Q1 2025 Marriott International Inc Earnings Call
Please stand by, we're about to begin.
Speaker Change: Good day everyone and welcome to today's Marriott International, first quarter, 2025 earnings call
Speaker Change: At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two [inaudible]
Speaker Change: Please note this call may be recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Jackie McConagha, Senior Vice President of Investor Relations. Please go ahead now.
Thank you [inaudible]
Speaker Change: Good morning, everyone, and welcome to Maria's first quarter of 2025 verdicts call. On the call of me today was Tony Capuano from President and Chief Executive Officer, Leni Oberg, her chief financial officer and an executive vice-president development, and Pilar Fernandez, Senior Director of Investor Relations.
Speaker Change: Before we begin, I would like to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal security's laws.
Speaker Change: These statements are subject to numerous risks and uncertainties, and described in our F&D filing, which could cause future results to differ materially from those expressed in your heart and mind by your comments.
Speaker Change: Unless otherwise stated, arrest par occupancy, average daily rate, and property level revenues, comments, reflects system-wide constant currency results from terrible hotels, and all changes refer to year over year changes for the comparable period.
Speaker Change: Statements in our comments and the press release we issued earlier today are effective only today and will not be updated as actually events unfold. You can find our earnings release and reconciliation of all non-gab financial vendors referred to in our remarks today on our Investor Relations West.
and now I will turn the call over to Tony.
Tony Capuano: Thank you, Jackie, good morning, everyone. We reported strong first-order results this morning despite an uncertain macroeconomic environment, and each of our regions out will perform our expectations.
Tony Capuano: Developing activity remained robust, with record first quarter global signings, and we grew net rooms 4.6% over the trailing 12 months of screw march [inaudible]
Tony Capuano: First quarter local rip part was 4.1%, just above the top end of our 3 to 4% guidance rate.
with ADR increasing 3% and occupancy rising 1%
Thank you very much.
Tony Capuano: RIPAR in the U.S. and Canada, Region rose over 3% with our luxury and full-service hotels, meaningfully outperforming select service properties. Thanks to solid demand across both root-bed and transient guests.
Tony Capuano: International Rev Par was up nearly 6% led by growth in the A-pack [inaudible]
Tony Capuano: Apex First quarter rate on rose 11 percent, driven by strong AVR growth and higher demand through international
Tony Capuano: Growth was broad-based across the region, with red part increases of 16 and 17% respectively in its two largest markets, India and Japan.
Tony Capuano: Rip are in Caledon, Rose 7% led by strong luxury and resort results [inaudible]
Tony Capuano: In India, RIPPAR rose 6% on solid increases in ADR as well as occupancy.
with strong transient demand from both infantry and cross-border guests.
Tony Capuano: First quarter red part of the greater China declined 2% due to the weaker macro environment and 12 year old of your comparisons, though it did come in ahead of our prior expectation, primarily as a result of strong domestic demands.
This corner, group was again the standout customer say.
Tony Capuano: Brim Barrow's 80% the globally and the U.S. First quarter business transient and leisure transient, each from 2% globally and 1% in the U.S. with growth driven by ADR increases.
Tony Capuano: While Repar Trends International, we're strong throughout the quarter, our U.S. and Canada region saw softer growth in March, particularly in the Select Service segment.
Tony Capuano: We operate a cyclical business and there is no doubt that today we are in a period of heightened macroeconomic uncertainty, especially here in the US with many concerns about slowing economic activity and lower consumer profits.
Tony Capuano: Throughout our long history, we've shown our agility and resilience while also continuing to deliver solid system growth throughout economic science.
Tony Capuano: As Leone will discuss in greater detail, against this macro backdrop, we are lowering our guidance for full-earth of our growth by 50 basis points due to a more cautious outlook in our US and Canada region.
Tony Capuano: In whatever environment we find ourselves, we remain focused on dropping returns to our hotels and executing our proven long-term growth strategy.
Speaker Change: You can see in our first quarter of GNA results the positive benefits from the work we did last year to enhance our efficiency and productivity across the company.
Speaker Change: While we are marginally lowering our 2025 Red Park Dines range, we still expect strong and Rooms growth for the year and the future.
Owners continue to show the reference for our lives.
Speaker Change: Our role signing has been excellent so far this year, despite uncertainty around construction costs and the challenging finance of the environment in US and Europe . Our first quarter signings were a 35% year-over-year [inaudible]
Convergence, including multi-unit opportunities remain a significant driver of growth.
Speaker Change: representing about one third both signings and opening soon before.
Speaker Change: I'm also very excited about our recent citizen ammo announcement and the expected addition of this unique lifestyle portfolio to our system later this year.
Speaker Change: This transaction builds our commitment to expand our industry-leading global portfolio to provide even more exciting innovative options for guests and hotel owners.
Speaker Change: comprised of over 8,500 open rooms and 600 pipeline rooms. Citizen Amazine differentiated grant with unique characteristics that we believe will be a great compliment to our existing lifestyles, select
Speaker Change: Citizen M is known for its tech-savvy in-hotel experience, highly efficient use of space, and focus on art and design, and we see a large runway of growth for the brand in markets around the world.
