Q1 2024 Marriott International Inc Earnings Call
Good day everyone.
And welcome to today's Marriott International first quarter 2024 earnings Conference call.
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Following the speakers remarks, there will be a question and answer session.
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It is now my pleasure to turn the conference over.
Jackie Burka McConagha: To Jackie mechanical senior.
Senior Vice President Investor Relations. Please go ahead.
Jackie Burka McConagha: Thank you good morning, everyone and welcome to Marriott first quarter of 2024 earnings call.
Jackie Burka McConagha: On the call with me today are Tony Capuano, our President and Chief Executive Officer.
The Hilbert: The Hilbert, our Chief Financial Officer, and Executive Vice President development.
The Hilbert: <unk>, our vice President of Investor Relations.
The Hilbert: Before we begin I would like to remind everyone that many of our comments today are not historical facts are considered forward looking statements under federal Securities laws.
These statements are subject to numerous risks and uncertainties as described in our S. E. T. Finally, which can cause future results to differ materially from those expressed in or implied by our comments.
Otherwise stated our Revpar occupancy average daily rate and property level revenues comments reflect systemwide constant currency results for comparable hotel and all changes refer to year over year changes for the comparable period Steve.
Statements in our comments in the press release, we wish the press release, we issued earlier today are effective only today and will not be updated and the 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 Thanks, Jackie and good morning, everyone walks.
24 is off to a solid start Marriott continues to deliver great experiences to travelers around the world.
First quarter Global Revpar rose four 2% with ADR, increasing around 3% and occupancy, reaching almost 66% up nearly 100 basis points year over year.
While overall industry Revpar growth is normalizing post COVID-19, we continue to gain Revpar index across our portfolio and increase our market share of global hotels.
The Hilbert: Once again, we saw revpar growth across all three of our customer group.
Leisure transient business trends.
Ooh, which comprised 24% of cool nights in the first quarter once again, the strongest customer segment.
Turning to the year ago quarter group, Revpar rose, 6% globally.
Full year 2024 worldwide group revenues were pacing up 9% year over year at the end of the first quarter with a 5% increase in room nights and a 4% rise in average daily rate.
Leisure transient accounted for 42% of worldwide room nights in the core.
Globally, both leisure demand and ADR growth have remained remarkably resilient driving leisure revpar up 4% year over year.
This transient which contributed the remaining 34% of total room nights in the first quarter had a 1% increase in revpar.
We are making great progress on the multi year digital and technology transformation of our three major systems reservations property management and watch it.
Through this transformation, we expect to unlock new revenue opportunities to further strengthen our efficient operating model enhance marriott bonds white and elevate the associate and customer digital experience, we still expect to begin rolling out our new cloud based systems to properties next year.
The Hilbert: Meantime, we're enhancing digital experiences that matter most to customers, primarily how they shop and books through our channels.
We also recently celebrated the five year anniversary of Marriott bonds, which added nearly 7 million members during the quarter and had around 203 million members at the end of March.
The Hilbert: Member penetration of global room nights reached record highs in the first quarter at 70% in the U S and Canada and 64% globally.
Since its introduction Meredith Adler way has evolved to become a travel and loyalty platform encompassing a portfolio of more than 30 brands across nearly 8900 properties and other travel offerings, such as homes and villas by Marriott bonds White and the Ritz Carlton Yacht collection Marriott ongoing also.
Spanish numerous additional collaborations and member benefits, including co brand credit cards in 11 markets and Kelly and access to a broad range of unique curated experiences through Marriott bonds way mogens, including select Taylor Swift Era's tour concert performances looking.
The Hilbert: Looking ahead, we continue to focus on new ways to enhance the platform and connect with our members in their daily lives and across their traffic charts.
The Hilbert: We had a very busy first quarter on the development front, we added a record 46000 net rooms growing our distribution by seven 1% compared to the end of the first quarter last year.
She hasn't collection with Marriott Bon voyage has now launched with 16 properties in Las Vegas, and other key U S cities now available on our system. While it is still early days, we've been extremely pleased with the initial booking pace and Marriott envoy room contribution which have both outpaced expectations.
The Hilbert: Well Nancy environment in the U S and Europe is still challenging we have strong momentum in global signings. After a record 2023 and have tremendous optimism for the full year.
Both greater China, and APAC had notable geo production in the first quarter.
Year over year, our open and pipeline roads grew six 7%. Excluding the addition of our 17000 City Express rooms.
<unk>, including multi unit opportunities continue to be a meaningful driver of growth representing 30% of global signings in the first quarter.
Our new Midscale brands City expressed by Marriott four points Express and studio Ras are seeing significant developer interest earlier.
Earlier this year, we signed our first city express steel in the region since acquiring the brand and we are in multiple deal discussions for other properties across the calories.
We are also now opened our first four points expressed in Turkey and have all their properties in the pipeline.
We also recently signed our first mid scale deal and the APAC a portfolio of more than dozen hotels that are expected to be added to our system. Later this year.
In the U S and Canada, we have commitments for around 140 studio Rez properties and are actively working on deals for over 100 more.
Additionally, in about a month, we look forward to unveiling details on our next exciting brand launch our conversion friendly midscale brands in the region.
As always I spent much of my time this year traveling around the world.
The Hilbert: It's been a pleasure to visit many of our amazing hotels and speaking with our incredible associates I wanted to express my gratitude to all of our associates for their continued hard work and dedication.
As we will now discuss further as part of her financial review, we are raising our full year 2020 for earnings and capital returns guidance on the back of the strength of our diverse global portfolio. The continued resilience and steady demand for travel our strong international performance and our continued room.
The Hilbert: This growth leading.
Thank you Tony.
