Finance

Hilton and Marriott

The hospitality industry is an important part of the economy since it contributes significantly to a country's GDP. The hotel sector in the United States generated $218 billion in revenue between 2001 and 2018, as assessed by occupancy rate, average day rate (ADR), and revenue per available room (Statista.com, 2022). Hilton Inc. and Marriott International Inc., for example, are ideal examples of global hospitality corporations that have been in operation for over a century. In this study, several ratio studies such as liquidity, solvency, activity, and profitability ratios will be used to conduct in-depth assessments of Hilton Inc. and Marriott International Inc. Appropriate conclusions will be drawn from the analyses to assist investors and creditors in making investment choices (Hiltonfoundation.org, 2022 and Marriott.com, 2022).

Liquidity ratios are important in showing a company's ability to meet short-term and urgent obligations. Liquidity ratios essentially help determine a company's financial soundness in meeting short-term obligations as they come due, as well as long-term obligations as they come due (Chiaramonte, & Casu, 2017). Below are some examples of common liquidity ratios: Current Ratio and Quick Ratio.

Current Ratio

The current ratio indicates how well a corporation can meet current liabilities with assets that can be turned into cash quickly. It's a crucial ratio since it shows current liabilities that are due within the following year. The current ratio indicates a company's capacity to pay off short-term debt. The higher the current ratio, the better. Investors and creditors can use the short-term ratio to analyze a company's liquidity and estimate how easily short-term obligations can be serviced. The formula is as follows: Current Assets/Current Liabilities = Current Ratio (Purba & Septian, 2019).

Figure 1. Current Ratio for Hilton World Wide Holdings Inc.

Source: (Finbox.com,2022).

Over the previous twelve months, Hilton Worldwide's quick ratio has been 0.9x. For the fiscal years ending in 2017, 2018, and 2021, Hilton has a stable current ratio (Finbox.com, 2022). The quick ratio fell to 0.7 in 2019, then rose to 1.7 in 2020, the highest level in five years, before falling to 1.0 in 2021, showing that Hilton Worldwide Holding Inc. was better able to make debt payments in two years in 2020. (Finbox.com,2022).

Hilton Worldwide's quick ratio decreased in 2017 (0.8x, -38.5 %), 2018, (0.8x, -7.0 %), 2019, (0.7x, -3.9 %), and 2021 (1.0x, -45.0 %), but increased in 2020 (1.7x, +137.1 %). (Finbox.com ,2022). In 2020, the company's current assets earned a larger return than its current liabilities. Current and historical current ratio capital indicators for Hilton Worldwide Inc. (Macrotrends.com, 2022).

Figure 2. Current and historical current ratio capital indicators for Hilton Worldwide Inc.

Source: (Macrotrends.com, 2022)

As for Marriott International Inc D., the current ratio was 0.5x in latest twelve months current ratio for fiscal years ending December 2017 to 2021 averaged 0.5x (Finbox.com,2022). Marriott International's quick-term ratio peaked at 0.6x in December 2021, looking back five years (Finbox.com,2022). Marriott International's short-term ratio, which was 0.4x in December 2018, was at a five-year low. Marriott International's short-term ratio decreased in 2017 (0.5x, -28.0 percent) and 2018 (0.4x, -10.9 percent), but increased in 2019 (0.5x, +11.4 percent), 2020 (0.5x, +4.9 percent) and 2021 (0.6x, +15.2 percent) (Finbox.com, 2022). Marriott (MAR) current and historical current ratios from 2010 through 2022. The current ratio is a liquidity ratio that assesses a firm's capacity to meet short-term obligations. For the three months ended March 31, 2022, Marriott's current ratio was 0.53. (Macrotrends.com, 2022). This, in theory, indicates that the corporation improved its operations and generated more money from current assets to cover the due current obligations.

When comparing Hilton to Marriott International Inc., it's easy to see that Hilton Worldwide Holding Inc.'s current ratio was higher in all years from 2017 to 2021 than Marriott International Inc.'s, implying that Hilton Inc. was in a better position to meet its current commitments.

Figure 2. Current Ratio for Marriott International Inc.

Source: (Finbox.com,2022).

