Soaring gas prices and catastrophic destruction from two hurricanes have had little effect on Marriott International Inc.'s bottom line, the company said yesterday as it reported third-quarter revenue up 18 percent.
Executives at the nation's largest hotel operator and franchiser told investors in a conference call that corporate travel, the firm's primary revenue generator, was strong despite high fuel prices. Also, Marriott's hotels in other cities picked up the slack for more than a dozen locations temporarily shut down in New Orleans.
"Let me say that despite considerable operating challenges from the Gulf Coast, our third-quarter results were fantastic," said Arne M. Sorenson, the Bethesda firm's chief financial officer. "In virtually every other market in the U.S. and around the world, demand was strong during the quarter."
Marriott's profit was $149 million (65 cents per share), up from $133 million (56 cents) from the comparable quarter last year, surpassing Wall Street's expectations. Revenue rose to $2.7 billion. Average daily room rates were up 8 percent.
The company said it lost about $1 million in management fees from its New Orleans hotels because of Hurricane Katrina and another $1 million from a donation it made to relief efforts. Marriott said fourth-quarter fees would be "modestly impaired," but over time it would recover the lost fees from insurance.
Having thousands of hotels around the country is likely to lessen the impact. "Major markets like Philadelphia, Washington, Orlando, Atlanta and Chicago have picked up business," Sorenson said. Twelve of the hotels in New Orleans have either already opened or will open soon, Marriott said.
Analysts had predicted that gas prices wouldn't hurt the company because Marriott is not in the economy hotel market, which caters to consumers more sensitive to higher gasoline prices. Also, there has been a slowing of new hotel construction, diminishing competition.
Companies in financial services, consumer goods, the defense industry, technology and pharmaceuticals were strong revenue generators during the quarter, Marriott said. Telecommunications and auto-industry firms were more cautious. Marriott intends to raise corporate rates 7 to 9 percent in 2006.
In another development, three current and former sales executives sued in a California federal court alleging age discrimination. The suit names several Marriott businesses and Rick Owen, a regional vice president.
A Marriott spokesman said the complaint has "no merit."