Marriott 2Q profit declines 76 percent

NEW YORK - As businesses continued to scale back on travel in the recession, Marriott International Inc.'s second-quarter profit fell 76 percent.

Marriott expects the trend to continue and offered far more cautious outlooks for the third quarter and full fiscal year than Wall Street expected, sending its shares down $1.36, or 6.2 percent, to close at $20.44 Thursday.

On a conference call with analysts, President and Chief Operating Officer Arne Sorenson said Marriott's corporate travel business is suffering as companies worldwide shrink their travel budgets. Hotel operators like Marriott typically counted on business meetings for substantial revenue, but many banquet halls and rooms now sit empty.

"We aren't yet seeing more corporate travelers and business meetings returning to our hotels," Sorenson said. "Everyone is price-sensitive today, not just vacationers," he added.

Marriott's net income in the quarter that ended June 19 plummeted to $37 million, or 10 cents per share, from $157 million, or 42 cents per share, a year earlier.

Excluding restructuring and other charges, it earned 23 cents per share, 2 cents better than the average analyst forecast, according to Thomson Reuters.

Revenue slid 20 percent to $2.56 billion from $3.19 billion but topped Wall Street estimates of $2.52 billion.

Revenue per available room, or revpar, at company-owned properties worldwide declined 26.1 percent. RevPar is considered a key metric for lodging companies.

Friedman, Billings, Ramsey analyst Patrick Scholes said second-quarter earnings were better than expected mostly because of better-than-anticipated revpar in the U.S. and gains from its timeshare segment. However, Scholes believes shares will head lower as investors focus on the third-quarter forecast.

Marriott's revpar in North America declined 21.2 percent for the second quarter and is expected to decline between 20 percent and 23 percent in the third quarter because of lower room rates, discounting and higher competition.

Outside North America, Sorenson said Marriott is seeing more significant revpar declines because of the added impact of swine flu in Mexico and Asia. There have been nearly 95,000 cases of swine flu worldwide, including 429 deaths, according to a report last week from the World Health Organization.

One bright area for Marriott was timeshare contract sales. While they fell compared with the second quarter of 2008, an anniversary promotion gave them a boost. Marriott expects the segment to generate positive cash flow this year.

The Bethesda, Md., company expects third-quarter income in a range of 9 cents to 14 cents per share, well short of the current analyst estimate of 20 cents per share. It also predicts full-year earnings of 76 cents to 86 cents a share, below Wall Street's average forecast of 91 cents a share.

Marriott owns more than 3,200 lodging properties globally.

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