MAR YOUTUBE

In preparation for MAR's 3Q earnings release tonight, we’ve put together pertinent forward looking company commentary from its 2Q earnings call.

 

 

2Q YOUTUBE

  • “Transient business is back in a big way. The 2011 transient occupancy rate for the Marriott brand increased 3.5% points, reaching 2007 peak transient occupancy levels this quarter"
  • [Internationally] “We opened over 32,000 rooms in the last 12 months, roughly a 4.5% net unit growth rate”
  • “Our development pipeline increased to more than 100,000 rooms with nearly 40% of our rooms in the full-service pipeline in China and India”
  • “YTD, we have returned over $700mm in share repurchases and dividends to shareholders, and we remain committed to do more”
  • Timeshare sales and services net was about $0.02 lower than expected, largely due to reportability. We expect about half of this shortfall will turn around later this year and the remainder next year.”
  • “G&A was about $0.02 better than expected due to several non-routine items including reversal of an earlier loan loss provision… largely due to $5mm reversal of a loan loss provision and lower than expected workout costs which we now believe will occur later in the year"
  • “Approximately 5% of our domestic system-wide rooms are located in the Greater Washington, D.C. market, considerably higher than the industry’s concentration. In 2010, approximately 6% of our worldwide fee revenue came from this market and 13% of our incentive fee.”
  • “Across North America, second quarter Group REVPAR at the Marriott brand increased 2% YoY”
  • “Group bookings made in Q2 for later in 2011 increased 18% and long-term group bookings are returning. In Q2, we booked business for 2012 that was 19% higher than the prior year and booked business for 2013 that was 13% higher… Nearly a quarter of the group business booked in our second quarter were for the years 2014 and beyond”
  • “With good cost controls, we expect domestic house profit margins to increase 100 to 125bps and international margins to increase roughly 150BPS for the full year and that’s excluding the impact of the Middle East and Japan”
  • “Incentive fee growth YoY was constrained by modestly lower incentive fees in the DC market and declines in incentive fees at hotels in the Middle East.”
  • “Our owned and leased profits declined $2mm due to lower hotel termination fees YoY and lower results at our leased hotels in Tokyo”
  • “Timeshare sales and services net declined due to lower interest income and to a lesser extent, higher product costs.  Compared to our expectations, lower timeshare sales and services net reflected higher sales and marketing costs as well as delays in revenue recognition associated with certain special promotions”
  • “Our international REVPAR growth, even excluding the Middle East, is likely to slow a bit in Q3 from Q2 pace. The 2010 World Expo will be a tough comp for our Shanghai hotels later this year.  REVPAR growth in Europe is expected to moderate in H2 due to the timing of this year’s fairs in Germany as well as tougher comparables.”
  • Guidance:
    • Q3 International system-wide REVPAR: 6% to 8% (ex Middle East and Japan)
    • FY11 International system-wide REVPAR: 7% to 9% (ex Middle East and Japan)
    • Q3 NA system-wide REVPAR: 5% to 7% due to a higher leisure mix
    • FY11 NA system-wide REVPAR: 6% to 8%
    • 3Q Timeshare contract sales: slightly up YoY
    • 3Q Timeshare segment results: $25-30MM
    • FY11 Timeshare contract sales: slightly down YoY
    • FY11 Timeshare segment results: $140-150MM
    • FY11 Timeshare sales and services revenue, net: $205-$215MM
    • FY11 G&A expense: +6% to 8% over adjusted levels in the prior year (which includes $5MM in transaction costs) 
    • FY11 EPS: +17% to 24%
    • FY11: EBITDA will climb 9% to 13% compared to last year’s adjusted amount
    • FY11: $500-$700MM of investment spend; including $50-100MM of maintenance spend
  • “We expect to remain aggressive given our recent stock price and substantial investment capacity”
  • [Timeshare Spinoff] “We also believe we can generate cash flow over time from the sale of excess assets including some very attractive beachfront real estate.  We expect to generate meaningful amounts of FCF for the foreseeable future. As our inventory declines over time, we intend to pursue asset light expansion opportunities. We also expect to be able to develop new resorts, buy distressed inventory, or enter into turnkey projects with third-party developers”
  • “Cash tax benefits to be several hundred million dollars; and just to clarify, that’s cash taxes. We’ve benefited those over the years. But this is inherently triggering those taxes as part of the spin. And a good portion of those will be recognized currently or be benefited currently at the date of the spin with the rest carried forward over the next several years”
  • [Japan]:”We’re seeing occupancy build, but we expect that even in Q4, we will be on average 20% to 30% REVPAR down from Q4 2010.”
  • “That wholesale business is not likely to come back with significance until there has been sustained stability in that market. We haven’t seen that yet and so we would both expect in the guidance that we’ve given and as a predictive matter that Egypt is probably a 12 to 18 month recovery story.”
  • “Jordan is not as bad as Egypt and in many respects is more stable. But generally, I think implicit in our guidance is a pretty slow recovery for the region as a whole”
  • “If anything, we’ve been very heartened by the strength of leisure business. Now, let’s back up and state the obvious: leisure travel is more price-sensitive than business travel. Notwithstanding that, I think most of the leisure business which is driven in our hotels is probably coming out of the higher wealth demographic. As a consequence, the persistent high unemployment, the weakness in the construction trades and the like is probably less relevant currently to what we’re seeing in leisure demand. But leisure demand is going to be more influenced by pricing and by consumer sentiment and those sorts of things. And as a consequence, we see it to be a little bit weaker but still pretty healthy on a y-over-y basis and are quite gratified by what we’ve seen so far.”
  • [Group bookings in] “Q2 were up anywhere from roughly 15% to roughly 20% depending on whether you’re looking at bookings for Q3 or Q4 or 2012 or 2013”
  • “Our incentive fee…increased without the DC, Middle East or Japan.  Incentive fees would have been up almost 22% in Q2. So you could see the effect that that had on percentage that we ended up reporting at 9%.”
  • “$30mm to $35mm is the total fees out of the Middle East last year.”
  • “Marriott brand is bigger than most of the full service brands. So we tend to have more suburban hotels; we’re probably going to tend to have more secondary market hotels. I know among our markets where we have disproportionate market share, we’ve got Detroit, we’ve got Atlanta, and we’ve got Washington DC.”

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