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Company: Marriott International (MAR)
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7 votes

  U.S. economic slowdown hits hotel earnings and outlook

The hotel chain predicted that Q2 earnings would fall 24% to $157 million, or $0.42 per share. Excluding costs for a tax provision, earnings were $0.51 per share, actually better than the Street consensus of $0.49 per share.

However, the company cut its full-year earnings expectations, which greatly disappointed investors. It is the second time this year Marriott has lowered its guidance. The company now expects to earn $1.77-1.88 in 2008, down from the previous forecast of $1.98-2.08. Management blames weak numbers on the slow U.S. market, where revenue per available room (Revpar) may fall 1% this year. Like its peers, Marriott has experienced a drop in occupancy in the U.S. as record high gas prices and a broad economic slowdown reduce travel demand. Another concern for the lodging industry is its reliance on the U.S. airlines – an ongoing decline in airline capacity could mean trouble for the hotels. One research firm said that a 1% drop in seats available for passengers could result in a 0.39% decline in hotel demand.

These challenges have resulted in Marriott cautioning for “soft U.S. lodging demand to persist into 2009.”

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3 votes

  Big expansion plans in slumping economy

Marriott has big expansion plans for the four years starting in 2009 - the company plans to open 130 hotels during the period with about half built in emerging markets like China, India and the United Arab Emirates.[1] The expansion would add 32,000 rooms to Marriott's capacity. Unfortunately, a slumping world economy makes these plans seem like a recipe for disaster; with Premier Wen Jiabao predicting 2009 to be "the most difficult year for China's economic development since the beginning of the 21st century,"[2] it seems unlikely that Marriott will capture the big revenues it expected from its new hotels.

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