This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Marriott International Inc. (MAR) on February 14, 2008.
Management:
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EVP, CFO and President of Continental European Lodging: Arne Sorenson
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EVP Financial Information and Enterprise Risk Management: Carl Berquist
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SVP – IR: Laura Paugh
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Senior Director of IR: Betsy Dahm
Key Investors Issues
- Earnings were up 8% to $236 million or 62 cents a share.
- Management and franchise fee revenue rose 19% resulting in an 8% growth in revenue to $4.1 billion.
- Worldwide company-operated comparable REVPAR rose 7% to $124.
Full Year Highlights:
- Earnings were $1.6 billion or $1.89 a share, which is 15% higher than the prior year.
- Management and franchise fees were $1.4 billion, 17% higher than 2006.
- Worldwide system wide comparable RevPAR, using constant dollars increased 6.5%, and 7.6% with the impact of foreign exchange.
Fourth Quarter Highlights
Earnings were $236 million or 62 cents, up 8% from 2006 as RevPAR, margins were strong and lodging fees came in about 3 cents ahead of expectations.
- About 2 cents of the fee performance related to receipt of business interruption insurance proceeds, while the time share business outperformed expectations by 2 cents.
- General administrative and other expenses were about 2 cents higher than expected due to legal costs, while 3 cents was lost on a non-cash loan reserve on a hotel and a leveraged aircraft lease.
- Gains and other income totaled $20 million and included $10 million of gains on the sale of real estate, an $8 million gain from the sale of a stock investment and $2 million of preferred returns from joint venture investments and other income.
- Interest expense increased $21 million to $45 million, primarily due to higher interest rates and higher average borrowings, including $400 million of senior debt issued.
REVPAR for the comparable worldwide systemwide properties increased 8.1% while comparable worldwide company-operated properties experienced 9.2% REVPAR growth over the year ago quarter.
- North American REVPAR for the company’s comparable company-operated properties rose 6.2%, largely driven by a 5.6% increase in rate and a slight increase in occupancy to 70%
- International company-operated comparable REVPAR increased 15.5%, including a 13.9% increase in average daily rate and a 1.0 percentage point improvement in occupancy to 76%.
- Strong international economic growth continues to drive global travel.
The firm added 70 new properties (10,787 rooms) to its worldwide lodging portfolio, including 12 new hotels (2,697 rooms) outside the United States, as 13 properties (2,832 rooms) exited the system.
- The provision for loan losses totaled $17 million, reflecting a $12 million reserve for a loan at one property and a $5 million reserve for an aircraft leveraged lease.
- The firm repurchased 41 million shares of stock for nearly $1.8 billion, including 12 million shares for $462 million in the fourth quarter.
- About $900 million in capital was deployed which included capital expenditures, loan advances, net time share development, and equity and other investments.
- The firm recycled about $1.5 billion of investments, including dispositions of 13 properties, and interests in five joint venture hotels as well as note collections in sales and timeshare note sales.
Operational Insights:
- In 2007, the firm opened over 200 hotels and announced two new brand additions, a boutique brand designed by Ian Schrager, and a Nickelodeon family resort, bringing the brand portfolio to 19.
- It signed preliminary agreements on nine additional hotels after only six months of effort, and will likely have over 20 signed by the end of this year, in line with the target of more than 100 hotels worldwide within 10 years.
- New lobby designs were introduced at Renaissance, Marriott and Courtyard hotels, as well as a new look for guest rooms and lobbies in the Residence Inn, TownePlace Suites and SpringHill Suites brands.
A new sales and marketing approach was initiated, providing a level of service to group customers that competitors will be hard-pressed to match.
- The Marriott rewards is nearly 30-million member strong and provides a rich database to better understand and serve the most loyal and profitable trends in guests.
- At almost a fifth of all bookings, Marriott.com provides the most cost-effective way to provide that personalized touch.
- The firm was one of the first to open a global shared services centre for finance operations and is expanding human resources systems into a similar model to benefit associates.
- It also achieved another 4% reduction in energy usage in the US managed hotels in 2007, and named an EPA ENERGY STAR partner.
Segment Highlights:
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Marriott Revenues totaled $4.1 billion, an 8% increase from the same period in 2006.
- Base management and franchise fees rose 15% to $339 million as a result of REVPAR improvement and unit expansion.
- In addition, base management fees reflected $4 million in proceeds from business interruption insurance.
- Incentive management fees rose 31% to $126 million, driven by strong REVPAR, higher property-level house profit margins and $9 million of business interruption insurance proceeds.
A record 600 company-operated hotels earned incentive management fees, including 165 properties outside the United States.
