uploads///Marriott Valuation

What Investors Are Willing to Pay for Marriott International


May. 5 2017, Updated 7:36 a.m. ET

Current valuation

Marriott (MAR) currently trades at a forward EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 14.5x. Marriott’s valuation is significantly higher than its average valuation of 13.9x since January 2008.

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Peer comparison

Among Marriott’s peers, Hilton (HLT) is trading at 17.6x, Hyatt (H) is trading at 10.2x, Wyndham (WYN) is trading at 9.2x, and InterContinental Hotel Group (IHG) is trading at 13.2x.

The market is expecting Marriott’s EBITDA[2. earnings before interest, tax, depreciation, and amortization] to grow 44% in 2017. Keep in mind that most of this growth is inorganic and is related to the Starwood acquisition. Organic EBITDA growth should be in the range of 3%–6%. Rival Hilton’s EBITDA is expected to decline 36.1% in 2017.

Hyatt’s EBITDA is expected to grow 4% in 2017. InterContinental’s EBITDA is expected to grow 7% in 2017. Wyndham’s EBITDA is expected to grow 4% in 2017.

Our analysis

The lodging industry is currently facing headwinds, including slowing GDP growth. Slow GDP growth means less corporate travel, which means bad news for hotels—especially large ones like Marriott. Increased geopolitical and terrorist concerns, the strengthening US dollar, and increasing competition are other headwinds for the industry.

However, with travel demand around the globe increasing, Marriott’s long-term growth seems to have potential. This demand, as well as Marriott’s ability to capitalize on it, should be a major valuation driver in the long term. However, short-term multiples could be impacted by the merger-related news.

Investors should also keep an eye on Marriott’s increasing leverage, as increasing leverage could make the stock more volatile. Investors can gain exposure to Marriott by investing in the iShares US Consumer Services ETF (IYC), which holds 0.96% of its portfolio in Marriott.


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