Marriott International (MAR 0.96%) is on the move again thanks to a general upswing in travel (have you noticed Priceline.com's stock surge?!) and the IPO of larger rival Hilton spurring interest in the sector. But there's plenty of reason to go with Marriott instead...five huge ones, in fact.
1. A new presence in Africa
Marriott just bought operating rights for the Protea hotel chain in Africa. This move will double its number of rooms in the region to ~23,000. Some 80% of the hotels are in South Africa with the remaining spread around Uganda, Zambia, Namibia, Malawi, Tanzania, and Nigeria. Marriott CEO Arne Sorenson said,
Africa has significant untapped potential for travel and tourism, both as a destination and source of new global travelers. The continent's GDP is anticipated to grow at over five percent annually over the next several years which we expect will raise more people into the emerging middle class. With the Protea Hotels acquisition, our expanded footprint should allow us to become the first choice of Africa's rapidly growing population of young, sophisticated travelers.
2. Diverse holdings across the globe
The Hilton chain, soon to debut publicly, has 4,000 hotels but Marriott is right behind it at close to 3,900 hotels in 72 countries. Marriott owns 18 different hotel brands from luxury names The Ritz-Carton and Bulgari to business and family friendly Courtyard and Fairfield. The company lists the following in its global hotel pipeline under development and available to franchisees: 40 in the Middle East/Africa, 160 in Asia Pacific, 25 in Latin America and the Caribbean, 35 in Europe, and 550 in the US and Canada. The Asia numbers are of interest because Marriott predicts the 2011-2021 compound annual growth rate for hotel spending is 10.1%, almost double that of these other regions, except for the MiddleEast/Africa at 6.8%.
World's tallest hotel, the JW Marriott Marquis in Dubai
Source: Marriott 2012 annual report
3. Its franchise model works
Just like restaurants, Marriott's owners and franchisees take on most of the risk as well as responsibilities and still generate revenue for the company. Chief executive Sorenson said in the 2012 shareholder letter, "By focusing on managing and franchising hotels, rather than owning them, we drive strong shareholder value and high return on invested capital." The company expects 8%-12% growth in revenue fees in 2013.
Source: Marriott presentation at JPMorgan roadshow
4. Strong insider conviction with Marriott family members:
Since 1927 when J. Willard Marriott started a root beer stand to slake thirsts during a muggy Washington, D.C. summer, one or more Marriott family members have been at the helm. J. Willard Marriott Jr stepped down as CEO, but he is still executive chairman. With the exception of Wal-Mart, few other public businesses have had this strong continuous familial interest. Marriott family members hold approximately 25% of shares. Caveat: family members have sold 1.5% of their stake in the last six months.
The Marriotts are well known as a conservative and value-oriented family and so is their overall management style. But they're more than willing to share the wealth with shareholders. Marriott bought back $1.2 billion worth of shares in 2012 and paid $1.3 billion in dividends. The company has grown tremendously since 1998, more than doubling its 1,500 hotels. In addition to the Protea buy in Africa, last year the company paid $210 million for the destination Gaylord hotel chain.
5. Marriott is wooing millennials
'Must get millennials' seems to be the new mantra in service industries. Marriott opened a new European three-star chain called MOXY HOTELS to attract the economizing youth traveler in 2012 and expects to expand it to 150 franchised properties within a decade. Chief executive Sorenson said this:
We are focused on next generation travelers. Nearly half the people on this planet are under the age of 25. They will increasingly be our new customers, and what they want, we will deliver.That includes technology leadership and mobility, along with style, choices and experiences.
To that end, the company has upped its social media and mobile game, earning a place on Forbes Social Media Stars list in 2012.
source:MOXY Hotels website
How Marriott racks up against Wyndham Worldwide and Intercontinental Hotels Group
Compared to soon-to-IPO Hilton with its trailing-12 month revenue of approximately $9.3 billion, Marriotts' $2.6 billion seems puny, but Marriott earned almost double the net income at $656 million to Hilton's $359 million.
Marriott's most serious rivals on a global scale are Wyndham Worldwide (TNL 2.67%) and InterContinental Hotels Group (IHG 1.89%). InterContinental Hotels Group owns 4,600 hotels in 100 countries. InterContinental trades at a lower trailing earnings multiple of 14.7 and has a yield of 1.5%. InterContinental operates or manages such famed hotel brands as Holiday Inn, Hotel Indigo, Candlewood Suites, and six more.
Wyndham calls itself the world's largest hotel chain at 7,440 hotels worldwide. It has a similar trailing earnings multiple of 22.8 to Marriott's 22.7 and a slightly higher yield of 1.6% to Marriott's 1.4%. Wyndham operates/franchises many well known hotel brands, Ramada, Super 8, Microtel, and 14 more.
Wyndham, too, is trading at 52-week highs along with other travel-related stocks. Wyndham's earnings growth rate of 13.5%, predicted by analysts for year-end of 2014, is higher than InterContinental's 3.7% but not as robust as Marriott's 16.9%.
Check into Marriott
Marriott is rapidly expanding worldwide, doubling its African properties this year alone. The company is shareholder friendly and is the fastest grower of these three. With strong insider conviction, growing franchise fees, and a forward vision of social and mobile media attracting a new generation, Marriott is a hotel chain you should check into.
