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On Wednesday, UBS analysts maintained their Neutral rating and $299.00 price target on Marriott International (NASDAQ:MAR), which currently commands a market capitalization of $73.22 billion and boasts impressive gross profit margins of 81.89%. The focus for investors has been on the topic of unit growth in the hotel industry, particularly how the overall slowdown in new construction might impact future expansion. According to InvestingPro data, the company is expected to grow revenue by 5% in fiscal year 2025. Marriott International reported that it currently has 244,000 rooms under construction, noting a change in how it categorizes these rooms. The company now includes conversions in its ’under construction’ figures, resulting in a 3.5 percentage point decrease from 45.5% in Q1 2019 to 42% now, since the 2019 numbers did not account for all conversions.
The percentage of rooms under construction compared to the total pipeline may also have declined year-over-year. Although direct comparisons are challenging due to the reclassification of room categories, Marriott indicated that the number of rooms under construction in Q1, based on the new definition, increased by a mid-single-digit percentage year-over-year. However, with the pipeline growing by 7% over the same period, the proportion of rooms under construction relative to the total pipeline might be lower.
This shift in the percentage of rooms under construction, when set against the backdrop of an annually increasing rooms base, could signal a change in the future growth rate of the company. The metric is seen as a more telling indicator of growth since it is calculated against a continuously expanding base of rooms. The reclassification of what constitutes rooms under construction has introduced a new variable into the evaluation of Marriott’s expansion trajectory, potentially affecting how growth is measured and anticipated. InvestingPro analysis reveals that while Marriott trades at a high EBITDA multiple, it maintains strong financial health scores. Discover 12 additional key insights about Marriott’s valuation and growth prospects with an InvestingPro subscription, including exclusive access to the comprehensive Pro Research Report.
In other recent news, Marriott International reported strong financial results for the first quarter of 2025, surpassing expectations with earnings per share (EPS) of $2.32 against a forecast of $2.26, and revenue of $6.26 billion exceeding the anticipated $6.20 billion. The company announced an increased quarterly dividend of 67 cents per share, reflecting its robust cash generation and commitment to returning value to shareholders. Analysts have taken note of Marriott’s performance, with Jefferies upgrading the stock from Hold to Buy and increasing the price target to $303, citing the company’s resilient business model and earnings growth potential. BMO Capital Markets also adjusted its price target for Marriott, raising it to $265 from $250, while maintaining a Market Perform rating. This adjustment follows a strong first quarter performance, particularly in international markets. Despite a slight reduction in full-year RevPAR growth guidance, Marriott’s strategic positioning with less reliance on select-service and a focus on international exposure is seen as a calculated move to mitigate market risks. The acquisition of CitizenM is expected to bolster Marriott’s growth in the luxury segment, further enhancing its market presence. These developments underscore Marriott’s ability to navigate economic uncertainties while maintaining a strong growth trajectory.
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