Q4 2023 Marriott International Inc Earnings Call
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The program Please press Star zero.
Good day, everyone and welcome to today's Marriott International Q4, 2023 earnings call.
At this time all participants are in a listen only mode. Later, you will have an opportunity to ask questions. During the question and answer session you'll be registered to ask a question at any time by pressing the star and one on your telephone keypad. Please note. This call is being recorded and I'll be standing by should you need any assistance. It is now my pleasure.
To turn today's program over to Jacky mechanical.
Thank you good morning, everyone and welcome to Marriott fourth quarter 2023 earnings call on.
On the call with me today are Tony you have one O, our president and Chief Executive Officer, Danny O'brien, Our Chief Financial Officer, and Executive Vice President Development, Betsy Dahm, Vice President of Investor Relations.
Before we begin I would like to remind everyone that many of our comments today are not historical facts.
Since 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 note that our discussion of revenues across different customer segments referred to property level revenues and unless otherwise stated our revpar occupancy ADR and property level revenue comments reflect systemwide constant currency results for comparable hotels.
Statements in our comments in our press release, we issued earlier today are effective only today and will not be updated and 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.
Tony: Thank you Jackie and good morning, everyone.
Our team produced fantastic results in 2023.
We continue to experience strong momentum in our business around the world. Thanks to solid demand for travel and our diverse portfolio of 30, plus leading branch.
In the fourth quarter global Revpar increased over 7% year over year, driven by roughly equal games in ADR and occupancy.
Group, which comprised 23% of room nights was again the standout customer segment.
Compared to the year ago quarter group revenues rose, 9% globally, and 7% in the U S and chip.
And group is shaping up to have another solid year in 2024.
At the end of last year full year 2024 group revenues were pacing up nearly 13% globally and 11% in the U S and Canada on a year over year basis, driven by robust increases in both room nights and ADR.
Leisure transients accounted for 44% of global room nights in the quarter.
This segment has by far the fastest coming out of cold with global leisure transient revenues, the fourth quarter nearly 50% above the same quarter in 2019.
Even with this strong growth demand has remained resilient.
Fourth quarter Global room nights rose, 5% over the year ago quarter, leading to a 6% leisure transient revenue growth worldwide.
In the U S and Canada leisure revenues were up 2%.
Business transient contributed 33% of global room nights in the fourth quarter.
Demand from small and medium sized corporate remained robust and while large corporates are still lagging they continued to post volume increases.
Tony: Solid gains in ADR drove business transient revenues up 7% globally and 3% in the U S.
Our powerful Marriott ongoing loyalty program grew to over 196 million members at the end of the year.
Never penetration of global room nights reached new highs in the fourth quarter and 69% in the U S and Canada and 62% cool.
Our digital channels and mobile in particular remain key drivers of growth at a lower cost to our owners.
Our Marriott envoy Apple contributed 22% more room nights in 2023 than in the prior year, we were focused on improving the customer experience across all our digital and other booking channels through the multi year technology transformation, we apple underway.
[noise] bouncing engagement with our members outside of hotel stays through our numerous successful Marriott envoy collaborations, including our co branded credit cards also remains a priority our growing portfolio of 31 credit cards across 11 countries had record global.
Card member acquisitions last year and card spend for the year grew 11%.
On the development front, despite a challenging financing environment in the U S. In Europe, we signed a record 891 organic management franchise and license agreements in 2023, representing approximately 164000 workers.
Additionally, we ended the year with a new high of roughly 573000 rooms in our pipes.
We expect another year of strong global signings in 2024 and are already off to an incredible start.
We also saw a meaningful acceleration in net rooms growth last year to four 7% the highest growth since 2019.
Conversions helped again in 2023 accounting for 25% organic room additions and 40% of organic room signings.
For 2024, we anticipate net rooms growth for 5.5% to 6%.
This includes around 37000 rooms from energy.
The first set of these rooms at New York, New York became available on our Marriott channels at the end of January with the remaining properties is expected to be available by the middle of March while it is very early days, we're incredibly pleased with the initial booking pace. We're excited about adding these amazing properties to our poor.
Oh, yeah, and enhancing our distribution and Las Vegas, and other cities across the U S.
We remain confident in the three year net rooms compound annual growth rate, we discussed at our Investor meeting in September.
Tony: Five to five 5% from year end 2022 to year end 2025.
As we focus on expanding our lodging offerings for owners franchisees and guests were making significant progress globally in the high growth mid scale space. We're in numerous numerous deal discussions for city express in the Caribbean and Latin America, where shallow region.
For four points Express in Europe, the Middle East Africa.
Here in the U S. We celebrated the first groundbreaking for studio rests in Fort Myers, Florida in January and have over 300 additional potential deals under discussion in around 150 markets.
As we strive to offer more options for our stakeholders. We're also working on a new U S transient midscale brand for both new builds and conversions.
At the other end of the chain scale, our luxury distribution is currently over 50% larger than our next closest competitor and that lead is expanded in 2023, we had records luxury signings with 58, new deals and we added 29, new luxury hotels to our portfolio.
In closing 2023 was a banner year for Marriott and I am optimistic about what lies ahead.
