Bloomberg News

Marriott Has Third-Quarter Loss After Costs From Timeshare Unit

October 06, 2011

Oct. 6 (Bloomberg) -- Marriott International Inc., the largest publicly traded U.S. hotel chain, had a third-quarter loss after recording costs related to a timeshare business it’s planning to spin off.

The net loss was $179 million, or 52 cents a share, compared with a profit of $83 million, or 22 cents, a year earlier, the Bethesda, Maryland-based company said yesterday in a statement. Analysts expected earnings of 28 cents a share, the average of 14 estimates in a Bloomberg survey.

Results included $324 million of pretax impairment costs at Marriott’s timeshare business, hurt by a slump in demand as economic growth slows. The company said in February that it would separate the unit later this year to concentrate on operating properties.

“The spinoff of our timeshare business is on track,” J.W. Marriott Jr., the company’s chairman and chief executive officer, said in the statement. It’s scheduled for completion by the end of the year, he said.

Earnings before a pretax charge of $352 million, which includes the impairment related to the timeshare segment, beat estimates. Adjusted earnings were $104 million, or 29 cents a share. On that basis, analysts expected a profit of 27 cents, the average of 23 estimates compiled by Bloomberg.

Marriott’s revenue rose to $2.87 billion in the third quarter from $2.65 billion a year earlier.

Growth in Revpar

At its hotel operations, which include the Ritz-Carlton brand, Marriott said it expects revenue per available room, an industry measure of occupancy and rate, to grow 5 percent to 7 percent this quarter, and 3 percent to 7 percent next year, before adjustments for currency fluctuations. In the third quarter, it increased 6.9 percent.

Slower growth in the U.S. economy will weigh on hotel occupancy and room rates, according to Patrick Scholes, an analyst at FBR Capital Markets Corp. with an “outperform” rating on the shares. The U.S. jobless rate was 9.1 percent in August and has been stuck at 9 percent or higher for five months.

“The macroeconomic environment has definitely had an impact nobody can deny,” Scholes said in a telephone interview. “The fact that they start their revpar range at 3 percent tells me there is a chance that next year could be pretty soft. Three or four months ago, Street estimates were 7 to 9 percent.”

In the third quarter, revpar increased 6.9 percent in North America, the same as the worldwide gain, Marriott said. That’s less than the 9.6 percent increase this year through August across all hotels in the top 25 U.S. markets, and 8.1 percent nationwide, according to Smith Travel Research Inc. of Hendersonville, Tennessee.

Lowered Outlook

Last week, Moody’s Investors Service lowered its outlook for the U.S. lodging industry as slower economic growth threatens to limit demand for travel and curtail operators’ ability to raise room rates.

Shares of hotel companies tumbled in the third quarter as job growth stalled and the Federal Reserve said there are “significant downside risks” to the U.S. economy. Marriott declined 23 percent in the three months ended Sept. 30.

The company announced earnings after the close of regular U.S. trading yesterday. Its shares rose 4 percent to $28.18 in New York Stock Exchange composite trading yesterday.

Marriott is the first of the major U.S. hotel chains to report third-quarter earnings.

--Editors: Daniel Taub, Christine Maurus

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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