What You Ought to Know about Marriott International’s Asset Utilization
Marriott has one of the lowest asset bases among its industry peers, having reduced its PPE-to-total-assets ratio from 24% in 2012 to 21.2% in 2014.
Feb. 2 2016, Updated 11:04 a.m. ET
Marriott International’s low PPE-to-total-assets ratio
Marriott International (MAR) has one of the lowest asset bases among its industry peers, perhaps because it has largely focused on its lodging management and franchise business. In 2011, the company spun off its timeshare business, which required a relatively large capital investment. This is reflected in its low net PPE (plant property and equipment) ratio to the total assets of Marriott.
The company has reduced its PPE-to-total-assets ratio from 24% in 2012 to 21.2% in 2014. Among peers, Hyatt Hotels Corporation (H) recorded the highest at 50%, followed by Hilton Worldwide Holdings (HLT) at 34.5%, Starwood Hotels & Resorts Worldwide (HOT) at 30.4%, Marriott International (MAR) at 21.2%, and Wyndham Worldwide Corporation (WYN) at 15.4%.
Marriott’s asset turnover ratio
Marriott recorded the highest asset turnover ratio among its peers at 2.0, followed by Starwood (HOT) at 0.69, Wyndham (WYN) at 0.54, Hyatt (H) at 0.54, and Hilton (HLT) at 0.4. This steady growth in revenues came in spite of the reduction of its asset base and resulted in a higher asset turnover ratio for Marriott.
The company’s focus on asset-light franchise model is also helping improve its asset turnover ratio. Moreover, the total revenues reported by Marriott was boosted by its cost reimbursements. Although its peers also have cost reimbursements, Marriott has a higher number of hotels under management, resulting in higher number of cost reimbursements and higher asset turnover ratios.
Marriott’s ROA ratio
Marriott has the highest ROA (return on assets) ratio among its peers at 12.4%. Starwood recorded 6.4%, whereas Wyndham recorded 5.7%, Hyatt saw 3.3%, and Hilton saw 2.9%. These higher asset turnovers and ROAs are due to Marriott’s successful implementation of an asset-light strategy, wherein it does not own real estate property and invests its capital to franchise and manage hotels.
Investors can gain exposure to the hotel sector by investing in the First Trust US IPO Index Fund (FPX), which has approximately 6% of its total holdings in the hotel sector.
But how is Marriott International doing on the debt front? Continue to the next part to find out.