Marriott Earnings: China’s Weakening Economy and Moderating Demand Elsewhere Weigh on Results

Marriott’s shares dropped 5% during July 31 trading, as China’s second-quarter revenue per available room, or revPAR, declined 4%, versus 6% growth in the prior quarter, under the weight of weaker economic growth in the region. We plan to lower our near-term revPAR by around half a percentage point to account for China’s weakness and believe wide-moat peers Hilton and InterContinental could see a similar affect. Looking beyond 2024, assuming around 2% US GDP growth on average the next few years, we continue to see about 3.5% annual revPAR growth, which matches the long-term performance for the US hotel upscale industry. As a result, we don’t expect to meaningfully change our $224 fair value estimate. We see shares as fairly valued.