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Marriott’s 2Q17 Earnings Preview: What Can Investors Expect?

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Part 2
Marriott’s 2Q17 Earnings Preview: What Can Investors Expect? PART 2 OF 8

What Marriott’s Key Metrics Suggest ahead of Its 2Q17 Results

RevPAR grows

Marriott’s (MAR) RevPAR1 for 1Q17 rose 3.1% year-over-year (or YoY) in constant dollars to $108.80 across its worldwide properties. Its North America RevPAR also rose 3.1% YoY and its International Properties RevPAR rose 3.2% YoY in 1Q17.

The company’s average daily rate (or ADR) and occupancy aided its RevPAR growth. Its ADR rose 0.6% to $157.13, and its occupancy rose 1.7% to 69.3%.

What Marriott&#8217;s Key Metrics Suggest ahead of Its 2Q17 Results

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For fiscal 2016, Marriott’s system-wide RevPAR grew 1.8% YoY. Its North American RevPAR rose 2.3% YoY, and its International Properties RevPAR rose 0.7% YoY.

Strong pipeline

During the second quarter, Marriott (MAR) added 17,000 rooms, including 6,400 rooms internationally and 3,300 rooms from competitors. At the end of 1Q17, it had another 430,000 rooms in its development pipeline, including 1,300,000 rooms under Starwood. Of these, 36,000 rooms are approved for development but are not signed for the contract.

2Q17 outlook

Marriott (MAR) expects room growth of 6% YoY for fiscal 2017. For 2Q17, its RevPAR is expected to increase 0%–2% YoY in North America and 3%–5% YoY in International Properties, leading to 1%–3% YoY growth across its worldwide properties.

Long-term outlook

During its last investor day held on March 21, Marriott revealed its growth plan to add 285,000–300,000 rooms worldwide by 2019. It expects these additional rooms to add $675 million in annual fees. Accordingly, it assumes its RevPAR could grow at a CAGR2 of 1%–3%.

Investors can gain exposure to the hotel sector by investing in the First Trust Consumer Discretionary AlphaDEX ETF (FXD), which invests ~15% in the hotel, restaurant, and leisure sector. FXD holds 1.1% each in Wyndham (WYN) and Marriott International (MAR), as well as 0.55% in Hyatt (H). However, this ETF has no holdings in Hilton Worldwide Holdings (HLT).

  1. revenue per available room
  2. compound annual growth rate
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