Q2 2019 Earnings Call
At this time I would like to welcome everyone to the Marriott International's second quarter 2019 earnings Conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer session.
He would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question press the pound key.
Thank you I would now like to turn the call over to Arnie Sorenson. Please go ahead.
Good morning, everyone welcome to our second quarter 2019 earnings Conference call.
Joining me today are Leeny Oberg, executive Vice President and Chief Financial Officer for Park Senior Vice President of Investor Relations and Betsy does senior director Investor Relations.
First let me remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal Securities laws. These statements are subject to numerous risks and uncertainties.
As described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments.
Forward looking statements in the press release that we issued today along with our comments are effective only today August six 2019 and will not be updated as actual events unfold.
In our discussion today, we will talk about results, excluding merger related costs and reimbursed revenue and related expenses.
GAAP results appear on page one of the earnings release, but our remarks today will largely referred to the adjusted results that appear on the non-GAAP reconciliation pages.
Of course, you can find our earnings release and reconciliations of all non-GAAP financial measures referred to in our remarks also on our website.
Before we move to specifics about the quarter, let me make a few observations about our results.
Global economic growth is clearly.
[noise] slower than we anticipated when the year began demand growth for the U.S. lodging industry as reported by STR reflected the weaker us economy with lodging demand in the quarter up less than 2% year over year about 50 basis points lower than the past couple of quarters combined with a relatively higher supply growth in the largest 25 U.S. markets STR as revpar growth in these markets increased only 0.2% in the quarter compared to plus 1.6% in secondary and tertiary markets.
Marriott's North American system wide Revpar rose, 0.7% in the quarter and our system wide Revpar index in North America increased 100 basis points with improvement across all luxury premium and select service portfolios.
Despite the business climate, our North American sales team had a solid quarter gross group booking gross group revenue bookings made in the second quarter for all future periods increased 6% and booking pace for the next 12 months is up at a low single digit rate largely related to strong corporate demand.
New group bookings at our legacy Starwood hotels were particularly strong in the quarter as these hotels benefited from the completed the integration of our sales organizations that occurred in 20 early 2018, North American group sales were even stronger in July .
On the transit side, we have seen meaningful and steady improvement in legacy Starwood Hotel performance since the cut over to Marriott revenue management systems in the fourth quarter of 2018.
We believe there is additional revpar growth upside as we further fine tune performance of these brands.
We're continuing trade disputes revpar in greater and greater China rose, 2.6% in the quarter, reflecting moderating revpar growth in manufacturing markets like sessions and 10 Gen and in corporate destinations like Shanghai political demonstrations in Hong Kong also constrained revpar growth.
At the same time, our Revpar index in greater China Rose sharply again in the quarter.
Elsewhere in Asia demand for our hotels in Japan, and India continue to show robust trends with Revpar up nearly 7% in the quarter.
In Europe transient room nights booked by U.S. travelers rose 8%.
As tourist enjoyed the FIFA worlds women's World Cup and the BLE inventus by the way congratulations to Meg and repeat in the entire U.S. women's national team.
On an impressive tournament.
Europe also attracted a greater share of the strong outbound business from China as our Chinese guests are enjoying more personalized hospitality through our Lee you service programs.
Room nights sold to Chinese guests traveling to Europe increased 34% in the quarter.
Our hotels in Malaysia, Egypt, and Mexico also saw significant increases in Chinese demand.
Global.
Excuse me globally.
Comparable hotel Revpar on a constant dollar basis increased 1.2% in the second quarter and global Revpar index increased by more than 100 basis points, our strongest performance since our acquisition of Starwood.
We remain focused on delivering leading profitability for owners and franchisees labor and benefit costs are rising in many markets, even as revpar growth moderates. Despite this in the second quarter, we maintain flattish house profit margins across our company operated system.
As we leveraged our scale and increase productivity.
In addition to significant savings in procurement and loyal lower loyalty charges.
Our hotels benefited from lower commission rates on group intermediaries, and a grower growing proportion of lower costs direct transient bookings.
System wide direct digital hotel revenue increased over 20% in the second quarter.
And now represent nearly one third of property revenue globally, 38% of transit revenue alone.
