Growing global distribution and integration of Starwood expected to drive record cash flow to Marriott shareholders.
Marriott International’s (NASDAQ: MAR) three-year growth plan, adding 285,000 to 300,000 rooms worldwide by 2019, could yield a record $675 million in annual stabilized fees from these rooms.
The expansion would also allow the company to further capitalize on its industry leading loyalty programs – Marriott Rewards, which includes The Ritz-Carlton Rewards, and Starwood Preferred Guest.
The programs now have over 100 million members – growing at a record pace of roughly one million net new members per month since the company’s historic acquisition of Starwood Hotels and Resorts in September 2016.
“We are more optimistic than ever about our future. Marriott has made a significant leap forward in distribution and scale with its once-in-a-generation acquisition of Starwood. With global travel estimated to increase at a 7 percent compounded rate over the next 10 years and international trips expected to top 1.8 billion by 2030, Marriott is well positioned to benefit given its strong global footprint now in 122 countries and territories and an unmatched portfolio of 30 lodging brands” said Arne Sorenson, Marriott International president and chief executive officer.
In its three-year growth plan, the company expects to earn $675 million in stabilized fees from hotel rooms added to its system in 2017 through 2019. In addition, non-property related franchise fees, largely credit card branding fees, should increase by $100 million during the three years. The plan assumes, but does not forecast RevPAR (Revenue per Available Room) growth of 1 to 3 percent compounded annually through 2019.
Given these assumptions, Marriott could produce the following results over the next three years:
Diluted earnings per share of $5.25 to $5.80 by 2019, a compound growth rate of 17 to 21 percent over 2016 combined results;
Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) increasing by 7 to 10 percent compounded, excluding the impact of asset sales, with net income increasing by 11 to 14 percent compounded, each compared to combined results in 2016;
Cash available for shareholders could total $8.3 to $9.3 billion for the three years (2017 through 2019);
Shareholders could see $1.4 to $1.5 billion in dividends, assuming a continued 30 percent payout ratio, and $6.9 to $7.8 billion in share repurchases over the three-year period.
Starwood Integration Brings Meaningful Savings and Revenue Opportunities
Marriott has already made great progress on integrating Starwood, including immediately linking loyalty programs, integrating its development organization, and rolling out its unified guest feedback system, guestVoice, across legacy-Starwood properties.
Looking ahead, with broader distribution and applying the company’s operating expertise, Marriott can offer enhanced guest choice, a more powerful loyalty program, improved sales and marketing efficiency and effectiveness, and meaningful cost efficiencies. In addition, with anticipated increasing loyalty program participation, number of credit card holders, and credit card spend, Marriott expects to see an increase in payments from its co-brand loyalty credit cards benefiting loyalty programs, Marriott’s hotel owners and Marriott.
“While the acquisition has provided us with enviable distribution, scale and global footprint, Marriott’s strategy hasn’t changed. We remain focused on growing our superior brand portfolio through signing long-term, high quality contracts with minimal investment. We expect to deliver significant free cash flow and sustained earnings growth as we expand our footprint strategically around the world. Our integration plans are on track and we are excited about the potential we see for additional benefits still being developed and not included in the plan” said Leeny Oberg, Marriott International executive vice president and chief financial officer.
