Q1 2021 Marriott International Inc Earnings Call
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On to the Marriott International's first quarter 2020 weren't on conference call.
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I would now like the entities conference over to your speaker today, Jackie Burke of mechanical Senior Vice President Investor Relations. Please go ahead.
Thank you good morning, everyone and welcome to Marriott first quarter 2021 earnings call on the call with me today are Tony Capuano, Our Chief Executive Officer leaning over the our executive Vice President and Chief Financial Officer, and Betsy the on our Vice President of Investor Relations.
To remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal Securities laws.
These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause the future results to differ materially from those expressed in or implied by our comments.
Statements in our comments on the press release, we issued earlier today are effective only today and will not be updated as actual events unfold.
Please also note that unless otherwise stated our revpar occupancy and ADR comments reflect the system wide constant currency results for comparable hotels and income.
<unk> hotels temporarily closed due to COVID-19.
The revpar occupancy and ADR comparisons between 2021 and 2019 reflect properties that are defined as comparable as of March 31, 2021 even if they were not open and operating for the full year 2019, or they did not meet all of the other criteria for comparable in 2019.
Can find our earnings release and reconciliations of all non-GAAP financial measures referred to in our remarks today on our Investor Relations website, and now I will turn the call over to Tony.
Thanks Jackie.
As I enter my 26 year with Marriott.
Honored and humbled to be here. This morning from my first earnings call as CEO the.
Senior leadership team and I have worked together for many years, we are all committed to building on the Army's legacy and advancing the strategy, we've put in place to navigate the pandemic drive towards recovery and grow our business.
Global Revpar is currently still substantially below pre pandemic levels and certain countries continue to experience concerning levels of COVID-19 cases.
You get more and more people are getting vaccine vaccinated every day.
And demand is rebounding rapidly on some of our largest regions.
Over 95% of our hotels are opened globally and we've seen overall worldwide occupancy improve every month this year.
In March we saw the largest months over months of sequential increase in global occupancy since the beginning of the pandemic.
Occupancy reached over 45% up nine percentage points from occupancy on February <unk>.
March Global Revpar was down 53 per cent compared to March of 2019, eight percentage points better than February its decline.
Global occupancy in April rose again to around 48 per cent.
Revpar for April declined roughly 50 per cent compared to the same month in 2019.
We remain very encouraged by the strong recovery in mainland China.
Several markets were impacted by strict government mandated lockdowns in January and February of this year.
<unk> recovered quickly once the COVID-19 cases were under control and restrictions were relaxed occupancy.
Occupancy in the March was 66 per cent almost flat to the same time in 2019.
Importantly, despite limited international travel into mainland China, we saw a robust demand from both leisure and business gifts in March.
Leisure transient room nights were above pre pandemic levels for the third quarter in a row biz.
Business transient room nights surpassed the pre pandemic levels in March of 5% versus March 2019.
While group room nights in March still trailed the same month in 2019 demanded in the segment stepped up significantly after restrictions on large gatherings were lifted mid month.
Some of these trends in mainland China running near pre pandemic levels gives us confidence in strong full recoveries across all customer segments in other regions as conditions improve.
We've seen demand pick up quickly and meaningfully in countries with early on Swift vaccine Rollouts like the U S. The UAE and Qatar and in places, where airlift has improved or travel restrictions have been relaxed like Mexico Macau in the U S Virgin Islands.
While room nights of overall are still heavily weighted to leisure the resilience of demand is clear.
And whether it's from conversations with business leaders customers friends or family. We know there is a significant amount of pent up demand for all types of travel given that so many trips had to be put on hold over the past year.
For example, when the EU recently announced that they expect to be opened the vaccinated U S. Travelers. This summer our reservation centers saw the immediate surge in call volume.
In the U S occupancy has increased swiftly this year with the acceleration of vaccine Rollouts in March the U S and Canada region had the second highest occupancy behind greater China at 49%.
The domestic rebound as still being primarily led by leisure transient demand.
Special corporate and group bookings in the U S from Canada remained meaningfully below pre pandemic levels, but are slowly recovering.
In March special corporate bookings for all future stays exceeded February bookings by 25 per cent the largest.
The sequential monthly increase in this customer segment since the pandemic the GAAP and special corporate bookings took another nice leg up in the April improving 13% over March.
