Q1 2022 Marriott International Inc Earnings Call
Okay.
Yes.
Good day, everyone and welcome to today's Marriott International's first quarter 2022 earnings.
At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session. You may registered to ask a question at any time by pressing star one on your Touchtone phone you may withdraw yourself from the queue by pressing the pound key. Please note that this call may be recorded and I will be standing by if you.
Need any assistance.
It is now my pleasure to turn the conference over to <unk>, Oberg, Chief Financial Officer, and Executive Vice President of business operations.
Thank you operator before we begin I wanted to take a moment to remember a lot of power.
Trusted and valued friend and colleague to many of US on this call.
As most of you know Laura tragically passed away after a car accident a few weeks ago.
Laura was smart helpful.
And unfailingly honest to all who knew her.
Mr Incredible spirit and are committed to honor her legacy Marriott, where his family was her greatest achievement and we're holding them in our thoughts and prayers and now I'll turn the call over to Jacky.
Thank you Ronnie and good morning, everyone and welcome to Marriott first quarter 2022 earnings call on the call with me today are Tony Capuano, Our Chief Executive Officer, Nino Berg, Our Chief Financial Officer, and Executive Vice President business operations, and Betsy Dahm, Vice President of Investor Relations.
I will 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 future results to differ materially from those expressed in or implied by our comments.
<unk> in our comments in 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 average daily rate comments reflect system wide constant currency results for comparable hotels and include hotels temporarily closed.
The COVID-19.
Part of occupancy and ADR comparisons between 2022, and 2019 reflect properties that are defined as comparable as of March 31, 2022, even if they were not open and operating for the full year 2019, where they did not meet all the other criteria for comparable in 2019.
Additionally, unless otherwise stated all comparisons to pre pandemic or 2019 are comparing the same time period in each year you 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 and thank you all for joining us this morning.
Global demand rebounded strongly in swiftly during the first quarter. After a brief omicron related slowdown early in the year in.
In March worldwide Revpar was just 9% below 2019.
Occupancy rose to 64% with ADR, an impressive 5% above March of 2019.
COVID-19 is still impacting our business to varying degrees around the world, but as global vaccination rates increase tastes counts decline and new Covid variance are tending to be less severe many countries have started to cautiously adopt a wave with COVID-19 policy, leading to a rise in demand for all types of <unk>.
Travel.
Leisure demand, which had already fully recovered during 2021 has further strengthened this year with first quarter global leisure transient room nights more than 10% above 2019.
Recovery of business transient and group demand is still lagging leisure, but it is greater numbers of employees returned to the office demand has been rapidly improving Additionally.
Additionally day of the week trends continue to show their trips that blend leisure and business are on the rise in March in the U S and Canada, while Monday through Wednesday occupancy was down in the mid teens occupancy during the shoulder days Thursday, and Sunday was down in the single digits and occupancy on for.
Todays in Saturday's was nearly in line with March of 2019.
While still below pre pandemic room nights cross border travel demand is growing slowly as more countries around the world reopen their borders and lift travel restrictions cross border gas accounted for 14% of global room nights in the first quarter, a gain of around 100 basis points compared to.
A quarter ago, but well below the 2019 share of 19%.
In the U S and Canada March Revpar was within 4% of 2019.
You can see top 68% during the month and ADR accelerated to 6% over pre pandemic levels.
While the extent of Revpar recovery still varies widely from city to city overall progress during the quarter was widespread across all chain scales as well as market types that is primary secondary and tertiary markets Revpar recovery saw meaningful improvement in March versus the fourth quarter.
Luxury was the standout in the quarter with ADR, a remarkable 27% above pre pandemic rates.
Group demand in the U S and Canada accelerated sharply during the first quarter in March group Revpar was 16% below 2019 compared to down more than 30% in the fourth quarter of last year.
Growth in new bookings has contributed to a meaningful improvement in group pace for the remainder of the year as of March 31.
Group revenue pace for the remainder of 2022 was down in the high single digit range compared to 2019.
We also expect additional short term bookings to further boost or excuse me boost group revenues April was the eight months in a row, where in the year for the year group bookings exceeded 2019 levels importantly.
Importantly, our sales teams remain focused on driving ADR, which has continued to rise for new bookings.
For managed hotel bookings made in January was 3% above 2019 levels, while ADR for bookings made in March had risen to 12% above pre pandemic levels.
Business transient demand in the U S. Also gained momentum during the quarter recovery in March improved, notably compared to the fourth quarter with business transient room nights down 10% to 15%.
Special corporate accounts, which tend to be larger companies have recovered more slowly than smaller sized businesses, which have now fully recovered.
Special corporate new bookings strengthened in March and further advanced in April .
Internationally, all regions, except for greater China experienced additional revpar recovery in March compared to the fourth quarter recovery.
In the Middle East and Africa, where borders have been opened since late last year first quarter performance was stellar with Revpar, surpassing 2019 for the second quarter in a row.
