Marriott & Hilton: Hotel Empires That Own No Hotels

"We are not in the hotel business. We are in the brand business."

– Arne Sorenson, former CEO of Marriott International

Air conditioning.

That’s the first thing someone outside of Europe buys when they start earning real money and have some savings left.

It’s the first step toward improving their quality of life. Unbearable heat suddenly becomes bearable at home. Sleep improves. Concentration at work rises. Children can study without sweating.

And do you know what comes right after that?

Travel.

People today don’t want to buy more stuff. They want experiences. It is a consumer shift that happened over the past few years accelerated by Covid. Recall: Pandemics are next to wars and deep recessions one of the three key impetus for shifting consumer preferences as found out by studying 5’000 years of history (arvy Book Club: Lessons of History). And the favorite experience of all is seeing the world. A weekend in Paris. Two weeks in Bali. A road trip through Patagonia. The pictures on Instagram are the new Porsche in the garage.

This is not a feeling. It is a measurable shift in global consumer behavior.

And the numbers are striking: global tourism spending is forecast to rise from roughly $205 billion in 2023 to nearly $750 billion by 2032 (chart 1). That works out to a compound annual growth rate of 15.5% — well above the growth of the world economy, and even above most tech subsectors.

A whole world that wants to travel. More of it, every single year.

The only question is: who makes money from it?

And no, not the airlines.

Gordon Gekko already nailed them in the 1987 Wall Street classic (here the 12 Best Investment & Finance Movies of All Time), calling them a “minefield of lousy unions”. They operate in a brutally cyclical business with razor-thin margins and regular bankruptcies.

The real beneficiaries—apart from aircraft manufacturers and suppliers such as Airbus, Safran, and GE Aerospace—are to be found elsewhere entirely.

They own almost no real estate. They pay no electricity bills. They don’t replace towels. And yet, every month, a check arrives from roughly 19,000 hotels worldwide — contracted, for 20 to 30 years, rising with inflation.

Enter the two largest hotel companies in the world.

Marriott.

Hilton.

Chart 1: Global Tourism Spending — a Decade of 15.5% Growth Per Year

Asset-Light: Why It Pays Not to Own Hotels

In the 1990s, Hilton and Marriott had exactly what every hotel company believed it was supposed to have.

Hotels.

Lots of them. They bought land, built towers, hired thousands of employees, paid electricity and water bills, and took out loans when the roof needed replacing.

The business was cyclical, capital-intensive, and low-margin. In a recession, the rooms sat empty, the fixed costs kept running, and the balance sheet groaned.

Sounds familiar?

Yes — it sounds like Maersk from our Weekly a few weeks back. Just on land.

Then came the big idea. And it took twenty years to fully play out.

They sold the buildings. To real estate investors. To pension funds. To wealthy families. And offered those new owners a deal that almost sounded too good to be true:

“You keep the walls. We give you our name, our booking system, our loyalty program, our 271 million members — and in return, you pay us a small fee on every room dollar you collect.”

The investors said yes. Thousands of times.

Welcome to the world of the franchise model — the secret sauce of every asset-light company. We wrote a whole Weekly on this a while back, about how Marriott and Domino’s Pizza have perfected this playbook.

The essence in one sentence?

You build on something that already works — and let someone else carry the capital risk.

Genius, isn’t it?

Today, 99% of Marriott’s portfolio runs under franchise or management contracts. Hilton is practically identical. The contracts typically last 20 to 30 years, with renewal options. Anyone wanting out must rebrand the hotel entirely, renovate it to new standards, and pay two to three years of management fees as a termination penalty.

The attrition rate?

1 to 2% per year.

And even that is mostly the brand itself deciding not to renew.

This is no longer a hotel business. This is a toll booth on the global travel river (chart 2).

Marriott and Hilton run licensing and brand platforms that generate recurring, contracted, inflation-protected fee income. Why inflation-protected? Because the fees are a percentage of room revenue — and room rates rise with inflation automatically.

The numbers speak for themselves.

Marriott’s operating margin is expected to climb above 22% by 2035. Hilton’s toward 29% by 2030. A traditional hotel operator that still owns its buildings? Single digits on a good day.

And because almost no capital is tied up, the returns on invested capital look almost absurd. Hilton’s Return on Invested Capital (ROIC)?

37% over the next five years.

For context: that is more than three times what an average industrial business ever achieves.

Fun fact: Marriott was founded in 1927 — not as a hotel, but as a nine-stool root beer stand in Washington D.C. It wasn’t until thirty years later, in 1957, that J. Willard Marriott opened his first hotel in Arlington, Virginia. The Marriott family still holds around 15% of the company today.

And what about Hilton?

The Hilton family, Paris Hilton included (Yes, you guessed right—she’s the heiress everyone thinks of when they hear “Hilton”), essentially holds no shares in Hilton Worldwide Holdings anymore.

A root beer stand that grew into the second-largest hotel company in the world.

If that’s not a “Good Story,” we don’t know what is.

But that’s not all.

Chart 2: The Unstoppable March of Hotels & Rooms — Hilton and Marriott in Lockstep

The Strongest Brand Wins: 521 Million Reasons for Pricing Power

521 million.

That’s how many members the loyalty programs of Marriott Bonvoy and Hilton Honors count together. More than the entire population of the European Union. Twice as many people as Booking.com serves in a typical year.

