Marriott International

Marriott's second-quarter revenue per available room, or revPAR, increased 3.4%, above its 1.5%-2.5% guidance range. Adjusted EBITDA increased 13%. The hotelier raised its 2026 revPAR growth target to 3%-3.5% from 2%-3%, but lowered 2026 unit growth to the lower end of its prior 4.5%-5% guidance.

Why it matters: The company's brand is resonating with owners and travelers, despite the Iran War, which drove a 43% decrease in revPAR in the Middle East. We see total revPAR seeing to 5% growth in both 2027 and 2028 amid ongoing economic growth and US infrastructure spending. Travel demand remains healthy, with Europe, US, and Asia revPAR all increasing between 3% and 5%. The company is capitalizing on its brand by securing two co-branded credit card agreements, which are expected to generate $120 million in incremental fees by 2028. Marriott announced a program that offers owners discounted fees for enhancing traveler experience levels. We see this investment supporting its brand edge and our 4% average annual 2026-30 room growth forecast, which is also buoyed by a 7% increase in the room pipeline.

The bottom line: We plan to lift our $272 fair value estimate for wide-moat Marriott by a mid-single-digit percentage, driven by higher credit card sales. Shares decreased 6% in response to the release, which we think is due to the high expectations embedded in the company's 19 times 2026 EV/EBITDA multiple. We plan to increase our 2026-28 credit card fee revenue to mid-20% average annual growth, up from 20% prior, reaching 19% of total net fees in 2028. At a $350 per share valuation, we believe investors need to assume 2026-35 revPAR growth averaging about 5%. We view this as aggressive compared with our 3%-3.5% forecast, which is in line with the long-term US growth average.

Key stats: We aren't concerned about the reduced room growth guidance for this year, as it is driven by geopolitical tensions that are pushing some openings in the Middle East from 2026 to 2027.

After reviewing Marriott's second-quarter results, we increased our fair value estimate to $286 per share from $272 per share, reflecting higher credit card revenue and the time value of money. Our fair value estimate implies a 2027 enterprise value/EBITDA of 15 times. The key drivers of our financial model are revenue per available room, growth in managed and franchised rooms, and owned expenses.

Marriott's second-quarter revenue per available room, or revPAR, increased 3.4%, above its 1.5%-2.5% guidance range. Adjusted EBITDA was up 13%. The hotelier raised its 2026 revPAR growth target to 3%-3.5% from 2%-3%, but lowered 2026-unit growth to the lower end of its prior 4.5%-5% guidance. Despite headwinds from the war in Iran, demand for Marriott's brands remains strong. Europe, US, and Asia revPAR all increased between 3% and 5%. US performance is improving due to tax rebates and secular artificial intelligence, onshoring, and infrastructure investment. We see total revPAR strengthening to 5% growth in both 2027 and 2028 amid ongoing economic growth and US infrastructure spending. Our revPAR annual growth forecast for the next 10 years is 3.2%. The company is capitalizing on its brand by securing two new co-branded credit card agreements, which are expected to generate $120 million in incremental fees by 2028. We estimate 2026-28 credit card fee revenue at mid-20% average annual growth, up from 20% prior, reaching 19% of total net fees in 2028.

We aren't concerned about the reduced room-growth guidance for this year, as it is driven by geopolitical tensions that are pushing some openings in the Middle East from 2026 to 2027. We think Marriott's unit growth can average about 3%-4% annually over 2026-35, above the industry's long-term growth rate of 2%, given the visibility into its 629,000-room pipeline.

As a result, we estimate an average annual revenue growth rate of 4%-5% for 2026-35. We project operating margins (unadjusted for cost reimbursement) will reach 23.7% in 2035 from 8.6% in the prepandemic year of 2019. Operating margin expansion is driven by revenue scale and cost efficiencies across the business.

We believe Marriott has a wide moat due to its industry-leading brand intangible and switching cost advantages that have expanded relative to the industry and peers, evidenced by its portfolio scale, management expertise, loyalty program, and expansion into adjacent verticals. As a result, we have conviction in further revenue share gains for the foreseeable future and durable economic profits well beyond the next 20 years.

Hotel owners are attracted to Marriott’s portfolio of 1.8 million rooms, which allows owners to team up to spend $20 billion toward marketing, reservations, distribution, and loyalty annually, supporting its brand intangible prowess, which is multiples of that of narrow-moat peers Wyndham, Choice, Accor, and Hyatt. Further, Marriott derives about 40% of its business directly through its low-cost app and website channels, which is about double the average hotelier, showing the advantages of its brand awareness and scale. Furthermore, Marriott gets just a low-double-digit percentage from the higher-cost online travel agency channel versus closer to 40% for the average hotel, and we believe it pays out just a single-digit percentage commission rate compared with the estimated 20%-plus paid by some independent owners. Additionally, Marriott has noted that third-party owners have been able to obtain financing at relatively attractive terms (unquantified) because of the hotelier’s history of strong returns, providing another cost benefit to third-party owners.

