On Jun 24, 2014, we issued an updated research report on
Marriott International, Inc.
On Apr 28, this leading hotelier posted strong first quarter 2014
results with earnings and revenues beating the Zacks Consensus
Estimate. Adjusted earnings of 55 cents increased 27.9% year over
year and were above management's guidance range of 47 to 52 cents
per share driven by an increase in occupancy and room rates in
Despite fewer days in the first quarter of 2014 compared to the
year-ago period, revenues increased 4.8% year over year,
attributable to an increase in revenues at all its segments and
solid revenue per available room (RevPAR) growth. Adjusted
operating margin increased 400 basis points to 41.0% due to
increased business travel that increased occupancy.
With the economy beginning to improve gradually, the U.S. hotel
industry has started to grow. Group booking in North America is
improving at a rapid pace. The company stated at the earnings call
that group bookings have increased from 4.0% to 5.0% over the three
months period. The company expects group bookings to remain
modestly higher year over year in the second quarter and sees
strength in the corporate and leisure transient business.
Moreover, with a low supply growth environment, the company expects
to be able to raise its room rate, going forward. Also, the
company is making efforts to further increase room rates by
reducing discounts and special offers.
Additionally, the company is consistently trying to expand its
presence worldwide. Also, the company plans to significantly grow
its global portfolio of luxury and lifestyle brands. It intends to
add more than 200 luxury and lifestyle hotel projects over the next
several years. Moreover, the company is trying to expand its
footprint in the potential markets of Asia, Africa, Middle East,
Europe and Latin America.
Over the past 20 years, the company has scaled up its number of
brands from 5 to 20. Currently, it has 800 franchisees operating in
78 countries and has 200,000 rooms compared to 100 franchisees, 21
countries and 30,000 rooms 20 years ago. Also, its worldwide
presence has increased tremendously over the same period.
In 2013, the company achieved record signings of 67,000 rooms
worldwide and expects to maintain the trend in 2014 too. The
company expects 5.0% net increase in number of rooms in 2014.
Driven by its strong development pipeline, the company has also
increased its RevPAR and earnings guidance for 2014.
Despite Marriott's immense growth potential, a deteriorating
political situation and a weak economy have decelerated overall
Latin American sales. Moreover, tighter credit markets in China,
the political turmoil in Thailand, and Russian actions in Crimea
have further added to the woes. Further, upcoming elections in
Brazil and Indonesia make the situation more unpredictable. Egypt
is in the midst of political instability while riots are affecting
growth prospects in Nigeria.
According to the European Central Bank, though financial markets in
the region have improved, they are yet to reach pre-crisis levels.
Given Marriott's significant presence in the region, the current
sluggishness in Eurozone may limit the growth of vacation rental
businesses. An uncertain political situation in Ukraine seems to
have a negative impact on the economic sentiment in the Eurozone.
Eurozone recovery is not expected to be strong enough in 2014,
thereby remaining a concern for this Zacks Rank #3 (Hold) company.
Other Stocks to Consider
Better-ranked stocks in the hotel industry include
Wyndham Worldwide Corp.
Marriott Vacations Worldwide Corporation
Hilton Worldwide Holdings Inc.
). All these stocks have a Zacks Rank #2 (Buy).
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