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Why Marriott’s Revenue Per Available Room Increased in 2014

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Revenue per available room

Marriott International (MAR) derives its revenue from hotel operations. Revenue per available room (or RevPAR) is the most important performance indicator for the hotel industry, capturing both the occupancy and the average daily room rates (or ADR). RevPAR is calculated by dividing hotel room revenue by the total available room nights.

Marriott International’s (MAR) systemwide RevPAR increased 6.2% to $105.05, mainly driven by strong performance in the Middle East and Africa regions.

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Systemwide RevPAR increased by ~5% YoY in the fourth quarter of 2014 for both Wyndham Worldwide (WYN) and Hyatt Hotels (H). Hilton’s (HLT) systemwide RevPAR rose 6.6% YoY in the fourth quarter of 2014. The RevPAR figures referenced in this article are adjusted for currency for consistent comparability.

Investors can buy Marriott International shares directly or through ETFs such as the PowerShares Dynamic Leisure and Entertainment Portfolio ETF (or PEJ) and the Consumer Discretionary Select Sector SPDR Fund (XLY).

Regional performance 

As noted in Marriott International’s 4Q14 earnings call, RevPAR in Europe and the Asia-Pacific region increased 3% in 4Q14 versus 4Q13. This increase was mainly attributable to a healthy group occupancy rate and holiday demand in Germany and Austria. Approximately 30% of Marriott’s guests in Europe are from abroad.

Demand in the Asia-Pacific region was supported by the weaker yen, which made the area more affordable to international travelers.

Africa and the Middle East were the top performing regions, where Marriott saw an increase of 15% in 2014, supported by growth in Egypt. Investors should keep in mind that the Middle East and Africa make up roughly 3% of Marriott’s total revenue.

In the next article, we’ll discuss why Marriott is buying back its own shares.

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