The company said as it reported on its earnings Monday that it will spin off its struggling timeshare development and management company later this year. The remaining business will concentrate on lodging management and franchising.
Marriott said the move will help both companies focus on opportunities in their respective industries.
It also helps the hotel chain shed the timeshare business. Marriott will continue to receive franchise fees from the timeshare company's use of the Marriott and Ritz-Carlton brands.
Marriott curbed its development of timeshares in 2009, but revenue from the segment continued to fall in 2010. The company recently tried to increase its appeal by allowing customers to purchase timeshares in smaller increments and offering more flexible terms.
"It's unexpected because people didn't know what the fix for timeshare was going to be," said Janet Brashear, an analyst for Sanford Bernstein. "The spinoff is kind of a neat solution: You get rid of the business and clean up your model so that it is purely lodging."
Marriott said the business had revenue of $1.5 billion in 2010 - about 13 percent of the company's total. At year's end, it included 71 timeshare and fractional-ownership resorts with more than 400,000 partial owners and 10,000 employees.
Marriott's shares ended regular trading Monday down 22 cents at $41. They rose $1.75, or 4.3 percent, after hours to $42.75.
Marriott said its day-to-day operations should not be affected by the transaction. It also does not expect to cut any jobs or reduce its shareholder dividend because of the split.
The Marriott family will hold a roughly 21 percent stake in each company.
Stephen P. Weisz, president of Marriott's timeshare business since 1997, will become CEO of the new timeshare company. William J. Shaw, who recently announced his retirement as vice chairman of Marriott International and resigned from its board, will be chairman of the new company's board.
The company said its net income for the 16 weeks that ended Dec. 31 rose 63 percent to $173 million, or 46 cents per share. That's up from $106 million, or 28 cents per share, for the same period a year earlier.
Excluding one-time impairment charges and other special items, Marriott earned 39 cents per share, up from 32 cents per share.
Marriott's total revenue rose to $3.6 billion from $3.4 billion.
Analysts anticipated adjusted earnings of 36 cents per share and revenue of $3.58 billion, according to FactSet.
The company's worldwide revenue per available room, a key industry metric, increased more than 8 percent in the fourth quarter as demand and pricing continued to strengthen.
For the year, Marriott earned $458 million, or $1.21 per share. That compares with a loss of $353 million, or 97 cents per share, in the year that ended Jan. 1, 2010. Its revenue was $11.69 billion, up from $10.91 billion. It said its adjusted earnings per share were $1.15.
Looking forward, Marriott expects to earn $1.35 to $1.45 per share in the current fiscal year. Analysts on average expect $1.41 per share. The company did not include any transaction costs tied to the split in its forecast.
Marriott International will continue to be listed on the New York Stock Exchange, and the company expects the new timeshare business also to list there. The new timeshare company does not expect to pay a quarterly cash dividend or be investment-grade in the near term.
The company is hosting a conference call Tuesday with investors.