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Marriott (MAR) Banks on Expansion Efforts, RevPAR Dismal

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Marriott International, Inc. (MAR - Free Report) is poised to benefit from its expansion initiatives, digitization, loyalty program and marketing strategies. However, decline in revenue per available room (RevPAR) due to the coronavirus pandemic is a concern.

Let us discuss the factors that highlight why investors should hold on to the stock for the time being.

Catalysts

Marriott is consistently trying to expand worldwide presence and capitalize on demand for hotels in international markets. Moving ahead, the company plans to significantly expand global portfolio of luxury and lifestyle brands. At the end of first-quarter 2021, Marriott's development pipeline totaled nearly 2,825 hotels, with approximately 491,000 rooms. Given its property locations, we believe that the company is well-poised to benefit from the increasing market demand on the back of stepped-up business and leisure traveling in major North American and international locations.

With the roll out of vaccines in full swing, pent-up demand is being witnessed in countries such as the United States, the UAE and Qatar. Also, improvements are being registered in regions including Africa, Maldives, Australia, Canada, Mexico, Macau and Virgin Islands. Notably, easing of travel restrictions coupled with enhanced airlift activities are driving the company. Furthermore, Greater China continues to lead growth owing to rise in demand. The company stated that bookings for leisure transient room and business transient room in the region have exceeded pre-pandemic levels. Given the positive trend in recoveries, the company is optimistic regarding full recovery across other regions. However, it is subject to normalization of the current scenario.

Meanwhile, digital innovation and social media are playing increasingly important roles in hotel bookings, Marriot isn’t far behind to improvise. Notably, the company re-imagined its Marriott Mobile app to meet the needs of the modern traveler. Also, the company’s loyalty program, Marriott Bonvoy, has been playing a supporting hand in its marketing strategies.

To this end, the company has been engaging its customers with promotional offers such as grocery and retail spending accelerators on its co-branded credit cards (American Express and Chase). Also, its association with uber is encouraging. Solid customer engagement is being registered on the idea of providing loyalty points for activities such as ride hailing and food delivery. We believe that the initiatives are likely to capture additional revenues, going forward.

Concerns

 

Zacks Investment ResearchImage Source: Zacks Investment Research

Shares of Marriott have gained 6.5% so far this year compared with the industry’s 9.5% growth. Notably, the company’s operations have been negatively impacted by the coronavirus pandemic. Due to the crisis, the company has not provided earnings and RevPAR guidance for 2021. It also suspended its share repurchase and dividend payments until further notice.

Moreover, the company is experiencing substantial declines in RevPAR and occupancy in all regions served. During first-quarter 2021, revenue per available room (RevPAR) for worldwide comparable system-wide properties fell 59.1% in constant dollars due to 30.4% and 26.2% decline in occupancy and average daily rate (ADR), respectively. These metrics were impacted by the coronavirus pandemic. Comparable system-wide RevPAR in Asia Pacific (excluding China) fell 68.3% in constant dollars due to 37.3% and 37.3% decline in ADR and occupancy, respectively. On a constant-dollar basis, international comparable system-wide RevPAR fell 64.1% due to decline of 34.4% and 25% in occupancy and ADR, respectively. Moreover, comparable system-wide RevPAR in Europe and America declined 85.8% and 65.9%, respectively. Notably, low occupancy levels and steep RevPAR declines were witnessed in Europe, Middle East and Africa region (or EMEA) as well as the Caribbean and Latin America region (or CALA).

Marriott — which shares space with Hilton Worldwide Holdings Inc. (HLT - Free Report) , Hyatt Hotels Corporation (H - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) — has a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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