Please ensure Javascript is enabled for purposes of website accessibility

Marriott Finishes a Terrific Year

By Dan Caplinger - Feb 14, 2018 at 7:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Find out how the hotel company is rewarding employees with up to $1,000.

It's been more than a year since Marriott International (MAR -0.69%) merged with Starwood Hotels & Resorts, but already, the impact of the combination has been felt across the industry. Marriott's competitive position within the hotel sector is stronger than ever, and the company's global presence gives it a competitive advantage that few of its peers have been able to match.

Coming into Wednesday's fourth-quarter financial report, Marriott investors wanted to see evidence that the hotel giant was using its competitive leverage to extract further gains from the industry. Marriott's results were solid, and company officials are looking forward to a strong 2018. Let's take a closer look at Marriott and what its results say about its outlook for the coming year.

Tropical garden next to a multi-story hotel with the Marriott name and logo on it.

Image source: Marriott.

Marriott gets the job done

Marriott's fourth-quarter results showed ongoing progress in its mission to integrate Starwood and boost total growth. Total revenue rose 8% to $5.88 billion, which was far better than the 3% growth rate that most of those following the stock were expecting to see. GAAP net income sank because of one-time factors, but adjusted net income of $415 million was higher by 24% from year-ago levels, and adjusted earnings of $1.12 per share topped the consensus forecast among investors of $1 per share.

Tax reform did have a fleeting impact on Marriott's financials. The company faced a $745 million transition tax on accumulated foreign earnings, which it will have to pay over the next eight years. However, offsetting tax benefits of $159 million came from revaluing net deferred tax liabilities at the new lower corporate tax rates.

Fundamentally, Marriott looked solid. Worldwide, comparable systemwide revenue per available room rose 4.6%, outpacing the comparable RevPAR gains in North America of 3.9%. Base management and franchise fees were up 11% from the year-ago quarter, while incentive management fees picked up 14%, with Marriott pointing to particular strength in North America and the Asia-Pacific region. Expenses remained under control, lifting adjusted pre-tax operating income by 7% from year-earlier levels.

Marriott grew its network, adding 132 new properties and about 21,000 rooms to its worldwide portfolio. As of the end of 2017, Marriott had more than 6,500 properties, and those assets contained almost 1.26 million rooms. Marriott's pipeline is still impressive, with more than 2,700 properties and 460,000 rooms in various stages of development.

CEO Arne Sorenson had no doubts in his views on Marriott's progress. "2017 was a terrific year," Sorenson said, noting that "we made great progress on the integration of Starwood, capturing significant property and corporate overhead cost synergies while also increasing our worldwide RevPAR index." The CEO also pointed to joint ventures with Alibaba (BABA -0.62%) and strategic credit card agreements to bring in more revenue and reward its loyal customer base.

Can Marriott keep up the pace in 2018?

Marriott has plenty of optimism about its immediate future. Among the moves that the company is making is to offer a one-time contribution to retirement savings plans, offering a $5 to $1 match of up to $1,000 from the hotel company. Reduced tax rates should support the one-time move.

Marriott also gave further guidance. Full-year 2018 projections are relatively consistent with what the company said previously, with the hotel chain expecting a 7% rise in room counts before accounting for roughly 1% to 1.5% of rooms to be sold or otherwise eliminated. Global RevPAR should rise 1% to 3%, with a slight upward revision in growth to a 1% to 2% range in North America and 3% to 5% internationally. Adjusted earnings will be between $5.22 and $5.45 per share after taking into account new accounting standards for revenue.

For the first quarter, comparable systemwide RevPAR in North America should come in flat to up 2%, with international growth of 3% to 5% lifting worldwide comps to a range of 1% to 3%. The move should come despite some unfavorable comparisons, including the change in when Easter falls this year compared to last.

Marriott investors weren't entirely happy with the report and guidance, and the stock fell 4% in after-hours trading following the announcement. Nevertheless, Marriott has done a good job of integrating the Starwood acquisition, and the future still looks bright for the hotel giant in 2018 and beyond.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marriott International, Inc. Stock Quote
Marriott International, Inc.
MAR
$137.73 (-0.69%) $0.96
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
BABA
$116.03 (-0.62%) $0.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.