Q2 2025 Marriott International Inc Earnings Call

Mhm.

Please stand by your program is about to begin.

Good day and welcome to the Marriott International Q2 2025 earnings conference call. At this time, all participants are in a listen-only mode later. You'll have the opportunity to ask a question during the question and answer session.

To register to ask a question, you may press the star and 1 on your touchtone telephone at any time to remove yourself from the queue. You may press star 2.

Please note, today's call may be recorded, and it is now my pleasure to turn the call over to Jackie mckana. Senior vice president of investor relations. Please go ahead.

Thank you.

Good morning everyone and welcome to Marion second quarter 2025 earnings call on the call of me today are Tony capuano our president and chief executive officer. Lenny oberg, our Chief Financial Officer and Executive, Vice President development and Pilar, Fernandez, our senior director of investor relations.

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 Securities laws.

Results to differ materially from those expressed in or implied by our comments.

Unless otherwise stated our ref par occupancy, average, daily rate and property level revenues comments, reflect systemwide, constant currency results for comparable hotels and all changes referred to year-over-year. Changes for the comparable period.

Statements in our comments, in the press release. We issued earlier today are effective only today and will not be updated as actual events unfold. You can find our earnings release and reconciliations of all non-gaap Financial measures referred to on our remarks today on our investor relations website. And now I will turn the call over to Tony

Thank you, Jackie, and good morning. Everyone Marriott. Reported strong second quarter Financial results. This morning ahead of our previous guidance, during a period of notable, macroeconomic uncertainty,

The company's pipeline reached a record level, and net rooms grew 4.7%. Since the end of the 2024, second quarter,

Second quarter Global revpar, Rose 1.5%.

Our industry-leading portfolio continued to gain share. And our red bar index, which is already at a substantial premium to peers rose again in the quarter.

International revar Rose over 5%. Led by growth in both Apec and emia revpar and APAC Rose. 9% driven by strong ADR growth and higher demand from International guests.

Key markets like Japan and Australia saw double digit. Red Bar increases

second quarter revpar and emia Rose 7% on solid increases in both ADR and occupancy with strong transient demand from both income country and cross border guests.

Revar in the US and Canada region, was flat year-over-year and grew nearly 1% when adjusting for the Easter shift.

RevPAR growth was again strongest at the high end, with luxury RevPAR up 4%. It weakened going down the chain scales, where results came in below our prior expectations.

Second quarter US and Canada select service and Extended. Stay rev part declined, around 1 and a half percent year-over-year, primarily due to a decline in government demand.

As 2/3 of government revenues are in the select service segments as well as weaker demand from smaller businesses.

Across chain scales group.

Rev par in the US and Canada was also softer than previously anticipated. Primarily due to fewer near-term bookings and elevated attrition rates

Looking at Rift part by customer segment, Leisure transient through the fastest, this quarter with Leisure, transient revpar Rising, 3% globally, and 1% in the US and Canada.

Group, rev par Rose, 2% globally and 1% in the US and Canada.

Second quarter, business, transient rev bar, declined, 2% globally, and in the US, and Canada in part, because of a shift in Eastern Time.

With ongoing economic uncertainty, we now estimate full year, rev part growth to be in the lower end of our prior range, and increase between 1 and a half and 2 and a half percent over last year. Leni will share more details on our Outlook during her remarks

We still expect Strong net rooms growth in 2025 and Beyond as owners continue to show preference for our brands.

Even with higher construction costs and the challenging financing environment in the US and Europe. Second quarter deal signings Rose, 35% with every region signing more projects than in the same quarter last year.

As a result, our pipeline grew to a record of over 590,000 rooms at the end of the quarter, with 40% of those pipeline rooms under construction.

Conversions remain a significant driver of growth representing, nearly 30% of both rooms signings and openings during the first half of the year.

Progress across all of our chain scales.

With their highly efficient operating models and strong value. Propositions, our existing midscale Brands City Express by Marriott 4 Points, flex and Studio res are attracting significant interest from owners at the end of a second quarter. We had around 200, open mid-scale hotels with another nearly 200 in the piper.

In may, we announced the global launch of our latest collection. Brand in the midscale to upscale segment series by Marriott,

We created series by Marriott to bring established quality, Regional hotels into our portfolio and to further our reach among value conscious Travelers, provide additional choice for our existing Marriott bonvoy members and guests and offer more affiliation opportunities and growth for local owners.

In conjunction with the launch, we announced a founding deal to affiliate the fern portfolio, which has over 100 open and pipeline hotels across India with series by Mary.

We also recently closed on the acquis acquisition of the Innovative Tech forward Lifestyle brand, Citizen M. We see meaningful opportunity for Global growth for both of these recent brand Editions,

At the upper end of the chain scale, we continue to expand our leading global luxury portfolio where our distribution of nearly 168,000 rooms across 670 open luxury. Properties is currently over 40% larger than our next closest competitor

this year, we plan to open an additional 27 luxury properties and we have an additional 270 projects in the pipeline as we look to provide new opportunities to deliver bespoke experiences in iconic destinations.

