Will Marriott Stock Fall?

Marriott International is a well-known and respected name in the hotel business.
However, the company is facing a rapidly changing industrial landscape as technology transforms the way that people travel.
We examine some of the challenges and opportunities that Marriott faces in the digital age and consider what ramifications these may have on the performance of its stock.
Will the company be able to adapt and thrive in the face of these changes, or will MAR ultimately struggle to keep up?
Source: Unsplash

Good Financials Belie Deeper Concerns

On the face of it, Marriott appears to be doing pretty well.

For instance, the famous hotel franchise currently benefits from several post-pandemic tailwinds, which have helped spike its adjusted net income by 69% in the third quarter of 2022.

In fact, it’s difficult to identify any negative points in its latest earnings report. RevPAR – or revenue per available room – was up 36.3% worldwide, while the company added around 14,000 rooms to its portfolio over the period. Moreover, the business performed so well that Marriott was able to repurchase 6.2 million shares of its common stock, thereby delivering $1.9 billion of value to investors year-to-date.

That said, there are dark clouds on the horizon for heritage players in the space, and MAR is not immune to the coming storm. So, let’s examine some of the most relevant catalysts that could make or break the brand’s recovery in the future.

Business Travel

Corporate spending accounts for a significant portion of hotel company revenue, with the performance of the broader economic market having a major impact on the level of this source of income.
Indeed, as the industry continues to grapple with the effects of the COVID-19 pandemic, it’s more important than ever for firms to understand the various factors that can affect their revenue streams.
As such, macroeconomic trends tend to play a prominent role in influencing corporate spending, which, in turn, affects the revenue that hotels generate from it. This is particularly evident during an economic downturn, as businesses may be more likely to reduce nonessential expenses, leading to a decrease in travel bookings and the like. Alternatively, when things are going well, companies are willing to invest in these discretionary activities, providing a boost to the sector in the process.
It’s crucial, therefore, for Marriott to closely monitor economic indicators in order to anticipate changes in spending and adjust its strategies accordingly. Indeed, it appears that the gap between business and leisure travel is starting to shrink, with the corporate sector now accounting for an increasingly larger share of hotel sales volume.
Nevertheless, global travel spend isn’t expected to return to pre-pandemic levels before 2026, meaning that the firm’s coffers won’t be overflowing just yet.

Legacy Hotels Are Having To Play Catch-up

The hospitality industry is highly competitive, and hotels must constantly be aware of how their rivals are innovating. In recent years, the rise of home-sharing platforms like Airbnb has presented a new challenge to traditional outlets such as Marriott.

For example, ABNB provides an alternative to conventional overnight accommodation, and has grown in popularity partly due to the perceived value and uniqueness of the options that they offer. Its properties can be more affordable than traditional hotels and often promise a more local and authentic travel experience.

Moreover, firms like Marriott have had to adapt to the presence of Airbnb and other home-sharing platforms in several ways. Some have started offering more diverse travel packages – such as extended stay apartments and vacation rentals – so as to better compete with their more disruptive opponents.

Hotel chains have also sought to differentiate themselves from ABNB, emphasizing their professional management and services, as well as the convenience and reliability of their properties. They’ve also tried to make their loyalty programs more attractive to travelers, offering a wealth of amenities and added extras that are not typically available through online marketplace vendors.

However, in this regard, the momentum appears to be with the new collection of hoteliers rather than the cumbersome, sleeping giants of the past.

Technology + Tourism: The Industry Must Change?

Digital transformation is the integration of new technologies into all areas of business, resulting in fundamental changes to how organizations operate and deliver value to their customers.

Indeed, technology has already made a notable effect on the hotel industry, and it’s likely to continue to drive more change as time progresses.

For instance, online reservations – and the increasing use of mobile devices – have made it easier for travelers to find and book hotel rooms, leading to greater competition as guests have more options to choose from.

Furthermore, hotels that can effectively use new pathways to reach and serve customers will likely have an advantage. In fact, advanced personalization is becoming more possible as technology allows businesses to use data to create customized offers, including tailored experiences based on past stays, preferences, and behaviors.

Other developments, such as virtual and augmented reality, are also being used in the hotel industry, making it easier to deliver marketing, training, and guest experiences.

As this phenomenon continues, Marriott may find it hard to be a leader in the technological revolution, especially when competing with more agile businesses like Airbnb and Vrbo.

And while this offers an opportunity, it also presents a danger too. For example, if MAR is not able to adapt in time, it may be left behind by more vigorous rivals, especially those who are able to quickly adapt and utilize new technologies to stay relevant in the changing market.

Will Marriott Stock Fall: Wrap-up

The outlook for Marriott stock is not particularly optimistic. The company is facing significant challenges as it tries to navigate the technological revolution that’s transforming the industry as a whole.

Airbnb and other home-sharing platforms are breaking apart the traditional hotel business model, and MAR may struggle to compete with these more agile players.

In addition, economic conditions, demographic shifts, and changing consumer preferences all present risks for the company, making it difficult to have confidence in the long-term prospects for Marriott stock.

Therefore, from a bearish perspective, it may be wise for investors to steer clear of Marriott for the moment and look for more attractive opportunities elsewhere.

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