Marriott International MAR announced the 2020 vision, where it plans to expand the footprint in the AsiaPacific by targeting to open 1000 hotels by the end of 2020. In 2019, the company aims to open 100 hotels in Australia, Hong Kong, Philippines, Nepal and India, with approximately 20,000 rooms.
This move underscores Marriott’s efforts to expand presence worldwide and capitalize on the demand for hotels in international markets. It also indicates the company’s way of countering competition from the likes of Hyatt H and Hilton HLT. Backed by strong brand presence, shares of Marriott have gained 21.8% so far this year, outperforming the industry’s 20.4% rally.
Why is Marriott Focusing on the AsiaPacific?
Marriott expects to capitalize on global travel trends in China, India and Indonesia. High population along with a burgeoning middle class is expected to help the company to derive profits from operations in these countries. China continues to be the most important growth driver for Marriott,with more than 300 hotels in the pipeline. In 2019, the company expects to open more than 30 hotels in China, including the first JW Marriott Marquis Hotel.
Meanwhile, India is the second-fastest growing engine in the Asia Pacific, with more than 50 properties in Marriott’s pipeline. It expects to open more than 30,000 rooms in India by the end of 2023. In the Pacific region, Marriott plans to open 50 hotels by 2020.
Notably, the demand for hotels in these markets is greater than in the domestic space as the rising disposable income, primarily among the middle class, is boosting tourism. Within the AsiaPacific, China promises immense growth potential despite the economic slowdown. Meanwhile, as income rises, China's middle class is looking for higher-quality products and elevated travel experiences. Notably, China is the largest source market for outbound travel now. In fact, China outbound travel is set to boom further with 700 million expected trips over the next five years.
In fourth-quarter 2018, system-wide revenue per available room (RevPAR) increased 5% in the Asia Pacific region, following 6% gain in the preceding quarter. The company expects the same metric to grow at a mid-single-digit rate in 2019.
Focus on Expansion to Drive Top-Line Growth
Expansion of its brands has been a riveting growth strategy for Marriott. The company plans to significantly expand the global portfolio of luxury and lifestyle brands. For 2019, Marriott anticipates 5.5% net room growth, which is likely to continue building economics, scale and consumer preference for its brands.
The hotel company is also trying to expand footprint outside the United States, especially in Asia, Latin America, the Middle East and Africa. Its Europe pipeline has grown consistently in the recent past and is expected to continue, going forward. In fact, the company aims to expand its lead in the luxury and full-service segments in the region, have the largest portfolio in the upscale division and also win over millennial in the affordable lifestyle group by 2020. Marriot is very optimistic about growth opportunity in India.
We believe that by expanding presence, the company will further see top-line growth. In the fourth quarter of 2018, RevPAR for worldwide comparable system-wide properties increased 1.3% in constant dollars (up 0.1% in actual dollars), driven by a 2.2% improvement in average daily rate (ADR), partially offset by a 0.7% fall in occupancy.
For 2019, Marriott’s comparable system-wide RevPAR is expected to increase 1-3% in North America, 2-4% outside North America and 1-3% worldwide.
Zacks Rank & Stock to Consider
Marriott currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the hotel space is Red Lions Hotel RLH, currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Red Lions’ earnings for 2019 are expected to grow 95.6%.
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Hyatt Hotels Corporation (H) : Free Stock Analysis Report
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