With Big Development Pipeline, Marriott Looks Good

Marriott (NASDAQ: MAR  ) is the third-largest hotel chain in the world, yet the company continues to offer investors growth opportunities with its stock. Furthermore, the hospitality industry is projected to be one of the fastest-growing areas of business for years to come. With occupancy rates rising, revenue in each room gaining, and the company's premium brands expanding nicely into new territory, Marriott looks to continue its respectable track record of generating, on average, more than 11% per year in capital appreciation. With second-quarter earnings fresh off the press, here's what you need to know about Marriott.

Solid gains
For a hotelier, the go-to metric is RevPAR -- revenue per available room. More than any other, RevPAR tells both the company and investors how its key assets are performing on an individual basis -- similar to how retailers use same-store sales or sales per square foot.

For Marriott, RevPAR is looking strong, with a year-over-year increase of 5.3% coupled with a 4.3% increase in room rates. As mentioned by management during the conference call, occupancy rates are hovering around their pre-recessionary, 2007 peak. The company is comforted with different avenues of bookings -- leisure travel is increasing at an impressive rate, especially among luxury travelers, while group bookings have positive outlook as well with more conferences and meetings taking place. Weekend RevPAR posted the strongest gains, with the Ritz Carlton brand leading the pack at 9% year-over-year growth.

The weakest segment by far was the government travel business, which accounted for just 5% of group business last year and is projected to hit 2% by the end of 2013.

Internationally, the Middle East has overtaken Asia as the go-to area for RevPAR growth. Marriott found 11% RevPAR growth in the region, as opposed to just 3% (using local currency) in China. Management has taken a more conservative approach to RevPAR forecasting for both areas, but noted it remains "very bullish" on the long-term outlook.

As far as headline numbers, the company came in at the midpoint of guidance at $0.57 per share.

Looking ahead
Both on a macro and a company-specific level, things look great for Marriott. Management noted that the company's development chain is red-hot. Since 2009, the chain has grown its portfolio by 12%, with 22% more in development. Internationally, 1 in 8 new hotels is a Marriott brand. Domestically, that number is 1 in 4.

Though supply growth remains sluggish in the United States, the company is ambitiously building out for the boom in leisure and business travel. Through 2013, the company is expecting to open 30,000 new rooms.

Marriott pays a decent dividend, offers investors solid chances of capital appreciation, and has a management team that has navigated both the ups and downs of domestic and foreign economies with relative ease. For exposure to the booming industry, take a look at Marriott first.

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