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Marriott’s Revenues Could Grow 25% despite Hotel Industry Slowdown

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Analyst estimates

For 2Q17, analysts are estimating Marriott’s (MAR) revenues to grow 43.7% year-over-year (or YoY) to $5.6 billion. Analysts expect Marriott to post 41.7% YoY growth in 3Q17, leading to revenues of $5.3 billion.

Most of this growth is attributed to the Starwood acquisition, which Marriott completed in 3Q16. For 4Q17, as the impact of this acquisition fades, revenues are expected to grow at a normal rate of 3.2% YoY to $5.6 billion.

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For fiscal 2017, this trend could lead to 28.7% growth, as the full benefit of the Starwood consolidation is realized. The combined entity is expected to post sales of ~$22.0 billion. Its growth is expected to normalize at 4.4% YoY in 2018 to $22.9 billion, which is in line with Starwood’s estimate for the lodging industry.

Outlook

For 2Q17, Marriott’s total fee revenues are expected to increase to $820 million–$835 million. This increase includes a $10 million negative impact due to currency losses. Net of direct expenses, Marriott’s owned, leased, and other revenues are expected to increase to $90 million.

For fiscal 2017, total fee revenues are expected to rise 3%–6% to about $3.2 billion–$3.3 billion. Owned, leased, and other revenues are expected to fall 16%–19% to $340 million–$350 million. This is due to the sale of some legacy Starwood properties during the quarter.

In fiscal 2017, Marriott’s general, administrative, and other expenses are expected to increase to $880 million–$890 million compared to the earlier estimate of $895 million–$905 million. Its depreciation expenses are expected to reach $270 million.

Investors can gain exposure to the hotel sector by investing in the PowerShares Dynamic Leisure and Entertainment Portfolio ETF (PEJ), which invests 2.6% of its portfolio in Hyatt and 2.9% in Wyndham (WYN). However, it has no exposure to Marriott (MAR) or Hilton (HLT).

Next, we’ll discuss how these metrics could impact Marriott’s profitability.

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