Marriott International (MAR) shares are moving up on Monday morning after the announcement of a new growth model that proposes aggressive expansion and sizable shareholder returns.
The three-year growth plan targets the opening more than 1,700 hotels around the world, adding between 275,000 and 295,000 rooms by 2021. The plan adds to Marriott's 478,000-room pipeline, including roughly 214,000 rooms that the company has already begun construction on, a press release stated.
The aggressive buildout is expected to contribute $400 million in fee revenue in 2021 and $700 million annually when stabilized, which will help Marriott keep shareholders comfortable alongside its guests.
"Shareholders could see $1.9 (billion) to $2 billion in dividends, assuming a continued 30 percent payout ratio, and $7.6 (billion) to $9 billion in share repurchases over the three-year period," the company forecast in an SEC filing on Monday morning.
"Our new three-year plan, with Starwood fully integrated, demonstrates how our fee-based, asset-light business model generates even stronger and more sustainable cash flows," CFO Leeny Oberg said. "This allows us to invest profitably in our core business at high rates of return and also return significant amounts of capital to shareholders."
Starwood, a former competitor that was acquired in 2016, was noted as a key driver of Marriott's loyalty programs and international expansion targets.
"Starwood has made us a more formidable competitor, providing a more valuable loyalty program, brands with strong appeal to loyalty members and owners, talented associates, terrific locations, particularly in the fast-growing Asia Pacific region, significant cost synergies and meaningful scale," Arne Sorenson, Marriott International president and chief executive officer, said. "We launched our newly branded loyalty program, Marriott Bonvoy, just last month. The program reached 125 million members as of year-end 2018, adding roughly 50,000 members per day."
Marriott expects about half the hotels it opens moving forward to be outside the United States, shifting the balance of its hotel footprint that is currently about two-thirds U.S.-based.
"The rest of the world is growing faster off of a smaller base," Sorenson told CNBC's Squawk Box on Monday morning. "When you see the growing global middle class, you see the relative lack of existing hotel stock in some of these markets, the percentage growth is meaningfully higher."
Sorenson added that tourism numbers, particularly out of China, will continue to support strong growth in demand to sustain its rapid expansion plan.
To be sure, the growth does not change analyst estimates for earnings immediately ahead, as Marriott said it sees diluted earnings per share in the range of $7.65 to $8.50 each. That range largely matches the Refinitiv forecast of $7.72 per share that has been in place since the company's earnings release in early March.
For more on Marriott's plans and details on how the company will deal with hacking risks, activist investors and the rise of Airbnb, follow Stock of the Day and tune in to the company's Security Analyst Meeting, set to kick off at 9:30 a.m. ET.