In China, our successful Alibaba joint venture helped to increase our direct digital revenue bookings in that market by 36% in the second quarter.
Property revenues booked on OTI is worldwide declined 2% in the second quarter.
Our new program services fund destruction structure is also improving margins at our hotels.
Launched at the beginning of this year owners and franchisees are now being a single amount that covers roughly 20 programs and services, including reservations sales and marketing and technology support. This simplified pricing is easier to understand and forecast and we expect it will generate savings for the vast majority of our owners.
This focus on owner returns and transparency is helping drive our share of new hotel development, our global system totaled roughly 1.35 million rooms at the end of the second quarter and our worldwide pipeline reached a record 487000 rooms, nearly 5% higher than a year ago, and 3% higher than last quarter.
Owners and franchisees are continuing to sign new deals at a rapid clip.
In the second quarter, we added 29000 rooms to our pipeline and opened more than 16000 rooms.
Over 20% of room openings in the quarter were conversions from competitive brands.
And our expected pace of openings, our under construction pipeline represents the equivalent of two and a half years of embedded gross room's growth. The remainder of our pipeline represents another three and a half years of growth.
In 2019, we expect our worldwide rooms distribution will increase by roughly 5% to 5.5% net of 1% to 1.5% room deletions a bit more modest than our prior guidance, reflecting opening delays in North America and the middle East.
We have not seen project cancellations for 2019 openings.
Over the past few years length, and construction periods reflect labor shortages, a larger proportion of urban properties and in an increasing number of new projects using multiple brands.
Well construction delays have moderated our near term room's growth in 2019.
Our under construction pipeline totaled 213000 rooms at quarter end.
Given the significant depth of our under construction pipeline, we expect openings in 2020 will accelerate meaningfully.
We continue to expand our lead and luxury lodging, we have over 700 luxury properties with 175000 luxury rooms open or under development nearly doubled the luxury portfolio of our next meeting competitor.
60% of our 200 luxury pipeline properties are already under construction.
Thus far in 2019, we have opened 15 luxury properties around the world and expect to open another 15 luxury projects by the end of the year.
Worldwide leisure transient demand was solid in the second quarter, and we believe leisure offers a meaningful and incremental growth opportunity.
Today, Marriott bond way tours and activities offer 200000 leisure experiences in 1000 global destinations.
And our homes and villas by Marriott International which launched in May now has nearly 2500 homes in the Americas and Europe .
In early 2020, we expect our Ritz Carlton yet we'll set sail on its first cruise from Fort Lauderdale to Barbados cruise bookings are running ahead of expectations.
And in addition, yesterday, we announced our intention to grow in the all inclusive space after signing new management agreements for five new build all inclusive resorts located in Mexico, and the Dominican Republic.
These projects will be added to our first all inclusive project in Costa Rica, which joined our portfolio. When we acquired Starwood. The all inclusive market is growing rapidly and our Marriott bond way members would like to see us in this space.
We expect to expand our all inclusive portfolio in popular leisure destinations in the Americas, Europe , and southeast Asia with both new build projects and property conversions, leveraging our well established full service and luxury brands.
Maryann bond Voya as a key element of our leisure strategy.
Marriott Bondpoint membership totaled roughly 133 million at quarter end with strong sign ups in the Asia Pacific region in the quarter year to date member occupancy penetration increased 160 basis points and in the second quarter alone bookings on the new Marriott Bond voice App rose 70%.
We are bullish about merits future, we continue to leverage our scale for the benefit of our guests owners franchisees and shareholders. Our strong brands are getting better.
Owners and franchisees continue to add hotels to our already broad distribution.
And most important our culture focused on people remains front and center.
Before I turn the call over to Leeny to talk about our second quarter performance and outlook. Let me give you a quick health update I have almost completed chemo treatments and they have gone well. The doctors are pleased with my progress so far.
I still have radiation in surgery ahead, but so far everything is on schedule I. Appreciate all the kind words and support from so many of you now levy for the second quarter.
Thank you Arnie for the second quarter of 2019, adjusted diluted earnings per share totaled $1.56 compared to $1.73 in the year ago quarter.
