Q1 2023 Marriott International Inc Earnings Call
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Good day, everyone and welcome to today's first quarter 2023 earnings call. At this time all participants are any listen only mode. Later, you will have an opportunity to ask questions. During the question and answer session. He may registered to ask a question at any time by pressing the star and one on your touch tone phone.
Please note this call maybe recorded and I'll be standing by she need any assistance. It is now my pleasure to turn the program over to senior Vice President of Investor Relations Jackie Burka.
Thank you.
And welcome to Marion's first quarter 2023 earnings call on the call with me today are Tony Capuano, Our President and Chief Executive Officer, Lady over our Chief Financial Officer, and Executive Vice President development, and Betsy Dahm, our 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.
Please also note that unless otherwise stated our revpar occupancy and average daily rate common refund systemwide constant currency results for comparable themselves.
Statements in our comments in the press release, we issued earlier today are effective only today and will not be updated as actual events unfold 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. Thank you Jackie Thank you.
You all for joining us this morning, we announced excellent first quarter results.
Reflecting continued momentum in our business realm.
While the timing of demand recovery is varied across regions, depending on coli policies. It is clear that post pandemic people with a deep appreciation for trial.
As the largest global watching company with properties and 138 countries and territories.
First quarter Global Revpar rose, 34% versus 2022, driven by significant recovery in Asia Pacific and strong growth across the rest of our regions.
Worldwide occupancy reached 65%.
And percentage points higher than a year ago.
Global ADR grew 11% demonstrating our continued focus on driving rate.
While macroeconomic uncertainty persists it has not wavered on travel demand and to do it.
In fact demand continued to rise across all customer segments in the quarter.
Forward bookings are solved so our transient booking window is still short term at around three weeks, so trends could change relatively quickly.
Globally leisure demand and ADR are still incredibly robust following a year, which we should come out already well below pre pandemic levels first quarter transient room nights for the segment increased 12% with ADR rising 8% year over year.
Demand was also very strong and important.
In the Western Canada group revenue for full year 2023 was pacing up 26% to 2022 at the end of the quarter a significant improvement from group pace at the end of last year.
For the second through fourth quarter of this year.
Room nights were pacing up 9% with rate up 7%, leading to revenue is pacing up 16% year over year.
U S and Canada business transient demand saw modest additional recovery in the quarter.
ADR rose meaningfully primarily due to solid special corporate rate increases.
First quarter U S and Canada business transient revenues surpassed 2019 levels for the first time since the pandemic began.
Important cross border travel has continued to rise globally. However, it is still a few hundred basis points below 2019, when guests traveling abroad accounted for.
We are focused on strengthening our marriott bonds, where loyalty platform by continuing to grow our membership base, which reached 182 million members at the end of March and it.
Housing engagement with these valuable customers.
Our co branded credit cards with offerings in nine countries performed well again this quarter.
What card acquisition, shortly 35% year over year, while global card spend increased 16%.
To engage with our customers we are increasingly leveraging our digital platforms, which are highly profitable channels for our owners.
Those digital channels had a record first quarter on a year over year basis mobile App users grew 31%.
Digital room nights rose, 17% and digital revenue has climbed 26%.
Turning to development, we still expect gross room's growth around five 5% this year and net rooms growth of 44, 5%. While we are keeping a close eye on the financing environment as Lee will discuss in her remarks, we do anticipate.
Returning to a mid single digit net rooms growth in the next few years.
We were pleased to close the city Express transaction, just yesterday welcoming roughly 17000 rooms in the Caribbean and Latin American region, where towers into our portfolio.
City Express is an incredible launch pad to jumpstart our entry into the high growth moderately priced mid scale space, we see meaningful opportunity to expand and expand the brand in talent as well as in other locations around the world.
Our industry, leading pipeline stood at approximately 502000 rooms at quarter end was 57% of those rooms in the international markets and about 200000 rooms under construction.
Strong interest in conversions continues including multi unit opportunities.
<unk> represented nearly 30% of signings in the quarter and 25% of openings I will now turn the call over to leading to discuss our financial results in more detail.
Thank you Tony.
First quarter results reflected robust demand growth around the world with all regions and all hotel tiers posting solid performance.
And Canada, Revpar grew 26% year over year occupancy reached 66% up eight percentage points, while ADR rose, 10% versus the year ago quarter.
International Revpar rose a remarkable 63% over the 22 first quarter with ADR rising 16%.
Occupancy reached 64%, an 18 percentage point improvement versus the prior year quarter.
Demand was strong in all international markets with particularly impressive improvement in Asia Pacific After travel restrictions were lifted.
Revpar in greater China was 95% recovered to pre pandemic levels in the quarter and mainland China was more than fully recovered.
