Marriott International Inc. on Thursday said quarterly profit rose 25 percent as strong demand allowed it to increase room rates, and the top U.S. hotel operator raised its earnings forecast for 2006.
The company expects earnings to come in about 8 cents a share higher than it had anticipated as it sells more assets this year, spokeswoman Laura Paugh said.
The hotelier operates an asset-light business model --where it manages hotels, but does not necessarily own them. It has continued to sell properties and retain management contracts.
In 2005, the company said it gained $34 million from the sale of real estate. Arne Sorenson, chief financial officer, said in a conference call that the company expects asset sales of about $1 billion in 2006.
Fourth-quarter net income rose 25 percent to $237 million, or $1.07 per share, from $189 million, or 79 cents a share, a year earlier. Analysts on average were expecting 98 cents per share, according to Reuters Estimates.
“The core operations seem to be doing well,” Robert LaFleur, an analyst at Susquehanna Financial Group said, adding that the company’s operating earnings were in line with his expectations.
David Katz, an analyst at CIBC World Markets, wrote in a research note that quarterly results also benefited from Marriott’s ongoing share repurchase program and other gains such as the sale of assets and equity interest in joint ventures.
Strong demand
The Bethesda, Maryland-based company, whose brands include Ritz-Carlton and Courtyard as well as Marriott, has benefited from strong demand and limited growth in supply.
Hoteliers have been able to raise room rates as occupancy levels increase and renovations and service improvements make for happier guests -- allowing them to charge more.
Revenue increased 16 percent to $3.6 billion, topping the analysts’ average estimate of $3.42 billion.
Revenue per available room, a key measure of the industry’s health, rose 11.2 percent at all of Marriott’s comparable properties.
Looking ahead, the company said it expected North American company-operated revenue per available room to increase 8 percent to 10 percent in 2006.
The company said it had suspended production at its four synthetic fuel facilities in mid-January, citing higher fuel prices and uncertainty about tax credits.
Without the impact of its synthetic fuel business, Marriott said it expected earnings per share of 67 cents to 73 cents in the first quarter and between $2.95 and $3.05 for the full year. Further excluding the impact of accounting changes, it forecast earnings between $3.08 and $3.18 for 2006.
Marriott said it had repurchased 26 million shares in 2005, and the remaining share buyback authorization totaled about 17.9 million at the end of the year.
“We expect to remain aggressive buyers of our stock in 2006,” Sorenson said.