The demand for all types of travel remains strong even as the rebound impacts from the pandemic has waned.
The fundamentals for our industry are outstanding and we are determined to grow our industry leading position.
We remain focused on offering the best brands and experiences to the most valuable and engage guests, while expanding the broadest and deepest portfolio global properties and offerings. So we can continue to connect people around the world through the power of the trial.
I want to thank our Marriott teams around the world for their <unk>.
Marketable dedication and excellent work.
And now let me turn the call over to leading to discuss our financial results in more detail.
Thank you Tony I'll walk you through our strong 2023 financial results in the fourth quarter U S and Canada Revpar increased over 3% year over year, primarily due to higher E. R International Revpar rose, 17% driven by an eight percentage point gain in occupancy.
Leading: 4% rise in EMEA or Asia Pacific again experienced the largest year over year Revpar increase Revpar rose, 81% in greater China helped by the last quarter of easy comparisons to Covid looks lockdowns in the year ago quarter and grew 13% and <unk>.
Asia Pacific Excluding China.
Leading: Fourth quarter total gross P revenues grew 10% to 124 billion, reflecting higher revpar room additions and strong growth in our co brand credit card fees and incentive management fees or IMS rose 17%.
Reaching 218 million driven by another quarter of significant increases in Asia Pacific for the full year gross fees rose, 18% record IMS that were nearly 20% higher than our prior peak in 2019.
Owned leased and other revenue net of direct expenses reached $151 million in the quarter and included substantially higher termination fees, primarily due to 63 million associated with the termination of a development project.
G&A of 330 million was impacted by a $27 million litigation reserve for an international hotel as well as timing of performance related compensation and increase in bad debt expense and higher professional fees, which included costs associated with our intellectual property restructuring.
The actions.
Fourth quarter adjusted EBITDA grew 10% to nearly one 2 billion for the full year adjusted EBITDA was 21% higher than in 2022.
Leading: Thanks to our team's excellent tax planning efforts.
Left evolving global tax laws, we had a tax benefit of 267 million in the quarter. This was due to over 400 million of favorable discrete items related to international IP restructuring strategies and the release of a tax valuation allowance the fourth quarter effective tax.
This rate was slightly higher than last years and above our previous expectations due to jurisdictional mix shift.
Hotel level, despite meaningful wage and benefit inflation, we maintained profit margins in our U S managed hotels in the quarter and for the year compared to both 2022 and 2019, a strong performance importantly, our guest surveys indicate the customer satisfaction.
Continues to rise in December our intent to recommend score achieved its highest monthly score in over five years.
Our asset light business model once again generated significant cash with almost $3 2 billion of cash provided by operating activities in 2023 of 34% year over year.
Our loyalty program was a source of cash even after factoring in the final year of reduced payments from the credit card companies, resulting from the amendments we entered into in 2020.
2024, we expect a loyalty cash flow to be roughly neutral.
Now, let's talk more about 2024, our full year outlook assumes a steady, albeit slower growing global economy and also reflects normalized lodging demand in most regions around the world with Asia Pacific expected to see higher growth in other regions as it continues to have some benefit.
Kobe recovery as well as additional international Airlift.
In 2020 for Revpar growth is expected to be driven by another meaningful increase in group revenue continued improvement in business transient demand, which will be helped by a mid single digit special corporate rate increases and slower, but still growing leisure revenues were off to a strong start with <unk>.
January Revpar up 7% globally, reflecting continued strong demand around the world, particularly in international markets.
International Revpar rose, 14% in U S and Canada, Revpar increased 4% in the month.
With year over year comparisons easiest in January and Easter shifting from April to March this year global Revpar for the first quarter could increase 4% to 5%.
For the full year, we anticipate a 3% to 5% rise in global Revpar growth is expected to remain higher in international markets than in the U S and Canada with particular strength in Asia Pacific.
The sensitivity a 1% change in full year 2020 for Revpar versus 2023 could be around 50 to 60 million of revpar related fees.
For the full year gross fees could rise, 6% to 8% to five one to $5 2 billion with non revpar related fees rising 9% to 10% driven by strong credit card and residential branding fee growth.
Owned leased and other revenues net of expenses are expected to total $320 million to $330 million.
17% to 20% lower than 2023 due to meaningfully lower termination fees given the large termination fee in the fourth quarter of 'twenty three.
<unk>, we sold last summer and Calla flipping from owned to managed and renovations at several hotels, we expect 2024 and G&A expense could be flat to up 2% year over year. There were a few discrete one time items from 2023 and are expected to.
Leading: Offset wage and benefit increases.
All year adjusted EBITDAR could increase between five and 8% to roughly 4.9 to 5 billion.
Knowing that our 2024 effective tax rate is expected to be around 25%, while we expect our underlying core cash tax rate to remain in the low 20% range.
Details for the full year and first quarter are in the press release. Please note that first quarter results are expected to be impacted by a few items first the timing of residential branding fees is expected to result in these non revpar related fees being meaningfully lower.
In the first quarter, but up nicely for the full year.
Oh, it leased and other revenue net of expenses will be lower due to the renovations several owned properties as well as then Carlo property that slipped from owned to manage and finally G&A in the year ago quarter benefited from several onetime items. While this year's first quarter includes MTM integration costs.