This was slightly over the midpoint of our guidance of $1.52 to $1.58. Despite global revpar growth below the midpoint of our guidance recall that in the 2018 second quarter. Adjusted EPS included 26 cents from gains on asset sales.
Gross fee revenues totaled nearly a billion in the quarter up 5% over the prior year.
Largely due to revpar growth unit growth and higher branding fees.
Credit card fees totaled 104 million up 12% driven by new credit card sign ups and higher spend.
With a stronger US dollar second quarter fee revenue reflected 7 million year over year unfavorable impact from foreign exchange net of hedges.
Owned leased and other revenue net of expenses totaled 87 million in the second quarter, a 2 million dollar decline from the prior year largely due to the net impact of sold hotels and renovations.
Termination fees totaled $11 million in the quarter compared to $5 million in the prior year.
Owned leased and other profits were stronger than expected in the quarter due to timing as non operating expenses.
Second quarter, adjusted EBITDA totaled 952 million consistent with our guidance our year over year growth in adjusted EBITDA was constrained by $6 million and lower profits from hotels under renovation and 8 million unfavorable foreign exchange impact net of hedges.
While not included in adjusted EBITDA, We recorded a $126 million Nontax deductible accrual in the second quarter for the fine proposed by the UK information Commissioner's office related to the data security incident, we disclosed last year.
We have the right to respond before the amount of the finest finally determined and as we have said, we intend to respond and vigorously defend our position.
Looking ahead, we expect our North American Revpar will increase 1% to 2% in both the third and fourth quarters, albeit at the lower end of that range in the fourth quarter.
The third quarter should be helped by the impact of the shifting Jewish holidays, and strong group business on the books, while the fourth quarter should be helped by easier comparisons to last year strikes.
In the Asia Pacific region, we expect low single digit revpar growth in the second half, reflecting cautious corporate demand in China and continued political demonstrations in Hong Kong.
At the same time, we also believe there could be demand upside in India, and Japan, where we have significant distribution.
We expect Revpar growth in the Middle East and Africa region will be flattish in the third quarter helped by the timing of Ramadan and modestly lower in the fourth quarter.
For Europe , we expect to use travel to the region will remain strong in the second half, but tough comps to last year's World Cup in Russia will likely hold Europe revpar growth to a low to mid mid single digit rate in the second half.
In the Caribbean and Latin America region, we expect Revpar will grow at a low single digit rate in the second half on easier comparisons in Mexico, and strong ongoing leisure demand in the Caribbean.
In summary, we expect worldwide system wide Revpar will increase 1% to 2% in both the third and fourth quarters, yielding 1% to 2% revpar growth for the full year.
For the full year 2019, we believe gross fee revenue totaled 3.82 to 3.85 billion up 5% to 6% over the prior year.
This is $50 million lower than our last guidance at the midpoint due to a modestly more conservative revpar outlook negative foreign exchange impact and fine tuning of our credit card branding fee estimate.
We believe credit card fees could total 400 to 410 million for the year.
Incentive fees could be flattish for the full year, reflecting the impact of hotel renovations modest revpar growth at full service hotels in the U.S. in China.
And unfavorable foreign exchange.
Owned leased and other revenue net of direct expense could total roughly $295 million for the year, reflecting roughly $35 million and lower termination fees compared to 2015.
DNA should total 920 to 930 million for 2019, consistent with our prior guidance.
These assumptions yield $5.97 to $6.06 diluted earnings per share for 2019.
Recall that the full year 2018 included 65 cents in gains from the sale of owned and joint venture assets.
Adjusted EBITDA in 2019 should total roughly 3.586 to 3.626 billion.
3% to 4% increase over 2018 adjusted EBITDA.
Our year over year growth rate and adjusted EBITDA reflects unit growth modest growth in revpar and higher branding fees.
At the same time, we estimate lower termination fees, a negative foreign exchange impact combined create more than $50 million of headwinds depressing, our full year adjusted EBITDA growth rate by more than 100 basis points.
Our press release outlines our earnings expectations for the third and fourth quarters.
Third quarter incentive fees will likely decline due to a tough comparison to last year's World Cup and continued modest revpar growth in the largest U.S. markets.
We also expect a decline in residential branding fees in the third quarter.