Recent notable highlights include the openings of the all-inclusive W Pune and the JW Marriott Creek Resort and Spa and last month we celebrated the inaugural Voyage of luminara, the Third Edition to the Ritz Carlton yacht collection.

Delivering exceptional guest experiences helps fuel the growth of our powerful, Global loyalty program with an acceleration and enrollments our Marriott bonvoy loyalty program grew to nearly 248 million members at the end of June.

Marriott bonvoy member penetration rose again, reaching a record of 69% of rooms globally and 74% in the US and 10.

In June we announced the introduction of the Marriott media Network, a media Network that will help Brands connect more meaningfully with guests across their travel Journey.

Leveraging, our leading scale and Marriott bonvoy loyalty program. Marriott media network will allow advertisers to use our deep insights into traveler behavior and preferences to reach high value audiences. Through curated touch points, like the Marriott bonvoy app and in Room television,

Everyone has likely seen the news that Leanie will be retiring from Marriott in March of next year.

As you all know, Lee needs an incredible leader with an unwavering commitment to Excellence. And the creation of shareholder value, it has been an absolute privilege to work with her and I am 1 of The Many, Many people who were who will miss her greatly when she retires next year. Weenie will remain the company's CFO through the filing of this year's 10K in early 2026 and I am pleased.

That upon her retirement 2 long time, veterans will succeed. Leading, Jen Mason. Our current Global officer Treasurer and risk management will become our CFO and Sean Hill. Currently, the head of development of Apec will become our Global head of development.

I'll now turn the call over to leaning leaning. Thank you Tony and and thank you for your kind words. This was a a hard decision and very Bittersweet as it's it's never easy to leave a company and job that you love. I have the utmost confidence in Jen and Sean and look forward to working with them on a smooth transition.

As Tony noted, I'm not leaving anytime soon. So now let's talk about our financial results and Outlook second quarter global resources by nearly 2% ADR growth.

Setting a 30 basis. Point decline in occupancy, large, we reflecting declines in US and Canada. Select service hotels. Average daily rate has held up well in most regions demonstrating, excellent Revenue management across our system, despite short, booking windows.

Second quarter, total gross, fee revenues increased 4% year-over-year to 1.4 billion.

And higher res, power and co-branded credit card fees partially offset by an 8 million decline in residential branding fees related to the timing of unit sales.

Incentive management fees or IMF throws 3% to 200 million in the second quarter with roughly 2/3, earned by international hotels.

Higher IMF and all International regions were partly offset by declines in the US and Canada primarily due to some large hotels undergoing renovation.

Only and other Revenue. Net of expenses was ahead of expectations.

And Rose 14% compared to the prior year. Largely driven by contributions from the Sheridan Grand Chicago.

And improved performance at other hotels in the portfolio and favorable currency impacts.

Second quarter GNA declined. 1% year-over-year primarily due to lower compensation costs.

as we continue to benefit from the work we did last year across,

The Enterprise.

To enhance our efficiency.

Our adjusted Eva de Roos 7% to 1.42 billion.

Now, let me talk about our third quarter and 4 year 2025 Outlook.

With ongoing economic uncertainty, we expect Global rev part to be flat to up 1%.

And a quarter and up 1 and a half to 2 and a half percent for the full year. Our full year revpar growth is still expected to be meaningfully stronger internationally and in the US and Canada. Even with greater China, resar still anticipated to be around flat compared to last year.

the luxury and full service segments where we are extremely well positioned accounting for over half of our open, Global rooms are expected to continue to nicely outperform lower-end chain scales

Globally. Fourth quarter. Rev Park growth is anticipated to accelerate from the third quarter in part due to holiday shifts and the timing of certain large events.

examples include the positive impact of the Paris Olympics and the Euro Cup in the 2024 third quarter, the positive impact of the Republican and Democratic conventions in the 2024, third quarter, and then the negative impact of the US presidential election in the 2024 fourth quarter,

Plus F1 in Singapore is shifting from the third quarter last year to the fourth quarter this year.

At the end of June on a global basis, revenues for group, the customer segment, where we have the most visibility. We're pacing down 2% for the third quarter and pacing up 6% for the fourth quarter, reflecting some of these calendar impacts.

Full year 2025 with revenues. We're pacing up. 3% below the pace. We saw a quarter ago primarily due to fewer near-term. Bookings.

However, group bookings for future periods have strengthened with group revenues for 2026 pacing up. 8% in the US and Canada and globally up from 7%, a quarter ago.

