Marriott International Reports First Quarter 2011 Results
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Marriott International Reports First Quarter 2011 Results
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Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2011-04-21
Listen to the quarterly earnings review at http://www.marriott.com/investor (click "recent and upcoming events" tab and click on the quarterly conference call link).
First Quarter Highlights:
• First quarter diluted earnings per share (EPS) totaled $0.26, an 18 percent increase over prior year results;
• Total fee revenue increased 9 percent from the year-ago quarter to $279 million as a result of strong revenue per available room (REVPAR) and unit growth;
• First quarter worldwide comparable systemwide REVPAR rose 6.5 percent using constant dollars. Average daily rate rose 3.0 percent using constant dollars;
• North American comparable systemwide REVPAR rose 5.8 percent in the first quarter. For the calendar quarter, North American comparable systemwide REVPAR increased 6.8 percent;
• At the end of the first quarter, the company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled more than 95,000 rooms, including nearly 39,000 rooms outside North America;
• Over 14,200 rooms were added during the quarter, including 7,100 rooms to be branded AC Hotels by Marriott and 1,900 rooms converted from competitor brands. The company opened over 11,000 rooms in international markets;
• Marriott repurchased 7.8 million shares of the company’s common stock for $300 million during the quarter. Year-to-date through April 19, 2011, the company repurchased 13.4 million shares for $493 million.
BETHESDA, MD – April 20, 2011 - Marriott International, Inc. (NYSE: MAR) today reported first quarter 2011 results, exceeding the company’s prior year results.
FIRST QUARTER 2011 RESULTS
First quarter 2011 net income totaled $101 million, a 22 percent increase compared to first quarter 2010 net income. Diluted EPS totaled $0.26, an 18 percent increase from diluted EPS in the year-ago quarter. On February 14, 2011, the company forecasted first quarter diluted EPS of $0.24 to $0.28.
J.W. Marriott, Jr., Marriott International chairman and chief executive officer, said, “We achieved strong financial results in the 2011 first quarter, benefiting from improved economic climates in most markets around the world, strong unit growth and continued operating efficiencies across our company.
“We are optimistic about the future. Overall business transient demand is very strong and corporate group demand is building. Our outstanding brands continue to lead in their respective market segments as reflected by our substantial REVPAR index premiums to competitor hotels.
“We have nearly 631,000 rooms in over 3,600 hotels around the world and we continue to attract new hotel owners and developers. We expect to open approximately 35,000 new rooms in 2011 alone, or over one-third of our worldwide development pipeline of 95,000 rooms. We are already off to a great start with the addition of 68 AC Hotels with over 7,100 rooms joining our system in the quarter. We plan to launch the AC Hotels by Marriott brand on our booking channels next month. Our momentum continues as we recently opened the stunning Ritz-Carlton Hong Kong to rave reviews and announced plans to expand in India from 12 to 100 hotels across seven brands by 2015. Our investment grade balance sheet is in great shape and our significant cash flow enables us to invest to further improve efficiency, build our brands, and return cash to shareholders through share repurchases and dividends.”
For the 2011 first quarter, REVPAR for worldwide comparable systemwide properties increased 6.5 percent (a 6.6 percent increase using actual dollars).
Despite weak lodging demand in Bahrain and Egypt, international comparable systemwide REVPAR rose 11.2 percent (an 11.4 percent increase using actual dollars), including a 5.9 percent increase in average daily rate (a 6.0 percent increase using actual dollars) in the first quarter of 2011. Comparable systemwide constant dollar REVPAR rose 14.4 percent in the Caribbean and Latin America and increased 17.2 percent in the Asia Pacific market.
In North America, comparable systemwide REVPAR increased 5.8 percent in the first quarter of 2011, including a 2.4 percent increase in average daily rate. While our Washington, D.C. hotels reflected weaker demand associated with a shorter Congressional calendar and budget negotiations and New York was impacted by new supply, most North American markets reflected both strong demand increases and modest supply growth. REVPAR for comparable systemwide North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels) increased 4.9 percent with a 3.0 percent increase in average daily rate. REVPAR for comparable systemwide North American limited-service hotels (including Courtyard, Residence Inn, SpringHill Suites, TownePlace Suites and Fairfield Inn & Suites) increased 6.5 percent in the first quarter with a 2.4 percent increase in average daily rate.
Calendar quarter REVPAR for North American comparable systemwide properties increased 6.8 percent. REVPAR for comparable systemwide North American full-service and luxury hotels (including Marriott Hotels & Resorts, The Ritz-Carlton and Renaissance Hotels) increased 6.5 percent for the calendar quarter.