Our capital allocation philosophy remains the same we're committed to our investment grade ratings investing in growth that is accretive to shareholder value and then returning excess capital to shareholders through a combination of a modest cash dividends and share repurchases. We're pleased with the significant value we.
Turn to shareholders in 2023, and expect strong capital returns yeah in 2020.
For 2024, and factoring in a 500 million of required cash in the fourth quarter for the purchase of the Sheraton Grand Chicago capital returns to shareholders could be between four one and $4 3 billion full year investment spending could total one to 1.2.
2 billion. This includes another year of higher than historical investments in technology. The vast majority of which is expected to be reimbursed over time.
The 500 million for the Sheraton Grand Chicago consists of $200 million of Capex and 300 million elimination of a previously recorded guarantee liability.
Investment spending is also expected to incorporate roughly 200 million for our own lease portfolio and include spending for the renovation and the elegant portfolios in Barbados and the completion of the W. Union Square renovations will look to recycle these assets and sign long term.
Management contracts after renovations are complete.
As Tony mentioned, we're also thrilled about our development growth prospects, both inside and outside the U S. We continue to gain market share with 7% open road and 18% of rooms under construction globally at the end of last year, Tony and I are now happy to take your questions operate.
Sure.
Good morning, good questions.
I was hoping you can view the.
Jim.
Action and what's included in fee contribution for this year and then if you could maybe clarify what the integration cost that you referred to.
Your prepared comments related to the MGM license deal.
Yeah sure. So it's really a modest amount of G&A, but it's just worth noting in the year over year comparison in Q1 that that as we expect all of those hotels to nutrition to.
Transition onto Marriott system.
Leading: That will all be done in Q1, when we think about the same contribution as we've talked about before Joe are they will be coming on in Q1, and we expect that business to ramp up over the year and there's not a particular number that I'm that I would give you now, but just a reflection that it is.
Related to a percentage of the hotel revenues.
That fits into our franchise fee model as a result of a license agreement over the year.
Great and then I know you gave us some detail in terms of investment spend.
This year in the Cherokee Chicago is a big chunk of that.
Is the 500 million all cash out the door I know, there's the 200 and Capex and 300 million.
To satisfy the getting out of that that guarantee can you provide a little bit more clarity on that and then sure sure sure yeah.
Billy and his sort of aspirational and not spoken for at this point Yeah No no no. It's a group. It's a good clarification question, Joe that 500 million is cash out the door and we would expect that to occur in Q4 2024, but to to help you understand what we're.
Really considering capital investment we wanted to clarify it to say that $200 million 500 billion relates to the purchase of the underlying land on the Sheraton Grand Chicago, and so that is in Capex Oh, while the rest reflects a liability that we had established.
On the balance sheet, frankly years ago as part of the overall transaction. So it does obviously impact our available cash.
Leading: For the year, but is in there and when do you think about on Indentified capital expenditures in that number of the one to 1.2, it's really quite modest.
Great. Thanks, so much.
Thank you.
Question from Shaun Kelley from Bank of America.
Okay.
Hi, good morning, everyone.
Tony Leo just wondering.
If you could just start with maybe kind of current state of the development environment Tony Yes.
Obviously, a global interest rates have cooperated a little bit for the hope of developers and just sort of what you are probably the same thing on the construction cost landscape. So as we sit here today I know, it's only four months or so from your big update at the analyst day, but could you just give us latest center the land how some of those conversations when it Alice and.
What people should expect on the organic side for for signings and more importantly, probably starting to move into construction.
Of course so.
As we mentioned in the.
Prepared remarks on the heels of a record signings year, it's more anecdotal than anything else, but in terms of deal volume through the first months of the year, it's really encouraging and we're seeing strong momentum both on submissions for newbuild projects around the world as well as two.
Leading: Continued really encouraging momentum on the conversion side.
In terms of the environment coming out of the Atlas I'm going to ramble here, a little bit because I think there are both some positives and negatives that we heard from the owner and franchisee community about their expectations for 2024.
On the positive side of the ledger as you point out there there is a sense that there will be continued relief on the interest rate side as we get in particularly in the back half of 2024.
There is an expectation maybe in parallel to the hotel transaction market will start to be a bit more active in the back half of the year as well and while there is still like visibly some gap in the BSD ask between sellers and buyers. It feels like that gap is continuing to narrow.
Which will likely lead.
Expect to a little more active transaction environment, which has always historically been a good news for us on the conversion front when.
When you pivot to the more challenging side of the ledger.
You do still have lenders.
Thinking about our compliance with proposed regulatory.
Tori environment.
That will perhaps impact their ability to really open the faucet in terms of the amount of depth and deaths announcing that they make available for new construction.
But there again, it's one of the reasons, we're so enthusiastic about our entry into mid scale. When we talk to our franchise partners on the Midscale front, they feel like the size of those commitments.
Something that theyre going to have a decent measure of success in procuring new debt.
And then the last thing I would remind you is the <unk>.
This debt, while we stay very focused on the availability of debt and its impact on our growth.
Trajectory.
