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Expansion Efforts Support Marriott (MAR) Stock, RevPAR Dismal

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Marriott International, Inc. MAR is likely to benefit from its expansion initiatives, digitization, loyalty program and marketing strategies. However, a decline in revenue per available room (RevPAR) from pre-pandemic levels is a headwind.

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

Key Growth Drivers

Marriott is consistently trying to expand worldwide presence and capitalize on demand for hotels in international markets. Moving ahead, the company plans to significantly expand global portfolio of luxury and lifestyle brands. At the end of second-quarter 2021, Marriott's development pipeline totaled nearly 2,750 hotels, with approximately 478,000 rooms. For 2021, the company anticipates net rooms growth to be toward the higher end of the previous expectation of 3-3.5%.

Digital innovation and social media are playing important roles in hotel bookings and Marriot isn’t far behind to improvise. The company re-imagined its Marriott Mobile app to meet the needs of the modern traveler. Also, the company’s loyalty program, Marriott Bonvoy, has been playing a supporting hand in its marketing strategies.

To this end, the company has been engaging its customers with promotional offers such as grocery and retail spending accelerators on its co-branded credit cards (American Express and Chase). Its association with uber is encouraging. Solid customer engagement is being registered on the idea of providing loyalty points for activities such as ride hailing and food delivery. We believe that the initiatives are likely to generate additional revenues, going forward.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Shares of Marriott have rallied 61.3% in the past year compared with the industry’s 39.4% growth. Improvement in demand has been boosting Marriott’s performance amid the pandemic scenario. During the second quarter 2021, the company reported resurgence of lodging demand in Mainland China with leisure, business transient and group room bookings ahead of 2019 levels. Also, the company reported solid leisure demand in the United States and Canada region on the back of accelerated vaccinations. The U.S leisure room nights in the second quarter increased 15% from second-quarter 2019 levels. Moreover, the company reported sequential improvements in demand across Middle East and Africa, Caribbean and Latin America as well as in Europe. Given the positive trend in recoveries, the company is optimistic about full recovery across other regions. However, it is subject to normalization of the current scenario.

Concerns

The Hotel and Motels industry is currently grappling with the coronavirus pandemic and Marriott isn’t immune to the trend. The industry’s luxury, upper scale and urban hotels have been affected by the coronavirus pandemic. Due to the crisis, the company failed to provide earnings and RevPAR guidance for 2021. Emergence of the new COVID-19 variants is likely to create volatility in demand.

The company is encountering substantial declines in RevPAR and occupancy in all regions served. During second-quarter 2021, revenue per available room (RevPAR) for worldwide comparable system-wide properties fell 43.8% (in constant dollars) from 2019 levels. The decline was primarily due to fall in occupancy and average daily rate (ADR). Occupancy and ADR declined 24.1% and 17.2%, respectively, from 2019 levels. These metrics were impacted by the coronavirus pandemic. Comparable system-wide RevPAR in Asia Pacific (excluding China) fell 69% (in constant dollars) from 2019 levels. Occupancy and ADR had fallen 39.9% and 28.2%, respectively, from 2019 levels. Comparable system-wide RevPAR in Greater China fell 16.9% from 2019 levels.

Zacks Rank & Key Picks

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 Vista Outdoor Inc. VSTO, Civeo Corporation CVEO and Crocs, Inc. CROX. Vista Outdoor and Civeo sport a Zacks Rank #1, while Crocs carries a Zacks Rank #2 (Buy).

Vista Outdoor has a trailing four-quarter earnings surprise of 70.1%, on average.

Civeo Corporation has a three-five year earnings per share growth rate of 10%.

Crocs’ 2021 earnings are expected to surge 114%.


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Marriott International, Inc. (MAR) : Free Stock Analysis Report

Crocs, Inc. (CROX) : Free Stock Analysis Report

Civeo Corporation (CVEO) : Free Stock Analysis Report

Vista Outdoor Inc. (VSTO) : Free Stock Analysis Report

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