Marriott Plans Overseas Expansion As Earnings Rise

Marriott International yesterday detailed a plan to add 85,000 to 100,000 hotel rooms worldwide within the next three years. Overall, this plan represents a 5 percent to 6 percent compound growth annually, and the growth will focus strongly on international properties.

The chain revealed its expansion plans as part of its third-quarter earnings announcement, which showed strong growth in room rates and revenue in a performance that is expected to set the tone for other hotel companies.

Marriott expects to add more than 30,000 new hotel rooms outside of North America, which would be an increase of more than 30 percent by 2009. Additionally, as much as 60 percent of additions to Marriott's full-service brands will come outside of the United States and Canada.

The chain also said it would open 50 midprice Courtyard by Marriott properties in Europe during that time. "Courtyard is a brand with great global promise in North America, Europe, Asia and Latin America," said Marriott president and COO William Shaw. "We have 67 Courtyards already open outside North America, and between now and the end of 2009, Courtyard's expansion should nearly double the number of units in those markets."

With this plan, Marriott expects to increase its overall marketshare outside of the United States, which it currently reports at less than 1 percent.

Marriott's third-quarter financial performance beat analysts' expectations, and its revenue per available room was slightly above the 6 percent to 8 percent overall guidance issued by JPMorgan Securities' U.S. Equity Research earlier this month. Other hotel companies, including Hilton, will announce their quarterly results next week.

Average daily rates for Marriott increased 9.1 percent compared with the same quarter last year, and revenue per available room was up 9.4 percent, according to Marriott. The company added 38 new properties, accounting for 6,281 rooms, during the quarter. Net income actually was down 5.4 percent, but that stemmed from Marriott's exit from the synthetic-fuel business earlier this year, and lodging revenue was able to offset the $92 million decline in synthetic fuel revenues.

Although the industry is showing no sign of weakness, Smith Travel Research president Mark Lomanno said in a recent conference call to investors that there has been a slight slowing of the rise of RevPAR during the past few months. That is not good news for travel buyers looking for an edge in negotiations, however.

"The pricing seems to be holding up pretty firmly in most of the segments, particularly in the high-end segments," Lomanno said. "What's changed the dynamics a little bit is somewhat of a weaker demand than we anticipated."

Year-over-year demand growth comparisons are skewed somewhat by the impact of Hurricane Katrina and subsequent Gulf hurricanes last year, he said. Overall, the industry remains strong with higher-end and luxury hotels getting good pricing and upper upscale properties slightly weaker, he said.

Lomanno expects supply and demand lines to cross in the fourth quarter of 2007. He predicted about a 1.7 percent to 1.8 percent growth in supply, with a majority of construction within the upscale and midprice without food and beverage categories.