That is largely a U S, Canada and Western Europe.
Attributes when you look at the pace of growth, we're seeing across Asia Pacific across the middle East that growth does not seem to be particularly impacted by the ups and downs of the availability of debt.
I think you also had a question about construction costs.
And so maybe I'll expand my answer a little bit when we think about potential impediments to growth.
The availability of debt is the one that I think we're most focused on.
Supply chain issues, which we were talking with you about a year ago are not nearly as severe as we saw several quarters ago construction.
Construction costs have come down a little bit and they're rising year over year at lower rates than we saw a year or two ago. So help on that front I think we're pretty encouraged.
But it's really the ability to source debt for new construction is the area that leading and the team are most focused on.
Thank you very much.
Thank you we'll take our next question from Smedes Rose with Citi. Your line is now open.
Hi, Thank you.
I was just wondering you know when we look at the sort of core metrics that you guys provide in terms of EBITDAR for the for the year.
That growth and capital return all of those at least relative to our forecast or in line or better than book.
Similar for consensus forecast, but your operating EPS outlook is quite a bit lower than consensus and I was just wondering if there's any.
Leading: One or two things that you.
Might point to you what do you think maybe there was a difference in sort of expectations versus what you expect to put out because it doesn't sound like it's like a tax rate issue I was just wondering if maybe theres something else there.
Yeah, no. Thanks feeds very much no I appreciate that.
Yes tax rate is probably the biggest item when you think about it.
First of all just remember that in 'twenty three there is the reality of this extra termination fees. So when you look at year over year growth back then impacts how you look at 'twenty for over 23, and so if you if you adjust out for the odd balls of bows the little.
<unk> reserve and the performance.
The termination fee and you take into consideration that we've got probably about one point higher booked tax rate and I do emphasize it's a book tax rate rather than cash our cash tax rate is essentially staying the same.
Thanks to the great work that the team has done and working through our global tax planning, but when you look at from a book perspective, it's about a point higher overall and you put those together and you can you know do.
Something that looks from an adjusted EPS that looks on 24 that looks close to double digits.
Okay. That's helpful. And then I was just wondering.
It's kind of impaired for the foreseeable future or is it.
Something that you think could improve or overtime, just maybe some more color there.
Well Yeah of course, so really my comment was that.
Let me break it down into two buckets, what I talked about business transient the small and medium sized corporate the demands coming out of those groups continues to be quite robust and my comment about large corporates lagging is really sort of in reference to our pre pandemic environment.
But with that said, we continue to see incremental growth, even coming out of the large corporates quarter over quarter, Yeah, just to be clear that was on the transient side on the group side, we're actually as we talked about on the group pace.
It is really still a very strong number and I think to me one of the interesting things is we're now getting back to some of the the way it looked before where 75% of the group that is on.
That is that we're expecting in 'twenty four is already on the books.
Which you know if you look at that a year ago that was only 65%. So it's still really points out that with this 11% pace that we're looking after 24 at 12% for 25 in the U S that actually the corporate group as well as the other types of group is still quite strong.
Thank you we'll take our next question from Richard Clarke with Baird with Bernstein. Your line is open.
Thanks very much for taking my question, maybe just one on the SG&A costs.
You gave some color on why it was a little bit higher but just wondering whether you can just do the bridge from the $2 55 guidance. You gave Q3 what wasn't anticipated. There was it has IP restructuring and why did that suddenly happened in Q4, and then maybe some color on the bad debt is there anything to read across from that as well.
Right so.
Quarter to quarter fluctuations that reflect everything from closing deals and travel expense to as you probably remember when we go back to Q1 of 2020 three we were still in the process of getting.
Getting back to being fully staffed which then ramps up during the year and then as you know the performance compensation and performance related compensation and then takes into consideration.
How the company is doing against its targets and you put all those together and other constant analysis of your positions of receivables from all of your hotels around the world and I, just really reflects the timing of when they fell in Q3 versus Q4.
For and and there again when do you think about looking at next year, you do see that we're talking about flat to up 2%, which really reflects that there were a number of items this year.
Okay that makes sense, maybe if I can just ask a follow up just to the CND you gave our revpar guidance for the two year stack of three to six.
Net new unit growth guidance of four to five obviously both of those are gonna have to accelerate into 2025 to kind of get to the midpoint is that what you're anticipating that that drives us to get revpar and an acceleration in 2025.
Yes, so Richard maybe I'll take the question first.
Richard: As we talked a little bit when we were together in Miami.
We continue to think that as you sit here.
It is less instructive to look at a single year and much more instructive.
Total look at rooms growth over a multiyear period.
Speaker Change: Some ways the MGM rooms coming into the system slipping from the back of 23 into early 'twenty four is the best illustration of that.
Speaker Change: Notwithstanding mgm's sliding into 'twenty four.
As you know we ended up a little higher than anticipated in 'twenty three at four 7% net unit growth.
We expect to be at.
Speaker Change: At a meaningfully higher number this year because of the impact.
The MGM openings and when we look at the three year CAGR that we discussed at our security Analyst Conference. We continue to be very confident in our ability to deliver that mid single digit range of about five to five 5%.