Speaker Change: Our powerful, powerful, industry-leading Marriott Bonvoy loyalty program had nearly 237 million members at the end of March
Speaker Change: Mary Thonroy, Member of Penetration, Rose again, reaching a record of 68% of Roombaite's quote.
Speaker Change: Ottering our members' appetites for experiences, we recently launched our newest global ad campaign title, You Are The Greatest Souvenir, which so many showcases our wide range of operas and celebrates travel's power in creating lasting memories
Speaker Change: We're also continuing to make great progress on the multi-year digital and technology transformation of our reservation's property management and loyalty system.
Shh.
Speaker Change: We expect this new technology platform to further strengthen our efficient operating model, enhance and elevate both the associate and customer digital experience.
Speaker Change: It is also expected to unlock new relevant opportunities through enhanced functionality and options such as booking specific room types and amenities in advance and seamless shopping, like profloging, ethnic needs, spa, and other non-watching products.
Speaker Change: As always, I've spent much my time so far this year traveling around the world. I have visited properties and spent time with associates in every one of our regions [inaudible]
Speaker Change: and I've seen the first town their ability to adapt to changes in their markets and their dedication to delivering outstanding experiences to our guests. I want to express my gratitude to all of our global associates for their hard work and dedication.
Speaker Change: And now I'll turn the call over to reading for more details on our results. Leading. Thank you, Johnny. And then, don't you know, the first quarter of all the party reached just over 4%.
Lieny: Looking more closely at how we finish the quarter, Rev. March rose 2% globally . . . . .
Speaker Change: March Road Power for International Regions with a bit ahead of our prior expectations rising 2.4% or 5% excluding the impact of the problem
Speaker Change: After January and February results were stronger than we expected, demand in the U.S. did soften in March, primarily due to a 10% year-over-year decline in U.S. government growth power.
Speaker Change: Rothbard in the US and Canada region rose 2% year-over-year, which included a nice benefit from the timing of Easter.
Speaker Change: In 2024, the U.S. government segment contributed around 4% of the U.S. and Canada Regions reunites at an ADR that was 21% lower than the region's average . . . . . . . . . . .
Speaker Change: To a lesser extent, we also experienced softness and select service and extended state demand in the U.S. and March, mainly driven by lower, abuser transient demand, given the less certain macro-invents.
Speaker Change: Notably, the uncertainty did not impact results at our higher chain scale hotels, and we did not see signs of trade-outs from our higher end customers during the quarter.
Speaker Change: While we do not have final results for April we had, it looks like year-over-year road car excluding the impact of Easter in both months in the US and Canada improved sequentially from March to April
Speaker Change: First quarter total gross fee revenues in 35%, you're a year to 1.28 billion
Speaker Change: The increase reflects higher rev-par, root-grove, 8% increase in contract, credit card fees, and a significant increase in residential branding fees related to the timing of units sales
Speaker Change: Currency had a negative $8 million impact on first-quarter gross fees in line with our expectations.
Speaker Change: Incident of management fees, or IMS, fell 2% to 204 million in the first quarter, with roughly two-thirds earned by international hotels.
Speaker Change: Increases an impact were offset by declines in greater China and in India, partly due to a few properties converting from managed to franchise.
Speaker Change: I am asked in the U.S. Canada for a relatively in line with last year.
Speaker Change: First quarter, GNA Declined, 6% year over year, primarily due to lower compensation costs.
Speaker Change: Now, let's talk about our outlook for the second quarter in the full year, which assumes the citizen and transaction closes in the back half of the year.
Speaker Change: Given today's uncertain macro backdrop, we have limited visibility into the fact half of the year.
Speaker Change: The updated view that we're sharing today does not incorporate a recession.
Speaker Change: It reflects our current booking trends and assumes that broadly speaking they continue. It's important to remember that we have a short average booking window of around three weeks for our transient customers, which represent around three-quarters of our total room nights.
So demand could, of course, change quickly.
Speaker Change: Grove Park is now expected to increase 1.5 to 2.5 percent in the second quarter, which includes a negative impact from Easter in April and a 1.5 to 3.5 percent rose for the full year.
Thank you.
Speaker Change: Our update incorporates lower than previously anticipated Rothbard roads in the U.S. and Canada region for the second to four quarters of the year. This is primarily due to an expected continuation of declines in U.S. government demands. It also assumes slightly lower...
Speaker Change: Slightly slower growth from US select service and tells due to lower transient demand and marginally lower growth growth.
Speaker Change: International Aid, Demand Trends, and all regions except greater China have remained strong, and we have not changed our outlook for international red talkers.
Speaker Change: For your Rev-Part growth is expected to be meaningfully stronger internationally than in the US and Canada, even with greater China Rev-Part still anticipated to be around flat compared to last year [inaudible]
Speaker Change: On a global basis, looking at fully-eared red part roads by customer segments
Speaker Change: The each segment's expectations have softened slightly due to lower US and Canada assumptions.
We continue to expect the strongest growth in growth. [inaudible]
Speaker Change: For the full year, Group was still pacing up 6% at the end of March, but as usual, could moderate a bit over the remainder of the year. This is followed by Business Transient, which could be up low single digits, and then Leisure Transient, which could be flat to up low single digits.
