Q3 2025 Marriott International Inc Earnings Call
Please stand by. We're about to begin.
Good day everyone and welcome to the Marriott International Q3 2025 earnings.
At this time, all participants are in a listen-only mode. Later there will be a question and answer session.
You may cue for a question at any time. By pressing the start key followed by the number 1 on your telephone keypad.
You may remove yourself from the queue, by pressing star 2.
Please be advised that today's call is being recorded. Should you require operator assistance, you may press star zero.
I now like to turn the floor over to Jackie makanika senior vice president investor relations. Please go ahead.
Thank you.
Good morning everyone and welcome to Marriott's third quarter 2025 earnings call.
On the call with me today are Tony capuano our president and chief executive officer. Lean me over our Chief Financial Officer and an 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 in our considered, forward-looking statements under Federal Securities laws.
These statements are subject to numerous risks and uncertainties as described in our FCC filings which could cause future 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 refer to year-over-year changes for the comparable period.
Statements in our comments in the press release. We've issued earlier today, are effective only today and will not be updated as actual events unfold. You can find our earnings release and reconciliations of all non-gaap Financial measures referred to in our remarks today on our investor relations website. And now I will turn the call over to Tony
Thanks Jackie. And good morning everyone. We are pleased with our third quarter Financial results which were ahead of our previous expectations.
Development activity, remained, strong and we grew our industry-leading Global portfolio of rooms by 4.7% year-over-year to over 1.75 million rooms across more than 9,700 properties. At the end of September,
As expected, RevPAR growth from the quarter was modest, reflecting ongoing global macroeconomic uncertainty.
Our hotels continued to gain revpar index. Third quarter, Global revpar, Rose half a percent.
International revpar grew 2.6%. Again outperforming the US and Canada where revpar was down 0.4%.
By region, revpar growth was strongest in APC, which has been benefiting from solid macroeconomic growth. In many countries and double-digit rooms growth.
Particularly from greater China and Europe.
Third quarter revpar, and emia Rose 2.5% on increases in both ADR and occupancy. Led by strong Regional demand, excluding the impact of the Olympics in France and the Euro 2024 in Germany last year, emia revpar would have been up 5%.
Revpar in kala Rose nearly 3%, with gains in both ADR and occupancy. And helped by Citywide events in Puerto Rico. And Rio
City. Express hotels across the region are seeing meaningful benefits from being integrated into our ecosystem and are performing very well.
The operating environment in Greater China remains challenged by weaker macro conditions, though our market share across the region continued to grow.
With year-over-year, comps easing and demand. Stabilizing revpar was flat and would have been slightly positive, excluding the impact of multiple typhoons.
Leisure demand was solid, offsetting a decline in business, transient demand.
A slight revenue part decrease in the U.S. and Canada was driven by declines in select service brands, which offset nice gains in luxury. Along with calendar shifts, impacting group.
The third quarter Rift group decreased 3%. While Leisure was up slightly, business transient was down slightly compared to last year.
Business transient was further impacted by government revpar. Declining 14%.
Globally, RevPAR growth was again strongest at the higher end, as high-end consumers have demonstrated resilience to macroeconomic uncertainties and continue to prioritize travel.
Luxury. Rev parros 4% as performance weakened down the chain scales.
Our portfolio is well, positioned to benefit from outperformance at the upper end as 10% of our rooms are in the luxury segment. And another 42% are in the full service premium segment.
by customer segment on a
Seizure transient continued to lead. Red Park performance Rising 1%.
Business, transient Red Bar was flat and group red card declined 2%, reflecting timing of events.
As Linney will discuss further redbar growth is anticipated to accelerate from the third quarter with revpar. Expected to increase 1 to 2% in Q4 compared to the prior year.
Full year, 2025 revpar is still anticipated to rise between 1 and a half and a 2 and a half percent year-over-year.
We also still expect Strong net rooms growth in 2025 and Beyond as owners continue to show preference for our brands.
Despite higher construction costs and the challenging financing environment in both the US and Europe. We still have excellent momentum in our Global signings during the first 9 months of the year signing reached a record, year-to-date level
our pipeline grew to a new high of more than 596,000 rooms at quarter end with over 250,000 pipeline rooms under construction.
Conversions remain a key driver of our portfolio expansion, reflecting the many revenue and costs related benefits of being part of the Marriott ecosystem.