This was led by strength in the UAE from the World Expo in Dubai that ran from October of 2021 through March of this year at.
At the other end of the spectrum in greater China, where restrictions have been the most severe revpar dropped significantly with the lockdown of several major cities, including Shanghai late in the court.
We are keeping a close eye on trends in Europe , but outside of Russia. The war in Ukraine has not yet impacted demand cancellations have been minimal and it's all countries in the region have removed or reduced travel restrictions bookings across the rest of Europe have accelerated for spring and the summer high season.
In Russia, we've closed our corporate offices and paused all future Hotel development and New hotel openings. There are currently 23 properties opened in the country. No Occupancies are modest we continue to evaluate our operations in Russia, which represented well under 1% of our global fees in 2019.
Yeah.
We are watching the horrific humanitarian crisis in Ukraine, and neighboring countries with deep concern and we're doing what we can to help those impacted in the region I'm very proud of our teams that have been mobilizing to help those in need in numerous ways, including working with relief partners and housing refugees Marriott properties in ne.
<unk> countries.
The power of Marriott's envoy was again evident in the quarter as we remained focused on strengthening our loyalty platform for our 164 million members of course member engagement has risen as travel demand comes back but there has also been a significant increase in members, earning and using points outside of <unk>.
Hotels are bond <unk> members are interacting with us more through everyday spending thanks to our collaborations with companies like Uber. We've also seen incredible global interest in an engagement with our bond void co brand cards with new card acquisitions and card spend both up meaningfully year over year.
The first quarter also marked our best quarter ever for direct digital bookings, which helped drive owner and franchisee profitability.
Digital bookings were up 14% compared to the first quarter of 2019, partially driven by meaningfully higher downloads of our redesign redesign envoy app, which were 70% above pre pandemic levels.
Turning to development the number of deals presented at our monthly development Committee meetings has continued to increase we signed 124 deals globally through March of this year, a new first quarter record.
Conversion activity remains a bright spot given the breath of our roster of conversion friendly brands across chain scales, and the meaningful top and bottom bottom line benefits associated with being part of our system.
Conversions accounted for 22% of room additions in the quarter.
Despite construction timelines, having lengthened a bit so far this year due to supply chain disruptions and labor shortages, we expect openings to ramp up each quarter in 2022 average.
Construction timelines are currently just over two years for limited service properties and remain longer for full service properties.
Looking ahead, we still expect full year gross room's growth to approach, 5% and deletions of one to one 5% leading to anticipated net rooms growth of 3.5% to 4%.
While signing activity has been picking up nicely 2022 gross room additions are expected to be impacted by the diminished construction starts the industry has experienced throughout the pandemic, particularly here in the U S with financing starting to ease a bit the industry has seen a notable ramp up in new construction starts.
In the first quarter, but they are still well below 2019 levels. However, we remain confident that over the next several years, we will return to our pre pandemic mid single digit net rooms growth rate given the improving global environment, the attractiveness of our brands.
Our strong development activity, our momentum around conversions and the largest pipeline in the industry.
In closing I feel extremely optimistic about our future.
With our unparalleled portfolio of 30 global brands and over 8000 properties worldwide are invaluable marriott's envoy loyalty program, our numerous growth opportunities and the best associates in the business I believe Marriott is uniquely positioned to benefit from the continued recovery ahead I will now turn the call over to Lee.
To discuss our financial results in more detail.
Thank you Tony our first quarter results came in ahead of our expectations with global Revpar down 19% compared to 2019 gross fee revenues totaled $815 million in the quarter almost doubling from a year ago, driven overwhelmingly by higher revpar, our non revpar related franchise fees once.
Again showed meaningful growth totaling $170 million in the first quarter up 21% year over year, primarily due to significantly higher year over year credit card fees.
Incentive management fees or IMF are rebounding nicely and reached $102 million in the quarter.
They comprise 13% of total gross fees and acceleration from 7% in a year ago quarter driven in part by strong performance at our U S and Canada hotels.
Over 55% of our IMS were earned at our industry, leading luxury properties.
From our comp luxury hotels were 10% above the first quarter of 2019, while IMS from a comp luxury resorts were up more than 60% over the same timeframe roughly 60% of Imf's work earned at our international properties during the quarter.
Our owned and leased portfolio again generated positive profits totaling $44 million in the quarter due to international government subsidies and improved results at hotels in the U S. The Caribbean and Latin America and Europe .
G&A and other expense totaled $208 million in the first quarter due to timing and lower travel costs as a result of the omicron variant.
Adjusted EBITDA totaled $759 million down only 8% compared to the first quarter of 2019.
We remain focused on working closely with our owners and franchisees to deliver superior customer service, while also containing operating costs. Our U S managed hotels profit margins were nearly back to 2019 levels in the first quarter, despite revpar down 16% compared to 2000.
19.
All industry staffing challenges persist primarily uncertain U S market, we've made great progress since last summer in successfully hiring for open positions.
