The travel and hospitality industries have been among the hardest hit amid the global coronavirus pandemic. Closed borders, shelter-in-place orders, and a general fear of catching the highly contagious virus largely brought travel to a halt this year. However, headlines related to the FDA’s emergency use authorization of the Pfizer-BioNTech COVID-19 Vaccine have lifted hopes for the hospitality industry’s recovery next year.
Although it will take some time for vaccines to become available to all, the global economy should start realizing the impact of the vaccines by summer of 2021 as life returns to “normal.” There is little doubt that news headlines about vaccines will boost travelers’ confidence and gradually increase hotel demand. Hotels with appealing amenities could then see a high influx of patrons in 2021. As the global economy is on track to deliver 6.4% GDP growth in the coming year, the hospitality industry should see a decent recovery.
Marriott International, Inc. (MAR), Hilton Worldwide Holdings Inc. (HLT) and InterContinental Hotels Group PLC (IHG) are expected to recover faster than the others in the industry based on their strong fundamentals and market reach.
Marriott International, Inc. (MAR)
MAR, one of the largest hotel chains in the world, needs no introduction. The company operates in segments such as, North American Full-Service, North American Limited-Service, and Asia Pacific. It manages 30 brands with 7,484 properties in 131 countries and territories around the world.
On October 29, MAR and Grab, Southeast Asia’s leading super app, announced a partnership across multiple verticals including food delivery, advertising, loyalty and rewards, payment, and transport services. The collaboration will enable MAR to serve a growing pool of customers who are increasingly transacting online.
On October 2, MAR announced the opening of Batam Marriott Hotel Harbour Bay on Batam island, Indonesia. This hotel promises to reinvent for the better visitors’ hotel experience and sets the stage in the hotel industry through its signature service and facilities.
MAR’s revenue has increased 54% sequentially to $2.25 billion in the third quarter ended September 30, 2020. Net income rose 57.3% to $100 million, while adjusted EBITDA grew 436.1% sequentially to $327 million over the period.
The consensus EPS estimate of $2.47 for the next year indicates a 1276.2% improvement from the year-ago value. The consensus revenue estimate of $14.22 billion for the next year indicates a 31.7% growth from the same period last year. The stock has gained 38.8% over the past six months.
How does MAR stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating.
The stock is ranked #5 of 15 stocks in the Travel – Hotels/Resorts industry.
Hilton Worldwide Holdings Inc. (HLT)
HLT is a hospitality company that manages, leases, and franchises hotels and resorts. The company operates through the two segments of Management and Franchise, and Ownership. It has approximately 6,100 properties with approximately 971,000 rooms in 119 countries and territories.
HLT recently marked a new milestone in the China market with the opening of its 300th hotel in the country – Waldorf Astoria Xiamen. This highlights the company’s commitment to building upon its already extensive portfolio in the Chinese market.
On December 9, HLT and Jin Jiang International announced the extension of the Hampton through a Hilton management license agreement to create a network of more than 600 Hampton by Hilton hotels in China. This strategic partnership will further elevate and expand HLT’s position in the key Chinese market.
HLT’s revenue increased 65.4% sequentially to $933 million in the third quarter ended September 30, 2020, while adjusted EBITDA grew 339.2% to $224 million.
The consensus EPS estimate of $2.06 for the next year indicates an 881% improvement from the year-ago value. Moreover, HLT has an impressive earnings surprise history, with the company beating consensus EPS estimates in three of four trailing quarters. The consensus revenue estimate of $6.89 billion for the next year indicates 53.4% growth from the same period last year. The stock has gained 33.4% over the past six months.
HLT’s promising outlook is reflected in its POWR Ratings. It is rated a “Buy” with an “A” for Trade Grade, and a “B” for Buy & Hold Grade, Peer Grade and Industry Rank. It is ranked #6 of 15 stocks in the same industry.
InterContinental Hotels Group PLC (IHG)
IHG owns, operates, and manages hotels, resorts, restaurants, and spas under the brand names InterContinental Hotels & Resorts, Regent, Kimpton Hotels & Restaurants, Hotel Indigo, Candlewood Suites, and others. The company owns approximately 5,900 hotels with 884,000 rooms in approximately 100 countries.
Earlier this year, IHG announced the arrival of its Voco brand in the United States, with first locations planned in New York City, Florida, and Missouri. This upscale brand will enhance the originality of existing properties, while also tapping into IHG’s powerful global network.
IHG’s revenue per available room declined 53% in the third quarter ended September 30, 2020, compared to a 75% decline in the prior quarter. Occupancy improved 44% sequentially, while net system size grew 2.9% year-over-year. Total available liquidity increased 5% sequentially to $2.10 billion over this period.
The consensus EPS estimate of $1.47 for the next year indicates a 464.9% increase year-over-year. The consensus revenue estimate of $1.52 billion for the next year indicates a 46% increase from the same period last year. The stock has gained 29.1% over the past six months.
IHG’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. It is ranked #1 of 15 stocks in the same industry.
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MAR shares were trading at $130.97 per share on Thursday afternoon, up $0.53 (+0.41%). Year-to-date, MAR has declined -13.16%, versus a 17.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More…
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