InterContinental Hotels Group PLC (ADR) (IHG), Marriott International Inc (MAR): Checking In With One of the World’s Top Hotel Chains

You’ve probably had experiences at hotels that range from truly enjoyable to “never goin’ back to that dump again.” Today, we look at a hotel chain that excels at providing top-flight customer service as well as furthering the goals of its franchisees and stockholders. In other words, a hotel chain that gets it right.

Marriott International Inc (NYSE:MAR) operates and franchises hotels across the globe. Among the company’s brands are Marriott Hotels & Resorts, JW Marriott, Renaissance Hotels, Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, TownePlace Suites, and The Ritz-Carlton. As of June 19, 2013, Marriott had 3,800 properties in 74 countries.

When revpar is above par

A key hospitality industry metric is RevPAR, or revenue per available room. The metric is calculated by multiplying the occupancy rate of hotels by their ADR, which means average daily room rate. Ideally, a hotel chain would like to see increases in both occupancy and ADR, with a resulting increase in RevPAR. If occupancy rises but ADR falls, it can mean the chain tried to fill rooms by charging less for them.

In the second quarter, Marriott International Inc (NYSE:MAR) reported that for its North American hotels, comparable system RevPAR rose 5.2%, with a 3.9% increase in ADR. The gains were across the board: their full-service and luxury hotels scored a 5.9% increase in RevPAR, with ADR rising 4.1%. Its limited service brands — another term for less expensive rooms — including Courtyard and Residence Inn, showed a 4.7% increase in RevPAR and ADR that was 3.6% higher.

So, what does all this RevPAR stuff mean in terms of making money: Marriott International Inc (NYSE:MAR) reported that net income surged 25% compared to the same quarter last year, reaching $179 million. The company said both the business and leisure segments were strong.

For comparison purposes, let’s look at a major competitor of Marriott International Inc (NYSE:MAR)’s, InterContinental Hotels Group PLC (ADR) (NYSE:IHG), whose brands include Crowne Plaza and Holiday Inn. This company reported that in the first quarter, global RevPAR was up 3.1% over the previous year, with a 2% increase in ADR. U.S. RevPAR was particularly strong, up 4.6%. The company reported that its luxury/upscale brands achieved notably high revenue growth during the quarter.

The joy of giving back

To shareholders, that is. Through a combination of stock repurchases and dividend payments, Marriott International Inc (NYSE:MAR) has returned nearly $600 million to shareholders so far in 2013. This built upon the foundation set last year, when the company returned more than $1.3 billion. Shareholders love dividends of course, but stock repurchases mean the supply of stock is decreased. As earnings are spread over fewer shares — particularly when earnings are growing — this translates into higher EPS.

Who doesn’t love higher EPS? Committing to a repurchase program that massive also gives us a clue that management believes that the stock represents a good value for the price, so perhaps, we should as well. It gives us a further clue that the business is generating large amounts of cash.