All the more notable given that demand in the quarter was overwhelmingly driven by domestic travelers as international Air lift was still less than 20% in 2019 capacity.
The end of March as you will recall around one quarter of room nights in greater China were from international guests pre pandemic.
International flights to and from China are slowly being adding although airlift is only expected to be around 40% of 2019 levels in the second quarter.
Total gross fee revenues totaled $1 1 billion nearly 40% above the prior year quarter with a meaningful rise in incentive management fees or IMS.
I am asked nearly doubled compared to 2022 to 201 million. They also tops. The first quarter of 2019 by 23% with every region, except for greater China, earning more incentive fees than in the 2019 first quarter.
Our non revpar related to franchise fees also grew meaningfully once again totaling 197 million.
Oh, 16% year over year, primarily due to co branded credit card fees rising 18%.
Containing costs remains a focus at both the corporate and hotel level in the U S and Canada margins at our managed hotels rose two percentage points versus the 2022 first quarter and they remain above 2019 margin levels adjust.
Adjusted EBITDA totaled $1 1 billion, a new quarterly record despite the first quarter being the seasonally slowest quarter of the year.
Now, let's talk about our 2023 outlook the full details of which are in our earnings press release.
The better than expected first quarter results and robust global booking trends, we're raising our full year guidance macroeconomic uncertainty is not impacting our short term demand and trends across all customer segments remain strong.
Quarter is expected to benefit from particularly strong year over year growth in international markets, especially in Asia Pacific.
However, there is less than visibility in forecasting the company's financial performance for the second half of the year.
High end of the range reflects relatively steady global economic conditions throughout the remainder of 2023 with continued resilience of travel demand across all customer segments and markets.
The low end of the range reflects a meaningful softening of the global economy in the second half of the year with worldwide Revpar in the last two quarters roughly flat compared to 2022.
For the full year Revpar in the U S and Canada could grow 6% to 9% and international Revpar could grow with 22% to 25% leading to global Revpar rising 10% to 13%.
Total fees for the full year it could rise between 13, and 16% with a non revpar related components, increasing 4% to 7%.
Non revpar fee growth is expected to benefit from higher credit card fees, resulting from growth in average spend and in the number of cardholders.
We still expect G&A expenses of 915 to 935 million, an annual increase of 3% to 5%, but still below 2019 levels.
Full year, adjusted EBITDA could increase between 13, and 18% and adjusted EPS could rise, 19% to 26% above 2022.
Our powerful asset light business model continues to generate a great deal of cash in the first quarter. Our net cash provided by operating activities was around $890 million and we returned over $1 2 billion to shareholders through the end of March.
Capital allocation philosophy has not changed we're committed to our investment grade ratings investing in growth that is accretive to shareholder value, while returning excess capital to shareholders through a combination of a modest cash dividend and share repurchases.
The full year, we still expect 2023 investment spending of $850 million to 1 billion. This includes a 100 million for the just completed acquisition of our city Express brand portfolio as well as higher than typical investment in our customer facing technology, which is overwhelmingly you expect it to be.
Reimbursed over time.
With the increase in our adjusted EBITDA forecast, we now expect to return between three 6 billion and $4 $1 billion to shareholders in 2023.
On the development front, we are sure. Many of you have questions about the banking environment in the U S and in Europe in particular.
Given rapidly rising interest rates the financing environment in these regions has been challenging for some time.
Another element of uncertainty has now been added as some banks wait for more clarity around capital requirements and perhaps additional regulations.
However, while there are challenges with lending, especially for new construction projects deals that have committed financing continue to move forward. Additionally.
Additionally, the number of deals where you think the pipeline is not increasing fallout in the quarter was around one 5% below our historical average of just over 2%.
We're closely monitoring the situation and the regulatory response, but we do expect the tightening and hotel financing to be short term.
As we have seen overtime hotel financing has proven to be quite resilient over the long term.
Hotel loans have been among the better performing sectors of commercial real estate lending of late and hotels continued to post excellent operating results I will now turn the call back over to Tony who has a few more comments before we go to Q&A.
Thanks leaning up before we open up for questions I, just want to pause for a moment and thank our team of associates around the world who continue to do such outstanding work and are a key reason that our year is off to such a strong start. They are remarkable I'm also excited to let you all know that we plan to hold our first analyst day since early two.
<unk> thousand 19 after W South Beach in Miami.
<unk> September 27th will open registration for that event in June and we look forward to seeing you in South Florida.
And sharing a deeper dive on our business with you.
This fall so now many and I are happy to answer your questions.
At this time, if he would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the queue at any time by pressing star into once again that is star. One if you would like to ask a question and we will take our first question from Joe Greff with J P. Morgan Your line is open.
Hi, good morning, guys.
What's the lag.
Good morning, what stood out to US was obviously the AR.
