Marriott’s Demand Set to Increase Further in 2023, Aided by Industry Tailwinds

Narrow-moat Marriott’s fourth-quarter revenue per available room, or revPAR, improved again to 107% of 2019′s level from 105% in the prior quarter. And the hotelier expects further growth in 2023, with revPAR guided for a 6%-11% lift, harmonizing with our 8% estimate. We don’t plan to materially alter our $180 fair value estimate, leaving shares appropriately valued.

RevPAR improved as a percentage of 2019′s level across all major regions (excluding China), with the U.S. and Canada at 105% of 2019′s level versus 104% last quarter and Europe at 107% compared with 106% three months prior. Leisure demand remains resilient, with room nights and average daily rate at 107% and 122% of prepandemic levels, respectively, augmented by improving group revenue that reached 110% of 2019′s level in the fourth quarter, up from 103% in the third quarter. In our view, Marriott’s results support our stance that industry travel demand will grow further in 2023, as the tailwinds of service consumption, remote work flexibility and the human-ingrained desire to travel offset the headwind of slowing economic growth (barring a severe recession, which we see as unlikely). Meanwhile, 2022 EBITDA of $3.85 billion equated to an 18.5% margin, near our 18.7% estimate, with EBITDA guided for $4.03-$4.3 billion in 2023 also around our $4.2 billion forecast.

In line with our expectation, Marriott’s unit growth slowed to 3.1% in 2022 from 3.9% in 2023, in part due to COVID-19 restrictions in China delaying new openings. That said, we still expect unit growth to reaccelerate to 3.6% (4.3% including the City Express acquisition scheduled to close in early 2023), driven by China’s removal of COVID-19 stringency Jan. 8, 2023. Looking beyond 2023, we believe the company’s room growth can average around 4% over the next several years, supported by its industry-leading pipeline of 496,000 rooms (up 2% year over year) and loyalty membership of 177 million.