The group bookings for the U S and Canada also continue to pick up as meeting planners are increasingly optimistic about the recovery and are feeling more confident that they can plan of events, especially in 2022 wouldn't be on it at.
At the end of the first quarter group revenue on the books for 2022 was down less than 15% compared to pre pandemic levels as compared to group revenue on the books as of the end of the first quarter of 2019 and for 2020.
Perhaps more importantly rates for group room nights booked in the first quarter for 2022, and 2023 are currently 6% and 10 per cent, respectively above pre pandemic levels, demonstrating that we are not trading rate for occupancy.
Turning to other regions demand continues to improve in the Middle East and Africa March occupancy reached 45 per cent driven primarily by local leisure staycations sporting events and room blocks for medical personnel related to vaccine rollouts.
The recoveries across Asia Pacific, excluding China, or APAC, and the Caribbean and Latin America or caller had been more on either in the APAC strong demand in Australia, and the Maldives has been offset by rising COVID-19 cases in the other countries like India and Japan.
And caller, while many resort properties are enjoying strong demand, especially from U S leisure travelers urban markets remain challenged.
In Europe, given rising COVID-19 cases, and strict restrictions in many countries, 25% of the reagents hotels are currently closed and the recovery has been much more muted.
Our marketing teams are employing localized and personalized marketing strategies that utilize our direct channels to help capture more leisure as well as bleser travel as the lines between work and home blur.
Especially focused on leveraging our powerful Marriott envoy loyalty program and on enhancing the platform through new expanded collaborations that help make the program even stickier for our 150 million members.
Interacting with our members who are not yet ready to stay on the hotel has been a priority for us through the pandemic.
Our co branded credit card holders have been particularly engaged and new cardholder acquisitions are improving as well.
Helped by popular spending incentives first quarter global credit card spending was down just 5% versus the first quarter of 2019.
We continued to grow our global co brand portfolio with the recent introduction of new cards in South Korea, and in Mexico, bringing the total number of countries with co brand cards to seven.
The early results from these recent launches have been excellent and are a strong testament to the power of our brands and the bond flight platform in markets around the world.
Another way bond boy members have been engaging with us is through the whole home rental platform homes and villas by Marriott International or HDMI.
While <unk> does not have a material impact on our financials. It is complementary to our portfolio of hotel brands with roughly 30000 of listings. It continues to grow and as the popular way for members to earn and redeem points.
We also recently announced a new program with Uber, allowing members in the U S to earn loyalty points and high frequency activities like ride hailing and food delivery early engagement for this program has been quite strong.
The health and safety of our guests and associates is extremely important to us we first rolled out our elevated cleanliness standards over a year ago. Since then we've continued to evolve our contactless experience and leverage technologies, such as mobile and web check in mobile key to help meet the changing needs of our guests.
While also driving productivity.
We are currently testing contactless arrival kiosks and contactless grab and go marketplaces at several select service properties across the U S. As part of our efforts to further streamline our operations and enhance the guest experience.
Over the past year, we've ramped up engagement with our owner and franchisee community through multiple channels of communication. We've worked very hard to help the owners lower their costs and maximize hotel operating margins in this low occupancy environment.
We continue to work closely to align on priorities as we navigate the recovery together.
Turning to development, our pace of signings has picked up and is dramatically better than it was for much of last year.
Our conversion activity was particularly strong in the quarter as we talked about on our last call in February we signed the conversion deal on Kalla for approximately 7000, all inclusive of rooms positioning us to be of top 10 player in the popular and fast growing all inclusive of space.
Given our impressive roster of conversion friendly brands and the meaningful benefits associated with being part of the Marriott system, We expect our momentum around conversions will continue.
We added over 23500 rooms to our system in the first quarter, 60% more than the first quarter of last year.
<unk> 31 per cent of the rooms added work from conversions the highest percentage in any quarter over the last six years.
Looking ahead to the full year, we still expect gross room's growth could accelerate to approximately 6% and net rooms growth could be roughly three to three 5%.
While we and the industry are still seeing some delays in construction starts 45% of our industry, leading price pipeline of approximately 491000 rooms is already under construction.
