),
including a 16.0 percent increase in average daily rate (9.2 percent using
constant dollars) and a 1.5 percentage point improvement in occupancy to
70.5 percent. Singapore, Moscow, Paris, Panama and Dubai were particularly
strong markets.
Marriott added 40 new properties (5,948 rooms) to its worldwide lodging
portfolio in the first quarter, including the Renaissance Boston Waterfront
and the Denver Ritz-Carlton. Seven hotels (1,450 rooms) were converted from
competitor brands and 20 properties (3,101 rooms) exited the system during
the quarter. At quarter-end, the company's lodging group encompassed 3,019
properties and timeshare resorts for a total of nearly 538,000 rooms.
MARRIOTT REVENUES totaled $2.9 billion in the first quarter, a 4
percent increase from the same period in 2007. Base management and
franchise fees rose 8 percent to $244 million as a result of REVPAR
improvement and unit expansion. Incentive management fees rose 4 percent to
$74 million.
Worldwide company-operated comparable house profit margins grew 40
basis points. House profit margins for comparable company-operated
properties outside North America grew 350 basis points and house profit per
available room increased over 21 percent. North American company-operated
comparable house profit margins declined 70 basis points from the year ago
quarter and house profit per available room increased 1 percent.
In the first quarter, owned, leased, corporate housing and other
revenue, net of direct expenses, decreased $5 million, to $26 million,
reflecting start-up costs at the new Renaissance Boston Waterfront hotel,
the impact of properties under renovation and lower termination fees.
Timeshare sales and services revenue decreased 12 percent to $326
million in the 2008 first quarter primarily due to unfavorable
year-over-year reportability at several projects. In the 2008 quarter,
timeshare sales and services revenue, net of direct expenses, totaled $13
million, which reflected start-up costs and low reportability at new
projects on Marco and Singer Islands in Florida and the impact of other
projects nearing sell-out. In the 2007 quarter, a significant amount of
contract sales associated with a Hawaiian project became financially
reportable. The company stated in February 2008 that it expected first
quarter timeshare sales and services revenue, net of direct expenses, to
total $7 million to $12 million.
Timeshare segment results include timeshare sales and services revenue,
net of direct expenses, as well as base fees, equity earnings, minority
interest and general, administrative and other expenses associated with the
timeshare business. Timeshare segment results totaled $4 million and
reflected unfavorable year-over-year reportability, start-up costs
associated with new projects, projects nearing sell-out and higher
timeshare administrative costs offset by increased equity earnings from the
Kapalua joint venture.
First quarter timeshare contract sales increased 2 percent to $333
million as a result of timeshare sales at new projects in Florida, higher
sales from the Asia Pacific points program, and higher residential sales at
the Kapalua joint venture, partially offset by declining contract sales at
projects near sell-out and lower sales of fractional products. Contract
sales for the first quarter were expected to be flat to up 5 percent.
GENERAL, ADMINISTRATIVE and OTHER expenses for the first quarter
totaled $162 million, a 10 percent increase compared to the prior year
quarter reflecting higher spending related to unit growth, development,
systems improvements, brand initiatives and legal expenses. The 2008 first
quarter included an $8 million favorable impact associated with deferred
compensation while the 2007 first quarter benefited from reversal of
reserves totaling $9 million established several years earlier that were no
longer required.
GAINS AND OTHER INCOME totaled $3 million largely generated by
preferred returns from joint venture investments. A $4 million loss on the
sale of a new hotel due to higher construction costs was also reflected in
the total for the quarter. The prior year's first quarter gains totaled $35
million and included $10 million from the sale of an interest in a joint
venture, $2 million of gains from the sale of real estate, $9 million of
gains associated with the forgiveness of debt, an $11 million gain on the
sale of a stock investment and $3 million of preferred returns from joint
venture investments.
INTEREST EXPENSE, net of INTEREST INCOME and PROVISION FOR LOAN LOSSES,
increased $5 million to $29 million, primarily due to higher average
borrowings, partially offset by lower interest rates.
EQUITY IN EARNINGS (LOSSES) totaled $27 million reflecting Marriott's
share of income in equity joint venture investments. The increase in equity
earnings was primarily driven by a $15 million gain on the sale of a joint
venture's assets, insurance proceeds of $6 million received through a joint
venture and $6 million of improved results at a timeshare joint venture
project in Kapalua, Hawaii.
PROVISION FOR INCOME TAXES reflects a 38.4 percent effective tax rate,
in part reflecting an $8 million unfavorable impact associated with
deferred compensation.
BALANCE SHEET
At the end of first quarter 2008, total debt was $3,395 million and
cash balances totaled $314 million, compared to $2,965 million in debt and
$332 million of cash at the end of 2007. The company repurchased 6.2
million shares of common stock in the first quarter of 2008 at a cost of
$208 million. Weighted average fully diluted shares outstanding totaled
371.9 million at the end of the first quarter compared to 411.3 million at
the end of the year-ago quarter. The remaining share repurchase
authorization, as of March 21, 2008, totaled approximately 27 million
shares.
OUTLOOK
The company expects worldwide systemwide comparable REVPAR and North
American company-operated comparable REVPAR to increase 3 to 5 percent in
2008, with modest increases in North American house profit margins and
roughly 30,000 new room openings. For the full year 2008, the company
expects timeshare sales and services revenue, net of direct expenses, to
total $300 million to $315 million reflecting approximately $70 million of
timeshare note sale gains. Timeshare segment results in 2008 are expected
to be $280 million to $295 million with contract sales growth of 15 to 20
percent.
Assuming roughly $1 billion of share repurchases during the year, the
company believes that net interest expense will approximate $135 million
for the full year.
For the second quarter of 2008, the company expects worldwide
systemwide comparable REVPAR and North American company-operated comparable
REVPAR to also increase 3 to 5 percent. Comparable North American house
profit margins are expected to be flat in the quarter.
In the second quarter, the company expects timeshare sales and services
revenue, net of direct expenses, to total $55 million to $60 million
reflecting $15 million to $20 million of timeshare note sale gains. The
company expects timeshare segment results of $45 million to $50 million in
the quarter. Second quarter contract sales are expected to grow
approximately 5 percent over the year ago quarter.
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