Marriott International has reported third quarter 2014 results with net income totalling $192 million, a 20 percent increase over third quarter 2013 net income. Diluted earnings per share (EPS) totalled $0.65, a 25 percent increase from diluted EPS in the year-ago quarter.
RevPAR rose 8.1 per cent, average daily rate rose 4.5 per cent, development pipeline increased to 225,000 rooms, with a record 700,000 rooms operating worldwide.
Highlights
- Third quarter diluted EPS totalled $0.65, a 25 percent increase over prior year results;
- North American comparable systemwide RevPAR rose 8.7 percent in the third quarter with average daily rates up 5.0 percent;
- On a constant dollar basis, worldwide comparable systemwide RevPAR rose 8.1 percent in the third quarter, including a 4.5 percent increase in average daily rate;
- Marriott repurchased 4.5 million shares of the company’s common stock for $300 million during the third quarter. To date in October, the company repurchased 3.9 million shares for $254 million. Year-to-date, the company repurchased 20.4 million shares for $1.2 billion;
- Comparable company-operated house profit margins increased 240 basis points in North America and 200 basis points worldwide in the third quarter;
- Adjusted for cost reimbursements, the company’s operating income margin increased to 43 percent compared to 41 percent in the year-ago quarter;
- At the end of the third quarter, the company’s worldwide development pipeline increased to nearly 225,000 rooms, including approximately 37,000 rooms approved, but not yet subject to signed contracts;
- Nearly 6,900 rooms were added during the third quarter, including over 2,200 rooms in international markets. At quarter-end, Marriott operated or franchised over 700,000 rooms worldwide;
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totalled $393 million in the quarter, a 19 percent increase over third quarter 2013 adjusted EBITDA.
Outperformance compared to guidance
Arne M. Sorenson, president and chief executive officer of Marriott International commented:
“We were very pleased with results in the quarter. Our outperformance compared to the guidance we provided in July was largely due to stronger than expected RevPAR and margin growth. North American systemwide RevPAR rose nearly 9 percent and occupancy reached an extraordinary 77.6 percent while room rates rose 5 percent. Group demand was particularly strong with significant last minute bookings and high attendance. With the addition of greater corporate and leisure demand, room rates surged to record levels in many North American markets. Worldwide systemwide RevPAR increased more than 8 percent.
“Our development pipeline grew to nearly 225,000 rooms, approximately 40 percent of which are under construction. We’re on a record-setting pace for room signings with 80,000 to 90,000 room signings expected during 2014. Our portfolio of luxury and lifestyle brands continues to grow in response to terrific guest feedback and great demand by owners and developers around the world. We opened our first Moxy hotel in Milan in September. We expect to introduce the AC Hotels brand to the U.S. in November when the first property opens in New Orleans. Our newest EDITION hotel also arrives in the U.S. next month with the opening of the Miami EDITION and Residences.
“For 2015, we expect North American systemwide RevPAR to increase 5 to 7 percent, 4 to 6 percent outside North America and 5 to 7 percent worldwide. Our group booking pace for the Marriott brand for 2015 is up at a mid-single digit rate with only about 60 percent of expected group business volume booked thus far. With continued North American demand growth expected in 2015, we believe both group and transient room rates will continue to strengthen. And, given our strong development pipeline, we anticipate 6 to 7 percent worldwide gross room additions in 2015.”
Outlook
For the 2014 fourth quarter, the company expects comparable systemwide RevPAR on a constant dollar basis will increase 5 to 7 percent in North America, 4 to 6 percent outside North America and 5 to 7 percent worldwide.
The company anticipates gross room additions of 7 percent worldwide for the full year 2014 including the 10,016 rooms associated with the Protea acquisition. Net of deletions, the company expects its portfolio of rooms will increase by approximately 6 percent in 2014.
The company assumes full year fee revenue could total $1,714 million to $1,724 million, growth of 11 to 12 percent over 2013 fee revenue of $1,543 million.
For 2014, the company anticipates general, administrative and other expenses will total $654 million to $659 million, up 1 to 2 percent compared to 2013 expenses of $649 million.
Given these assumptions, 2014 diluted EPS could total $2.48 to $2.52, a 24 to 26 percent increase year-over-year. This full year EPS outlook includes the $0.07 of unfavorable adjustments reported in the second quarter.
Fourth Quarter 2014 | Full Year 2014 | |
Total fee revenue | $425 million to $435 million | $1,714 million to $1,724 million |
Owned, leased and other revenue, net of direct expenses | Approx. $65 million | Approx. $239 million |
Depreciation, amortization, and other expenses | Approx. $30 million | Approx. $146 million |
General, administrative, and other expenses | $175 million to $180 million | $654 million to $659 million |
Operating income | $280 million to $295 million | $1,148 million to $1,163 million |
Gains and other income | Approx. $3 million | Approx. $7 million |
Net interest expense1 | Approx. $20 million | Approx. $92 million |
Equity in earnings (losses) | Approx. $(2) million | Approx. $4 million |
Earnings per share | $0.62 to $0.66 | $2.48 to $2.52 |
Tax rate | 32.5 percent |
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