Hotel chain operator, Marriott International Inc. (MAR), recently announced that its extended-stay portfolio now accounts for a third of its development pipeline in North America. With the extended-stay portfolio brands, Marriott currently has nearly 450 properties which are already approved for development or are under construction in North America. This includes the company’s Signature, Select Service and Luxury Collection, and Lifestyle brand hotels.
The company’s extended-stay portfolio comprises of three brands - Residence Inn by Marriott, TownePlace Suites by Marriott and Marriott Executive Apartments. Of the three, Residence Inn and TownePlace Suites together have around 180 hotels under construction, with 140 slated to open by 2015 in North America.
Residence Inn, which has the third-largest number of hotels in the Marriott portfolio worldwide, is exclusively designed to preserve the personal and business routines of guests. The brand’s amenities and services are meant for those who seek a place for long stay. Currently, Marriott has over 600 Residence Inn hotels in the U.S. and Canada. Driven by strong franchise demand for the brand, Residence Inn projects to extend its footprints by another 120 hotels in the North American region by 2015.
TownePlace Suites by Marriott has been designed to be like a home for travelers. The brand provides them with simple, quality surroundings and special service to make them enjoy a real living experience. The brand currently has more than 200 properties in the U.S. and Canada. TownePlace Suites anticipates that it will increase the number of hotels by more than 40% in the U.S. and Canada by 2015.
The demand for Marriott’s brand in North America is driven by strong occupancy rates, which is the basis for a price hike across all its brands. In the recently concluded third quarter of 2012, REVPAR for comparable company-operated North American limited service hotels grew 5.9% (including Residence Inn and TownePlace Suites), driven by a 5% upside in the average daily rate.
However, the company should be wary of its competitors. Major hotelier peer Starwood Hotels & Resorts Worldwide Inc. (HOT) and Choice Hotels International (CHH) are also poised to expand their major brands in the North American region by 2013.
Another Marriott extended-stay brand, Marriott Executive Apartments, caters to international travelers and professionals seeking luxurious living for a stretch of 30 nights or more. The apartments are strategically situated in the heart of business, shopping and entertainment districts and are designed to offer an upscale environment to guests.
The brand has a presence only outside the U.S., with hotels in more than 15 countries across Latin America, Europe, Asia, the Middle East and Africa. Marriott Executive Apartments projects an increase by 50% to nearly 40 properties on the international level by 2016. The move is aimed to serve the rising demand for Marriott Executive apartments in the emerging markets of Asia, the Middle East and Africa.
Marriott recently reported third-quarter 2012 earnings of 44 cents per share, comfortably surpassing the Zacks Consensus Estimate of 40 cents and the year-ago quarter adjusted earnings of 29 cents per share.
We currently have a long-term Neutral recommendation on the stock. Also, it carries a short-term Zacks #3 Rank (Hold).
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