MARRIOTT Fundamental Analysis October 2023

Marriott Fundamental Analysis: Marriott International Inc. is a renowned global hospitality company with a primary focus on lodging management and franchising. This focus has been prominent since its timeshare business spin-off into a publicly-traded company in November 2011.

In the second quarter of 2023, Marriott significantly expanded its worldwide lodging portfolio by adding 254 properties, equating to an impressive 33,097 rooms. By the close of Q2 2023, Marriott boasts a development pipeline consisting of 3,149 hotels, comprising approximately 547,000 rooms, with over 240,000 rooms in various stages of construction.

As of June 30, 2023, Marriott operates, franchises, and holds licensing agreements for hotels and timeshare properties spanning more than 8,500 properties across 139 countries and territories. All these properties are managed under the umbrella of 31 distinct brand names.

Marriott has thoughtfully organized its brand portfolio into three distinct groups:

Marriott’s luxury category features classic luxury hotel brands such as JW Marriott, The Ritz-Carlton, and St. Regis. Additionally, Marriott includes distinctive luxury hotel brands like W Hotels, The Luxury Collection, EDITION, and Bulgari.

Marriott’s premium offerings include classic brands such as Marriott Hotels, Sheraton, Delta Hotels, Marriott Executive Apartments, and Marriott Vacation Club. The premium category further encompasses distinctive brands like Westin, Renaissance, Le Méridien, Autograph Collection, Gaylord Hotels, Tribute Portfolio, and Design Hotels.

Within the select category, classic select hotel brands encompass Courtyard, Residence Inn, Fairfield by Marriott, SpringHill Suites, Four Points, TownePlace Suites, and Protea Hotels. Marriott’s unique select brands encompass Aloft, AC Hotels by Marriott, Element, and Moxy.

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marriott fundamental analysis: reasons to buy the stock.

Brand Portfolio

Marriott holds a prominent position in the luxury and lifestyle sector, with a portfolio of nearly 8,600 properties spanning 139 countries and territories. This extensive brand portfolio and market dominance allow Marriott to command premium room rates in a highly competitive lodging industry. With strategic property locations, we are confident in Marriott’s ability to capitalize on the increasing demand resulting from growing business and leisure travel in major North American and international destinations.

Continued Demand Growth

During Q2 2023, the company experienced robust demand in the United States, Canada, and the Asia Pacific region. This surge was driven by strong leisure demand and average daily rates (ADR), while business travel demand continued to recover. In Q2, global hotel demand witnessed a significant upswing across all regions.

In the United States and Canada, Revenue per Available Room (RevPAR) increased by 5.2% year-over-year, with occupancy growing by 1.2 percentage points year-over-year and a 3.4% increase in ADR. Internationally, RevPAR saw substantial growth at 39.1%, with ADR surging by 13.7% and occupancy increasing by 12.4 percentage points. The Asia Pacific region, in particular, experienced remarkable demand growth after travel restrictions eased. Throughout Q2, there was a 5% rise in transient room nights for the leisure segment, along with a 5% increase in ADR compared to the previous year. Group demand also displayed strength, with group revenues in the United States and Canada rising by 10% year-over-year. As of the end of Q2 2023, group revenues for the latter half of 2023 and the entire year of 2024 had increased by 11% and 14% respectively, year-over-year.

Efforts to Drive Growth

Marriott leverages its vast global membership base of nearly 186 million members through the Marriott Bonvoy loyalty program. The company goes beyond traditional hotel stays to offer non-hotel experiences like Eat Around Town and Homes and Villas by Marriott International. These initiatives, while not significant financially, allow Bonvoy members to earn and redeem points across its 30,000 listings. Marriott also introduces creative offerings like Fall for Travel and October Week of Wonders, catering to evolving customer preferences. In response to the rise of remote work, the company introduced Work from Anywhere packages in October 2020. These innovative efforts are expected to stimulate leisure demand and create additional revenue streams. In 2022, digital revenues increased by 41% year-over-year, with a 32% increase in mobile app users and a 27% increase in digital room nights.

Marriott engages customers through promotional offers, including grocery and retail spending accelerators on its co-branded credit cards, such as American Express and Chase. The company expanded its co-brand credit card portfolio in South Korea and Mexico in Q1 2021. In 2022, Marriott introduced a new credit card in China and Saudi Arabia, receiving positive feedback. During Q2, the company reported significant engagement with its co-branded credit cards, including growth in the number of cards, expansion into new countries, and an expanding base of cardholders. Notably, there was an increase in cardholders in Japan and South Korea, signaling promising prospects for future expansion. Given the positive customer response to credit card programs and the rise in average credit card spending, the company anticipates increased contributions from credit card fees in 2023.

Robust Expansion Strategy

Marriott is actively expanding its global footprint to meet the growing demand for hotels in international markets. The company is committed to growing its portfolio of luxury and lifestyle brands worldwide. In Q2 2022, Marriott entered into an agreement with Vinpearl to establish eight hotels in Vietnam, adding 1,700 rooms to its system.

Marriott focuses on hotel conversions to mitigate construction delays. In 2022, conversions accounted for 20% of room signings and 27% of room openings. The company anticipates that positive development trends will continue, driven by new development and multiunit conversion opportunities.

Marriott also places emphasis on its strategic licensing agreement with MGM Resorts, which resulted in the creation of the MGM Collection with Marriott Bonvoy. This collaboration expands Marriott’s presence in Las Vegas, incorporating 17 MGM Resorts properties. Members can now make reservations through Marriott’s digital platforms. The company is optimistic about the growth potential associated with this agreement.

Growth through Strategic Acquisitions

Marriott has consistently used acquisitions to drive its global expansion. In a significant move in late 2016, the company acquired Starwood, becoming the world’s largest hotel company. This acquisition significantly boosted Marriott’s presence in Asia, the Middle East, and Africa. Marriott continues to expand the brands acquired through this merger.

On December 9, 2019, Marriott acquired Elegant Hotels Group plc, adding seven hotels and a beachfront restaurant in Barbados to its portfolio in the Caribbean and Latin America. Marriott also expanded its brand portfolio by completing the acquisition of City Express, marking its 31st brand and making a significant entry into the midscale sector.

Leveraging Digital Innovations for Customer Loyalty

Marriott recognizes the importance of digital innovation and social media in shaping hotel bookings. The Marriott mobile app empowers guests to manage their bookings, access interactive maps, and engage with the brand’s reward programs. Marriott has revamped its app to cater to modern travelers, offering enhanced features, personalized content, and user-friendly navigation. The company actively uses its digital platforms to establish deeper connections with customers.

Marriott has formed a unique partnership with Rappi, Inc., enhancing earnings and travel experiences for Marriott Bonvoy members and Rappi users. Through this collaboration, Marriott Bonvoy members can link their Rappi and Marriott Bonvoy accounts, unlocking exclusive benefits.

Optimistic Outlook

Marriott is poised for a strong performance in 2023, with projected increases in gross fee revenues, adjusted EBITDA, and diluted EPS. This reflects Marriott’s strong position in the industry and its ability to capitalize on emerging trends in the hospitality sector.