First quarter Global Revpar Rose four 2% Revpar in the U S and Canada, where demand has normalized rose one 5%.
Growth in the U S and Canada was led by strong growth in large corporate business with our top 100 accounts seem the most sequential improvement in eight quarters.
The Hilbert: Leisure Revpar was flat in the U S and Canada with more customers going abroad to find warmer weather.
The Hilbert: Quarterly Revpar results in the region was impacted by negative growth in March due to the timing of Easter given less business travel will be before the <unk>.
Holiday the impact of a months Revpar was roughly negative 300 basis points of course, we expect a similar favorable impact in aprils revpar.
First quarter International Revpar increased 11% growth was led by a remarkable 16, 5% revpar gain Pac held by strong macro trend sustained leisure and business growth and an uptick in cross border demand.
Especially for mainland China is international Airlift improved.
Revpar in count rose nearly 12% in the quarter with excellent leisure demand coming from the U S. Revpar grew 10% in India with strong growth across most of our largest markets greater China experienced a 6% increase in revpar.
Growth was strong in January and February rising, 10% for those two months demand weakened a bit after the Chinese new year with slower macroeconomic rabbits, and more outbound travel, especially from high income travelers.
First quarter total royalty revenues were above our expectations rising 7% year over year or 212 1 billion. The increase reflects higher revpar rooms growth and 10% higher co brand credit card fees.
The Hilbert: Hello, New card acquisitions grew 18% and card spend rose, 10% driven by significant growth in our international card programs.
Incentive management fees or <unk> rose, 4%, reaching 209 million in the first quarter significant increases in each of our international regions were offset by a decline in the U S and Canada in part due to lower fees in Mt.
The Hilbert: First quarter adjusted EBITDA grew 4% to nearly 114 billion.
Now I'd like to talk about our outlook for the full year.
2024 outlook still assumes continued sturdy travel demand and a continuation of current macroeconomic trends.
Global Revpar is expected to grow four 5% in the second quarter and 3% to 5% for the full year.
By customer segment Revpar growth is still anticipated to be driven by another year of strong growth in group revenue.
The Hilbert: Genuine improvement in business transient revenues and slower, but still growing leisure revenues revpar growth is expected to remain higher in our international markets than in the U S and Canada.
While our full year global Revpar guidance is not changing compared to our prior expectations. We now expect higher year over year Revpar growth in APAC EMEA.
Uh huh.
<unk> and lower Revpar growth in the U S and Canada and greater China.
As a result, we are raising our full year adjusted EBITDA and adjusted EPS expectations, primarily due to higher and only about <unk> of our international regions in.
The Hilbert: In the second quarter Revpar growth benefits from Easter timing fee growth is expected to be in the 7% to 8% range. Our owned leased and other revenues net of expenses are anticipated to be lower than the prior year largely as a result of a few favorable items in the year ago quarter.
For the full year gross fees could now rise, 7% to 9% to five two to $5 3 billion with non revpar related fees rising 9% to 10% driven by strong credit card and residential branding fee growth.
The sensitivity a 1% change in full year 2020 for Revpar versus 2023 could be around 50 to 60 million revpar related fees.
The Hilbert: Owned leased and other revenues net of expenses could now totaled 335 to 345 million.
We now expect 2020 for G&A expense comprised 1% to 300% year over year recall that there were a few discrete one time items from 2023 that are expected to offset wage and benefit increases.
Full year adjusted EBITDA is now expected to rise between seven and 9% to roughly five to $5 1 billion or 2024 effective tax rate is expected to be just above 25%.
2024, adjusted EPS is now expected to be between $9.31 and $9.65.
We still anticipate net rooms growth of five 5% to 6% for the full year.
The Hilbert: Additionally, we remain confident in the three year net rooms compound annual growth rate, we discussed at last year's Investor meeting of five to five 5% from year end 'twenty two to year end 2025.
For more details on second quarter and full year metrics. Please see our press release.
Our capital allocation philosophy remains the same we're committed to our investment grade rating investing in growth that is accretive to shareholder value and then returning excess capital to shareholders through a combination of a modest but rising cash dividend and share repurchases.
For 2024 factories in the $500 million of required cash in the fourth quarter for the purchase of the Sheraton Grand Chicago, given our higher adjusted EBITDA expectation capital returns to shareholders could now be between $4, two and $4 4 billion.
Okay.
The Hilbert: Or your investment spending is still expected to total one to one 2 billion. This includes another year of higher than historical investment in technology. The vast majority of which is expected to be reimbursed over time.
The Hilbert: As a reminder of the 500 million for the Sheraton Grand Chicago consists of $200 million of Capex and 300 million elimination of a previously recorded guarantee liability.
The Hilbert: <unk> spending is also expected to incorporate roughly 200 million for our owned and leased portfolio. It includes spending for the elegant portfolio in Barbados as well as the renovations and a fabulous W Union square in Manhattan, well ultimately look to recycle these assets and sign long term man.
The contracts after renovations are complete Tony and I are now happy to take your questions operator.
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The Hilbert: Our first question comes from Shaun Kelly with Bank of America. Please go ahead.
Hi, good morning, everyone. Thanks for taking my questions.
Shaun Clisby Kelley: Linear or Tony I want to dig in actually on China, a little bit I thought the comment in <unk> prepared remarks about this.
Slowdown you're seeing there what was incremental so my questions are twofold one.
Shaun Clisby Kelley: Seeing that continue at all into April if you could give us just kind of a little bit of a real time feel and Tony I'm sure you've probably been over in that region. So maybe if you could help us break it down by you know is this the Hong Kong Macau or is this sort of more broadly across some of the cities and then secondarily, probably as importantly, as any of this translating into what you're seeing on the development front.