On a global basis for the full year. We now expect Leisure transient and group revpar to grow in the low single digit, range business. Transient Rose Bar is now expected to be around flat year-over-year with government demand, expected to remain weak government room, knife in the US. And Canada were down 16% year-over-year in the second quarter more than in March, but do appear to have stabilized around these levels.

Turning to the P&L in the third quarter, growth in speed could be in the 2% to 3% range. Third quarter growth will be impacted by the timing of residential branding fees, which are expected to be down significantly year-over-year.

To see declines around 15% in the third quarter, largely reflecting tougher year-over-year, RV, park comps continued Renovations at some large properties in the US and Canada region and the receipt of business Interruption insurance proceeds at certain Florida hotels. In the last year, third quarter,

fourth quarter IMS are expected to increase to the mid in the mid to high single-digit range, part partly due to easier comps as a result of hurricanes, impacting some Florida hotels last year as well as improved performance at renovating hotels.

Full year. I am apps are anticipated to be flattish to slightly down year-over-year.

Is expected to increase 5 to 7%.

For the full year.

Of 5.37 to 5.42 billion up, 4 to 5% year-over-year for the full year. Co-branded credit card fee growth is still expected to be a couple hundred basis points, lower than the nearly 10% growth in 2024. And time share fees are still expected to be around 110 million.

With a shift in the expected timing of sales for certain properties. Full year residential, branding fees are now anticipated to decline around 30%.

Only and other Revenue. Net of expenses is now expected to Total 360 to 370 million primarily reflecting the flow through of second quarter results.

2025 GNA expense is still anticipated to decline 8 to 10% to 965 to 985 million. This decline, reflects the expected 80 to 90 million of above property savings from our Enterprise wide initiative to enhance our Effectiveness and efficiency across the company that is also expected to yield cost savings to our owners.

For your adjusted Eva, doc could increase between 7 and 8% to 5.3 to 5.4 billion.

Full-year adjusted diluted EPS could total $9.85 to $10.8. Our full-year adjusted effective tax rate is still expected to be roughly 1 percentage point higher than a year ago, given a shift in earnings to higher tax rate jurisdictions.

Our underlying full year core cash tax rate is still anticipated to be in the low 20% range. Let me also share some sensitivity to help with modeling the sensitivity of 1% change in full year 2025 US. Revpar versus 2024 could be around 35 to 40 million of total revpar related fees. The impact of a 1% change in full year 2025 Global rug car versus 2024 assuming equal changes across all hotels around the world, could be 50 to 60 million

Our 2025 net rooms growth is still anticipated to approach 5% as we look ahead with our strong momentum in global signings. We still expect long-term Global networks growth in the mid single digit range.

Total investment, spending is still expected to be 1.36 billion to 1.46, billion or 1 to 1.1 billion, excluding 355 million for the Citizen M transaction.

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 cash dividend which has risen. Meaning play over time and share repurchases. We're pleased with the company's strong. Year-to-date cash flow performance and Outlook given strong cash flow generation. We still expect full year Capital returns to shareholders to be around 4 billion. While maintaining our leverage in the lower part of our net debt to evade our range of 3 to 3.5 times.

Before ending our prepared, the large Tony. And I want to express our gratitude to our incredible team of Associates around the world for their continued, hard work and dedication.

The operator can now open the lines for questions. Please ask just 1 question each so we can speak with as many of you as possible. Thank you.

Thank you as a reminder at this time. If you would like to ask a question, it is the star in 1 on your touchtone telephone. If you find your question, has been answered. You may remove Yourself by pressing star 2. And again, as a reminder, it is just 1 question per line. We'll go first to the line of

I'm sorry, Stephen Grambling with Morgan Stanley. Please go ahead.

Hey, thanks, uh, Lenny. I know you still have time but congratulations and thanks for all of your consistent insight and support.

Thank you, Stephen.

so I, I think

This is a is a big picture question, but given all of the advances in technology particularly around AI, where are we in the technology transformation project as it relates to timing and spend and what are some of the major changes both owners and travelers can expect to see over the next few years?

Wanted a select service hotels later this year, uh, the strategy is intended to do a few things. Uh, it is intended to meaningfully enhance. Uh, the ease with which our Associates are trained on those platforms, in turn, enhancing our competitiveness, particularly for Next Generation, future Associates. Uh, it should make the uh, experience for our guests, both on property and when they're engaging with our customer engagement centers, much more seamless, much more efficient uh and then from an owner perspective it should drive

Both some opportunities to improve the efficiency of our operations, but maybe even more compelling, the ability to better merchandise and sell the full range of products and services, that we want to make available, uh, to our guests, ideally, uh, representing some Revenue upside for the owners, uh, pivoting to AI. I think, I talked about this last quarter. Uh, we have stood up and, uh, Marriott AI incubator that is working on a variety of proof of Concepts. Some of those early proof of Concepts were in areas, like reimagining, the uh, concierge function, uh, where we think there's a real opportunity to take advantage. Uh, we're also

Looking at pilots in our customer engagement centers, to help those agents navigate such a broad and diverse portfolio. Uh, as you as you may know, we've, uh, Incorporated AI into the Marriott homes and Villas platform. And while it's early, the Early, uh, reaction of our guests, uh, has been terrific. Uh, and then we've also launched an ambassador trip planning tool that is fueled by AI. So, uh, lots of work going on in the AI space. Uh, but again, all of its focused on number 1 serving each of the constituents that we serve every day. And number 2, creating capacities, for our Associates to better engage, uh, guests.