In contrast, fourth quarter incentive fee should increase benefiting from easy comparisons to last year strikes in North America, and international unit growth and branding fees should move higher.
As always our 2019 guidance does not include merger related costs or reimbursed revenues and expenses.
Total investment spending for the year could total 650 to 700 and $750 million, including roughly $225 million of maintenance spending and $200 million to $250 million that should be reimbursed or recycled overtime.
Our renovation of the Phoenix shared in downtown is well underway and includes new designs for the hotels public space in rooms, and should be completed by early 2020.
We have already begun marketing the hotel subject to a long term management agreement.
Marriott Bon voyage point redemptions are running ahead of expectations in 2019 as members explore the new locations and experiences offered by the significantly improved program.
As a result, we expect the net cash impact of the loyalty program will be a few hundred million dollars more negative in 2019 than we expected at the beginning of the year, but should improve significantly in 2020.
We repurchased more than 12 million shares from January one through August the second for $1.6 billion, and we expect cash returned to shareholders through share repurchases and share repurchases and dividends will approach 3 billion in 2019.
This assumes no asset sales in 2019 beyond those already completed and reflects our current EBITDA guidance our balance sheet remains in great shape at June 30, our debt ratio was within our targeted credit standard of three to 3.5 times adjusted debt to adjusted EBITDAR.
So let's answer your questions. So that we can speak with as many of you as possible. We ask that you limit yourself to one question and one follow up we'll take your questions now.
Operator are you there.
Yes. Your first question comes from the line of Shaun Kelley from Bank of America. Thank you.
Hi, good morning, everyone.
Arnie glad to hear positive update on your health.
Maybe we could just get started with the unit growth side and a little bit more color. There I think last year towards the end of last year in Q4 ran into a similar issue on some of these construction delays that you guys described at the analyst day.
Can you just give us a little bit more color on.
Confidence levels around both your sort of longer term three year outlook for overall net unit growth and then why specifically should we be.
Super comfortable and an acceleration for next year. What are you guys seeing in that and that data that that should allow this to improve materially.
Well.
Obviously, notwithstanding the fact that we're bringing the growth assumptions for the year down a little bit 25 basis points essentially to the midpoints from a quarter ago.
Which makes it feel like we don't have much Greg predictability here, we actually do have a fair amount of predictive predictability, because we can see what that pipeline looks like.
And based on hotels under construction in projected earnings state, we can see that the openings in 2020.
In the couple of years beyond should accelerate meaningfully from where we're experiencing in 2019.
That doesn't mean that we can be exactly precise about when these hotels open and I think in many respects what we've experienced this quarter is that an indication of that.
We do have obviously very tight construction market is tight labor markets.
And I think when you look at our US portfolio, what we see is even in the limited service segments.
The bulk of what we're doing or at least a bit over half of what we are doing is non prototypical work.
So we're not talking about.
Suburban courtyard that looks the same from market to market to market, but were tending to talk about an urban core yard or an urban AC or an urban aloft or an urban moxi.
That is very much a custom job and in the tight labor and tight construction cost markets, probably exacerbated a little bit by the moderate modest revpar market.
We're seeing that the construct construction timelines continue to increase I think the other bit of good news in this was of course, we put in our prepared remarks is when we look at our quarterly ads and deletions from our pipeline, we don't see a change in the cancellation portfolio that.
From prior quarters.
Middle East is obviously something also we've called out here I think the two primary areas in North America, and the Middle East.
Middle East is a big.
Market highly diverse you've got some markets like Saudi in Cairo, performing extraordinarily well.
The Emirates have a lot of supply growth and very modest impact negative revpar growth in the market now and I suspect that the combination of negative revpar growth is further extending the construction timeline in those markets.
Thanks, Tony and just as a follow up just to be a little bit more precise have you factored a like a longer construction timeline in Q.
The 2024 cash, but still even with that can you can see some sort of acceleration just assuming this is kind of the new normal, yes, yes, and yes.
Thank you very much.
Your next question comes from the line of Wes Golladay from RBC capital market.
Hey, good morning, everyone I was looking at those result.
Hi, looking at the results in China, you definitely have some strength versus competitors how much of that is due to the the bomb boy marketing versus the partnership with Alibaba the flaky.
