Targeting future growth via International expansion and new brands
Talking about international expansions, Marriott International Inc (NYSE:MAR) is well-placed with its total projections of about 4000 hotels in 90 countries by 2014. This includes about 40 markets in China, marking the importance of Asia in the travel market. As of now, the company has already signed deals for over 9000 rooms, of which the majority (90%) is in Asia. The main reason behind the importance of the international, specifically Asian expansion, is that these new contracts are organized in such a way, that will generate more incentive management fees (IMF) for the company as compared to what it gets in the US. Currently, only 13% of the North American properties are generating IMF. Therefore, the Asian expansion presents a huge opportunity for the company to pull-back its IMF to the level of 2007 (60%).
Among Marriott International Inc (NYSE:MAR)’s future plans, my favorites are its two proposed luxury hotels in phase 2 of Galaxy Macau. With its remarkable growth rate, the Macau industry has become a prominent spot for world tourism. In 2012, Marriott announced two hotels, the Ritz Carlton and the JW Marriott Hotel Macau, in partnership with Galaxy Entertainment. With this launch scheduled in 2015, the company will make its first step in the booming region of Macau. Looking at these attractive expansion strategies, I expect the worldwide RevPAR (revenue per available room) growth of 6%-8% for the company by 2014-15; which, in turn, can push the IMF to reach its peak levels in 2015-16.
On the other side, one of its strong competitors Intercontinental Hotels Group PLC (ADR) (NYSE:IHG), is focusing on its newly launched brands to grab a higher market share. Last year, IHG launched two brands- HUALUXE and EVEN, to further enhance its portfolio. Each of these brands is targeting at a specific set of customers. HUALUXE is specially designed for the Chinese customers and to tap the growth opportunities in the Chinese hotel market. Similarly, EVEN is designed for the health conscious travelers focusing on wellness and fitness. Under these brands, IHG is expected to open its first hotels in late 2013 and in 2014. The company is targeting at around 21% of its revenue from these brands in the long-run.
Another strategy of InterContinental Hotels Group PLC (ADR) (NYSE:IHG), which will directly lead to higher shareholder’s returns, is its asset disposal policy. The program includes the disposal of the IHG London Park Lane and the IHG New York Barclay. The sale of its property in New York is taking much longer time than what was earlier expected. However, the improvement in the commercial real estate prices will help the company to fetch a more attractive price in 2013. These sale proceeds will be utilized by the company to return more cash to its shareholders via dividend or buybacks. With this, IHG remains on track with its $1 billion return of capital to its shareholders, announced in August, 2012.
Wyndham Worldwide Corporation (NYSE:WYN) – Making its presence with a difference!
Wyndham reported its fourth quarter results for 2012 with adjusted EPS of $0.63, beating the consensus estimate of $0.60. This was also up by around 34% on a year-on-year basis. The company’s fourth-quarter revenue increased by about 9% to $1.1 billion, mainly driven by its lodging and vacation ownership segments. The company even gave its shareholders, a reason to celebrate by increasing the dividend by 26% bringing the annual dividend to $1.16 per share.
The key differentiator for Wyndham Worldwide Corporation (NYSE:WYN) is its higher focus on the asset-light model. With this strategy, the company continues to adopt an asset-light structure aiming at capital optimization. This has always helped the company to generate a good amount of free cash flow, which has supported the shareholder’s return in a better way. The company even increased its guidance for free cash flow to $750 million from its previous guidance of $650-$700 million. This is an annual figure for 2013 and 2014, reflecting a yield of 9%-10%. At this level, Wyndham has the highest cash flow yield among the lodging stocks.
Recap
All the three stocks discussed above can be seen as investor-friendly stocks with their respective policies. Marriott International Inc (NYSE:MAR)’s expansion in Asia, especially Macau, will boost its RevPAR and IMF growth. Along with that, its strong foothold in North America and a low-leverage position will help the company to provide better return to its shareholders.
Similarly, InterContinental Hotels Group PLC (ADR) (NYSE:IHG)’s focus on its new brands and its asset disposal policy; will fetch more returns for its shareholders. And, Wyndham Worldwide Corporation (NYSE:WYN)’s strength lies in its asset-light model, which has made it a high cash flow generating company over time.
I recommend a Buy for all three companies.
The article These Investor Friendly Companies Will Make Your Portfolio Shine! originally appeared on Fool.com.
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