Here’s Why You Should Retain Marriott (MAR) in Your Portfolio

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Marriott International, Inc. MAR is likely to benefit from unit-expansion efforts, acquisition initiatives and solid leisure demand. Also, its focus on the loyalty program bodes well. However, constrained RevPAR in Greater China and Asia Pacific is a concern.

Let us discuss the factors highlighting why investors should retain the stock for the time being.

Growth Catalysts

Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in international markets. During the second quarter of 2022, the company announced an agreement with Vinpearl to open eight hotels in Vietnam. The deal is expected to add 1,700 rooms to the system. The company is focused on hotel conversion opportunities to mitigate the impact of construction delays caused by the pandemic. Conversions during the third quarter represented 21% of room signings and 27% of room openings. The company expects positive development trends to continue on the back of new development and multiunit conversion opportunities. For 2022, the company anticipates gross additions to reach 4.5%.

The hotel company is also trying to strengthen its presence outside the United States, especially in Asia, Latin America, the Middle East and Africa. In October 2022, the company announced an agreement to acquire the City Express brand portfolio comprising 152 hotels (with over 17,000 rooms). The initiative paves a path to strengthen its presence in the CALA region. Through this addition, the company anticipates its 2022 gross rooms growth to be around 5.5% and net rooms growth of approximately 4%. Much depends on the closing of the transaction prior to the year-end. Given the attractiveness of its portfolio of global brands, loyalty program and momentum around conversions, the company remains optimistic about the moderately priced mid-scale space.

Marriott has been gaining from reopening international borders and leniency in travel restrictions. Throughout the third quarter of 2022, the company witnessed a steady increase in demand in the United States, Canada, the Middle East and Africa regions. The company benefited from robust leisure demand and business and cross-border travel improvements. Also, it reported a strong RevPAR recovery in Europe. Group demand in the United States and Canada increased sharply during the quarter, leading to improved occupancies and strength in ADR.

With global trends improving, the company expects the recovery momentum to continue in the future. Attributes such as pent-up demand for all types of travel, the shift of spending toward experiences versus goods, sustained high levels of employment, lifting of travel restrictions and opening borders (in most markets) are likely to aid the company in the upcoming periods.

The company is benefiting from the robust growth of its loyalty program. With nearly 173 million members globally, the company’s loyalty program Marriott Bonvoy is supporting its marketing strategies. During the third quarter of 2022, the program reported solid penetration levels of 60% in the United States and Canada and 53% globally. Also, the company is engaging its customers with promotional offers such as grocery and retail spending accelerators on its co-branded credit cards. During the third quarter of 2022, the company reported increased sign-ups following the addition of new benefits to its U.S. cards. Backed by solid customer acceptance for credit card programs coupled with a rise in credit card average spending, the company anticipates higher contributions from credit card fees in 2022.  

Concerns


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Shares of Marriott have gained 1.2% in the past six months compared with the industry’s 2.7% growth. The coronavirus crisis continues to cause disruptions to the global economy and the hospitality industry. During the third quarter, strict COVID policies in China weighed on travel demand. RevPAR remained constrained in Greater China and Asia Pacific (excluding China). During the third quarter, comparable system-wide RevPAR in the Asia Pacific (excluding China) fell 14.1% (in constant dollars) from 2019 levels. Occupancy declined 11.3% from 2019 levels. Comparable system-wide RevPAR in Greater China fell 23% from 2019 levels. The company expects demand to remain uneven in the near term.

Zacks Rank & Stocks to Consider

Marriott currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hyatt Hotels Corporation H, Crocs, Inc. CROX and Boyd Gaming Corporation BYD.

Hyatt currently has a Zacks Rank #2 (Buy). H has a trailing four-quarter earnings surprise of 652.3%, on average. The stock has increased 16.1% in the past year.

The Zacks Consensus Estimate for H’s current financial year sales and earnings per share (EPS) indicates a surge of 92.6% and 121.8%, respectively, from the year-ago period’s reported levels.

Crocs currently has a Zacks Rank #2. CROX has a long-term earnings growth rate of 15%. Shares of Crocs have plunged 43.7% in the past year.

The Zacks Consensus Estimate for CROX’s 2022 sales and EPS indicates a rise of 51.5% and 23.7%, respectively, from the year-ago period’s levels.

Boyd Gaming carries a Zacks Rank #2. BYD has a long-term earnings growth rate of 12.8%. The stock have declined 3.4% in the past year.

The Zacks Consensus Estimate for BYD’s 2022 sales and EPS indicates growth of 4.5% and 12.7%, respectively, from the year-ago period’s reported levels.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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