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

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

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!