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Marriott’s (MAR) Sheraton Brand Expands its Presence in China


Sheraton Hotels & Resorts, part of Marriott International, Inc. MAR, recently announced the opening of Sheraton Guangzhou Nansha Hotel. This property is sited in the district of Nansha, which is located in the heart of the Pearl River Delta.

Further, the new hotel marks Sheraton’s second property in Guangzhou and the 13th in the Guangdong Province, accentuating the demand and popularity of Marriott's most global brand.

The 291-roomed hotel offers magnificent views over Nansha and the Jiaomen River through its floor-to-ceiling windows. It also features a fitness center, a club lounge, outdoor swimming and whirlpool, 11 function rooms, and four food & beverage outlets.

Conveniently located in the Guangzhou Nansha free-trade zone, the hotel is an exclusive option for leisure and corporate travelers alike. Also, Nansha is the geographical center within the Shenzhen, Hong Kong & Macao bay area, playing a key role in international trading and financial services.

Being the first internationally branded hotel in Nansha, Marriott’s new propertyis expected to further support the development of the region as a trade and business hub.

Capitalizing on the Demand in Asia-Pacific

Currently, Marriott’s Sheraton brand has about 450 hotels in over 70 countries around the world. We note that Marriott is consistently trying to expand its presence worldwide and capitalize on the demand for hotels in the international markets. In fact, the demand for hotels in these markets is greater than in the domestic space as the rising disposable income, primarily among the middle classes, seems to boost tourism.

Notably, China promises immense growth potential within the Asia-Pacific region, despite itscooling economy.

To this end, the company recently entered into a joint venture agreement with Alibaba Group Holding Limited BABA — the largest e-commerce platform in the world — to develop a travel storefront that leverages Alibaba's digital travel platform, retail expertise and digital payment platform, Alipay.

Meanwhile, as incomes increase, China's middle class is looking toward higher quality products and elevated travel experiences.

Markedly, China is the largest source market for outbound travel now. In fact, Chinese outbound travel is set to boom further with 700 million trips projected over the next five years. In sync with this, the company aims to broaden its offerings of guest amenities and services for the Chinese travelers in more hotels.

In fact, Marriott anticipates this new joint venture with Alibaba to aid in capturing a greater share of this growing Chinese travel market, grow membership of its loyalty programs and reduce distribution costs. In the meantime, the company continues to focus on expanding its presence in other Asian countries like India, Indonesia, Thailand and Australia, besides China.

Bottom Line

Accompanied by the boost in the economy and an improvement in business as well as leisure travel, Marriott is well poised to grow in the near as well as long term. The company’s significant international exposure and an aggressive buyback strategy add to the positives.

Notably, after announcing the acquisition of Starwood Hotels & Resorts on Sep 23, 2016, Marriott has become the world’s largest hotel company, spanning across 125 countries with more than 6,200 properties. Post-acquisition, shares of the company have surged 67.2% while the S&P 500 index gained 17.1%.

Though headwinds persist in the form of lingering political uncertainty in key international markets and currency headwinds, Marriott is well poised to grow in the long term on the back of its continual expansion efforts and an unmatched portfolio of lodging brands.

Zacks Rank & Stocks to Consider

Marriott carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include China Lodging Group, Limited HTHT and Hilton Worldwide Holdings, Inc. HLT.

China Lodging has witnessed its Zacks Consensus Estimate for current-year’s earnings revising upward by 22.2% over the past two months. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Hilton holds a Zacks Rank of 2 (Buy) and has beat/met estimates in the each of the past four quarters, delivering an average positive surprise of 16.18%.

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