Marriott International Hits New All-time High in Wake of Strong Q1 Results

A full transcript follows the video.

Chris Hill: Let's move on to Marriott. Their first quarter profits came in higher than expected. The stock is up around 6%, hitting a new high. They really crushed it this quarter. The stock is up 22%, but it's had such a great, steady run for so long here. You look at the fact that their occupancy rates are higher, and their room rates are higher. If you run a hotel, it doesn't get a whole lot better than that.

Jason Moser: No it does not. Chris, I must say, I'm a little disappointed with this quarter. I was hoping maybe for a poorer performance and some tepid guidance, because we have this on our watch list in MDP and we have a very firm price that we're looking to add this to the portfolio at, and today's pop is not helping that cause.

Hill: It's not helping? [laughs] 

Moser: No, not at all. I really like this business. The uncertainty with Marriott for the past six months was the acquisition of Starwood. There was a little bit of a back-and-forth there with some competing bids and whatnot, but that deal went through, so now Marriott owns Starwood, and they've created the biggest hotel company in the world. And it's acting like it. RevPAR, which is revenue per available room, that's their version of comps, and that was up 3.1% for the quarter. Improving trends in Europe and Asia Pacific regions led them to vie for a bit more than optimistic revPAR for the remainder of the year. And when you get that, along with a management team that has made a commitment to return a lot of value to shareholders here over the coming three years, they're going to spend somewhere in the neighborhood of $7 billion in buying back shares, and another $1.5 billion in dividends over these next three years. That's ultimately how they juice that earnings growth, they bring that share count down and continue to pay out dividends.

It's a lovely business model. These guys don't own the buildings, they're not maintaining these buildings, they're just selling their services. They have this big portfolio of like, 30 different hotel brands. The folks that own the real estate say, "We want to work with Marriott because it's a known and respected brand, and it'll bring in a lot of traffic." Then they go in and run these hotels, and they do a darn good job of it. There's nothing to hate here. I was hoping for perhaps a little bit of a weaker outlook. We felt like it was fair, at least, to think it might happen, because of concerns as far as travel restrictions, the stronger dollar doesn't necessarily play into their favor, either. But it didn't work out that way. It'll remain on the watchlist. If you're an investor in Marriott today, I think you'll be feeling very good about owning these shares.

Hill: To go to something we talked about with Coach and Kate Spade, the Marriott brand is as solid a brand -- I'll just speak for myself, but I know if I'm traveling somewhere, if that's an option, I think, "OK, good, I'm fine." If I'm staying at a Marriott, I'm going to be taken care of. And it's not going to break my wallet.

Moser: And that's a very good point you make, and that's one of the bigger catalysts that they have going for them, is the loyalty program that Marriott has had has been very sound. They have a customer loyalty second to none. And really, Starwood is kind of the same nature, so the acquisition is really bringing two very powerful loyalty programs together. And I think that over time, that's going to be something that they exploit in a good way. Now, it's interesting to think --- the other day, I was reading a take on this sector in general, and how technology, and how review sites like TripAdvisor have changed that sentiment that you just expressed there. I think for a long time, people would say, "I'm going to go to Marriott because it's a known quantity, I know what I'm getting and I know it's going to be good," whereas now you can go to something like TripAdvisor and read all of these different reviews on all of these different hotels in the area. Hotels can be sort of a fragmented market, and suddenly now, it opens this world of opportunities up. I don't just have to go to Marriott, because I could find out what these other hotels are like, and I can really shop for the best deal. So it is a little bit of a different dynamic today than it was before, but Marriott fights that by having so many different brands under that umbrella that hit all of those different value points. And the acquisition of Starwood really only strengthened that.