As always we're keeping a close eye on wage and benefit inflation, but we are optimistic that our cost reduction efforts could mitigate inflation in future years.
As we look ahead to the rest of 2022, we're very pleased with the positive momentum in demand, we're seeing across customer segments and the vast majority of markets around the world with the recent widespread easing of travel restrictions in many regions employees returning to the office in greater numbers increasingly pause.
Ziv travel sentiment and our team's focus on ADR, we're even more optimistic than we were a quarter ago that we'll see meaningful additional global Revpar recovery. This year, assuming no major change in the global economic environment or the behavior of the virus.
There's still too much volatility given uncertainty around travel restrictions in countries like China, and a high reliance on cross border guests across our international markets to give global Revpar or specific earnings guidance, but we do have more visibility in our largest market the U S and Canada, which is <unk>.
Almost entirely dependent on domestic travelers.
In the U S and Canada.
You can see in ADR continued to improve in April and we estimate that revpar fully recover into 2019 levels for the month were extremely pleased to reach this milestone in roughly two years after the pandemic began.
While demand still varies considerably across hotel types and markets given current booking an ADR trends, we expect revpar in the U S and Canada to be roughly flat to 2019 and the remaining quarters of 2022.
Internationally, we expect continued revpar recovery across markets that have not yet fully recovered.
The progress will vary widely across regions.
To further help with your modeling let me share some additional color.
Current revpar levels, we still expect the sensitivity of a 1% change in full year 2020 to revpar versus full year 2021 could be around $25 million to $30 million of fees.
We've seen the relationship is not linear given the variability of IMF and the inclusion of non revpar related franchise fees.
For the full year interest expense net is still anticipated to be roughly $350 million and our core tax rate is now expected to be around 24% and.
G&A and other expenses are still anticipated to be 860 to 880 million well below 2019.
We still anticipate full year investment spending of $600 million to $700 million, which includes roughly $250 million for maintenance capital and our new headquarters.
We can now see loyalty UBS slight use of cash for the full year before factoring in the reduced payments received from the credit card companies with a meaningful pickup in demand we've seen an increase in redemption activity and expect this trend to persist.
We've made meaningful progress in driving cash flow managing expenses and improving our credit profile.
Given that progress as well as the strength of our business and our confidence in our outlook improving further we're very pleased to be resuming capital returns to shareholders sooner than we had anticipated with leverage close to our target ratio of between three and three five times adjusted net debt to adjusted EBITDAR.
We are resuming our dividend at <unk> 30, a share in the second quarter. The first dividend in two years, we remain committed to our investment grade ratings investing in growth that increases shareholder value and then returning excess capital to shareholders through a combination of a modest cash dividend and share repurchases.
Assuming the global demand environment continues to improve and that we are within our target leverage ratio range, we expect to resume share repurchases. This year.
Our business model has demonstrated terrific resilience and I want to thank our teams all over the world for helping us navigate the challenges over the past two years.
It's thrilling to see so many hotels full of gas again, and we're very optimistic about the future of travel and the future of Marriott International Tony and I are now happy to take your questions operator.
Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone.
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Yeah.
Thank you our first question will come from Stephen Grambling with Goldman Sachs.
Hey, good morning, I just wanted to say.
My condolences to everyone on the line as well as Echo your thoughts really.
On Lora.
Thank you to Dave strengthens.
To start things off I guess on the.
The development environment, particularly in China, and its locked down.
Will you be thinking through any impact there as you think about net unit growth or net room growth.
How many conversions or other property is not explicitly in the pipeline impact conditions for the year.
Great question I'll answer it a few ways.
As you know many of the development projects that we entertain in greater China come to us when they are well under construction and so one of the metrics we use to evaluate growth pace is intake of mou's or LOI.
And we've seen pretty steady pace of Mou intake, even during the impact of the zero Covid policy across China.
We have seen some construction interruption as we've seen here in the U S.
But for the first time, we're starting to see.
Some real traction on the conversion side, which has not historically been particularly active source of rooms growth across greater China.
That's helpful and then maybe one follow up.
The guidance and some of the comments that you made lately.
What are the guardrails that we should be thinking about as it relates to credit card fees and the trajectory there as well as any concrete impact to working capital given the confluence of.
Earning and burning points versus the point pull forward. Thank you.
Sure. So I think generally as we've talked about the credit cards.
It's been a tremendously resilient and steady force in our fees over the past few years and as you probably heard US say, we actually saw credit card fees in Q1 dollars 22 up 26% compared.
Compared to 19 so.
They really and obviously up a whole lot over last year as well. So it's a combination of two things Stephen one is that we continue to see overall credit card spend increase and then our new card acquisition growth has also been impressive. So I think as you continue to see that.
Moving forward that's a strength the other thing is obviously, we are a card that.
Tends to be bothered by.
People, who love to travel and so there again as you see people returning to travel I think Thats also a great incentive with all the bonds points that they earn so I think you'll continue to see that be a strong force in the growth in Rfps. This year and as you think about the cash flow.
