MAR MARRIOTT INTERNATIONAL INC
Sector financial performance:
This company, who is primarily a luxury and upscale hotel franchisor and operator, the revenue of which comes from percentage-of-revenue royalty fee and management fees and as well from its owned hotels, has been grouped into franchised hotel – upscale &midscale sector.
It seems that it is consistent in terms of increase in demand for hotels in this sector and in other sectors: companies in this sector have benefited more from the increase in royalty fees (annual growth rate of 1-6% due to the good performance of their franchised hotels in the past three years. Data indicates that increase in royalty revenue has been primarily attributable to increase in room rate (increased by 1-4% annually) and, to lesser extent, to increase in number of rooms and occupancy rate. However, the trend that the increase in both ADR and occupancy rate slowed down in 2016/17 was obviously observed among the companies in this sector, which caused the increase in RevPAR to go down from average 4% to near 1% in 2017. After starting of 2018, benefiting from larger increase in room rate, rooms and occupancy rate, revenue grew faster than those in 2016 and 2017.
Our data indicate that the typical companies’ average gross margins (including marketing and reservation system fees and expenses and depreciation but excluding managed hotels expenses) are around 64% and all presented an improved SG&A (19%). The typical operating margin is 43%. Due to continuously increasing revenue the cash flow of companies has increased in the past three years.
According to our analysis, the current companies’ enterprise price/EBI ratio is 32 with an interest/EBITDA ratio of 11%.
It seems that the franchised and managed US hotels of this company have performed well in the past three years as indicated by continuing increased in RevPAR (1.5-5.2% annually) including increase in daily rate and occupancy rate. However, the growth seems to slow down in 2017 but up again in 2018 as ADR growth fluctuated. Compared with its international hotels’ performance, which continued strong increase as indicated by the increase in occupancy rate and the recently fast increase in price, the US hotels have grown slower probably due to stronger US dollars.
The first six months of fiscal 2018 compared with the same period of 2017
Comparable North America system-wide RevPAR increased 2.7% (3.1% for 2Q) (1.5% daily rate/$160 and 0.8% occupancy rate/75%).
Comparable international system-wide RevPAR increased 6.3% (5.7% for 2Q) (2.4% daily rate/$168 and 2.6% occupancy rate/70%).
The fiscal 2017 compared with 2016
Comparable North America system-wide RevPAR increased 2.1% (1.3% daily rate/$158 and 0.6% occupancy rate/74%).
Comparable international system-wide RevPAR increased 5.9% (1.1% daily rate/$154 and 3.2% occupancy rate/70%).
The first nine months of fiscal 2017 compared with the same period of 2016
Comparable North America system-wide RevPAR increased 1.5% (1.1% daily rate/$158 and 0.3% occupancy rate/76%).
Comparable international system-wide RevPAR increased 5.9% (0.9% daily rate/$153 and 3.5% occupancy rate/70%).
Fiscal 2016 compared with 2015
Comparable North America system-wide RevPAR increased 2.3% (2% daily rate/$157and 0.2% occupancy rate/74%).
Comparable international system-wide RevPAR increased 0.7% (-1.5% daily rate/$157 and 1.4% occupancy rate/68%).
Fiscal 2015 compared with 2014
Comparable North America system-wide RevPAR increased 5.2% (4.5% daily rate/$148and 0.5% occupancy rate/74%).
Comparable international system-wide RevPAR increased 5.1% (2.1% daily rate/$171 and 2.1% occupancy rate/73%).
Its gross margin (marketing and reservation system expenses included, costs of managed hotels excluded, and depreciation included) was at around 66% in 2017 down from 2016 due probably to faster increasing costs in owned hotels operations. With an improved leverage of SG&A, which was down to 17%, its operating margin thus went down slightly to about 49% in 2017. However, in 2018 gross margin (mainly depreciation and operating costs of owned hotels) went up to about 68% as franchised and managed revenue increased.
This stock currently has an enterprise price/EBI ratio of 33. We think that its stock is being relatively fairly valued with its peers.
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