Speaker Change: In the second quarter, gross fee growth can be in the 3-4% range. Growth will be impacted by the timing of residential branding fees which are expected to be down nearly 60% year-over-year. I am asked or expected to see slight declines primarily due to renovations that certain properties in the U.S. and Canada region. In the second quarter, gross fee growth will be impacted by the timing of residential branding fees which are expected to be down nearly 60% year-over-year.
My Justin Eba-Dah is expected to increase three to five percent [inaudible]
Speaker Change: For the full year, the expect rose fees of $5.4 to $5.5 billion, which IMF still expected to be relatively have faced in line with last year.
Speaker Change: We still expect gross fee growth from around 5% at the midpoint. Despite the midpoint, our full-year run-up on a road that would have come down to 50 bass points.
Speaker Change: This is primarily due to a less meaningful negative effects impact from a weakened dollar at a small piece contribution from citizen Elm in the back out of the year.
Speaker Change: Additionally, with two-thirds of our IMFs coming from international markets where there is often no owners' priority and the change in our full year rip our expectation coming from US and Canada as I noted, our IMF outlook is not changing
Speaker Change: For the full year, co-brain credit card fee growth is still expected to be a couple hundred basis points lower than the nearly ten percent growth in 2024.
Speaker Change: Residential branding fees are still anticipated to decline nearly 50%, solely due to the timing of unit sales, while timeshare fees are still expected to be around 100% going.
Speaker Change: Bones, Least, and other revenue, net of expenses, is still expected to total $345 to $355 million, relatively in line with 2024's results, someone impacted by a larger number of renovations that are owned and leased hotels.
Speaker Change: 2025 DNA expense is still anticipated to decline 8-10% to $965-985 million.
Speaker Change: This decline is the result of the expected 80 to 90 million of above-property savings from our enterprise-wide initiatives to enhance our effectiveness and efficiency across the company that is also expected to yield cost savings to our owners of franchising.
Thank you.
Speaker Change: 4-year-adjusted EBITDAQ could increase between 6 and 9 percent to roughly 5.3 to 5.4 billion. 4-year-adjusted diluted EPS could total $9.82 to $10.19.
Speaker Change: We still anticipate EPS growth will be impacted by an expected effective tax rate of around 26% compared to under 25% in 2024, reflecting certain international tax rate changes
Speaker Change: Our underlying full-year core cash tax rate is still anticipated to be in the low 20s for salary.
Speaker Change: Let me also share some sensitivities to help you with modeling.
Speaker Change: The sensitivity of a 1% change in full-year 2025 U.S. Redgar, versus 2024, could be around 35 to 40 million of total Redgar related fees.
Speaker Change: The impact of a 1% change in the 4-year 2025 global revile versus 2024, assuming equal changes across all hotels around the world, could be around 50 to 60 million.
Speaker Change: On the back of the citizen M transaction, we now expect our 2025 net rooms growth to approach 5%. As we look ahead with our strong momentum and global signing, we still expect long-term global net rooms growth in the mid-single-digit range.
Speaker Change: with spending excluding the 355 million for the citizen and transactions still expected to total 1 to 1.1 billion.
Speaker Change: Our capital allocation philosophy remains the same. We're committed to our investment-grade rating, investing in growth that is credent to share what their value, and then returning excess capital to shareholders through a combination of a modest cash dividend, which is risen meaningfully over time, and share repurchases.
Speaker Change: We're pleased with the company's strong first quarter cash flow performance and output.
Speaker Change: Given strong cash flow generation, we still expect blue-year capital returns to shareholders to be around $4 billion, even after factoring in the $355 million to the citizen and transaction.
Speaker Change: while maintaining our leverage in the lower part of our next step to even draw a range of 3 to 3.5 times. Tony and I are now happy to take your questions. Operator?
Speaker Change: Thank you very much, ladies and gentlemen. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue by pressing star two. We'll go first this morning to Michael Bellisario of Baird.
Thanks. Good morning, everyone.
Good morning.
Speaker Change: Just to start on the macro, can we just zoom in on the sort of weaker select service performance that you noted? I mean, how much of that do you think is regional versus the Easter shift impacting demand patterns? And then just more broadly anymore thoughts that would be helpful, especially in light of the fact that you said you're not seeing any trade down effect.
Speaker Change: You know, we came out of the start of the year, really dropped January and February and worked for a second.
Speaker Change: Marsh, as Leanie mentioned in her prepared remarks, we saw a little bit of softness around the edges of the US and Canada, and it was as it is.
Speaker Change: You know, the travel community felt a little bit of shock and off from the early days of the administration.
Speaker Change: One of the things that's encouraging to us, you heard Leny talk about for eliminating April results and if you normalize March and April by excluding the impact of Easter, you saw some financial improvement from March to April , which is encouraged. So the hope is, and embedded in our assumptions is a bit of steady as she goes. [inaudible]
Speaker Change: Leaning Manchin, we're not assuming a recession scenario, we expect to continue to see a pretty solid demand on a global basis, a little more weakness of the US and Canada . . .
Speaker Change: and the 50 basis point reduction in guidance really is reflective of these common witches, tougher visibility into the back half of the year, given the relatively short booking witness.
Speaker Change: The only thing I'll add is when you think about the impact of Easter, that ends up being almost...