Conversions accounted for around 30% of both signings and openings in the first 9 months of the year.
We remain keenly focused on driving growth and on being in more places around the world with the Best Brands and experience.
in September, we launched outdoor collection by Marriott bonvoy, which includes postcard, cabins and Trailblazers
This new portfolio offers guests unique outdoor focused stays with easy access to popular activities. Like skiing snowboarding biking and Hiking. We also announced the US debut of series by Marriott Less Than 3 months after the Brand's initial launch with an agreement to convert 5 select service found hotels in major US cities.
As the largest global lodging loyalty program Marriott bonvoy serves as a powerful engine for guest engagement and brings significant value to our owners and franchisees membership, grew to nearly 260 million members. At the end of September up, 18% year-over-year.
Homes and Villas by Marriott bonvoy and our portfolio of 32 co-branded credit cards across 11 countries.
Our us cards are by far, the largest contributor of our credit card fees.
Our current US deals were signs in 2017 and extended in 2020. And we are currently an active discussions with our current credit card Partners, our best estimate right now, is that we could have new deals in place. Sometimes, next year, sometime next year, that reflect the increased relevance of Marriott bonvoy and the significant growth of our globing Global lodging portfolio.
On the technology front, we continue to progress in the multi-year evolution of our property management, reservations and loyalty platforms and the deployment of new cloud-based systems across our Global portfolio. Which we believe will enable Merit to have an industry-leading technology stack.
Leveraging best-in-class, technology architecture and proprietary Innovations. This Tech transformation is expected to deliver a new ecosystem, of capabilities and revenue, driving opportunities on property.
Owners are excited about the potential top and bottom line benefits at their hotels.
The first few hotels recently started the transition onto the new systems.
And Associates have shared, very positive feedback about the new capabilities and how they Empower them to deliver. On the customer experience, we plan to continue deploying our systems to hotels around the world over the next few years. We're also excited about increasingly leveraging AI across our business with a focus on areas like content creation, augmented business, intelligence for associates and more efficient processes that help Associates deliver elevated customer experiences.
Before I turn the call over to leaning. I want to thank our fantastic teams around the world for all that, they do their commitment and perseverance are invaluable to our continued success. And among the many reasons I remain incredibly optimistic about Marriott's future leaning. Thank you. Tony our results today. Demonstrate the power of Marriott's business model and the numerous levers driving our earnings growth, despite continued macroeconomic uncertainty and modest Global red car. Growth, our third quarter adjusted, Eva de Roos 10% and our adjusted EPS grew 9%
As Tony noted third quarter, Global rug part increased 50 basis points in line with expectations driven by nearly 1% ADR growth, offsetting a 30 basis point decline in occupancy, third quarter, total gross fee revenues, increased 4% year-over-year to 1.34 billion. The increase primarily reflects runes growth and strong co-branded, credit card fee growth co-branded credit card fees Rose, 13%, reflecting robust card. Acquisitions and meaningfully higher Global Card spending, as well as the timing of Point transfer. Promotions fees from our international cards which continue to ramp nicely Rose, nearly 20% driven by particularly strong performance in Japan and the UAE
Incentive management fees are imf's. Total of 148 million higher than previously anticipated down 7% year-over-year. The change was primarily due to declines in the US and Canada reflecting, some large hotels undergoing Renovations in the third quarter this year and certain hotels in Florida benefiting from insurance proceeds in the third quarter last year only and other Revenue. Net of expenses surpassed expectations Rising 16% compared to the prior year. The year-over-year increase was largely driven by contributions from the
Sheraton Grand Chicago, which we purchased in the fourth quarter last year as well as improved performance at other hotels in the portfolio.
Third quarter GNA declined, 15% compared to last year's third quarter, which included a 19 million, operating guarantee reserve, for a US Hotel. The year-over-year decline. Also reflects timing and lower compensation costs.
As we continue to benefit from the work we did last year across the Enterprise to enhance our efficiency and productivity.
The strong growth in Gross fee, revenues and owned least, and other net coupled. With the decline in GNA led to adjusted. Eva increasing 10% to 1.35 billion above the high end of our guidance.
Now, let's talk about our Outlook.
Increased 1 to 2% in the fourth quarter, the acceleration in global RV Park Road from the third quarter to the fourth quarter is partially due to calendar shifts and 1-time events. Reservoir growth is anticipated to still be meaningfully stronger internationally than in the US and Canada.
