Marriott International Inc.
Weekly Valuation – Valutico | June 1st, 2023
About the company
Marriott International, a hospitality giant headquartered in Bethesda, commands a global portfolio of properties known for their exceptional guest experiences. Established in 1927, the company operates an impressive network of over 7,600 properties spanning 130 countries. A relentless advocate for innovation, growth, and operational prowess, Marriott’s strategic trajectory is marked by savvy acquisitions, the most recent of which is the City Express brand from Hoteles City Express.
About the deal
Marriott International has received approval from Mexico’s Federal Economic Competition Commission for its acquisition of the City Express brand portfolio, comprising 150 hotels and 17,000 rooms across Mexico and Latin America. The City Express brands will be rebranded with Marriott’s “by Marriott” endorsement. With this acquisition, City Express becomes Marriott’s 31st brand, allowing the hotel giant to expand its presence in the Caribbean and Latin America by approximately 45% with over 480 properties in 37 countries.
Recent Financial Performance
In Q1 2023, Marriott exceeded market expectations with gross lodging fees reaching USD 1.13 billion and an EBITDA of USD 1.09 billion, up from last year’s USD 759 million. Net income soared to USD 757 million, double that of last year, with an adjusted EPS of USD 2.09. Marriott’s pipeline grew 2.6% year-over-year to approximately 502K rooms. With steady conversion activity, the firm expects 4-4.5% net rooms growth for the year, ending the quarter with USD 10.7 billion in debt and a USD 600 million cash reserve.
Share Price Performance
Marriott’s stock saw a sharp decline in 2020 due to COVID-19, plummeting from around USD 140-150 to USD 60-70. The easing of travel restrictions and vaccine distribution in 2021 prompted a recovery, with the stock achieving an all-time high of USD 188.14 on April 20, 2022. The past year’s high and low were USD 183.27 and USD 131.01, respectively, averaging USD 159.53. Reflecting strong Q1 2023 performance and favorable travel trends, Marriott’s current share price stands at USD 171.76.
We analyzed Marriott International Inc. by using the Discounted Cash Flow method, specifically our DCF WACC simplified approach, as well as a Trading Comparables analysis. The Discounted Cash Flow analysis produced a value of USD 28.09 billion using a WACC of 11.3%.
The Trading Comparables analysis resulted in a valuation range of USD 43.08 billion to USD 71.14 billion by applying the observed trading multiples EV/Sales, EV/EBITDA, EV/EBIT and P/E. For our Trading Comparables we selected similar peers such as Hilton Worldwide Holdings Inc., Hyatt Hotels Corporation and InterContinental Hotels Group PLC.
Combining our DCF WACC and Trading Comparables analysis results in a valuation range of USD 37.05 billion to USD 61.46 billion. In comparison to Marriott market capitalization of USD 52.9 billion we suggest that the company is fairly valued.
This article is for informational purposes only and does not constitute investment advice. None of the information contained herein constitutes a solicitation, offer or recommendation to sell or buy any financial instrument