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Shares of Marriott International, Inc. MAR have rallied 55.5% in the past year compared with the industry’s 44.7% growth. Notably, the company is gaining momentum on the back of its digital efforts, loyalty program, marketing strategies and expansion initiatives. Improvement in demand reinstates growth prospects for the stock. Going forward, earnings are anticipated to register growth of 1,188.9% and 112.5% in 2021 and 2022, respectively.
However, decline in revenue per available room (RevPAR) due to the coronavirus pandemic is a concern.
Let us discuss the factors that highlight why investors should retain the stock for the time being.
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Key Growth Drivers
Digital innovation and social media are playing important roles in hotel bookings, and Marriot isn’t far behind to improvise. The company re-imagined its Marriott Mobile app to meet the needs of the modern traveler. The company’s loyalty program, Marriott Bonvoy, is also playing a supporting hand in its marketing strategies.
To this end, the company is engaging customers with promotional offers like grocery and retail spending accelerators on its co-branded credit cards (American Express and Chase). During the first quarter, the company expanded its co-brand portfolio in South Korea and Mexico, bringing the total count to seven. Moreover, its association with uber is encouraging. Solid customer engagement is being registered on the idea of providing loyalty points for activities such as ride hailing and food delivery.
With the roll out of vaccines in full swing, pent-up demand is being witnessed in countries such as the United States, the UAE and Qatar. Also, improvements are being registered in regions including Africa, Maldives, Australia, Canada, Mexico, Macau and Virgin Islands. Ease on travel restrictions coupled with enhanced airlift activities are boosting the company’s prospects. Greater China continues to lead growth owing to rise in demand. The company stated that bookings for leisure transient room and business transient room in the region have exceeded pre-pandemic levels.
Given its property locations, we believe that the company is well-poised to benefit from the increasing market demand on the back of ramped-up business and leisure traveling in major North American and international locations.
Meanwhile, Marriott is consistently trying to expand worldwide presence and capitalize on 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 first-quarter 2021, Marriott's development pipeline totaled nearly 2,825 hotels, with approximately 491,000 rooms. For 2021, the company anticipates net rooms growth in the range of 3-3.5%.
The Hotel and Motels industry is currently grappling with the coronavirus pandemic and Marriott isn’t immune to the trend. The industry’s luxury, upper scale and urban hotels have been affected by the coronavirus pandemic. Due to the crisis, the company failed to provide earnings and RevPAR guidance for 2021. It also suspended its share repurchase and dividend payments until further notice.
Meanwhile, the company is experiencing substantial declines in RevPAR and occupancy in all regions served. During first-quarter 2021, RevPAR for worldwide comparable system-wide properties fell 59.1% in constant dollars due to 30.4% and 26.2% decline in occupancy and average daily rate (ADR), respectively. These metrics were impacted by the coronavirus pandemic. Comparable system-wide RevPAR in Asia Pacific (excluding China) plunged 68.3% in constant dollars due to 37.3% and 37.3% decline in ADR and occupancy, respectively. Moreover, comparable system-wide RevPAR in Europe and America declined 85.8% and 65.9%, respectively.
Marriott — which shares space with Hilton Worldwide Holdings Inc. HLT, Hyatt Hotels Corporation H and Choice Hotels International, Inc. CHH — 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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Marriott International, Inc. (MAR) : Free Stock Analysis Report
Hyatt Hotels Corporation (H) : Free Stock Analysis Report
Choice Hotels International, Inc. (CHH) : Free Stock Analysis Report
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