MAR YOUTUBE

In preparation for Marriott's Q1 2O11 earnings release after close tonight, we’ve put together the pertinent forward looking commentary from its Q4 2010 earnings call and subsequent conferences/releases, including commentary from the guide down on March 28th.

 

 

Post Earnings Business Commentary

  • Demand in international markets has been robust and international systemwide RevPAR is expected to increase 11% in constant dollars in 1Q 2011.
  • The company expects its worldwide systemwide 1Q RevPar to increase approximately 7%, at the low end of the company's 7 to 9% 1Q guidance.
  • MAR reiterates the company's diluted earnings per share guidance for 1Q of $0.24 to $0.28 per share.
  • “In February, [we] had guided to a North America number of 6% to 8%. And although North America is still strong and the business is still strong, there were a few things that changed that we think North America will come in at 5% to 6% instead of 6% to 8%, still strong but lower than the lower end of that guidance”
  • “What changed from our expectations in February:”
    • “In New York City a lot of supply came on. We were expecting that supply, that was no new news, but it came on at rates that were lower and weaker than we had anticipated, so as many of you know, we were the rate leader in New York where we had pushed rates first and had moved our rates up and had been aggressively moving our rates up in New York. And as this supply came on at the lower rates, it slowed that process down which we weren’t anticipating when we gave guidance. And then New York also had weather. As all of you know it had quite a few snowstorms that slowed the pace down as well and we have a very big footprint in New York.”
    • “In Washington, DC, you had a little bit of noise for about a month on the government shutting down and that slowed down. You have a lot of government contractors in Washington, DC and they slowed down their meetings and slowed down some of their transient while they waited to see what was going to happen with the government. The good news is the government kind of settled down and extended the budgetary process, so that noise is kind of out of the system now but during the quarter it was there.”
    • “Atlanta had some weather.... we have several large, big-box hotels, multi-thousand room hotels, and we saw the pace of in the quarter for the quarter small group bookings did not materialize at the same level we were expecting.”
  • “We saw good group bookings in December, we saw good group bookings in January and we used that as our basis to set our guidance for the full first quarter. Although February came in good– group bookings were up 15%, it was not at the expectation levels we had thought it would be as we set our guidance.”
  • “Transient is fine. I think what we’re seeing there is if you look at our Select-Service it’s coming in where we thought it would be which is mostly business transient as you think about it.  It was more of this short term in the quarter for the quarter group bookings that had more of the effect of still having a good quarter of 5% to 6% but instead of the 6% to 8%.”
  • “We gave guidance and talked about adding 35,000 rooms this year. We’re on target to do that, 9,000 of those are AC Hotels, which we successfully closed March 1st, that joint venture. That’ll add 9,000 AC by Marriott hotels: 80 in Spain where we had very little representation.”
  • “As far as what we’ve seen in Japan, you know we have very little presence in Japan. I think our total fees in 2010 was about $12 million, $13 million. We have about 10 hotels there, so not a big effect to us. What we have seen is business move out of Japan into Beijing, Shanghai, some into Singapore, a little bit into Thailand, meetings, things that were going to happen in Japan have moved over.”
  • “The Middle East, we have about 30 hotels in the Middle East. Our fees in 2010 were about $37 million, so not a big footprint there. The outbound traffic there would be mostly to Paris in the summer time. That’s typically wealthy Middle Easterners so we’ll see what the effect is there. But Paris is a very strong market so it will absorb anything that would change there, I think.”
  • “We’ve been very aggressive in the first quarter with share repurchase and we’ll continue to do that throughout the year as we have this excess $1 billion of cash.”

 

4Q YOUTUBE

  • “Our new points product has been very well received by customers. Timeshare demand correlates highly with consumer confidence, which is coming back. New construction starts in the timeshare industry are very low as the industry continues to absorb existing inventory.”
  • “Looking further ahead, while we don’t expect the new company to be investment grade in the near term, we do expect that it will continue to securitize its consumer notes receivable and should require little additional incremental capital.”
  • “We’re roughly two-thirds of the way done with special corporate rate negotiations for 2011, and the resulting rates for the completed accounts are running up at a high single-digit rate over 2010 prices. Special corporate customers also tell us that they expect to be traveling more in 2011.”
  • “Roughly 35% of our pipeline rooms are under construction and nearly 20% are awaiting conversion.”
  • “For 2011, we expect Adjusted EBITDA is expected to climb 12% to 18% for the full year.”
  • “The first quarter reflects slower growth than the full year, largely due to timing issues for G&A and Timeshare. The first quarter 2011 G&A increase reflects a tough comparison to a $6 million guarantee reserve reversal and unusually low incentive compensation in the prior year quarter. For Timeshare, lower interest income and rental profits will likely depress results in the first quarter, but favorable development profit reportability and solid cost controls should yield much stronger earnings in the remainder of the year.”
  • “We assume about $500 million to $700 million in investment spending in 2011 including $50 million to $100 million in maintenance spending. Total investment spending in 2010 was about $400 million. We will be disciplined in our approach to capital investments and repurchases, but expect to return cash to shareholders if attractive investment opportunities do not appear.”
  • [2011 investment spend] “That amount is mostly committed at this point in time.”
  • “We know that the securitization debt will go with the timeshare company.”
  •  [Mix] “I think just shy of about 40% [group] for full-year 2011.” 
  • “Probably two-thirds or so of our group business was on the books as of the end of ‘10 for ‘11 and the balance will be booked over the course of the year.”
  • “The limited service areas, that’s where the supply growth was most significant, and that supply, by and large, completed opening in the early part of ‘10. And so I think we’re starting to see the benefit from a supply side of much less limited service product coming on."
  • “We’ll want a fee structure that is an appropriate incentive for this business to grow with us. And obviously, if we put a fee that is too high on their sales, that potentially cause them to say we’re giving up too big a share of our profits for those, we’re going to tend to run that business away from us sooner rather than later and we basically never want to run that business away from us.”
  • “We do think that we’ve got occupancy growth in most markets in the United States, including secondary and tertiary markets, so we’re starting to see rate growth in most, albeit it’s a bit more modest in the secondary markets than it is in the primary markets at the moment. But it will come.”

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