Speaker Change: You very much.
Speaker Change: So let me answer the latter part first because that's that's very easy to point out and that has absolutely no impact on the development front matter of fact, as Tony pointed out we actually had a tremendous quarter of signings in greater China in the first quarter as well as APAC for that matter.
So really excellent continued demand for our brands and from owners there.
Speaker Change: Q1 was a little interesting in greater China, Sean a little bit of a tail of each month.
Speaker Change: From that standpoint, you had a really strong domestic demand coming.
Speaker Change: In January and February and with the Chinese new year, but also reflecting the fact that last year in Q1 for example.
Speaker Change: And we're seeing stunning increase in demand all domestic as they were coming out of Covid. So when you think about it for the full quarter.
Speaker Change: <unk> actually had a decline in revpar year over year, although very strong demand.
Speaker Change: And in Hong Kong Macau with much.
Speaker Change: More relaxed restrictions, we had almost 30% increase in Revpar in Q1, so super strong in tier one cities.
Speaker Change: We're very strong classic Shenzhen, Shanghai, Beijing, They did really well.
Speaker Change: It's really where we saw interestingly in March the new tier one cities is where I think you were seeing the impact of the overall macroeconomic picture in China.
Speaker Change: We're at it it wasn't quite as strong as we might have.
Speaker Change: Expected, but again, the overall still really strong revpar for greater China at 6% and again for the full year, we still expect a nice strong revpar for greater China, but but yes, a bit of a view that the macroeconomic situation there may.
Speaker Change: I mean that Revpar is a little bit lower than we expected a quarter ago.
Speaker Change: And Sean the only maybe qualitative observation I would share with you and I'll try to underpin it with one statistic.
Speaker Change: I was there recently I was in Shenzhen, Hong Kong, Macau, and while it certainly does not feel as balanced and populated with international visitors as maybe we were accustomed to you know pre pandemic world is felt better than when I was there a year ago and in fact.
Speaker Change: If you look at the first quarter.
Speaker Change: International guests represented about 15% of our room nights in greater China.
Speaker Change: That compares to about 28% in the same quarter back in 2019. So it is improving steadily and the availability of the airline seats is improving steadily but I think over time that represents some additional upside for us as more and more international deserves returned to China.
Speaker Change:
Speaker Change: Thank you so much.
Speaker Change: Of course.
Speaker Change: Thank you. Our next question will come from Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen White Grambling: Hey, there, we'd love to just clarify a couple of things on the guidance.
Stephen White Grambling: On the fee increase to the guidance is that all IMAX or is there any change as we think about non revpar related contributions and then I would love to just hear some of the moving parts for the increase on the owned and leased side too.
Speaker Change: Yeah sure absolutely so.
Speaker Change: Dan do you want to go.
Dan: The last ones first and that is this does not this increase in fees does not reflect an increase in the non revpar related fees. We still do expect really strong growth as we talked about the 9% to 10% a year over year and those fees, but not an increase and those from our prior guidance.
Speaker Change: I would say Stephen.
Speaker Change: 75% of the increase is.
Speaker Change: Is from IMS.
Speaker Change: Overwhelmingly essentially entirely from our international markets just to give you a sense a year ago in the first quarter.
Speaker Change: International was 58% of our IMS in this year in the first quarter was 64% and again just as an example in APAC, 90% of our managed hotels paid IMS in the in the first quarter earnings followed it was almost 80% said they they both saw some really nice.
Speaker Change: Increases so we clearly outperformed particularly in the IMF space. The remainder of the growth is really a reflection of none.
Speaker Change: Revpar related gross fees for example, when you have in our international on hotels, very strong food and beverage sales et cetera, where we're also getting fees as well as the ramp up of our fast growing segments in Asia Pacific When you think about.
Speaker Change: A new hotel.
Speaker Change: Ah, we're getting nice growth there as well, but 75% is really from the from the IMF and obviously, including the outperformance in Q1.
Speaker Change: Oh.
Speaker Change: Got it that's helpful I'll jump back in the queue. Thank you.
Speaker Change: Thank you. Our next question comes from Joe Greff with JP Morgan. Please go ahead.
Joseph Richard Greff: Good morning, everybody.
Joseph Richard Greff: Thank you Leanne.
Joseph Richard Greff: Hi, Tony.
Joseph Richard Greff: In your prepared remarks, you went through the three.
Joseph Richard Greff: Main customer segments are going through your phone.
Joseph Richard Greff: 24 outlook and you talked about leisure steep seeing slow, but still positive revpar growth I think that was on a worldwide global basis.
Joseph Richard Greff: What is baked in for U S leisure revpar growth for the balance of the year.
Joseph Richard Greff: Yeah.
Joseph Richard Greff: So generally speaking we do see what are you sure are relatively speaking at the lower end of the growth rates, but still being positive.
Joseph Richard Greff: But I wouldn't put it towards the lower end group is going to be the homerun hitter again for the full year, we do see between AR being up as well and continuing to progress as you know Joe in Q1, obviously being fitted with weaker because of the month of March but when we look at it overall for the year we do.
Joseph Richard Greff: We expect the team to continue to gain ground and if.
Speaker Change: I can't I'm going to go back for one second and asks answer Sean's question on owned and leased which the increase in guidance. There is overwhelmingly from a stronger performance in our international owned leased hotel portfolio, sorry, Joe I'm going to hijack. Your question they are to make sure I answer.
Joseph Richard Greff: Was asked before and I think Joe the further answer your question.
Joseph Richard Greff: The differences, we're seeing in leisure in the U S and Canada relative to global leisure are broadly reflective of demand patterns, we're seeing across segments.