Marriott added 100 new properties (14,203 rooms) to its worldwide lodging portfolio in the 2011 first quarter, including the newly renovated historic St. Pancras London Renaissance Hotel, the converted JW Marriott Cannes, the impressive 1,000-room JW Marriott Indianapolis and the first international EDITION hotel in Istanbul. During the quarter, 68 AC Hotels with over 7,100 rooms joined the system and should be branded AC Hotels by Marriott in May. Six properties (1,479 rooms) exited the system during the quarter. At quarter-end, the company’s lodging group encompassed 3,639 properties and timeshare resorts for a total of nearly 631,000 rooms.
The company’s worldwide pipeline of hotels under construction, awaiting conversion or approved for development totaled over 600 properties with more than 95,000 rooms at quarter-end.
MARRIOTT REVENUES totaled nearly $2.8 billion in the 2011 first quarter compared to over $2.6 billion for the first quarter of 2010. Base management and franchise fees rose 10 percent to $237 million reflecting higher REVPAR and fees from new hotels. First quarter worldwide incentive management fees increased 5 percent to $42 million. In the first quarter, nearly 25 percent of company-managed hotels earned incentive management fees compared to 23 percent in the year-ago quarter.
Worldwide comparable company-operated house profit margins increased 30 basis points in the first quarter reflecting higher occupancy and rate increases, partially offset by higher incentive compensation. House profit margins for comparable company-operated properties outside North America increased 180 basis points and North American comparable company-operated house profit margins declined 30 basis points from the year-ago quarter. International hotel house profit margins benefited from very strong REVPAR growth in the first quarter while North American house profit margins were affected by the non-comparable New Year’s holiday, increased state unemployment tax rates, higher marketing and sales costs and the timing of property-level bonus accruals. For full year 2011, the company expects house profit margins to increase roughly 100 basis points in international markets and 100 to 150 basis points in North America.
Owned, leased, corporate housing and other revenue, net of direct expenses, increased $8 million in the 2011 first quarter, to $20 million, largely due to an increase in branding fee revenue, higher termination fees and improved operating results at owned and leased hotels.
In the first quarter, Marriott’s timeshare business remained focused on increasing the number of existing customers enrolled in its new points-based program. The program allows customers to purchase timeshare in smaller increments than the traditional one-week product and allows greater flexibility of use. Since the program launched in June 2010, over 64,000 existing owners have enrolled more than 123,000 weeks in the points program, continuing to exceed the company’s expectations. Contract sales to existing owners represented more than 61 percent of sales in the quarter compared to 48 percent in the year-ago quarter. While sales to existing customers were strong, with fewer sales to new customers year-over-year and a lower average contract price, first quarter adjusted Timeshare segment contract sales declined $27 million to $145 million (excluding a $1 million reversal of an allowance for fractional contract cancellations recorded in a prior period). In the prior year’s quarter, Timeshare adjusted segment contract sales totaled $172 million (excluding an $8 million allowance for fractional and residential contract cancellations).
In the first quarter, Timeshare sales and services revenue totaled $276 million and, net of expenses, totaled $51 million for the quarter. First quarter 2010 Timeshare sales and services revenue totaled $285 million and, net of direct expenses, totaled $50 million.
Timeshare segment results include Timeshare sales and services revenue, net of direct expenses, as well as base management fees, equity in earnings (losses), interest expense and general, administrative and other expenses associated with the timeshare business. Timeshare segment results for the 2011 first quarter totaled $35 million and included $12 million of interest expense related to the consolidation of securitized Timeshare notes. In the prior year quarter, Timeshare segment results totaled $26 million and included $14 million of interest expense related to the consolidation of securitized Timeshare notes.
First quarter 2011 Timeshare segment results increased from the year-ago quarter largely due to the $5 million decrease in losses for a residential and fractional joint venture and the $2 million decrease in interest expense as a result of lower interest rates and lower outstanding debt obligations related to previously securitized notes receivable.
GENERAL, ADMINISTRATIVE and OTHER expenses for the 2011 first quarter increased 15 percent to $159 million, compared to expenses of $138 million in the year-ago quarter. The increase in expenses reflected $7 million of higher incentive compensation costs, which are largely related to timing, the absence of $8 million in prior year favorable items noted below, as well as higher costs in international markets and increased brand investments. The 2010 first quarter benefited from $6 million in guarantee reserve reversals and the collection of $2 million of receivables previously reserved.
