Stock Wars: Hilton Worldwide Vs. Marriott International

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector, allowing readers to decide which company is the better investment.

This week, the duel is between two major players in the hotel industry: Hilton Worldwide Holdings Inc. HLT and Marriott International Inc MAR.

The Case For Hilton: In 1919, Conrad Hilton made his debut in the hotel industry by purchasing the 40-room Mobley Hotel in Cisco, Texas.

Over the next decade, the entrepreneurial hotelier purchased several additional hotels across the Lone Star State. Hilton expanded outside of Texas into Albuquerque, New Mexico in 1939 and California, New York and Chicago in the 1940s.

Today, the Hilton portfolio consists of 18 brands covering more than 6,500 properties in 119 countries and territories, making it the world’s second-largest hotel company.

The hospitality industry has been eager to move beyond the COVID-19 pandemic and Hilton is eager to welcome post-pandemic travelers.

The company recently opened Spain’s Atocha Hotel Madrid as the first European property in the Tapestry Collection by Hilton brand, and it announced deals with Shimao Group Holdings Ltd. to build four luxury hotels in China and with Signo Hospitality to develop 10 new hotels in Germany.

Closer to home, Hilton and Resorts World Las Vegas are finishing work on three Hilton brand hotels that are part of a $4.3 billion, 3,500-room integrated resort scheduled to open in Las Vegas by the July 4 holiday weekend.

In its Q1 earnings report, Hilton reported it approved 21,900 new rooms for development during the quarter, bringing its development pipeline to 399,000 rooms as of March 31. As of April 28, 97% of Hilton's system-wide hotels were open.

However, Hilton’s financial performance during the quarter offered a reminder that the residue of the pandemic era has yet to be scraped away.

Total first-quarter revenue was $874 million, down from $1.9 billion one year earlier, with the company reporting a net income loss of $109 million versus the $18 million profit from the previous year.

Adjusted EBITDA was $198 million, down from $363 million one year earlier. Diluted earnings per share (EPS) was -39 cents, compared to 6 cents one year earlier, and adjusted diluted EPS was 2 cents versus 74 cents in the first quarter of 2020.

Hilton President and CEO Christopher J. Nassetta acknowledged rising coronavirus cases and tightened travel restrictions in Europe and the Asia-Pacific region worked against the company during January and February, there was “meaningful improvement in March and April” and there was an opportunity for a more vibrant post-pandemic near-future.

“We expect this positive momentum to continue as vaccines are more widely distributed and our customers feel safe traveling again,” Nassetta said. “We continue to grow our portfolio of hotels in exciting destinations throughout the world, giving our guests more options than ever before to make a Hilton hotel a part of their plans as travel resumes.”

Hilton trades around $129.25, slightly below its 52-week high of $132.69 and far from its 52-week low of $69.83.

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The Case For Marriott: In 1927, John and Alice Marriott opened a root beer stand in Washington, D.C.

From that humble beginning, the company expanded into the hospitality industry through the Hot Shoppes Inc. restaurant chain, which they took public in 1953. The Marriotts opened their first lodging property in 1957 with the Twin Bridges Motor Hotel in Arlington, Virginia.

Today, Marriott is the world’s largest hotel company, with a portfolio of more than 7,600 properties under 30 brands spanning 133 countries and territories.

As with Hilton, Marriott is planning for the post-pandemic environment with a flurry of new properties. The Marriott brands have recently seen new hotels opening in South Korea, the Maldives, Dubai, Bermuda, Montreal, Maui and Philadelphia, while the company has signed an agreement with China’s Ningbo Central Plaza Construction and Development Co. Ltd to bring its Ritz-Carlton brand to Ningbo, a port city that has been taking on increased prominence.

In February, Marriott experienced an emotional setback with the death of President and CEO Arne Sorenson at the age of 62 following a bout with pancreatic cancer.

Sorenson, who held his offices since 2012, was only the third chief executive in the company’s history and the first who was not part of the founding Marriott family.

Sorenson’s duties were divided between Anthony Capuano, who was promoted to CEO from group president of global development, design and operations services, and Stephanie Linnartz, who was promoted to president from group president of consumer operations, technology and emerging businesses.

In one of his first interviews as CEO, Capuano told Yahoo Finance Live that the company was scrambling to hire new employees to meet the rising demand in hotel guests.

"We have had some labor challenges in those leisure destinations where we have seen demand spike so quickly," Capuano said. "So, in South Florida, Texas, Arizona we are running job fairs and we are providing some one-time hiring incentives to get the hotels staffed."

In its Q1 earnings report, Marriott said it added more than 23,500 rooms, including nearly 12,000 rooms.

But Marriott shared Hilton’s situation in trying to move past the tumult created by the pandemic: it reported operating income totaled $84 million, down from $114 million one year earlier, and recorded an $11 million net loss compared to net income of $31 million in the previous year.

Adjusted EBITDA totaled $296 million, compared to first-quarter 2020’s adjusted EBITDA of $442 million. The quarter reported diluted loss per share totaled 3 cents, compared to the reported diluted EPS of 9 cents in the year-ago quarter. First-quarter adjusted diluted EPS totaled 10 cents, compared to first quarter 2020 adjusted diluted EPS of 49 cents.

Capuano stressed Marriott’s fortunes were improving, noting how U.S. and Canadian occupancy grew from 33% in January to 49% in March while “occupancy reached 66% in mainland China in March, nearly the same as in March 2019.”

He added the company was “welcoming more and more guests to our hotels as consumers are traveling again once they feel it is safe.”

Marriott trades around $144, closer to its 52-week high of $159.98 than to its 52-week low of $80.26.

The Verdict: Despite the upheaval felt in the hospitality space as a result of the pandemic, both Hilton and Marriott stocks have maintained their respective strength.

Both companies are ready and able to put the pandemic in the rearview mirror, and the partnerships they are striking in Europe and Asia show both companies believe their road to increased profits lies overseas.

Barring an unforeseen surge in coronavirus infections or a global economic slump, both Hilton and Marriott are poised for a brighter future.

Either company would be a solid portfolio presence for investors seeking long-haul growth.

In this Stock War, we have to declare a draw.

(Photo by Albrecht Fietz / Pixabay.)