And these aren’t dormant accounts.

At Marriott, roughly 70% of all room nights are booked by loyalty members. At Hilton, it’s more than two thirds. For comparison: smaller chains like Hyatt, Accor, and Choice all sit below 50%.

This is not customer retention. This is a weapon.

A weapon against Booking.com and Expedia. A weapon in the negotiations with credit card partners. And a weapon against franchisees, who accept higher royalty fees because the brand delivers.

Let’s break it down.

1. The direct distribution machine. Roughly 40% of Marriott’s and Hilton’s bookings come directly through their own channels. That’s about double the average hotel. Only a low-double-digit percentage flows through online travel agencies, versus close to 40% for independents. An independent hotel owner hands up to a fifth of every room dollar to the platforms.

Do the math. The difference pays the franchise fee — and then some. That’s why hotel owners voluntarily bolt someone else’s name onto their own facades.

• The flywheel. Every point you collect as a guest is simultaneously a switching cost for you and a bargaining chip for the company. You book Marriott again because you already have 40,000 Bonvoy points. And because you keep booking, Marriott can demand higher royalty fees from every new franchise partner. And because Marriott collects higher royalty fees, it can invest more in marketing and in the loyalty program. And because more is invested, more guests come back.

A flywheel Jeff Bezos himself could not have drawn better.

• The hidden credit card business. Marriott Bonvoy has co-branded credit cards with American Express and Chase. Hilton Honors has one with American Express. Every swipe earns points — and the brands collect fat fees from the card issuers. In 2025, co-branded credit cards already accounted for 14% of Marriott’s total fee income. For 2026, we expect growth of more than 35% — because the contracts are being renegotiated right now, and Marriott’s bargaining power has essentially doubled since the last deal was signed in 2017.

From hotel guest to credit card customer to recurring fee payer. A dream business model.

• The pricing power. Here the circle closes back to the megatrend from the beginning. The global travel market is growing at 15% per year. Meanwhile, the long-term growth rate of hotel room supply in the US sits at just 1 to 2%. More demand, barely any new supply, rising room rates (chart 3). And because the fees are a percentage of room revenue, Marriott and Hilton ride the curve for free.

The pipeline confirms where this is heading.

Marriott has 620,500 rooms in the construction or contract phase. Hilton has 520,500 rooms. Together, that is 39% of their current footprint — already in the pipeline. And a large portion is being built in new mid-scale and extended-stay brands: Spark, LivSmart, and Outset at Hilton; StudioRes, City Express, and citizenM at Marriott.

These are not prestige projects. These are volume plays for the next generation of travelers.

A strong business model. A growing market. A moat that widens with every new hotel added.

Sounds like a “Good Story”?

Yes. Clearly.

But — and our long-time readers know this well — a “Good Story” alone is not enough at arvy.

Now it is time for the “Good Chart.”

Chart 3: Pricing Power in Action — Average Daily Rate at Marriott and Hilton as well as Airbnb

Relative Strength Meets All-Time Highs: The Most Bullish Chart Behavior There Is

At arvy, we stick to one simple rule.

A wonderful business is not yet a wonderful investment. The stock price must confirm the fundamentals.

As you know: we love stock charts that run like a Swiss watch — from the bottom left to the top right.

What do we love on top of that?

Relative strength.

The concept goes back to William O’Neil, the founder of Investor’s Business Daily and the author of the classic “How to Make Money in Stocks”. O’Neil spent decades studying the biggest stock winners on Wall Street.

His conclusion, in one sentence: “Buy the leaders, not the laggards.”

And how do you spot the leaders?

By their relative strength.

The concept is simple: relative strength measures whether a stock is outperforming or underperforming its underlying index. If a stock climbs 10% while the index rises 7%, the company builds 3 percentage points of relative strength. If the stock falls more than the index, it loses relative strength.

The so-called RS line visualizes exactly that.

If the line rises, the stock is outperforming. If it falls, the stock is lagging. If it moves sideways, the stock is moving in lockstep with the market.

Here’s our practical example: Marriott and Hilton against the MSCI All Country World Index (including emerging markets, chart 4). The relative strength line tells the story of the last few years with brutal clarity. Strong outperformance before Covid — the line climbs. Then the collapse during Covid, as the world and global tourism came to a standstill — the line falls. And ever since: a steady return to outperformance.

The beauty of this one single line lies in its simplicity. You only need to focus on this one line. If it rises, you’re on the right track. If it falls, your position is not keeping pace with the market.

And here is where it gets interesting.

Even as geopolitical shocks ripple through the world and markets remain volatile, the two hotel franchisers manage both to outperform the market and to display the most bullish chart behavior there is.

New all-time highs.

And here comes the insight that many investors get wrong: a stock at an all-time high is not “too expensive.” It is a market leader. O’Neil confirmed it thousands of times in his studies: the biggest winners almost always start their runs from all-time highs — not from lows.

Relative strength plus a new all-time high is the most bullish setup the stock market has to offer.

The world will keep traveling. Marriott and Hilton will keep collecting a piece of every night booked. And right now, their stocks are displaying exactly the behavior that defines a true compounder on the market.

The stage is yours, Marriott and Hilton.

We’re participating alongside.

Chart 4: Hilton (HLT) and Marriott (MAR) — At All-Time Highs and With Relative Strength vs. MSCI ACWI