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By: Allie Leon

By: Allie Leon. Market Multiple Valuation. The Lodging Industry. $ 592.6 B total industry revenue in 2013 H it hard by recession, but on the recovery Intense competition due to low barriers to entry and threat of substitution Major global players are Marriott and Hilton

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By: Allie Leon

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  1. By: Allie Leon Market Multiple Valuation

  2. The Lodging Industry • $592.6 B total industry revenue in 2013 • Hit hard by recession, but on the recovery • Intense competition due to low barriers to entry and threat of substitution • Major global players are Marriott and Hilton • Marriott owns 3900 properties in 72 countries • Comprised of 19 brands

  3. Use of Multiples in Company Valuation Pros: -widely used -easily understood by the general public -gives you an idea of where the company stands in the industry -helps you compare firms Cons: -lots of judgment and estimations -hard to determine comparable companies

  4. NEA Multiple Notes: - Excluded Hyatt from industry averages -much smaller than the other competitors -differences in company capital structures will not affect NEA calculations like they do for BV

  5. EPAT Multiple Notes: -still excluded Hyatt -use EPAT because dividends are paid out of earnings, and potential dividends are the basis for company value -companies that generate more earnings should be worth more -more reliable than NI multiple

  6. NI Multiple Notes: -still exclude Hyatt -difference between NI and EPAT multiples is the weights put on debt -approach produces the value of equity, not of the enterprise

  7. RevPAR Notes: -still exclude Hyatt -performance metric in the hotel industry -hard to determine which revenue was from room verse other sources –possible source of error

  8. RecommendationSELL • Market price at close of day 1/24/14 = $49.76 • Values excluding Hyatt were significantly below this price (with the exception of RevPAR) • Stock is overvalued – expect it to underperform the market • Conclusion: SELL

  9. Questions??

  10. Sources • Marriott International, Inc. 2012 Annual Report • Yahoo Finance

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