Speaker Change: Kind of around 250 basis points for the month, who are close to 1% for the quarter, and that's really across all US and Canada. The other thing that's interesting is that when you take March and April together...
Speaker Change: So, you look at it, 25 over 24, which really then, if you look at those months together, which negates the impact of Easter, you see Reffar showing up 1%
Speaker Change: in U.S. and can, obviously, international, has been higher. And the point that I want to...
Almost a bit of a... [inaudible]
One-time impact from the shock of...
Tony Capuano: The government layoffs as well as a lot of tariff announcements, et cetera, and the sequential improvement that Tony talked about.
Tony Capuano: is something that we see continuing with the one caveat that we do believe that the biggest impact of our reduction in road part in the US and Canada for the rest of the year is all about continued reduced government nights.
and their families. Thank you. Thank you.
Speaker Change: Got it. That's helpful. And then just one follow up on Citizen M. What's the owner's commitment to build or convert more hotels for that brand? That's all for me. Thank you.
Speaker Change: Yeah, I mean, I think it's less of a commitment and just really profound enthusiasm about the positioning of the ground. Among as we talked with the owners of Citizen M, the thing I believe they found so intriguing about this partnership is the ability to plug into meaning extraordinarily strong network of developers around the world and really accelerate the growth of the platform the way they always envision.
Thank you. We'll go next now.
Sean Kelly: We'll go next now to Sean Kelly of Bank of America.
Sean Kelly: Hi, good morning, everyone. Tony Orleini, maybe we could tackle the development side of the equation. Obviously, your comments and looks like your activity in the quarter were very encouraging, but could you help us dig in a little bit, particularly on the full service side, just how are conversations like in the US right now? What are some of the risks around just slippage with tariffs or uncertainty and how are developers reacting to what we consider the run rate here in March and April ? We'll want some of these uncertainties kicked in a little bit.
But thank you.
Sean Kelly: Sure, so again, maybe I'll start at a high level and then let me get more detail. To me, Shaun, the most encouraging metric on growth that we share was we saw four rooms in Q1, the nanny Q1s in our history.
Sean Kelly: So that, in many ways, reinforces a theme we've talked about the last number of reporters, which is the vast majority of our older and franchisee community are long-term investors in the sector, not necessarily getting spooked by some of his short-term turbulence [inaudible]
Sean Kelly: They believe in the long-term opportunity, the long-term demand trends and travel. They're excited, particularly here in the US and Canada, about a continuation of historically low additions to supply, and what that means for them in terms of opportunities.
Sean Kelly: They are to be sure a bit frustrated about the relative lack of availability of death financing for new construction, but they are quite bullish on the long term.
Speaker Change: Yes, and a couple comments for you, Shaun. One is to reinforce what Tony was saying is that our signings were up very nicely in every continent around the world.
Speaker Change: Except for one, and that was solely because they had a very large multi-unit deal a year ago in the first quarter . . .
Speaker Change: And so when you kind of look at year-over-year increases in signings that were over 30% compared to the year of a quarter, I think it continues to demonstrate.
Speaker Change: The Real Momentum. We continue to have a view that conversions will be around 30% and that is continued to be the case in signings.
Speaker Change: and then kind of last they all touch on your point about thunder construction, which is there's no doubt that...
Speaker Change: Owners are evaluating what's going on with their construction costs and how they're thinking about
Speaker Change: kind of raw materials, et cetera. But we haven't seen the pace of construction starts.
Drop, are they still below 2019 levels, absolute base? No, no, no, no, no, no,
Tony Capuano: Marriott had the most new discussions charts in the U.S. and Canada in 2024 in the U.S. and, you know, we're pleased with what we see but there is no doubt to your question quite a bit of watching to see what you want us to be.
Speaker Change: The inept on construction cloths. But for the moment, it's steady as she goes in the U.S. and Canada for new construction.
Thank you.
Speaker Change: And then Shaun, maybe just one other statistic to further reinforce the fours.
the confidence within our older community.
Speaker Change: Generally, we're seeing fallout on the pipeline treatment system with what we've seen historically, but interestingly in Q1, and for sure, one order doesn't make a trend, but fallout was about half a large typical quarterly average. [inaudible]
Speaker Change: So the strength of the playwright continues to be free approach.
Speaker Change: Thank you, and then maybe just as a very brief follow-up, but Tony, there's some high-level concerns out there about just sort of US brands operating in China, specifically given the specific trade tensions there. Could you just kind of think about, you know, help us think about, you know, your positioning there, how do you kind of navigate that as a CEO , just a few thoughts on that, and that's it for me. Thank you.
Tony Capuano: Thank you, Shaun. Yeah, so we've talked about this a bit in the past. To me, one of the things that gives me a lot of confidence about the long-term opportunity for China, which is in fact our second largest market, we really are open into the economy there. Almost the entirety of our 600-plus hotel operating portfolio, almost the entirety of our more than 400-plus
Tony Capuano: Hotel Pipeline is Chinese owned. The vast majority of the associates working at those hotels are domestic Chinese associates. And so...
I don't think there is a view in that market.
Tony Capuano: that we are just a big American company. I mean, it is viewed in many ways as a Chinese business.
Tony Capuano: The fact that the market is being so driven by domestic Chinese demand and the way they were performing there I think is reflective of the manner in which that domestic Chinese traveler has embraced our portfolio [inaudible]
Thank you.