And higher-end chain scales are expected to.
And change scales.
As we look ahead to next year, while we're still working on our budget. Our preliminary view is that 20226 year over year over year Global rev Park growth could be similar to the 1 and a half to 2 and a half percent growth expected. This year, growth is expected to again be higher internationally than in the US and Canada and next Summer's World Cup.
could contribute around 30 to 35 basis points to full year, Global rep Department growth
turning to this year's p&l in the fourth quarter, gross fee growth could be in the 4 to 5% range compared to Prior expectations. This Outlook reflects slightly lower expectations for imfs and fees on FNB revenues. In Asia fourth quarter, I am asked, are now expected to rise in the low to mid single digit range, partially reflecting the timing of some fees that shifted to the third quarter. For your imf's are anticipated to be around flat with last year 4.
Quarter growth. Speed growth will still be impacted by the timing of residential branding fees, which are expected to be down year-over-year. Fourth quarter adjusted EVA is expected to increase 7% to 9%.
For the full year, we expect gross fees to increase around 4 and a half to 5% year-over-year full year. Co-brand credit card fees are now anticipated to grow. Roughly 9% primarily reflecting stronger than expected. Third, quarter performance, timeshare fees are still expected to be around 110 million and full year residential, branding fees are now anticipated to decline around 20% a meaningful Improvement compared to expectations at the beginning of the year, reflecting the continued success of our residential business, and the volatility in the timing of residential projects sales.
Own lease and other revenue, net of expenses, is expected to total around $370 million.
2025 GNA expenses, anticipated to decline 8 to 9%, to 975 to 985 million. This decline, reflects roughly, 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.
Oh, your adjusted Eva do could increase between 7 and 8 percent to 5.35 to 5.38 billion.
4 year adjusted EPS could total 9. $9.98 to $106 our full year. Adjusted effective tax rate is expected to be just over 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.
Our 2025 net rooms growth is still anticipated to approach 5% as we look ahead to the next few years, with our strong momentum in global signings. And conversions in particular, we still expect global net rooms growth in the mid single-digit range.
Full year, total investment spending, is expected to be roughly 1.1 billion or 1.45 billion when you include around 350 million for the Citizen M transaction.
Our Capital allocations philosophy Remains the Same. We're committed to our investment grade rating investing in growth, that is accredited to shareholder 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.
We're pleased with the company's strong year-to-date cash flow performance and outlook, given strong cash flow generation. We expect full-year capital returns to shareholders to be roughly $4 billion, while maintaining our leverage in the lower part of our net debt to EBITDA range of 3 to 3.5 times.
Operator can now open the lines for questions. Please, ask just 1 question each so we can speak to as many of you as possible. Thank you.
if you would like to ask a question simply press star 1 on your telephone keypad,
If at any point you would like to remove yourself from the queue, you may press *2.
once again, that is star 1 to signal and star 2, to remove yourself
We'll pause for just a moment to allow questions to queue.
We'll take our first question from Sean Kelly with Bank of America. Please go ahead.
Hi, good morning everyone and thank you for taking my question. Um, Tony irini obviously the the language around the the credit card program and renewal uh you know, conversation there is new. So uh I think we're going to feel a lot of questions on the parameters of of what that deal could look like. So obviously these things are delicate while they're in negotiation but maybe you could put them in perspective. Uh a couple things for US 1, just current size of the program 2, how we should think about maybe you know, what's on the table or what could be renegotiated relative to maybe some of the growth rates that you saw back? When you combine the programs and did the renegotiation back in 2017? I think just some parameters around, that would be helpful. And then third, if I can, if I can sort of add it into the general gist, you know, earlier late in the year would be helpful just because it could be a meaningful earnings contributor. So just any timing uh refinement would be useful to thanks.
Thank you Sean. Well the good news is you've been asking for a few quarters. So I'm going to make you happy. That we talked about it, bad news I'm probably not going to give you the specificity you want for. Exactly the reason you described that we are still, you know, we are inactive and fluid negotiations, but maybe I can give you a little bit of atmospherics around how we're thinking about it. And then, if it would be helpful, I might ask leanie just to remind you about how the mechanics of the program work. Uh, as we said in the prepared remarks, we're an active discussion with our current Partners, um, the power of bonvoy, the value of bonvoy points to our customers, the strength of the portfolio and the brands, the broad array of experiences that we offer without question.
