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Marriott (MAR) Stock Up 29% in the Past Year: More Room to Run?

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In the past year, shares of Marriott International, Inc. (MAR - Free Report) have gained 28.9% compared with the industry’s 27.1% growth. MAR’s solid start to 2024 is a testament to its strategic initiatives and robust operational performance. By leveraging its diverse customer base, advancing digital transformation, expanding its loyalty program and executing strategic developments, the company is well-positioned to sustain its growth trajectory and deliver exceptional value to its stakeholders. However, elevated investment expenses and an uncertain macroeconomic environment are a concern.

Let's Delve deeper.

Factors Likely to Drive Growth

Solid RevPAR: Marriott has been benefiting from robust leisure demand and solid global booking trends. During the first-quarter of 2024, the company reported 4.2% growth in worldwide revenue per available room (RevPAR), with ADR increasing 3% and occupancy reaching about 66% (marking a nearly 100 basis-points improvement year on year). Despite the normalization of overall industry RevPAR growth following COVID-19, Marriott's RevPAR index steadily climbed across its portfolio and increased its worldwide hotel market share.

Given its property locations, we believe that the company is well-poised to benefit from the increasing market demand on the back of stepped-up business and leisure traveling in major North American and international locations.

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Digital Transformation: Marriott is making significant progress in its multi-year digital and technology transformation, focusing on its reservations, property management and loyalty programs. The company expects to roll out new cloud-based systems next year, thereby unlocking new revenue opportunities and enhancing operational efficiency. The company emphasizes improving the digital booking experience, paving a path for attracting and retaining customers.

Strengthening Marriott Bonvoy: Marriott Bonvoy continues to be a critical growth driver. During the first quarter of 2024, the company added nearly 7 million members, bringing the total count to approximately 203 million. During the quarter, member penetration of global room nights reached record highs, with 70% in the US and Canada and 64% globally. Marriott Bonvoy’s evolution into a comprehensive travel and loyalty platform, including offerings like Homes and Villas by Marriott Bonvoy and the Ritz-Carlton Yacht Collection, along with member benefits and co-brand credit cards, bode well. The continuous enhancement of this platform, including unique collaborations, enhances customer loyalty and drives repeat business.

Expanding Development Pipeline: MAR is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in international markets. In the first quarter, Marriott added 46,000 net rooms, increasing its distribution by 7.1% year over year. Conversions during the quarter represented 30% of global signings. The launch of the MGM collection with Marriott Bonvoy, featuring 16 properties in Las Vegas and other key U.S. cities, exceeded booking expectations. Despite challenges in the U.S. and European financing environments, Marriott maintains strong momentum in global signings, particularly in Greater China and APEC. The company is optimistic concerning the growth strategy and anticipates 2024 net room growth expectations of 5.5-6% on a year-over-year basis.

Financial Outlook: MAR is raising its full-year 2024 earnings and capital returns guidance, supported by the strength of its diverse global portfolio, resilient travel demand and continued room growth. The company expects global RevPAR to grow 4-5% in the second quarter and 3-5% for the full year. Fee revenues are projected to rise 7-9% year over year, while non-RevPAR-related fees are expected to increase 9-10% year over year. Adjusted EBITDA is expected to grow 7-9% year over year. It envisions 2024 earnings per share (EPS) in the band of $9.31-$9.65, up from the prior expectation of $9.18-$9.52.

Risks to Consider

Marriott is pursuant to uncertainties in financial markets on account of liquidity constraints. The banking environment in the United States and Europe is facing challenges due to rising interest rates. Financing conditions in these regions have been challenging, with some banks waiting for more clarity on capital requirements and potential regulations. Despite lending challenges, deals with committed financing are still progressing, with no significant increase in deals falling through the pipeline. The company is cautious of the uncertain macroeconomic environment.

The company is investing in a multi-year digital and technology transformation, aiming to enhance its reservations, property management and loyalty systems. While the transformation is expected to unlock new revenue opportunities, the costs associated with these upgrades are substantial. Marriott expects investment spending to total between $1 billion and $1.2 billion for 2024.

Zacks Rank & Key Picks

Marriott currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Consumer Discretionary sector are as follows:

PlayAGS, Inc. (AGS - Free Report) sports a Zacks Rank #1 (Strong Buy). AGS has a trailing four-quarter earnings surprise of 33.3%, on average. The stock has appreciated 75.2% in the past year. You can see the complete list of today’s Zacks Rank #1 stocks here.

The consensus estimate for AGS’s 2024 sales and EPS suggests growth of 7.7% and 5,200%, respectively, from the year-ago levels.

OneSpaWorld Holdings Limited (OSW - Free Report) currently carries a Zacks Rank #2 (Buy). OSW has a trailing four-quarter earnings surprise of 4.7%, on average. The stock has surged 35.9% in the past year.

The Zacks Consensus Estimate for OSW’s 2024 sales and EPS indicates an increase of 10.4% and 28.6%, respectively, from year-ago levels.

Royal Caribbean Cruises Ltd. (RCL - Free Report) currently carries a Zacks Rank #2. RCL has a trailing four-quarter earnings surprise of 18.3%, on average. The stock has rallied 69.8% in the past year.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS calls for growth of 16.9% and 64%, respectively, from year-ago levels.

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