It's a good quarter overall, what stood out to US was the incentive management fee performance in the <unk>.
And the comment you made that it was driven.
Or above 2019 levels, China, just below can you talk about China I M F expectations.
For the balance of this year and how you think about IMF growth relative to base in.
Franchise and other fee growth.
Oh sure. So let me just kind of set the stage a little bit and that is that you you talked about the fact that iron mountain essentially doubled Q1 over Q1, and certainly a huge part of that was driven by Asia Pacific and their great Revpar recovery. So again broadly speaking if you call it.
100 billion and increase and I am out about $30 million to $40 million of that came from Asia Pacific So definitely with a disproportionate increase in revpar relative to the rest of the world. They were a big provider as you know Joe.
Generally our incentive fees in our Asia Pacific do not include an owner's priority. So they tend to be not quite as lumpy.
Lumpy in terms of the way that they return so we would expect as you see incentive fees for the remainder of this year to continue to show.
That characteristic and I guess, the best way to put it is that if we hit.
The high end of our guidance you could expect to see incentive fees globally actually surpass.
The peak levels that we had in 2019 and then the only other thing that I'll point out is that obviously.
Sure.
Managed rooms, which make up about 550000 rooms out of one 5 billion.
Over 75% of them are full service room, so as you see.
The strength in both group and returning business transient and continued leisure demand I think that bodes well for IMS.
And then we need the only thing I might add for Joe's benefits. Since his question was specific to China.
Did you see in the quarter, Joe that mainland China Revpar was fully recovered to 2019 levels, but remember the vast majority of that recovery was domestic Tibet at the end of the quarter only about 20% of the international Air lift in China recovered I think by April liquids rich.
Covered about 40% and so we do expect a stronger and stronger return of international demand in China through the balance of the year.
Great. Thank you that's helpful and then my follow up question.
Thank you for your bedroom prepared remarks on the development front with potential financing challenges or are you guys getting increased requests or do you anticipate increased requests from developers for financial support.
No I think.
We always get a request for financial support and we're happy to consider though I do think Joe at the end of the day. The felt the largest area of the capital stock, particularly in the U S that needs to be filled is the senior alone.
And so from that perspective are that that is not in place, where we typically get requests and so around the edges. I would say there is a bit more of a request for whether they're debt service guarantees or operating profit guarantees and that obviously is for managed properties, but but I.
Would say that broadly speaking the the level of capital that we're putting into deals has not changed meaningfully.
But this really is more about a temporary.
Slowdown in the bank's willingness to get some of these financings over the finish line.
Thank you very much.
We will take our next question from Stephen Grambling with Morgan Stanley . Your line is now open.
Hey, good morning wanted to touch base on the digital our technology investment that you talked about last quarter.
Just want to know a little bit more about how you think that could impact the consumer experience into our employee experience as we think about longer term revenue and our margin implications from.
That investment.
Sure so.
As we think about not only the re platforming of our major systems, but also ongoing investment in our technology infrastructure, we always think about it through the lens of the impact on our associates, our guests and our owners and franchisees I think from an associate.
<unk>, particularly our future workforce, a workforce that has grown up opening an iPhone box with the understanding that there are no instructions and that that technology will be intuitive and the design of our future technology will be similarly intuitive. So we think it will both be at.
Fantasia says we compete for talent, but it will also create capacity for them to more deeply engage with our guests.
For our guests.
Envision both at the property level and at our customer engagement centers, making.
Breadth of information that we have about our guests available to our agents so that they can quickly and seamlessly.
Address whatever questions or concerns or needs that those guests hat and then I think from the owner's perspective.
There are both inherent operating efficiencies from new technologies that should be margin enhancing enhancing excuse me and I also think from a revenue generation perspective today. When you go to M. Dot Com you have the ability to book rooms.
When our new systems rollout, it's a full breadth of products and services that we have to sell our customers food and beverage Spa golf will be available as single clinic, and we think that represents a very meaningful revenue upside.
And Stephen the only thing that I'll add is just a reminder, that this is really a multi year.
Process that we talked about it a quarter ago. When we talk about it again today is that is that I mean, we're thrilled with what we see for the potential with this and that that will impact this year's investment spending, but we expect this will take several years.
That's helpful and perhaps a quick follow up on Joe's question about development and really focus on the pipeline given the strong growth in international markets in China in particular in the pipeline how does that change the visibility as we think about translating to net unit growth from that particular part of the pipeline.
Well I'll make a couple of comments first of all the continued strength in conversion is obviously, great for our visibility into the pipeline they tend to be shorter to actually open they tend to be clearer and exactly what needs to be done to be able to put our flag on them.
And you've seen that we continue to put out really strong numbers on both signings and openings. The other trends that we've noticed over the past couple of years is increasing comfort internationally with conversion said as you think about our soft brands that really started frankly.
