Travel Industry

Marriott’s Financial Woes are Everyone’s

Posted in:

Uncategorized

Marriott International's quarterly report had few surprises buried deep in its bowels. Many were obvious: a soft economy, tight lending, sluggish residential sales, high fuel costs and less consumer confidence all seem to be taking a toll on Marriott as well as other hoteliers. The report said that recent events and the volatile capital markets may cause owners and franchisees to delay, refinance or pull the plug on some projects. (Marriott opened 42 properties during the third quarter, the company also disposed of six.) Marriott specifically cited the Lehman Brothers bankruptcy because Marriott used its financing and the company acknowledged it "may prevent some projects that are in construction or development." Although the company reported higher revenues, up about $20 million from last year, its least-performing sectors, like its timeshare division, struggled. According to its balance sheet, the company's weighted down with $3 billion in long-term debt, up from $2.8 billion in December 2007. Its profits dropped about 28 percent and its outlook doesn't look much better in 2009. (Marriott hopes to save money by modifying menus, restaurant hours and hiring freezes. That's a lot of cheap beef!) Arne Sorenson, executive vice president and chief financial officer, told reporters that reduced flights and visitors hurt some areas domestically but by contrast, Marriott saw strength in the Middle East, Latin America and the Caribbean. Sorenson admitted the company drew $900 million from its bank revolver to tide itself over over the lean patch, only the second time in the last 20 years. The first time it happened? Just after Sept. 11, 2001. This could lead the average person to believe that we are seeing the travel industry reach the depths of a post 9/11 economic slide. Could it get much worse? According to several sources, it can and the controversy on cutting rates seems to continue. An anonymous hospitality industry source gives his or her opinion, "In public we say 'Hold the rate.' That makes sense as long as we can do it. However, I may have courage to hold the rate in New York or Washington, DC, but I may not have courage to do so in Milwaukee when my competitors start cutting." The only solution or safety net? Cash, and plenty of it. The only way to ride out the economy's plunges and dips is with a liquidity/cash seatbelt. Don't have that? Then you're just like everyone else.

posted by Barbara E. Hernandez
October 7, 2008 @ 4:19 pm

Travel Industry

Marriott’s Financial Woes are Everyone’s

Last 10 posts: