Last weekend I was taking Kevin’s advice and decided to spoil myself with a dream vacation. I know Kevin enjoyed this trip nearly as much as I did because of all of the money I spent (you will see the race to $1 million update on Friday). What Kevin doesn’t know is that my vacation has inspired a great stock pick which will ultimately lead to my sweet enjoyment of the grand prize (and Kevin’s demise).

While I was sitting in my posh beachfront hotel, I wondered:  “Who can charge $200+ for a clean set of towels?  Does parking really cost $27 per day?  Do my $10 margaritas really have that much alcohol in them?”

Clearly there are some nice profit margins built into these prices and there may just be an investment opportunity here.

Marriott International (NYSE:MAR)

There is room for growth. Compared to its big brother Hilton (which is not a public stock), Marriott is tiny. I interpret this as room for growth.  In fact, Marriott is looking at adding nearly 100,000 hotel rooms through 2013.

Great selection of brands. Over the past few years Marriott has worked hard to complete their brand portfolio, and in my opinion has one of the most well rounded and clearly defined brand portfolio around. Residence Inn = longer stays. Courtyard = business traveler. Ritz Carlton = rich people. Marriott = regular hotels.

Customer Loyalty. The hotel industry has slowly moved from a price oriented industry to a loyalty industry. The Marriott Rewards program has won awards left and right and has become a major selling point.

Pipeline of business customers. The most loyal and profitable customers are business travelers.  Marriott is the only hotel chain with a clearly defined business brand – the Courtyard. Hilton’s comparable brand (Hilton Garden Inn) has very few locations which means business travelers are forced to switch between Hilton, HGI, and Hampton.

Great management decisions. The Marriott management team has made some great decisions in the past few years, including their current phase of expansion, as well as spinning off the lagging timeshare business. Great management decisions are key to long term stock performance.

Dividends and share repurchase. If nothing else, the dividend and MAR is currently higher than a typical CD, and it has been raised three times in the past year and is now above pre-crisis levels. In addition, they have authorized a new share repurchase program.

Disclosure:

I currently do not have a position in this stock and do not plan to do so for the next 90 days.

Kevin’s Take:

I am not a shareholder in Marriott, but I am a loyalty member and I always look to stay at a Marriott first because of their rewards program. Working at a large company where I do some traveling, I know the value of these hotel chains. Looking at hotels from a consumer perspective, I would never want to invest. But from a business traveler perspective, these things are gold mines. I’m in the same boat with The Hoff; if this stock is down 20% YTD, it’s a great opportunity to pick up a solid company at a cheap price.

Important to note that ALL ideas, thoughts, and/or forecasts expressed or implied herein are for informational and entertainment purposes only and should NOT be construed as a recommendation to invest, trade, or speculate in the markets.