In the U S. A with autograph and then have now really expanded as you think about autograph luxury collection tribute and to some extent Delta you really see those spreading more around the world and that obviously gives us better visibility both for the rhythms that aren't.
Gonna open and frankly really helps support the net rooms growth thesis that we have.
And I might just build on that Steve and the we talked a little bit about this last quarter of course, the teams around the world continue to pursue individual assets conversions.
We are just as aggressively looking for portfolio conversions, you might remember that in the middle of last year, we were delighted to announce and eight hotel portfolio conversion in Vietnam that we referred to as fin Earl.
Just last month, we did in Pearl round, two which was seven additional hotels about 2500 rooms.
Three of which are conversions that will open in calendar 2023, So I think that multi unit.
Portfolio conversion strategy is something you should reasonably expect to continue to be a focus area for our teams.
Yeah.
It's helpful context, thanks, so much.
Of course.
Well take our next question from David Katz with Jefferies.
Hi, good morning, and thanks for taking my question.
I was hoping to get just a little hi, good morning, I was hoping to get just a little more color on how we think about the arc or trajectory of non revpar fees relative to the core for you Scott.
You've obviously provided a ton of color on an.
Arguably we have a bit more experience modeling over the long term.
Sure.
I think you heard me talk about the 4% to 7% expectation for 2023, which is obviously a bit different as it relates to fees from Revpar given what we're seeing are in the lodging operations for the year, So I think oh.
Well, mainly as you know the non revpar fees, our co brand credit card fees. Those are the largest chunk and they are gonna tied to both the number of carnival theirs and the level of average spend I think it won't surprise you that as you've seen people start to.
Amount of Covid that we are seeing the average spend on credit card.
The increase this year over year moderate, but I will also say that the number of cardholders is growing very nicely. So I wouldn't say that it is relatively speaking more growth coming from the increased base of cardholders that it is on the actual spend.
But it is a great combination of the two of them. The other thing is on our rugby fees on a redfin branding fees. They are over a kind of three to five year time horizon, they've just been growing beautifully yes, there's great demand for that product to bars are but they are a bit lumpier in terms of when the.
Actual president's is open.
And that I think you should expect to see that it will continue to grow over time, but that it can vary quarter to quarter quite meaningfully given the onetime nature of those fees.
Understood very helpful and if I can ask my follow up just to touch on City Express you get more.
Admitting that I have not stayed in one.
Can you just help us sort of place that within kind of the revpar hierarchy.
Give us a sense.
As to sort of when and how and in what way, we might see that grow into other markets, notably more in the U S.
Yeah of course, so as I've mentioned in the opening remarks on the long list of attributes that excite us about this transaction. It is a great way for the company to enter the mid scale segment, which is not a segment where we have competed previously.
When we have talked in the past about the breadth of our portfolio. We also responded to questions by saying, we love the breadth of that portfolio for the way in which it satisfies the wants and needs of both our guests and our owners and franchisees and mid scale as a tier where we steer demands.
From both of those constituents mid.
Mid scale, obviously is from a revpar perspective, and a rate positioning perspective positioned below brands like fair fields that are in our current architecture.
We think there is an immediate opportunity.
To accelerate the growth of Citi.
City express across the Caribbean and Latin American region.
As we have done with many brands that we've either developed organically or acquired.
We are knee deep in exploring the applicable many of the city express platform and its growth potential in other markets around the world and in fact here in the U S. We're just a few weeks away from announcing a simple modern streamlined newbuild extended stay product. It has a very basic.
Services and amenities for those looking for longer stays at a mid scale price point and you should expect to hear more about that in the coming weeks.
Thank you so much I appreciate it but of course.
We will take our next question from Robin Farley with UBS. Your line is open.
Right It clearly seems to be the driver.
Business transient nights are as kind of a percent change the delta to 2019 level.
Yeah.
So business transient room nights are down about 1%.
<unk> 2019, obviously the rate has a terrific, particularly with the most recent renegotiation of the special corporate rate.
Oh, great. Thank you and I guess my my other follow up question would be any.
You've talked about the strength, you're raising revpar, so clearly you're seeing strong demand.
But when we look at the broader market. The STR data, we see luxury and economy that the two sort of ends.
Both having you know.
On a trailing at this point I think it's seven weeks of trailing six or seven weeks appealing.
Going down year over year for Revpar for those two segments Tonight I realize you're much more focused in the upscale and upper upscale but I wonder if you could just sort of like Oh behind for a moment on.
Whether that's something that you think will start to move into those other segments or how you view, what's happening in those kind of luxury and economy parts of the market. Thanks.
