Riding the Wave of Hospitality: Top Picks in the Consumer Discretionary Sector

As the travel industry bounces back from the pandemic, the hospitality industry is poised for growth. This industry is an exciting area of the consumer discretionary sector, which encompasses everything from high-end hotels to cruise lines, providing essential services that cater to both business and leisure travelers.

In this article, we focus on 2 leading hospitality companies that are making waves. Each of these companies offer unique strengths and opportunities.

We shall begin our journey with…

Marriott International Inc (MAR.NQ)

Marriott International Inc. is a global hospitality powerhouse, operating and franchising a diverse portfolio of over 30 hotel brands across more than 8,900 properties in 141 countries and territories.

Founded in 1927, Marriott International has grown from a humble root beer stand to a multinational hospitality giant. The company's impressive brand lineup includes renowned names such as The Ritz-Carlton, JW Marriott, Westin, and Courtyard.

• Strong Revenue and Profit Recovery: After a significant drop in 2020 due to the pandemic, Marriott has shown a robust recovery. Total revenues increased from $2.1 billion in 2020 to $6.3 billion in 2023, surpassing pre-pandemic levels.

• Strong Cash Position and Debt Management: As of the last report, Marriott has significantly improved its cash position from $225 million in 2018 to $429 million. While the company carries a substantial long-term debt of $11.62 billion, it has maintained a relatively stable debt level over the past few years. The company's ability to manage its debt while improving its cash position suggests financial stability and effective liquidity management, especially important in the cyclical hospitality industry.

• Strong and Improving Free Cash Flow: Marriott has demonstrated a robust and improving free cash flow (FCF) generation. The company's levered free cash flow increased significantly from $257.8 million in 2020 to $2,588.4 million in 2023. This substantial improvement in FCF indicates the company's ability to generate cash after accounting for capital expenditures and debt obligations, which is crucial for funding growth initiatives, returning value to shareholders, and maintaining financial flexibility.

Hilton Worldwide Holdings (HLT.NYSE)

With a rich history spanning over a century, Hilton has evolved from a single hotel in Cisco, Texas, to a global hospitality powerhouse. The company's growth strategy focuses on expanding its presence in key markets worldwide, particularly in the Asia-Pacific region.

The company's flagship Hilton Hotels & Resorts brand is complemented by other well-known names such as DoubleTree, Hampton, and Waldorf Astoria.

• Strong Recovery: The company’s net income rebounded significantly, reaching $1.141 billion in 2023 compared to a loss of $715 million in 2020. This turnaround showcases Hilton's resilience and ability to capitalize on the recovery in the travel and hospitality sector.

• Strong Cash Position and Liquidity: Hilton has significantly improved its cash position, with cash and equivalents increasing from $538 million in 2018 to $1.346 billion in the last report. This robust cash reserve provides the company with financial flexibility to navigate potential economic uncertainties and invest in growth opportunities. The improved liquidity position is particularly noteworthy given the challenges faced by the hospitality industry in recent years.

• Resilient Cash Generation Capacity: Hilton has exhibited a remarkable ability to generate cash from its operations, with operating cash flow rebounding strongly from $708 million in 2020 to $1.946 billion in 2023. This recovery underscores the company’s operational efficiency and adaptability to navigate potential economic uncertainties in the dynamic hospitality sector.

Conclusion

In conclusion, the hospitality sector is showing remarkable resilience and growth potential as the world recovers from the pandemic. The above 2 stocks have shown impressive financial resilience and a commitment to strength their cash positions and liquidity. For investors aiming to diversify their portfolios with high-potential stocks in the consumer discretionary sector, these hospitality leaders are worth considering.

Hope you have found the above stocks useful 😃 

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Sources:
1. Marriott International (no date) About Marriott International: Corporate Information, About Marriott International | Corporate Information. Available at: https://www.marriott.com/marriott/aboutmarriott.mi 
2. Plc, G. (no date) Marriott International Inc company profile - marriott international inc overview, GlobalData. Available at: https://www.globaldata.com/company-profile/marriott-international-inc/
3. Seeking Alpha (no date) Marriott International, Inc. (MAR) financials: Income statement | seeking alpha. Available at: https://seekingalpha.com/symbol/MAR/income-statement
4. Seeking Alpha (no date) Marriott International, Inc. (MAR) financials: Balance Sheet | seeking alpha. Available at: https://seekingalpha.com/symbol/MAR/balance-sheet
5. Seeking Alpha (no date) Marriott International, Inc. (MAR) financials: Cash Flow | seeking alpha. Available at: https://seekingalpha.com/symbol/MAR/cash-flow-statement
6. Seeking Alpha (no date) Hilton Worldwide Holdings (HLT) financials: Income statement | seeking alpha. Available at: https://seekingalpha.com/symbol/HLT/income-statement
7. Seeking Alpha (no date) Hilton Worldwide Holdings (HLT) financials: Balance Sheet | seeking alpha. Available at: https://seekingalpha.com/symbol/HLT/balance-sheet
8. Seeking Alpha (no date) Hilton Worldwide Holdings (HLT) financials: Cash Flow | seeking alpha. Available at: https://seekingalpha.com/symbol/HLT/cash-flow-statement
9. Plc, G. (no date) Hilton Worldwide Holdings company profile - hilton worldwide holdings inc overview, GlobalData. Available at: https://www.globaldata.com/company-profile/hilton-worldwide-holdings-inc/ 

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