And then I think just on a more macro basis.
We've not made any major changes in terms of our longer term outlook, we obviously have a little more visibility and clarity into two this year.
Now that the teams around the world have gone through all their numbers, but we've really not revisited anything beyond 'twenty four and continue to be quite confident in what we talked about from a revpar perspective, and just a reminder, that when we go through the process a lot of what we're trying to do the security analyst meeting is.
To help you understand our range from a modeling perspective.
It's it's done before we go through the budgeting process. So so actually as you know we ended up with a really strong year in 2023, and when we look at it overall from a growth are in our hotel revenue system, we're right, where we would've expected to be in very.
Please about the demand that we're seeing both on the rail side as we look into 'twenty four.
Okay. That's helpful color. Thank you very much.
Thank you.
Thank you we'll take our next question from Stephen Grambling with Morgan Stanley. Your line is now open.
Hi, good morning.
I wanted to touch on the density of introductory remarks, but could you help us bridge the gap from thinking about room growth and revpar growth versus the gross managed and franchise fee growth.
Essentially there's a mismatch that should continue.
Beyond 2025, due to what you've seen in the pipeline or is it more to do with the MGM contribution how that may ramp.
Yeah, It got totally not from a from an M. D M perspective, I think.
You know as we talked about so that's the fundamental.
Still actually works very well, we had a couple of anomalies going on.
In 2023, but what when you think about it broadly that the fundamental model of Revpar plus our fees continues to work fine. We've got the reality is that when you think about putting together.
The revpar.
Scenario, you're getting benefit across the board from the growth in our rooms as well as from IMS and as you saw we're talking about a really strong continued IMF growth.
And then of course, they are a reflection that our non revpar fees are expected to grow 9% to 10%.
And.
In 2024, so I don't expect the fundamental.
Kind of growth in fee algorithm to be different.
Different than we've talked about before.
Speaker Change: Great. Thanks, and maybe one other quick follow up to the last question, which was around the.
Speaker Change: The Investor Day in September I guess, just very very big picture.
What's changed from then to now as we think about that multiyear algorithm.
Okay.
I would say very little and in terms of.
You know the basic equation I mean, frankly twenty-three ended up being very strong.
And if you think about the guidance that we gave we ended up higher than the high end of what we.
David The security analyst meeting by $6 million. So your you are starting off with a higher base and then again, we're looking you know a lot of the numbers that we talked about at the security analyst meeting where over a three year timeframe.
And now we're being able to give you more specificity about 2020 for them.
But the fundamental about revpar growth, but net rooms growth some operating leverage.
Continues to work I you know one thing I do think it's interesting when you look back at G&A as a percentage of fee switch being a fee driven business.
That is a I think the best relationship given the fluctuations in owned leased as we sell hotels.
And that is you look at 2019, we earn G&A as a percentage of gross fee is around close to 25% and the numbers that we've given you today show that number having dropped down to under 20%, which I think does show you. The continued operating leverage that we're getting out of the box.
And I might just build on that a little bit and.
For those of you that have been covering us for a long time.
No theres a phrase that guidance almost everything we do that phrase being success is never final and while we are very encouraged by that.
Continued improvement in the G&A ratio you can rest assured that as a principal focus area for the senior leadership team with an eye towards continuing to improve that that efficiency.
Okay.
Great. Thanks, so much.
Sure.
Thank you we'll take our next question from Chad Beynon with Macquarie. Your line is open.
Good morning, Thanks for taking my question wanted to ask a question related to the the Revpar guidance I guess kind of looking at the chain scales. So based on how you report I guess premium, which some of US would consider upper upscale continues to be the strongest in the third and the fourth quarter.
Speaker Change: And that's kind of what we're seeing you know year to date as you can.
Think about I guess luxury and upper upscale versus some of the other segments.
Do you have a view in terms of what will kind of lead 2024 and is there still a lot of room for.
ADR increases and upper upscale given what youre seeing with group pace. Thank you.
Sure. So let me comment on a couple of things first of all when we think about special corporate rate you've heard us talk about kind of continued.
Holding of that demand and while it's not back to 2019 levels. It is continuing to make the margin grow little bit faster and Oh, you know we had high single digit growth rate in that segment in 'twenty three and we're looking at strong mid single digit rate growth in that segment and 24.
So that is absolutely.
As you look at that plus the roof strength, which are when I think about improving pace of that 11% are I would say between.
Rea group in ADR that is probably two thirds, one third rooms in ADR, So youre still seeing some very nice growth there.
So clearly in the premium segment is I think going to be the biggest beneficiary of that increase in demand on the select service side you saw in that segment really come out of Covid the fastest.
And one that has moderated as you know as you've seen towards the end of this year, we wouldn't expect that to be instead of yeti, but not really get the benefit of some of the things that I. Just mentioned and then we continue to expect to see luxury continues to do really well.
So there is opportunity there both on the rate and oxide, but I think the two areas I mentioned before are probably the.
The ones to highlight as you think about the tears and I might build on that that last luxury comment from Lady you heard in my opening remarks about the momentum we have in extending row luxury from a footprint perspective, and a fourth quarter 23 versus fourth quarter 22 on a global.