The brand’s enticement to third-party owners is also showcased by Marriott’s resilient and strong unit room growth. We model Marriott’s annual room growth at 3%-4% over the next 10 years, which is comfortably above our US industry forecast of 1%-2% growth, as we believe Marriott is well-positioned for market share gains over the next decade.

In addition to franchisee relationships, part of Marriott’s solid unit growth is driven by owners that choose to outsource management responsibilities, due to the company’s strong brand and management team with scale and expertise in reservations, advertising, marketing, and labor management, which leads to strong revenue per available room, occupancy, and profitability. In fact, worldwide, there are hundreds of lodging management companies, but only a few operators that manage more than 100 properties. Marriott is one of those, with a managed hotel business of 1,966 properties as of Dec. 31, 2025.

Marriott’s brand also resonates with travelers, evidenced by the industry’s largest loyalty membership of 295 million, as of June 30, 2026, which is up nicely from the 141 million level at the end of 2019. Additionally, individuals in the program are highly engaged, representing about 70% of total room nights, above narrow-moat peers, which average near 50%. We believe one of the reasons Marriott sees more engagement from its loyalty members is that the company’s complete price point offering allows those who might only be able to afford economy/midscale stays to earn points at those hotels and use them toward a special getaway at one of the firm’s numerous upscale/luxury properties in the future, an opportunity that doesn’t exist at most narrow-moat peers.

Marriott’s brand edge is further supported by the industry’s most complete hotel portfolio, spanning the globe across most price points. In this vein, Marriott has grown its portfolio to over 30 brands and 9,805 hotels in 2025 from 19 brands and 4,400 units in 2015. Recent brand launches are focused on extended stays, the midscale price point, lifestyle, and the select-service segment that targets the next-generation explorer. Entry into midscale allows travelers to enter its ecosystem earlier in their income-generation life cycle, which they can work to retain with their leading and growing upscale and luxury offerings. To this point, Marriott’s upscale brands had a 21% revenue share in 2025, above number-two Hilton’s 14% share, according to Euromonitor. Meanwhile, Marriott held the leading luxury brand revenue share of 10% in 2025, above the next-largest player, Hyatt, at 6%. We believe obtaining a share in these higher-price-point segments is harder than in lower-price segments, as they require offering travelers a higher level of consistent and reliable service and amenities, further supporting Marriott’s wide moat.

Not only does Marriott’s brand attract strong unit growth, but the hotelier is also able to secure managed and franchised contracts, typically for 20-30 years with options to renew for 10 or more years, leading to a switching-cost benefit. This is more than the 10 year to 20-year terms often received by narrow-moat peers. Terminating these contracts requires significant expenditures to renovate and rebrand a property to meet the new brand specifications, resulting in disruption and lost revenue to business operations for the owner, as well as cessation fees that must be paid by the owner. Marriott’s strong brand and management expertise, along with these meaningful switching costs, result in low attrition of its managed and franchised customer base. In fact, attrition averages 1%-2% of its portfolio each year (below the mid- to high-single-digit percentage of narrow-moat peers), and this is usually Marriott’s decision, as after 20-30 years, the hotel’s design or location may become too undesirable to renew the relationship.

Marriott’s strong affiliation with both owners and travelers has translated to its global revenue share expanding to 9% in 2025 from 8% in 2018, and its existing portfolio constituting a high-single-digit percentage of all industry rooms with the company’s pipeline amounting to around 15%-20% of the world’s under construction room base, implying further share gains ahead. Regionally, Marriott controls the number one or two revenue share position across all major geographies, including the top position in North America with 24.2% revenue share.

Marriott is positioned to benefit from its expanding presence geographically and across price points, with its recent brand launches, Spark (midscale) and StudioRes (extended-stay).

Marriott's leading procurement, marketing, technology, loyalty, and distribution scale drives its unit growth well above the industry's.

Marriott has a high exposure to recurring managed and franchised fees, which have high switching costs and generate strong ROICs.

Independent hotels and home and vacation rentals present a competitive threat, and the advancement of technology and its use by next-generation travelers increase the access and awareness of these properties.

Marriott faces direct competition for hotel owners from several other hotel operators, some of which have a higher revenue share in certain segments.

Marriott's North American hotels represent 61% of its rooms, exposing the company to an economic downturn in North America and the US to a greater extent than competitors.