Two two points that I'd make on working capital one is that generally speaking as you remember we are a negative working capital business overall and as the company a REIT.
<unk> continues I think that trend will continue to show itself from the standpoint that our fees get paid so quickly.
It is not always the case that our payables have to be paid quite as quickly. So that will continue to help us on the working capital side and as you pointed out our loyalty we have.
From where we thought it was a slight source of cash to a slight use of cash as a result of higher redemption. You know I think you should expect as the year moves on that that.
We will continue but that is our current forecast for the year that ties into these revpar.
Numbers that we've talked about in the U S.
Got it thanks, so much.
Okay.
Thank you. Our next question will come from Shaun Kelley with Bank of America.
Hi, Good morning, everyone and I'd also like to extend my thoughts and prayers for for Lora.
Thank you Sean Thank you.
Sue.
Tony on <unk>, just as we look at the outlook provided and appreciate.
We're still there's still enough volatility out there.
Want to extend yourself too far yet, but if we think about some of your comments around the U S. Could you maybe just help us think through your puts and takes around sort of that outlook for flat for the relative to 2019 levels for the remainder of the year.
Why not.
What would be holding you back from maybe seeing a bit more improvement as the year goes on and we see group and business travel still in is there some give back over the summer as it might relate to luxury and mix or is there just some conservatism in that outlook.
I think there is a bit of conservative ism in that outlook, but that conservatism is is driven by what.
What we've seen in terms of the booking windows. So we have much less visibility into Q3 and Q4.
Because the booking windows windows have been shortened shortening generally.
And then the trend towards shorter.
Shorter group bookings is even more acute and so we've shared with you the <unk>.
<unk> strength in leisure, we've talked to you a bit about the fact that we.
We saw a really strong group numbers at the end of the first quarter, we're feeling good about the last three quarters, but again.
We're dealing with quite short booking windows and the same is true with business transient I think it's that that murky nests of visibility in the back half of the year, that's causing us not to be more bullish in terms of forecasting.
Yes, Sean just to add one point to that Q2, obviously, there is a meaningful improvement in revpar, obviously to get to this roughly flat.
Kind of guidance that we've given and to Tony's point its really when you start looking further out that while we have seen tremendous in the quarter for the quarter in the year for the year group bookings were really giving you what we see today.
So from that standpoint.
The variability that we've seen we would agree that hopefully that.
Add some positivity as we move through the year, but we're really talking about what we see today and maybe just to illustrate that even a little further Shaun we look at the group activity in the U S and Canada in April April was the eighth straight month, where in the year for the year bookings were ahead of where we were in 19, so great news for.
Our business, but creates a bit more challenges into looking into Q3 and Q4.
Understood and then just my follow up could you just give a little bit more color on the large corporate activity you did give some in the prepared remarks and I think you said it improved in April as well, but I think that's an important driver, particularly from areas pretty good some of the larger format and urban hotel. So maybe talk about how much you think that REIT.
By the balance of the end of the year.
Just kind of give us a sense of magnitude of improvement in that channel would be super helpful. Thank you of course, so in the U S and Canada.
Business transient room nights were down as we said in the prepared remarks between 10 and 15% in March.
Obviously, a very meaningful improvement over what we saw in the fourth quarter, where business transient room nights were down about 30% as you might expect the volume coming out of small and medium sized companies has effectively fully recovered while the demand from larger companies are.
Still has a bit of of Hilda.
Hill to climb to get back to where we were pre pandemic, but we continue to see that improvement just more slowly than what we've seen from the small and medium sized companies.
Thank you very much of course.
Thank you. Our next question will come from Joe Greff with J P. Morgan.
Good morning, guys I too would like to extend my condolences.
Laura was a very special person she'll be missed.
Good morning, Joe.
Sure Tony.
How much.
Or if any of new development signings.
Is related to developers.
Maybe it's not the right way to describe it but pulling forward project in front of.
And it's hitting higher development and financing costs for new projects.
Not sure I understand exactly your question, but let me give it a shot.
As we've talked about in the past, our developer and owner and franchisee community. They tend to be long term investors in the sector. They.
They don't as a general rule try to time construction starts or opening.
In a given month or a given quarter based on what they're seeing I do think as we talked about last quarter.
The availability of debt financing has likely been the single biggest impediment to an acceleration of new construction, particularly in the U S and Canada and is that a flow of debt capital starts to free up a little bit. That's why I think we're seeing a parallel increase in construction.
<unk> starts it could actually.
<unk> be some pent up demand.
Because they're starting to believe based on the statistics that the recovery really has momentum and it's inspiring a bit more confidence in that development community to start putting shovels in the ground.
Great.
Helpful way of answering that question and then Lee I know youre not going to talk about.
The non revpar Steve's within that franchise and other fee line.
When you look at the composition of that line I mean at 34% of the.