Our net rooms growth expectation includes a one time 100 basis points headwind from the 88 service properties Trust or SPC hotels that left our system in the first quarter, we look forward to replacing the mostly limited service first generation SBC hotels with newer products.
And are already in active discussions for new deals in nearly three quarters of the portfolio's markets.
Before I turn the call over to Lee to talk about our financials in more detail I want to say that our hearts are with everyone, who has lost colleagues friends or family because of COVID-19.
We have all witnessed the devastation caused by this pandemic and its hard to see the alarmingly high number of COVID-19 cases in too many countries today.
I also want to recognize our amazing team of associates around the world who have worked tirelessly through these uncertain times I couldnt be prouder of their dedication determination and resilience. During this crisis. They have redefined what it means to truly take care of each other and our guests.
I do believe that Marriott will continue to see improving global trends and that we can all look ahead with real optimism. We are seeing wonderful signs that demand for travel is undeniably resilience, while some regions will recover faster than others based on the progress we've seen to date I am confident that it is not a question of.
If demand will return to pre COVID-19 levels. It is really only a question of when.
Leaning.
Thank you Tony.
We were pleased with the pace of continued recovery in our business during the first quarter, particularly in the U S.
In the first quarter global occupancy was 38% and Revpar declined 59% compared to the first quarter of 2019, and 46% compared to the first quarter of 2020.
Our gross fee revenues totaled $445 million for the quarter down 29% compared to the year ago quarter franchise fees of $306 million declined only 26% year over year with our non revpar related fees proving to be particularly steady day totaled 104.
The $1 million in the first quarter.
Lately over the year ago quarter.
Credit card branding fees were $81 million down the only 12% year over year.
We are also seeing strong performance in our branded residences business, where fees were $11 million higher than a year ago.
Center of management fees of our ion that's worth $33 million in the quarter around 45% of our IMF were earned in Asia Pacific mostly from hotels in greater China.
In the first quarter, which has traditionally been the seasonally lowest quarter of the year adjusted EBITDA was $296 million.
G&A improved by 22% versus the first quarter of last year, primarily due to $50 million of lower bad debt expense and $14 million of lower guarantee reserves.
<unk> in the 2021 first quarter included 14 million of additional non recurring executive compensation related to the leadership changes.
As Tony mentioned, we've been working closely with our hotel owners to rightsize costs at our hotels given their low occupancy levels. We are pleased that we've been able to reduce hotel breakeven occupancy level significantly.
Many of our initiatives to streamline operations and improve productivity such as more efficient management staffing levels at many of our managed hotels will remain in place after the pandemic and should help offset wage inflation. Additionally.
Additionally, we are currently assessing post COVID-19 renovation and brand standards with a view towards finding more ways to improve hotel profitability, while preserving the quality and experience of guests expect of our brands when they stay with us.
While the operating environment has been quite challenging for more than a year. We've been pleased that the vast majority of our hotels continue to pay their bill.
We have even seen the number of hotels on payment plans come down meaningfully over the last several months as occupancy has improved.
Turning to our cash flow even in this low revpar environment cash provided by operating activities was $27 million in the quarter.
That amount reflects in part the impact of roughly $90 million of reduced the cash payments from the co brand credit card companies.
As you May remember the company received $920 million of cash in May 2020, as part of the amendments to our credit card agreement and we will therefore see lower cash payments for the remainder of 'twenty one through 'twenty three.
If you add back that roughly $90 million and also deduct capital and technology expenditures loan advances and other investing activities of $39 million in the quarter. The company generated positive cash flows of around $78 million.
We've been very pleased with the strength of our cash generation throughout the pandemic, it's a clear reflection of our ability to quickly and effectively adapt our business and a real testament to the power of our asset light business model.
At the end of the first quarter, our net liquidity improved to approximately $4 7 billion, representing 600 million of available cash balances plus $4 1 billion of unused borrowing capacity on our revolver.
During the quarter, we increased our weighted average debt maturity with the 10 year $1 $1 billion bond issuance that has the 285% coupon and we also retired $750 million of senior notes.
As we look ahead to the rest of 2021, assuming continued progress with vaccinations and an improving consumer and macroeconomic environment in many regions around the world. We believe that the pace of the global recovery will continue to accelerate.
While trends will vary by region, we expect overall leisure demand will strengthen further into the summer months.
