LOS ANGELES (Reuters) - Marriott International Inc. (MAR.N: Quote, Profile, Research, Stock Buzz), the top U.S. hotel operator, expects to come close to a milestone in terms of profit levels at its hotels this year, its chief financial officer said on Wednesday.
Marriott, which manages rather than owns hotels, expects close to 70 percent of the hotels in its system will pay incentive fees this year linked to a hotel's profitability, CFO Arne Sorenson said, speaking at the Reuters Hotels and Casinos 2007 Summit.
Contracts generally include such fees that kick in when profit exceeds a certain level, but 2000 was the last time profits at 70 percent of hotel operators reached the level.
That reflects strong underlying profits for hotels. The industry is in the midst of a multiyear boom, with demand soaring and few new hotels opening. That has allowed hotels to steadily raise rates.
Marriott, which owns brands such as Marriott, Ritz-Carlton and Courtyard, expects to reach the 2000 peak number, at the latest, by 2009, Sorenson said, adding that he expected the percentage of managed hotels paying incentive fees to plateau in the 70s.
"Relatively soon," Sorenson said, when asked when the percentage of hotels paying incentive fees would get back to peak levels. "This year, next year, the year after probably at the worst."
Marriott also expects profit margins to return to 2000 peak levels this year, which would make it the first hotel management company to pull off the feat, Sorenson said.
"We're going to keep crowing about that through the course of the year," said Sorenson.
The Bethesda, Maryland-based company has been trying to increase profit margins by improving operations and cutting costs, Sorenson said.
But Sorenson said it will be tougher next year to improve profit margins further by making operational adjustments.
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