- The Washington Times - Monday, April 23, 2001

Marriott International Inc. by boosting room rates posted higher income and sales in the first quarter.

Marriott, the biggest U.S. hotel chain, said last week that its first-quarter income rose 29 percent to $121 million from $94 million a year ago. Meanwhile, sales also went up, by 13 percent, to $2.44 billion (47 cents per diluted share) from $2.17 billion (37 cents) the year before. Diluted shares reflect the value of options, warrants and other securities convertible into common stock.

The news prompted Marriott's shares to rise a bit, going over $40. The stock has traded between about $30 and under $50 for a year. It closed at $44.60 on the New York Stock Exchange on Friday.

Average room occupancy for Marriott's U.S. properties dropped 2 percent to 72.9 percent compared to a year ago, as companies cut back on travel spending, the company said last week.

But at the same time the chain's revpar revenue per available room rose 2.5 percent. Industry wide, revpar rose rose by 5.7 percent, reflecting slower growth in the U.S. economy, analysts say.

Yet Europe's hotel industry continues to boom, with revpar rising by 20 percent this year. This has prompted American chains to increasingly invest on the continent, analysts say.

Marriott said earlier this month that it will add 35,000 hotel rooms in Europe by 2003, mostly by renovating existing hotels. And it will spend about $100 million on new room development in Europe.

At the same time, British newspapers reported that Marriott is bidding for Le Meridien, a European chain that would bring it 146 new properties on the continent. Marriott officials would not confirm or deny the report.

"It's our company policy not to comment on market speculation," says Marriott spokesman Nick Hill.

Chains run only about 20 percent of Europe's 6 million rooms, about the same percentage as in the United States until the late 1980s. Since then, large companies like Marriott have aggressively grabbed market share, and today they run about 80 percent of the hotels in the United States.

Marriott has doubled its presence domestically to nearly 8 percent since 1997. Abroad the chain says it is growing even faster, running about tenfold more hotels today than in 1990.

"I think the company is one of the better hotel companies because of their business model," says Marie Driscoll, analyst with Argus Research in New York. "They have great brands, and their model of being a manager or a franchiser puts their earnings in less jeopardy than someone who outright owns the real estate."

Nevertheless Ms. Driscoll rates the stock a hold.

"I'm just a little concerned about occupancy," she says. "They are making it up in the rates they charge per room. But if occupancy drops there could be pricing pressure as well."

Another analyst, William Crow from New York's Raymond James & Associates, does not share the worry and rates the stock a buy.

"Historically Marriott has been a great investment, and as of late it's been performing in line with the rest of the lodging group," he says. "Year to date [the Marriott stock] has been flat or down a couple of percent, which is far better than how the broader stock market has performed."



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