In the U S and Canada reservations at our resort hotels are particularly strong booked transient room nights per stage 30 days out of our more are now over 60% above 2019 levels.
And on top of of that rates are almost 20% higher than 2019 level.
Occupancy on the books for our resorts in the region is higher relative to the same time in 2019 for every month through the end of the year.
We believe transient business transient and group will continue to slowly improve for now.
And then business demand could really accelerate in the fall as more businesses reopen with business transient returning faster than group given the lead time is generally required per booking group business.
As we think about the cadence of Revpar recovery ADR is also a key factor.
The encouraging to see that where demand has rebounded swiftly ADR has come back quickly as well.
In March Hi, Dan the popular resort market in China achieved the occupancy of 79% driving ADR of 40% above 2019 levels and resulting in March revpar over one five times higher than 2019 levels.
Here in the U S occupancy across our 34 luxury resorts rose to 59% in March.
Inc to ADR up 26% over March of 2019.
Similarly, certain resort properties in Caribbean destinations, such as the Ritz Carlton St Thomas and the Ritz Carlton Reserve Dorado of each in Puerto Rico saw a record first quarter ADR as a result of sudden surges in occupancy.
While we feel optimistic about the projector. The recovery trajectory ahead, there is still too much uncertainty about timing to be able to give specific revpar or earnings guidance, but I will again provide color on specific items, where we do have some visibility.
Starting with the topline at current Revpar levels from full year 2021, we expect the sensitivity of a one point change in Revpar versus 2019, revpar on our fees could be between 35 and $40 million per year.
Please note the given the nominal level of Revpar in 2020, the impact of a one percentage point change in 'twenty, one revpar compared to 2020 could be more like $15 million to $20 million.
As we have seen the relationship is not linear given the variability of IMF and the inclusion of non revpar related franchise fees.
For us to start earning meaningful levels of IMF in the U S and other markets, where IMF stand aside to owner priorities, we still need to see significant improvement in revpar.
We expect our non revpar related fees to continue to show the impact of improved credit card spending and strong fees from our branded residences.
We now expect full year G&A to be at the top end of the range. We shared last quarter of roughly 800 million primarily due to the additional non recurring executive compensation associated with our recent changes in leadership and higher outside legal fees. This is significantly lower than G&A in 2019.
<unk> and I'll also note that the cash component of G&A will be meaningfully below this range given non cash stock compensation.
Interest expense is still anticipated to be roughly $430 million for the full year.
Full year cash taxes are now expected to be $300 million to $325 million.
Another element related to our company's cash flow is the loyalty program.
Leisure demand has accelerated <unk> been particularly strong for our resort properties, we've seen loyalty redemption ninth pick up nicely. We expect this trend could continue as our bonds members are excited to travel again.
Even if redemptions do increase given our focus on carefully controlling program of administrative costs.
We anticipate the full year of cash flows from the loyalty program could be positive before factoring in the reduced payments, we will receive from the credit card companies.
After factoring in these reduced payments, which are expected to effectively repay.
Round, one third of the total $920 million, we received in 2020 cash flows from loyalty could be modestly negative.
Our expectation for 2021 investment spending has not changed full year investment spending excluding amounts expected to be reimbursed over time is anticipated to total $375 million to $450 million for the year, we anticipate another $200 million of investment spending that is expected to be re.
<unk> overtime.
This would lead to total investment spending of $575 million to $650 million as compared to $375 million in 2020.
As a reminder, approximately $220 million of the total spending in 2021 is for maintenance capital and our new headquarters.
Total investment spending includes capital and technology expenditures loan advances contract acquisition cost and other investing activities.
In closing we are pleased with our progress so far this year and are increasingly confident that the pace of recovery will improve significantly from here. We hear from so many people who are eager to get back on the road and we look forward to welcoming more and more guests at our hotels.
We will now open the line for questions.
Thank you as a reminder, in order to ask an audio question. Please press star followed by the number one on the telephone keypad.
And your first question is from the line of Joe Greff with J P. Morgan.
Good morning, guys.
Good morning, Jeff.
Tony you're probably the best Guy at Marriott to ask this question given your background in development, but can you just talk about your.
On a medium term views on full service urban development in the U S. How long that takes to recover and then maybe related to that can you talk about within the the net net rooms coast.
