The leading worldwide hospitality company, Marriott International, Inc. (MAR) recently entered into a partnership with Overseas Private Investment Corporation (OPIC) for the development of environment-friendly hotels in the emerging economies of Middle East, Africa, Latin America and the Caribbean.
OPIC is the development finance institution of the U.S. Government and helps businesses to expand in the emerging markets, driving jobs, revenues and growth opportunities both on national and international fronts. OPIC provides investors with financing, guarantees, support and other services for private equity investment funds.
The partnership is poised to generate cash for OPIC to finance Marriott’s international hotel development projects, thereby acknowledging the partnership’s covenant to the environment and investment in the emerging markets. OPIC intends to generate up to $200 million in total for financing the hotel projects.
According to a recently signed Memorandum of Understanding (MOU) between the two parties, OPIC will provide long-term loans to the third party owners of the Marriott’s 14 lodging brands, including Marriott Hotels & Resorts, Courtyard and Fairfield hotels. The company will put forward flexible loan terms and approval process, which can be altered based on local conditions and regulations. Alongside, Marriott will render management or franchising services for hotels under separate agreements.
The new alliance is anticipated to develop hotels in areas having dearth of water and energy resources. The hotels will be well equipped to comply with environmentally-sustainable standards such as the U.S. Green Building Council’s LEED (Leadership in Energy & Environmental Design) program, if available, or in accordance with other respected global or regional specifications.
Since 2008, Marriott is committed to sustaining the environment through a number of initiatives. It has donated $2 million to the Amazonas Sustainable Foundation to protect 1.4 million acres of Brazilian rainforest. Recently, the company also announced its upcoming hotels in Brazil to contribute $0.5 million to assist the REDD+ (Reduced Emissions from Deforestation and Degradation) project. By 2020, Marriott aims to reduce energy and water consumption by 20% and convert its multi-billion hotels chains to environment friendly hotels.
Owing to the saturation in the U.S market, major hoteliers are exploring growth opportunities in the international markets. The current trend shows that the economic balance of power has been shifting from the developed world to the rapidly growing economies and this transition has not escaped Marriott’s notice.
However, Marriott’s competitors are also in an expansion mode and this is something to be wary of. Recently, Starwood Hotels & Resorts Worldwide Inc. (HOT) also announced opening of several hotels in Middle East, Africa, Latin America and Caribbean regions. Several other major hoteliers like InterContinental Hotels Group (IHG) and Hyatt Hotels Corp. (H) are also poised to beef up their portfolio in that region, thus making the market competitive.
Based in Bethesda, Maryland, USA, Marriott operates and franchises hotels under 15 brands including Marriott, The Ritz-Carlton, JW Marriott, Bulgari, EDITION, etc. It also has licensed vacation ownership resorts under three additional brands: Marriott Vacation Club, Grand Residences by Marriott, and The Ritz-Carlton Destination Club. As of now, it has more than 3,700 properties in 73 countries and territories.
We presently have a long-term Outperform recommendation on Marriott, which holds a Zacks #2 Rank signifying a short term ‘Buy’ rating.
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