Marriott (MAR) Earnings - Strong Overseas; Weak US - No Rebound Until 2009

We like to follow companies that we have no inkling to invest in, simply to get a gauge on the reality of the economic plight (as opposed to relying on government reports). One such group are the hotels and Marriott (MAR) is a big name in the group. Last time around [Apr 17: Let's Review Some Earnings, and Add some Truth to "Earnings Labeling"] we found out

Once again great GLOBAL growth, helped by WEAK DOLLAR and putrid US growth. Notice a pattern? Again, pray the US dollar craters so that these companies continue to show great earnings (but the consumers of America will continue to pay higher prices through dollar destruction).

So here's my comment - I don't know the mix of sales between US rooms and non US rooms, but if I knew that we could do the math easily. If the rest of the world generated 18.5% growth, and your overall growth was only 6.5%, how bad was the US? Obviously to weigh down that 18.5% growth to such a large degree it had to be poor, but we don't know how poor without the actual sales mix. Summary: US stinks but hey Marriot is "cautiously optimistic".

Well the Kool Aid has worn off and "cautiously optimistic" has turned to "umm, not so much". Yet another company succumbs to the fairy tale of the "2nd half recovery" - the stock dropped 7% as unicorns, mermaids, and Hank Paulson were told "No Vacancy for You". Time to bang the drumbeat of the new and improved "1st half 2009" recovery. Now we have to ask what *if* the U.S. brand of malaise spreads worldwide under a cloud of inflationary demand destruction. Then where will these companies who have no strength domestically be getting growth from? Let's hope it does not get too severe overseas although parts of Europe are already sinking, and parts of Asia are suffering mightily from double digit inflation. Keep in mind Marriot is not exactly the Holiday Inn - they reflect what should be a more "sheltered" consumer from the storms hitting the lower and middle class.

• Marriott International Inc (MAR), the world No. 3 hotel operator, reported lower quarterly profit on Thursday and expects weak economic growth and soft U.S. lodging demand to persist into next year.
• Net income declined to $157 million, or 42 cents per share, in the second quarter ended on June 13, from $207 million, or 51 cents per share, a year earlier.
• "While our hotels outside the United States continue to benefit from solid global demand, business conditions have deteriorated in the United States," Chief Executive J.W. Marriott said in a statement. "While there is much uncertainty," Marriott said, "we expect weak economic growth and soft U.S. lodging demand to persist into 2009."
• A major concern for the hotel sector is its reliance on the U.S. airlines, which are cutting routes and fighting for their survival amid unprecedented fuel prices. Oil prices have roughly doubled in the past year.
• Marriott also cut its earnings outlook for 2008 to between $1.77 and $1.88 per share. Analysts expect $1.93 per share. (again, a big thesis for us is the ridiculous 2nd half 2008 analyst estimates for "growth" across the stock market - as these numbers fall, stocks will become much more expensive if stock prices hold steady)
  
• Revenue per available room, an industry benchmark known as revpar, grew 5.6 percent globally on strength in markets like the Middle East and Southeast Asia. But in North America, Marriott's largest market, revpar rose just 1.4 percent in the second quarter.
• As a result, Marriott's domestic hotels have implemented "contingency plans" according to Arne Sorenson, the company's chief financial officer. Those include modifying restaurant menus, hiring freezes and mandatory vacations for workers, and looking non-room sales, such as banquets.

Listen to the companies; ignore the government reports.