Marriott Swings to $10 Million Loss, Sees Continued Weakness for Year
From this morning's wall street journal. shouldn't get too worried about your points, worry about them keeping the system going.
By MIKE BARRIS
Marriott International Inc. swung to a fourth-quarter loss on restructuring charges as the company projected continued weakness this year.
It sees earnings of 13 cents to 15 cents a share amid a 17% drop in revenue per available room at company-operated hotels in North America.
For the year, earnings are seen between 86 cents and $1.04 a share on double-digit revpar declines in North America, though Marriott admitted it "cannot forecast results with any certainty."
Marriott also expects to slash capital spending by more than one-third from 2008's $950 million.
The hotel sector continues to be hammered by steep cuts in airline capacity, a pullback in consumer spending and waning corporate travel. Analysts have warned in the past that the hotel industry might not recover until 2011. Marriott's dour results come on the heels of weak reports and outlooks from rivals such as Starwood Hotels & Resorts Worldwide Inc. and Choice Hotels International Inc.
Marriott reported a net loss of $10 million, or 3 cents a share, compared with year-earlier net income of $176 million, or 46 cents a share. Excluding restructuring charges and other itmes, earnings fell to 34 cents.
Marriott's latest forecast -- from October -- was for earnings of 44 cents to 50 cents.
Revenue fell 7.5% to $3.78 billion even with the latest quarter including an extra week than a year earlier.
Marriott was one of the few major hotel companies to leave its fourth-quarter earnings forecast unchanged since its third-quarter report, despite business conditions subsequently taking a turn for the worse.
Its view had assumed world-wide revenue per available room falling 1% to 3%, including a 3% to 5% drop in North America. The results ended up being down 8.4% and 8.3%, respectively.
The bottom line was weighed down by the timeshare segment, which swung to a $2 million loss as revenue slumped 28% amid continued consumer skittishness about buying real estate.
The woes come as Fitch Ratings said last week that monthly defaults on timeshare loans hit an all-time high in December. Marriott, Starwood and other big hospitality companies consistently reaped big profits in the past by financing timeshare purchases amid strong consumer demand. But the lockdown in credit markets and pullback in consumer spending prompted developers to scale back plans for new projects.
What's ~not~ reported in the WSJ article is more optimistic than grim, actually. The author of the post prefaces by saying, "shouldn't get too worried about your points, worry about them keeping the system going."
Marriott Vacation Club International sustained a $2M loss in Sales, but that is a partial metric. The number is small enough to be offset by reducing capital expenses, headcount, administration and other non-owner facing services. The number of timeshare owners grew from 350,000 to 390,000 over 2008. Many owners own multiple weeks of timeshare. At a rough average of $1000/per week in maintenance fees, that's alot of revenue that is essential to keeping the "system" going.
The question therefore is what percentage of maintenance fees remain uncollected? That number has yet to be reported. Anecdotally, the % uncollected maintenance as of January 2009 is off by less than 1% January 2008 at the properties I am able to track. Similarly, Vacation Club occupancy is strong especially in Florida and South Carolina markets. Timeshare owners are able to avoid the additional expenses incurred by flying and car rental favoring a road trip.