MAR YOUTUBE

In preparation for MAR's Q2 earnings release we've put together some forward looking commentary from the company's Q1 and subsequent conferences.

POST 1Q2010 CONFERENCE QUOTES 

• “Well, we’ve just closed our period 5, which is largely coincident with the month of May, where we saw RevPAR up for our managed portfolio in the United States by about 9%, and for the first time in two years, we saw rate growth of one point.” 
• “Now for our second quarter, which would include that period 5, but also period 4, which was largely the month of April; I apologize for the complexity around our calendar, which is historic. But also then one more period after that, we’ve now got two quarters in the books and our North American managed RevPAR is plus 7.3% and rate is zero. So the fourth period would have been down a little and the fifth period up. Those are good numbers, and obviously to us, give confirmation that the recovery is well underway in the lodging space and it sure feels a lot better than it did a year ago.”
• “Well, right now we earn about 25% of our fees from outside the U.S. with Asia probably being about a third of that.”
• “I’ve never bragged in the past about market concentration because I’ve never had it before with the dramatic decline in incentive fees that we’ve had in the last three years, but today we have a lot of market concentration in both New York, Washington and the Florida resorts. They probably account for two-thirds of our incentive fees. So the incentive fees today are very much driven by international hotels, international RevPAR, international unit additions, and then RevPAR growth in those particular markets.”

1Q2010 CONF CALL

• “In January and February, North American REVPAR demonstrated solid improvement from recent trends, but March was even better.  For example, for the Marriott brand in North America, company-operated hotel REVPAR declined 8.5% in the first period, declined 3.1% in the second period, and rose 7.1% in the third period.  And Ritz-Carlton is ramping even better with their January down 2.4%, February up 7.6% and March, which is in our second fiscal quarter, up 15.7%.”
• “For the Marriott brand, group business also showed dramatic improvement late in the quarter, largely due to better attendance. Group room nights increased 1% in the first quarter, but then increased 10% in period three. While corporate business remains soft, association meeting attendance took off. Association room nights increased 15% for the quarter and rose 50% in our third period.”
• “Hotels are benefiting from stronger corporate transient business, increasing sales of suites, club level and other premium rooms and rising pricings at a few hotels. The recovery is clearly occurring faster than we anticipated.”
• “Our booking window is extremely short, which makes forecasting particularly difficult. Hotel demand is highly correlated to the economy, albeit with some delay, and we still have concern about the economy as unemployment is high.”
• “This year, I think the incentive management fee growth that we anticipate is going to largely be from hotels that are paying incentive fees now and we'll grow in what we earn from them with strengthening REVPAR, and house profits and the international growth, particularly including the unit growth that we've added outside the United States over the last number of years. The hotels that are not paying and are materially short of their owner’s priority in the U.S., again, that's going to be a little stickier. It’ll be a little longer coming back, but ultimately, we look forward to all of those rooms getting back to their fee contribution that they saw at the last peak.”
• “We are not incentivizing people to take the financing. Thus our financing propensity is down in the low 40s, I believe, for the quarter. And that compares to a couple of years ago with as high as 75% to 80% when we did incentivize people.”
• [Comment on guidance] “Year-over-year, it puts you at about, with incentive fees, up modestly say 5% to 10%.”

2Q 2010 Guidance:

• “We expect REVPAR to remain strong. We believe system-wide hotels in North America will increase REVPAR by 4% to 6%. International hotels should increase system-wide REVPAR by 8% to 10% on a constant dollar basis. And worldwide REVPAR should grow by 5% to 7%.”
• Total fee revenue of $275 million to $285 million”
• “For the Timeshare business…, we expect …contract sales to total $175 million to $185 million and anticipate Timeshare sales and services, net of direct expenses, to total roughly $40 million to $45 million. Given this, Timeshare segment earnings should total $20 million to $25 million.”
• “G&A expenses are expected to total approximately $150 million, a 10% increase over adjusted 2009 levels. In last year's second quarter, G&A benefited from a reversal of $8 million dollars in incentive compensation as we eliminated bonuses for executives for the year.
• We expect …EPS at about $0.25 to $0.29 per share.”

2010 Guidance:

• “We believe REVPAR for system-wide hotels in a North America will increase by 3% to 6% with higher pricing in sight. REVPAR for international hotels should increase by 4% to 7% on a constant dollar basis and global REVPAR should increase by 3% to 6% on a constant dollar basis.”
• “With unit growth of 25,000 to 30,000 rooms in 2010… fee revenue could total $1.145 billion to $1.175 billion. This fee outlook is $55 million to $65 million higher than the guidance we provided in February.”
• “Our Timeshare business is also expected to improve year-over-year, with stronger contract sales and higher closing efficiency. Realized prices of our North America one-week intervals are expected to move modestly higher year-over-year.”
• “Our overhead remains well under control and we look forward to significant operating leverage as demand continues to improve. Over half of our Timeshare customers are paying cash for their one-week interval, so our 2010 securitization will likely be smaller than in years past. We expect to sell notes in 2010, although the timing and amounts of such deals will depend on our sales pace. At present, we would expect only one note sale in 2010, probably in the fourth quarter.”
• “We expect the Timeshare business could generate $185 million to $195 million on the Timeshare sales and services net line in 2010, and $95 million to $105 million for Timeshare segment earnings.”
• “We expect Marriott’s general and administrative and other expenses to increase to $650 million to $660 million in 2010. Compared to last quarter’s forecast, our higher G&A estimate is largely related to higher incentive compensation associated with a stronger operating result.”
• We believe earnings per share total $0.95 to $1.05 in 2010. Our fully diluted share count in the first quarter was 373 million shares and we've assumed 378 million shares for our full year 2010 guidance. This increase in diluted shares is largely due to the impact of a rising stock price and to a lesser extent, to an increase in anticipated stock option exercises. We expect higher than normal exercises this year, due to the expiration of options on about 5 million shares in October 2010 and February 2011. As a result, we’re likely to see more Form 4 filings in this year, more than what is typical.”
• “Excluding the impact on consolidated timeshare securitization, we expect to reduce debt by another $400 million to $500 million in 2010.”
• “We are focused on selecting value-added investments to accelerate our growth. We expect to invest approximately $500 million for capital spending, loans and equity slivers in 2010.”
• “EBITDA is expected to total approximately $985 million to $1.04 billion this year. The changing Timeshare accounting rules would have increased 2010 adjusted EBITDA by about $75 million. So even adjusting for this value, we're still expecting a modest increase in EBITDA in '10.”