Marriott builds as demand soars

Marriott International is on a building spree in the Washington area and elsewhere amid steady demand for new hotels.

This month, the Bethesda-based hotel company and its partners broke ground on the first Hispanic-owned Marriott hotel in the District of Columbia and celebrated the reopening of the Renaissance M Street Hotel downtown after a $25.2 million makeover.

Still in various stages of development are Marriott hotels at National Harbor in Prince George’s County and next to the Washington Convention Center.

Its stock is up 15 percent from one year ago but down just over 20 percent from its high on April 18, prompting hotel industry analysts to rate its shares as a good buy for investors.

“We continue to believe the fundamental operating environment is favorable for the major lodging companies,” Andrew Didora, an analyst for the financial firm Jefferies & Co., wrote in a research note.

Its stock, MAR on the New York Stock Exchange, closed at $41.16 a share yesterday, up 3 percent, or $1.26, from Friday’s closing price. Mr. Didora predicts Marriott’s stock will rise to $59 a share in the next year.

Much of the hotel industry is consolidating, but Marriott officials say they have no intention of selling out.

“We’re just going to stick to our knitting, which is running our hotels,” said Norm Jenkins, Marriott’s vice president of North American lodging development.

Hotel chains that have consolidated in recent months include Hilton Hotels Corp., Equity Inns Inc. and Highland Hospitality Corp.

The difference is that most other hotel chains own the buildings where they rent rooms, whereas Marriott franchises and manages them.

“We don’t own these hotels,” Mr. Jenkins said. “That franchiser owns the bricks and mortar.”

Investors hunting for corporate takeovers “are chasing the hard hotel assets,” Mr. Jenkins said, referring to hotel buildings and other property.

Marriott franchises or manages nearly 2,900 hotels, time-share and corporate apartments worldwide. They operate under names like Ritz-Carlton, Renaissance Hotels, Residence Inns and Fairfield Inn.

The company reported net income of $207 million, or 51 cents per share, in the second quarter compared with $186 million, or 43 cents per share, last year. Revenue rose to $3.2 billion in the second quarter, up 11 percent from $2.9 billion in the same period of 2006.

Higher room rates, technology investments and more leisure travelers seeking hotel rooms contributed to the rise in earnings, said J.W. Marriott Jr., the company’s chief executive officer.

Growth appears to be strong for Marriott in its international market, where it operates in 67 countries and territories. About a fourth of the 110,000 rooms the company is developing lie outside the United States. Marriott plans to triple its presence in India by 2010 to capitalize on its growing economy.

Some analysts suggest the company should invest more abroad, but others warn about political disruption.

“We are bullish on Marriott’s international prospects,” William Crow, analyst for Raymond James & Associates, said in a research note. “Currency fluctuations have boosted international results for several quarters.”

However, William Truelove, a UBS analyst, wrote, “There is an additional risk of a global event that could disrupt travel patterns, which could adversely affect Marriott’s earnings.”

Marriott’s plans include building on a partnership it formed in the second quarter of this year to develop a new line of hotels called Nickelodeon by Marriott. They would combine lodging with resortlike entertainment for travelers seeking fun as well as a place to sleep.