Marriott International Inc. presented the company’s three-year financial model through 2025 at its meeting with institutional investors and security analysts today at the W South Beach in Miami Beach. During the presentation, the company launched a new midscale brand for the Europe, Middle East and Africa (EMEA) region, Four Points Express by Sheraton.
In the presentation, the company reiterated its 2023 outlook given in August and introduced two-year compounded annual growth rates (CAGRs) from 2023-2025 for certain key performance metrics. Marriott will outline its plan to add 230,000 to 270,000 net rooms over three years, expanding its industry-leading global portfolio to nearly 1.8 million rooms by year-end 2025. This represents a three-year CAGR for net rooms of 5% to 5.5%. In addition, the company’s model assumes global RevPAR growth at a two-year CAGR of 3% to 6% from 2023 to 2025, after rising 12% to 14% this year.
“With global travel poised for continued robust growth, our strategy is to deliver the best brands and experiences for consumers, to attract and retain the most loyal guests and to be in more places around the world—these are our three paths to win,” said Anthony Capuano, president/CEO, Marriott International. “As consumers continue to prioritize travel and experiences, we are focused on transforming our technology platform while leveraging our powerful revenue engines and our leading Marriott Bonvoy loyalty program to connect people through the power of travel. With our extraordinary associates around the world, I am incredibly optimistic about Marriott’s future.”
Given the assumptions in its three-year model, the company could produce the following results:
Total gross fee revenues could rise 16% to 18% year-over-year (YOY) in 2023 and at a 6.5% to 9.5% two-year CAGR to reach $5.4 billion to $5.8 billion in 2025.
Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) could increase 18% to 21% YOY in 2023 and at a 7% to 10% two-year CAGR to reach $5.2 billion to $5.7 billion in 2025.
Adjusted diluted earnings per share (adjusted diluted EPS) could rise 25% to 29% YOY in 2023 and at a 10% to 15% two-year CAGR to reach $10.10 to $11.45 in 2025.
Shareholders could see $1.9 billion to $2.0 billion in dividends, assuming a 25% payout ratio, and $9.8 billion to $11.6 billion in share repurchases, for total shareholder returns of $11.7 billion to $13.6 billion over the three-year period through 2025.
“Our asset-light and resilient business model drives powerful results,” said Leeny Oberg, CFO/ EVP, development. “We expect to produce significant free cash flow and earnings growth over the next few years and create meaningful value for our shareholders.”
Growth areas
The company expects to follow a tailored development approach in its expansion in the affordable midscale segment, recognizing differences by continent to accommodate regional customer and owner expectations. To date, Marriott has completed an acquisition (the City Express brand portfolio) in the Caribbean and Latin America region, created a midscale extended-stay brand in the U.S. & Canada region (StudioRes) and launched Four Points Express by Sheraton. The company also plans to further expand in the extended-stay segment, having recently announced the launch of Apartments by Marriott Bonvoy.
Marriott is also emphasizing luxury and leisure offerings. It is currently leading in luxury distribution globally, with nearly 500 open luxury hotels and 17% of the market, approximately 1.5 times the size of its next largest competitor. The company has another 225 luxury properties in the pipeline. Conversions, particularly multi-unit conversions, are also a critical piece of the company’s overall growth strategy. In the first six months of 2023, conversions accounted for 63% of room signings, including the MGM Resorts transaction, and 25% excluding MGM.
Continued growth in Marriott’s branded residential business, cobrand credit card offerings and other adjacencies such as The Ritz-Carlton Yacht Collection are also expected to enhance the company’s fee growth. Marriott expects to continue its disciplined approach to investing capital in long-term value-enhancing projects that drive cash flow growth.
New Four Points Express brand
The new Four Points Express by Sheraton brand launched in response to growing consumer demand for reliable yet affordable accommodation in Europe, the Middle East and Africa, according to the company.
“This new brand has been thoughtfully researched, designed and localized to deliver midscale travelers the fundamentals of a stay that meets every trip purpose at the right price point,” said Satya Anand, president, Europe, Middle East and Africa (EMEA), Marriott International. “Midscale is a resilient industry segment that currently represents almost 1.2 million rooms in EMEA, and 68% of those rooms are unbranded. Four Points Express will offer hotel owners the opportunity to capitalize on Marriott International’s powerful distribution systems and award-winning Marriott Bonvoy loyalty program, with an affordable conversion opportunity, offering competitive terms, and a light operational design model.”
The company has already signed three deals across the U.K. and Turkey, and has signed letters of intent for future Four Points Express hotels in Poland, Belgium and the U.K.
The first U.K. hotel is slated to open in Central London near Euston Station, Kings Cross and St. Pancras International. Four Points Express by Sheraton London Euston is expected to open in 2024 with 201 guestrooms following a significant renovation of the current property.
In Turkey, two Four Points Express hotels have been signed in Antalya and Bursa. Four Points Express by Sheraton Antalya Lara plans to offer 52 guestrooms upon its anticipated conversion later this year. In Bursa, Four Points Express by Sheraton Bursa Nilüfer will be located close to the highway that connects Bursa, Istanbul and Izmir.
