Marriott’s MAR analyst day painted a mosaic of a strong brand (source of its narrow moat) that we think is set to continue to deliver sales and profitability growth over the next several years. We plan a minor single-digit percentage decrease to our $191 fair value estimate, as we temper near-term growth due to an uncertain economic landscape.
Its industry-leading 7% global room share is set to expand, given its pipeline represents a stout 19% of all worldwide units. Regionally, it leads with 16% existing room share in the U.S./Canadian market, with even higher under construction pipeline share of 25%. Marriott holds a number one or two room share position in all major international markets, including China, where its 4% share is positioned to grow, with its pipeline share around 25%. Marriott is also the leader in luxury hotels, a key growth area driven by raising global wealth. Here, its room base is over 50% larger than its next largest peer, narrow-moat Hyatt. Marriott is not resting on its development laurels and continues to expand into midscale, extended stay, residential, and cruising, all providing incremental growth opportunity.
Marriott’s stout competitive position was reflected in management’s financial goals. It now sees revenue per available room (revPAR) growth at the high end of its 12% to 14% range for 2023, with an average lift of 3% to 6% in 2024-25, driven by further international, group, and business recovery. We plan to increase our 13% estimate to 14% for this year and expect to nudge our 5%-6% average growth prognosis for 2024-25 toward 4% due to lasting inflation that is a hinderance to consumers. We are holding our 5.4% average unit growth rate for 2023-25, at the high end of management’s 5%-5.5% target, as we expect strong conversion activity and progression with the under construction pipeline, given the company’s intact brand prowess.
Correction (Sept. 27, 2023): This note was amended to correct the $192 fair value estimate to $191.
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