Marriott International, Inc. MAR should benefit from solid leisure demand, increased cross-border travel and loyalty program. The focus on hotel conversion opportunities also bodes well. However, limited RevPAR in Greater China is a concern.
Let’s discuss the factors that highlight why investors should hold onto the stock for now.
growth catalysts
Marriott has benefited from pent-up leisure demand, the reopening of international borders, and relaxing travel restrictions. Throughout the fourth quarter of 2022, the Company saw a steady increase in demand in the United States, Canada, Middle East and Africa regions. The company benefited from robust leisure demand and improvements in business and cross-border travel. A strong RevPAR recovery was also reported in Europe. Group demand in the United States and Canada rose sharply during the quarter, resulting in improved utilization and strength at ADR. As global trends improve, the company expects the recovery momentum to continue. Attributes such as pent-up demand for all types of travel, a shift in spending towards experiences rather than goods, persistently high employment levels, the lifting of travel restrictions and the opening of borders (in most markets) should help the company in the coming periods.
The company is benefiting from the robust growth of its loyalty program. With nearly 177 million members worldwide, the company’s loyalty program, Marriott Bonvoy, supports its marketing strategies. The company also engages its customers with promotional offers such as grocery and retail purchase accelerators on its co-branded credit cards. In 2022, digital revenue grew 41% year over year. Mobile app users grew 32% year over year, while digital room stays increased 27% year over year.
In the fourth quarter of 2022, the company reported solid member engagement across its co-branded credit cards. The company expects higher contributions from credit card fees in 2023, supported by solid customer acceptance for credit card programs and an increase in average credit card spend. For 2023, the company expects total fees to increase between 6% and 12%, while the non-RevPAR-related component is expected to increase between 4% and 7% year-over-year.
Marriott is consistently trying to expand its presence worldwide and to capitalize on the demand for hotels in international markets. In 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. In 2022, conversions accounted for 20% of room signings and 27% of room openings. The company expects the positive development trends to continue due to new development and remodeling opportunities for multiple units. For 2023, the company anticipates net room growth in the range of 4-4.5% year-over-year.
Issue
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Marriott’s shares are up 1.8% over the past year, compared to industry growth of 5.3%. The coronavirus crisis continues to disrupt the global economy and hospitality. In the fourth quarter, strict COVID guidelines in China dampened travel demand. RevPAR remained limited in Greater China. During the quarter, Greater China comparable system-wide RevPAR fell 18.2% year-on-year. Occupancy fell 7.7% from 2021 levels and ADR fell 4.6% year over year. The company expects demand to remain mixed in the short term.
Zacks rank and stocks to consider
Marriott currently carries a #3 Zacks rank (hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks can be found here.
Some of Zacks’ better ranked stocks in the Consumer Discretionary sector are Las Vegas Sand Corp. LVS and Bluegreen Vacations Holding Corporation BVH and Crocs, Inc. CROX.
Las Vegas Sands has a Zacks rank #1. LVS has a long-term earnings growth rate of 2.5%. The stock is up 59.4% over the past year.
The Zacks Consensus estimate for 2023 LVS revenue and EPS shows an increase of 107.7% and 217.5%, respectively, from the estimated values for the same period last year.
Bluegreen Vacations has a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise averaging 11.6%. The company’s shares are up 24.2% over the past year.
The Zacks Consensus estimate for BVH’s 2023 sales and EPS shows an increase of 0.2% and 10.2%, respectively, from the prior-year levels.
Crocs carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise averaging 21.8%. Crocs shares are up 80.3% over the past year.
The Zacks Consensus estimate for 2023 CROX sales and EPS shows an increase of 12.5% and 2.5%, respectively, from the same period last year.
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