Shares of Marriott International (MAR) dropped after the hotel chain revealed a massive database breach potentially affecting up to 500M guests of its Starwood hotels company. An analyst believes the news will pressure shares in the near-term, but does not expect a meaningful financial impact long-term.
MASSIVE DATA BREACH AT STARWOOD: Marriott on Friday revealed a massive database breach that affects up to 500M guests of its Starwood hotels, which the company acquired in 2016. A security investigation on November 19 concluded that there was "unauthorized access" to a database holding hotel guest records. "Marriott learned during the investigation that there had been unauthorized access to the Starwood network since 2014," according to a statement from Marriott. The Starwood security breach affects a number of branded hotels owned by Marriott, including W Hotels, Sheraton, St. Regis and Weston. Marriott said it learned about the breach after an internal security tool sent an alert on September 8, but then learned data had been hacked long before. The company said for 327M guests, personal information compromised could include passport details, phone numbers and email addresses, while for others, it could include credit card information. Marriott said it had reported the incident to law enforcement and had begun notifying regulatory authorities. "We deeply regret this incident," Marriott President and Chief Executive Officer Arne Sorenson stated. "We fell short of what our guests deserve and what we expect of ourselves. We are doing everything we can to support our guests, and using lessons learned to be better moving forward." Sorenson also said Marriott has set up a dedicated website and call center for guests who may have questions about their personal information.
WHAT'S NOTABLE: In 2017, both InterContinental Hotels (IHG) and Hyatt Hotels (H) were victims of cyber attacks. In April 2017, InterContintenal released data showing that cash registers at more than 1,000 of its properties were compromised with malicious software designed to siphon customer debit and credit card data. Last October, Hyatt said it had discovered unauthorized access to payment card information at certain of its locations, affecting 41 properties in 11 countries. The incident affected payment card information, such as, cardholder name, card number, expiration date and internal verification code, from cards manually entered or swiped at the front desk of certain Hyatt-managed locations.
FINANCIAL IMPACT SEEN AS LIKELY MARGINAL: Jefferies analyst David Katz told investors in a research note that though shares are likely to be pressured in the near-term following the hack announcement, he does not expect a significant financial impact in either the near-term or long term-term. While he thinks any revisions to estimates will be marginal, Katz does think "it is prudent to contemplate" the possibility for near-term, headline-driven apprehension in new bookings, the possible medium- to longer-term impact of customers leaving to competitors and the near-term expenses and any potential charges or settlements. He maintained a Hold rating on Marriott shares with a $124 price target.
PRICE ACTION: Shares of Marriott are down about 5% in morning trading to $115.55.
OTHERS TO WATCH: Other publicly traded companies in the hotel space under pressure this morning include InterContinental, Hyatt and Hilton Hotels (HLT).