Joseph Richard Greff: If you look at it at.
Joseph Richard Greff: The guidance, we're giving we're not changing our our revpar guidance, but it's shifting a little bit we're seeing a little more normalization in the U S and Canada.
Joseph Richard Greff: Continued increases and strength in the international markets and I think that applies specifically to your question on Malaysia.
Speaker Change: Great and then Tony I think in your prepared comments.
Anthony G. Capuano: About the MGM licensing deal.
Anthony G. Capuano: I think he used the word we're extremely pleased and it's outpacing expectations.
Speaker Change: Can you talk a little bit what that specifically means and maybe kind of throw I don't know if its adoption measures or share of occupancy.
Speaker Change: Any kind of details would be helpful. Yes.
Speaker Change: Yes, not yet Joe I mean, I think it's so early we just brought them on the platform. So it's more anecdotal than anything else.
Speaker Change: I guess is bill and our friends at MGM will talk about it from their perspective, as well, but having done these sorts of deals over the years.
Speaker Change: Both parties have expectations about how quickly we will start to get traction on booking volume you said Bon voyage penetration and and we make some assumptions that we do those deals and I think it's safe to say for Marriott perspective, so as expectations have been.
Speaker Change: Exceed it in the early days.
Speaker Change: Great. Thanks very much.
Speaker Change: Of course.
Speaker Change: Thank you. Our next question will come from Patrick Scholz with Truest Securities. Please go ahead.
Patrick Scholz: Great. Thank you I Wonder if you can talk a little bit about.
Patrick Scholz: How 2025 and 2026 group revenue pace is looking maybe break that out by.
Patrick Scholz: Occupancy and ADR, certainly <unk> seen a very good group business this year, but comps do get harder going forward and I'm curious if you could give us some color on the future years support that segment. Thank you.
Speaker Change: Yeah. So Patrick it's early to start talking about 2020, but I'll try and give you some visibility into.
Speaker Change: Group pace in 2025, right now are tracking up about 13%.
Speaker Change: And it is is driven by both gains in demand and ADR.
Speaker Change: Or up about 7% in a definite room set up about 5% in ADR.
Speaker Change: Yeah.
Patrick Scholz: Okay. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Thank you. Our next question will come from Brent <unk> with Barclays. Please go ahead.
Brent: Hey, good morning, everybody. Thanks for taking my question. So I wanted to talk good morning, I wanted to talk a little bit about <unk>.
Brent: Construction activity your pipeline went up it looks like nicely quarter over quarter, if you back out MGM out of the construction pipeline.
Speaker Change: And so I guess Tony.
Speaker Change: Is there a sense that there's been any change in the developer mood with this sort of latest notion that the fed could be on hold for longer and maybe you could talk through the lens of U S starts.
Anthony G. Capuano: Sure. So maybe I'll go I'll follow these trends are going in reverse order I'll talk a little bit about the pipeline and then I'll, let <unk> provide some insights on both developer sentiment turn construction starts I agree with your observation I think the trends on the pipeline are really encouraging and the thing that.
Anthony G. Capuano: Was really encouraging to me if you look at the pipeline and just compare Q1 'twenty four to Q1 'twenty three because it's a it's a decent apples to apples comparison, because neither of those would have had a M. G. M were up 9% year over year on the pipeline and I think that's reflective of.
Speaker Change: Some of the broad trends that Lee described in her prepared remarks.
Speaker Change: And when you think about the.
Speaker Change: It kind of the overall environment I think it's got a couple of things going on you've still got a constrained lending environment certainly in the U S and Europe I think at the same time, though there is more confidence and a steadier economic.
Speaker Change: Sure. If you will so that we are for example, we've seen an increase in construction starts in the U S. It's about 25% compared to a year ago.
Speaker Change: We're really seeing a nice pick up as people start to move forward.
Speaker Change: Look at a more positive environment, where perhaps not quite as much volatility.
Speaker Change: And again as Tony has always quick to remind.
Speaker Change: Everyone. You know this is a long term business, where our folks are used to weather.
Speaker Change: Economic cycles and recognize that if there is a great place to put a hotel with strong demand.
Speaker Change: Fundamentals, it's going to get it going, especially with a beautiful new product.
Speaker Change: So from that perspective, we feel really good we added 31000 rooms to our pipeline.
Speaker Change: In the first quarter and really had a strong momentum around the world in terms of developer.
Speaker Change: Interest across all the brands.
Speaker Change: No. That's super helpful. And then just as a quick follow up maybe not so quick.
Speaker Change: Tony You mentioned gain that you guys gained revpar index is there any brands or regions or segments, you would highlight where you're where you're taking the most share.
Anthony G. Capuano: Yeah. So.
Speaker Change: Certainly I think that the strength.
Anthony G. Capuano: Of our luxury footprint is an area, where we continue to lengthen our lead.
Anthony G. Capuano: We're pleased with with Revpar index and the substantial premium that we enjoy really across the portfolio I think that the one maybe call beyond I would give you is that as our scale continues to grow I don't know that the RPI is as informed.
Anthony G. Capuano: It is as it might have been a decade or two ago, particularly in a post starwood world. We've got many competitive sets now where the bulk of the said, it's our own distribution of them. So I don't know that it's as relevant but it's certainly a metric we track and we're certainly pleased with the continued progress that way.
Anthony G. Capuano: No the only thing I'll add to it is that as we look over time, we are very pleased to see these revpar indices are really globally and also generally in the within the continent.
Anthony G. Capuano: <unk> levels that.
Anthony G. Capuano: That we've seen over time, so I think it's a great time, Oh, the power opine boy and our brands to see that it is it's kind of consistently some of the strongest numbers that we've seen over time.
