Staying at a luxury hotel is the stuff of daydreams for most people. The few who do regularly stay, or even live, in upscale hotels know that there is no substitute for a life where anything you desire is just a phone call away. Luxury hotels treat their guests like royalty, with many brands going so far as to institute rules forbidding employees from uttering the word “no." From photo-identification systems that allow employees to recognize repeat guests instantly to gourmet feasts in bed, luxury hotels are as close as many people get to heaven on earth.
As shareholders know, all this opulence comes at a high cost. Rooms rates in luxury hotels are limitless and, on an August weekend, the price of an average five-star hotel room in New York is $351 per night, with many closing in on $1,000.
Marriott International Inc. (MAR) (Ritz-Carlton, Marriott, Delta) is expanding rapidly and has reached its goal of having a million hotel rooms open or in the pipeline a full six months ahead of schedule. These million hotel rooms consist of an astounding 20,000 new rooms in Q2 2015, thanks in part to the company’s acquisition of Canadian hotel chain Delta. In all, Marriott has 250,000 rooms at 101 properties worldwide scheduled to open in the near future.
In the most recent quarter, Marriott posted EBITDA of $457 million and earnings per share of $0.87, is up an amazing 36% versus its Q2 2014 numbers, thanks in part to an increased RevPAR of 5.4%. Having repurchased $714 million of stock this quarter and building, acquiring and signing new properties, Marriott is showing investors that increasing EPS is a priority.
Starwood Hotels & Resorts
Starwood Hotels & Resorts Worldwide Inc. (HOT) (Westin, Sheraton, 4 Points by Sheraton) is another hotel company that’s trying to increase EPS by repurchasing shares. While the company didn’t spend as much as Marriott, it still repurchased 1.2 million shares in Q2 2015 at a cost of $105 million. This brings its total share repurchases in 2015 to $228 million.
On top of the stock repurchases, Starwood paid out a $0.375 dividend and had an EPS to $0.84. With EBITDA of $311 million and net income of $143 million, Starwood continues to expand its holdings, adding an additional 14,400 rooms to the pipeline this quarter.
RevPAR was up this quarter, overall revenue was down compared to Q2 2014 due to currency fluctuations and the spinoff of Starwood Vacation Ownership.
Hyatt Hotels Corp (H) (Park Hyatt, Grand Hyatt, Hyatt Regency) will release earnings on August 4th and analysts expect positive results. Last quarter’s EPS was $0.11 a share – about $0.07 short of analysts’ predictions. But this quarter, the company is expected to have a $0.45 EPS. There is concern over what effect the ever-changing currency rates will have had on Q2 2015 earnings. Nonetheless, 9 out of 11 rating firms declare it a “buy” and give it a target price of about 21% higher than its current level.
if you can’t afford to pay full price to stay at a luxury hotel, you may want to try one of the many websites which sell discounted hotel rooms, coupon websites that offer fire sales, or find a friend in the hospitality industry and get a friend & family rate. Shareholders don't like that you’re paying a discount price, but you have to treat yourself every once in a while.