Marriott International, Inc. (MAR - Free Report) is a leading company in the luxury and lifestyle space, which includes brands that own more than 6,782 properties in 129 countries and territories. The company’s strong brand presence, expansion strategy and acquisitions poise it for growth.
However, intense competition from big hotel chains such as Hyatt (H - Free Report) and Hilton (HLT - Free Report) , as well as smaller lodging establishments like Choice Hotels (CHH - Free Report) , is a notable concern. Further, top-line pressure in different macroeconomic region has been hurting Marriott of late.
Notably, shares of Marriott have lost 20.8% in the past year, outperforming the industry’s collective decline of 27.8%.
Factors Likely to Support Growth
Marriott’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. RevPAR in North America rose 3% in the third quarter.
Meanwhile, Marriott continues to rely on acquisitions in order to expand its footprint globally. In 2016, it completed the acquisition of Starwood and became the world's largest hotel company. With the completion of this acquisition, Marriott's distribution more than doubled in Asia, and the Middle East & Africa combined. Further, Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in international markets. Moving ahead, the company plans to significantly expand its global portfolio of luxury and lifestyle brands.
Marriott has also been extensively embracing social media and digital capabilities to drive revenue growth. The Marriott mobile app for tablets and smartphones helps guests to manage their bookings and access interactive maps/GPS as well as reward programs. Moreover, the company rolled out guestVoice to measure guest feedback, introduced SPG Mobile check-in and check-out in North America, and achieved procurement and OTA cost savings.
Marriott’s lower-than-expected top-line performance over the past three quarters has disappointed investors. The company’s revenues missed the Zacks Consensus Estimate in the first, second and third quarters of 2018.
Despite immense growth potential, a sluggish economy and oversupply in Brazil are weighing on the Latin American region. In the Middle East, sanctions on Qatar reduced travel in and out of that country. Meanwhile, political unrest, lower government spending, new hotel supply and a tough oil market continue to hurt tourism in other Middle East markets. The company expects weak RevPAR trends in the region to continue in the coming quarters as well.
Meanwhile, in the domestic market, the company is facing competition in New York due to a continuous increase in the supply of hotels, which is limiting room rents, thereby, hurting RevPAR in the region. On the whole, though leisure demand remains strong, cautious corporate, group and transient demand raise concern.
Marriott currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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