Anthony G. Capuano: And when you look at the regions of the World that are are outperforming all use APAC as an example.
Anthony G. Capuano: One of the powerful drivers to the strengths of our index in a market like that is our leading footprint I mean, when you look across some of the best performing markets there.
Anthony G. Capuano: The industry's largest footprint in markets like India, Japan, and South Korea is helping us drive really strong revpar performance.
Speaker Change: Great. Thanks, so much everyone.
Anthony G. Capuano: Okay.
Anthony G. Capuano: Thank you. Our next question comes from Richard Clarke with Bernstein. Please go ahead.
Richard J. Clarke: Hi, Good morning, Thanks for taking my question, maybe just to start off with you made a couple of comments about strong outbound travel out of the U S and China.
Richard J. Clarke: How well hedged do you see yourself for that today to those consumers stay and Marriott hotels, when they travel to other cities or is that normalizes does that become a tailwind for you.
Richard J. Clarke: Domestic travel begins to pick back up again.
Speaker Change: Yeah. It's a great question I think the way I would answer it is to point to the comments I made at the outset about <unk> penetration.
Speaker Change: It is not a coincidence against the backdrop of the environment. You described that we set all time records for Bon voyage.
Richard J. Clarke: Penetration both in the U S and globally and to me the strength of our loyalty platform combined with the breadth of our footprint in the international destinations, where our guests want to travel I think does create a tailwind for us and the only thing I'll add is kind of interesting.
Richard J. Clarke: Fact that we're really essentially back to where we were in terms of cross border penetration and while it may vary a bit here and there we can clearly still got lower cross border penetration in China.
Richard J. Clarke: And we've got in some other areas a bit higher in Cala was particularly high in Q1.
Richard J. Clarke: In the U S. It's very steady as she goes wherever you've got basically only 5% of the customers in the U S are coming from outside the U S a and that.
Richard J. Clarke: Broadly speaking our global distribution is is just tremendously helpful. As folks find the places they want to go within our system, but that overall.
Richard J. Clarke: A lot of the variations are really do drive that big of a change in revpar.
Speaker Change: Okay, Great maybe just as a follow up on the loyalty come in one of your peers has been making I guess a bit of noise out of the fact that they think they will overtake you in terms of total loyalty members.
Richard J. Clarke: Is that a relevant metric to you and is any of that tech investment youre doing looking to engage.
Richard J. Clarke: A higher number of customers overall.
Speaker Change: Well without question.
Speaker Change: The long list of loyalty metrics, we look at I think we have our enthusiasm about having the industry's largest platform.
Speaker Change: But from my perspective, it goes much deeper than that.
Speaker Change: Size is important of course engagement to me is a much more important facet of the program and the work that we are doing.
Speaker Change: To drive that engagement through our large powerful and growing credit card portfolio through the breadth of experiences that we offer our members.
Speaker Change: Those are the powerful drivers of engagement with our members I think the penetration is obviously critically important as you look at.
Speaker Change: Making sure that you are helping your customers understand the value.
Speaker Change: The program and all the options that they have whether it be going to a 141 countries or actually thinking about things like Ritz Carlton yacht and things like the Bonnefoy moments that Tony talked about so.
Speaker Change: Okay and number is a number but I think it's a it can actually.
Speaker Change: Not be.
Speaker Change: Trimmed guide for the power of our program.
Speaker Change: Thanks, Dan Thank you.
Speaker Change: Thank you. Our next question comes from Smedes Rose with Citi. Please go ahead.
Smedes Rose: Hi, Thank you.
Smedes Rose: I just wanted to ask a little bit more about the trends youre seeing in the U S.
Smedes Rose: It sounds like you're you revise your U S expectations down a little bit and it sounds like that's primarily due to the.
Smedes Rose: The leisure component, maybe more people going abroad, saying, what's your hotels, there and I get that your worldwide Revpar outlook hasn't changed but is there anything else you are seeing in the U S. That you can share that maybe led you to expect a little bit lower coming out here nationwide for the year or is it all.
Smedes Rose: Because of what Youre seeing on the leisure side.
Speaker Change: Yeah, no it's absolutely solely because of what we're seeing on the leisure side.
Speaker Change: And again, we still do expect to see our debt at roughly will be up a little for the year, but are we on the leisure side, but we do.
Smedes Rose: And would that be T. A group are absolutely as strong as we expected and leisure is still fine.
Smedes Rose: But when you look at the change, which which I would say kind of broadly speaking, maybe a point lower in the U S and we expected a quarter ago, maybe a little bit more than a point.
Smedes Rose: Higher internationally kind of gets us to roughly the same place from a revpar picture globally.
Smedes Rose: Other thing I'll point out is as we do expect.
Smedes Rose: That art here.
Smedes Rose: Across the segments in the U S. We do expect that they will all be up for the year in terms of Revpar from select service all the way up through luxury but again to your point, yes. It was the leisure segment.
Smedes Rose: It was a bit lower.
Smedes Rose: Okay, and then I just wanted to ask you you mentioned in your opening remarks, a conversion friendly brand.
Smedes Rose: Could you just talk a little bit more about that kind of what what.
Smedes Rose: What are you targeting there and is that primarily I guess for the U S or.
Speaker Change: Sure No it's global and I think while we have a terrific track record of doing conversions across many of the brands in the portfolio. When we find ourselves in an environment like this where conversions are a particularly important given some of the challenges in the <unk>.
Smedes Rose: Markets.
Smedes Rose: We feel like our trans actors are very well armed with brands like the three soft brand platform. So luxury collection autograph tribute great examples where they have a level of flexibility not only quality, but on aesthetic that is particularly appealing to.
