Good enough.  We expect Q2 to come in at low end of guidance. 



"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.

- J.W. Marriott, Jr., Marriott International chairman and chief executive officer




  • "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 plan to launch the AC Hotels by Marriott brand on our booking channels next month."  
  • 1Q11: "REVPAR for worldwide comparable systemwide properties increased 6.5 percent (a 6.6 percent increase using actual dollars)."
  • "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."
  • "Calendar quarter REVPAR for North American comparable systemwide properties increased 6.8 percent."
  • "Owned, leased, corporate housing and other revenue, net of direct expenses, increased ... largely due to an increase in branding fee revenue, higher termination fees and improved operating results at owned and leased hotels."
  • "Nearly 25 percent of company-managed hotels earned incentive management fees compared to 23 percent in the year-ago quarter."
  • "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.
  • "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."
  • "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."
  • [SG&A] "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."
  • "While all terms of the transaction are not yet complete, post spin-off, the company expects the new timeshare company will pay a franchise fee to Marriott International totaling approximately 2 percent of developer contract sales plus a flat $50 million annually for use of Marriott's brands.  The franchise fee is also expected to include a periodic inflation adjustment."
  • Repurchased 7.8MM shares in 1Q11 for $300MM. YTD MAR repurchased 13.4MM shares for $493MM. There are 10.5MM shares left under MAR's share repurchase authorization as of 4/19/2011
  • Cash: $144MM
  • Debt: $2,857MM, including CP of $42MM
  • FY 2011 Guidance:
    • Largely unchanged from previous guidance; only differentiated commentary/guidance is highlighted below
    • "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."
    • Adjusted EBITDA was lowered by $15MM
    • Fee revenue was lowered by $5MM
    • SG&A was increased by $15MM
    • Net interest expense higher by $10MM
  • 2Q2011 Guidance:
    • EPS: $0.34 to $0.38 is below consensus of $0.40
    • Fee revenue: $320-330MM
    • Owned, leased, corporate housing & other, net of direct expenses: $25-30MM
    • Timeshare sale and services, net of direct expenses: $50-55MM
    • G&A: $165-170MM
    • Net interest expense: $35MM


  • Washington DC - business is already improving with the recent budget settlement
  • Group business was weaker than expected for in the quarter for the quarter booking, however, bookings in the quarter made for the balance of the year was strong, up 10%.
  • Why was MAR's RevPAR lower than Smith travel data?
    • Systemwide, 1 in 20 of their systemwide hotels are in the DC market more than twice that of their comp base. They also have more exposure to group business - 45% more than the average smith travel hotel - 40% more than the average Sheraton.  Group business tends to lag the RevPAR index.  
    • 47 hotels are under renovation this year vs. [30] last year
    • They don't feel like they are overpriced relative to comps
    • They report comparable hotel data rather than same store like their competitors
  • Expect that domestic house profit margins will expand 100 -150bps this year while international will expand 100 bps
  • Last year's G&A included $8MM of unusual benefits
  • Expect to file the timeshare spinoff with the SEC in June 
  • International RevPAR will slow later this year.  Shanghai World Expo is a tough comp and they will be impacted by the events in Japan and the Middle East - although they expect that Japan and ME RevPAR will rebound by YE
  • Special Corporate rate negotiations resulted in rate increases in-line with their expectation
  • Interest income will be lower as one of their loans is expected to be paid back early
  • Expect share count to decrease due to their large share buybacks as they have been taking advantage of the recent share weakness
  • Believe that their actual openings will exceed today's pipeline over the next 3 years
  • Expect to add another 1700 AC hotels rooms next quarter
  • Have not adjusted their guidance for the incremental costs of the Timeshare Spin transaction
  • After adjusting for large renovations - Marriott's brand share was flat in Feb - despite their larger group concentration
  • Their brands are not losing marketing share
  • Over half of the occupancy in their hotels is touched by direct sales - group primarily
  • Recently changed their sales efforts (Sales Force One) for booking group business to a centralized system to be able to sell across all their brands vs. selling taking place at the individual hotels. Expect that their group market share will increase as a result.


  • Have seen good group bookings for 2011. March was the second best month that they've seen in 2 years for group bookings. Think that what they saw in 1Q was an anomaly.
  • $500-$700MM of investment spending update
    • Not a lot has been committed - the last investor day is the best guidance
    • Flat level of investment spending in 2011-2013
  • The Timeshare spinoff fees were set as to not stifle potential growth outside of MAR brands
  • House margin growth is based on incentive comp accrual - they are booking more aggressive comps than last year. They also have some issues with NY's day revenue recognition issues. Expect that RevPAR will be stronger in the balance of the year than in Q1
  •  Timeshare growth strategy out of the box regarding new brands?
    • As they convert to points they can be more efficient in growing the company without building new product
    • Individual projects; also don't need to be as large
    • Right now, the business is generating positive cash flow and given the level of inventory, they expect that that continues in the near term
  • Expectations from their leisure customer base?
    • Fairly optimistic despite the rise in gas prices. So far, there hasn't been an impact from the increase in gas prices and airfares
    • They still expect growing leisure business
  • Philly hotel renovation had 1/2 pt of RevPAR impact on their business. They don't take their under renovation hotels out of the comp set unless a material number of guest rooms are out of commissions. 
  • Haven't included one time costs from the spin transaction into their guidance
  • Ex Japan and ME, their international business is expectations are higher than they were last quarter. Feel like they are losing 3 cents of EPS due to ME & Japan impact.  
  • G&A - they had some one time items in 2010. Core G&A is growing more like 5% vs. earlier guidance of 3-5%
    • Ok i don't understand their response. Marriott clearly was aware of all the one-time 2010 items when they guided last quarter - including under accrual for incentive comp in 1Q2010... so the explanation for the revision doesn't really hold water
  • Claim the ME & Japan will impact their incentive fees by $10MM or so. Plus the DC market was really soft in the Q1 and they expect that to improve
  • How much of their group business in 2011 was booked before 2011
    • Varies by hotel. Bigger hotels could have as much as 75% of their business on the books before the year starts
    • Claim that on average 65% of their group business for the year is on the books at the beginning of the year
  • Not seeing much change in their booking window

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