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Marriott Relies on Expansion Initiatives, RevPAR Dismal
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Marriott International, Inc. (MAR - Free Report) is likely to benefit from expansion initiatives, strong brand position and digital efforts. However, decline in occupancy rates and RevPAR on account of the coronavirus pandemic pose concerns.
Let us delve deeper into the factors that highlight why investors should hold on to the stock for the time being.
Catalysts
Marriott is consistently trying to expand presence worldwide and capitalize on the 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 second-quarter 2020, Marriott's development pipeline had nearly 3,000 hotels, with approximately 510,000 rooms. Further, nearly 230,000 rooms were under construction.
Moreover, the company’s extensive portfolio and a strong brand position allow it to charge a premium room rate in the highly-competitive lodging industry. 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 as well as leisure traveling in major North American and international locations.
Given that 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. Through the platform, the company offers new and extended digital features, customized travel content, easier one-button navigation as well as a new swipe-able discovery home screen.
Meanwhile, Marriot has bolstered its liquidity to manage the coronavirus pandemic. In May, the company raised $920 million in additional liquidity through amendments to its co-brand credit card agreements with JPMorgan Chase & Co. and American Express. In June 2020, the company completed a cash tender offer and retired $853 million aggregate principal amount of Senior Notes maturing in 2022. Nonetheless, the company has increased its net liquidity to approximately $4.4 billion as of Jun 30. Although total debt at the end of Jun 30, 2020, was $11.8 billion, it is confident that with the amount of liquidity it holds, it can survive the pandemic longer.
Concerns
The Hotel and Motels industry is currently grappling with the coronavirus pandemic and Marriott isn’t immune. Owing to the same, the company has withdrawn its 2020 guidance. It has also suspended its share repurchase and dividend payments until further notice. Markedly, the pandemic is likely to hurt the company’s results in 2020.
Moreover, the company is experiencing substantial declines in revenue per available room (RevPAR) and occupancy in all regions served. In second-quarter 2020, RevPAR for worldwide comparable system-wide properties fell 84.4% in constant dollars (down 84.6% in actual dollars) on account of 57.4% and 35.3% decline in occupancy and average daily rate (ADR), respectively. Comparable system-wide RevPAR (in constant dollar) was down 83.6% in North America and 86.7% outside North America.
So far this year, shares of the company have fallen 36.6% compared with the industry’s 25.5% fall.
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
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Marriott Relies on Expansion Initiatives, RevPAR Dismal
Marriott International, Inc. (MAR - Free Report) is likely to benefit from expansion initiatives, strong brand position and digital efforts. However, decline in occupancy rates and RevPAR on account of the coronavirus pandemic pose concerns.
Let us delve deeper into the factors that highlight why investors should hold on to the stock for the time being.
Catalysts
Marriott is consistently trying to expand presence worldwide and capitalize on the 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 second-quarter 2020, Marriott's development pipeline had nearly 3,000 hotels, with approximately 510,000 rooms. Further, nearly 230,000 rooms were under construction.
Moreover, the company’s extensive portfolio and a strong brand position allow it to charge a premium room rate in the highly-competitive lodging industry. 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 as well as leisure traveling in major North American and international locations.
Given that 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. Through the platform, the company offers new and extended digital features, customized travel content, easier one-button navigation as well as a new swipe-able discovery home screen.
Meanwhile, Marriot has bolstered its liquidity to manage the coronavirus pandemic. In May, the company raised $920 million in additional liquidity through amendments to its co-brand credit card agreements with JPMorgan Chase & Co. and American Express. In June 2020, the company completed a cash tender offer and retired $853 million aggregate principal amount of Senior Notes maturing in 2022. Nonetheless, the company has increased its net liquidity to approximately $4.4 billion as of Jun 30. Although total debt at the end of Jun 30, 2020, was $11.8 billion, it is confident that with the amount of liquidity it holds, it can survive the pandemic longer.
Concerns
The Hotel and Motels industry is currently grappling with the coronavirus pandemic and Marriott isn’t immune. Owing to the same, the company has withdrawn its 2020 guidance. It has also suspended its share repurchase and dividend payments until further notice. Markedly, the pandemic is likely to hurt the company’s results in 2020.
Moreover, the company is experiencing substantial declines in revenue per available room (RevPAR) and occupancy in all regions served. In second-quarter 2020, RevPAR for worldwide comparable system-wide properties fell 84.4% in constant dollars (down 84.6% in actual dollars) on account of 57.4% and 35.3% decline in occupancy and average daily rate (ADR), respectively. Comparable system-wide RevPAR (in constant dollar) was down 83.6% in North America and 86.7% outside North America.
So far this year, shares of the company have fallen 36.6% compared with the industry’s 25.5% fall.
Marriott — which shares space with Hilton Worldwide Holdings Inc. (HLT - Free Report) , Hyatt Hotels Corporation (H - Free Report) and Extended Stay America, Inc. — 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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