Marriott International (NASDAQ:MAR) continues to feel the impact of the novel coronavirus pandemic. With people sheltering in place, travel restrictions, and canceled events, hotel bookings have dropped like a rock. Marriott has been forced to furlough hotel staff, and MAR stock has slumped to 2016 levels.
The closest thing to a silver lining about the situation for Marriott (and all hotel chains) is that when all is said and done, the coronavirus may end up doing even more damage to Airbnb.
Travel and tourism has been the hardest hit sector as the coronavirus pandemic has spread worldwide. Cruise lines like Carnival Corporation (NYSE:CCL) are facing an absolute disaster. Hotels have it bad as well. The outbreak is reportedly costing U.S. hotels $1.4 billion per week.
Marriott has 130,000 associates in its hotels and has begun to furlough staff. In addition, the company is delaying planned renovations and slashing executive salaries in an effort to cut costs.
On March 19, Marriott reported vacancy rates in its U.S. and European hotels at under 25% compared to 70% at this time last year, along with “historically high” cancellations for the first half of 2020.
MAR Stock Versus Other Chains
Marriott is down 46% since mid-February — and that’s after bouncing back with big gains after bottoming out just over the $59 level several weeks ago. During the same time period, Hilton Hotels (NYSE:HLT) has seen its value drop 40%, while Wyndham Destinations (NYSE:WIND) has lost 53%.
A pandemic is never good news for hotel chains.
Hotel Chain Advantage Over Airbnb in Post-Pandemic Recovery
When the coronavirus recovery begins and people resume traveling, the pandemic experience may hold a bit of good news for hotel chains. Airbnb may not recover as quickly.
The short-term rental startup has been a thorn in the side of hotels in recent years. However, during the coronavirus pandemic, Airbnb customers have reported having difficulty in getting refunds for cancellations, while hosts may be looking to long-term rentals for income security.
In addition, Airbnb lacks the ability to ensure all of its rental units are cleaned to the same standard that hotel chains can enforce — and that’s liable to be a big factor in the post-pandemic recovery.
Christopher Anderson is a professor of business at Cornell University’s Hotel School in Ithaca, New York. He points out that Airbnb may continue to take a hit in the coronavirus aftermath from travelers who are now pickier about cleaning standards. “I’m going to want the safety and security of established cleaning protocols that I get from an established lodging provider,” he said.
The Bottom Line on MAR Stock
Marriott is expected to report is first quarter 2020 earnings on May 8. Unlike the company’s Q4 2019 earnings, don’t look for an earnings beat this time around. With bookings decimated, and revenue per guest down, both earnings and revenue for the quarter are going to be hammered.
At the time the company released its Q4 earnings in February, analysts were projecting this quarter would see Marriott report EPS numbers in the $1.45 range. Now, $1.03 is their target.
It gets worse for Q2, when the company will have endured a full quarter of the coronavirus pandemic. The initial estimates of $1.76 have been dropped to predictions that EPS will drop by more than two thirds, to 53 cents.
Is MAR stock a buy? At $81.31, it’s priced at levels not seen since the end of 2016 and down 47% from a record $153.13 close in December. MAR has also bounced back from a $59.08 close on April 3.
The reality of the situation is that Marriott — like all hotel chains — is at the mercy of the coronavirus pandemic. It seems as though we have seen the worst of the market panic by now, suggesting MAR is unlikely to bottom out again. However, Q1 is going to be bad for the company and Q2 will likely be worse. There’s a good chance the market will react negatively when those results are released.
With the duration of the coronavirus pandemic a big question mark and the expectation of two brutal quarters to come, investment analysts have Marriott stock as a consensus hold. A few optimists rate it as a buy, but the reality is that MAR is unlikely to recover quickly, and there are more speed bumps on the horizon.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.