Figure 3. Current and historical current ratio capital indicators for Marriott International Inc. Source: (Macrotrends.com, 2022)

Quick Ratio

The quick ratio is likewise called the acid take a look at ratio. As a liquidity ratio, it's miles a beneficial indicator in displaying the capacity of the enterprise in paying its modern-day liabilities the use of the maximum liquid property. Cash, coins equivalents, brief time period investments, modern-day account receivable in addition to marketable securities are taken into consideration to be short property. The better the fast ratio, the greater favorable a enterprise can is in using liquid property to repay modern-day liabilities. To investor, the quick ratio is a superb ratio to cognizance on and to the creditors, it facilitates them understand precisely whether or not they'll be paid returned in time. In this case, the residual of the cutting-edge belongings is acquired after subtracting the stock quantity and then the quantity is split with the aid of using cutting-edge liabilities. i.e. Quick ratio = (Total Current belongings- stock-Prepaid Expenses) / Current Liabilities Hilton's quick ratio averaged 0.9x from December 2017 to December 2021, and it hasn't altered in 5 years. The speedy ratio of Hilton Worldwide declined in 2017 (0.6x, -5.5%), 2018 (0.6x, -7.2%), and 2021 (0.8x, -49.6%), however grew in 2019 (0.6x, +5.5%) and 2020 (1.6x, +161.9%). The speedy ratio climbed to 1.6 in 2020, indicating that the Hilton turned into withinside the finest function to pay down its cutting-edge commitments the usage of the maximum liquid belongings (Finbox.com,2022).

Figure 4. Quick Ratio for Hilton World Wide Holdings Inc.

Source: (Finbox.com,2022).

Marriott International Inc, on the other hand, had an average Quick Ratio of 0.4x from December 2017 to December 2021. Marriott International's Quick Ratio decreased in 2017 (0.4x, -18.1%) and 2018 (0.4x, -6.2%), but increased in 2019 (0.4x, +3.1%), 2020 (0.5x, +17.2%) and 2021 (0.5x, +14.6%). Marriott International Inc. was in a stronger position to service short-term debt with cash in 2020 as the quick ratio increased to 0.5x (Finbox.com,2022). When comparing Hilton to Marriott International Inc. it can be seen that Hilton Inc. had a higher Quick Ratio in all years from 2017 to 2021, meaning that the Hilton Company was in a better position to service short-term debt with the most cash.

Figure 5. Quick Ratio for Marriott International Inc.

Source: (Finbox.com,2022).

Debt to Equity Ratio / Equity Ratio

Debt Ratio / Total debt to Equity Ratio

Ideally, this ratio illustrates how much the firm relies on debt and equity as sources of funding to manage its assets, as measured by the book values of the capital sources. It's calculated like this:

Total Debt (Liabilities) / Total Shareholders' Equity = Total Debt (Liabilities) / Total Shareholders' Equity.

Hilton's total debt / total capital shows, over five years from 2017 -2021, Hilton Hotel's total debt that negatively increased, in 2018 by 26.2% and in 2020 by 27.5% - can indicate that the Covid-19 pandemic outbreak affected the hotel business, while unlisted years were positive, the company could weather total debt / total capital. (Finbox.com).

Figure 6. Total Debt / Total Capital for Hilton World Wide Holdings Inc.

Source: (Finbox.com,2022).

Marriott International's total debt/total equity for the fiscal years ending December 2017 through 2021 averaged 18.5%. Over the past five years, Marriott International's total debt/general equity peaked in December 2020 at 21.8% (Finbox.com).

Figure 7. Total Debt / Total Capital for Marriott International Inc.

Source: (Finbox.com,2022).

Over the course of several years, both Hilton and Marriott International Inc. accumulated additional debt. Hilton Worldwide Inc., on the other hand, has a greater total debt/total equity than Marriott International Inc. When comparing 2017 to 2021, both Hilton and Marriott experienced diminishing equity during Covid-19, but starting in 2021, they began to strengthen their market position, however Hilton's equity seems to be positive.

Ratio of equity to debt

The equity ratio is a solvency measure that attempts to determine how much of an asset's value is funded by the owner's investment. It achieves it by comparing the company's entire equity to its total assets. Investors fund firms by providing the resources and cash that they require to run their businesses. The equity ratio is used to determine how much the company's activities are financed by its investors. Corporations with larger equity ratios are more appealing to prospective investors and creditors, since investors are more sure that the firm will invest their money wisely and therefore be willing to fund operations. The equity ratio is calculated in the following way: Total equity divided by total assets is the equity ratio.

Hilton Worldwide Inc. reported an average equity ratio of -0.3% for the years ended December from 2017 to 2021. The debt-to-equity ratio, with an increase of -5.3%, shows that the company has taken on a higher amount of debt in 2021 to fund its operations (Finbox.com).

