Marriott International Inc (MAR), Starwood Hotels & Resorts Worldwide, Inc (HOT): Three Hotel Companies for Luxurious Returns

Page 1 of 2

Marriott International Inc (NYSE:MAR)With the global economy on the path to recovery, it will lead to a rise in the spending capacity of the population. This directly impacts the demand for hotel rooms, as the tourism industry gets a boost. According to PFK Hospitality Research, residents staying away from home for more than one day are expected to rise to 3.3% this year. Compare that to the increase in supply of hotel rooms, which stands at only 1%. Consequently, revenue per available room, or RevPAR, of the hotel industry will rise 7.7% in 2014, after 5.7% growth in 2012.

Here are the three picks from the hotel industry that are expanding through the approach of franchisee and management contracts to cater the robust demand of hotel rooms. Let’s discuss them in detail.

Condos – high in demand

During the recession, Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT)’s EBITDA was down by 50%, and its fee-based revenue was down by 20%. From that point forward, the company transitioned its focus to franchisee-based business with 1,100 franchise properties in approximately 100 countries. At present, it generates 50% of EBITDA from fee-based business and plans to reach 80% by 2016. To generate more profits from fee-based business, it is increasing the number of rooms franchised to 134,688 in 2013 from 127,666 in 2012. With more rooms franchised, it expects to generate $222 million in fee revenue this year and $240 million next year from $200 million in 2012.

Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) demolished and replaced the Sheraton with St. Regis Bal Harbour Resort. The company put $375 million cash into this project from 2008 to 2011. St. Regis features condos within the resort. Its infrastructure was unique in Florida, which created high demand for the condos. Approximately $1 billion worth of condos have sold, and the company expects to be completely sold out by the end of this year. This venture will bring $611 million in cash by the end of this, benefiting the company.

Expanding in China for more benefits

InterContinental Hotels Group PLC (ADR) (NYSE:IHG)’s franchisee business makes up 74% of its total number of rooms. The owner of the franchised hotel pays approximately 6% of sales as royalty fees for using the company’s brand name. Franchise fees contributed 60% of EBITDA in 2012, generating high profit margins of 84%. To capitalize on this further, it is increasing the number of rooms franchised by 5,300 worldwide in 2013 and will reach approximately 511,273 rooms in 2014. Revenue from franchise fees will to reach $704 million this year from $653 million in 2012.

Chinese residents were the highest spenders, reaching $102 billion on travel and tourism in 2012. This was up 40% from 2011. To monetize this opportunity, the company will increase the number of rooms in China by approximately 7,700 in 2013, reaching 78,000 rooms in 2014. This expansion will match China’s demand and increase revenue in China from $230 million in 2012 to $251 million in 2014.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!