The hotel business is competitive, but Marriott International (MAR 0.32%) has been an international leader in the industry for a long time. With the company having finished its merger with Starwood Hotels & Resorts in late September, Marriott just finished its first full quarter with the combined business. Coming into Wednesday's fourth-quarter financial report, Marriott investors fully expected the company to see huge sales gains reflecting the combination, but they also wanted to see solid earnings growth as well. Marriott exceeded expectations with its results, and it's optimistic about the coming year.
Let's take a closer look at Marriott to see how it did and what's ahead for the hotelier going forward.
Image source: Marriott.
Marriott and Starwood come together
Marriott's fourth-quarter results showed the impact that the merger has had on the hotel company. GAAP revenue jumped 47% to $5.46 billion, which was well above the $4.96 billion consensus figure among those following the stock. Adjusted net income of $334 million was up 15% from year-ago levels, and the resulting $0.85 per share in adjusted earnings was up by a fifth and topped what investors had expected to see by $0.01 per share.
Turning to some key operational metrics, Marriott said that its North American comparable systemwide revenue per available room rose 1.1% on a constant-dollar basis, which was slightly ahead of the 0.8% comparable RevPAR increase that Marriott saw across its entire portfolio worldwide. Incentive management fees were down slightly during the quarter, but a 5% rise in base management and franchise fees helped pull Marriott's top line upward. Moreover, total fee revenue of $713 million was above what Marriott had projected last quarter.
Marriott continued to see sizable increases to its network. The company added 116 new properties to its lodging portfolio during the quarter, boosting its total room count by more than 22,000. Just 10 properties left the system, and so at the end of the year, Marriott boasted 6,080 properties and timeshare resorts with more than 1.19 million rooms. Moreover, Marriott's development pipeline stayed solid, with almost 2,500 properties totaling more than 420,000 rooms under construction or approved for development.
CEO Arne Sorenson showed his pleasure with Marriott in how it finished the year. "The company delivered record high fee revenues in 2016," Sorenson said, "boosted by significant unit growth, RevPAR improvement, outstanding property-level margin gains, and the acquisition of Starwood Hotels & Resorts." The CEO also pointed to the 6,000-hotel milestone as significant, especially in a tightening credit market.
Can Marriott make 2017 even better?
Marriott also has high expectations for the coming year. In Sorensen's words, "We've never been more optimistic about our long-term prospects. Our expected new rooms growth for 2017 remains healthy, customers love our hotels and loyalty programs, and owners and franchisees prefer our portfolio of brands."
Marriott's guidance didn't necessarily reflect all of the company's enthusiasm. In the first quarter, Marriott believes that comparable RevPAR will be up 1% to 3% in North America and worldwide, with slightly slower 1% to 2% increases outside North America on a constant-dollar basis. For the full year, RevPAR should be flat to up 2% in North America, with a faster 1% to 3% rise internationally and 0.5% to 2.5% over the entire system. Earnings of $0.87 to $0.91 per share for the quarter and $3.79 to $3.97 per share for the full year were slightly less than investors had hoped to see, but they still represent flat to higher performance compared to the respective periods from last year.
Marriott investors were generally pleased with the results, and the stock climbed more than 1% in after-hours trading following the announcement. In the long run, Marriott and Starwood combined have huge opportunities ahead of them, and with a healthy environment in the hotel industry generally, Marriott should take full advantage of the situation to move forward aggressively.