Sure. So obviously, we're very focused on rate and I think that's a gross yield in the results with global Lady ADR up about 11% in the quarter. If you look at the U S and Canada Q1 luxury rates as you pointed out were down slightly year over year, but as we dig into.
That data our sense is that modest decline is largely around mix shift so the prior several quarters. The bulk of that luxury rate growth was in leisure destination resort destinations as we start to see pick up in demand in urban downtown core destinations.
That's great for the business, but it's at lower rates and that's dragging down a bit with that said globally luxury ADR was up 4% in the quarter, even as compared to the extraordinarily strong ADR, we saw for luxury in the first quarter.
Thank your second question was on the economy economy, which largely is as you might imagine I think we don't play very much there really in any meaningful way I think it's not a surprise when you see that just generally speaking in the economy are there tends to be less variability.
Both up and down over time than you see in the in the highest end rates, but I think again I will point out on on luxury Robyn that we're still very very pleased with what we see in terms of luxury demand.
And frankly, when do you think for example.
Of people, having more opportunities of where they want to travel that's one of the benefits of being the size and scale of our system because there actually may not be going to some places domestically that they weren't going before by top 10, now actually go abroad.
And then just to put a little more context to your question Robin and I think that's kind of tracks with the industry data that you referenced this is system wide for the quarter.
We then as compared to 22.
Sri Revpar was up 18%.
Oh not for year over year, yeah. Okay. Thank you thanks very much.
Youre welcome.
We will take our next question from Shaun Kelley with Bank of America. Your line is open.
Hi, Good morning, everyone. Thanks for taking my question too.
Lee maybe if we could talk about capital return a little bit obviously, you know you boost it up your your your expectations or outlook. There could you just remind us of kind of maybe where this new outlook range kind of puts you relative to your medium term leverage target and what that target is.
Sure I think it's a it's a great question to be able to reinforce where we are which is that.
We have been for some time continue to be and expect for the rest of this year to continue to be at the low end that'd be investment grade leverage targets. So that's the biggest chunk of it.
All of the chalk relative to the increase in capital return is from the.
The increase in expected EBITDA and cash flow for the company. So if you think about broadly speaking the midpoint of adjusted EBITDA going up between 250 million and $300 million, it's perceived pretty straight math to see there that can get you to this increase of <unk>.
Call It roughly 700 million of a midpoint of capital return. So we feel really strong about the way the business is operating from a cash flow performance as.
As well as the visibility that we've got certainly in the near term, but even at the lower end of the guidance that we provided I think we still feel really good about being at the low end of our leverage targets all with the kind of capital return range that we've given.
Great and as my follow up to maybe switch gears, a little bit but yeah. Following up on the comment around I think mid scale extended stay and and a little bit around M&A and city Express to you Tony could you just talk a little bit about sort of the balance of potential brand launches and where you see.
White space on that front relative to tuck in M&A, which I know we saw for a number of years kind of back into the early 2000 tens and then obviously you know starwood kind of took over for a few years and only the late teens there maybe help us balance those two priorities are or how you see you know opportunity in each.
Of course.
So the fundamental strategy has not shifted you are right to point out that prior to Starwood. There was a fairly consistent cadence of what we always referred to as bolt on acquisitions, but the bulk of those acquisitions had some common DNA. They often helped us gain a foothold.
In a geography, where we were dissatisfied with the pace of organic growth and they often we often had the view that they represented a growth platform either regionally or potentially globally.
<unk> acquisition would be perhaps the best illustration of that.
Our industry, leading scale gives us maybe the luxury of not needing to do M&A to gain scale, we enjoy scale.
But we will continue to look at opportunities. If we believe there is a gap in the geography, where our guests seek to travel and we're just satisfied with our footprint.
Or if we see a gap in our brand architecture.
That was what guided the city express transaction a transaction that solidified the strength.
And leadership of our footprint the Calla region and also filled in the gap brand architecture by giving us entry into mid scale, but.
The final bit of common DNA in every one of those transaction is to do something around the valuation and you should expect to see that same discipline as we evaluate what I think will be a fair number of opportunities that will be floating around out there in the market and then maybe the last.
Comment I would make is as I reflect on the last decade or more of expansion of our platform.
Residence Inn, and Ritz Carlton in AC which were added to the system through M&A I really liked that approach.
Thank you very much.
Of course.
We will take our next question from Smedes Rose with Citi. Your line is now open.
Hi, Thanks.
I just wanted to ask a little bit about how you're thinking about occupancy as we move through the year and I'm sort of asking in the context of it looks like for you and for others that we've seen reports from that Occupancies are still sort of stubbornly below kind of pre pandemic levels. I mean, it certainly gets closed but are still below.
Obviously offset by rate, but I'm wondering do you have any sort of updated thoughts on.