Outlook for this year, if you wanted to kind of break it out between on.
On a global basis between managed and franchise that would be helpful to us. Thank you.
Sure. Thanks, Joe.
Well as we've said for a while the.
The fluidity of the markets makes it pretty tough for us to look much beyond the end of 2021.
We continue to feel confident in the forecast we've given you for 6% gross room's growth.
Through the end of 2021.
And three to three 5% net rooms growth four to four 5%. If you back out the one time headwind from SBC on the mix of full service versus limited service, maybe I would point to the current pipeline. So if you look at the current pipeline today Interestingly about 40 per.
<unk> of the global pipeline is full service and even within that 40% 25 per cent of those full service rooms are in the luxury each year and I think that's quite encouraging for us as you know the fees coming out of a new luxury hotel can easily be 10 times that of a limited service hotel.
And so I think we continue to focus certainly on the metric of gross and net rooms, because that's an important metric, but as you've heard me Joe say four years looking at the composition of those rooms has every bit of important.
Okay.
Next question. Your next question is from the line of Shaun Kelley with Bank of America.
Hi, good morning, everybody.
Was just wondering if you could comment a little bit more on some of the changes in brand standards that were mentioned obviously it seems like some of this is here to stay.
But also I'm, just wondering where you're at in that overall review process and sort of on.
What does that mean for owners as we move into the kind of fall at the Occupancies pick up because we've definitely seen an explosion in margins for some of hotel owners, but it seems like that's in part because they were still running on contingency plans a little debt. So just kind of curious on your comments sure absolutely.
The right.
This is obviously a pretty fluid situation so.
The kind of the first part of this is around the dramatic changes that we made last year, which are obviously cut down to the very bare bone of what we needed to do it of hotel to manage with extraordinarily low levels of occupancy.
But then as <unk> seen demand pick back up, particularly in the resort hotels, we've obviously added back meaningfully.
More in the way of services for our guests, but to your point. We've also got the reality that guests also have.
Their own views on what they feel comfortable with as it relates to housekeeping and so we have made sure that there are choices for them to be able to for example in of luxury hotel continue to have daily housekeeping awhile.
If they are not comfortable with somebody coming in with their stay then they can have that two of our view is that we will continue to be looking at debt really with an eye towards the occupancy and a variety of markets, where we are going to need to be flexible, but I do think by the end of the year, Sean that we will.
<unk>.
The enable to make some decisions as we look forward about how we'll manage the.
Sure.
As occupancy really gets back closer to being normal and in that regard. We do believe that there are some things that we can do to improve the productivity.
Of the of the hotels it obviously varies a lot by the tier.
What is expected out of select service hotel is very different from the beach luxury hotel, but I do expect as we get into 'twenty two that we will have.
We established where we are on the brand standards. As you know renovations is also a whole another topic in there we've got to make sure that we're taking into consideration the dramatically lower cash reserves at the hotel owners have and picking our spots of making sure that we're picking the.
The renovation.
The work that is critical to the customer experience.
Thank you very much.
Your next question.
Yeah.
Your next question is from the line.
Thomas Allen of Morgan Stanley.
Okay.
Thomas Your line is open to immediate please on mute.
Sorry, yeah.
Morning Lee.
Just give us sort of more detail on the owned on lease segment performance, there and how you're thinking that's going to recover through the year.
Sure.
You are you are right on the money in terms of the question about the variability of that Aratana.
Just it just as a quick reminder, we got 66 owned leased hotels of which 20 are owned and I think.
You know it varies so much depending on what is going on in the Occupancies of these various markets.
Just to give you a sense.
Caller.
And EMEA are aware we've got.
Really the toughest time for occupancy right now for our owned leased hotels.
For that if you think about the elegant acquisition, where we had those hotels compared to a year ago in.
In the first quarter day, obviously had a dramatic change in their profitability year over year on the first quarter and similarly in Europe.
But at the same time.
In the U S. What we're seeing is.
With the improved demand situation debt those are owned leased profits are in better shape. So.
Broadly speaking the other thing to remember is that.
In the first quarter, we also had $17 million of termination fees, which actually helps you.
On your owned lease line and that tends to be in a given year or something like <unk>.
$45 million in that ballpark, so I think.