The most attractive customer groups in any industry for our partners in financial services as they think about credit card products.
Number 1 number 2. Um, as bonvoy continues to grow, um, that growth translates to more card holders more spend. And we expect to see that reflected, um, in growing program, credit card fees, and you heard leani, talk a little bit about that.
Um, and then I would just remind you that when we did the, the deals originally in 2017 and then extended them in 20. Um, the value that married at bonvoy brings to these Partnerships has grown exponentially. So I, I mean, when we did the deal on 17, bonvoy didn't even exist. We launched it in 19. Uh, the membership in our loyalty platform has more than doubled from 110 million members back in 17 to the nearly 2006 million that we described earlier in the call since the end of 17. The number of co-brand accounts and Global spending on our cards, have both grown by about 80%, uh, and our system size growth has grown from around. There has grown around 50%, uh, from 6,400 properties globally, back in 2017, uh, to over 9700 at the end of Q3. Um, so with that leaning, I might ask you to remind
Uh, Sean and the rest of the participants, just exactly how the mechanics of the program work. Yeah, sure. Um, and thanks for the question, Sean. You know, I think it’s definitely too early to talk about potential upside from these deals. But I think a reminder about how the basic economics of the credit card partnerships work is useful. Um, our credit card partners basically pay us.
flows into Marian's income statement, obviously we recognized
Uh Revenue in our franchise fees that is uh, compensation for the licensing of our intellectual property. And so we we take a royalty rate into earnings that that is essentially a percentage of the total credit card funding. And so as we as we move forward while um it would it would actually, of course not make any sense for us to talk about specifics and the negotiations. Uh I think Tony uh was clear in pointing out the
The increased relevance of bonvoy overall and uh, we're very excited about the
How our cards have done and how they continue to perform and are very optimistic about the outcome next year of these discussions. And then, I think, Sean, your last question was, you were hoping for some specificity on timing? Uh, all, you know, again, we are in in the throws of negotiation hard to give you a specifics. Other than to tell you give them the value. We think these projects uh will unlock for our financial services partners for uh bonvoy and our owner community. And for Marriott International, uh the teams will work diligently to try to get them done as as reasonably quickly as possible.
And just as a reminder about how we're performing this year, you know, in 2024 uh our credit card, branding fees were 660 million. And uh, we're looking at that growing this year. 9% in 2025 from again, uh, the continued power, uh, powerful combination of the credit card Partners in Marriott. Bonvoy.
We'll hear next from Michael Bellisario with beard. Please go ahead.
Thanks. Good morning, everyone.
Can we dig into the house of the franchisee? I think just this year. You've reduced loyalty chargebacks.
You've expanded your renovation, Scopes framework? I think to more Brands and obviously, rev par has slowed, so I guess 2 parts is what our owners still asking for what else? Can you provide them to ensure that economics or manage interactive and and you can get back to your mid single digit growth Target.
Thanks. Yeah. So, uh, there's a lot in that question. I'll try to unwrap. I think the fact that through the first 9 months of the year, we have on a global basis achieved record signings, uh, is, is indicative that I think we're hitting the right Mark with the owner and franchise Community. Uh, we are focused on driving enhanced Topline performance and we think that that's 1 of the most compelling features,
Of the technology transformation Journey that we're on. Uh, we think that represents some really exciting opportunity to continue to drive Topline, uh, the reduction in the Loyalty charge out rate was an example of an ongoing effort to identify, uh, across the landscape opportunities to reduce affiliation costs and then we continue from the work. We started last year, not just to lower uh, corporate GNA expense, but to look for opportunities for margin enhancement across the portfolio.
and I, I just
uh,
Comparisons of our affiliation costs against our competitors. Uh, we believe we have the lowest affiliation costs relative to revenue in the industry and we expect with our economies of scale to continue to work on improving that even more.
We'll go now to David Katz with Jeffries. Please go ahead.
Uh, morning for morning. Thanks for taking our question. But 1 of the observations is the investment spending, um, has sort of moved up to the high. I think the higher end of the range for what the guidance was before, you know, I can Venture some guesses as to, you know, what's driving that but I, I'd love to have you
To unpack that a little bit and and in particular give us some color, you know, on key money and how that is, you know, trending. Because I suspect that's that's 1 of the drivers there. Thank you.
