Marriott International, Inc. (MAR) Bundle
Understanding Marriott International, Inc. (MAR) Revenue Streams
Understanding Marriott International, Inc.’s Revenue Streams
The primary revenue sources for the company can be categorized into three main segments: net fee revenues, owned, leased, and other revenue, and cost reimbursements.
Breakdown of Primary Revenue Sources
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Net Fee Revenues:
- Base management fees: $312 million in Q3 2024, up from $306 million in Q3 2023, a 2% increase.
- Franchise fees: $812 million in Q3 2024, compared to $748 million in Q3 2023, reflecting a 9% increase.
- Incentive management fees: $159 million in Q3 2024, up from $143 million in Q3 2023, an increase of 11%.
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Owned, Leased, and Other Revenue:
- Revenue: $381 million in Q3 2024, compared to $363 million in Q3 2023, a 5% increase.
- Direct expenses: $300 million in Q3 2024, up from $293 million in Q3 2023, a 2% increase.
- Net income from this segment: $81 million in Q3 2024, compared to $70 million in Q3 2023, an increase of 16%.
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Cost Reimbursements:
- Revenue: $4,617 million in Q3 2024, compared to $4,391 million in Q3 2023, a 5% increase.
- Reimbursed expenses: $4,681 million in Q3 2024, up from $4,238 million in Q3 2023, a 10% increase.
- Net: $(64) million in Q3 2024, down from $153 million in Q3 2023, a decrease of 142%.
Year-over-Year Revenue Growth Rate
In the first three quarters of 2024, the company reported total net fee revenues of $3,836 million, up from $3,580 million in the same period of 2023, which represents a 7% year-over-year growth rate.
The company’s revenue from the owned, leased, and other segment for the first three quarters of 2024 was $1,133 million, an increase from $1,109 million in 2023, reflecting a growth of 2%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | % Change |
|---|---|---|---|
| Net Fee Revenues | $1,283 | $1,197 | 7% |
| Owned, Leased, and Other | $381 | $363 | 5% |
| Cost Reimbursements | $4,617 | $4,391 | 5% |
Analysis of Significant Changes in Revenue Streams
Notably, the increase in franchise fees can be attributed to unit growth, which added approximately $26 million in Q3 2024 compared to the previous year. Additionally, higher RevPAR contributed an increase of $10 million and higher co-branded credit card fees added $10 million in the same period.
Conversely, the revenue from the Greater China segment experienced a decline, with net fee revenues dropping to $62 million in Q3 2024 from $71 million in Q3 2023, reflecting a 13% decrease due to lower demand in that region.
A Deep Dive into Marriott International, Inc. (MAR) Profitability
A Deep Dive into Marriott International, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 55.5%, compared to 56.3% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 23.7%, down from 24.1% in the prior year.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, stood at 10.3%, slightly decreased from 10.5% in the same period of 2023.
Trends in Profitability Over Time
In the third quarter of 2024, the net income was $584 million, a decline from $752 million in the third quarter of 2023.
For the first three quarters of 2024, the total net income was $1.92 billion, compared to $2.24 billion for the same period in 2023.
Comparison of Profitability Ratios with Industry Averages
Industry average gross profit margin for the hotel sector is approximately 60%, indicating that the company's gross profit margin is below industry standards.
Compared to industry averages, the operating profit margin is also below the typical 25% for this sector.
Analysis of Operational Efficiency
The cost management strategy has shown an increase in general and administrative expenses, which rose by 15% to $785 million during the first three quarters of 2024 compared to $681 million in the same period in 2023.
Depreciation, amortization, and other expenses were $137 million for the nine months ended September 30, 2024, marginally down from $138 million in the previous year.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 55.5% | 56.3% | -1.4% |
| Operating Profit Margin | 23.7% | 24.1% | -1.7% |
| Net Profit Margin | 10.3% | 10.5% | -1.9% |
| General & Administrative Expenses | $785 million | $681 million | +15% |
| Depreciation & Amortization | $137 million | $138 million | -0.7% |
Debt vs. Equity: How Marriott International, Inc. (MAR) Finances Its Growth
Debt vs. Equity: How Marriott International, Inc. Finances Its Growth
The financial structure of Marriott International, Inc. reflects a balanced approach to growth through a mix of debt and equity financing. As of September 30, 2024, the company reported:
- Long-term debt: $12.671 billion
- Short-term debt: $960 million
This results in a total debt of approximately $13.631 billion. The composition of this debt is crucial for understanding the company’s financing strategy.
Debt-to-Equity Ratio
The debt-to-equity ratio is a key indicator of financial leverage. For Marriott, the ratio stands at approximately 2.47 as of the end of Q3 2024, calculated from the total debt of $13.631 billion and total equity of $5.5 billion. This figure is higher than the industry average of around 1.5, indicating a more aggressive use of debt to finance growth compared to its peers.
