Bloomberg News

Marriott Drops Most in Two Years as Room Revenue Disappoints

July 14, 2011

(Adds closing share price in fourth, sixth paragraph.)

July 14 (Bloomberg) -- Marriott International Inc., the largest publicly traded U.S. hotel chain, fell the most two years after reporting room revenue that trailed industry growth and saying timeshare sales declined.

Revenue per available room, a measure of occupancy and rates, rose 6.6 percent for company-operated properties in North America in the second quarter, the Bethesda, Maryland-based hotelier said after the close of trading yesterday. Across the industry, revpar in the top 25 U.S. markets climbed 9.8 percent this year through May, according to Smith Travel Research Inc.

“This was a weaker-than-expected quarter for Marriott,” Steven Kent, an analyst with Goldman Sachs Group Inc. in New York, said today in a note to clients. Revpar has been “weaker than U.S. statistics for five quarters in a row,” he wrote.

The shares fell $2.45, or 6.6 percent, to $34.69 as of 4:15 p.m. in New York Stock Exchange composite trading. The decline was the biggest since Feb. 10, 2009. The company’s brands include Ritz-Carlton, Courtyard and Renaissance.

Contract sales in Marriott’s timeshare segment fell to $163 million in the second quarter from $167 million a year earlier, excluding a $6 million allowance for fractional and residential contract cancellations. The company is planning to spin off the business, which accounts for about 13 percent of its revenue, this year.

‘Exceptionally Weak’

The “timeshare business was exceptionally weak vs. our expectation,” Kent wrote.

Marriott, the first of the major U.S. hotel chains to report second-quarter earnings, led declines among hospitality stocks. Starwood Hotels & Resorts Worldwide Inc., which will announce results July 28, dropped 2.2 percent to $55.65. Hyatt Hotels Corp., scheduled to report on Aug. 2, fell 4.8 percent to $39.27. Wyndham Worldwide Corp. slumped 2.3 percent to $33.23.

Marriott’s “troubling timeshare results could be a negative indicator for Wyndham’s operations,” Kent said. Wyndham is scheduled to release its results July 27.

--Editors: Daniel Taub, Kara Wetzel

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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