Yeah, well, no thanks Dave.
Temperatures in our own least uh, and existing portfolio, and um, from that standpoint. Uh, it's actually not development related key money that the increase is really around clearer visibility around the non-development related, uh, expenditures. So, for example, the timing of tech uh, transformation Investments onlys capex timing uh investments in um uh our existing Hotel base when there may be a particular asset sale Etc. So in that regard, it's really not reflective of any sort of change in our key money philosophy or actually uh the amounts that we're spending relative to key money. As you know, very often the deals that you sign or for hotels that are either converting uh, over the next year or so or for new development, new builds, uh, hotels, which then don't actually open for several years and the comments that we've made about.
Uh our key money used in new unit development are are actually quite consistent in terms of both amounts. Uh, and the way that we're using it
Will turn now to Dan Pulitzer with JP Morgan. Please go ahead.
Thanks and good morning everyone. Um, I wanted to go back to the 20126 Outlook, the 1 and a half to 2% 2 and a half percent rev part growth. I mean, it it it seems like it. It you guys are kind of extending or assuming a status quo most mostly holds here but maybe you can unpack that a bit in terms of what you're seeing across Leisure business, transient and group for next year. And and any any kind of, you know, color on on pacing there too. Thanks.
Yeah, sure, absolutely. Be happy to talk about that. So, so first of all, just to remind her that we have talked, we've said in our prepared remarks, we continue to expect that the US will be lower than the international. Uh, and that, that overall, broadly speaking, we'd expect it to be roughly, uh, the same globally. I, I will say that we would expect the US.
Uh, to end up slightly higher next year than this year, and a lot of that benefit is related to the World Cup. So, when you think about the World Cup next year, uh, having a a, a very healthy impact on, uh, US and Canada.
Uh that that from that standpoint.
You know, this extra 30 to 35 basis points globally is heavily squarely in the, in the US and Canada benefits side of things. Uh, when I think about group, I think it is, uh, again, uh, very encouraging to see that our group pays for next year, is up 7%. That's similar to a year to a quarter ago and actually, group pays for the US, uh, is up 8%. So I I think, uh, as we look into next year, I, I do agree with you that I expect Leisure to continue to be um, a stronger performer on a relative basis and particularly uh, in the upper chain scales. Uh, but but overall a fairly similar environment globally.
yeah, and I might just, um,
Re-emphasize, a comment. I made in the prepared remarks and that is to remind yourself of the distribution of our portfolio, with 10% of the rooms in the luxury tear and another 42% in Upper upscale. Um, we've had questions the last couple of quarters about the sustainability of the high-end and to post another quarter with 4%, Red Bar index, kind of leading the charge. I think is a pretty powerful illustration of the the strength and appetite of that luxury.
We'll go next to Conor Cunningham with Melius research. Please go ahead.
Hi everyone. Thank you. Sorry to go back to the credit card for for a quick second here. Uh, can you talk about the benefits of of of being between Amex and Chase? Is there is there anything that that that that's helpful having 2 Partners rather than 1?
and then, you can just
High level talk a little bit about the opportunity. There like is, is it is it further? Is it is there just like a scale opportunity from from from from having 2 different providers in general? Thank you.
LT program and you heard leading provides some some context to that, um, going with the Dual issue or approach. Gives us access to what we think are 2, very complimentary customer basis. Uh, gives us the ability to achieve really broad Market coverage while providing customers with a unique set of choices. Um, so, you know, we think it's, it's a really powerful opportunity for us. It also gives us um or gives our card holders greater trial and point transfer sales with their proprietary card base.
We'll go now to Stephen Grambling with Morgan Stanley. Please go ahead.
Hey thank you. Um just wanted to dig into the the pipeline a little bit. I think you touched on this a little bit in your intro remarks but um it looks like you had a sequential Improvement in the Under Construction in particular also group pretty substantially year-over-year. So just curious where some of that that strength is coming from, um, and if you've seen any kind of change in the environment from changes in rates or otherwise thank you.
Yeah sure absolutely I you know first I'm going to point out Stephen. Uh, what has continued?
Uh, which continues to be a real Trend, and that's all around conversions. So, the momentum around conversions has not stopped and that, uh, obviously feeds into our under construction pipeline in a, in a material way. And, uh, you know, we fully expect, uh, a third of our room openings, this year to be conversion rooms and frankly when you look at our signings that Trend, it's not doing anything except staying the same if not actually moving up a little bit. So I think that's very encouraging as you look at runes growth. But when you talk about
Construction pipeline.