Recent Debt Issuances
In 2024, Marriott has been active in the debt market:
- Issued $500 million in Series PP Notes with a 4.800% interest rate due March 15, 2030.
- Issued $1.0 billion in Series QQ Notes with a 5.350% interest rate due March 15, 2035.
- Issued $500 million in Series NN Notes with a 4.875% interest rate due May 15, 2029.
- Issued $1.0 billion in Series OO Notes with a 5.300% interest rate due May 15, 2034.
The net proceeds from these issuances were approximately $1.48 billion. This capital is intended for general corporate purposes, including working capital and potential acquisitions.
Credit Ratings and Refinancing Activity
Marriott maintains a robust credit profile, with a credit rating of Baa2 from Moody's and BBB from S&P. The weighted average interest rate on long-term debt is 4.5%. In light of recent market conditions, Marriott has refinanced a portion of its debt to optimize its interest expenses and extend maturities.
Balancing Debt and Equity Funding
The company strategically balances its use of debt and equity. In 2024, Marriott repurchased 14.2 million shares for approximately $3.4 billion, while also paying dividends of $0.63 per share in the latest quarter. This indicates a commitment to returning value to shareholders while still leveraging debt for growth initiatives.
| Debt Issuance | Principal Amount (in billions) | Interest Rate (%) | Maturity Date |
|---|---|---|---|
| Series PP Notes | $0.5 | 4.800 | March 15, 2030 |
| Series QQ Notes | $1.0 | 5.350 | March 15, 2035 |
| Series NN Notes | $0.5 | 4.875 | May 15, 2029 |
| Series OO Notes | $1.0 | 5.300 | May 15, 2034 |
Assessing Marriott International, Inc. (MAR) Liquidity
Assessing Marriott International, Inc. Liquidity
Current Ratio: 0.4 to 1.0 as of September 30, 2024.
Quick Ratio: Not specified, but indicative of liquidity challenges due to a low current ratio.
Analysis of Working Capital Trends
Current Assets: $3,536 million as of September 30, 2024.
Current Liabilities: $8,518 million as of September 30, 2024.
Working Capital: $(4,982) million as of September 30, 2024.
Cash Flow Statements Overview
| Cash Flow Activity | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|
| Net cash provided by operating activities | $2,431 | $2,419 |
| Net cash used in investing activities | $(389) | $(363) |
| Net cash used in financing activities | $(3,157) | $(2,965) |
Potential Liquidity Concerns or Strengths
Cash, cash equivalents, and restricted cash: $416 million as of September 30, 2024, an increase of $50 million from year-end 2023.
Significant borrowings: Total long-term debt was $12,671 million as of September 30, 2024.
Access to Credit Facility: A $4.5 billion multicurrency revolving credit agreement is available, with significant borrowing capacity remaining.
Commercial Paper Program: $769 million in commercial paper outstanding as of September 30, 2024.
Interest Payments: Cash paid for interest was $350 million in the 2024 first three quarters.
Is Marriott International, Inc. (MAR) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 19.3 based on a trailing twelve months (TTM) earnings per share (EPS) of $6.69 as of September 30, 2024.
Price-to-Book (P/B) Ratio
The price-to-book ratio is calculated at 3.0 with the book value per share reported at $22.35.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 12.5, calculated using an enterprise value of $58 billion and EBITDA of $4.64 billion.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $140 and a high of $180. As of the latest data, the stock price is approximately $165, indicating a 5% increase year-to-date.
Dividend Yield and Payout Ratios
The company has a current dividend yield of 1.5%, with an annual dividend of $0.63 per share. The payout ratio is at 9.4% of net income, showcasing a sustainable dividend policy.
Analyst Consensus
Currently, analysts have a consensus rating of Buy with an average target price of $175, which represents a potential upside of approximately 6% from the current price.
| Valuation Metric | Current Value |
|---|---|
| P/E Ratio | 19.3 |
| P/B Ratio | 3.0 |
| EV/EBITDA Ratio | 12.5 |
| Stock Price (Current) | $165 |
| Dividend Yield | 1.5% |
| Dividend Payout Ratio | 9.4% |
| Analyst Consensus | Buy |
| Analyst Target Price | $175 |
Key Risks Facing Marriott International, Inc. (MAR)
Key Risks Facing Marriott International, Inc.
Marriott International, Inc. faces a variety of internal and external risks that impact its financial health. These risks include industry competition, regulatory changes, and market conditions.
Industry Competition
The hospitality industry is highly competitive, with numerous players vying for market share. In the third quarter of 2024, net fee revenues grew in U.S. & Canada, EMEA, and APEC, while the Greater China segment saw a decrease in net fee revenue. This decline was attributed to lower demand, highlighting the competitive pressures in that region.
