Marriott (MAR) relies on expansion efforts, dismal RevPAR
Marriott International, Inc. MAR is poised to benefit from its expansion initiatives, digitization, loyalty program and marketing strategies. However, the decline in revenue per available room (RevPAR) due to the coronavirus pandemic is a concern.
Let’s discuss the factors that highlight why investors should hold onto the stock for now.
Marriott is constantly trying to expand its global presence and capitalize on the demand for hotels in international markets. Going forward, the company plans to significantly expand its global portfolio of luxury and lifestyle brands. At the end of the first quarter of 2021, Marriott’s development pipeline totaled nearly 2,825 hotels, with approximately 491,000 rooms. Given the location of its properties, we believe the company is well positioned to take advantage of growing market demand through increased business and leisure travel to major North American and international locations.
As vaccine rollout is in full swing, pent-up demand is seen in countries like the United States, the United Arab Emirates and Qatar. In addition, improvements are recorded in regions such as Africa, Maldives, Australia, Canada, Mexico, Macao and the Virgin Islands. Notably, easing travel restrictions and improving air transport operations are boosting the business. In addition, Greater China continues to drive growth due to increased demand. The company said reservations for transitional leisure rooms and transitional business rooms in the region have surpassed pre-pandemic levels. Given the positive trend in recoveries, the company is optimistic about a full recovery in other regions. However, it is subject to the standardization of the current scenario.
Meanwhile, digital innovation and social media are playing an increasingly important role in hotel reservations, Marriot is not far to improvise. Notably, the company has redesigned its Marriott Mobile app to meet the needs of the modern traveler. Additionally, the company’s loyalty program, Marriott Bonvoy, has played a supporting role in its marketing strategies.
To that end, the company engaged its customers with promotional offers such as grocery and retail spending accelerators on its co-branded credit cards (American Express and Chase). In addition, its association with uber is encouraging. Strong customer engagement is recorded on the idea of providing loyalty points for activities such as public transport and food delivery. We believe the initiatives are likely to generate additional revenue in the future.
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Marriott shares have gained 6.5% so far this year from the industry9.5% growth. Notably, the company’s operations have been negatively affected by the coronavirus pandemic. Due to the crisis, the company has not provided earnings guidance and RevPAR for 2021. It has also suspended its share buybacks and dividend payments until further notice.
In addition, the company is experiencing substantial declines in RevPAR and occupancy in all regions served. In the first quarter of 2021, revenue per available room (RevPAR) of comparable system-wide properties worldwide declined 59.1% in constant dollars due to a decrease of 30, 4% and 26.2% of occupancy and average daily rate (ADR), respectively. These measures have been impacted by the coronavirus pandemic. System-wide comparable RevPAR in Asia-Pacific (excluding China) decreased 68.3% in constant dollars due to a 37.3% and 37.3% decrease in ADR and occupation, respectively. On a constant dollar basis, the international comparable system-wide RevPAR declined 64.1% due to a 34.4% and 25% decline in occupancy and ADR, respectively . In addition, the system-wide comparable RevPAR in Europe and America decreased by 85.8% and 65.9% respectively. Notably, low occupancy levels and sharp declines in RevPAR were observed in the Europe, Middle East and Africa (or EMEA) region as well as in the Caribbean and Latin America (or CALA) region.
Marriott – who shares space with Hilton Worldwide Holdings Inc. HLT, Hyatt Hotels Corporation Hand Choice Hotels International, Inc. CHH – has a Zacks Rank # 3 (Hold), at the moment. You can see The full list of today’s Zacks # 1 Rank (Strong Buy) stocks here.
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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.