Marriott International Inc. ( MAR ) posted
first-quarter 2013 earnings of 43 cents per share, beating the
Zacks Consensus Estimate of 41 cents by 4.9% and the year-ago level
by 43.3%. Marriott's strong top-line, margin expansion, effective
pricing strategy and share buyback activities pushed up the
earnings for the quarter.
Total revenue in the first quarter was $3.1 billion, up 23% year
over year and also better than the Zacks Consensus Estimate of $2.9
billion by 6.9%. Marriott's growing North American business and
solid development pipeline helped drive the revenues during the
quarter. Additionally, Marriott has also gained from the rise in
the fee revenues at Marriott's owned, licensed and franchised
Inside the Headline Numbers
In the first quarter, base management and franchise
fees increased 23.4% year over year to $153 million. The
rise was mostly due to the shift in Marriott's fiscal calendar,
which added $31 million to its quarterly revenue. Apart from this,
an increase in the revenue per available room (RevPAR) in the
existing properties and higher fees earned from the company's newly
launched hotels also boosted the base management and franchise fees
during the quarter.
Incentive management fees increased 32% year
over year to $66 million, benefiting from the company's calendar
change and Gaylord acquisition.
Owned, leased, corporate housing and other
revenues inched up 3% to $224 million attributable to an
increase in credit card and residential branding fees as well as
higher termination fees.
In the first quarter, RevPAR for worldwide comparable
system-wide properties grew 4.6%, driven by a 3.8% rise in the
average daily rate (ADR). International comparable systemwide
RevPAR climbed up 4.1% with the rise in ADR and occupancy.
Following a 4.2% rise in the ADR, comparable system-wide RevPAR in
North America leaped 4.8%.
Adjusted operating margin in the quarter expanded 410 basis
points (bps) to 38% with better pricing and cost effective
Update on Hotel Rooms
During the first quarter, 37 properties with 13,982 guestrooms
were added to Marriot's existing hotel portfolio. The company also
divested 11 properties. Currently, lodging group and timeshare
resorts at Marriott were 3,822 and 663,000 properties,
respectively. Nearly 800 properties with over 135,000 rooms are
either under development or already under construction or
undergoing conversion from other brands.
In the reported quarter, the company has bought back 5.4 million
shares worth $212 million. At the end of the quarter, nearly 26.2
million shares were left to purchase under the current share
For second-quarter 2013, Marriot's total fee revenue will be
between $405 million and $415 million and earnings per share will
be between 55 cents and 59 cents.
The company estimates that North American comparable system-wide
RevPAR will be up 5% to 7%, whereas the same will increase only 2%
to 4% outside North America. Moreover, worldwide comparable
system-wide RevPAR is expected to surge 4%-6%.
The company projects operating income to be within the $275
million and $295 million range.
Marriott has raised its guidance for 2013. Earnings per share
for 2013 are now expected in the range of $1.93 - $2.08, up from
the previous estimate of $1.90 - $2.05. The company now forecasts
fee revenues to be within $1.53 billion and $1.58 billion in 2013,
up nearly 9% to 15% year over year.
Operating income will be within the range of $990 million and
$1,060 million, up from the prior guidance of $985 million and
For 2013, the company projects comparable system-wide RevPAR
will be up 4.5% to 7% in North America, 3% to 5% outside North
America and 4% to 7% worldwide, on a constant dollar basis.
Marriott is consistently growing with its strong pipeline,
significant international exposure and buyback strategy. Continuous
rise in the RevPAR in North America indicates that the company's
lodging business in the region is in a revival mode. Marriott is
poised to benefit from low supply growth in North America given an
increased demand scenario both in corporate and in leisure business
In addition, Marriott appears to be highly optimistic about the
acquisition of the hotel management company, Gaylord brand. It will
strengthen Marriott's position within the group bookings segment in
However, the weak economic conditions in Europe and the slowdown
in China continue to be headwinds. Moreover, as the hotel industry
is cyclical in nature and is highly dependent on the overall health
of the U.S. economy, the budget sequestration, effective since Mar
1, 2013, is expected to dampen growth prospects in North
A leading hospitality company, WyndhamWorldwide Corporation 's ( WYN ) earnings in the
first quarter beat the Zacks Consensus Estimate but its revenues
were in line with the same. Another hotelier, Starwood
Hotels & Resorts Worldwide Inc. ( HOT ), surpassed the
Zacks Consensus Estimate for both earnings and revenues.
Marriott currently retains a Zacks Rank #3 (Hold). Another
hotelier, which is worth considering at the moment includes
Home Inns & Hotels Management Inc. ( HMIN ) carrying a
Zacks Rank #1 (Strong Buy).HOME INNS&HOTEL (HMIN): Free Stock Analysis
ReportSTARWOOD HOTELS (HOT): Free Stock Analysis
ReportMARRIOTT INTL-A (MAR): Free Stock Analysis
ReportWYNDHAM WORLDWD (WYN): Free Stock Analysis
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