Pro forma diluted earnings per share for the 1998 first quarter was 33 cents, up 27 percent from 26 cents in the preceding year. Sales were $2.2 billion, an increase of 15 percent compared to the 1997 first quarter. J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said that the company is off to a strong start, and has excellent growth prospects for 1998 and beyond. "The U.S. lodging industry remains very robust," Mr. Marriott said, "and Marriott Lodging continues to set the pace in terms of both REVPAR growth and profitability. Our senior living and distribution services businesses also performed well in the 1998 first quarter. We expect to post outstanding operating results in this inaugural year for our new public company.
"We have set aggressive growth targets for each of our businesses," Mr. Marriott continued, "and we expect to invest over $1 billion annually in growth opportunities. Our new project pipeline is steadily expanding, and we now have more than 65,000 hotel rooms and 100 senior living communities under development."
LODGING operations reported a 31 percent increase in operating profit on 22 percent higher sales. Results reflect room rate growth at U.S. hotels well in excess of inflation, the acquisition of Renaissance Hotel Group N.V. (RHG), contributions from new units, and expansion of the company's vacation club (timeshare) resort business. Before the impact of the RHG acquisition, lodging profits were up 25 percent in the 1998 first quarter on nine percent sales growth.
Across the Marriott lodging brands, revenue per available room (REVPAR) for comparable company-operated U.S. properties grew by an average of seven percent in the 1998 first quarter. Average room rates for these hotels rose nearly nine percent. Occupancy in the 1998 quarter declined by more than one percentage point to 77 percent, primarily due to softness in the economy lodging sector, and at certain resort properties. Profits for international lodging operations also were higher in the 1998 first quarter. Contributions from new units and improved performance at key European hotels offset the impact of reduced travel in the Asia/Pacific and Middle East regions.
The company has added a net total of 318 properties (71,500 rooms) to its lodging system over the past 12 months, including 30 hotels and resorts (5,700 rooms) opened in the 1998 first quarter. At quarter-end, the Marriott lodging group encompassed 1,540 properties totaling 302,700 rooms and 3,500 timesharing villas. More than 170 hotels (over 25,000 rooms) are scheduled to open in 1998.
Marriott Vacation Club International posted substantial profit growth in the 1998 first quarter. The division achieved an increase in contract sales, despite adverse weather at several locations, and generated higher income from purchaser financing and resort management. Marriott expects to begin sales at six new timeshare resorts in the United States and Europe during 1998.
CONTRACT SERVICES reported a $9 million reduction in operating profit in the 1998 first quarter, on nine percent lower sales. Profit comparisons between years are affected by the June 1997 sale of 29 senior living communities which Marriott continues to operate under long-term agreements. Excluding the impact of this transaction, profits for contract services increased 17 percent in the 1998 quarter.
Marriott Senior Living Services posted higher sales, and solid profit growth in the 1998 first quarter, before the impact of the real estate transaction cited above. Results were boosted by contributions from 20 senior living communities added since the beginning of 1997. Occupancy for comparable communities remained at 95 percent in the quarter. The division now operates 92 independent full-service and assisted living communities totaling 18,100 units. Marriott plans to add more than 200 senior living communities over a five-year period (1998-2002), including nearly 30 properties scheduled to open in 1998.
Marriott Distribution Services generated higher profits in the 1998 first quarter, despite lower overall sales volume. Profit margins for the division improved considerably compared to the 1997 quarter, which included significant start-up costs associated with the rollout of service to a major restaurant customer.
CORPORATE EXPENSES rose $5 million in the 1998 first quarter, primarily due to year 2000 software modification costs, and noncash items related to investments generating significant income tax benefits. Interest expense declined by $4 million, reflecting the elimination of mortgage debt associated with real estate sold by the company in 1997. Interest income increased $5 million in the 1998 quarter as a result of higher notes receivable balances. The company's effective income tax rate decreased to 38.5% in 1998, compared to 39% in the preceding year.
MARRIOTT INTERNATIONAL, INC. is a leading worldwide hospitality company, with over 1,600 operating units in the United States and 53 other countries and territories. Major businesses include hotels operated and franchised under the Marriott, Ritz-Carlton, Courtyard, Residence Inn, Fairfield, TownePlace Suites, Renaissance, New World and Ramada International brands; vacation club (timeshare) resorts; senior living communities and services; and food service distribution. The company is headquartered in Washington, D.C. and has approximately 129,000 employees.
Note: This press release contains "forward-looking statements"
within the meaning of federal securities law, including statements concerning
the number of lodging and senior living communities expected to be added
in future years, business strategies and their intended results, and similar
statements concerning anticipated future events and expectations that are
not historical facts. The forward-looking statements in this press release
are subject to numerous risks and uncertainties, including the effects
of economic conditions; supply and demand changes for hotel rooms, vacation
timesharing intervals and senior living accommodations; competitive conditions
in the lodging, senior living and food service distribution industries;
relationships with clients and property owners; the impact of government
regulations; and the availability of capital to finance growth, which could
cause actual results to differ materially from those expressed in or implied
by the statements herein.
Resorts and Suites
|+ 7%||77.0%||- 1.4% pts||$ 140.35||+ 8.9%|
|Ritz-Carlton||+ 8%||75.5%||- 2.3% pts.||$ 213.47||+ 10.8%|
|Renaissance Hotels*||+ 7%||69.4%||- 0.1% pts.||$ 134.21||+ 7.3%|
|Residence Inn||+ 5%||82.0%||- 1.1% pts.||$ 99.98||+ 6.6%|
|Courtyard||+ 8%||78.5%||- 1.2% pts.||$ 90.42||+ 9.0%|
|Fairfield Inns and
|- 3%||69.6%||- 5.2% pts.||$ 50.23||+ 4.6%|
NOTE: Statistics are based on comparable company-operated U.S. properties
for the 12 week periods ended
March 27, 1998 and March 28, 1997.
(a) On a systemwide basis, Fairfield Inns and Suites reported a 4% increase
in REVPAR in the 1998 first quarter,
with occupancy of 69.8% (-0.9%) and average daily rate of $54.74 (+5.5%).