Marriott International has presented its ambitious three-year growth plan, which includes a goal of opening more than 1,700 hotels globally.
The news, announced Monday at the company’s meeting with institutional investors and security analysts at the New York Marriott Marquis, means Marriott plans to add between 275,000 and 295,000 rooms by 2021.
Of course, inevitably, a reference to the Starwood hack – the largest the largest data breach in the hotel industry’s history – also came up Monday.
“It has been, of course, an interesting 2018 for us,” said Marriott CEO Arne Sorenson, who had recently testified before the U.S. Senate regarding the breach. “As we gather here this morning, one of the conversations we’ve had with many of you is: ‘How’s that Starwood integration going?’” Adding that, “Things had been going so well out of the box that I think we were all a bit deluded in (thinking) this is gonna be a breeze.”
Though Sorenson didn’t go into details regarding exactly how that integration is going, he assured investors there were still absolutely no regret surrounding the acquisition.
According to Marriott, new room openings during this period could ultimately contribute some US$400 million in fee revenue in 2021 and US$700 million annually when stabilized. The company’s three-year growth plan assumes, but does not forecast, comparable hotel RevPAR growth of 1 and 3%, compounded annually.
Analysts from SunTrust Robinson Humphrey say much of that estimated 275,000 rooms growth will be driven by existing owners (in-line with the company’s historical development strategy). SunTrust calculates that net rooms growth is ~ +5.5-6.0% annually through 2021.
Additionally, progress on Sheraton Hotels & Resorts continues with a brand RevPAR Index now over 100, which compares to a couple points below fair share at the time of the merger.
“Improving the quality and perception of the Sheraton brand, particularly domestically, was one of the main upside opportunities Marriott saw when acquiring Starwood, and management has improved brand quality via renovations and targeted deletions, some of which resulted in conversions to other Marriott brands; there are currently 443 Sheraton-branded hotels today versus 445 at the end of 3Q16,” according to Baird Equity Research. The brand is the company’s third largest in terms of both rooms and fees.
Given the assumptions for its three-year plan, according to Marriott, the following results could potentially be produced:
- Diluted earnings per share of US$7.65 to US$8.50 by 2021, a compound growth rate of 11 to 15% over 2018 adjusted results
- Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) increasing by 6 to 9% compounded, with net income increasing by 5 to 8% compounded, each compared to adjusted results in 2018
- Cash available for shareholders could total US$9.5 to US$11 billion for the three years (2019 through 2021)
- Shareholders could see US$1.9 to US$2 billion in dividends, assuming a continued 30% payout ratio, and US$7.6 to US$9 billion in share repurchases over the three-year period