Marriott Lets Investors Rest Easy

One of America's older hoteliers, Marriott International shows no sign of slowing with age. The company is seeing occupancy levels at pre-financial-crisis levels in the majority of its brands, with the only weak segment coming from the government. But sequesters aside, this company has made a full recovery from the crisis and then some. Yet even while flirting with its 52-week high and attracting much market attention, the company still trades at a discount to some of its peers. Looking forward, is Marriott International a buy, sell, or hold?

Earnings recap
Starting at the bottom line, Marriott posted $0.43 per share -- well ahead of analyst expectations and a more than 43% gain over the prior year's quarter. Besides blooming sales figures, the company witnessed better margins with fewer discounted rooms. Revenue came in at $3.1 billion -- 23% over the first quarter in 2012 and, again, ahead of analyst estimates. The company continues to be a dominant force in development, carrying over from 2012. At the beginning of this year, Marriott represented 24% of all new room development in the United States -- impressive considering the numerous other major players in the space.

For lodging companies, revenue per available room, or REVPAR, is the go-to metric for measuring unit growth. One of the most iconic Marriott brands, Ritz Carlton, led REVPAR growth with 9% gains in North America, year over year. Outside of the continent, REVPAR grew 11%. The gains were a healthy mix of price increases and more transient bookings. There are more than 30 Ritz Carltons in development worldwide -- a 35% premium to today's numbers. The company forecasts growing luxury demand around the world, despite global economic uncertainties.

Regionally, Mexico posted the greatest REVPAR growth, at 16% year over year.

Company-operated Marriott Hotels and Resorts saw REVPAR rise 8% on heightened demand in markets such as Miami and Houston, even while government regulation limited REVPAR growth by 60 to 70 basis points, according to management.

Regardless of some minor external headwinds, Marriott as a whole appears to be the industry outperformer. So how does it measure up in terms of valuation?

Peer review
Marriott competes directly with Host Hotels, Hyatt, and Intercontinental Hotels Group, among others. Host, though similar in operational capacity, is structured as a REIT, making its stock more appealing for dividend-seeking investors. Host recently surpassed analyst expectations and is growing in a similar fashion to Marriott, yet it trades cheaper at under 13 times forward earnings along with a chunkier 2.3% dividend.

Hyatt trades at nearly 40 times forward earnings, and hasn't had the same degree of benefit from U.S. travel as Marriott has experienced. Intercontinental, which operates Holiday Inns along with other notable properties (including its namesake hotels), trades at 18.52 times forward earnings.

Marriott is currently trading at just over 18 times earnings. And, while it is certainly not the most value-priced of the bunch (Host takes that cake), I find Marriott management to be very shareholder-friendly and taking the right approach to growth. For investors willing to pay up, Marriott remains an appealing long-term hold.

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