This morning, leading hotelier Marriott (NYSE:MAR) announced its first-ever stock split -- a two-for-one variety, payable next month. Looking at the progress the shares have made since bottoming out in a post-9/11 malaise several years ago, it is easy to see what prompted the decision.
When I checked in on the company this same time last year, the stock had already delivered an impressive 40% gain over the prior 12 months, with Marriott and many of its peers enjoying a brisk rebound in business and leisure travel, as well as a much firmer pricing environment. And over the past year the shares have continued to climb -- tacking on another 18% to reach a new five-year peak of $74.59 on Thursday.
While the stock split alone isn't particularly newsworthy, Marriott also unveiled some additional plans that are of far more significance to shareholders. Beginning next quarter, management has decided to boost the company's dividend by nearly 20%, to a split-adjusted annual payment of $0.25 per share. After five consecutive annual increases, the firm's dividend has nearly doubled from the $0.13 payout offered in 2001.
All of this comes on the heels of some solid first-quarter results last week. For the period, net revenues rose 7% to $2.7 billion, while adjusted earnings jumped 43% to $0.76 per share -- easily topping the high end of the company's internal targeted range.
Those gains were aided by a solid 8% uptick in average daily room rates, which drove global systemwide RevPAR (revenues per available room) up 10.3% on a comparable basis. The results were in line with rival Starwood (NYSE:HOT), which posted a 10.3% RevPAR improvement across its system worldwide.
Meanwhile, buoyed by continued strength in key urban markets like Dallas and Chicago, the same metric was even stronger here at home, advancing 10.9%. Those gains, in turn, helped property-level EBITDA margins climb more than two hundred basis points during the quarter. As a result, management, franchise, and incentive fees (which are linked to property profitability) all delivered gains in the mid-teens.
Like both Hilton (NYSE:HLT) and Starwood, Marriott has been systematically shedding its properties, exchanging the burden of ownership for lucrative long-term management contracts. Though this limits the firm's upside potential when the lodging industry is in high gear, it does provide a measure of protection when the cyclical business loses steam.
With more than 20 million members in its Marriott Rewards program, travelers have shown a preference for the company's brands, which cover the entire spectrum -- from the budget-minded Fairfield Inn to the pampered luxury of the Ritz-Carlton. In fact, more than half of the rooms that entered Marriott's system last quarter were conversions from other brands, and there are currently another 75,000 still waiting in the development pipeline.
Looking ahead, the company is forecasting possible double-digit RevPAR gains and continued margin expansion -- and thus healthy fee growth as well. Given the robust demand for high-end lodging and the somewhat limited capacity available, Marriott could be headed for another split within a few years.
Fool contributor Nathan Slaughter practices the Fool's LBYM philosophy and once stayed in a hotel room with a hole in the ceiling. He owns none of the companies mentioned.
