Marriott International Inc. (MAR), the largest U.S. hotel operator, Thursday said quarterly profit rose 27 percent as an upswing in travel drove room rates and occupancy higher.

The company, which owns the Ritz Carlton (search) and Courtyard by Marriott (search) brands along with flagship-name properties, also raised its full-year earnings outlook, and its shares were up 1.3 percent in early trading.

"Clearly, we are seeing a favorable mix toward more transient business, a reduction in deep discount business and ... a shift toward corporate groups, chief financial officer Arne Sorenson said on a conference call.

The Bethesda, Md.-based company said it now expects North American revenue per room to rise as much as 10 percent this year, up from its previous forecast of 9 percent, driven mainly by higher room rates.

First-quarter net income rose to $145 million, or 61 cents a share, from $114 million, or 47 cents a share, a year earlier. The profit surpassed the average analyst estimate of 55 cents a share, as compiled by Reuters Estimates.

The results "support our conviction in the strength of the lodging recovery," said Marc Falcone, an analyst at Deutsche Bank. He noted that Marriott reported a 52 percent increase in incentive management fees -- an income line that virtually disappeared during the slump driven by the attacks of Sept. 11, 2001 and the U.S. recession.

The hotel chain's overall revenue rose 13 percent to $2.53 billion, also beating analysts' estimates of $2.47 billion.

Revenue per available room, a key measure of health in the lodging industry, rose 8.4 percent at North American hotels open at least a year.

For the full year, Marriott raised its earnings forecast to between $2.80 and $2.90 a share, including an 11-cent-per-share charge for installing new bedding in its hotel rooms. In February, the company had said it expected to earn $2.73 to $2.83 a share, excluding the bedding costs.

Wall Street's average estimate for 2005 is $2.82.

Marriott said its 2005 forecast also includes 42 cents to 46 cents a share from its alternative fuel business, which generates federal tax credits. The credits phase out if oil prices rise above a certain level, Sorenson said.

The company said it expects to earn 74 cents to 76 cents a share in the second quarter, compared with analysts' estimates of 73 cents.

As the industry recovered from the three-year slump following the Sept. 11 attacks on the World Trade Center, initial revenue-per-room increases were driven mostly by higher occupancy. Marriott began raising room rates only last year.

The company said it bought back 5.1 million shares of its stock for $328 million during the first quarter.

The shares were up 82 cents at $63.02 on the New York Stock Exchange.