Here's Why You Should Retain Marriott (MAR) in Your Portfolio
Marriott International, Inc. MAR is likely to benefit from solid leisure demand, rising cross-border travel and the loyalty program. Also, its focus on hotel conversion opportunities bodes well. However, constrained RevPAR in Greater China is a concern.
Let us discuss the factors highlighting why investors should retain the stock for now.
Marriott has been gaining from pent-up leisure demand, reopening international borders and lenient travel restrictions. Throughout the fourth quarter of 2022, the company witnessed a steady increase in demand in the United States, Canada, the Middle East and Africa regions. The company benefited from robust leisure demand and business and cross-border travel improvements. Also, it reported a strong RevPAR recovery in Europe. Group demand in the United States and Canada increased sharply during the quarter, leading to improved occupancies and strength in ADR. With global trends improving, the company expects the recovery momentum to continue. Attributes such as pent-up demand for all types of travel, the shift of spending toward experiences versus goods, sustained high levels of employment, lifting of travel restrictions and opening borders (in most markets) are likely to aid the company in the upcoming periods.
The company is benefiting from the robust growth of its loyalty program. With nearly 177 million members globally, the company’s loyalty program Marriott Bonvoy is supporting its marketing strategies. Also, the company is engaging its customers with promotional offers such as grocery and retail spending accelerators on its co-branded credit cards. In 2022, digital revenues increased 41% year over year. Mobile app users were up 32% year-over-year, while digital room nights rose 27% year over year.
During the fourth quarter of 2022, the company reported solid member engagement with respect to its co-branded credit cards. Backed by solid customer acceptance for credit card programs and a rise in credit card average spending, the company anticipates higher contributions from credit card fees in 2023. In 2023, the company expects total fees to rise between 6% and 12%, while the non-RevPAR-related component is anticipated to rise 4% to 7% year over year.
Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in international markets. During the second quarter of 2022, the company announced an agreement with Vinpearl to open eight hotels in Vietnam. The deal is expected to add 1,700 rooms to the system. The company is focused on hotel conversion opportunities to mitigate the impact of construction delays caused by the pandemic. In 2022, conversions represented 20% of room signings and 27% of room openings. The company expects positive development trends to continue on the back of new development and multiunit conversion opportunities. For 2023, the company anticipates net room growth in the range of 4-4.5% year over year.
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Shares of Marriott have inched up 1.8% in the past year compared with the industry’s 5.3% growth. The coronavirus crisis continues to cause disruptions to the global economy and the hospitality industry. During the fourth quarter, strict COVID policies in China dented travel demand. RevPAR remained constrained in Greater China. During the quarter, comparable system-wide RevPAR in Greater China fell 18.2% year over year. Occupancy declined 7.7% from 2021 levels and ADR fell 4.6% year over year. The company expects demand to remain uneven in the near term.
Zacks Rank & Stocks to Consider
Marriott currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Consumer Discretionary sector are Las Vegas Sands Corp. LVS and Bluegreen Vacations Holding Corporation BVH and Crocs, Inc. CROX.
Las Vegas Sands sports a Zacks Rank #1. LVS has a long-term earnings growth rate of 2.5%. The stock has increased 59.4% in the past year.
The Zacks Consensus Estimate for LVS’ 2023 sales and EPS indicates a rise of 107.7% and 217.5%, respectively, from the year-ago period’s estimated levels.
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 11.6%, on average. Shares of the company have increased 24.2% in the past year.
The Zacks Consensus Estimate for BVH’s 2023 sales and EPS indicates a rise of 0.2% and 10.2%, respectively, from the year-ago levels.
Crocs carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 21.8%, on average. Shares of Crocs have increased 80.3% in the past year.
The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates a rise of 12.5% and 2.5%, respectively, from the year-ago period’s levels.
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