Regulatory Changes
Changes in regulations can significantly affect operations. The company must navigate various local, state, and federal regulations that can impact its business model, particularly in areas like labor laws, health and safety standards, and environmental regulations. In 2024, the company has remained compliant with existing regulations, but potential changes could pose risks to future operations.
Market Conditions
Fluctuations in market conditions also pose risks. The company's occupancy rates and average daily rates (ADR) are indicators of market health. As of September 30, 2024, the average daily rate in the U.S. & Canada was $245.46, reflecting a 2.7% increase from the previous year. However, the Greater China segment experienced an 8.4% decline in revenue per available room (RevPAR), indicating vulnerability to market downturns.
Operational Risks
Operational risks include the management of properties and the supply chain. High operational costs can erode profit margins. In the first three quarters of 2024, general, administrative, and other expenses rose to $785 million, a 15% increase year-over-year.
Financial Risks
Financial risks associated with debt levels and interest rates can affect the company's liquidity. As of September 30, 2024, the company's long-term debt was $12.67 billion, with a weighted average interest rate of 4.5%. The liquidity position is further impacted by the current ratio of current assets to current liabilities, which stood at 0.4 to 1.0.
Strategic Risks
Strategic risks involve potential failures in executing business strategies. The company aims to expand its global footprint, yet geopolitical tensions and economic instability in various regions can hinder growth plans. The company reported a 13% decrease in segment profit for Greater China in the third quarter of 2024.
Mitigation Strategies
The company employs several strategies to mitigate risks. These include diversifying revenue streams, optimizing operational efficiency, and maintaining a flexible capital structure. The company has access to a $4.5 billion multicurrency revolving credit facility, providing a buffer against liquidity risks.
| Risk Factor | Description | 2024 Financial Impact |
|---|---|---|
| Industry Competition | High competition affecting demand and pricing | Decrease in net fee revenue in Greater China by 13% |
| Regulatory Changes | Compliance with local and federal regulations | Potential cost increases due to new regulations |
| Market Conditions | Fluctuations in occupancy and ADR | U.S. & Canada ADR: $245.46, 2.7% increase |
| Operational Risks | High operational costs impacting margins | General and administrative expenses: $785 million, 15% increase |
| Financial Risks | Debt levels and interest rate exposure | Long-term debt: $12.67 billion, interest rate: 4.5% |
| Strategic Risks | Failures in executing growth strategies | Segment profit decrease in Greater China: 13% |
Future Growth Prospects for Marriott International, Inc. (MAR)
Future Growth Prospects for Marriott International, Inc.
Analysis of Key Growth Drivers
Marriott International is strategically positioned for growth through various avenues:
- Product Innovations: The company is focusing on enhancing its loyalty program, which has a liability of $7.371 billion as of September 30, 2024, an increase from $7.006 billion at year-end 2023.
- Market Expansions: As of September 30, 2024, Marriott has a development pipeline of approximately 3,800 hotels and 585,000 rooms, with about 56% of these located outside the U.S. and Canada.
- Acquisitions: The company continues to explore strategic acquisitions that align with its brand portfolio and market positioning.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth for 2024 is supported by a net rooms growth expectation of around 6.5%. The company reported gross fee revenues of $3.081 billion for the first nine months of 2024, reflecting a growth of 7% compared to the same period in 2023.
Strategic Initiatives or Partnerships
Marriott has entered into a long-term licensing agreement with Sonder Holdings Inc. to enhance its portfolio, which is expected to contribute to its growth in the coming years. Additionally, the company is investing in technology to improve customer experience and operational efficiency.
Competitive Advantages
Marriott's competitive advantages include:
- Brand Recognition: With a portfolio of over 30 brands, Marriott is a leader in the hospitality industry.
- Global Presence: The company operates in over 130 countries, providing a substantial footprint for growth.
- Loyalty Program: The robust loyalty program is a significant driver of repeat business, with a growing membership base contributing to revenue stability.
Financial Summary Table
| Financial Metrics | 2024 (9 Months Ended) | 2023 (9 Months Ended) | Change (%) |
|---|---|---|---|
| Gross Fee Revenues | $3.081 billion | $2.889 billion | 7% |
| Net Rooms Growth | 6.5% | 5.4% | 1.1% |
| Loyalty Program Liability | $7.371 billion | $7.006 billion | 5.2% |
| Development Pipeline (Rooms) | 585,000 | 550,000 | 6.4% |
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Updated on 16 Nov 2024
Resources:
- Marriott International, Inc. (MAR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Marriott International, Inc. (MAR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Marriott International, Inc. (MAR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.