Marriott's Discounted Valuation: Hidden Opportunity or Overvalued Mirage?

The hospitality sector has long been a battleground of valuation metrics, but few rivalries are as stark as the one between Marriott International (MAR) and Hilton Worldwide (HLT). While both companies have navigated a post-pandemic recovery with varying degrees of success, Marriott's current valuation gap relative to Hilton raises a critical question: Is its discount a sign of undervaluation—or a red flag?

The Valuation Gap: Marriott's Discounted Multiple

Marriott's trailing P/E ratio of 29.1 (as of July 2025) lags behind Hilton's 42.6, while its EV/EBITDA multiple of 19.7x is nearly 30% lower than Hilton's 26.7x. These metrics suggest investors are willing to pay a premium for Hilton's asset-light model, which derives 80% of revenue from recurring franchise fees and management contracts. Yet Marriott's asset-light exposure—through its 98% franchised/managed portfolio—should theoretically align with Hilton's valuation logic. So why the gap?

The answer lies in perception. Hilton's strong momentum score (74 vs. Marriott's 66) and positive earnings revisions have fueled optimism, while Marriott faces downward revisions due to macroeconomic headwinds. However, this overlooks Marriott's robust international RevPAR growth, which surged 12% in Asia-Pacific and 8% in Europe during Q2 2025. Such trends suggest Marriott's valuation may be overly pessimistic.

Growth Catalysts: RevPAR, Pipeline, and Dividends

Marriott's global pipeline of over 500,000 rooms—up 7% from 2024—supports long-term revenue growth. Its luxury brands (e.g., Ritz-Carlton, St. Regis) command ADR premiums, while midscale brands like Moxy cater to budget-conscious travelers. Meanwhile, its dividend yield of 2.3% (vs. Hilton's 1.8%) offers stability in volatile markets.

The company's asset-light strategy reduces capital expenditure risks, allowing it to reinvest in tech-driven loyalty programs (e.g., Marriott Bonvoy). This contrasts with Hilton's heavy reliance on fee-based revenue, which may struggle in a slowdown.

The Analyst Divide: Bullish or Cautious?

Jefferies recently upgraded Marriott to “outperform”, citing its strong RevPAR momentum and dividend resilience, while JPMorgan maintained a “neutral” rating, warning of booking delays in corporate travel and slower room growth in key markets like the U.S.

The debate hinges on macroeconomic resilience. If global travel demand holds, Marriott's exposure to high-growth regions (e.g., China's reopening, Middle East tourism booms) could narrow the valuation gap. But if recessionary pressures dampen discretionary spending, Hilton's recurring revenue model may prove safer.

Risks to Consider

• Booking Delays: Corporate clients are delaying reservations amid uncertain economic conditions, a trend that could pressure RevPAR in 2026.
• Supply Growth: Marriott's pipeline expansion requires disciplined execution to avoid oversupply in saturated markets like the U.S.
• Currency Fluctuations: A stronger dollar could erode international revenue growth, particularly in emerging markets.

Conclusion: A Buying Opportunity at MAR?

Marriott's 29.1x P/E and 19.7x EV/EBITDA place it at a 22% discount to Hilton despite comparable growth drivers. While risks like booking delays are valid, the company's dividend stability, geographic diversification, and luxury brand dominance suggest its valuation is overly conservative.

Investors seeking exposure to a recovering travel sector should consider adding MAR to a diversified portfolio, especially if the stock dips further. However, the “neutral” rating from JPMorgan isn't entirely unwarranted—this is a stock to buy on dips rather than chase at current levels.

In the end, Marriott's valuation gap may be less about fundamentals and more about sentiment. For those willing to bet on global travel's long-term trajectory, the discount could prove a hidden opportunity.