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Takeaway: Despite the beat, lodging demand is softening.

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance.



  • WORSE:  MAR’s outlook, while still bullish,  is "modestly" weaker, particularly on North America, relative to a few months ago. 



  • BETTER:  G&A came in $23MM below guidance.  There was a ~$4-5MM benefit from better cost controls, $5MM net benefit from a litigation settlement less higher legal expenses, and about a $12-15MM benefit from lower than anticipated workout costs.
  • PREVIOUSLY: “We expect general and administrative expenses will total roughly $155 million in the third quarter, largely related to normal inflation and costs associated with some property workout.”


  • LITTLE WORSE:  Incentive had their best Q of 2012 in 3Q, up 24% YoY.  YTD they are up 17%. Marriott did not revise full year guidance but did say that they expect less growth in YoY results for 4Q.  This implies that results will come in a little below 20% for the full year.
  • PREVIOUSLY: “I think we still expect in full-year 2012 that our incentive fees will be growing about 20%.”


  • SLIGHTLY WORSE:  Including the acquisition of Gaylord, which will add 8,100 rooms to the system in 4Q, MAR expects to open 28,000 rooms in 2012—basically just below the low end of prior guidance.
  • PREVIOUSLY: “We've also reduced our room opening expectations a bit for 2012. In the first quarter, we noted slippage in opening dates from 2012 to 2013 for some new hotels in Asia and the Middle East. In the second quarter, the slippage continued in these markets as well as with a few projects in Mexico. We continue to see a lot of conversion opportunities around the world but they too are taking a bit longer as some projects require more extensive renovation before flagging. As a result, today we expect to open 20,000 to 25,000 rooms in 2012. Since this reduction is largely timing”


  • LITTLE BETTER:  Marriott recognized $7MM of deferred fee base revenue vs. guidance of $5MM
  • PREVIOUSLY:  “With this transaction, Marriot expects to recognize about $5 million in fee revenue for deferred base fees”


  • SAME:  No change in their leverage targets
  • PREVIOUSLY: “We will continue to manage our leverage to 3 to 3.25 times debt-to-EBITDA. So that's what we are targeting for.”



  • SAME:  Group revenue rose 8% in 3Q for comparable properties
  • PREVIOUSLY: “In North America, year-to-date the Marriott brand's special corporate revenue has been strong, up over 8%; group revenue rose 7% year-to-date and group bookings for the second half are even stronger.”


  • SAME:  While government per diems will stay flat in 2013, Marriott expects to substitute much of this business with better mix.  MAR expects DC REVPAR to grow at a mid-single digit rate in 2013.
  • PREVIOUSLY: “Here there is good news; interest in the upcoming election is starting to drive political business to the city. Group revenue bookings in DC for the Marriott brand are up 10% for the second half of 2012 and 16% for 2013. 2013 should be a good year overall in this market but we'll have to see how government demand shakes out. Next year's government per diems will be set this August and we will be watching this carefully.”


  • SLIGHTLY WORSE:  Group revenues on the books for 2013 for the Marriott brand in North America are up over 7% with rates up nearly 4%.  Marriott also said bookings in 3Q for the next twelve months were down 5% but up 10% for business two years out since they are running out of capacity.  Marriott reiterated that they are particularly bullish on North America and expect NA systemwide RevPAR of 5-7% in 2013.  Special corporate rate negotiations are still on pace for high-single digit increases. 
  • PREVIOUSLY: “Looking ahead for the second half of the year, group booking pace is up 10%, and 2013 booking pace is up 8%.  We are very bullish about pricing in North America in 2013. For group business on the books for next year, room rates are running up 4%. On the transient side, we are targeting price increases for special corporate business at a high single-digit rate on average.”



  • SAME: Middle East RevPAR was strong in 3Q on the back of easy comps and good results at their Red Sea resorts.  4Q is expected to be healthy at mid-to-high single digit increases but moderate from 3Q levels.
  • PREVIOUSLY: Occupancies at our hotels in the Middle East improved compared to last year's Arab spring results. However, travel wholesalers still aren't jumping back into the market. So, we are likely to continue to see volatility here for a while longer… Middle East ought to be performing reasonably well as the year goes along.”


  • BETTER: European RevPAR increased 3.8% in 3Q and is expected to increase in the low single-digit range in 4Q
  • PREVIOUSLY: “We would think Europe will continue to tick along around of that 3% sort of number. Q3 maybe a bit better because of the Olympics and Q4 maybe a bit worse because we don't have anything like the Olympics, which is likely to help Q4, but still kind of the same rates that we've seen.”


  • SAME:  China has been relatively stable since last quarter’s guidance
    • “Growth in China moderated in the second quarter but continued to deliver outstanding performance, with constant dollar REVPAR up 8%.”
    • “China, we've been… 10 or above year-to-date, I suspect the right set of expectations would be as high single-digit as opposed to a double-digit growth rate for the balance of the year reflecting – probably a somewhat more modest growth rate there.”