- The Washington Times - Monday, February 18, 2002

Shares of Marriott International Inc. remained steady last week despite an announced $116 million fourth-quarter loss by the company.
Some analysts say the stock's resiliency may be the result of a belief that the hotel industry will soon rebound from its post-September 11 slump. Others say it will be some time before Marriott, a global hospitality chain and owner of the Ritz-Carlton, Fairfield Inn and other popular hotel chains, recovers.
Shares of the Bethesda company closed at $38.08 on the New York Stock Exchange Friday, after climbing $2.46 to hit $39.36 on Wednesday.
The hotel industry was hit hard by the September 11 attacks and the recession, which caused the first drop in international travel since 1982. Marriott spent $271 million in the fourth quarter to cut jobs, close offices and cancel hotel projects. The company's revenue per room fell 25 percent from the same quarter a year earlier.
The company announced last week that it took $85 million in write-downs of "off-balance sheet" loans to developers. The company had $1.15 billion off-balance sheet items at the end of the year. No more write-downs are expected, says Marriott's chief financial officer, Arne Sorin.
"We are very optomistic about the long-term prospects of our lodging business," says J.W. Marriott Jr., the company's chairman and chief executive officer. "With a recovering economy, industry demand growth is expected to exceed supply growth by 2003. Meanwhile, the advantages of Marriott's strong brands have never been apparent."
Analysts agree that the familiarity of the Marriott name may have saved the company from further post-September 11 damage many had thought revenue per room would decline as much as 35 percent but point out that the stock prices of familiar competitors have rebounded more quickly. While Marriott's shares have increased about 18 percent, shares of Starwood Hotels and Resorts Worldwide, Inc. have rebounded 63 percent and shares of Hilton Hotel Corp. are now above pre-September 11 levels.
Also, analysts say Marriott's practice of managing and franchising hotels puts it at a disadvantage compared to its competitors. While it is less vulnerable to profit decline when earnings from its hotels fall, the potential for profits when travel rebounds is not as great. Marriott owns 11 hotels, while Hilton and Starwood own 78 and 157, respectively.
Last week, one analyst downgraded Marriott's stock from "strong buy" to "buy," noting a decline in hotel development.
"The downgrade is not a reflection on our view of the quality of the company but instead reflects our belief that managers/franchisers such as Marriott tend to benefit the most during periods of accelerating hotel construction growth a period which we are not currently in," writes Merrill Lynch analyst David Anders in a research comment.
Marriott's development pipeline declined from 70,000 rooms in the second financial quarter of last year to 55,000 in the fourth quarter.
There is some hope that the hotel industry is recovering. Smith Travel Research said last week that revenue per room for the week ending Feb. 2 fell by the second slowest pace since September 11.
Marriott says it expects to earn 26 cents per share for the first quarter of 2002, compared to analysts' estimates of 28 cents.

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