Marriott International Inc. (MAR) reduced its worldwide systemwide revenue per available room (RevPAR) guidance for the first quarter of 2011 based on lower-than-expected demand from North America. Management at present expects system-wide RevPAR to increase approximately 7% at the low end of the company’s previous guidance range of 7 to 9%.

While the hotelier remains optimistic on the robust demand from the overseas market, it witnessed that the growth in RevPAR from North America remained sluggish, especially in larger group of hotel markets including New York, Atlanta, Orlando and Washington, D.C.

However, on a year-over-year basis, North America continues to register growth. In the recently concluded fourth quarter, international company-operated RevPAR climbed 10.1% year over year (up 7.9% on a constant-dollar basis) coupled with a 3.9% hike in average daily rate (inched up 1.8% using constant dollars). RevPAR was strongest in the Chinese region with a rise of 33.0%.

As per management, approximately 65% of the company’s incentive fees were derived from international properties. Marriott now expects international systemwide to rise 11% in constant dollars in the first quarter of 2011 whereas North American systemwide RevPAR growth is anticipated to be around 5-6%.

Marriott’s management reiterates the company’s diluted earnings per share guidance for the first quarter in the range of 24–28 cents per share.

Marriott’s closest competitor, Starwood Hotels & Resorts Worldwide Inc. (HOT), expects its first-quarter 2011 earnings to be within 22–26 cents, with a RevPAR increasing at 8% to 10% in constant dollars. Even for Starwood, international demand remained strong as evident from its fourth-quarter 2010 metrics.

In the fourth quarter, system-wide RevPAR for same-store hotels increased 10.0% (10.3% in constant dollars) year over year whereas in North America it surged 10.2% (9.7% in constant dollars). RevPAR in Asia-Pacific and Latin America registered a strong growth, accelerating 20.3% (15.1% in constant dollars) and 17.2% (same in constant dollars), respectively.

We believe Marriott will face stiff competition from its peers also in international business. Starwood boasts of a sturdy international exposure compared with many of its peers. Over 80% of Starwood’s 85,000 room pipeline will be built in international markets.

Hence, Marriott currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also maintain our long-term Neutral recommendation on the stock.

 
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