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Marriott (MAR) Plans to Expand Presence in Europe by 2020

Zacks Equity Research

With the acquisition of Starwood Hotels & Resorts on Sep 23, 2016, Marriott International, Inc. MAR has become the world’s largest hotel company, with over 6,000 properties across 122 countries. Shares of the company have gained 25.9% since the takeover while the S&P 500 Index witnessed an increase of 9.1% over the same time frame.

Notably, in addition to the domestic markets, Marriott has been consistently trying to expand its presence worldwide and capitalize on the demand for hotels in the international markets.

In fact, during a conference in Berlin on Mar 6, 2017, Marriott’s CEO Arne Sorenson announced plans to ramp up the expansion of brands acquired through the takeover, such as Sheraton, W and Aloft. Moreover, even with 30 brands under portfolio, the company has not ruled out further M&A activities. Holding about a 14–15% market share in the U.S., the company is well positioned to capitalize on the existing growth potential.

Moreover, at the International Hotel Investment Forum (IHIF) in Berlin, Marriott has now announced that it expects to considerably increase the size of its portfolio in Europe across all segments of the industry. It is to be noted that the planned expansion in Europe is the first development vision stated for the continent since Starwood acquisition.

Inside the Headlines

Notably, the hotel conglomerate added 40,000 rooms in Europe with the Starwood acquisition alone, and attained its long-term goal to triple in size in the continent, from 40,000 open rooms in 2010 to 134,000 open or signed rooms at 2016-end. The company has now set some goals in the region and aims to expand its lead in the luxury and full-service segments, have the largest portfolio in the upscale division and win over millennials in the affordable lifestyle group by 2020.  

Marriott plans to further expand its large and diverse portfolio of hotels in the luxury and full-service segments in Europe via accelerated growth of its iconic luxury brands such as The Ritz-Carlton and St. Regis, its collection brands including The Luxury Collection, Autograph Collection Hotels and Tribute Portfolio, and industry stalwarts like Marriott Hotels and Sheraton.

The company also plans to debut Delta Hotels by Marriott in Europe and have more than 4,000 opened or signed rooms for the brand by 2020. It also aims to triple the number of signed deals for the game-changing design brand, W Hotels, in Europe by that time.

Meanwhile, Marriott currently has the fifth largest portfolio of open hotels in the European upscale segment with roughly 24,000 open rooms featuring brands like AC Hotels, Aloft Hotels and Four Points by Sheraton. The company aims to lead the segment, with plans to double this portfolio in the continent in opened and signed rooms by 2020.

Also, Marriott plans to expand its Courtyard Hotels presence in Europe by over 12,000 opened and signed rooms, on the back of a strong pipeline of expected openings. Meanwhile, addition of over 30 open and signed hotels to the innovative Residence Inn and Element brands is expected to drive growth in the extended stay segment.

Interestingly, Marriott expects the major portion of its room growth to come from its economical lifestyle brand, Moxy Hotels. Launched in Milan in 2014, Moxy offers travelers a classy and feisty hotel stay at reasonable rates. Moxy presently has over 1,000 rooms open in Europe and more than 9,000 in its pipeline. Marriott expects to further add 22,000 signed rooms for Moxy by 2020 in order to compete with other affordable, experience-driven brands.

Bottom Line

With the boost in the economy, and an improvement in business and leisure travel, Marriott is well poised to grow in the near as well as long term. Further, its investments in technology for hotel bookings would improve guest experience, thereby boosting occupancy.

However, revenue growth at Marriot might get restricted as lingering political uncertainty in key international markets and significant currency headwinds are affecting most of the hotel chains including Hyatt Hotels Corporation H, Hilton Worldwide Holdings HLT, Wyndham Worldwide Corporation WYN.

Nonetheless, consistent efforts to expand its presence worldwide and capitalize on the demand for hotels in the international markets, in addition to domestic lands, bode well for this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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