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Marriott to Expand in Middle East & Africa, Eyes Sales Growth

Zacks Equity Research

Marriott International, Inc. MAR announced plans of adding 19 properties with more than 3,000 rooms in the Middle East and Africa portfolio in 2019. The company expects to expand the portfolio by 45% and have more than 100 new properties, with 26,000 rooms in the region by 2023.

This move underscores Marriott’s efforts to expand presence worldwide and capitalize on the demand for hotels in international markets. It is also 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 3.9% in the past year against the industry’s 2.6% decline.


International Expansion — A Growth Driver

Marriott expects to capitalize on global travel trends in the Middle East region. There is a potential for the company’s luxury brands to flourish in the region. So far in 2019, Marriott has opened five properties in the region and is expected to add 14 more, thereby bringing the portfolio across the region to nearly 270 properties and over 60,000 rooms by the end of the year.

As it is, Marriott plans to significantly expand the global portfolio of luxury and lifestyle brands. For 2019, it anticipates 5.5% net room growth, which is likely to continue building economics, scale and consumer preference for its brands. This hotel company is also trying to expand footprint outside the United States, especially in Asia, Latin America, the Middle East and Africa.

Expansion to Facilitate Top Line

We believe that by expanding presence, the company will further witness 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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