The hospitality industry is benefiting from what's shaping up to be a record year. And Marriott (NYSE:MAR), one of the top hotel-management companies in that industry, is reflecting the booming business in its strong quarterly results, the latest of which was released last Thursday.
Revenue per available room, or RevPAR, a key indicator of strength in the hotel industry, rose by 10.4% for the second quarter. That, in turn, led to nice increases in net income, which climbed 17% to $182 million when adjusted for the company's synthetic-fuel business and a $94 million one-time charge. Revenue, meanwhile, rose 7.1% to $2.8 billion, led by demand around the globe. Europe's results in particular were propelled by heavy advance demand for World Cup lodging. RevPAR in North America was up about 10% over last year, mostly because of bookings at large downtown and convention hotels. The company also boosted its earnings estimates for the rest of the year, citing continuing expected demand for lodging and travel.
Given such hefty growth and tough competition from competitors such as Four Seasons (NYSE:FS), Hilton Hotels (NYSE:HLT), and Starwood Hotels (NYSE:HOT), it's surprising to see Marriott choose now to tinker with the brand at its Ritz-Carlton luxury chain. Per a recent WSJ.com article (subscription required), the company is changing its long-standing 20 "Ritz-Carlton Basics," which have included rules such as never letting the guest carry his or her own luggage and never using "hello" in place of a more formal greeting. The idea is that these basics are a little out-of-tune with what today's guest expects, given that the luxury traveler is no longer exclusively a middle-aged businessman, but may instead be a twentysomething worth millions who's fiddling with a BlackBerry in the lobby. That twentysomething may simply feel uncomfortable being addressed as a "gentleman," and may have very different expectations for an outstanding level of service; getting quick room service, for example, may be more of a priority for this traveler than getting help with his or her bags.
The new rules, however, sound an awful lot like corporatespeak: "I build strong relationships and create Ritz-Carlton guests for life." And "I have the opportunity to continue to learn and grow." Still, the new standards are giving some flexibility to what were previously dogmatic rules. Will it make a positive difference for the brand? This Fool thinks it is a positive, but ultimately, Ritz-Carlton employees have to execute on the new rules and hope that their guests aren't turned off.
Does this all mean that Marriott is a compelling investment at these prices? Perhaps, but with a P/E of 27 against a long-term expected growth rate of 15%, it seems that a lot of growth and big expectations are already priced in.
For more traveling-related Foolishness:
- Four Seasons Pampers Its Investors
- Between a Hard Rock and a Hard Place
- Marriott Calls It Splitsville
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Fool contributor Stephen Ellis does not own shares in any companies named above. You can view his holdings here . The Motley Fool has a king-sized disclosure policy .
