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Marriott International, Inc. is an operator, franchisor and licensor of hotel, residential, timeshare, and other lodging properties under various brand names. Marriott owns brands across high end Luxury to select service hotel brands, some of their hotel brands include JW Marriott, The Ritz-Carlton, W Hotels, Sheraton, Courtyard, Residence Inn, and Moxy Hotels, amongst others.

Investment Overview

Market leader within the US luxury hospitality market; consistent higher profitability margins in comparison to peers. MAR is the largest global operator, franchisor of hotels with a total global count of 1.6 million rooms within its system. Brand positioning is targeted within the luxury segment where MAR commands the largest market share, with a prominent c.17% market share. It's strong membership program Marriott Bonvoy and competitive suite of brands has historically seen strong entrenchment amongst existing users with c.61% of room bookings through the membership program. MAR enjoys the highest EBITDA margins of 53% within its full-service luxury peer group and the lowest earnings volatility. MAR's franchisee income is directly related to the operating profitability of underlying properties is on track to show recovery on global travel normalisation to sustain MAR's current global fees per room of US$2745.

Sequential growth to stem from APAC demand recovery with China international air traffic recovering off a low base and pipeline growth in room counts. MAR foresees a 5-6% RevPAR CAGR (FY23-FY25) boosted by APAC demand which continues to see uplift from China outbound travel. MAR expects room rate uplift from corporate demand in the range of 5-10% off a lower comparable base and for both leisure and corporate segments to reflect higher occupancy in the coming years. Net room growth will stem from MAR's record high pipeline room supply of 557k rooms, or approximately 35% of existing room stock. The effect of net new room supply and RevPAR growth within the portfolio should see MAR's delivering consensus forward revenue growth of 11% and EBITDA forward growth of c.13%.

Escalation of share buyback program on the back of cash flow recovery. Marriot announced the recent expansion of its share buy back mandate, by an additional 25 million shares. Marriot will be looking to repatriate more capital back to unitholders this year. A total quantum of 18.3m shares was repurchased by the company in 2023 (10M23), or a total quantum of US$3.3b. We see this strategic move a signal to recycle access capital and to yield a higher return on equity to unitholders.

Value-driven consumption may see diversion of luxury room spend to lower price point offerings. Existing macroeconomic uncertainties may warrant a cut back on corporate travel or a trade down in terms of corporate room demand, which may hurt MAR's room demand within the luxury positioned brands. MAR generally has lower exposure into the upscale and midscale segments to ride growth in these segments. (ii) Heightened costs to impact margins. Consensus estimates that staffing cost is expected to increase above the mid single digit range y-o-y, which will negatively impact property level EBITDA.

We believe that MAR's positioning as the market leader, alongside the company's track record of higher than sector average EBITDA margins and strong pipeline growth should warrant the stock to trade at or above its 5-year historical EV/EBITDA multiple.

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