And Steen just on your question about the funding of the project, uh, for the tech transformation, that the heaviest spend levels are really 2425 and 26. And as you know, uh there there will be several hundred million that uh will go on to Marriott's balance sheet be paid off over time but um the Delta is not huge kind of compared to normal, but probably is call it a 100 million more than you might typically expect uh, on the tech spend side for those years.

Thank you. And we'll go next to the line of Sean Kelly with Bank of America. Please go ahead. Your line is open.

Hi, good morning, everyone. And Laney, I'll pass along my sentiments as well. You'll be sorely missed when we get to that moment. But I think we have another quarter or two together. So I appreciate all you've done.

Thank you. But Sean, you can share those share those sentiments. The next 2 quarterly calls it's it's just going to be a, a really long farewell. So, uh,

so, so, uh,

Tony Tony where I wanted to go with. With my question was actually some of the implications on the the 1, big beautiful bill. So, obviously some certainty here for the sort of broader kind of investment community and and the way people think about it, but you know, if you could put your development hat on for us for a second, you know, given some of the expensing features in that legislation, I'm curious on whether or not you think this can drive some renovation Capital to the space, uh, you know, possibly, you know, some more development or optimism on that side and then, you know, leaning for you, anything on the Marriott corporate side in terms of interest deduction, accelerated appreciation or anything that would matter for Marriott, corporate. Thank you.

Yeah, thank you Sean. I maybe I'll talk macro and leani can be a little more, uh, granular.

In some ways, the best thing about, uh, the big beautiful bill as it's done, right? And so the, the level of uncertainty, both among consumers, and among our owners and franchisees, uh, improves meaningfully, with the, the signature on, on that bill. Um,

Um, that will give them some measure of pause. Um, but again, their long-term investors and so we've seen a bit of an uptick in construction starts. Certainly not to where we'd like to see it in a, a pre-pandemic world. Uh, we continue to see really strong and accelerating traction on the conversion front. Uh, you heard in my prepared remarks, in just a quarter, we've seen our Global, uh, pipeline of midscale doubled from 100 project a quarter ago to 200 at the end of Q2, uh, leaning. I don't know if you want to add any color there. Yeah, so the, let's let's talk for a minute about the broader picture that you're asking about Sean, and clearly as it relates to certain, uh, kind of depreciation factors, Etc. That that is 1 element that can be encouraging. Uh, but I think it's again, you know, it's a broader picture about

Economic stability, about interest rates about uh kind of where the transaction Market is and bid ask spreads, Etc. And I do think that uh, with uh, as Tony said, the bill passing, and hopefully uh a more concrete view about where tariffs are going to end up that, uh, we've got the possibility that the transaction Market uh, starts to open up some more. That is certainly helpful. As we think about having some assets that, uh, we're finishing, fantastic Renovations in

And we would like to recycle that capital. So, from that standpoint, we're looking forward to opportunities on that front.

Thank you. And we'll go next to the line of Dan Pulitzer with JP Morgan. Please go ahead.

Hey, good morning everyone and Lennie. Thanks for everything. Uh, I'm glad we'll help you for a bit longer though to help us out.

Um oh I wanted to go on zoom in on the group business a bit. It seems like it's been choppy or near-term but you you mentioned 2026 is actually tracking a little bit better than even last quarter. Can you maybe unpack that a little bit in terms of what you're seeing in terms of lead volumes versus some of the deferrals? Um possibly and you know, is it an actual change in the type of customer or booking that you're seeing or what exactly is going on there?

Sure, I'll give it a try the um as you rightly point out the uh, a a quarter ago. Uh when we gave you visibility into, um, group pace for 2026, we were tracking up 7%. That's tip, ticked up a 100 basis points, we're now tracking at of 8, um, not a meaningful shift in in distribution across the various sources of group. I mean, as you know, we get 45% of all group comes from corporate. That seems to be staying pretty consistent about a quarter comes from Association. That is remaining for

Fairly consistent as well. Uh, we are not seeing any sort of above normal volume of cancellations in the group segment.

I think, uh, in our prepared remarks, we may have mentioned little uptick in attrition here in in Q2 and, and, uh, into the back half of 25. But again, those those, um,

Uh, case numbers for 2026 are really encouraging. I would, the other thing I would say, we talked in response to 1 of the earlier questions, about some of the, the fluidity and the macro environment. Um that's really I think been the driver in a little uh, drop in uh, in the year for the year. Booking certainly, in Q2 of this year and an expectation, for the back half of the year.