This quarter's franchise and other fees relates to the non revpar fees, a similar percentage in the fourth quarter when.
When you think about it when you are coming out of this year going into next year. How do you look at that percentage or how do you kind of look at the trajectory of credit card fees and then on franchisees there.
Yeah, you know obviously, it's too soon to be talking about how we're really looking at credit card spend for 2023.
But I think one thing to remember is that the residential is lumpy.
So just as a reminder, last year for example, we had $67 million in fees in 2021 for a residential and the year before that it was well under half of that so just remember that.
Terrific Lees strong business for us and we love what we see in terms of signings and performance, but it is based on the pace of those sales of those residences and so it does vary up and down.
But I'll put on the credit card part, which is as you know.
Well over half of the total number of for example, a 107 to eight.
In the first quarter I think steady as she goes I'm not willing to give a particular growth percentage, but I think it is really those the combination of our strength of.
The consumer so we're assuming that there's not a big change in the macroeconomic picture and then number two is the connection to the envoy and to our overall system.
And I think that that.
Has definitely been part of what Youre seeing in the growth just to remind you where we were pre COVID-19.
Is that the credit card growth was in the high single digits pre Covid now obviously, we've seen better numbers than that is we're as we're coming out of it.
Thank you Beth.
Thanks, Jeff.
Thank you. Our next question will come from Patrick Scholes with Trust Securities.
Good morning.
Hi, good morning.
I'm also reiterate that muscle.
Sorry to hear about Lora.
So very tragic for them she will.
Pretty much.
Thank you. Thank you.
I have two questions. The first one is when you talk about your forecast for development growth three 5% to 4%.
What those percentages are.
By a global region, specifically, China, Europe et cetera, as North America.
Yeah I'll have.
Jackie and Betsy give you the specific statistics, what I can tell you is.
Several quarters ago.
The composition of the pipeline pivoted towards a higher percentage of international.
We're in the low 60% of the total pipeline is outside the U S.
And in terms of the relative pace of growth international versus domestic.
See international growing roughly twice as rapidly as as our domestic rooms growth. The other thing just when you look at the pipeline, which is one of the kind of interest way interesting ways to look at it Asia Pacific is basically roughly double the existing penetration of a 17% split.
Fairly evenly between China and APAC.
And then I would say for a camera in Europe . The pipeline is fairly similar relative to current proportions of the existing.
Portfolio, though I will remind you we had a very large conversion deal in <unk> last year, where they the conversions entered the pipeline quickly and then and then actually I hope so so it can vary.
The other kind of disproportionate pipeline area is middle East Africa, where it's currently about 4% of our rooms, but it's about 9% of our pipeline.
And then obviously in the U S. As we've talked about before it's a bit lower relative to our existing makeup because of the strength in international and Thats a great point on middle East linear in fact, if you look back pre pandemic.
Middle East rooms grew at about six 5%.
Last year, they grew closer to 8% and this year they could grow in the mid teens.
Okay.
Good color. Thank you and then my follow up question you had talked earlier in the prepared remarks, I believe about upticks in loyalty redemption in <unk>, perhaps April or how should we think about you.
You know what.
As a quantify it as a sort of a percentage of seize up.
What is loyalty redemption is as a percentage of Ts.
So the best way to think about it I think is in terms of nights and redemption nights or in the ballpark of 5% to 6%.
Of our total overall nights. So just when you when you think about that now that obviously can be.
Someone going to see somebody where.
It's at a hotel that is not very full and so then the redemption rate that is paid to that hotel is actually lower than revpar or it can be at a high redemption hotel.
Where it is obviously more like typical average daily rate, but I think overall the best way to think about it is roughly 5% of total rent.
Okay.
We shared the detail thank you.
Q.
Thank you. Our next question will come from Smedes Rose with Citi.
Hi, Thanks.
Like everyone else on the call I, just want to say I'm, sorry, what did you hear about lora.
Thank you.
I really wanted to just ask you a little bit more about what you're seeing.
Seeing and hearing from owners around wage pressure.
And so where that stands.
And then any sort of let up in that and then just Tony in general because I'm sure you know the.
Risk or there's fears around recession has been heightened significantly its effect is tightening.
Just wondering if you have any kind of feedback from the <unk>.
Corporates or whomever that you're speaking with around.
Heightened concerns on that front.
So I'll start on the on the wage pressures and then.
We'll kind of tag team as we go through that Smedes.
There's no doubt if you if you remember in the U S.
For us.
Average hourly salary from January 21 to December of 'twenty, one was about a 10% increase so I mean, there is no doubt that in certain markets.
Certain hotels places that debt to to get the hiring done a really did require some some meaningful work.
And what we are finding now that as.
Frankly, the world returns to a bit more normal pace of everything from availability of child care to the government subsidies winding down to.
Frankly people feeling more comfortable about being in the workplace that we have had an easier time getting positions filled and we're basically back to.