That the that Marriott has, um, kind of the leading share of both signings for new build, uh, construction hotels as well as actually, what's under construction, that, uh, 29% of signed and, uh, 28% of under construction. And we did see a pickup in Q3 of a rooms, uh, going under, uh, actually, uh, digging the shovel in the ground. But I would say, overall,
Trend is fairly similar. We are still meaningfully below. Construction starts for compared to 2019. Uh, and when you think about um the the environment we don't see a major Trend clearly, as you uh, look at dropping rates that should.
Help. We are seeing a bit of a pickup in, uh, asset sale transactions in proven markets with proven Brands. Uh, but I would say, we still need to see more Improvement, uh, on the financing environment to see a dramatic pickup in in new build construction starts. But but again, uh every every little bit of momentum is appreciated and we are seeing a little bit.
We'll go next to Patrick's schools with truist. Please go ahead.
Uh, good morning, thank you. Um, in relation to the last question, can we drill down a little bit about? Um,
The development, the latest trends in development environments. Uh, and APAC. Um,
Uh, and China.
Uh, thank you.
Yeah, sure. So, um, basically, we're thrilled with what we see in terms of both rooms growth and continued signing in Asia? Uh, let me talk first about greater China. Uh, again broadly speaking, both areas are seeing double digit rooms growth and and continue disproportionate share of of signings uh as we move forward. So when you look at the pipeline, um, I would say we've got a situation where in, uh, Apec you've got
Continued outperformance, uh, for Marriott as compared to our competitors in signing New Deals across all the chain scales, we're continuing to do, uh, lots of Premium deals there. But also now seeing more extension down into the upscale um, and even midscale space in Greater China. It's it's obviously a little bit of a different story where there uh, while we see the same, um, big increase in signing growth. It is much more concentrated in the upscale
Uh, tear and from that standpoint, you're seeing investors appreciate the relatively, uh, lower volatility and lower unit costs for, uh, developing a hotel as compared to a luxury hotel in a tier 1 City, for example. Uh, so a as we've seen the the continued growing strength of Our Brands and greater China. The demands for a strong model that has the power of Marriott Bond boy and also very competitive affiliation costs.
Uh, and operating costs uh those brands are doing particularly well. So we've seen very strong Improvement there and again, just as a reminder for from a greater China uh perspective, you know, we are right now, still seeing a bit higher percentage of domestic travel.
Travelers. Uh then we did pre-covid uh in the in the low 80 percentage and I I think it's a good reminder that our our hotels uh provide jobs for Chinese citizens. They're overwhelmingly for Chinese customers. And as the as Our Brands grow in strength uh you are seeing this this growth across markets and across chain scales uh for Marriott International and Patrick just to quantify some of that greater China momentum. That Lennie described uh, year to date through the end of the third quarter. Our room signings in Greater China are up 24% year-over-year
We hear next from Brant, Montour with Barclays. Please go ahead.
Good morning everybody. Um I was hoping we could double click good morning, I was hoping we could double click on um business transient. It doesn't sound like you guys are baking in a dramatic. Um recovery in the fourth quarter or your comments on 26, but you know, Trends did seem to sort of worsen as of late. So just wondering how much of that was, you know, the government shutdown or government related and ex-government. Had, do you have you seen Trends stabilize or any sort of green shoots there? You can talk about. Thank you.
Yeah, let me give it a try, the um, Global business transit in the in the quarter was effectively flat. Um, but that was a sequential Improvement versus Q2 when Global Beatty was down 2%, um, Global BT rev part if you exclude government to your point was actually up 1% year-over-year. Um, but we saw government transient down 15% year-over-year. Um, and I think as we look into 2026 little bit of more of the same, the um, the larger companies that make up.
Pretty encouraging strength, but you are seeing a bit of hesitancy from some of the smas, um, you know, as they try to navigate the the volatile economic environment.
And the only thing I'll add is that uh, on a from a kind of relative basis of the larger corporate VT versus the small and medium-sized businesses, we did see uh, relatively more weakness in the smaller and medium-sized businesses, which as you might imagine, uh, has a, a bit greater impact on our select service brands.
Pull your neck from ra Klein with B BMO. Please go ahead.
