Marriott moves to 4th-quarter profit as business travel starts to improve

Marriott moves to profit in 4th quarter

Marriott International Inc. returned to a fourth-quarter profit Thursday as the hotel operator continues to combat the waning recession, with occupancy rising but room rates lagging.

The lodging company, known for brands such as Ritz-Carlton and its namesake, saw business travel improve during the quarter while budget-conscious leisure travelers took advantage of promotions.

Chief Financial Officer Carl Berquist said higher occupancy during the quarter shows demand is strengthening but conceded that room rates remain weak. The first quarter’s results are showing much of the same so far, he added.

Balancing prices and occupancy is a delicate dance for hotels, with the two components linked to each other’s success.

“As occupancy builds you will see greater confidence around (room) rates,” Berquist explained when questioned on when pricing would start to improve.

With conditions starting to improve, Marriott offered first-quarter and full-year earnings outlooks in range of analysts’ expectations and raised its guidance for a 2010 key revenue figure.

Upscale hotels, about a quarter of the U.S. market, were hit hard during the recession as business travelers and affluent guests scaled back on travel.

While signs point toward rising business travel, it may take longer for leisure travel to pick up. Consumers have been wary about the recession, and high unemployment continues to push people to postpone travel or take shorter trips. Many hotel companies have tried to woo this segment with discounts to keep rooms full. That squeezes profits.

But Berquist is confident things are starting to turn around. “Folks of all sorts are getting back to travel and getting back to work,” he said.

Marriott earned $106 million, or 28 cents per share, for the period ended Jan. 1. That compares with a loss of $10 million, or 3 cents per share, a year earlier.

Removing restructuring charges of $7 million and other items, adjusted income from continuing operations was 32 cents per share.

Analysts surveyed by Thomson Reuters, whose estimates generally exclude one-time items, forecast a smaller profit of 26 cents per share.

The results also beat Marriott’s previous guidance for adjusted earnings between 20 cents and 23 cents per share.

Chairman and CEO J.W. Marriott Jr. said in a statement that leisure travelers responded well to special offers and that business travel was starting to pick up, particularly overseas.

Fourth-quarter revenue dropped to $3.38 billion from $3.78 billion, but the performance still managed to surpass Wall Street’s $3.21 billion estimate.

Revenue per available room for Marriott’s worldwide company-run hotels open at least a year fell 13.1 percent in the quarter. Revenue per available room for its company-run North American full-service and luxury hotels open at least a year slipped 11.8 percent.

Revenue per available room is a key gauge of a lodging company’s performance.

For the full year, Marriott posted a loss of $346 million, or 97 cents per share.

Annual revenue declined to $10.91 billion from $12.88 billion.

The company, based in Bethesda, Md., expects first-quarter earnings from continuing operations of 15 cents to 21 cents per share and 2010 earnings of 82 cents to 94 cents per share.

Analysts predict profit of 18 cents per share for the first quarter and 89 cents per share for the year.

Marriott now expects 2010 revenue per available room to be up 2 percent to down 2 percent, adjusted for currency shifts. Its previous outlook was for revpar to be flat to down 5 percent.

“While revpar trends may very well turn this year, in our opinion, we are still quite a ways away from a significant re-acceleration of profitability,” Susquehanna Financial Group’s Robert LaFleur wrote in a client note.

Marriott’s stock added rose 26 cents to $26.66.