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Hilton versus Marriot: Which is the Better Hotel Stock?

Zacks Equity Research
·5 min read

The hotel industry, which has been crippled by the coronavirus pandemic, is slowly regaining momentum.

Per STR, the U.S. Hotel industry’s occupancy for the week ended Sep 26, 2020 has rebounded sharply from the historic lows in mid-April. According to STR, occupancy for the week ended Sep 26 hit 48.7%, in sharp contrast to the industry’s historic low of 22% in mid-April. However, the ongoing pandemic will continue to hurt the industry’s occupancy rate and RevPAR in 2020.

Moreover, higher costs remain a concern for the industry participants. Notably, hoteliers are focusing on cost saving measures to counter the crisis as the global travel industry remains under the influence of the coronavirus crisis. The industry workers are facing pay cuts, layoffs, shortened working hours and furloughs. In fact, dominant industry players including Hilton Worldwide Holdings Inc. HLT, Hyatt Hotels Corporation H, Wyndham Hotels & Resorts, Inc. WH and Marriott International, Inc. MAR are all facing coronavirus related woes.

Due to the coronavirus pandemic, the Zacks Hotels and Motels industry have declined 27.1% so far this year, against the S&P 500’s gain of 4%.

Leading hoteliers like Hilton and Marriott have been adopting and deploying strategies to generate profits.

Taking this scenario into consideration, let’s analyze and find out which of the two — Hilton and Marriott — is better positioned at the moment. Notably, both the stocks carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Price Performance

While shares of Hilton have surged 20.4% in the past three months, the same for Marriot have gained 10.7%.

Shares of both the companies have benefited from hotels reopening after coronavirus led-shutdown. The hotel industry is witnessing early signs of recovery.

 

Earnings History and Projected Growth

Hilton beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once. It has a trailing four-quarter negative earnings surprise of 1.7%, on average. Meanwhile, Marriott missed estimates in three of the trailing four quarters and surpassed once. It has a trailing four-quarter negative earnings surprise of 27.1%, on average. While Hilton has an impressive long-term earnings growth rate of 9.5%, the same for Marriot is anticipated to be 6.1%.

Fundamentals

With restrictions being lifted and properties reopening globally, Hilton’s business is likely to pick up on improved demand post the summer period. Notably, management expects hotel occupancy levels to improve 40-50% by late summer (or early fall).

Hilton continues to invest heavily in the digital platform to provide seamless and contactless experience to customers. Notably, features including digital check-in, room selection and ability to message hotel team members through personal devices bode well with customers. These initiatives combined with its new approach toward cleaning and sanitation are likely to boost consumer confidence during the pandemic. Moreover, the company has extended its cancellation policies to help Honors member maintain their points and status amid the crisis. To this end, the company has partnered with American Express in order to provide Honors members with greater flexibility and more points for future travel purposes.

In a bid to maintain its position as the fastest-growing global hospitality company, Hilton is continuously driving unit growth. During second-quarter 2020, the company opened 60 new hotels. It also achieved net unit growth of roughly 5,500 rooms. As of Jun 30, 2020, Hilton's development pipeline comprised more than 2,700 hotels, with more than 414,000 rooms throughout 121 countries and territories, including 35 countries and territories where it currently does not have any operational hotels. Moreover, 234,000 rooms in the development pipeline were located outside the United States and 222,000 rooms were under construction.

Marriott is consistently trying to expand presence worldwide and capitalize on demand for hotels in international markets. Moving ahead, the company plans to significantly expand global portfolio of luxury and lifestyle brands. In April 2019, the company opened its 7000th property — the 27 storey St. Regis Hong Kong. At the end of second-quarter 2020, Marriott's development pipeline had nearly 3,000 hotels, with approximately 510,000 rooms. Further, nearly 230,000 rooms were under construction.

With more than 143 million members globally, the company’s loyalty program Marriott Bonvoy plays a supporting hand in its marketing strategies. Notably, the company is entitled to engage with customers through email campaigns and promotional offers such as point accelerators on its co-brand credit cards for gas, dining and groceries, and gift card discounts. Additional benefits for elite members were also provided.

Our Take

Our comparative analysis shows that Hilton has an edge over Marriot in terms of share price appreciation and projected EPS growth rate. However, the fundamentals of both the companies look solid. Taking all the factors into account, we believe Hilton is slightly better positioned than Marriot at the moment.

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Marriott International, Inc. (MAR) : Free Stock Analysis Report
 
Hyatt Hotels Corporation (H) : Free Stock Analysis Report
 
Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report
 
Wyndham Hotels Resorts Inc. (WH) : Free Stock Analysis Report
 
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Zacks Investment Research