David Katz: Thank you. We'll go next now to David Katz of Jeffries.
David Katz: Hi, good morning. Thanks for taking that question. Good morning. Good morning. So I wanted to drill down just a bit on the Nug guidance.
David Katz: which is four to five inclusive of Citizen M, and noting your commentary that it's pushed toward the higher end. Could you just talk through maybe the puts and takes of Citizen M's adding 50 basis points. Thanks for your time.
David Katz: You know, is there a reasonable thought that it could have risen to four and a half to five and a half? And you know, what if anything changed that may have you know altered the thinking there? [inaudible]
David Katz: Yeah, sure. No, I think it's the reality, David, that we started the beginning of the year with this wider range as we do, given you're at the very beginning of the year.
David Katz: It's absolutely no other change to our view except that we're farther in the year. We've got greater visibility and this is our best thinking at the moment that with citizen M we're approaching 5% so no change compared to a quarter of a month. [inaudible]
David Katz: Got it. And if I can ask, one other quick follow-up was respect to the guidance.
David Katz: In going through a number of the...
David Katz: A number of the metrics came down, a very small amount, but the EPS remained the same, is that? Is there anything to that other than just one quarter farther down the road with some buybacks? Or is there any other movement in there? It looked like the tax rate's the same, etc.
Speaker Change: No, I think, as I talked about in my comments, we basically had, yes, a reduction in Rezpar, which obviously has its impact on fees, but we had several other items that basically,
Speaker Change: Citizen MPs, assuming that the deal closes in the back half of the year. And then, as I talked about on VMS, because we are not changing international red card and those IMFs
and Billy.
Speaker Change: flowed through without the other's priority. The IMS picture for the company even with the change in Rebbar is not changing .
Speaker Change: And so you put all those together, and as you know, a number of our other areas state the same relative to Hilton Least and G&A
Speaker Change: And that frankly puts you right back at the $10 midpoint for EPS, EBITDA, that midpoint lowered ever so slightly by $10 million, and that is solely a funny number of refinement of a couple addbacks.
Speaker Change: that we have in our event, one being reimbursed, depreciation on reimbursed costs, that impacted that. So again, overwhelmingly no change.
Understood. Thank you very much.
Thank you. Bye. Bye.
Speaker Change: Thank you. We're going to ask now to Stephen Grambling of Morgan Stanley .
Stephen Grambling: Hi, thanks. Maybe just to follow up on the pipeline conversation. I think there's been some questions around both Steve's Perum over time as well as key money, or the need to lend his associate with development. I'd love to hear just how you think about the Steve Perum kind of trajectory that's embedded within the pipeline and any capital support.
Speaker Change: Whether it's contract acquisition costs or otherwise and how you see that changing over time. Thanks.
Speaker Change: Sure, maybe I'll take the key money one and you can take the fees for rolling. On the key money, to be sure, particularly given the growing importance of conversions across the industry, you are seeing incrementally more use of key money. It tends to be more frequently used in the upper quality tiers, luxury and upper up scale, although occasionally we'll see it come down a category or two, particularly for some of the larger customers.
and so...
Disproportionately High Feeds
Speaker Change: I'll also say that when you look at our overall pipeline, given we're growing more international age
Speaker Change: then we are in the US and that is disproportionately full service.
You've also got a greater strength there supporting the continued. [inaudible]
Rowe and Fees Per Keed.
Speaker Change: Lastly, as you know, there are non-reptar-related seas, which also tend to grow a bit faster than Rose Far. And you put that together, and I would say seeing these per key continuing to grow.
Speaker Change: Assuming that the kind of revp our assumptions that we've given you would be our best estimate.
Speaker Change: Super helpful, maybe one other quick follow-up. Just on a co-brand credit card, I'm curious if you saw anything in the spend on the co-brand credit card that may suggest any kind of backing up, no more focus on goods or retail versus typical travel that may have occurred at any point during the quarter. Thanks.
Speaker Change: So I think, and you've heard this, I'm sure, from the credit card companies as well. There continues to be, frankly, from our perspective, a really positive, continued interest in Trump.
and a real prioritization of travel when people look. [inaudible]
Speaker Change: and what they're doing. Now, there is a bit of a difference that we noted in our Rev. Part, which is that leisure in the lower price tiers.
Speaker Change: was showing some signs of weaker demand, but in the credit card spend I would say kind of nothing very kind of meaningful or super obvious so far.
Great, thanks so much.
Thank you.
Moderator: We'll go next now to Ari Klein of BMO Capital Markets.
David Katz,
Ari Klein: Thank you and good morning. I'm hoping you could talk a little bit about what you're seeing with respect to the U.S. and to the extent that that is happening, our other international market is benefiting us.
Ari Klein: Yeah, of course. So, you know, the interesting thing, if you look in, and we're good.
Ari Klein: We're actually about a point above where we were pre-pandemic in 2019, about 20% of total reunites globally are from strong border guests.
Ari Klein: in the U.S., International Room 9 mix in Q1 was about 6%, which was about 70 basis points higher than full year 2024.