And just to for, for 1, follow up.

So much of the drop in Q2 group relative to our expectations, a quarter ago, not quite half was from attrition and the rest was from weaker in the quarter for the quarter booking. So it's kind of a fairly even mix of the 2 and then as Tony said, I think some some real uncertainty uh, around uh the state of play in the economy. The other thing it's worth noting is that obviously with uh, a number of of both holidays and events shifting. That's also partly what you're seeing in the group outlook for Q3 and Q4

Um, being different between those 2 quarters.

Thank you and we'll go next to Connor Cunningham with Melius research. Please go ahead.

Opportunity to realize it's still very very new but other travel companies talk, talk up this opportunity, you know on on media and ads and it's just a significant driver of of profits and whatnot and I I'm just trying to understand the potential opportunity set ahead. Is it on the level of like a co-branded credit card contribution at full maturation and and maybe you could just talk about how you view it is it is it people? Is it companies that are coming into the the Marriott ecosystem or is it an ad-based type platform? Just any thoughts would be would be helpful. Thank you.

Yeah, Conor happy to talk about it and um, I was with Peggy row and her team at cam W. And uh earlier this summer where we did our official launch and uh certainly if the the early level of of interest that we saw from prospective advertisers is any indication, I think we ought to be really optimistic about, uh, the future of the network. Uh, it's really fundamentally Conor a network that helps friends connect with audiences throughout the guest Journey. Um, it allows us to take both the Deep insights, we have into Travelers and their preferences and then provide, that guidance, and then access for those advertisers uh across our digital platforms and our physical environments uh in our guest rooms.

To try and offer really bespoke um, uh, campaigns that that appeal to traveler interests. Uh, it's really too early to give you a sense of of what the economics might look like. We're in very early days. Uh, but again, the the level of Interest I think, has exceeded our expectations and it gives us a lot of optimism about the future of the network.

The only thing I I would add to that is we do expect to be sharing uh the returns with our owners as well. I think it's uh 1 of these great examples of complimentary uh adjacent businesses that help our overall power of bonvoy, but also help. Uh, the p&l of both the company and our owners

Thank you. And we'll go next to the line of Richard. Clark with Bernstein. Please go ahead. Your line is open

Hi. Thanks for taking my questions and just uh continue the thanks Alini, been pleasure, working with you the last few years.

I I guess I just want to ask a question on the resident residential branded fees. It seems to be coming up every quarter as a a piece of volatility and I guess investors in in hotel stocks don't like volatility very much. So just your commitment to the residential business and how you're feeling about the long-term Outlook uh in continuing to pursue that opportunity.

Sure. Uh, thank you very much for the question, and I, I will, uh, kind of Double Down emphasize, uh, our excitement about this business. We are the clear leader in the Branded residential business across, uh, a number of Our Brands around the world and we are thrilled with what we see. In terms of continued openings, continued strength of the prices that these units are selling for which then feeds into um a branding fees for us. You know, it's worth mentioning that we also do get management fees um, from these which are in our base management fees, they are obviously a smaller amount and they do not have the same volatility uh associated with them but but as an example, last year was 80 million. So uh, while I hear your point about Investors, not liking uh, the volatility of them, uh, it's still not a huge part of our overall fee, stream.

And uh, this year, we now expect them to just from a timing perspective to be more like 30% down. That's actually better than it was a quarter ago when we had talked about them being down, close to 50%. Um, and again, in in the big scheme of things, not not such a huge impact on earnings but they are, uh, High return on investment fees and, uh, typically also associated with a hotel next door.

And uh provide tremendous value to those hotels as well. Uh so no we are we are huge fans of our residential business and I would be remiss not to thank that team for the extraordinary work that they do and delivering these results and Richard the only other uh color commentary, I would add

for contributor to that uh growing leads that we enjoy in the most valuable tear

Thank you. And we'll go next to the line of Brant. Montour with Barclays. Please go ahead.

Good morning everybody. And I want to extend a heartfelt graduation to lynnie. Uh, you'll definitely be missed.

um, I wanted to ask about business,

Trends um obviously down in the quarter and low visibility within this business. But maybe um if you could break out non-government business transient and just give us a sense on what you've sort of baked in to your assumptions going into the third and fourth quarter within guidance. Um you know what are your hearing Tony from those the larger corporates especially that that we know you have good relations with and what they're what they're thinking

so maybe I'll

government piece just to to ground you, and remind you that last year in full year 24 about 3% of global room nights and about 4% of US and Canada. Uh, room nights were US government workers that's federal state local. Um, and we've done our best to try to estimate government adjacent room nights as well. Uh, and in the US and Canada, we would guess that would be about another 1%. Um and and it's it's sort of scales by Chain scale. Meaning if you go to the select service scale about 6%, a room nights come from government,

About 3% in full service and about 2% in the luxury tier, um, which maybe speaks a little bit to some of the trends that we've seen, uh, talking more broadly about business transient, uh, you know, most of the, the corporates that we work with are to a certain extent. I would characterize them as back to normal. A lot of the travel restrictions they had coming out of the pandemic are largely gone.

