(MAR) Marriott Adds JW Marriott in Mexico

In order to further ramp up its presence in Mexico, JW Marriott Hotels & Resorts brand, one of the world class luxury brands of Marriott International, Inc. (MAR), recently struck a deal with Operadora Punta Peninsula, S.A. de C.V., and ownership group Grupo Diestra to unveil a ‘JW Marriott Los Cabos’ hotel in Los Cabos, Mexico in 2015. This property highlights the fourth hotel of the JW Marriott brand in Mexico.

Situated within the Puerto Los Cabos master-planned development and in close proximity with the Los Cabos International Airport, which is Mexico’s seventh busiest airport, the new hotel will offer 300 guest rooms and suites along with several other amenities and will enjoy a prime location. Moreover, the site of the hotel is also attractive with 14 acres overlooking the Sea of Cortez and exposure to 820 feet of beach front, which will further drive tourists.

Marriott’s expansion plan in Mexico is mainly driven by strong economic growth and a large tourism industry. In Mexico, the brand is present in an upscale Polanco neighborhood and in Santa Fe and Cancun city.

The country is the number one destination for foreign tourists in Latin America. As per World Travel & Tourism Council, the total contribution of travel & tourism to gross domestic product (GDP) was 12.4% of GDP in 2011, and is forecast to rise by 3.3% in 2012, and to rise by 4.5% in 2022.

Moreover, the middle income population in Mexico is growing. This fraction of the population also has an inclination to spend on travel and leisure. Apart from tourism, the region is successfully emerging as a business hub. Additionally, a long-standing presence in this country allows Marriott to have a stable relationship with owners and developers across the country.

According to renowned consulting firm specializing in real estate, Jones Lang LaSalle (JLL), the hotel market in Mexico is showing strong growth, following a steep decline in 2009 and lackluster performance for a part of 2010. Strong demand with limited supply provides robust growth opportunities to hoteliers over the next several years. Mexico City’s average daily rate (ADR) is expected to accelerate further in 2012 and beyond.

Marriott currently operates 52 JW Marriott hotels in 21 countries and remains on track to open 77 JW Marriott properties in 28 countries by 2014. The JW Marriott brand consists of luxurious properties and distinctive resort locations across the world. The brand, which mainly has hotels in international locations, also has properties in major U.S. states like California, Texas and Arizona.

However, the market is not free from competition. Many of Marriott’s peers like Starwood Hotels & Resorts Worldwide Inc. (HOT), InterContinental Hotels Group (IHG) and Hyatt Hotels Corporation (H) are present in Mexico. Furthermore, a sluggish macroeconomic environment acts as another short-term restraint.

The company is likely to release its third quarter 2012 earnings on October 3, 2012. The Zacks Consensus Estimate for the third quarter is pegged at 40 cents per share. We presently have a long-term Neutral recommendation on Marriott. Also, it carries a Zacks #4 Rank (a short-term Sell rating).
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