Every month of Q1, including March, March,
Ari Klein: Saw a higher international mix than the prior year. And to be sure, Canadian Inbound was impacted, it was down about 5% in Q1, but strong inbound demand from other countries around the world more than made up for that decline. [inaudible]
Speaker Change: Thanks for that. And then just on the government, you mentioned some of the weakness you saw there in March. Has that started to stabilize in April and any signs of weakness that government adjacent business is such as consultants?
Speaker Change: Yeah, so we have not, don't have all the details yet on the April Reff par. I think you certainly can expect that
Speaker Change: The government continued to be down, but as we entered the month, we weren't seeing that it was starting to go down further.
Speaker Change: but it will take another month for that to kind of square away. And then, as you think about the adjacent businesses,
Speaker Change: Those depend a bit more on exactly which area they are serving. One interesting thing is that some of the big consulting firms, which as you remember, have been some of the...
Speaker Change: The biggest lagerge relative to 2019, we saw some really nice pickups [inaudible]
Speaker Change: in their business and obviously they have a very strong ADR as we came into Q1 but again when we think of generally the business travel that is related to government. Thank you.
Speaker Change: That in the U.S. would add one more percent of night, so it's not a really big part, the 4% that we describe in the U.S. of Canada that is purely government-related, that is the one where we were talking about risk of our being down 10%. [inaudible]
Thank you.
We'll be next now to Conor Cunningham of Melius Research.
David Katz, Ed Sheerl,
Speaker Change: Hi everyone, thank you. I'm just going back to group for a second. You talked about the booking curve and I have some limited visibility but on group it seems like you have a fair bit. So if you could just talk about how things have trended, maybe into 26, are you seeing any hesitation there at all? That would be helpful. Thank you.
Speaker Change: Yeah, thanks for the question Conor, so again, we're a week into May, but if you look at the forward-looking in the 26th right now...
Speaker Change: Definite Change, we're tracking it off about 7% for 26% and reasonably well split between occupancy and average rate, about 4% off in rooms at about 3% of the Navy Army.
Speaker Change: So as you heard in leading prepared remarks, right now we're tracking about six, or 2025, but about seven into 26.
Speaker Change: And the only thing on Dove, you know, when we talked about our red part of Klein's coming out overwhelmingly because of government, we did mention that there was ever some flame
Speaker Change: Impact from our expectations on growth for the rest of this year. And so if you look at where we were a quarter ago for US growth pace.
Speaker Change: compared to at the end of this quarter, it is ever so slightly down, so just barely down, you know, nowhere near a full percentage point. So again, that was kind of built into our view.
Speaker Change: of this lower rough part in U.S. and Canada for the back-hound to be here.
Speaker Change: Okay, that's helpful. And then you've talked about stabilization in the April and just...
Thank you
Speaker Change: No, I think we want to continue to execute our growth strategy. It's one of the both opportunities and challenges of being in nearly 150 countries. We've got very deliberate growth strategies. We intend to execute those growth strategies. [inaudible]
Speaker Change: Throughout the economic cycle, these are long-term assets, and we think about the stewardship of the management of these assets through a long-term lesson.
Okay. Thank you.
Good morning.
We'll go next now to Patrick Scholes of Tourist Securities.
Speaker Change: Is that similar to what you're seeing for your other brands? And if so, where would you think that plus six actually settles out as far as actual revenue, assuming that there is attrition for your other brands? Thank you Thank you.
Speaker Change: Yeah, I mean, again, it's early Patrick, but right now that's not a trend we're seeing across our broader group of states.
Speaker Change: Would that be okay? Would that be an idiosyncratic issue to just the rhyme and brand?
Courage, thank you
Speaker Change: Yeah, I mean, it's a good question for Colin, but obviously those are things to eat at hotels. They may behave slightly differently than the group we're fully on or broadly, but we're just not seeing it in the data at this point. Just to give you an example, our group, 70% of our group is 100 people and over.
Speaker Change: So there is obviously very wide variations in the types of groups that are being held in our hotels.
Speaker Change: But again, broadly speaking, to the extent that we don't have groups end up where we are now, it's 6%. That is more because of in the year for the year booking timing, not because of attrition. [inaudible]
Speaker Change: As you know, every year, as you move through the year, typically your group pace declines as you end up kind of filling in in the year for the year. So we don't see that being a result of attrition. [inaudible]
Speaker Change: Thank you, that makes sense, and I appreciate the colors. Thank you.
Thanks, Patrick.
Thank you. Thank you.
We'll go next now to Brant Montour of Barclays.
Brant Montour: Good morning, everybody. Thanks for taking my question. I wanted to dig into conversions a little bit. This is a segment that has had some countercyclicality in the past historically. Tony, you've been around this business for a long time and you've seen a couple cycles. The conversation that usually happens around increased conversions with your developers happening, i.e.,
Brant Montour: You know, when things are slowing down, conversions pick up, that's kind of the old adage. Are you starting to have those types of conversations or still a little too early for that?
Brant Montour: Yes, and it's interesting question we talked about a lot. I'm actually quite bullish. As you point out for the bulk of my career in development,
Brant Montour: You can almost set your watch by the cycles. In strong economic environments, you saw a new build activity spike and you saw conversion volume start to recede a bit. And then as you started to enter into an area of actual or perceived economic weakness. [inaudible]
Brant Montour: New Bill would start to slow and you'd see a big off-tick in versions
Brant Montour: Eventually we'll see more and more availability of new construction debt. My expectation, however, is you won't see the same sort of parallel slowdown in conversions. Why do I believe that? A few reasons. I think number one
Brant Montour: We continue to be at this historical level, low levels of incremental new supply growth in the U.S.