Smedes Rose: A broad cross section of the owner and franchisee community.
Speaker Change: Okay. Thank you.
Smedes Rose: Mhm.
Smedes Rose: Thank you. Our next question comes from Dan Pulitzer with Wells Fargo. Please go ahead.
Dan Pulitzer: And thanks for taking my questions are leaning I think you mentioned that the within group. The Fortune 100, you've seen the strongest quarter over quarter growth in quite some time can you maybe give a little bit of additional color and how that maybe compares with the small and medium size business customers and and maybe remind US you know which typically lead.
Dan Pulitzer: The other within the cycle.
Dan Pulitzer: Okay.
Dan Pulitzer: So a couple of things one reminder, that small and medium size businesses.
Dan Pulitzer: That is probably the hardest segment to actually pinpoint all the specifics on the travel, but I think you did see in Q1, you did see.
Dan Pulitzer: But relatively speaking slightly a lower.
Dan Pulitzer: The lower percentage of small and medium sized BT business.
Dan Pulitzer: Across the portfolio showing up in the lower end up on the special corporate on the larger company size, we absolutely continue to see.
Dan Pulitzer: Recovery of that business as you saw for example, finance the finance segment is now 8% relative.
Dan Pulitzer: Relative to 2019, you saw really strong.
Dan Pulitzer: <unk> momentum in manufacturing and communications and actually while accounting consulting and technology are still down meaningfully compared to 2019. They also continue to see meaningful momentum into Q1.
Dan Pulitzer: When you think about a typical trends in a cycle I think one quarter does not a.
Dan Pulitzer: A trend make we know that the month of March.
Dan Pulitzer: <unk> has had some real calendar issues and you also know that January tends to be a little off on in terms of being able to determine trends because of the timing of when Christmas and new years are so I think it'll it'll take a little time, we arent expecting.
Dan Pulitzer: Big difference you may remember that we used to have.
Dan Pulitzer: Pre COVID-19 kind of a 60 40 split between a classic negotiated rate versus the small and medium business.
Dan Pulitzer: Flipped coming out of Covid and now I would say, we're kind of more towards the 50 545 with the small and medium still be in the 55%, but yes from a relative growth perspective, we did see that it was the special corporate and the things that really group.
Dan Pulitzer: <unk>.
Speaker Change: Got it thanks.
Speaker Change: And just for my follow up I think non revpar fees they were up.
Speaker Change: <unk>, 6% in the quarter I think you had been talking about them being down and credit card fees in there I think you also said were up so what.
Speaker Change: I think as Youre, probably familiar that our residential branding fees tend to be quite lumpy literally can go from 10 million one quarter down to $3 million in next quarter because as units are sold we burn those fees. They are one time fees on that residential sales branding.
Speaker Change: So with a unit sells out we got them all at once so that is purely timing for the full year perspective, we don't anticipate anything different from what we thought before.
Speaker Change: Understood. Thanks, so much.
Speaker Change: Thank you. Our next question comes from Bill Crow with Raymond James. Please go ahead.
William Andrew Crow: Hey, Thanks, Good morning, I wanted to follow up.
William Andrew Crow: Smedes question from earlier.
William Andrew Crow: And Tony you talked about normalization in U S demand is certainly blueprint and the same thing but.
William Andrew Crow: Industry wide demand has been flat to down over the past year, which really doesn't seem so much as normalization does it does a slowdown, especially given the economic growth, which has surprised to the upside I'm just curious at what point do we start to worry about the consumer and it may be a change in spending patterns.
Speaker Change: Yeah, that's a fair question.
Speaker Change: Mike might have a deeper concern if we were reporting to you in the U S and Canada negative Rev.
Speaker Change: Revpar of the fact that we were up one 5% in the quarter, even with the holiday timing impact that Lee described gives me some comfort and if you kind of tick through the segments.
Speaker Change: Leisure was flat relative to last year's first quarter, but still meaningfully ahead of where we were back in 2019 in response to one of the earlier questions I shared what I think are really encouraging statistics on the continued strength we're seeing in group.
Speaker Change: We were talking to the team yesterday that is selling.
Speaker Change: Joining it sounds selling for the cable or the Pacific.
Speaker Change: <unk> is under construction and they are hitting it out of the park I mean, they are seeing extraordinary volumes of demand on the group side and then even on business transient.
Speaker Change: When I think about what a lady's comments, the fact that the growth in the U S and Canada.
Speaker Change: We saw large corporate business with our top 100 accounts seeing the most sequential.
Speaker Change: <unk> seen in the last eight quarters.
Speaker Change: I throw all of that as a blender and it does feel a little more like.
Speaker Change: I'm settling into a more normalized pattern reverses.
Speaker Change: A really systemic falling off the cliff.
Speaker Change: If I can I'm going to throw in a little bit of a glass half full are relative to what I think seems like a little bit of a glass half empty question and that is when we look at the rest of the year. We are looking both U S and international like gains in both Aachen rate for the full year.
Speaker Change: We also saw that in the first quarter you saw.
Speaker Change: Through luxury premium and select you saw.
Speaker Change: That you had generally right in our games overall with the exception that in the select you saw a slight decline in <unk>, but for the full year, we are expecting that.
Speaker Change: We will continue to see growth so you know.
Speaker Change: So at least speaking we still feel like we really benefit from these different types of travel demand. There's no doubt that we appreciate when group strengthens when leisure.
Speaker Change: Quiets down a little bit and there is overall more normalization of our travel types than a couple of years ago, but when we think about the overall demand levels.
Speaker Change: We feel really good about it.
