NEW YORK (Reuters) - Marriott International Inc <MAR.N>, the No. 2 U.S. hotel operator, lowered its 2008 profit forecast on Thursday, as the slowing U.S. economy begins to sap travel demand.
By Chris Reiter
NEW YORK (Reuters) - Marriott International Inc <MAR.N>, the No. 2 U.S. hotel operator, lowered its 2008 profit forecast on Thursday, as the slowing U.S. economy begins to sap travel demand.
Marriott's lowered outlook is the latest sign that the once-booming hotel industry, which has been cooling as supply creeps up, faces further headwinds from the U.S. economy.
Marriott shares, which have lost about a third of their value since hitting a 13-year high of $52 in April, rose 1.7 percent to $35.50 in morning trading on the New York Stock Exchange.
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Marriott lowered its forecast for 2008 earnings to a range of $2.00 to $2.10 per share, compared with an October forecast of $2.10 to $2.25.
"The lowered expectations supports our cautious stance on the hotels and illustrates our view that not all the 'bad news' is in estimates or stocks," Goldman Sachs analyst Steven Kent said in a note.
While Marriott's fourth-quarter earnings were in line with Wall Street expectations, the new 2008 forecast was below the average analyst estimate of $2.13, according to Reuters Estimates.
"A LOT OF CAUTION"
Laura Paugh, Marriott's senior vice president of investor relations, told Reuters that the company saw "more relative softness" in its transient hotel business in January, which was countered by strong group and international bookings.
"There's a lot of caution in the guidance," she said.
Marriott expects worldwide and North American comparable revenue per available room, or revpar -- a key measure of hotel performance that accounts for rates and occupancy levels -- to rise 3 percent to 5 percent in 2008. The forecast is down from the previous range of 5 percent to 7 percent.
For the first quarter, Marriott expects to earn 32 to 36 cents per share. Wall Street had been expecting earnings of 41 cents per share, according to Reuters Estimates.
Still, the company, which runs hotel brands such as Marriott, Courtyard, Ritz-Carlton and Fairfield Inn, was upbeat about weathering a slower economy, because it said its franchise and management agreements made it less susceptible to market cycles than hotel owners.
"We've never been better positioned to tackle short-term economic challenges nor more optimistic about our long-term prospects," Chief Executive J.W. Marriott said in a statement.
RESULTS IN LINE
Marriott said net profit for the fourth quarter fell to $176 million, or 46 cents per share, from 220 million, or 52 cents per share, a year earlier.
Excluding losses from Marriott's synthetic fuel business, which shut down in the fourth quarter, the company earned 62 cents per share from continuing operations, up from 52 cents a year earlier and in line with Wall Street expectations.
Revenue for the company, which typically manages hotels rather than owning them, rose 8 percent to $4.1 billion, boosted by higher room rates.
Worldwide company-operated comparable revpar rose 9.2 percent, while management and franchise fee revenue rose 19 percent.
Unfazed by tighter credit markets, Marriott said its development pipeline rose to 125,000 rooms, compared to 100,000 rooms a year ago.
Marriott's Paugh said of the roughly 800 hotels under development, only about 20 do not have financing. But tighter credit markets may slow the rate of new development deals over the course of the year, she said.
(Editing by Gerald E. McCormick and Maureen Bavdek)