Brant Montour: Number two, while we consider conversions across almost every brand in the portfolio [inaudible]
Brant Montour: We have a subset of brands that are really well suited to conversions.
Brant Montour: You think about ourselves perhaps, you think about Delta. They are really ideal for quick, efficient conversions.
Brant Montour: Number three, Leanie and her team have done a terrific job of populating our development teams with resources who are specifically focused on conversions
Brant Montour: and I even know a layer deeper, not just individual assets and versions, but portfolio conversions where we've had a really strong run that I expect to continue. And lastly, I would tell you...
Leave me out.
Brant Montour: nimbleness of the organization and the creativity, not in terms of...
Brant Montour: Singular Gold Component of Art and Art Story. Yeah, and that's the only thing I'd add to that is the reality that we are seeing more and more comforts.
Brant Montour: around the world with conversion. This was really a trend that started as you pointed out earlier an economic cycle that's related to the US.
Brant Montour: and then with both the addition of brands as well as the realization of the kind of the improved performance on the top end bottom line when hotels join the Bonvoy system, we are seeing
Tony Capuano: Just meaningful increases in the percentages of conversions across every continent and that leads to Tony's confidence around this being more of a continued trend rather than purely part of the cycle [inaudible]
Thank you.
Speaker Change: That's super helpful. Thanks for that. And then just a follow-up question, if we could just hone in on China development, just hoping for a couple stats, the percentage of pipeline that's China, the percentage of pipeline under construction of your pipeline under construction that's China, and then just sort of, you know, the stats, sorry, the starts in the quarter, how that, if that grew your year-to-year quarter, or however you can show it. [inaudible]
Speaker Change: Sure, so from the perspective of Greater China, it's currently 10% of our existing rooms and 18% of our pipelines. We had another spectacular...
Speaker Change: corner of signings in Greater China, another big increase over last year, which was already really outstanding quarter a year ago. And we've talked about the forms there too, we are broadening our razor-fraud segments.
Speaker Change: And in China, there's been terrific interests in particular in our select service grants, and that when you look at owners wanting to think about diversifying their risks across peers and across cities [inaudible]
Speaker Change: and, frankly, across kind of perv hotel dollars that they need to put to work. Philex Service has been a great...
Speaker Change: and investment. So, very pleased with what we see there.
and I again expect for that to continue.
Speaker Change: The building's use has not been entirely determined but built about halfway or two-thirds before the owner makes a decision about exactly what the function of the building is going to be. So, while conversions...
Speaker Change: in the entire company typically or only in the pipeline for maybe a year. These adaptive reuse lines, which are a good chunk of our signings can be closer to 18 to 22 months that are in our pipeline. But again...
just as palatable room additions as any other.
Excellent. Thanks, everybody.
Thank you [inaudible]
We'll go next now to Duane Pfennigwerth of Evercore ISI.
Hey, thanks. Good morning.
Morning.
Speaker Change: On your segmentation commentary, which I thought was helpful, a group leading followed by BT, followed by Leisure.
Speaker Change: A big if here, but if the trade overhang moderates and if the clouds begin to part, what segment do you feel like has the most potential energy or said differently the biggest chance for re-acceleration this year? Yeah.
Speaker Change: Yeah, I mean I need so much of this is driven by consumer confidence [inaudible]
Speaker Change: So to the extent that the clouds part in the way that you describe, you'd think that would drive consumer confidence which historically has driven an uptick in leisure demand. And I think similarly,
Speaker Change: You hear most business leaders across sectors talking about the challenges of forward planning given uncertainty to the extent some of that uncertainty starts to evaporate. That could similarly provide some upside and confidence in beauty.
Speaker Change: and I hope you are a fortune teller, but to the extent that happens, that would be our expectation.
Speaker Change: Big if, admittedly, but just for my follow-up, I wanted to ask you about the concept of trade-down high-end change layout performance continues to be just remarkably sticky.
Speaker Change: Are you surprised at all we're not seeing trade down? And how do you think about this cycle differently than past cycles? Thanks for taking the questions.
Speaker Change: Yeah, sure, absolutely. So, one of the things that I've been studying is just looking at...
Speaker Change: kind of changes in demographics. So just to give you perspective in 2004, 22% of the U.S. population was 55 and over, that's now 30%.
Speaker Change: And when you think about total U.S. household net worth of being a few of its in the ballpark of 170 trillions, then it's going from 61% being 55 and over in kind of that
Speaker Change: Percentage of Household Network held in that age group that's going up to 73 percent.
Speaker Change: So, I do think that the reality of some of these demographics and desire for travels [inaudible]
Speaker Change: is helping to add a base of demand that is perhaps a bit different than in prior recessions. Now, again, all this depends on the severity of the recession if it occurs.
Speaker Change: Currently, you're looking at GDP growth in the US. It's called in the ballpark of one and a half. And from that standpoint, we haven't seen the trade down as you described. So, you know, we'll need to see where the economy goes. [inaudible]
Speaker Change: And Duane just to underscore that with some Q1 statistics that really I think illiterate some of the demographic trends that Lee is watching.
