Marriott Reports Strong 2Q Earnings

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Sluggish worldwide economic news hasn't put a damper on Marriott International's bottom line. At least that's one way to read the global hospitality giant's recent quarterly earnings statement.

Indeed, Marriott International, Inc. (NYSE: MAR), which has more than 3,700 hotel and resort properties in 74 countries and territories, reported second quarter net income of $143 million, a 13 percent increase from the previous year's quarter ($135 million).

Marriott revenue totaled nearly $2.8 billion in the 2012 second quarter compared to adjusted revenues of $2.6 billion for the second quarter of 2011. Marriott showed particularly strong quarterly growth in EBITDA (Earnings before interest, taxes, depreciation and amortization) at $289 million, a 13 percent spike over second quarter 2011 adjusted EBITDA.

"In the second quarter, our business performed well in most markets around the world," said Arne M. Sorenson, president and chief executive officer of Marriott International, which generated more than $12 billion in fiscal 2011. "In North America, strengthening group business, more travel by our special corporate customers, especially in the technology and consulting industries, and the impact of modest supply growth, drove our occupancy and room rates higher.  In Europe, more travelers from the United States, Russia and China helped move REVPAR higher. In the Asia Pacific region, solid REVPAR growth resulted from strong economic growth and maturing new hotels."

Property-level revenues from group customers at comparable Marriott brand hotels increased eight percent in the second quarter, according to Sorenson, with banquet revenue up seven percent.  Special corporate revenue also increased eight percent during the quarter. Group booking pace is up 10 percent for the remainder of 2012.

"While second quarter REVPAR growth benefited from strong group and special corporate business," Sorenson added. "it also reflected some impact from weak results in Washington, D.C. and renovations at a few hotels.  In other markets, such as Hawaii, our hotel occupancy was both very high and well ahead of the market, constraining our REVPAR growth in the quarter."

Overall, Marriott's global comparable system-wide REVPAR rose 6.7 percent. The company's average daily rate was up 4.1 percent using "constant dollars."

On the real estate development front, at the end of the second quarter, the company's worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled approximately 115,000 rooms, not including the nearly 8,000 rooms from the planned acquisition of the Gaylord brand and hotel management business (see previous story reported on World Property Channel).

Meanwhile, more than 5,000 rooms opened during the quarter, including over 1,300 rooms converted from competitor brands and nearly 2,700 rooms in international markets.

Marriott currently operates and franchises hotels and licenses vacation ownership resorts under 17 brands, including Marriott Hotels & Resorts, The Ritz-Carlton, JW Marriott, Bulgari, EDITION, Renaissance, Autograph Collection, AC Hotels by Marriott, Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, TownePlace Suites, Marriott Executive Apartments, Marriott Vacation Club, Grand Residences by Marriott, and The Ritz-Carlton Destination Club.

The Bethesda, Md.-based company has approximately 300,000 employees at headquarters, managed and franchised properties.

"With robust group bookings in North America, including Washington, D.C., we expect strong REVPAR and room rate growth in the second half of the year," Sorenson added. "In fact, group revenue on the books is up 10 percent for the second half of 2012 and up 8 percent for 2013.  We are targeting high single-digit percentage increases in special corporate rates for 2013.

"Our development pipeline totaled 115,000 rooms at the end of the second quarter, excluding the pending Gaylord acquisition.  While we added 8,000 rooms to our pipeline in the second quarter, new hotel construction delays in the Middle East, Asia and Mexico pushed some openings to 2013.  We now expect to open 20,000 to 25,000 rooms worldwide in 2012, not including Gaylord branded rooms, and 90,000 to 105,000 rooms during the three-year period from 2012 to 2014."

Sorenson added Marriott still anticipates returning $1 billion to shareholders in 2012 through dividends and share repurchases.