As the coronavirus largely becomes a thing of the past -- or at least something we can live with -- experts believe 2022 could see a huge spike in travel. That's good news for Marriott International (NYSE: MAR). The company has 30 brands and almost 8,000 properties around the world carrying one of those logos.
But is the optimism already priced-in? It's a fair question with the stock near all-time highs. A few charts help answer the question.
Riding a wave of growth
The travel and tourism industry grew from $7.7 trillion in 2016 to $9.2 trillion in 2019 -- before the pandemic. Marriott acquired Starwood Hotels in 2016 and has continued to grow its footprint each year. It employs an asset-light model of not owning the properties. Instead, it chooses to only operate them or completely outsource operations by franchising and licensing. Management clearly favors the latter model as the mix over time shows.
Loyalty as a strategy
A 2016 mega-merger with Starwood Hotels allowed Marriott to gain scale while building a deeper connection with its guests by combining the two loyalty programs. It was necessary after the 2015 tie-up of online travel agencies (OTA) Expedia (EXPE 0.83%) and Orbitz. Those services take commissions for booking rooms, thus cutting into Marriott's profitability.
Profitability climbs as customers do more direct booking with the company. And it has succeeded in building this direct relationship with customers through its award-winning Bonvoy loyalty program. It has served as a differentiator in a world of middlemen and alternatives like AirBnB (ABNB -0.24%). Management referenced Starwood's loyalty program as a strategic component to the acquisition. The combination has been hard for travelers to resist.
Will the good times last forever
With a dominant and growing footprint and loyal customers, the case for buying shares of Marriott is compelling. Wall Street knows it. The stock trades for more than four times trailing 12 months sales. That's a significant premium to its historical range. But it's a bit misleading.
Sales have been depressed by a global pandemic. And analysts expect revenue to climb nearly 40% year over year in 2022. That still makes the forward-looking, price-to-sales ratio 3.0 based on the current $57 billion market capitalization. Maybe that's why the average analyst price target for the stock is $175 -- essentially where it trades right now.
Given the uncertainly of geopolitical tensions, sky-high gas prices, and the never-ending threat of another coronavirus variant, discretionary spending on travel would seem to be one of the first cuts consumers make, not to mention how a new "work from anywhere" economy will impact corporate travel.
For those reasons, it seems prudent to wait for a pullback in shares of Marriott. It's a wonderful company with a strong position in an industry rebounding from COVID. But shares trade as if that rebound is the new normal instead of just a one-time benefit.