Our position of being relatively consistent with pre pandemic levels of open positions and I'm really talking about the U S. Here.
No I think certainly as you've described we do expect to continue to have strong pressures on the wage and benefit front, we've worked incredibly hard on scheduling and productivity measures too.
Make sure that we're managing that hotel is the best way, we can with also providing great service to.
The guests and so right now we've been thrilled to see that even with Revpar as our managed hotels.
That revpar is meaningfully down compared to <unk> 19 that are managed margins are similar.
And we do expect to continue to see gains in occupancy as we move forward, which will be helpful.
So we will keep some of this productivity gains.
Maybe 200 basis points ish around the world to help us offset inflation, but we.
And we're really glad that we repriced our rooms every night in terms of ADR, because theres no doubt that that's been a big help in managing these margins and all of the recession front I guess I would point out two things number one.
Even though we saw a pretty pretty tough GDP number.
Come out recently I think that the.
The factors behind it really point to actually a pretty strong economy.
<unk> got really strong job additions in the U S. You've got generally two jobs available for every person that's looking for a job you have seen a greater participation rates and in chunks of the population you've also seen that <unk>.
Consumer spending continues to be really strong and while the export markets for us where we're a tough I think in many respects because of Covid and other parts of the world.
We're really I think there's good reason to think that the.
The U S economy will continue to March along now.
As we see what the fed could do that obviously could.
Could have a slowing impact, but we think there is still pent up demand and we believe that will continue to see strong demand for our hotels.
And then I think you said the second part of your question was really around big multinationals and.
Attitude to attitude in a way how theyre thinking about travel going forward.
I'll speak both anecdotally and then statistically whether it's meeting with big multinationals here domestically I was in Europe last week and met with about 30.
Travel managers for multinationals across Europe .
A bit of a tug of war right now I think between a.
Managing travel cost and and being mindful of carbon footprint and that's being pulled by the absolute desire to collaborate.
Collaborate with colleagues meet with customers.
Immerse newest employees into corporate cultures, and the statistics, particularly that.
Improvement to down 10% to 15% in business transient, which suggests that that appetite for the benefits of in person interaction or are starting to win that tug of war of it.
Just one other data point that I think you'll find interesting is that in Q1. The average group size for all new group bookings.
It's actually up relative.
Q1, 2019, and one of the main factors is the length of stay and length of stay is up 26% compared to 2019, so to Tony's point I think.
There is a.
A strong.
Compelling view that people being together to collaborate and to.
Kind of have these meetings and be traveling seeing your customers is still an important component of their business.
Okay. Thank you I appreciate it of course.
Thank you. Our next question will come from Richard Clarke with Bernstein.
Yeah.
Good morning.
I would like to share my condolences to yourself and also to endorse a family as well as for the events are very sad to hear about that.
In terms of first question just wanted to answer the all see this sort of.
U S. North America guidance question, a slightly different way is there anything particular in April that pushed April performance sort of disproportionately higher like the the timing of of of Easter Passover or anything that pushed that higher and how would you think about the rest of the shape of Q2, where you say you've got a reasonable amount of visibility.
Coming out of April .
Yeah, nothing, particularly particular in terms of the calendar.
Not yet we didn't see any particular impact from the timing of Easter.
I think our view is generally it's just continued.
Pace of demand recovery acceleration.
Okay.
Okay. That's that's helpful. And then I just noticed in the release you mentioned the $33 million of Oh of government support that you received in the quarter.
Just any color on where is where is that written sports still being received and can we expect more of that to come through the rest of the year.
Thank you very much now I think this is Scott at the tail end of some of the government subsidies. These were specifically in Europe and similar to.
Some other places that we've seen during COVID-19 it required immense amounts of data submission.
Applications put in that than needed some time to be processed by the various governments.
So these are all related to 2020 one.
The sorts of expenses on the parts of that.
The hotels because much of this relates to our owned lease portfolio.
The support of the associates there that then the government supported so are we.
Remember that we had about 18 million of these subsidies in 2021 then.
And then we have $33 million that we've talked about here today and I would not expect additional subsidies going forward.
Okay. Thank you very much.
Okay.
Thank you. Our next question will come from David Katz with Jefferies.
Hi, good morning, everyone.
I like to share my condolences for literally everyone's loss.
Thanks, David.
Believe me I wanted to just start with our capital returns perspective.
I think when we sat down to model you know for the last quarter I guess it was early March.
We weren't really you werent really having us put much in this year.
We are how could we sort of think about that the dividend rolling through this year and potentially its ability to grow.
More importantly, the stock buybacks, what you're kind of looking for what you know what.
Data points et cetera, because we obviously can't wait for you to tell us we have to sort of circling around.
Yeah, no absolutely I had a couple of things.
As a reminder.
This is a fairly similar pattern to how we did it coming out of the great recession, which is to give ourselves.
Time to see how the recovery is moving forward. So assuming that we continue to see the strength that we are seeing is that our bookings are showing I would expect that we will obviously continue the dividend and fairly in fairly short order and get it back.