Thanks and good morning. Um, go going back to the credit cards. Uh, there's been some pretty big program renewals for premium cards at both case and Amex with their own offerings and curious if you view that, as competition in any way. And what if anything? That might mean for the upcoming renewals, thanks.
Thing, that'll be incorporated into the ongoing discussions.
We'll hear next from Richard Clark with Bernstein. Please go ahead.
Hi, good morning. Thanks for taking my question. Um, I guess you gave some helpful color on how you're using, um, AI artificial intelligence. Uh, internally just any comments on the sort of external use, um, you know, making your hotels discoverable. Bookable through uh, chat TBT and other other platforms, do you see that as an opportunity? Is that
Something that's been worked on at Marriott.
Yeah, I mean, without question when we think about our distribution strategy, broadly, uh we are increasingly certain that AI platforms uh, can. And will be helpful new distribution channel for us, uh, more and more guests are going to use them for trip suggestions trip planning. Um, while the search and the Commerce models are still, You could argue in their infancy. Uh, we are certainly optimizing. The content across our platforms to take advantage of gen AI Services. Um, our channels channel strategy, broadly is designed to ensure, we've got broad reach across all traditional and emerging channels. And certainly generative ai agentic, ai false squarely, in that emerging category.
Will turn now to Dwayne pfennigwerth with evercore isi, please go ahead.
Hey, thank you. Good morning.
Wanted to ask you about um, any changes you're seeing in underlying seasonality? Uh, 1 of the things we've heard from the airlines has been a shift.
In the underlying seasonality to Europe, a little less focus on Peak summer uh July and August, and better Trends in the fall uh with October seeing more Demand versus maybe the pre-pandemic period. I wonder if you're seeing this.
Elongated Peak seasonality too. And can you just remind us, how much of your Europe demand comes from, uh, us point of sale?
Yeah, while lean is pulling that I want to give you the precise number. I'll give you maybe a more anecdotal answer. Uh, I've been on the road for the last 6 or 7 weeks. Uh, I was in, uh, a few cities in Europe. I was in uh, Rome and and Milan and Venice and uh, walking around in October. In those markets felt like the traditional crowds in June and July, I do think some of that is weather related. Uh, I was in Florence talking to our teams there and they said that the pretty significant press coverage about elevated temperatures during traditional peak, season caused a bunch of re-bookings into the fall. Uh, as I talked to our operators across Europe, there is certainly a
View that the season is extending, um, earlier into the spring and later into the fall. And, uh, Lenny and I were in Japan for the opening of our new JW Marriott in Tokyo. And I think we saw the same thing there a really strong extension of peak season into the fall.
yes, and just
Numbers perspective. Um, the mix of us customers in Europe. In Q3 this year, was 36% uh for the full year last year. It was 33% so there's not really a huge shift. Uh I think generally speaking I'm looking to see if there are any other uh kind of categories that look meaningfully higher um and just a little bit more.
Um, from certain other parts, like aipac Etc. But but I'd say overwhelmingly pretty, pretty similar, you know, you would have thought that with FX with the weakening dollar that you, you might have seen more of an impact, but we still saw a very strong uh, summer results. And then just as a reminder, there were certain events that happened in Q3 a year ago as compared to this Q3 like the Paris Olympics, which I, I think also is, uh, is just a point to mention but from an overall,
Seasonality, you know, we've got the Boomers uh, obviously traveling all over but I I'd say no major shifts.
We'll go next, the speeds rose with City. Please go ahead.
To continue can do you have a sense of how developers in the US are thinking about Returns on, that kind of products? Have they come down? Do you feel like, you know, you'll take more share given the strength of your Brands within what is being built, or just just kind of curious. Like, you know, um, you know, how does the developer decide to put a shovel in the ground now, given you know what, what we're seeing at least on the revenue side,
so, I'm going to talk
About 2 aspects of this and 1 is on conversions. And 1 is on new builds, uh, because I do appreciate the opportunity to have a little advertisement, uh, regarding our growth in midscale. Uh, you know, and we've only been in the mid-scale space, a couple of years. We've already got 200 rooms open, and we've got, um, well over 200 more in the pipeline, uh, in the midscale space across our studio res City, Express, and 4 Points, Flex hotels, hotels. Yeah. And, and in the, the US and Canada, for example, we've got 150 mid-scale hotels in the pipeline. So it's really a very excited about, uh, the opportunities there and to your point, we actually see um, meaningful interest in the conversions to our brands or the strength that we provide relative to revenues as well as uh extremely competitive affiliation costs. I think on the new build side.