Is there some piece of business, that's maybe kind of gone or are people are being priced out or do you think occupancy can and will return to pre pandemic levels. As we go through this year and into next year.
Sure. So I'll give it a try and do you feel free to jump in.
As we pointed out in the prepared remarks, we continue to see robust demand recovery translating into strong occupancy growth in fact on a global basis, we saw 11 points of occupancy improvement in the quarter when.
When we think about our updated guidance at the high end of that guidance, we expect our revpar growth to be fairly evenly split between ADR and occupancy gains. So we do expect there to be continued occupancy gains at the high end of that guidance.
The low end of the range would reflect a meaningful softening in the global economy in the back half of the year.
And that would have worldwide revpar relatively flat compared to where we were in the back half of last year.
The only thing I'll add is it is interesting when you look at occupancy compared to 2019 and and we do continue to make progress in that comparison, when I look at U S and Canada.
Kind of moving through from January through March of this Q compared to 19, we are we're down to only two percentage points difference by the time, we're at March and globally actually were only two percentage points in March as well.
I think there are a couple of things to note number one is the the portfolios are pretty different we've added 11% more rooms. Since 2019. So the comparison starts to be not completely.
Apples to apples and I think there's also been some great learnings on the part of the industry about revenue management.
And there I think at the end of the day, we're trying to make sure that we're maximizing the returns on these real estate assets and that as you've seen with group for example.
There's actually been some benefit over the reality that group is booking are closer to the time of the actual event.
So I think we will eventually get back there we are getting fairly close.
But I think the best part is that Youre seeing the fundamental business segments of business transient leisure and group are really all operating on full cylinders not exactly the way they behaved in 2019, but still really.
It's in good shape.
Okay. Thanks, and then maybe just on that I'm, sorry, if you said, but what what percent of demand in the quarter came true Marriott <unk> members and then they could you just talk a little bit about what kind of.
And that's coming through Otas at the screen.
Yeah.
N attrition side is that is that your question on Marriott, Yes, yeah like what are you talking about digital channels or are you talking about <unk> very.
Well for <unk>.
For occupancy how much came through Marriott gateway. So yeah. So for the first quarter in Gabon as well as the member penetration was 53%.
And in the U S. It was 60%.
Okay and.
Inbound occupancy through Otas changed meaningfully or.
No that is stay that's at about 11% and that is quite similar to what was pre COVID-19 I think the interesting part is that you look at either the digital channels, which have grown 600 basis points since pre COVID-19 or if you look at it all of the various direct channels together we've actually.
Sure.
About 100 basis points since pre COVID-19, but the Otas has remained roughly flat.
Yeah.
Great. Okay. Thank you I appreciate the detail.
We'll take our next question from Patrick shows what true Securities. Your line is now open.
Hey, good morning, everyone.
Good morning.
Tony I think there's some news in the last day or so that you folks will begin bundling your resort fees into your pricing displays later this month.
It looks like you're the first major hotel company to be doing this do you see this.
Putting yourself.
And would you expect other.
Hotel companies to also follow your lead with display needs fees. Thank you.
So.
The way I'd answer that Patrick we we've already been showing at the discussions we've been having with the very various jurisdictions are just about making sure that the transparency.
Of those disclosures is enhanced and crystal clear for our guests. It it is not as if those were.
Further clarifying and enhancing that transparency.
I'll leave it to the state Ags around the rest of the country for the rest of the industry.
But I am I'm pleased that people lead the industry in terms of the transparency of our disclosure for our guests.
Thank you. Thank you and I have no I agree I think that's the right thing to do to give full transparency. So thank you.
Sure.
We will take our next question from Richard Clarke with Bernstein. Your line is now open.
Hi, there thanks for taking my questions just the first one your comment most of it.
Projects that are under construction financing are not being affected about 60% of your pipeline is under construction.
Clarify that how much of that is finance the construction of housing starts and how much risk associated to stay without 60% knockdown to construction.
Sure. So so yes, you've got the basic parameters roughly right, which is those that have started construction you would expect those to be already be financed.
You know theres not a specific number on firm financing for that other 60% that's an ongoing.
Process and always has been between the developers.
As they consider their various capital sources are one thing to remember and that is that our pipeline is over 50% international.
Which does tend to be less dependent on our senior loan financing and then for the remainder in the U S. It is overwhelmingly limited service.
Franchised properties and those are from a relative speaking basis, we do believe that there is some slowdown.
Slowdown in the pace of financing for those but we are at the same time continuing to see.
That banks are willing to consider phones for strong brands and strong proven markets and and we are still seeing that lenders are looking at those projects. So I don't think that there is a fundamental change in how we see those.
Ah projects materializing into actually built hotels I'd also remind you that theres quite a few conversion hotels in that as well.
