NEW YORK (Reuters) - Wyndham Worldwide Corp <WYN.N> forecast 2008 earnings that disappointed Wall Street on Tuesday as the biggest U.S. hotel company expects the first quarter to be burdened by deferred timeshare revenue.
By Chris Reiter
NEW YORK (Reuters) - Wyndham Worldwide Corp <WYN.N> forecast 2008 earnings that disappointed Wall Street on Tuesday as the biggest U.S. hotel company expects the first quarter to be burdened by deferred timeshare revenue.
The lackluster forecast, which sent Wyndham's shares down nearly 8 percent, comes as the booming lodging sector shows signs of slowing and follows lower third-quarter earnings at rivals Marriott International Inc <MAR.N> and Starwood Hotels & Resorts Worldwide Inc <HOT.N>.
In a presentation at its investor day in New York, Wyndham said it expected adjusted earnings per share of $2.02 to $2.13 for 2007, compared with $1.70 in the previous year.
!ADVERTISEMENT!For 2008, the operator of the Ramada, Days Inn, and Super 8 hotel chains expects adjusted earnings to rise to a range of $2.23 to $2.38 per share.
Wall Street analysts on average were expecting Wyndham to post earnings of $2.12 per share for 2007 and $2.36 for 2008, according to Reuters Estimates.
For the first quarter of 2008, the company, which serves primarily leisure travelers through its large timeshare businesses and bargain hotel chains, expects adjusted earnings of 30 cents to 35 cents per share.
Wyndham said its first-quarter earnings forecast includes an expected burden of 12 cents to 15 cents a share because of the deferral of revenue from its timeshare business. The company defers revenue on timeshare sales for projects under construction.
Wall Street analysts had been expecting the company to post first-quarter earnings of 48 cents per share, according to Reuters Estimates.
The lodging sector has enjoyed a long boom as robust demand and the limited construction of new hotels allowed hoteliers to steadily raise rates. But the rate of growth is seen slowing as the U.S. economy softens and hotel supply creeps up.
PKF Hospitality Research on Monday forecast a 4.5 percent gain in 2008 revenue per available room, or revpar -- a key measure of hotel performance that reflects rates and occupancy. That growth rate would mark the slowest since 2003.
For its part, Wyndham forecast revpar growth of 4 percent to 6 percent in both 2007 and 2008.
Wyndham believes it is better positioned compared to other hotel companies because of its businesses that appeal to a generation of Americans hitting retirement age.
"Baby boomers fuel the leisure travel market," because they have more time and money to spend on hotel rooms and buy timeshare, said Chief Executive Stephen Holmes during a presentation to investors.
He also said the company's bargain hotel chains should be more stable during an economic downturn, as business and leisure travelers shift from more expensive brands to save money.
Shares of Wyndham, which was spun off from Cendant Corp in July 2006, were down $2.43, or 7.9 percent, at $28.16 in morning New York Stock Exchange trade. Wyndham shares have fallen about 25 percent since hitting a record high of $39.40 on July 5.
(Reporting by Chris Reiter; Editing by Dave Zimmerman)