Well that's that is a probably as much of that is.
We'll be we'll be coming in the future as opposed to delivered already I think the Alibaba partnership is off to a great start we're about a year into it.
And if anything we're seeing ramping performance and.
We're very optimistic about the future.
I think it probably has had some impact so far but I actually don't think that is as profound as.
The portfolio that we've got in China, you look at.
No were 50 hotels roughly opened in Shanghai very much.
Great strength in the luxury and full service spaces.
The business is.
Principally Chinese business, even in a market like Shanghai, which we've talked about before.
And I think when you look across the markets you see that we have a really powerful luxury and full service.
Portfolio, we are expanding in the select service space, but that is been much more reason for us.
And I think with the portfolio. We've got we've got strong brand familiarity strong loyalty program.
And strong Chinese customer preference so that we continue to take.
Really quarter after quarter for the last number of years strong increases in our Revpar index performance in China.
Okay, and then quickly looking at that loyalty program you mentioned the cash cash usage. This quarter this year, but it will grow next year or two a benefit to you.
What is going to drive that.
So if we look typically of our loyalty program generates cash on an annual basis, because the cash that we take in as folks earn points is more that needs to go out the door for.
Either redemptions or the cost to the loyalty program. This year, we had several things that were a bit unusual first of all you had some integration expenses timing that fell into 19 versus 18 second of all you had if you remember the introduction of Bon voyage of the combined program we did.
Pretty meaningful marketing spend.
In the first half of the year that was unusual relative to typical timing and then third and certainly not last is certainly not least is that redemptions have been higher this year as we've seen folks introduce to the new combined program trying out.
Hotels from the various portfolios and we do expect over time that that.
And that that starts to come down and not have some of these unusual items next year.
Got it thanks Thats all from me.
Your next question comes from the line of Robin Farley with yes.
Great. Thanks.
Two questions. One is just on the credit card fees.
Lower than the previous guidance is that fewer sign ups are less usage or.
Just to lower fee renegotiation and then just as a follow up.
Just following up on the comment about the.
Redemptions being higher.
Than you'd expected in your expectation that will come down over time.
Hey will you.
Raise the cost of award nights or what would you do to kind of maybe get the redemptions in line with where are you.
I want them ideally thanks.
Thanks, Robin So first of all on the credit cards, we've actually been pleasantly surprised with the growth in.
New card sign ups.
This year, they have been higher than our expectations across the cards, we've been particularly pleased with no fee card that we just introduced.
And from that standpoint, the business is going really well. This is really just fine tuning of the money that's coming in the door.
Relative to the credit cards and the overall the combination of the overall spend in the sign up so so really nothing.
In the fundamental trends in that business and then as you look on the redemption side I think if you remember we've got the combination of the two business of the two programs into one.
And a huge systems integration of the loyalty platforms and and as we move into 2020.
We can already see that theres, a bit more of folks kind of settling out into a more normal pattern, but but we did see some trends of.
Not only higher numbers of redemptions, but at more expensive properties at high occupancy periods and that obviously means that the cash going out the door is a bit higher than expectations, but we are confident that the balance of that will even out over time.
Okay, great. Thank you.
Your next question comes from the line of Jared Shaw Giant from Wolfe Research.
Hi, Good morning, everyone. Thanks for taking my question. Good morning can you just good morning can you elaborate a little bit more on the magnitude of the full year incentive management fee reduction I think you cited some renovation impact, but maybe relative to your last thinking what changed and then as we think about next year in sort of a low revpar growth environment is it realistic that the IMF line can still grow at call. It a unit growth plus revpar growth kind of rate or are you close to hitting some of the hurdle rates on the owner's priority.
So let me first talk about the percentage of owners of.
Hotels, earning incentive fees, because I think that that's helpful.
To your question and that this year is in Q2 was it.
61% versus 65% a year ago. So so you can see that the impact.
Of.
Environment is meaning that fewer hotels are hitting that threshold.
I think for the full year, we would expect that in the U.S. given our revpar guidance that you would actually see margin slightly slightly but slightly down for the year, and 2019, which will impact that percentage a bit.
Internationally, we've got both great new rooms growth as well as.