You're seeing more and more return to the office, either voluntary or mandated. Um, and I think that's having some impact on business transient volume as well. But the volatility and the uncertainty that both Lenny and I talked about in our prepared, remarks appears to be the biggest contributor to the bit of softness. We saw in the quarter

And and Brad to break out kind of your specific question about uh the impact without the government.

Globally, uh, business, transient revpar was down. 1%, if you exclude the government because government transient revpar was down, 17% in the quarter, and that's a bit more than it was, uh, say in March of 2025, but it does appear to be uh kind of steadying out. So I think if you kind of unpack that a bit you you continue to see that BT apart from government is experiencing this uh kind of lower growth. That fits what's going on with global economic activity.

which is clearly lower than what was expected at the beginning of the year, but also not um falling dramatically

Thank you. And we'll go next to Robin Farley with UBS. Please go ahead. Your line is open.

Great. Thank you. And I want to Echo everyone's sentiments about leaning, as well. Um, my my question is on the, um, Pipeline and and rooms under construction obviously the, you know, the development environment is different um, than it's been historically.

It looks like about 40% of your pipelines under construction. And if we

you know, without the change in how you count conversions, that would be somewhere in the 30% range, and if we think about how that was close to 50%, kind of pre-pandemic or like a, you know what, the old normal was

can you help us? Think about what conversions as a percent of openings needs to grow to next year, um, for to to hit that same kind of mid single digit range in unit growth, just what the conversions of the percent would would have to grow to, to kind of offset. Maybe what's not? Um,

You know, kind of new uh big newly built. Thank you.

To Robin. Uh, I I think the best way to, uh, talk about this is the reality that conversions have been, uh, call it a 30, even a little bit over often uh, a percentage of our signings for several years now.

For in, in general a shorter period of time. So we would expect to continue

To see over the next few years that, uh, we would have, uh, call it roughly a third, uh, Woo's opening, uh, that are, uh, conversion rooms that that includes adaptive reuse, uh, in Greater China, which are kind of a mix of, uh, new construction and conversion rooms and, uh, continue to see this strong amount of signings being in the conversion space. And as we look at a pipeline that is, uh, over 5% higher than a year ago, uh, with again, this heightened element of several years of conversions, we're confident that we're building uh the track record for this mid single digits, uh net rooms growth over the next several years.

And Robin, the only thing I I'd add 2 things to that, I would, I think I mentioned this in my prepared, remarks. Um, we're just getting started in the mid-scale tier where we think there is tremendous opportunity as I mentioned. Uh, the number of mid-scale deals in the pipeline globally doubled, uh, just from a quarter ago, uh, and with the introduction introduction of something like, series, that really enhances an effort that we've talked about the last few quarters around portfolio conversions. Uh, which is really encouraging to us.

Thank you. And we'll go next to the line of Dwayne pfennigwerth with evercore isi. Please go ahead.

Hey, good morning. Um, as you think about the expected uh, improvement from third quarter, to fourth quarter, uh, just a couple assumptions. I wanted to check with you is this primarily a domestic pickup or are there other regions uh of the world where you also expect sequential Improvement?

And then relatedly by segment. It sounds from your commentary, clearly group. Uh, the group pace is higher is that the biggest sequential driver. I mean, our, our sense is BT is actually improving business travels improving. We're in a peak Leisure period now. So it's a little bit hard to measure. But, how are you thinking about pickup for BT specifically into the fall?

Yeah. So

About Q4 over Q3 which is, uh, again, the items clearly that we mentioned, uh, clearly pointed out in the US. But you've also got things like easier comps.

Uh, in China As you move through the year and that, uh, becomes, uh, even more heightened as you get to Q4, uh, which obviously at close to 10% of our systems, uh, is a nice help. As you look at the overall pickup, uh, and then, obviously, you pointed out the group, uh, difference. But, but I would also agree with you that just, uh, from a BT standpoint that it is a generally heavier, period of BT travel. Uh, and with some of the, uh, resolution of things like either the bill or, uh, continued progress about tear offs that there is, uh, and potentially interest rates that there is a, a bit more of a, a open view about where the economy is going. We, we are not assuming a, a fundamental shift in business transient, uh, but more seasonality impacts as you pointed out, but but from a

General level of uh, economic activity. We are assuming pretty much Steady As She Goes and not a uh, some sort of big.

Uh, pick up in the economy that.