So I think as you've probably seen in our past times, where lending has had a slow down that that there can be a bit of a slowdown in the construction starts but that we do expect with the performance of the hotel business and frankly the relative performance.
So of hotel loans, particularly in limited service loans.
We would expect that to get going again.
More quickly, we arent seeing fall out of those deals from our pipeline.
And anything more than typical fashion.
Okay. Thanks for that color and just as a follow up you mentioned your credit costs now in nine countries, just how meaningfully others don't U S. Congress, so far I'm, what does the opportunity to catch a week and we have a <unk>.
Credit card in 200 countries eventually or is there some natural limit to how many countries you can launch.
Well, we're certainly going to have as many as we can and you can be sure of that.
I'd make two comments first of all certainly with the use of revolving credit in the U S. A that is by far the lion's share of the fees that we receive are related to the U S. But I would say the rate of growth that we're seeing in terms of both the spend and the card holder.
Numbers and international is really quite tremendous both in the terms of the numbers of cards.
Numbers of countries that we're adding cards as well as the number of cardholders in those countries. So we've been really pleased with the increases for example, in Japan and South Korea.
In terms of the growth in card holders and I think that bodes really well.
For future growth, but also also for our hotel for us and for our hotel business. Because these are all bond board members, who want to be earning points and staying at our properties. So it's a it's a great part of the ecosystem of our business.
Helpful. Thank you.
Well take our next question from Dori Kesten with Wells Fargo. Your line is open.
Hi, Thanks, good morning.
What percentage.
200000 rooms under construction are slated to open over the next three years.
Well I think the best way, we don't have a particular percentage as you know we don't control exactly when they opened we do keep a very careful eye on.
How they are doing and again feel comfortable with the numbers that we've talked to said Tony talked about in terms of the gross room openings, which has both a share of those coming out from under construction as well as conversions.
Okay.
Yes.
And I guess onto conversions.
First is just a an owner choosing to play.
Yeah, I don't think there's necessarily a typical percentage if I had to guess over the last decade or so.
Hopefully relatively evenly.
Evenly split between.
On the owner that simply has an opportunity to change brands or just flagging independent hotel versus an opportunity that is created as a result of the transaction.
But I think that ebbs and flows a bit depending on where we find ourselves in an economic cycle.
And I'll just add one other point that maybe as you try to come up with your own math. It's just a reminder that for hotel construction and a limited service hotel is roughly speaking two years under construction in a full service hotel can be anywhere from a.
Three to four.
Okay. Thank you.
Okay.
We will take our next question from Bert Brant mature with Barclays. Your line is open.
Thank you.
Good morning, everybody.
Just quickly.
Back to back to China, tornadoes or or or or anyone could you talk about maybe the starts.
Momentum there on the ground I know, it's sort of it's a little bit to its own drum or different drug than what we're talking about in the U S. But are you seeing any building in momentum in new construction starts in China, and do you think that that could potentially offset.
Sort of the growing headwinds on the financing side in the U S. Lenny that you just that you just talked about we've talked about.
I think as you know the borders are just opening the economy is just starting to really gear up so it's a bit soon for new construction starts what I can tell you. It is some of the in flight construction projects that had been paused have restarted.
Our approval volumes are accelerating.
Volume of memorandums of understanding that we're negotiating and executing our accelerating so all of the leading indicators that should drive construction starts are really encouraging, but probably a bit premature to have any really strong data for you.
Yeah. The other thing I'll point out is that roughly speaking about 15% of our Chinese pipeline deals have some state owned enterprise participation and I think that does help as you think about the capital sourcing for those projects that are that that is helpful.
As we are.
Get those all go in again and maybe as a last point I would add because we're so heavily weighted to the most valuable quality tiers upper upscale and luxury.
Often times when we engage with the owner of the project is well under construction. So unlike the U S where our conversations start.
With a greenfield site they may come to us with a tower twenty-five stories out of the brand.
So it's a bit of an apples to orange comparison.
Kind of squaring that with the fact that you guys are implying a ton of growth in the U S. In the back half, but as you mentioned your mix skews to full service, which has the group component in there can you try and sort of square those factors away for us. Please.
Sure absolutely so I do you know.
If you look at you.
Year over year Q1, you are right in pointing out that the U S. I M apps, which came close to doubling in.
In Q1 from.
From 42 to 85 actually Didnt double.
That that growth was overwhelmingly driven by the premium hotels with the return of group and business transient to a premium hotels. We did continue to see growth in IMS from our luxury hotels, but the biggest chunk of growth came from those premium hotel. So I I think.
With the strength of group that Tony pointed out.
His comments for the rest of the year that you should continue to see the strong growth in both U S and Canada, IMS as well as international.
Perfect. Thanks, so much.
Yes.
And we'll take our next question from Duane <unk> with Evercore ISI. Your line is now open.