Basis, we saw a luxury revpar up 10% and so we continue to see a pretty compelling economics in the luxury segment and are.
Are excited about the growth, we're seeing in terms of our industry leading footprint.
Thank you I appreciate it and then just a housekeeping IMF at the end of the year.
North American properties what.
What percentage were where payers during the year maybe versus versus peak.
Yeah sure. This is where it gets a little complicated, but let's do it.
And that is in 'twenty three for the full year or would you rely on quarter or year, which do you prefer.
Yeah.
The exit rate is massively different.
So 31% for the full year in U S and Canada versus 56, However, there's really as you remember there was a big change in our limited service portfolio as a result of the HPT hotels, leaving the system. So full service hotels in 'twenty, 340% of our managed full service hotel.
We're earning IMF in the U S, 45% and Pete really limited services, the big change of 19% and 23 versus <unk>, 66% and 19, but many of those hotels are no longer in our system and then when you look at.
In international.
And it's really overwhelmingly quite similar.
As to when it was in 2019, so for the entire company 23, 68% are earning IMF versus 72% and if you adjust for that limited service portfolio that I discussed it was 70% in 2019, so we're really getting to a quite similar less.
And as I said international is really overwhelmingly the same as it was at 19.
Great. Thanks for all the detail I appreciate it.
Right.
Speaker Change: Hey, good morning, everybody. Thanks for taking my question, So maybe for Tony just curious.
In terms of the.
The development momentum going out on the ground in China today.
What's sort of baked into the guidance in terms of China openings or maybe you could answer it qualitatively is that market markets opening momentum changed now versus.
Three three or six months ago.
Yeah. So we continue to see the momentum on the development side in China that we talked about a quarter or two ago.
Both in terms of what I would call it didn't take meaning the volume of MLR use that we're signing the volume of.
New deals that we're improving but just as compelling in terms of driving opening volume.
During the pandemic, we saw a variety of projects across the pipeline pause construction and we're seeing the vast majority of those paused projects back under construction moving towards opening so I think on.
Early pipeline, if you will approved and signed deals and under construction deals we see encouraging trends at all three of those categories.
Okay, that's encouraging.
Go ahead and I'd just add one thing that I think are kind of helps frame. Your question and that is when we look at our overall growth in rooms in Asia Pacific. We're in the high single digits that we're looking at both in 'twenty, three and 'twenty four of <unk>.
Including China, and Asia Pacific outside of China, just just really strong demand for our brands.
Cross the various scales.
Okay. Thank you for that and then just as a follow up also on development just to.
Speaker Change: Longer term question.
Sort of thinking about reflecting back on 23 is a year, where you know.
Capital formation.
Speaker Change: And that financing was harder to come by.
And that sort of weighed on U S. New hotel starts is this do you think we'll be looking back on 23.
Hmm.
When we get to sort of 25% or 26 and you're talking about.
Something of an air pocket in terms of new hotel openings because of 'twenty three or do you think it's not as meaningful and there's other things that will offset how do you think about that when you do your longer term planning.
Yes.
You make a good point as Tony talked about and he is a response to the question about the financing environment, There's no doubt that.
Financing availability for Newbuild construction.
Hotels is is limited and the strong brands get the most of it but you've got some uncertainty around bank capital regulations et cetera.
So it is clearly down meaningfully from the kind of pace of new Bill that was in 2019 I think what you have seen on the good side is that our conversion as a percentage of room signings.
It has gone up meaningfully and we look forward to that continuing.
But yes, I I I hope that that is the case and that we're kind of seeing a bit of an air pocket in the U S. As we talked about outside the U S. We're not as dependent I will call out Europe, which also has a lot of the same characteristics as the U S on the Newbuild construction side.
But we.
We are really pleased with what we're seeing on the studio rez demand side and ability to start getting those shovels in the ground.
So there we are hopeful that you'll start to see that pace pick up as well.
Construction costs the demand side continues to be very strong.
And I might just build on that comment about mid scale.
Lenient I tend to climb over each other with enthusiasm to talk about mid scale.
We think there is a tremendous market opportunity from a demand perspective with areas keep appetite from our franchise community. We think the cost of developing mid scale.
We will help our partners navigate what is still a challenging financing environment and the other thing that is exciting to us.
Youll recall, the last number of quarters in select service broadly, we talked about a lengthening in the construction cycle weakening and I were both Dallas and Fort Myers, putting a shovel in the ground for the first studio risk and our partners there talked about an expectation of opening that hotel in Atmos 13 months.
With an eye trying towards trying to get it opened in 12 months and so the ability to get mid scale deals signed shovels.
Speaker Change: <unk> shovels in the ground and open more quickly than what we've seen with a lot of other tiers in our portfolio.
<unk> is another factor in our enthusiasm for our entry into mid scale.
Thanks, everyone.
Thanks.
Thank you we'll take our next question from Kevin Copeland with TD Cowen. Your line is now open.
Kevin Kopelman: Thank you so much.
Now while the MGM deal is starting off.
Kevin Kopelman: As you think about your pipeline talks what's the outlook for these for other large partnerships akin to the MGM deal going forward. Thanks.