Speaker Change: That's really helpful. If I could just do a follow up quick follow up here I think theres been a wet optimism that especially this summer we'd see the inbound outbound travel relationship in the United States kind of normalize that would propel demand and I'm just curious whether there's been a shift in that thinking at all since you.
Speaker Change: Moved.
Speaker Change: On the margin your revpar growth more in favor of international.
Speaker Change: From domestic maybe maybe the strong dollar is not helping things any thoughts you have there would be helpful.
Speaker Change: I honestly couldnt quite hear the question Yeah. I think the question is really just around <unk>.
Speaker Change: U S travel stay out domestic versus international I think.
Speaker Change: Bill your comment about the continued strength of the dollar is a pretty relevant.
Speaker Change: Uh huh.
Speaker Change: Data point to consider.
Speaker Change: As you may or May not know 2024 is the year of U S. Japan tourism Theres, a big collaboration between the United States and Japan.
Speaker Change: I met with the Japanese ambassador on Monday of this week and he talked about the extraordinarily strong flow of U S visitors to Japan.
Speaker Change: And maybe innocently I ask Jos.
Speaker Change: We can draw it drives strong Japanese visitation to the U S. And his response was well you can weaken the dollar against the yen itself I do think it's a relevant data point is.
Speaker Change: Bodes well for our international distribution and I think that is reflected in our.
Speaker Change: While our overall revpar guidance Hasnt modified youre seeing.
Speaker Change: Meaningfully more strengths in the international markets for exactly that Reis. So it's really the only other thing I'll add is that one of the interesting part is that when you look at Asia Pacific Revpar.
Speaker Change: While some of the benefits from Tony's.
Speaker Change: Tony's comment about U S traveler, a whole lot of that is the reality that now China is opening up more for cross border. So you are seeing global travel preferences are not just U S travelers interestingly our U S proportion of domestic travelers has been from <unk>.
Speaker Change: Probably consistent overtime, where you know it.
Speaker Change: It was for many years and was roughly only 5% are from outside the U S and that the domestic business is overwhelmingly 95% U S traveler and that is still the case now so we aren't seeing that the U S business. It was really suffering from everybody leaving.
Speaker Change: The U S. A I think it is more the reality.
Speaker Change: Global.
Speaker Change: Gross travel in general.
Speaker Change: Great. Thank you both.
Speaker Change: Thank you. Our next question will come from David Katz with Jefferies. Please go ahead.
David Brian Katz: Hi, good morning, everyone. Thanks for taking my questions.
David Brian Katz: Tony one of the last.
David Brian Katz: I noticed that you dropped in was about your forthcoming conversion.
David Brian Katz: <unk> brand and not to steal any thunder, but if we could borrow a couple of cracks of lightning.
David Brian Katz: And just talk about sort of why why now what the sort of philosophical thought processes about sort of bringing that to market.
Speaker Change: Would be great.
Speaker Change: Of course, I think David you and I have had the chance to talk in the past about our overarching growth strategy and that strategy is really guided by this desire to make sure. Our portfolio offers the right product everywhere, our guests want to travel for every trip purpose and we learn with increasingly fluids.
Speaker Change: Increasingly frequency excuse me.
Speaker Change: More and more members and prospective members soap envoy for certain trip purposes seek.
Speaker Change: The price point and the value proposition of platforms in the mid scale here.
Speaker Change: The reality is given the climate for new construction debt in the U S. Having a platform that can easily pivot between both new build and conversion opportunities.
Speaker Change: When do you think about.
Speaker Change: The supply that's out there where supply is growing and where it is not a we definitely believe that there is some great opportunity for us to.
Speaker Change: Add more new bond void members choices.
Speaker Change: For them across the spectrum, and frankly also need owner and franchisee demand for.
Speaker Change: Marriott product that allows for conversions and markets that over time, it may have been removed and changed et cetera.
Speaker Change: We think its tremendous opportunity as you know studio rise, which is also a new midscale brand for US is overwhelmingly due bills and its extended stay and we just from our conversations that there'll be great demand for us in this space as well.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question will come from Robin Farley with UBS. Please go ahead.
Robin Margaret Farley: Great. Thanks.
Robin Margaret Farley: We think about I think when investors think about the algorithm for sort of top line growth. It's hugely unit growth plus revpar growth kind of getting to your top line growth and this quarter that would have been you know the floor plus seven getting to 11, but to.
Robin Margaret Farley: Your top line is more up in the sort of 6% to 7% range and is there any.
Robin Margaret Farley: That you.
Robin Margaret Farley: I would say how investors should think about that going forward I know, there's sort of different types of rooms.
Robin Margaret Farley: Net unit growth so is that sort of revpar testing across not the way to think about top line. Thanks.
Robin Margaret Farley: Yeah.
Speaker Change: So couple of things I think first of all the algorithm absolutely works over time gotta be careful about looking quarter to quarter or.
Speaker Change: It kind of really looking at specifics that are happening in our printed number versus what the trend is overtime because absolutely over time, we believe that.
Speaker Change: And it proves out well and if you think about it this year our rooms guidance.
Speaker Change: Five five to $5 nine at a midpoint of four on Revpar and we've talked about gross rebate gross fee revenues, having a high of roughly 9% I mean these are even within the year pretty close to that algorithm. So we do believe that the algorithm works.
Speaker Change: And I really just have to look at it not just one year in isolation.
Speaker Change: Okay.
Speaker Change: Thank you and then just a follow up question on conversions.
Speaker Change: And I don't know what.
Speaker Change: Don't know if you broke out the conversion percent outside of the MGM deal.
Speaker Change: I'm, just sort of looking at that traditional conversions as a percentage of total unit growth, but I think that your guidance for next year assumes an acceleration in conversions as a as a percent of from unit growth and is this the brand that you havent that you're going to launch that.
