Marriott says business travelers still in short supply

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

Hotel giant Marriott International on Thursday said it was seeing no sign of an upturn in business travel demand that would signal an improving economy.

The company, whose brands include Marriott, Ritz-Carlton, Renaissance and Courtyard, reported a 56% drop in second-quarter operating earnings, to $84 million, or 23 cents a share. Revenue sank 19% to $2.57 billion.

‘In North American lodging we continue to see signs of stabilization in occupancy levels. Unfortunately, we aren’t yet seeing more corporate travelers and business meetings returning to our hotels,’ said Arne Sorenson, Marriott’s president, in a conference call with analysts and investors. ‘Instead, our mix of business remains skewed toward price-sensitive leisure travelers.’

In other words, Marriott is at the mercy of people looking for bargains.

‘With occupancy levels stabilizing in the low- to mid-60s [percentage level], pricing has become a greater challenge,’ Sorenson said. ‘Everyone is price-sensitive today, not just vacationers.’

For the Marriott brand, room nights sold to corporate travelers plunged 18% in the quarter from a year earlier, while room nights for leisure travelers were up 12%, the company said.

Carl Berquist, Marriott’s chief financial officer, said meeting planners and bookers were ‘sitting on the sidelines waiting to see if they can get a better deal.’

That’s a natural reaction in a bad economy, but it’s the kind of deflation mentality that ought to give the Federal Reserve the willies.

Marriott also threw cold water on the idea that business might be holding up better overall in emerging markets overseas. (NOTE: The company’s results were announced before the bombings Friday at Marriott hotels in Indonesia.)

In China, ‘Their economy obviously is better-performing and forecasted to be better-performing than much of the rest of the world,’ Sorenson said. ‘But you’ve got still a tough travel environment, which is compounded by meaningfully higher supply growth in China than we’ve seen probably anywhere else.

‘And so you look at the RevPAR numbers [revenue per available room] actually for that market, and they are not meaningfully better, and in fact in many respects are worse in many months than we’ve seen in the United States.’

Travel also has been hit hard in some foreign markets by the H1N1 flu outbreak.

Marriott said it was hard-pressed to come up with an earnings forecast for 2009 because of economic uncertainty, but it offered a range of 76 to 86 cents a share in operating results -- down from the range of 88 cents to $1.02 it had forecast in April.

The company’s stock sank $1.36, or 6.2%, to $20.44. It fell as low as $12.58 in March.

-- Tom Petruno