Marriott narrows loss after travel uptick

Host Marriott, the largest U.S. upscale hotel owner, Wednesday narrowed its net loss after preferred dividends, helped by an uptick in travel.
The Bethesda, Maryland, company also forecast an increase in room revenue for the rest of the year, as more travelers continue to drive room rates and occupancy higher.

Host, which owns Marriott, Ritz-Carlton, Hyatt and other hotel brands, said it expects to pay a second-quarter dividend of 9 to 10 cents a share, up from its current 8 cents a share.

Funds from operations, a key measure of performance for real estate investment trusts, were 23 cents a share, excluding a 4 cent charge for refinancing debt. On that basis, analysts were expecting 22 cents a share. The company narrowed its loss to $2 million, or 1 cent a share, despite an $8 million preferred dividend payment, compared with a year-earlier loss of $40 million, or 12 cents a share. Analysts had expected a profit of 7 cents a share, according to Reuters Estimates. Revenue rose 5.3% to $818 million, but fell shy of Wall Street estimates of $867.7 million. Host Marriott shares edged down 2 cents to $16.77 on the New York Stock Exchange early Wednesday afternoon. Host completed the $92 million sale of 85% of its interest in a Courtyard by Marriott joint venture in the second quarter. The company on Wednesday said the sale will result in a second-quarter gain of about $42 million. The hotel owner also sold some non-core hotels in the first quarter. "Anticipate potential acquisitions in coming quarters with proceeds and cash on hand," Deutsche Bank Marc Falcone said. Chief Executive Christopher Nassetta said the company was looking at some acquisition possibilities, and has a "reasonably good pipeline of opportunities," but refused to give any further details. The hotel owner also sold some non-core hotels in the first quarter. "Anticipate potential acquisitions in coming quarters with proceeds and cash on hand," Deutsche Bank Marc Falcone said.

The hotel owner also sold some non-core hotels in the first quarter. "Anticipate potential acquisitions in coming quarters with proceeds and cash on hand," Deutsche Bank Marc Falcone said.

Chief Executive Christopher Nassetta said the company was looking at some acquisition possibilities, and has a "reasonably good pipeline of opportunities," but refused to give any further details.

Bear Stearns analyst Joe Greff said he maintains his "outperform" rating on the stock partly because Host properties are concentrated in major urban and resort markets with large exposure to convention crowds. Greff also said the possibility of an increased dividend makes the stock attractive.

Revenue per available room, a key measure of health in the lodging industry, rose 7.6% at hotels open at least a year, driven by "significant increases" in room rates, Nassetta said. "We are confident that we can build on this early momentum and that operating results will continue to improve for the remainder of the year."

Revenue per room — a combination of occupancy and room rates — will rise 8 to 10% in the second quarter and 7% to 9% in the full year, the company said. Nassetta said about three-fourths of that gain will be driven by occupancy.

Convention calendars in markets such as Atlanta, San Diego and San Francisco are shaping up to be stronger in 2006, Host Marriott Chief Executive Christopher Nassetta told analysts on a conference call.

Room rates will continue to rise, he said, adding that 2006 or 2007 will be Host's "best year from a cash flow and bottom line point of view."

The largest hotel real estate investment trust also said it expects earnings of 20 cents to 22 cents a share for the second quarter and 23 cents to 32 cents for the full year.

Host expects funds from operations of 29 cents to 30 cents a share in the second quarter and $1.01 to $1.09 a share for the full year.

Source: http://www.usatoday.com/ - Reuters