For better for worse is going to depend very much on what happens in caller as well as in EMEA to see these owned lease numbers rebound.
Thank you.
Your next question is from the line of Smedes Rose with the city.
Hi, Thanks.
I was just wondering if you could talk a little bit about who they are.
In the U S for the group bookings on the corporate yeah, maybe modest scope of pickup you've seen so far.
It sounds like no because you mentioned higher rates of just in general do you think companies are concerned around.
Increasing their travel budgets after having enjoyed here of no travel and.
With high productivity evidently.
Just kind of pushed back or just kind of follow ups, you're getting them around that.
Yeah. So you know I think.
Again.
For all of Us.
We're all seeing that.
Rod.
Good day.
People have around travel is now moving in the right direction, but there is still uncertainty.
And as you've got different vaccination rates in different parts of the world and.
And even within the U S at different rates in the U S. There is still some concern around.
Getting everyone together.
In a large group, but interestingly what we see is that by the time you get to 2022, we really arent seeing cancellations, there and frankly, even when you look at the pace between Q3 and Q4.
You'd see a notable difference.
And when you look at the ADR in the U S. For example for for system wide Youre actually looking at ADR from group pace being up versus.
<unk> 19, starting in Q3 of.
2021, all of the way through 'twenty, two and overall revenue.
Being from our group pace standpoint, 20 points better in Q4 than it is in Q3. So we do believe by the time, we get to 'twenty. Two there is a lot of pent up demand and debt from all of that we hear from our corporate clients in association clients that people are very anxious to be back in the.
But whether that feels comfortable exactly in Q3 are exactly in Q4 is where we do sense hesitancy, but that once you get past 'twenty one.
Debt there is a full expectation that people will be.
Getting back into doing their group business and I think just to build on the <unk> point. The statistics I gave you on rates for the front of 22% and 23 I think really speaks to your concern about reluctance of the fact that in the first quarter of 'twenty two our rates are 6% higher than they were.
Two years ago, and 10% for 'twenty, three I think underscores <unk> point debt debt.
That reluctance is fading as folks crave the ability to meet face to face.
Great. Okay. Thank you.
Your next question is from the line of Robin Farley with UBS.
Oh, great. Thanks.
The two clarifications one is just on the on the group business I know you were talking about the.
Right the head is.
Starting in Q3 did you say the total group nights for 'twenty, two how that compares to pre pandemic levels. Just in terms of the the volume of nights. Yeah total room nights at this point are down 16% now. This is on group pace. This is not on the books. The sisters group kind of the group pace that we're seeing.
And they were down 16% compared to 19 levels on rooms.
Compared to this share down 62%, but again.
The.
It's early days right, we're the only seen Q1.
So I think part of this is the uncertainty I was pointing out that people are looking for just a little bit more clarity around is it August is it October when people are more comfortable.
Hi.
Having these large group meetings, where everybody can be together.
The.
And you said the down 16 was group pace, but not group room nights on the books is that.
Is that a number you can kind of ballpark for us that for 'twenty two.
Yeah.
For group room nights on the books at this point of.
We'll get that to you I don't have anything specifically in front of me I would guess again at this point, it's down a bit more than that.
As again.
You would expect.
In the year for the year.
Exactly.
Got it.
Okay.
In the U S and Canada of room nights are down 16% from 2020 right that the pace, Yeah, right and then revenue.
Okay.
Circle back later, and then maybe just one other clarification.
You're guiding for the.
The gross and net for the year and just kind of looking at it.
The Q1 came in is there anything we should be keeping in mind about gross and net change.
Changes in the next couple of quarters in other words.
Clearly there would have been maybe some construction delays in 2020 debt. So just thinking about is there are other quarters, where were the gross to net will.
Not the kind of consistent with the full year.
That's a good question Robin that again, it's a little hard to forecast quarter to quarter I think what I would say to you is we continue to see some construction delays around the world.
But it's part of the reason, we're so encouraged by the first quarter's volume of conversion activity conversions will have been and will continue to be a significant priority for our transaction teams around the world and I think it's in many ways. The one silver bullet we have to offset the <unk>.
Impact of ongoing construction delays.
Okay. Thank you.
Robin just to circle back the.
On the books was the minus 16% of room nights that I gave you.
