With winter storm Juno buffeting the northeast and the stock market in disarray, it’s enough to want to throw in the towel and take a vacation. While that may seem like the easy way out, I have a better proposition for you: To invest some of that rainy day money in a vacation stock. In particular, I have my eye on one hotel operator that hopes to reach one million rooms by the end of this year. And with the market pulling back today, now could be a good opportunity to buy shares. Let’s take a look.
If you plug five of the top publicly-traded hotel chains into Portfolio Grader, you can see that not all hotel operators are created equally. Wyndham (WYN) is a B (cautious buy), Hilton (HLT) and Hyatt (H) barely squeak by with Cs (hold) and Starwood Hotels (HOT) outright fails with a D-rating (sell). That’s because the smart money (as indicated by the Quantitative Grade) is chasing another major player: Marriott International (MAR).
Marriott is a familiar name to travelers. The company’s properties cover the full spectrum of luxury (The Ritz-Carlton and BVGARI) to economy (Courtyard and Springhill Suites). Marriott also offers travelers extended stay accommodations (Residence Inn and Towneplace Suites) and destination entertainment options (Gaylord Hotels and Marriott Vacation Club).
Outside of hotels and timeshares, the company operates, markets, and develops residential properties, as well as provides services to home/condominium owner associations. At last count, Marriott has approximately 4,100 properties and over 700,000 rooms in 77 countries and territories.
While Marriott has been in business for more than 80 years, it is still growing. Just last week, Marriott announced a big push to reach 1 million hotel rooms by the end of 2015. Given that Marriott added an unprecedented 100,000 rooms last year alone and has nearly 225,000 rooms in the development pipeline, it could very well meet this target.
The company is increasingly moving upscale. Over the next several years, Marriott plans on adding 200 new hotels, 25% of which will likely be luxury and lifestyle hotels. Most recently, Marriott revealed plans to expand its Moxy brand, a trendy, lower-cost hotel geared towards millennials. All of this is expected to generate rich returns for Marriott.
For Marriott’s upcoming fourth-quarter earnings report on February 18, analysts are calling for 8.2% sales growth and 32.7% earnings growth. Marriott is expected to maintain this pace of sales and earnings growth over the next several quarters. And when you factor in Marriott’s 1% annual dividend yield into the equation, I consider MAR an A-rated Strong Buy.