Marriott International Inc., faced with stiffening competition to lure retirees to its senior living facilities, said yesterday that it is canceling construction of 35 new projects and predicted that, as a result, its fourth-quarter earnings will be reduced by a nickel a share.
The worldwide hotelier, which depends on its senior living communities for 2 percent of its earnings, said an increasing number of companies vying for the senior market has resulted in an oversupply of units being built in some locales, although not in the Washington area.
"The demographics are still very attractive in terms of the aging of the population," a Marriott spokesman said, adding that the firm has no intention of dropping out of the construction of senior housing.
Marriott is just the latest firm to realize that constructing and managing housing for those in their golden years may not always be golden for the bottom line. One of its competitors, Sunrise Assisted Living Inc. of Fairfax, recently announced that it would earn much less than Wall Street analysts expected during the third and fourth quarters.
Marriott operates 139 senior living facilities in 31 states, including five in suburban Maryland and three in Northern Virginia. Marriott said none of the canceled projects is in the Washington area; instead they were scattered throughout the country, in such diverse places as Pittsburgh; Akron, Ohio; Charleston, S.C.; Knoxville, Tenn.; and Reno, Nev.
The firm often builds the senior housing and then sells it to investors while continuing to manage the facilities.
But lately "it's been more difficult to find buyers," the Marriott spokesman said. "Commercial real estate is out of favor at the moment. There's more supply [of senior housing], and the numbers of buyers hasn't increased."
Nonetheless, he said, the 20,000 current residents at the Marriott facilities and their relatives will not notice any change. "If your mom's in a property in Arlington, they're not going to be affected," he said.
In the first three quarters of Marriott's fiscal year, the firm earned $577 million from its primary lodging business, $14 million from its food-distribution operations and $6 million from the senior living facilities.
Marriott shares closed at $33 yesterday, down 50 cents.