Marriott International Inc. (MAR) swung to a fourth-quarter loss on restructuring charges as the company projected continued weakness in 2009, including first-quarter results below analysts' expectations.

Overall, the report offered little surprise as the hospitality industry grapples with one of the most severe economic downturns in decades. Wall Street analysts, however, took great note of continued weakness in Marriott's timeshare business, which has become a growing source of vulnerability for major hotel chains.

"Timeshare guidance was significantly worse than what people expected," said Patrick Scholes, a lodging analyst at FBR Capital Markets. He noted that Marriott cut its projection for timeshare income for 2009 to $45 million from between $215 million to $265 million forecasted in October.

Scholes attributed weakness in the timeshare segment, accounting for less than 20% of Marriott's business, as driving most of the company's earnings miss.

Large hospitality companies such as Marriott, Wyndham Worldwide Corp. (WYN) and Starwood Hotels and Resorts Worldwide (HOT) have consistently reaped big profits by financing timeshare purchases amid strong consumer demand. With the lockdown in credit markets and concerns that consumers are shunning big-ticket purchases, many developers have already scaled back expansion plans in vacation ownership.

Marriott reported a fourth-quarter net loss of 10 million, or 3 cents a share, compared with year-earlier net income of $176 million, or 46 cents a share. Excluding restructuring charges and other items, earnings fell to 34 cents.

Revenue fell 7.5% to $3.78 billion even with the latest quarter including an extra week than a year earlier. Analysts surveyed by Thomson Reuters were expecting earnings, excluding items, of 39 cents a share, on revenue of $3.86 billion. Marriott's latest forecast - from October - was for earnings of 44 cents to 50 cents.

Marriott's shares recently traded up 3.2% to $15.63 in recent trading.

Marriott Chief Financial Officer Arne Sorenson said during a conference call that the company reduced costs in the timeshare business by about $65 million to $75 million. In addition, the company financed approximately 70% of its timeshare contracts compared to 80% in the prior year quarter.

Marriott ended all financing incentives and was financing only about half of new timeshare contracts. "We are optimistic that we'll complete note sales in 2009, but pricing is likely to remain unfavorable so no note sale gain is assumed in our 2009 outlook," Sorenson said.

The company said delinquencies for U.S.-financed loans rose to 7.9% as of the end of December from 6.7% at the end of 2007.

"The company is reacting very aggressively [by]...shrinking that business and focusing on maintaining cash flow," said John Arabia, an analyst at Green Street Advisors.

Arabia noted there has been an outcry from analysts that Marriott exit timeshares, given steep profit declines. "It's an ill-informed and knee-jerk reaction," he said, adding that he expects timeshares will be profitable in the long term.

For the first quarter of 2009, Marriott sees earnings of 13 cents to 15 cents a share on a 17% drop in revenue per available room at company-operated hotels in North America. Analysts surveyed by Thomson Reuters projected earnings of 22 cents.

For the year, earnings are seen at between 86 cents and $1.04 a share on double-digit percentage revpar declines in North America, though Marriott admitted it "cannot forecast results with any certainty." Analysts expected earnings of $1.10 a share.

Marriott also expects to slash capital spending by more than one-third from 2008's $950 million.

The hotel sector continues to be hammered by steep cuts in airline capacity, a pullback in consumer spending and waning corporate travel. Analysts have warned in the past that the hotel industry might not recover until 2011. Marriott's dour results come on the heels of weak reports and outlooks from rivals such as Starwood and Choice Hotels International Inc. (CHH).

Marriott was one of the few major hotel companies to leave its fourth-quarter earnings forecast unchanged since its third-quarter report, despite business conditions subsequently taking a turn for the worse.

Its view had assumed worldwide revenue per available room falling 1% to 3%, including a 3% to 5% drop in North America. The results ended up being down 8.4% and 8.3%, respectively.

The bottom line was weighed down by the timeshare segment, which swung to a $2 million loss as revenue slumped 28% amid continued consumer skittishness about buying real estate.

The woes come as Fitch Ratings said last week that monthly defaults on timeshare loans hit an all-time high in December. Marriott, Starwood and other big hospitality companies consistently reaped large profits in the past by financing timeshare purchases amid strong consumer demand. But the lockdown in credit markets and pullback in consumer spending prompted developers to scale back plans for new projects.

-By A.D. Pruitt, Dow Jones Newswires; 201-938-2269; angela.pruitt@dowjones.com