Speaker Change: In Q1 globally, the luxury tier had the strongest oxency growth of any tier where we operate. Similarly, the luxury tier had the strongest percentage ADR growth of any tier where we operate. [inaudible]
Speaker Change: and we're really not seeing a train down at least through the first quarter of the year.
Speaker Change: And again, I'll play a little cheerleader here. Luxury makes up 10% of our existing roads.
Speaker Change: Certainly the leader there and then we also have almost 10% in our pipeline of the pipeline.
Our luxury motels around the world. So, so, I'm strong. So, I'm strong.
Speaker Change: Continually growing range of great experiences for our bondsley members to have.
Thank you.
We'll go next now to Robin Farley of UBS.
Speaker Change: Great, thank you. Just trying to think about the change in rooms under construction year over year, and you mentioned in the release that you're kind of defining it a little bit differently with the conversion rooms in there. Is there a way to think about rooms under construction, either without conversions in either period or counting conversions like...
Speaker Change: You know, all conversions, just trying to think about a comparable metric year every year to think about runes under construction. Thanks.
Speaker Change: Yeah, no, I think we again define it that way which makes sense because you really think about what under construction means which are the ones that you expect to actually open fairly soon. So we think that makes the most sense. [inaudible]
Thank you very much.
Speaker Change: Okay, thanks. And then maybe just on that, the IMF fees, it sounds like, you know, no change in your expectation for US and Canada fee pairs. Can you just kind of unpack for us a little bit? Sometimes you've shared metrics about kind of what percent of...
Speaker Change: Hotels in the US are fee-paying and kind of, you know, how that may have changed here, but I don't know if higher wage costs are impacting the US businesses. It sounds like there was no change in your expectation for those fees, but just a little color behind that. Thank you.
Sure, yes, in Q1.
Speaker Change: 60% of our hotels worldwide, repaying incentive fees that compares to 61% a year, however, to your employees in the U.S. and Canada.
Speaker Change: It's 21% in the first quarter of 2025 as compared to 20% a year ago, so it's actually ever so slightly higher, and that's in the full-service space.
Speaker Change: They're both full service and limited service, they went out from percentage points. [inaudible]
Speaker Change: compared to a year ago. Internationally, broadly speaking, it ranges, but in Asia, it's properly towards the low 80s percent earning incentives, maybe a little bit lower. [inaudible]
Speaker Change: in the rest of the world because some of those hotels do have owners' priority constructs in their contracts. I'd say internationally, roughly speaking, it's a 75% kind of for the entire international portfolio while in the US, as I've mentioned, it's 21.
Thank you.
Speaker Change: Okay, and I guess with the strength in luxury and full service, that's actually where most of your fees would be coming from and that's the part that's holding up, it sounds like.
Speaker Change: I actually, I mean, he's coming strongly both from premium and luxury industry.
Okay, great, thank you [inaudible]
Thanks, Robin.
We'll go next now to Lizzie Dove of Goldman Sachs.
Lizzie Dove: Hi there, thanks for taking the question. You've been undergoing your digital transformation strategy the past couple of years, curious if we could just get a status update there, where you're out with the rollout, when that might start to kind of hit and how meaningful those benefits can be.
Speaker Change: Drew Pinto and his team. We are deep in testing as we speak. We expect to start rolling out to the South Park Select brand of hotels in the back half of this year and are really bullish as we talked about in the prepared remarks.
Speaker Change: Great and then just to switch gears for a second on the non Revpar side, obviously, you've mentioned in the past is a little bit of pressure. This year, mainly from the kind of timing of the residential side, maybe too early to ask but are you expecting that to rebound in 2026 to some degree.
Speaker Change: Yes, absolutely.
Speaker Change: I'm, just saying that Jackie MLR can take you through that business is growing.
Speaker Change: Incredibly well.
Speaker Change: Very pleased with our continued growth in signings that we havent residential but around the world, but they are lumpy and as you saw in Q1, we had a couple of developments that closed in the quarter and you have a bit of a waterfall of fees and then it depends on when the next under construction residential.
Speaker Change: Jack.
Speaker Change: Is completed and so yes, you absolutely should expect to see that number over time go up we've talked about this year, just given the kind of the.
Speaker Change: The way the projects are closing that we expect that number to be down almost $40 million compared to a year ago, but again broadly.
Speaker Change: Overtime, absolutely correctly.
Speaker Change: Great. Thank you.
Speaker Change: Thank you and ladies and gentlemen that is all the time, we have for questions. This morning at this time I'll turn things back over to Tony for any closing comments.
Speaker Change: Great well as always thank you for your continued interest in Marion Thanks for a great set of questions. This morning.
Speaker Change: Notwithstanding Lee's comments about short booking window.
Speaker Change: Marriott Dot com start booking memorial day in your summer travel and we look forward to welcoming you around the world have a great day.
Speaker Change: Thank you again, ladies and gentlemen that will conclude the Marriott International first quarter 2025 earnings conference call again, thank so much for joining US everyone and we wish you all a great day Goodbye.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Mhm.
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Hello.
Speaker Change: [music].