When we talked earlier in terms of bookings for next year, when we look at.
In the quarter, we also.
There, we're seeing that the room nights are down 30%.
If you again looking solely at what was booked in Q1, but from the group that is on the books for the moment.
For the next year it was the 16% room nights that I described earlier.
Okay and those are both versus 2019.
They are GAAP, we find that to be a better comparison, Oh, yeah, no absolutely I just wanted to make sure. Okay. Great. Thank you. Thank.
Thanks, Rob.
Your next question is from the line of Patrick Scholes with the <unk> Securities.
Hi, good morning, everyone.
We confirm the good morning, one concern that I have been hearing from our hotel owners, including one or more of who told the.
Is regarding the automatic re booking tools.
There. The these owners of Reits are feeling that the brands are doing enough and develop the technology to prevent it and they they see these rebuilt the re.
The resistance to increasing rates is there anything.
Debt you folks on your end can be doing to help with that thank you.
Okay.
So I'll I'll make one comment on I guess.
The first thing is to look at where we did talk about.
Some of our March numbers, which was when you saw that occupancy rebound dramatically you also saw on rate.
Respond extremely well and very dynamically so our revenue management system.
It's designed to be that dynamic and we've spent a lot.
Paid a lot of attention to making sure that we adjusted for a way of happened to business over the last year and a half and so I think from our perspective.
We're very pleased with what we see in terms of rate discipline. The group numbers that we talked to you about what we've seen on the special corporate side, which is debt. This year rates stayed essentially flat. So it is something that we're paying really close attention to and market by market right. This is very much.
That happens depending on exactly what's going on for a particular tier in a particular market.
So we are very careful to be looking to make sure of that as we see the pickup in demand that we're adjusting for rate.
Extremely quickly.
Okay. Thank you.
Your next question is from the line of Stephen Grambling of Goldman Sachs.
Hi, Good morning, I may have missed this in the opening but can you remind us of your capital allocation priorities, including how you might consider reinstating the dividend or buyback and how do you think the pandemic has altered your view longer term on the right balance there.
Sure. So as we've talked about before we are working quickly to get our leverage ratios back in line.
We are still not there we have of ways to go as you think about our EBITDA still being in the ballpark is down 60% two to where it was before and we are determined to through both the spending of cost the.
The cash management as well as obviously stimulating demand to getting back there as quickly as we can.
And we're confident that we're going to get there and hopefully sooner rather than later when we think about capital return I'll also point out debt. We have worked hard to extend our weighted average maturities on our debt over the past year and a half of which I think does put us in good position to.
To be thinking about capital return once we get our leverage ratios back where we want them to be I can't predict exactly when that'll be.
And I think when you ask about the question of.
Will we.
The keeping them at a different level I think a lot of this does depend on how we see business coming back and the stability of it. So we will see when we get there obviously the discussions with our board on that topic and continue to look forward to that conversation, but again on.
I'm confident that we will be there before too long.
Great. Thank you.
Your next question is from the line of David Katz with Jefferies.
Good morning, everyone. Thanks for taking my question.
I wanted to go back to the notion of.
Around.
The perspective of inflation.
Twofold.
One being the degree to which that may play into construction costs and have some impact on.
New construction starting up again.
And secondarily, we have an awful lot of discussions about labor costs across our coverage.
And the degree to which the you know that is a factor.
Factoring into your thoughts today. Thank you.
So I'll start on the hotel margin side, and then Tony can.
Talk about the development side on the hotel margin side.
As you've heard us talk about before so much of how we hold on to these margins depends on how fast the demand comes back because we do believe that there is some work that we've done that will permanently.
Help keep some of this margin improvement, but obviously, depending on how long it takes for demand at the ADR to come back you've obviously got annual wage inflation risks that are.
Start to cut against some of the savings that we've come up with.
So in that.
From that respect we do watch really carefully I would say roughly 50% of of full service cost structure is related to labor and we are.
We're watching that very carefully.
As we see demand come back and look at all of the things that we've done on the on the productivity side, but the pace. There is very much around how quickly demand comes back.
So far from what we can tell we do like what we see in terms of the pop back on rate and feel good about our ability to hold on to some of these state of savings in a more permanent way, but obviously wage inflation is something that.
