Marriott Tops Earnings Forecast

Some See Signs Of Stabilizing Business Travel

Marriott International's third-quarter earnings report on Thursday contained some mildly good news for the hotel industry, despite the Bethesda company's loss due to a big write-down on its timeshare business.

"The third quarter was a little bit stronger than anticipated, but not by a large margin," said John Arabia, an analyst with Green Street Advisors. "There is a sense that the largest declines are behind us. But we are not out of the woods yet."

Arabia and other analysts are keeping an especially close eye on business travel, which collapsed a year ago but shows glimmers of recovering. The hotel industry relies on business travel for as much as 80 percent of its revenues.

"I do get a sense that corporate demand has stabilized," said Arabia. "I am hearing anecdotal evidence that there are some corporate travel restrictions that are being softened. We are starting to see evidence of certain sections of the market, such as finance, starting to book small meetings again."

For the quarter, Marriott recorded a $466 million ($1.31 per share) loss compared to a profit of $94 million (25 cents) one year ago.

Excluding the pre-tax write-down of $752 million in its timeshare sector and other special items, Marriott posted third-quarter income of $53 million. That's less than half of what the company earned in the same quarter of 2008, but the fact that Marriott's third-quarter earnings of 15 cents a share exceeded their expectation by 2 cents provided some comfort that the sector is stabilizing.

Revenue also was slightly better than expected, totaling $2.47 billion in the third quarter, down from $3 billion for the third quarter of 2008, but slightly better than what analysts expected.

Marriott took the timeshare write-down in response to a soft economy. The company expects to reduce prices for its timeshares, convert some timeshare projects to other uses and to sell some land.

Marriott's worldwide company-run properties saw its revenue per available room, a closely watched industry measure, decline 23.5 percent from the year before. Corporate room rates and visits both fell 19 percent for the quarter from a year earlier, a slight improvement over the second quarter's 23 percent drop, the Associated Press reported.

J.W. Marriott Jr., chairman and chief executive, said the company saw more vacationers than expected in the third quarter, cushioning the decline of revenue per available room in North America.

"Revenue per available room across our North American system declined less than expected during the third quarter as leisure travelers responded to attractive promotions," Marriott said.

Marriott shares closed Thursday at $26.80, down less than 1 percent.

With 3,200 hotels around the world reaching across many price points, Marriott is closely watched by competitors and investors as a barometer for the industry. The company said Thursday that the business climate for 2010 will continue to be difficult.

To cope, the industry will likely offer big discounts this holiday season, though there may be some exceptions, Arabia said.

"If you want to be at a high-end ski resort for the week between Christmas and New Year's, you better pull out your checkbook," he said.