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Marriott Poised to Grow on Starwood Takeover Despite Risks


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On Sep 29, we issued an updated research report on Marriott International, Inc. (MAR - Analyst Report) .

Marriott recently completed its previously announced acquisition of Starwood Hotels & Resorts Worldwide Inc., which led to the creation of the world's largest hotel company. After getting the much awaited approval from the Chinese regulatory agency (MOFCOM), both the companies closed the transaction shortly.

The combined entity would now operate or franchise more than 5,700 hotels which comprise around 1.1 million rooms globally, bringing together 30 brands catering to all lodging segments.

Meanwhile, with economic boost and an improvement in business and leisure travel, Marriott is well poised to grow in the near as well as long term.

Apart from focusing on the lucrative domestic market, Marriott is consistently striving to expand its international footprint, especially in Asia, Middle East, Europe and Latin America. The acquisition of Starwood also bode well in this regard as it would greatly expand Marriott’s reach in Europe and Latin America markets.

Other hoteliers like Wyndham Worldwide Corporation (WYN - Analyst Report) , Hyatt Hotels Corporation (H - Snapshot Report) and Hilton Worldwide Holdings Inc. (HLT - Snapshot Report) are also capitalizing on growing prospects in the international markets.

Further, Marriott is significantly investing in technology for hotel bookings, in order to improve guest experience, which in turn should boost occupancy. Moreover, frequent share buybacks and continuous increase in quarterly dividend payments further affirm the company’s optimistic outlook and growth prospects.

However, macroeconomic concerns in several emerging economies might spell trouble for Marriott. Particularly, the slowdown in the Chinese economy is hurting discretionary spending and, in turn, travel. Also, in Europe, economic/political conditions are expected to be challenging after the U.K.’s exit from the 28-member economic bloc.

Meanwhile, in the domestic market, the company is facing competition in New York due to a continuous increase in supply of hotels, which is limiting room rents, thereby hurting RevPAR in the region. Further, in Houston, RevPAR is expected to be sluggish due to weakness in the energy sector.

Also, Marriott is highly vulnerable to fluctuations in exchange rates, given its significant international presence.

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