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.”
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. 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," it seems unlikely that Marriott will capture the big revenues it expected from its new hotels.