Hey, Thank you good morning.
Just with respect to China understand that the recovery has been primarily domestic so far and.
We obviously have a good feel for airlift recovery, but I wonder if you could talk a little bit about segmentation is it like other geographies and that its primarily leisure at this stage and could you just comment on.
B T and group recovery within China, or if theres any differences versus other geographies and then just for my follow up for the sake of time you know.
Do you do you share the view that it'll be a fairly booming summer to Europe .
Looking forward. Thank you.
Sure. So I'll start with the second question first and then Tony will fill in.
Europe hotels for the summer and very pleased with the booking patterns, we see there on on greater China. Let me talk about a couple of things first of all cross border. Just a reminder of our comments earlier that roughly three quarters of the business typically is domestic well right now it's.
Over 90% is domestic so I think there is a reality that there's.
There's going to be more travel both in and out Oh, greater China as demand.
As the airlift improve so we would expect to see that.
How those other parts of the world, but also that there's more travel into China in terms of the segment is seeing the recovery in segments very similar to the way that we saw it in other.
Parts of the World the one difference being that on special corporate and business transient in China that is recovering much more quickly than it did in the U S. A for example overwhelmingly people are back in their offices in greater China, while in the U S. There's obviously much more of a hybrid mix. So so we are actually seeing.
In the all of the segments recover more in line with each other rather than necessarily one after another the way it was in the U S.
And then the only other small note I would make and I'm sure you're aware of this.
But the Chinese government, just pivoted a bit and said that those four and he says issued prior to March 'twenty eight 'twenty.
Initially they had said we need to be renewed those are now available for use for entry into mainland China.
Sure.
Processing for international visitors and Didnt quite lengthy.
Really interesting thank you.
Hello.
And we'll take our next question from Chad Beynon with Macquarie. Your line is open.
Good morning, Thanks for taking my question.
First Tony in terms of what your team has coined bleser, which is presumably help the length of stay at a I'd assume upper upscale and luxury well it's hard to pinpoint have you seen any reduction in these hybrid trips I know, it's always tough to analyze that but just trying to figure out is as people get back to fully in the office.
If if that.
Benefit has waned at all thanks.
Yes, not yet.
Thank the best Statistical data we have is is the.
Recovery by days, a week and we continue to see strong recovery on Sundays, and Thursdays, which is probably the most compelling empirical data. We have suggests that blended shrimp purpose continues to be strong.
And then I would supplement that data with what we hear anecdotally when we're talking both with with special corporate customers and with group customers.
Who are talking to us as we re platform of our technology and encouraging us to make it easier for their business travelers or their group meeting attendees took book a single reservation that has both business and leisure purposes. So our sense is that that's true.
Trend shows no sign of showing down and as I've said in other forums, that's great news for our business.
Thank you and then lastly, and this is something you'll probably get into at the analyst day, but leaning in terms of the guidance you laid out.
The difference between the high and low end, obviously regarding variable macro scenarios and prior global recessions or in the analysis. You guys are currently doing for the guidance should we expect a more pronounced flattening or maybe decline in north America or outside of the U S. Obviously, a lot of variables in there, but just kind of wonder.
How are you thinking about maybe a soft landing or slightly.
Worse than soft-land it could affect each each market. Thank you.
Yeah.
I I would probably consider it about the timing of the recovery.
So you.
You know a couple of broad comments generally speaking lodging demand does have a high correlation with GDP growth. So when do you think of our emerging economies like India. As an example, where you're seeing 6% GDP growth that's going to be very different than what you see in the U S.
We're in a more typical GDP growth might be more like two.
And so the impact of a recession can be different in that regard, but I think when I think about the guidance that we've given this year. It is much more tied to the pace of recovery. The U S. A for example, meaningfully farther along in its recovery from Covid that Asia Pacific for example, and I think.
We're clearly seeing that now all restrictions are lifted in Asia Pacific and that.
That both pent up demand in return of demand, it's coming quite nicely, which will mean that shouldn't we see an economic slowdown I think they will be impacted a bit less than for example in the U S. We're obviously in the U S are if we see it it's it's starting from a different <unk>.
So again as we talked about we would imagine that Q3, and Q4 and that slowed down.
A super sharp deep V, but but clearly a real meaningful economic slowdown that would get us to that roughly flat revpar in Q3, and Q4 compared to 22.
Very helpful. Thank you very much I appreciate it.
Sure.
We have reached our allotted time for questions I will now turn the call back over to Tony Capuano for closing remarks.
Great well. Thank you all again for your thoughtful questions. Thanks for your interest in Marriott International we hope to accommodate you and what should be a terrific summer around the world and we look forward to welcoming all of you to the beach in Miami in the fall for our Investor Day have a great afternoon and thank you.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Wonderful day.
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