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Marriott (MAR) Reveals Large-Scale African Expansion Plans

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The world’s largest hotel company, Marriott International, Inc. (MAR - Free Report) recently announced its plans of constructing three new hotels in Cape Town, South Africa.

These hotels will be constructed in collaboration with Amdec Group, Marriott’s partner since 2015, when it announced the development of the first two Marriott branded hotels in South Africa. Notably, those two properties are situated in Johannesburg and are scheduled to open in 2018.

This brings Amdec’s total investment in South Africa to over R3 billion, which is expected to have positive economic spinoffs and colossal impact on job creation.

Among the three new hotels in the Cape Town, one is slated to be the first Marriott Hotel in the city under the company’s signature brand – Marriott Hotels. The second is under Marriott’s upscale extended stay brand – Residence Inn by Marriott, the first for South Africa. The third one is the first hotel in the Middle East & Africa (MEA) region under Marriott’s upper-moderate tier lifestyle brand – AC Hotels by Marriott.

Moreover, the three new hotels are expected to add over 500 rooms to Cape Town’s existing hotel accommodation offering. The 189-room AC Hotel Cape Town Waterfront will be located in the Roggebaai precinct at the gateway to Cape Town's waterfront, while the 200-room Cape Town Marriott Hotel Foreshore and the 150-room Residence Inn by Marriott Cape Town Foreshore will be situated at the Harbour Arch which is currently the location of several major construction projects.

The new additions reinforce Marriott’s vigorous expansion strategy across the rapidly growing MEA region. On Oct 5, it unveiled its first hotel in Kigali, Rwanda and also recently announced plans to expand into Nairobi, Cairo and Mauritius. The company targets to expand its presence in Africa to 27 countries with over 200 hotels and around 37,000 rooms by the year 2025.


Our Take

We note that these announcements follow Marriott’s recent acquisition of Starwood Hotels & Resorts. Marriott is currently operating or franchising more than 5,700 properties and 1.1 million rooms, in over 110 countries. With the completion of the acquisition, Marriott's distribution more than doubled in the Middle East and Africa combined.

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. The company’s significant international exposure and an aggressive buyback strategy add to the positives. Further, its investments in technology for hotel bookings would improve guest experience, which in turn should boost occupancy.

However, lingering political uncertainty in key international markets and significant currency headwinds might restrict revenue growth.

Zacks Rank and Other Stocks to Consider

Marriott currently has a Zacks Rank #3 (Hold). Better-ranked hotel stocks include China Lodging Group, Limited (HTHT - Free Report) , Intrawest Resorts Holdings, Inc. and Peak Resorts, Inc. (SKIS - Free Report) . While China Lodging sports a Zacks Rank #1 (Strong Buy), Intrawest Resorts and Peak Resorts are currently Zacks Rank #2 (Buy) companies. You can see the complete list of today’s Zacks #1 Rank stocks here.

China Lodging has recorded an average positive earnings surprise of 54.33% over the past four quarters, with a beat in each. Additionally, its growth estimate for the full year 2016 is pegged at 65.7% compared with the industry average of 21.7%.

Intrawest Resorts has received three upward revisions over the last 30 days as against zero downward revisions. Moreover, its current year earnings estimates increased from 28 cents 30 days ago to 60 cents currently.

Peak Resorts’ growth estimate for the full year 2016 is pegged at 200% compared with the industry average of 21.7%. Moreover, it has received three upward revisions over the last 30 days as against zero downward revisions.

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