Travelers Cut Back; Marriott Profit Falls

As the U.S. economy goes, so does Marriott International.

The Bethesda hotel company said its first-quarter profit sank 34 percent -- to $121 million, or 33 cents a share -- as travelers continued to cut back on trips. Revenue was up nearly 4 percent, to $2.95 billion.

But Marriott's revenue per available room, known as RevPar, increased just 2.3 percent in North America, where the firm has most of its properties. The measurement is a key indicator of a lodging company's health, and in better times, Marriott saw RevPar growth of 9 percent or more a year.

Arne Sorenson, Marriott's chief financial officer, told analysts in a conference call, "As expected, slower U.S. economic growth impacted the lodging industry in the first quarter as our RevPar growth trailed inflation."

But internationally, Marriott is expanding rapidly. Outside North America, RevPar grew 18.5 percent, helping push international operating profit up nearly 30 percent.

Smedes Rose, an analyst with Keefe, Bruyette & Woods, said that although it has become a cliche to cite India and China as key new markets for U.S. companies, "It is a real growth opportunity with a lot of demand for hotels."

Marriott shares closed up 97 cents, or 3 percent, at $33.46. Rose said investors were relieved that Marriott did not cut its guidance for full-year RevPar growth of 3 to 5 percent in the United States and worldwide.

"There was an expectation that it was going to be taken down," said Rose, whose company seeks investment banking business from Marriott. "I think people are thinking that they can see the light at the end of the tunnel."

Sorenson told analysts the company was encouraged that attendance at group meetings was good and cancellations are still below last year's levels.

"Our philosophy in an environment like this is very simple: While we cannot make our lodging business immune to a weaker economy, we can strive to outperform our competitors," he said.