GAINS AND OTHER INCOME totaled $2 million primarily reflecting net gains on the sale of real estate compared to $1 million in the prior year.
INTEREST EXPENSE decreased $4 million to $41 million in the first quarter, primarily due to lower total debt balances.
EQUITY IN EARNINGS (LOSSES) totaled a $4 million loss in the quarter compared to an $11 million loss in the year-ago quarter. The 2010 quarter included a $3 million cancellation reserve at one Timeshare joint venture and impairment charges of $3 million associated with two investments.
Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)
EBITDA totaled $234 million in the 2011 first quarter, a 6 percent increase over EBITDA of $221 million in the year-ago quarter. EBITDA for the Timeshare segment increased 8 percent to $54 million in the 2011 first quarter. See pages A-6 and A-7 for the EBITDA calculations.
BALANCE SHEET
At the end of the first quarter 2011, total debt was $2,857 million, including $42 million of outstanding commercial paper, and cash balances totaled $144 million, compared to $2,829 million in debt and $505 million of cash at year-end 2010.
COMMON STOCK
Weighted average fully diluted shares outstanding used to calculate diluted EPS totaled 381.8 million in the 2011 first quarter compared to 373.3 million in the year-ago quarter.
The company repurchased 7.8 million shares of common stock in the first quarter of 2011 at a cost of $300 million. Year-to-date through April 19, 2011, Marriott repurchased 13.4 million shares of its stock for $493 million. The remaining share repurchase authorization, as of April 19, 2011, totaled 10.5 million shares.
SECOND QUARTER 2011 OUTLOOK
For the second quarter, the company assumes comparable systemwide REVPAR on a constant dollar basis will increase 6 to 8 percent in North America, 5 to 7 percent outside North America and 6 to 8 percent worldwide. Excluding the Middle East and Japan markets, the company expects comparable systemwide REVPAR on a constant dollar basis to increase 8 to 10 percent outside North America in the second quarter.
The company assumes second quarter 2011 Timeshare contract sales will total $150 million to $160 million and Timeshare sales and services revenue, net of direct expenses, will total approximately $50 million to $55 million. With these assumptions, Timeshare segment results for the second quarter, including interest expense associated with securitized notes, are expected to total $35 million to $40 million.
For the 2011 second quarter, the company expects general and administrative costs to total $165 million to $170 million reflecting higher year-over-year workout and legal costs, as well as higher costs in international growth markets.
2011 OUTLOOK
The company’s 2011 second quarter and full year guidance assumes that the spin-off of the Timeshare segment does not occur in the current year and does not include pro forma adjustments or transaction expenses.
For the full year 2011, the company expects a strong pricing environment. The company assumes full year 2011 systemwide REVPAR on a constant dollar basis will increase 6 to 8 percent in North America, 5 to 7 percent outside North America and 6 to 8 percent worldwide. Excluding the Middle East and Japan markets, the company expects comparable systemwide REVPAR on a constant dollar basis to increase 6 to 8 percent outside North America.
The company expects to add approximately 35,000 rooms in 2011 as most hotels expected to open are already under construction or undergoing conversion from other brands. Given these assumptions, full year 2011 fee revenue could total $1,305 million to $1,335 million. Compared to full year guidance issued in February 2011, the company expects stronger growth in fee revenue in Asia and weaker fees in the Middle East.
Owned, leased, corporate housing and other revenue, net of direct expense, could total $115 million to $125 million. Compared to full year guidance issued in February 2011, the company expects stronger performance at European owned and leased hotels and higher termination fees, offset by a $10 million decline in results in Japan.
The company estimates that, on a full year basis, one point of worldwide systemwide REVPAR impacts total fees by approximately $15 million pretax and owned, leased, corporate housing and other revenue, net of direct expense, by approximately $5 million pretax.
The company expects 2011 Timeshare contract sales to be slightly below 2010 adjusted levels and timeshare sales and services revenue, net of direct expenses, to total $215 million to $225 million, $15 million higher than prior guidance largely due to improved rental revenue.
The company expects its 2011 general and administrative costs to increase 5 to 7 percent over 2010 adjusted levels reflecting anticipated increased spending for brand initiatives and higher workout costs, as well as higher costs in international growth markets.
Compared to prior guidance, the company expects higher net interest expense due to lower capitalized interest and lower interest income as a result of an expected loan repayment. All in all, the company continues to expect full year 2011 diluted EPS of $1.35 to $1.45.
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