Yes, so lenient both in Las Vegas, This past weekend for Super Bowl and so I'll make a couple comments number one when you look at the vibrancy of that market you look at how are effectively the city was able to accommodate an event like that you likely heard the NFL.
<unk> are talking about how anxious the league is to get back to Las Vegas, I think both of US left the market really enthusiastic about what this partnership is going to offer our guests around the world and our bottom line numbers.
In terms of your specific question as we talked about when we announced the transaction. It is a creative opportunity for us.
I think you will continue to see lots of activity for us is in traditional conversions, but in the category of multi unit conversions you heard us a quarter ago talk about a terrific multi unit conversion in Vietnam with a partner called Finn Earl and our teams around the world.
Eldar actively working on a number of multi unit conversions to the extent a unique opportunity like MGM presents itself I think will roll up our sleeves and see if we can make sense of it we're really excited about what MGM dose for bond Boyd and if those sorts of opportunities presented.
Themselves, we are certainly open.
Kevin Kopelman: But you are pursuing.
Great very helpful. Thanks, Tony.
Sure.
Thank you we'll take our next question from Michael Bellisario with Baird. Your line is.
Thanks, Good morning, everyone.
Good morning.
Michael Bellisario: Just on the capital allocation front.
Been a handful of reports are just a few smaller brands for sale, particularly domestically are you seeing anymore.
Interesting tuck in M&A opportunities and does the math pencil any better or worse, especially relative to where where your where.
Where your stock is trading today.
Well so some great question and as we have said for a long time, we've been very consistent in our message about.
Really always being willing to entertain the way that we grow.
We have grown very successfully both in terms of tuck in brand acquisitions as well as growing organic new brands and growing that way around the world. We will continue to do that we also are going to stay very price disciplined in terms of looking at both Oh.
The price that you would be paying for the existing distribution as well as for the growth opportunities.
We are really aware of looking at where something could add something unique to our portfolio whether it is in a certain part of the world as we did with our city Express deal.
That really was a tremendous way for us to enter the midscale space in a really attractive market like Mexico.
As a absolutely reasonable price. So I think in that regard you know you got to look at all the elements and what's out there and as you know it depends very much all of the sellers.
Expectations of what Theyre looking for AI.
I would say that.
Well over time.
We hope to see that those opportunities continue to be there and then we're going to remain as disciplined as we have before and looking at them.
I'll just build on <unk> comment I think this this historical blend of considering acquisitions, where we think they still are an opportunity and our brand architecture or accelerate.
Our growth.
Jacques Ruffie, where we're not happy with our pace of organic growth.
But also looking at the launch organic platforms is a strategy that has served us well and our strategy.
<unk> to guide, our thinking about adding new platforms.
Interesting I was looking at some numbers last night autograph, which was a platform in the soft brand space that we launched from scratch between the open and pipeline, we have more than 400 hotels and AC by Marriott, which was a platform that we acquired in Spain.
Time of acquisition I think had 80 or 90 hotels today between opening pipeline has nearly 400 hotels and so there are a variety of strategies to add compelling platforms to the portfolio and we'll continue to look at both.
Yeah.
Got it that's helpful. And then just one quick follow up on on mid scale, what's the owner profile. There look like thinking about the mix of existing Marriott franchisees versus new owners and would you expect that mix to be similar for the new brand. Thanks.
Very similar yes.
Have a great mix always welcoming new owners into.
Our stable of owners and franchisees.
But I would say when I think about.
The studio arrest some of that.
The blend of what we're seeing in terms of Uh huh.
Called the Onesies and Twosies, where somebody is kind of in a particular market been very successful and wants to build a hotel there I would say many of them in the studio read space reflect a multi unit.
Expectations on the part of partners of ours, who we've been working with for a long time.
Okay.
No.
We'll take our next question from David Katz with Jefferies. Your line is now open.
Hmm.
Hi, Damon.
Hi, good morning, everyone.
Okay I apologize.
I wanted to just drill a little bit deeper into the conversion discussion if I may.
Just looking at the percentage of your pipeline versus old machine elsewhere.
Michael Bellisario: If you could talk more about.
Where those are coming from what the strategies are.
Whether there is any change in the landscape.
Refuse whether theres a change in pricing.
Whats new with it it's been such an important discussion for the past year or so among everyone including yourself.
Sure so.
Conversions have always been an important part of our growth story in and in a climate, where the debt markets for new construction are somewhat constricted the importance of of conversions is elevated.
As we talked about in the opening really compelling numbers in 2023, with 25% of our openings and 40% of our signings in the conversion category.
They are coming in terms of the type of projects pretty typical of what we've seen over the last number of years. So a good mixture of conversions from other brands.
And with such a compelling stack of soft brands with luxury collection autograph and tribute lots of conversions coming from the world of independence as well from a geographical perspective.
Not necessarily a shift in strategy, but we are seeing in for instance, some of the Asia Pacific markets, which historically had been disproportionately new build we are seeing some uptick in conversion activity our pursuit of conversion opportunities is quite deliberate.
And it's resulting in deals like the one I mentioned earlier in Vietnam.
We will take our next question from Patrick Shovels with Truth Securities. Your line is now open.
