Marriott International Inc (NYSE:MAR) has a few catalysts to exploit in order to increase earnings and keep shareholders content. Namely: strong brand recognition, the recovering U.S. economy, its cost-saving strategies, room for international expansion, and successful acquisitions. International expansion has been accomplished successfully by acquiring Gaylord and IKEA, with its subsidiaries, in order to cater to less exquisite customers. Such an approach has opened a new geography to the company – Europe, and a wide new pool of customers. Hence, the company holds good future prospects, and since its stock trades at a reasonable price (at 21.4 times its earnings, slightly below the industry mean), it is recommended to buy before it rises.
Shareholders over profits
There is no better stock than that which shares earnings with stockholders, and Wyndham Worldwide Corporation (NYSE:WYN) has a history of doing so. Barron’s has pointed that a new handout is around the corner, and there are no doubts there are enough greenbacks to do it. But, are there other reasons to buy stock from the firm? Yes.
Besides being the largest global hotel and timeshare operator, measured by units, the company maintains its competitive hunger. Evidence can be found in Marriott’s timeshare spinoff. Good performance and competition elimination is a direct result of its management’s decision to strengthen its fee-for-services business, while at the same time raising the market’s entry price. The point is, the firm has established a strong enough network to maintain its leading position.
Unlike Marriott International Inc (NYSE:MAR), Wyndham Worldwide Corporation (NYSE:WYN) serves not-so-high-end customers. Focusing on mid-scale and economy segments has allowed the company to curb recessionary effects, and return to an upstream flow quicker. Such recovery has allowed the company to maintain its small but important economic moat, by raising switching costs for hotel franchises and managers. It is relevant to point out that most of hotel revenues come from franchise mid-scale and economy segments.
As the world economy returns to an improving trend, Wyndham Worldwide Corporation (NYSE:WYN) will find more suitable operating environments and finances will keep improving. North America represents a big part of the business, but risks have been diversified through acquisitions; the firm has expanded hotel operations to Germany and the UK, and increased its timeshare market presence.
So, the company has displayed management qualities by re-aiming its focus, expanding market share and operational geography, while remaining financially sane. In the end, however, I would recommend holding because market positioning, rapid recovery, recent expansion, and management have yet to prove recovery is not a cyclical mirage.
Bottom line
None if these stocks is a bad buy, and all face the same risks: cyclical volatility and economic slowdown. In my opinion, InterContinental Hotels Group PLC (ADR) (NYSE:IHG) holds the best future prospects. Shareholder indifference is a blow, but the company has taken an important advantage over competition and that is, sometimes, more important.
The article Making Room for Expansion: The Lodging Industry originally appeared on Fool.com and is written by Damian Illia.
Damian Illia has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Damian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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