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OK quarter but the outlook is strong

“Results were terrific in the first quarter of 2012. There is tremendous strength in global travel today; travelers are on the road, attending meetings, making sales calls and taking family vacations."

-Arne M. Sorenson, president and CEO of Marriott International


  • Hotel room supply is estimated to grow by less than 1% in 2012.  Room supply is expected to stay low for the next few years, especially for full service hotels.  Financing is challenging, personal guarantees are often expected and lots of equity.
  • Expect a modest pull back of supply growth in China.  However, they still expect China to be one of the fastest growing market. They have 15% share of rooms under construction in Asia.
  • Have a big pipeline in India as well
  • In Europe, supply growth is also projected to be under 1%.  Their focus in Europe is mostly on conversions
  • International arrivals to MAR's US hotels is up 7%.  Brazil visitors up 16% and Chinese visitation was up 32%
  • RevPAR rose 9% in London
  • 2012 special events:
    • London Olympics
    • Paris conventions
    • Euro Soccer Championships
  • Attendance at group meetings is ahead of expectations
  • Ritz Carlton - demand from consultants and transient business is strong and had allowed them to push rate.  Have 24 Ritz hotels under development with 50% in Asia.
  • Higher group attendance and stronger last minute business helped their results in the Q
  • Systemwide RevPAR would have increased 6.5% this Q internationally if you include March results
  • Japan continues to improve. 
  • RevPAR in the Middle East declined 6%.  Expect easier comps as the year continues
  • Property level margins were helped by improved productivity
  • Improved profitability in Eastern Europe, Asia strength, helped drive incentive business
  • Sale of their Execustay - expected to close at the end of April.  $100MM of revenues in 2011 from this business. The results though are immaterial.
  • Autograph continues to gain momentum 
  • Seeing some construction delays in ME and Asia as well as some conversion delays since renovations need to be completed in advance of conversions
  • Higher transient expectations reflect stronger transient and group bookings, especially at smaller hotels
  • Much stronger results at leased hotels in London, Tokyo, and Anaheim are driving full-year estimates higher.


  • Normal growth in benefits and wages - sees 100-200bps in margins given their RevPAR expectations
  • The 11% number is (for group business) for Marriott brands.  What they see underneath that is 16-17% growth for group bookings at the smaller hotels and high single digit growth at the larger box convention hotels.  What that means is that smaller groups that require less lead-time are doing better than the very large conventions.  Government groups are the one area where they are cautious, especially in the quake of the GSA scandal
  • 20% growth in incentive fees is probably a good number for the full year, but it will vary Q to Q
  • Most of the the 11% group bookings increase is volume - only 2% is rate
  • Why didn't the higher RevPAR translate into higher fees this Q aside from the $3MM fee reversal?
    • Lower re-licensing fees - thinks that's more timing
    • Ancillary fees - grew 5% but not as good as RevPAR
  • Their appetite for acquisitions hasn't changed over the last few years.  They remain committed to being a management company.  Although, they have some flexibility to hold real estate for recycling purpose for select opportunities like Edition.
  • Europe first quarter results were comforting- came in around budgeted levels.  Much of that was driven by global gateway markets like London and Paris that benefit more from stronger international travel trends. They feel a little better for the balance of the year for Europe but are still cautious on rural UK, weak Spain, etc. Watching Germany, have very little exposure to Greece - only one hotel there.  In Russia and the East they are still seeing strength.
  • In the year for the year bookings came in stronger.  Also meeting attendance was higher than expected. They also had lower group cancellations in the quarter.  Combined, that led to better results in the quarter.  Think that better attendance and lower cancellations may be a trend for the rest of the year
  • They are guardedly encouraged by Europe's results in the Q and wouldn't be surprised with 0% RevPAR in that region
  • Diluted quarter end share count was 332MM basic shares plus 11MM of dilution = 343MM shares at Q end 
  • Base management fee $3MM reversal color?
    • Relative to the restructuring and the capital going into the hotel, MAR agreed to temporarily adjust down their fees
  • Think that China will continue to grow very robustly. It's in some of the biggest and most established markets, that residential development is slowing. Often times, those residential developments include a hotel.  They are a bit more cautious about deal signings in cities like Shanghai and Beijing. 
  • Board is more included towards share buybacks vs. dividends
  • They would gladly partner with development partners to develop their brands faster.  The Fairfield investment in India is just that.
  • They have already started talking to buyers for their Edition hotels under construction.  But they won't count on selling the hotels before they are open. London would be the easiest to sell since it's furthest along while NY is in the earliest stages so that wouldn't sell for a little while until all construction costs are nailed down.
  • Tokyo is coming along very strong vs. last year's very easy comp
  • Residence Inn has been the weakest brand, but given the longer stay at those, it tends to lag.  They have seen a bit of a shift from the Eastern US strength to Western US.  NY is actually doing well as is Philadelphia, as is Chicago and Boston.  Would not say though that this recovery has just been driven by key gateway markets, it's been pretty broad. 
  • Anticipate that the return of capital will be through buybacks and dividends, but if unique opportunities presented themselves that could change
  • Think that the current conditions in DC are only partly related to the Election year, but also has to do with budget cuts in the government and the Congressional calendar. They do expect DC to continue to stay weak. Post election, things should improve. Group bookings in 2013 look stronger than 2012.  The biggest threat to DC is a reduction in government in general.
  • Chinese NY timing isn't a factor for their results this quarter
  • They are seeing very marginal improvements in labor productivity. They are are in the middle of DC labor negotiations.


  • "Worldwide pipeline of hotels under construction, awaiting conversion or approved for development increased to approximately 115,000 rooms, including over 51,000 rooms outside North America"
  • "The company expects to add 25,000 to 30,000 rooms and expects 7,000 to 8,000 rooms to exit the system in 2012."
  • "Over 3,200 rooms opened during the quarter, including nearly 950 rooms converted from competitor brands and nearly 1,200 rooms in international markets.. Ten properties (2,487 rooms) exited the system during the quarter."
  • "Marriott repurchased 4.2 million shares of the company’s common stock for $150 million during the quarter. Year-to-date through April 17, 2012, the company repurchased 6.7 million shares for $245 million"
  • "Comparable Marriott Hotels & Resorts properties in North America, room revenue from negotiated special corporate business rose over 9% in the first quarter. Group room revenue at comparable hotels increased approximately 6%"
  • "At quarter-end, group room revenue bookings for North American comparable Marriott Hotels & Resorts properties for the remainder of 2012 are over 11% higher than for such bookings at the end of the 2011 first quarter"
  • "29 percent of worldwide company-managed hotels earned incentive management fees compared to 25 percent in the year-ago quarter."
  • Guidance:
    • Comparable systemwide WW, NA, and International RevPAR: 6-8% for 2012 and 2Q12
      • Up 1% from last quarter's guidance
    • Fee revenue: 2Q12: $345-355MM; 2012: $1,425-1,465MM
      • Up 1% from last quarter's guidance or $15MM 
      • Street's at $350MM for 2Q and $1,430MM for 2012
    • Owned, leased, corporate housing and other, net: 2Q12: $35-40MM; 2012: $140-145MM
      • Increased by $5-10MM from prior Q's guidance
    • Adjusted EBITDA: $1,105 - 1,160MM 
      • Increased EBITDA guidance by $10-25MM
      • Street's at $1,108MM for 2012
    • EPS: 2Q12: $0.39-$0.43; 2012: $1.58 to $1.69 
      • Raised EPS guidance 5-6 cents from last Q's guidance
      • Street's at $0.42 for 2Q and $1.58 for 2012