Record Growth, Powerful Portfolio Expected to Drive Profitability and Cash Flow to Shareholders
Bethesda, Md., September 8, 2014 – With plans to add over 1,300 hotels globally – or more than six hotels a week – from 2014 through 2017, Marriott International, Inc. (NASDAQ: MAR) will tell a meeting of security analysts and institutional investors today that its portfolio could total over 5,000 hotels in 100 countries. With a record pipeline already in place, Marriott expects to add between 200,000 and 235,000 new rooms around the world in 2014 through 2017.
In presentations at the new Marriott Marquis Washington, D.C., the company will say assuming 6 percent RevPAR (Revenue per Available Room) growth in 2014, the midpoint of its current guidance, and 4 to 6 percent annual RevPAR growth in 2015 through 2017, the company could produce diluted earnings per share (EPS) of between $4.00 and $4.60 by 2017, a compound growth rate of 19 to 23 percent over the period. Given these RevPAR assumptions, cash available for dividends and share repurchases could total $6.7 billion to $7.6 billion for the four years 2014 through 2017.
“This is a great time to be in the hotel business,” said Arne Sorenson, Marriott International president and chief executive officer. “Around the world, this is a golden age of travel. In 2012, international trips topped a record one billion, and we would like to see that double over the next 10 years. Economic growth and rising middle classes are driving this travel, and we now have more hotels open or in development outside the U.S. than at any time in our company’s history. In North America, we believe we are only midway through an elongated lodging cycle, with considerable upside to come.”
Discussing its operating model, the company will say that assuming the RevPAR growth detailed above, it would expect:
- Worldwide total fees of $2.2 billion to $2.4 billion by 2017, a 10 to 12 percent compound growth rate from 2013;
- Incentive management fees of $445 million to $510 million in 2017, a 15 to 19 percent compound growth rate from 2013;
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of between $2.1 billion to $2.3 billion by 2017, a 12 to 14 percent compound growth rate from 2013;
- Operating income margins of 45 to 46 percent by 2017; and
- Pre-tax return on invested capital of 48 to 53 percent by 2017.
The company’s investment spending for the three years from 2012 to 2014, including capital expenditures, note advances, contract acquisition costs and joint venture investments, is expected to total $2.0 billion to $2.2 billion, roughly 20 percent lower than that modeled for the same three-year period at the last analyst meeting in June 2012. The company’s investment spending for the next three years, 2015 to 2017 is expected to total $1.6 billion to $1.8 billion, 20 percent lower still.
Marriott will say it is focused on aggressive growth in new markets and new brands. In recent years, Marriott has introduced or acquired six brands, Gaylord, Moxy, EDITION, Protea, AC Hotels by Marriott and Autograph Collection, each positioned to capture a new customer or provide a new stay experience for our already loyal customers, and expected to account for 20 percent of the company’s unit growth through 2017. In fact, the Autograph Collection is the fastest growing collection of independent full-service hotels and will soon welcome The Atlantis Paradise Island.
The company’s luxury and lifestyle portfolio is in position to capture the loyalties of Generations X and Y, which are expected to account for 90 percent of the working age population within a decade. These exciting brands include The Ritz-Carlton, JW Marriott, Renaissance, EDITION, AC Hotels by Marriott, Moxy and Autograph Collection.
Marriott’s limited-service brands continue to drive growth in North America and are attracting a loyal following in markets abroad where their design reflects local tastes. Marriott also has the preeminent meetings and convention hotel network in the U.S., with the addition of Gaylord properties and hotels such as the Marriott Marquis Washington, D.C. The company is reimagining and reinventing its first brand, Marriott Hotels, such as introducing the M Club lounge, which brings the concierge lounge to the first floor and boosts food and beverage sales and guest engagement.
In total, the company expects to open 200,000 to 235,000 rooms from 2014 to 2017. Given the company’s RevPAR growth assumptions, these new rooms could generate roughly $360 million in fee revenue in 2017 or approximately $450 million annually once stabilized.
Marriott.com, one of the company’s most important connections to its customers, receives 35 million visits per month and booked a quarter of Marriott’s room nights in 2013, generating nearly $10 billion in gross room bookings. The Marriott.com mobile app generated $1.3 billion of those bookings in 2013.
Another driver of growth is Marriott Rewards, ranked the most popular loyalty program in the industry by U.S. News & World Report. Its 47 million members account for 50 percent of all paid and stayed room nights.
Regionally, in Asia Pacific, Marriott’s second largest region following North America, the company expects to double its portfolio by 2017, reaching 300 to 315 hotels in 19 countries. China’s role in this growth is significant – almost 40 percent of the company’s 5 million Marriott Rewards members in the Asia Pacific region live in China.
Marriott’s growth in the Middle East and Africa region has doubled in less than three years. By 2017, Marriott expects to have a portfolio of 31,000 to 33,000 rooms in 29 countries throughout the region, a 24 to 26 percent compound growth rate from 2013, driven significantly by Marriott’s acquisition earlier this year of South Africa’s Protea Hospitality Group.
“We are focused on growing a superior brand portfolio through long-term, high quality contracts with minimal investments, resulting in strong free cash flow, high return on invested capital and meaningful earnings growth,” said Carl Berquist, Marriott’s executive vice president and chief financial officer. “It’s a strategy that creates considerable shareholder value.”
Marriott International, Inc. is a global leading lodging company based in Bethesda, Maryland, USA, with more than 4,000 properties, and more than 690,000 rooms in 79 countries and territories. Marriott International reported revenues of nearly $13 billion in fiscal year 2013. The company operates and franchises hotels and licenses vacation ownership resorts under 18 brands. Marriott has been consistently recognized as a top employer and for its superior business ethics. The company also manages the award-winning guest loyalty program, Marriott Rewards® and The Ritz-Carlton Rewards® program, which together comprise 47 million members. For more information or reservations, please visit our website at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com.
Marriott will provide a live webcast of today’s investor and security analyst conference. The live webcast will be available for U.S. investors on September 8, 2014 from approximately 10:00 am to 3:30 pm Eastern Daylight Time (EDT). Slides and video from the meeting will be provided through a live webcast via Marriott’s investor relations web site. The slides contain financial models for the four-year period, including estimates of earnings before interest, taxes, depreciation and amortization (EBITDA), return on invested capital, and free cash flow, as well as non-GAAP financial measure reconciliations for those estimates as appropriate. Copies of the slides will be available for download approximately one hour before the start of the presentation. Those wishing to access the webcast should log onto http://www.marriott.com/investor, and click on the Security Analyst Meeting link under the “Recent & Upcoming Events” tab. Presentation materials from the meeting and the webcast replay will be available online after the meeting as well. Investor or analyst questions concerning the analyst conference should be addressed to Marriott Investor Relations at (301) 380-1379 or firstname.lastname@example.org.
Note on Forward Looking Statements: This press release contains “forward-looking statements” within the meaning of federal securities laws, including RevPAR, profit margin and earnings trends; the number of lodging properties we may add in future years; our potential investment spending and similar statements concerning possible future events or expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including changes in market conditions; the continuation and pace of the economic recovery; supply and demand changes for hotel rooms; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors that we identify in our most recent quarterly report on Form 10-Q; any of which could cause actual results to differ materially from the expectations we express or imply here. We make these statements as of September 8, 2014 and we assume no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
For a complete set of Non-GAAP financial tables, click here: http://investor.shareholder.com/mar/reconciliations.cfm
Contact: Tom Marder