Two the kind of payout levels that we had.
Prior to the pandemic.
Share repurchases, obviously, they're much more flexible part of our capital return strategy and so there we've got some gatekeepers, we really want to absolutely feel comfortable about.
The positioning at our three to three five times adjusted net debt to adjusted EBITDAR range, that's an important.
Part and as I talked about in my comments, where we're very close to that and we will with the kind of cash generation that our business model has we will get there.
Quickly, but we do want to be squarely in that range.
We are comfortable that with possible volatility that we are in good shape to stay there. So I think you will see.
See as as we've talked about that assuming things continue as they are I would expect that you will see both.
The dividend continue as well as the share repurchase the timing of when we may have a dividend increase David is really all around.
The pace of acceleration, whether this pace of acceleration continues whether it's different I, just think we need a little bit more time to feel comfortable because the one thing you know once we raised that dividend we want to make sure that we're comfortable to keep it there.
We're very comfortable with the 30 <unk>.
And we'll be looking at it literally every single month as we move forward.
Understood I appreciate it if I can follow up just quickly on another direction.
We've clearly seen a.
And acceleration.
Business travel and group and one that's expected to keep accelerating it.
Can you share some data points.
What youre seeing in terms of midweek and where it is relative to weekend I assume that <unk> group or more of a mid week question rather than the weekend some of that would be helpful as well.
Sure absolutely, so interestingly Fridays and Saturdays.
We definitely were seeing in March that they were right around pre pandemic levels. The shoulder days of Thursday, and Sunday were down a bit mid single digits compared to 2009.
19, Monday through Wednesday, they were down more in the mid teens so.
That's where you're classically you can see what Tony talked about earlier is that some of the special corporate negotiated business you would classically think or that Monday through Wednesday night stay.
Probably the last.
To come back in terms of the comparison to 2019.
But but again improving nicely as we moved from January to February to March.
And then I think given that given that pattern. David you also see it manifest itself a little bit in terms of rate.
ADR on the weekends was about 4% higher than it was on week days in the quarter.
Perfect. Thanks, a lot of course.
Thank you. Our next question will come from Chad Beynon with Macquarie Group.
Hi, Good morning, good morning, thoughts and prayers from myself for Lawrence friends and families as well.
Wanted to maybe ask kind of a pretty pointed question on IMF Sweeney I know you've given us some sensitivity just around the model, but as we think about the recovery for IMF, particularly domestically.
Is there a level of growth of Revpar growth, we need to see versus pre pandemic levels to get that domestic IMF level kind of back to where it was.
Kind of factoring in for real expenses that we've seen for the past couple of years and any capex investments from your partners. Thanks, Yeah sure. So so two things I would say a couple of facts for you just to give you perspective I think again, we were really pleased with the IMF in Q1.
We're again, roughly 40% coming from the U S and Canada and frankly, that's only down so call that 40 million, that's only down from the high <unk> in 2019, while.
While Revpar is obviously still down in the mid teens for those hotels in the U S. So it really impressive performance in Q1 of 2019, 56% of the U S. Hotels are paid in IMF, while in Q2 Q1. This year, we're at 12% so to your point.
There is a way to go and it obviously is.
They are much stronger in the luxury and resort hotels, it's it's a step function, where so many hotels have this.
<unk> jumped from an owner's priority in the U S to then where they actually earn that theres not I can't point to one particular kind.
Kind of demarcation point that I'll tell you that we can we can jump in the international it is much more.
Aligned with what happens with base fees, because as you know there with every dollar of profit we get a percentage with.
Without an owner's priority and many of the hotels so in the U S.
Obviously, the big weakness right now is still on the occupancy side and that will help us, particularly in the large cities as we continue to see gains in the premium hotels in the big cities, but there's unfortunately, not one particular play.
Place that says if we get to ADR of whatever it is or revpar that that's going to come.
Glen Chick, but again one of the points that.
I made during my comments, we're really pleased to see the margins being similar to 2019 levels and and we're hopeful that that will continue for the rest of the year that we're able to to hold onto this kind of margin performance.
For the full year for these managed full service hotels in the U S and that will obviously.
Get us more IMF. If you remember you can only recognize IMF as you look at your full year forecast. So that's one of the other things as we continue to move through the year, we'll have more visibility about the full year forecast for these hotels, which will also be helpful.
Okay, great. Thanks, and then just a high level on the <unk>.
Right.
The growing consumer demand in premium and luxury properties in resort areas in the past couple of years, you've made inroads I guess from a same store basis with al again with homes and villas.
Thank you kind of have the REIT offerings or are there more opportunities for you organically or inorganically to expand in these markets, Yes, yes, and yes is the short answer I think Chad.
Chad.
Even pre pandemic, whether it be because of of what we were hearing from our customers. What we thought would act as an accelerant to the appeal of envoy platform. We have been very focused on continuing to accelerate the growth of our resort portfolio.
