Marriott has higher-than-expected profit, aided by cost cuts
(Reuters) - Hotel operator Marriott International reported a higher-than-expected quarterly profit on Wednesday on stronger group and corporate business and lower costs, sending its shares higher in extended trading.
Still, the company's profit outlook for the current quarter came in below average analyst estimates as Marriott cited weakness in international markets.
A demand recovery in North America and rising room rates in the face of limited supply growth is helping Marriott offset softness in Europe. North America accounts for 75 percent of business at Marriott, whose brands include Ritz-Carlton, Residence Inn and Courtyard.
"We're not seeing a slowdown in Marriott fundamentals," said MLV & Co. analyst Ryan Meliker. "Group pace going forward looks pretty strong as does their expectation for corporate rate growth next year."
Net income came to $143 million, or 44 cents a share, in the fiscal third quarter ended September 7, compared with a loss of $179 million, or 52 cents a share, a year earlier.
Analysts expected 40 cents a share, on average, according to Thomson Reuters I/B/E/S.
Quarterly revenue fell to $2.73 billion from $2.87 billion a year earlier.
At Marriott, revenue per available room, a key industry measure, rose 6.3 percent at comparable systemwide hotels in North America in the third quarter.
International markets had systemwide revPAR gains, with Europe up 3.8 percent aided by the Olympic Games in London, Asia-Pacific up 6.8 percent and Middle East and Africa up 13 percent.
Results were helped by rising revenue tied to group meetings and corporate travel. Marriott said it is negotiating corporate business for next year and is looking to achieve high single-digit-percentage increases in room rates.
Marriott forecast per-share profit of 52 cents to 56 cents a share for the fourth quarter, compared with 57 cents expected by analysts. Spokeswoman Laura Paugh said international weakness, particularly in Europe, was a challenge.
"The economy in Europe has been hidden by the special events you saw in the third quarter," Paugh said. She said Marriott expects "very modest revPAR improvement" there in the fourth quarter. Europe accounts for about 9 percent of Marriott fees.
Marriott shares rose to $39.72 in extended trading from their close of $39 on the New York Stock Exchange on Wednesday. (Editing by Leslie Adler and Andrew Hay)