Hilton (HLT) vs. Marriott (MAR): Which is the Better Hotel Stock?

Despite concerns over the global economy and discretionary spending, there may still be room for investment in the travel sector heading into the final part of the year. Hilton Worldwide Holdings Ltd. (HLT) and Marriott International Inc. (MAR) are two goliath hotel chains that are pretty much found worldwide in abundance.

Both hotels have incredible market share in the travel and business accommodation sector, and they are able to cater to almost anyone regardless of his or her budget for a vacation, business trip, or excursion.

Both hotel chains make the bulk of their revenue through lodging, and catering to visitors’ different tastes in foods, services, etc. Each hotel company aims to sell itself as the better value, however, is HLT more successful than MAR? Which one has a larger market capitalization? Are they both beating analysts’ estimates? Which one is the better bargain? We look at how both of these stack up against one another, and which is ultimately the better moneymaker when it boils down to an investor’s view point.

Hilton Information

Hilton is a hospitality firm that focuses on accommodation for all. It is well known for its Hilton Hotels & Resorts. As of December 2013, the company had approximately 4,080 operating hotels, resorts, and timeshare properties, which totaled up to around 671,926 rooms, in about 90 different countries and territories. The company boasts a lot of brands in its diverse portfolio, including top notch luxury hotels like the Waldorf Astoria Hotels & Resorts, and the Conrad Hotels & Resorts.

HLT’s full-service brands include DoubleTree by Hilton, as well as Embassy Suites Hotels. Its focused-service hotel brands are Hilton Garden Inn, Hampton Inn, Homewood Suites by Hilton, and Home2 Suites by Hilton, and its timeshare brand, Hilton Grand Vacations.

Marriott Information

Marriott International, Inc. is a diversified hospitality lodging firm with more than 3,700 properties worldwide, in many global gateway destinations. It is found in 73 nations and territories, and the company operates and franchises hotels, including Marriott, the Ritz-Carlton, JW Marriott, Bulgari, Courtyard, Fairfield Inn & Suites, ExecuStay, and Marriott Executive Apartments brand names, among others.

HLT Financials and Prospects

Financials can tell us a lot in regards to which direction this company is going to take. HLT is a giant, and there is no doubt that it is going to stick with us for a very long time, however HLT needs to make sure that it remains a global leader, and so far it has done so against its rival, MAR, as HLT maintained a larger market capitalization. Without further ado, here is some of HLT’s key financial data, bearing in mind that net income, gross profit, and diluted net EPS are FY ended on 12/31/2013:

We can see that from these factors, HLT is doing okay financially, especially when compared to the its previous years, in which its diluted net EPS was 0.29, as opposed to last year’s 0.45. The accommodation and lodging industry needs HLT to constantly be on its guard, so as to adapt to changing customer tastes and preferences, especially after the 2007 deal, in which HLT agreed to sell all its outstanding common stock to Blackstone (BX). HLT should not allow the divestiture of any of its hotel brands, or the increase of daily rates (offsetting increasing property prices), otherwise it may start losing market share in this competitive industry.

HLT does have a positive net income, but its forward PE ratio is slightly worse than the industry’s average of 34.30. Perhaps most important for investors, its PEG ratio is a lot better in comparison to the industry’s average of 2.58.

It is also noteworthy that HLT’s stock has been very volatile since day one. For the current quarter (9/2014), analysts have continually revised and upped their EPS estimates from $0.16/share to $0.17/share, 7 days ago. HLT currently maintains 0.00% Earnings ESP, an average EPS surprise rate of -5.46%, and a +5.26% EPS Surprise last quarter.



MAR Financials and Prospects

MAR has had its stock on the market for a longer period of time than HLT, and historically, it has consistently surprised Zacks Consensus Estimates positively. It is a huge plus for MAR over HLT, because as of now, HLT still does not issue or pay any quarterly dividends, unlike MAR. MAR pays 20 cents quarterly dividend to its shareholders.

Marriott’s stock has been doing quite well in the past year, especially in the last 7 months or so, in which its stock price has jumped about $20/share. We can see just by looking at MAR’s stock that it is a solid long-term investment, and it can easily break the $80/share mark before the end of this year, if analysts’ estimates and expectations are met.

The company should strive for consistency by pushing for better international recognition, especially in emerging markets, in which dynamic growth is required for success. Burgeoning middle classes in Africa, Russia, China, and South Africa, are all positive trends that MAR should exploit. The adoption of greener buildings is something that should be on the radar for MAR as well.

MAR needs to uphold the highest environmental standards at all times, because recent studies have demonstrated that travelers are becoming more and more aware about business, social, and environmental responsibility. Here are some of MAR’s key financial data, bearing in mind that net income, gross profit, and diluted net EPS are FY ended on 12/31/2013:

For the current quarter (9/2014), analysts have continually revised and increased their EPS estimates from $0.61/share to $0.62/share, 60 days ago. MAR currently maintains 0.00% Earnings ESP, an average EPS surprise rate of +6.84%, and a +5.97% EPS Surprise last quarter.



Conclusion

It always takes time to develop a trend or a pattern, to predict where a stock is heading in the near future, and HLT is just one of those stocks that hasn't found its trend yet. It is relatively an infant in the stock market, while MAR has been on the exchange for quiet a long time now. It is up to the investor to decide on which company to invest in; as both currently sport a Zacks Rank #3 (Hold). Investors should keep earnings dates in the back of their minds, and make sure to follow analysts’ changing EPS estimates.

It seems that MAR is the better stock for short-term investors due to its better forward P/E ratio, however HLT has the better PEG ratio, which means that the stock has a better outlook in the future, based on growth expectations. Again though, MAR distributes quarterly dividends while HLT does not, but HLT is far cheaper, and it is more appealing to the value investor. As stated before, MAR has outperformed itself this past year, and we can clearly see that from the chart below, when comparing MAR’s stock performance with that of HLT’s and the S&P 500’s, we see how MAR has been superior to HLT.

Better stocks to invest in, in the same sector, are Civeo Corp. (CVEO), Marriott Vacations Worldwide Cor. (VAC), and maybe even China Lodging Group (HTHT). CVEO is a Zacks Rank #1 (Strong Buy), whilst the other two are a Zacks Rank #2 (Buy).

Perhaps a deeper analysis would be required, for example checking out whether MAR or HLT is better advertised/marketed on online travel agencies, such as Priceline (PCLN), and Expedia (EXPE). In fact, investors ought to give a thought to investing in online travel agencies instead in today’s market environment as these could also provide value to those seeking a play on the broader travel world at this time.

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