Of that we see and frankly it has typically been the case that when you have inflation on wages you often also have inflation on ADR.
Which helps to offset that on on the development side I'll turn it over to Tony I mean, I think the point, we need just made is an important one which is the our owner and franchisee community look at both sides of that coin.
We are seeing increases in construction costs, both on the labor and material side, but.
But as you've heard from us in the past, our our owner community doesn't necessarily try to time the market based on cost factors in a given quarter. They tend to be long term holders of these assets.
And to <unk> point, while they are appropriately aware of potential impact of inflation on wage rates. They also embraced the historical impact of inflation on the ADR growth.
Perfect. Thank you very much.
Your next question is from the line of Michael Bellisario of Baird.
Yes.
Good morning, everyone.
Good morning.
I was hoping you could provide some details on Revpar index performance during the quarter I don't think you provided any numbers of then also just bigger picture and seeing all of them.
Further out where do you think system wide index could normalize compared to prepay that debt levels.
Yes.
Both great questions. The challenge obviously is in this environment I'm not sure I've ever seen an environment, where Revpar index numbers are less relevant.
We look anecdotally at the way.
Our hotels are ramping up.
And the preference that our guests continue to have.
For our brands, but as you know we've essentially we've been pleased with the momentum we saw coming into 2020 on the improvements of index and we think when we get beyond the pandemic, we expect to pick up essentially right, where we left off in terms of improvements in index across the portfolio.
Just as a reminder, index has done as you know at the local level. So right now the index numbers can very often have the hotels that is either not open or it's just opened and so well frankly of the numbers may overwhelmingly look really good day. They also.
<unk> frankly are not really a good steady state view of how the hotel is doing because the demand is so volatile.
So at this point, we just we just don't believe that.
Number that is.
Reflective of the the real state of play for our hotels on our brands, but look forward to them getting back that way.
Got it.
Can you provide where 2019 was for the portfolio.
We don't we don't talk about specific numbers, except to tell you that they were going up of steadily across all of the brands and frankly as we moved into 2020 of what we saw in January and February.
Moving into with some really powerful momentum as the full integration of our loyalty program.
And all of the systems, when it's complete and a really strong set of movement across all of the brands around the world on Revpar Index.
Understood. Thank you.
Thank you and your last question will come from the line of Richard Clarke of Bernstein.
Hi, Thanks for taking my question. Good morning, everybody just wanted to follow up on the 6% to 10% ADR of lift you were seeing in group.
Is there anything behind that you caught on in terms of mix is not helping the U S recovering quicker there or different types of group or is this what youre charging of you pay you charging up to this because of some of the new technology of the clean promise instead of being put in the and then maybe any commentary on what you're seeing in terms of rates of the business transient as that comes back.
So maybe I'll take the group question and let Lee take the <unk> question.
Nothing, particularly remarkable I don't think we're seeing any dramatic dip.
The difference in trends from region to region I think as Lee alluded to earlier of the strength of our revenue management infrastructure really is allowing us to drive rate in the face of what is really encouraging upticks in demand for group and that really the <unk>.
<unk> for group is really kind of tracking the overall recovery REIT trends, we've seen by region across leisure and B G.
And on on business transient this again gets to its very market specific.
If somebody frankly needed to go and do business in Miami.
In the month of March or April frankly, they were paying.
The really strong rates, but in many markets. It's more of a reflection of New York city or of Chicago, where.
It was.
Obviously, lower special corporate kind of rates overall, though in terms of our contracted rates with our corporate large corporate clients as you probably know they actually rolled over in 'twenty one from 'twenty. So you see a pretty steady.
Sort of pricing, while if you look at the last recession, they actually went down by 6%.
So we've been pleased to see the them hold steady I think obviously as we get into this fall I will see where that goes for 'twenty two because that's typically when we go out and renegotiate these rates for next year.
But for this year, it's they've they've held pretty steady.
Wonderful thanks very much.
Yes.
Yeah.
And there are no further questions at this time.
Well I want to thank you all again for joining US This morning, and your continued interest in Marriott as we said at the outset, we continue to be encouraged that the pace of recovery around the world and look forward to hopefully sharing more good news of quarter from now.
Thank you.
Thank you. This does conclude today's conference call you may now disconnect.
Okay.
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