Speaker Change: In the Midscale segment, you mentioned this conversion friendly.
Speaker Change: That in your mind, what what investors should think of as the driver for that acceleration in conversions and twenty-five versus 24 or maybe there are other things that you haven't yet.
Speaker Change: About that you know other brands to Congress something better.
Speaker Change: Just wondering if that if this upcoming one would be that the main driver for that.
Speaker Change: Just as a reminder, our conversions were roughly 30% of our signings. This year in the first quarter and we've got a very strong stream of conversions are moving through.
Speaker Change: The pipeline so no while we do see tremendous opportunity there are the kinds of numbers that we've talked about and talked about last September.
Speaker Change: Did not.
Speaker Change: From this new brand on conversion. So we said roughly 30% of the romance ex MGM would be from conversions and we continue to believe that but that's not really a change for us over the last couple of quarters.
Speaker Change: Yeah, well, we better added another hour to the call I'll take the second part of your question I think.
Speaker Change: You know maybe the way I would ask answer the second part of your question the Ah.
Speaker Change: On a global basis travel and tourism thrive Sydney and relative stability I think uncertainty around the election creates all sorts of question Morris will get through the election.
Speaker Change: And post results, we hope will center settle into a little bit more stability terms of some of the policy issues that directly impact Marriott and travel more broadly.
Speaker Change: My sense is we will likely still end up with.
Speaker Change: A bit of a position in Congress. So you may not see strong moves one direction or the other and I'm sorry. Your first question was on.
Speaker Change: Impact of the election itself in D. C. I think right and generally speaking I would say, we do see that there is adept in government travel after labor day in that group and business transient obviously is going to not be traveling during election, we put our forecast incorporates the.
Speaker Change: Since that we've seen before and.
Speaker Change: And presidential elections.
Speaker Change: Thank you. Our next question comes from Michael Bellisario with Baird.
Michael Joseph Bellisario: Thanks, Good morning, everyone.
Michael Joseph Bellisario: Question on your owned assets when might we see some of those hotels get sold especially internationally I think.
Michael Joseph Bellisario: Okay about an improved outlook would suggest maybe the market or at least the transaction backdrop is better there and if not could you expand on that and then secondarily any capex plans next year for the Sheraton Chicago or should we expect a big year over year step down on Capex I think you're.
Speaker Change: Right so.
Speaker Change: We're going to do the second one first which is that on the Sheraton Grand Chicago.
Speaker Change: It actually has had a rooms redo ER over the past three years and so with the exception of of course, what you normally need to do I would not expect to see a big capex spend beyond the norm.
Speaker Change: As you move into 2025 on that hotel.
Speaker Change: We will be working.
Speaker Change: On a comprehensive view of that hotel or public spaceport F N b for the rooms et cetera, and ideally we'd be working with our partners. So that you can really in essence do it together so that it wouldn't be on Marriott balance sheet, but that we would sell the hotel and then work towards.
Speaker Change: What the hotel should look like with us with our partner as you talk about the other owned and leased assets. It's as is often the case with the ones that are still on our balance sheet. Each one has a bit of a story and so for the ones that are in Caribbean and Latin America. For example, the elegant portfolio, which we are.
Speaker Change: With a view of how we think about the AI the all inclusive product for.
Speaker Change: For those hotels, so continue to March along the W. Union Square, we're very close to being finished with that renovation again, absolutely thrilled with the product I encourage all of you.
Speaker Change: To go by and for sure make sure you stop by the living room.
Speaker Change: Which has a spectacular bar rooms are incredible and we're very excited about how that represents the W brand in North America, and so yes from that standpoint before too long, we'll be beginning to work on the process of determining when.
Speaker Change: And at what price is the right time for the sale of that asset.
Speaker Change: All of the rest are in that same ballpark.
Speaker Change: Really asbury appears starts to appear to be a bit more of a.
Speaker Change: A stable view about where interest rates are going I think we do expect that that will help free up either transaction market a bit and I think it's a little too soon to predict the timing of it but we are of course hopeful that as we get into the back half of the year are you starting to see a bit more clarity.
Speaker Change: Around exactly.
Speaker Change: But the next couple of years are looking like clearly there's a view that interest rates are likely to stay at that higher a bit longer and from that perspective, a stability of our book is always very helpful. When you're looking at asset sales as well as the markets that those assets are.
Speaker Change: Thank you our last question will come from Duane <unk> with Evercore ISI. Please go ahead.
Duane: Hey, good morning, saving the best for last I like it.
Duane: Just just wanted to follow up on the SMB commentary at the lower end chain scales.
Duane: No it's a much smaller percentage.
Duane: Of your mix, but can we think about maybe the drivers or any industries that may stick out if we want to call it drive to business travel.
Duane: Maybe less goods transportation, maybe less disaster relief in some markets.
Duane: I know, it's harder to analyze these trends because in many cases, they book direct but wondering if you had any industry commentary on the lower end SMB.
Duane: Yeah, I think it's a little hard to look at maybe individual industry is probably the one demand source, we're keeping a close eye on is government related business.
Duane: Which in that tier is is quite relevant.
Duane: Okay.
Duane: Thank you that concludes our question and answer session I will now turn the call back to Tony Capuano for closing remarks.
Anthony G. Capuano: Great well. Thank you again for your participation and interest.
Anthony G. Capuano: I'll hope you'll see on the road soon safe travels.
Anthony G. Capuano: Yeah.
Speaker Change: This does conclude the Marriott International Q1, 2024 earnings conference call.
Speaker Change: You may now disconnect your line and have a wonderful day.
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