There, there continues to be a host of factors that have met that there is a bit more reluctance. And part of this is around expectations on interest rates, i.eat of new hotels, going under construction. But I think, you know, we all have to recognize that compared to 2019 when the financing
cost were close to zero that it is a different environment, but we think from an attractiveness of the asset standpoint that uh, it still fits, many of the
Um, qualities for a limited service hotel, where you see, strong cash on cash, yields fairly steady performance over time, um, and a good environment. So I think some of this is about standing on the sidelines and waiting to go back in rather than not doing the deals at all.
We'll go now to Lizzie dove with Goldman Sachs. Please go ahead.
Hi there, thanks for taking the question. I just wanted to ask if you have any kind of appetite for whether it's kind of small tuck in m&a or Partnerships you know similar to kind of Citizen M. And if so if there's any kind of areas of the portfolio, you'd be looking to kind of fill out more. Thanks.
Sure. So at the risk of being a repetitive, I I'll give you the answer, I've given you in the past, which is I I don't think the team feels any burning need to Chase m&a and pursuit of scale. Thankfully, we enjoy industry-leading scale. Uh, we'll apply the same lens that we've applied, historically to opportunities, that may present themselves. And the, the lenses we have applied. If we see a a geographic area that we think represents real opportunity for growth Andor represents an important um, outbound uh, demand generation market, and we are dissatisfied with our pace of organic growth. We might look for an opportunity. If we scan our brand architecture and we
See a gap that we think is more effectively filled, uh, by a tuck-in m&a, acquisition versus the launch of an organic platform. We would consider it there, uh, but again, I think we'll be, uh, quite deliberate and we'll apply the same Financial rigor, that we always do and as was evidenced in a deal, like citizen app.
Will turn out to Maredudd Genten with HSBC. Please go ahead.
Digital vertical within bonvoy, might sort of serve as a framework, uh, for a future loyalty sub, kind of ecosystems or if this was more opportunistic, given that homes and Villas. And, um, some of the properties were already on a sort of separate platform, um, for digital integration and maybe just to add on to that if, um, sort of looking at these, um,
Platforms, like such as in them or the outdoor platform, you know, sort of shifts your way of thinking about digital distribution in a, in a broader sense. Thanks a lot.
Yeah, let me give it a try. The um, some of this is really inextricably linked to the the central reservations transformation, which we think will be quite reflective of how our customers want to shop. Um, so the ability to search our, our portfolio through passions as opposed to Simply a geographic, search, uh, homes and Billows is a good example of that outdoor. Collection is a great example of that. So, rather than saying, I want to go to Costa Rica, or I want to go to Hawaii, I may search surfing options within the portfolio and the new Central res system will give our guests, a seamless ability to do that. Citizen M. I, I would view as a little more traditional, um,
It's a terrific product, but I think that it will likely benefit from a more traditional geographic search.
Better view of what our digital channels um, provide and how we think about that platform. Obviously, uh,
We want people to be coming to the bonvoy platform and then being able to do their shopping and their communication with us uh however they choose whether it's by city or whether it's by activity. But but 1 thing, just as a as a really critical piece that we view uh an ultimate critical component of it is that we control uh, the experience that our customers have. And that that is where we really want to be the providers of fantastic experiences of being able to communicate with them about what they want, what they need, how they want that to go. Uh, and so while yes, the digital shopping is very important. At the end of the day, uh, the, the face-to-face person, to person way that people experience their, uh, their lodging stays is something that we feel very strongly about and, and, uh, will want that to be, uh, part of the overall, uh, advantage.
And ladies and gentlemen, with no further questions at this time, I'd like to turn the floor back over to Tony capallo for an additional or closing comments.
Great. Well, thank you all again for your continued interest and coverage of Marriott uh Laney. And I have both been on the road quite a bit. We have some extraordinary hotels and some new additions to the portfolio, uh, our teams continue to be as passionate and as engaged as you would hope. And uh, we look forward to seeing you on the road and hosting, you have a great afternoon.
Thank you, ladies and gentlemen, that will conclude today's event. Thank you for your participation. You may disconnect at this time and have a wonderful rest of your day.