Patrick Scholes: Hi, good morning, everyone.
Good morning.
Good morning, I wanted to drill down a little bit on the credit card fees.
It looks like you're expecting a big step up in if I understand it correctly step up in growth rate for <unk>.
2024, which actually I think you said 90 10.
If I'm correct is a little bit lower than Investor day up 12%, but specifically with that step up are you expecting that from.
New card sign ups or more so from sort of same user.
Spend thank you.
Sure. So first of all for first of all at once.
Be clear the difference between the growth rates between 'twenty three 'twenty four I would not expect to be very different across the credit cards.
They grew 9% to 10% in 'twenty, three and we would expect them to do fairly similarly at 24.
That is overwhelmingly a function of increase in the number of cardholders as you've heard us talk about we've been really successful in adding credit cards and a number of countries.
Really.
Expanded that program quite a bit and then some of the markets I'll point out Japan as an example, we've just seen a really.
Wonderful acceptance.
The bond with a credit card so in that respect.
Back to I'd say the growth that we would expect our Indo skis comes overwhelmingly from additional having additional cardholders and then overall a really.
Really very small amount related to a typical cardholder spend now when I look at overall not revpar piece I think that's where it gets a little bit interesting because you are dealing with things like residential.
Where you see residential branding fees tied to win those.
Those units opened for occupancy so they're quite lumpy. So as I explained in Q1, we expect them to be meaningfully lower in Q1, and Q1 and 23, while for the full year, we actually are seeing that business do very well and we expect year over year to see fantastic.
Growth in branding fees overall for the year at 24 over 23. So when you look overall at the non Revpar fees. We're excited about to see them continue to grow at these you know roughly a double digit.
Sorts of numbers for another year.
Okay.
Okay.
And we will take our next question from Robin Farley with UBS. Your line is now open.
Great. Thanks for taking the question.
Circling back to to the unit growth and I know, you've given a lot of great color around it.
Just looking at the kind of to your CAGR you had given at the Investor day, excluding MGM when the timing of that wasn't quite known this kind of implying 24 and 25, we'd be up excluding.
Excluding MTM and the kind of 4% to 5% range and I think the.
24 guide today, if MGM is up in the kind of 3% to 4% range. So maybe expecting an acceleration two 5% to 6% growth next year and just wondering I know you talked about.
You heard that conversions.
The higher percent of that.
You also recently announced the franchise agreement in China that.
The timing wasn't entirely clear it was kind of potentially over the next three years that can be had.
I don't know if it would be like 50 basis points, a year I guess I wonder if you could.
And also whether that.
That franchising agreement how much of that you expect to be driving the acceleration next year.
Patrick Scholes: Helpful.
Some color around the acceleration thank you.
Sure. So let me I'm going to do the last question first and then.
At some point, Tony feel free to jump in too.
More color, but let's first talk about telematics, which we're really excited about our.
Patrick Scholes: Our relationship they are.
Where there is a terrific a large hospitality company in China.
Patrick Scholes: We're looking forward to having the opportunity to convert a number of hotels.
And we actually Didnt give a timeframe. So it would just be as part of our normal growth in China and as we look at our overall group scrubbed. So there's not a particular.
Kind of specific sort of 10, 2030 40 basis points associated with the conversion of a number of those hotels into attributes.
We are again.
Really excited about working with them on.
The opportunity, but it's just part of our overall new rooms growth as I said, the signings that we're seeing in greater China.
Our very encouraging both in 'twenty, three and as we move into 'twenty four but that's really in addition to what you were talking to about the <unk> deal.
At Atlantic Steel and that is where I talked about the rooms growth in Asia are in the high single digits, which again is just a great reflection of the desire for our brands. When you ask about the basic kangaroos for returns growth relative to the security analyst meeting in September.
Our.
I think you really have to kind of.
Go back to what Tony said in his earlier comment is that these deals can be lumpy, whether its city express whether it's MGM, whether its a large conversion deal that we do and so you really need to think about the numbers that we gave that five to five and a half for a three year CAGR, which we.
To be really confident in and excited about.
We ended up a little bit higher on our net rooms growth in 'twenty three than.
And then the afforded to four two to four to five range that we gave and that's really a reflection of that.
The steady strong demand for our brands.
Then when we look at the MGM and the continuation of turning these rooms for our pipelines into openings, we actually see it as being essentially the same as where we were back.
Back at the Sam.
And then again you have to kind of be looking at it.
Not solely within the context of one ear and Robin I think the only other question embedded was about conversion volume.
And we mentioned in the opening that our openings in 23 were about 25% conversions. Even if you look at 'twenty four expected openings ex MGM, we expect some acceleration to about 30% of those openings being conversions and when.
Do you think about 40% of our signings last year being in the conversion category that's logical.
We have reached our.
Our allotted time for questions I would now like to turn the call back over to Tony for any additional or closing remarks.
Tony: Well as always thank you again for your interest in Marriott, we are coming off a terrific year in 2023 tremendously enthusiastic about 24 or 24 holes and we look forward to seeing all of you on the road safe travels.
Yeah.
This does conclude today's.
For your participation you may disconnect at any time.
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