Similarly, we saw both from a development perspective, and a guest perspective tremendous appetite for all inclusive experiences in certain markets and whole home rentals for certain trip types. I think you will continue to see us look at organic growth in all of those areas NSS has is at.
As has always been the case continue to look at portfolio deals like what we did with Sun wing last year in the all inclusive space.
Thanks, Anthony appreciate it my pleasure.
Thank you. Our next question will come from Robin Farley with UBS.
Great. Thank you, let me add my condolences on the on the terrible loss of Laura Thank you Robyn.
Sure.
My two questions. One is I know you gave great color on group accelerating.
For the year I don't know if I, if you setup, where 2023 is booked relative to pre pandemic just kind of wondering if the kind.
And a further out group demand is coming back maybe with a little more certainty than the than the closer in and then also I just wanted to make sure I understood. Your comment about how is the loyalty program.
Impacting your Revpar guidance I, just wanted to make sure I understood that.
Great I'll take the first one robin so as we talked about 2022, we talked about the first quarter being down about 30, the remaining three quarters being down.
High single digits, which gives us confidence that.
We will end up down 15 ish for 'twenty, two although that could improve meaningfully given.
The short term bookings are short term booking window that we've seen as.
As we look into 'twenty three looking at what's on the books today, we're down about 15.
Percent relative to 19.
But take my comment about booking window, we think there is massive opportunity to close that gap between now and the beginning of 'twenty three and Robyn it's worth noting that the rate for 2003 has improved relative to a quarter ago.
When we look at the rates on the group pace for 'twenty, three and as Tony said, we would continue to expect to see in.
In the year for the year bookings when we talked to you last quarter Robin about group 2023, ADR was pacing up about 4%.
As we sit here today, we are up about six 5%.
And on your question about loyalty no no meaningful impact so loyalty redemptions have been about 5% of our room nights.
Pre pandemic and are now.
So.
They kind of fit in with the overall scheme of how the hotels are doing depending on what market what tier they are so no.
Particular impact that's any different from when we normally look at our at our Revpar performance.
Okay, Alright, that's great. Thank you.
Thanks, Rob.
Thank you. Our next question will come from <unk> with Cleveland Research.
Great. Thanks also want to express my condolences for Lora question.
Profitability, you mentioned managed hotels being back I don't know in the past you have.
Discuss finding a balance between owner profitability and guest expectations and I'm curious, how you think youre doing there year to date, specifically around where you're at with housekeeping and food and beverage and reintroducing those in a manner that's meeting guests' expectations.
So I'll try to answer that qualitatively and leaning may provide a little color in terms of margins I would say, we are making good progress trying to strike that right balance.
We will be.
Landing on our our housekeeping solution on announcing that.
Probably towards the end of the second quarter I think in the markets where demand has recovered most quickly I think we're doing a particularly strong job of striking that right balance in some of the urban markets, where demand has been a bit more slow to recover.
I think we are on the right path, but we still have some work to do in front of us.
Okay.
Great.
And then a second unrelated.
It came up earlier.
The home sharing business.
Travel peer in that space, just printed <unk> results that were on.
Most double their 2019 levels. So just curious how your homes and villas by Marriott business has been informed are performing.
And how you think about the level of investment that you've made in that space and kind of where you go for from here.
Sure. So I think we talked last quarter the <unk>.
Growth of the platform itself in terms of listings has been pretty remarkable pre pandemic, we had two to 3000 listings.
We find ourselves today with about 57000 listings at the end of the first quarter still tiny relative to some of the peers in that space.
But again I think distinguished a bit because the composition of our portfolio is 100%.
Multi bedroom full homes. These are not spare rooms, or couches or anything else. These are full multi bedroom homes.
As you would expect with that sort of exponential growth in the sheer volume of listings, we've seen a very meaningful uptick in the revenue coming through that platform and I'll I'll turn it on the financial side is just a reminder that.
This is extremely small relative to <unk>.
Kind of the overall size of Marriott from a financial standpoint.
Really.
Across the spectrum of both investment as well as profitability.
Profitability and from that perspective, I would expect to see it the same way moving forward. This is been a really important part of our overall ecosystem and you know when we think about 90% of the bookings.
And HDMI or from bond <unk> members.
And that is just great recognition of the the extra strength that it gives our overall system.
But from a from an overall perspective to Maryann I would not expect for you to see it.
Be a meaningful part of our earnings stream.
In the near term.
Okay.
Operator. Thank you. Thank you. It appears we have no further questions at this time I would like to turn the call back over to Tony Capuano for any additional or closing remarks.
Thank you operator first let me. Thank you all for your heartfelt condolences I know how special Laura was to you both as a friend and a colleague.
So thank you for those kind words.
Thanks for your interest and participation today, and we look forward to seeing you on the road in the coming weeks and months have a great day.
Yeah.
Thank you ladies and gentlemen. This concludes today's event you may now disconnect.
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