That is, is different than what we're generally seeing overall?

And joy and the only thing I would add. We talk about group, um, 1, the the trends are encouraging 2. We've got a little longer term visibility than we have on the transient side and so just to remind you in the quarter, the global average booking window for transient was only 20 days and for BT, it was only 16 days. And so I think, um, I I your observations are spot-on. Uh, we just don't have as much visibility into transient as we do in group.

That's a great point.

Thank you. And we'll go next to the line of smees rose with City. Please go ahead.

You and other companies are talking about picking up into next year. Um, and I'm just wondering, you know, at this point of the year, like how much confidence do you have that? That pace can continue because it doesn't really feel like um, I mean you said sort of constant economic growth that you know, it feels like um I don't know the I mean there just seems to be much more uncertainty I guess. Um and a lot of levels despite you know, maybe some tax certainty and things. And um I guess I was just wondering how you know how confident do you feel in that that that pace can continue? Would you do you think people are just holding space and they might just cancel later?

Yeah, it's a good question sneeze, but as I said, you know, while it's a little early, the, uh, I I might have a different answer for you. If the weakness we saw in the back half of this year, was the result of wholesale cancellations. The fact that the contracts are holding pretty firm and really as you heard from Lonnie. It's it's a matter of some attrition likely related to some of the macro uncertainty and

Coupled with the fact that we're off a hundred basis points since a quarter ago on definite, on the books for $26 million does give us a measure of confidence about the continued strength in the group segment. The other thing I'd point out, which is a smaller fact but just interesting, is that the food and beverage component of this group business has not been bad. I mean, F&B has been up 4% and, uh, generally been sturdy. So,

So sometimes what you see is everybody scales back down to the bare nub on the on the uh, group meeting that they're having. And and what we're seeing is that it is continued to be robust. They're they're clearly, uh, I would say there is more uncertainty um, about the near-term in the year for the year, bookings in 25 uh than we thought a quarter ago. But I will say for the group uh that continues to roll through. Uh the quality of it is actually excellent and maybe just to build on lean's point. Uh we've talked a lot.

About luxury, those numbers and food and beverage spend, or even more compelling in the luxury, tear in the quarter globally. Uh, luxury, f&b spent was up 6% and up 7%, uh, in the US and Canada and if you just look at food and beverage spend for meetings and events, it was up 9% globally and 10% in the US and Canada within the luxury tear.

Thank you. And we'll go next to the line of David Katz with Jeff. Please. Go ahead.

Uh, morning, everybody. Thanks for taking my question. Uh, you know, Lainey, thanks is probably not enough, but I'd rather spend the next 2 quarters trying to talk you out of it.

If I can you and me both okay. Thank you, David.

You're welcome.

Um, look, I I I think we've covered a lot on sort of the Cadence of quarters and I'd rather sort of talk a little big picture, you know, with the discussion about residential and, you know, some of the affiliations that we've seen, you know, leaning you hosted a bunch of us on a, uh, a tour of a yacht uh not too long ago, can can we just sort of talk about those other channels and and what could be, you know, for Marriott longer term and the follow-up to it? You know obviously is thinking about the economic intensity of those other channels and and you know how how attractive you know they may or may not be relative to the the core business that that you've grown so far. Thanks.

Yeah, David thank you for the question. Maybe I'll talk a little strategically and then let Lonnie.

Chime in, uh, you and I talked about this maybe at, uh, last time we were together in person in New York, um, broadly, uh, as demonstrated by some of the recent deals, we've done our strategy continues to be on this focus of keeping our loyal guests within the Marriott ecosystem.

And so, it is not adding brands for the sake of adding Brands. It's not adding things like homes and Villas.

Outside.

so, on the economic model, David, I point to a couple things and that is that, uh, kind of, let's first talk about, uh, the ever widening range of travel opportunities with Mary, and I would say what you're seeing, for example, uh, with the fern announcement that we talked about, is kind of

Classic economics.

Um, MGM.

While while it is essentially franchise economics is a different structure, sort of contract given that we are, uh, largely sharing, uh, 2, incredibly powerful Brands. But, but when you think about some of these other multi-unit deals, we are doing, uh, they, they do fall much more in the classic sort of franchise super high, uh, roic sort of, uh, economic models. And then, when you think about broadening it to things like co-brand credit cards, there you again, uh, are seeing also a very high return, sort of adjacency, uh, that it actually, uh, extends Beyond, just earning on travel expenses. But, uh, on the ability for people to be buying gas and we ultimately earn branding fees, uh Tony talked about the uh Marriott media network with the opportunity to uh kind of there. Again, expand our adjacency

To be able to help link customers to Great experiences and great products in a way that uh, economically advantageous both, uh, Marriott and the owners, without frankly, a tremendous amount of investment. So uh, I think that the opportunities are terrific as we look longer term. And uh, I think we, we all believe we're just beginning.

