MAR’s current valuation
Marriott International (MAR) is now trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 15.5x. Marriott’s valuation is significantly higher than its average historical valuation of 13.9x since January 2008.
The market is expecting Marriott’s EBITDA to grow 40% in 2017, though most of this growth is inorganic (related to Starwood acquisition). MAR’s organic EBITDA growth should be in the range of 3%–6%.
By comparison, rival Hilton’s EBITDA is expected to fall 36.1% in 2017. Hyatt’s EBITDA is expected to grow 4%, while InterContinental’s EBITDA is expected to grow 7%, and Wyndham’s EBITDA is expected to grow 4%.
MAR’s potential growth
With travel demand across the globe increasing, Marriott’s long-term growth appears to many analysts to have potential. Marriott’s ability to capitalize on this demand will be a major valuation driver in the long term, while its short-term multiples will be impacted by merger-related news.
Meanwhile, investors will likely be keeping an eye on Marriott’s increasing leverage, which could make the stock more volatile.
Other risks to MAR’s valuation include slowing GDP growth, which would mean less corporate travel and would be bad for hotels—especially big ones like Marriott. We might also see risks arise from geopolitical and terrorist concerns, the strengthening US dollar, and increasing competition.
Notably, investors can gain exposure to Marriott by investing in the PowerShares Dynamic Large-Cap Growth Portfolio (PWB), which has 1.3% of its total portfolio in MAR.