Marriott Cuts Growth Outlook for 2008
Chain Cites Slowdown in Leisure Travel
Business travel is holding up, but a drop in consumer spending has cut into vacation travel, affecting Marriott's earnings, its finance chief says.
(By Khampha Bouaphanh -- Associated Press)
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Friday, February 15, 2008
Marriott International met Wall Street's lowered expectations for fourth-quarter profit, but in another sign that the industry's boom times are ending, the company slashed its outlook for growth this year as concerns mount that the slumping economy is slowing down leisure travel.
The Bethesda hotel chain said yesterday that revenue per available room -- a key measure of the industry's strength -- would grow 3 to 5 percent in 2008, down from the 5 to 7 percent the company had been forecasting. Earnings per share projections came in at $2 to $2.10 for the year, down from the previous estimate of $2.10 to $2.25.
For the fourth quarter, Marriott's profit was $176 million (46 cents) on $4.09 billion in revenue. It had a profit of $220 million (52 cents) on revenue of $3.8 billion in the corresponding period a year earlier. Excluding a $60 million loss from ending its synthetic fuel business, Marriott had a profit of 62 cents per share, in line with Wall Street's expectations.
Profit for the year was $696 million, up from $608 million the previous year. Revenue grew 8 percent, to $12.99 billion.
Marriott's tamped-down 2008 forecast comes as the company suspects a slowdown is underway for leisure travelers. Arne Sorenson, the chief financial officer, told analysts during a conference call that December and January bookings at suburban and airport Marriotts, as well as its limited-service brands, were weak. Although those months are often slow, the data cannot be ignored.
"This is not surprising," Sorensen said later in an interview. "The consumer is probably the weakest part of the economy. We see this as a consumer-led, therefore leisure, slowdown."
Leisure travel accounts for about 20 percent of Marriott's business, with group bookings and business travel equally splitting the remaining 80 percent. The latter segments seem to be holding up, Sorenson said. "At the moment we don't see the wheels coming off," he added.
Robert LaFleur, an analyst with Susquehanna Financial Group, said the previous economic downturn, which preceded the 2001 terrorist attacks, was more damaging to Marriott because it was corporate driven, or top-down, leading to a decline in business spending and travel. This slowdown is bottom-up.
"The characteristics of this slowdown are consumer-driven," LaFleur said. "They are exposed to that business, but it's a far less significant part of their business than business travel."
That does not offer much solace to Marriott shareholders. Marriott's stock has lost about 30 percent of its value in the past year.
Yesterday, Marriott shares finished up 22 cents, at $35.12.