Thank you and we'll go next to Steve bezilla with Dua banke. Please go ahead.

Good morning, and thank you for taking our question. Also wanted to Echo the comments to you leaning.

Just wanted to follow up on conversions. If we could, can you talk about what you're seeing in the current environment, both domestically and internationally from a competitive standpoint, including how much key money is being used.

And in addition, what do you view as the addressable market for conversions in license licensing agreements including some of the more bulkier say 500 to 1,000 plus room deals.

I I didn't hear the last part of the question, but I'll start in terms of of kind of what we're seeing. Broadly, just as a reminder globally, about half the hotels in the world are branded, um, obviously that's dramatically higher in the US and dramatically lower outside the US. So uh, we see

Just extraordinary opportunities for conversions. Extending as far as you can see into the future, particularly with the layout of soft brands that we have. When you think about Luxury Collection, uh series, um uh autograph tribute, Etc. And then you've also got um, just from a standpoint of uh, the ability to make that work economically. In many cases, you've got Hotel owners who are evaluating taking an existing Hotel. So rather than building a whole new 1, it's a question of how much do they need to reinvest in it um to make it fit 1 of these conversion Brands and also with the affiliation cost.

Uh, efficiency. Sorry, I don't understand.

We've been able to drive uh, in that case. Uh, you see

Just really great returns for the owner for being able to put a little bit of money into their hotel and then not having to pay too much to affiliate with one of our brands. So we see great possibilities on the conversion front on the use of key money. Frankly, it's the same as we've talked about before. There's really not a substantial difference this year relative to what is required. Is it extremely competitive? Absolutely, and key money is part of that. So are the terms of the contracts and the way that the investment is required.

But obviously, generate meaningfully higher fees.

Thank you and we'll go next to the line of Lizzie dove with Goldman Sachs. Please go ahead. Your line is open

Hi. Thanks for taking the question and congratulations, Laney. I echo everyone’s sentiments, and thank you for everything you’ve done. Um, just on the development side, going back there for a second, I’m curious specifically just around China and what you’re seeing. There feels like so far the development trends have kind of defied the mixed RevPAR outlook or environment, um, so just curious kind of what you’re seeing, uh, the latest there.

So yes, we we have continued to see uh fantastic room signings this year uh in Greater China. Uh, and again, really appreciate all the team's hard work. We've seen particular strengths in the select service Brands. Which if you think about it, make sense, given uh, the perspective of Hotel owners. These are relatively speaking, uh, lower risk, uh, less complex, uh, assets or require, um, kind of allow for greater diversification. They are lower cost per key and, uh, have, uh, solid returns. And so in that regard, that's where we've seen about 70% of the rooms in the first half of this year, have been in select service, uh, brands in China and

We're very excited about how our select service brands are performing against competitors. For these signings, and we continue to see, uh, solid movement as they go into the pipeline and then start moving through through to come through opening. If the the rooms growth that we have in Greater China, uh, is in the high single digits and uh, I think reflects the success that we're having with all of our Brands there and just to give you a little more quantitative context to lean's remarks. If you look at the first half of 2025, our room signings are up almost 20% year-over-year.

And we will take our final question from Kevin copelan, with TD Cowen. Please go ahead.

Thanks so much, and I'll add my congratulations to Lynnie. Thank you for your help and for your kindness.

Thank you. I have a

Uh, just a question on Leisure transient. Can you touch on how you would characterize? Um,

current underlying Leisure transient Trends after you strip out any calendar changes.

Yeah, so I have to admit, this is probably been the um, surprise out performer for us. Um, and again I, I will point to the luxury uh, and certain parts of the premium, uh, segment. Uh, for example, Resorts has have just performed extremely well. Uh, so I think, um, kind of, when you think about, um,

Kind of wealth and wealth movements in age groups around the world uh that you know demographics probably plays a role. Uh but uh the reality is people uh with these levels of unemployment, you're still seeing people take vacation and uh they love to travel this desire for experiences over Goods, uh, continues and the underlying,

Uh, trends that we see.

Um, are excellent. Now, as Tony pointed out earlier, the booking window is obviously quite short. So uh, it can't really predict much more than, uh, 3 weeks in advance. But, uh, so far we continue to see, uh, solid Leisure Trends. But, but again, I would not call them that they're accelerating.

Thank you at this point. We have used up our a lot of time but we like to think everyone further questions, I will now turn it back to Mr. Capuano for a closing remarks.

Great. Well, thank you all again. We um

Uh, I promised I wouldn't make leanie cry on this call, but there's more of that to come. So thank you all for your kind sentiments. Um, thank you for your continued interest in Marriot and uh we look forward to seeing you on the road in the coming weeks and months. Thanks.

Thank you.

We would like to thank everybody.

For participating today. Please feel free to disconnect your line at any time.