Figure 8. Equity / Total Assets for Hilton World Wide Holdings Inc. .

Source: (Finbox.com,2022).

Marriott International Inc. had a negative debt-to-equity ratio in 2017 and 2020, while the ratio increased to an all-time high of 5.5 in 2021 (Finbox.com). The negative sign is caused by negative shareholders' interests from treasury shares and negative accumulated other comprehensive income.

Figure 8. Equity / Total Assets for Marriott International Inc.

Source: (Finbox.com,2022).

Both Hilton and Marriott International Inc. have accumulated additional debt over the course of several years. On the other hand, Hilton Worldwide Inc. has a higher debt-to-equity ratio than Marriott International Inc. Comparing from 2017 to 2021, Hilton and Marriott's equity has decreased in Covid-19, but they are starting to strengthen their market positions in 2021, with Hilton's equity appearing to be positive (Finbox.com).

Recommendation

A analysis of Hilton Worldwide Inc.'s financial position shows that it is in a better financial position than Marrott International Inc. The drop in profits that happened as a result of the worldwide Covid 19 pandemic between 2019 and 2020. The hospitality business took a direct impact. The corporation, on the other hand, was able to rebound from the pandemic and increase its performance. The Marriott corporations have noticed the similar pattern. As a result, the corporation will be able to expand into new, lucrative areas.

REFERENCE:

Hilton 2022. [online] Available at: https://www.hiltonfoundation.org/about/history [Accessed 9 June 2022].

Marriott International. 2022. [online] Available at: https://www.marriott.com/marriott/aboutmarriott.mi [Accessed 9 June 2022].

Chiaramonte, L., & Casu, B. (2017). Capital and liquidity ratios and financial distress. Evidence from the European banking industry. The British Accounting Review, 49(2), 138-161. [online] Available at: https://www.sciencedirect.com/science/article/abs/pii/S089083891630004X [Accessed 9 June 2022].

Purba, J. H. V., & Septian, M. R. (2019). Analysis of Short-Term Financial Performance: A Case Study of an Energy Service Provider. Journal of Accounting Research, Organization and Economics, 2(2), 113-122. [online] Available at: http://e-repository.unsyiah.ac.id/JAROE/article/view/14632 [Accessed 9 June 2022].

Revenue of the United States hotel industry from 2001 to 2018., 2022 [online] Available at: https://www.statista.com/statistics/245841/total-revenue-of-the-us-hotel-industry/ [Accessed 9 June 2022].

Current Ratio for Hilton Worldwide Holdings Inc., 2022 [online] Available at: https://finbox.com/NYSE:HLT/explorer/current_ratio [Accessed 9 June 2022].

Hilton Worldwide Holdings Current Ratio 2011-2022, 2022 [online] Available at: https://www.macrotrends.net/stocks/charts/HLT/hilton-worldwide-holdings/current-ratio [Accessed 9 June 2022].

Current Ratio for Marriott International, Inc., 2022 [online] Available at: https://finbox.com/NASDAQGS:MAR/explorer/current_ratio [Accessed 9 June 2022].

Marriott Current Ratio 2010-2022, 2022 |[online] Available at: https://www.macrotrends.net/stocks/charts/MAR/marriott/current-ratio [Accessed 9 June 2022].

Quick Ratio for Hilton Worldwide Holdings Inc.,2022 [online] Available at: https://finbox.com/NYSE:HLT/explorer/quick_ratio [Accessed 10 June 2022].

Quick Ratio for Marriott International, Inc., 2022 [online] Available at: https://finbox.com/NASDAQGS:MAR/explorer/quick_ratio [Accessed 10 June 2022].

Total Debt / Total Capital for Hilton Worldwide Holdings Inc., 2022 [online] Available at: https://finbox.com/NYSE:HLT/explorer/debt_to_capital [Accessed 10 June 2022].

Total Debt / Total Capital for Marriott International Inc., 2022. [online] Available at: https://finbox.com/NASDAQGS:MAR/explorer/debt_to_capital [Accessed 10 June 2022].

Equity / Total Assets for Hilton Worldwide Holdings Inc., 2022 [online] Available at: https://finbox.com/NYSE:HLT/explorer/equity_to_assets [Accessed 10 June 2022].

Equity / Total Assets for Marriott International, Inc., 2022 [online] Available at: https://finbox.com/NASDAQGS:MAR/explorer/equity_to_assets [Accessed 10 June 2022].