Stronger revpar growth on a relative basis. So I think there you'll actually see continued strong numbers on the penetration side.
For IMF and I think next year its too soon to say, where we are on Revpar and that obviously will have a bearing as we get into the budget process. We will we will be able to talk more about that.
When you think about from the guidance standpoint on the IMF.
The reality is that you've got FX being more of an impact than we had expected.
On the back half of the year as well as lower Revpar overall, and when you put those two together, that's where you get the.
The change from.
The incentive fee guidance that we gave a quarter ago.
Yes, I think the other thing to keep in mind, just one thing here is we talked about the difference in Smith travel.
Industry Revpar numbers for the top 25 markets and then the rest of the United States got 25 being down two tenths of a point and the rest of the U.S. being up 1.6 points.
Which is a number of factors going into it but but significant one is higher supply growth in the top 25 markets than we're seeing in the risk.
It shouldn't surprise you to know that a big chunk of our incentive fees come out of those top 25 markets, that's where we tend to.
Have disproportionate distribution in the managed portfolio as opposed to the franchise portfolio is where many of the convention center hotels are.
And when you look at more modest revpar growth and margin performance in those markets you get the kind of.
Impact on incentive fees that leave you talked about.
Okay, great. Thank you and then Arnie you noted you haven't really seen any incremental project cancellations, what's a normal level of attrition figure pipeline, specifically a percentage that never actually comes online and maybe how has that evolved over time and can you talk about how that attrition compares to what you saw on wholly to know nine and how that's how we might expect that to look in the next recession, yeah, I mean, it's a small percentage, which.
Tritan and in some respects you can't.
You got to be careful about limiting the timeframe you look at this because we would see for example in a deep recessionary environment more projects Council lot of our Sis are out of our pipeline than we would in stronger times, but but gratifyingly. Many of those projects come back when the economy comes back because you've got partners of ours, who have control over the land and they may have decided not to proceed with the project during the recession, but if you hang around the hoop long enough.
Suddenly they are taking a shot again and moving forward with it.
I would think in the fullness of time, you're probably in that 10% to 15% range.
Of projects that will cancel or indefinitely sort of differ.
And of course every quarter, we go through our pipeline and we are signing new deals and improving new deals which are adds but we're also.
Pulling deals so the comments, we made or not to suggest that there are zero cancellations, but we are not seeing a change in the cancellation pace.
From prior periods of time, including the last many number of years.
Okay. Thank you very much.
Your next question comes from the line of Joe Greff with JP Morgan.
Good morning, everybody I had two questions.
One is on the development pipeline nice to see that sequential increase.
There can you talk about what brands and what geographies are driving that beyond deal. The new all inclusive deals announced this morning, it's it's very global.
The.
I think essentially every every region in every segment are up I'm, just sort of double checking the notes here to.
Make sure I am not overstating this but.
By and large we are seeing.
Very strong appetite for.
Development across the segments and across the globe.
That's not necessarily to say that every country is CE CE mad because you've got some countries, which are obviously experiencing.
Either tougher economic times or tougher industry times, if you will.
But you look across most markets and you see a pretty darn healthy growth.
Great and then back to.
On your comments on the construction delays.
How many projects.
Are you talking about with those delays and how did that break out between North America, the middle East in the Africa regions.
Well, we're monitoring about 3000 projects in that development pipeline.
And.
If you look at.
Where they're spread obviously the us is still the biggest market for us and probably is nearly 50% of those projects.
So you're talking about 1500 projects roughly in the United States.
I'm doing the math, a little bit as we talked here, but they are disproportionately select service hotels.
And Thats that is where we're seeing.
Probably two thirds of the impact if you will in the United States and maybe one third in the Middle East and Africa.
Thank you very much.
Your next question comes from the line of Anthony Powell with Barclays.
Hi, Good morning, you talked a lot about how the top 25 markets have been a bit slower in the us.
We've seen a strong growth in international outbound travel from the U.S. over the past few years do you think travel just substituting Europe enough interfaces for top 25 markets and could that have a negative impact going forward.
Oh as possible on the margin that that isn't impacted maybe in the summertime I don't think it's probably the biggest impact I think more of this is just the industry data we look at.
Top 25 supply growth versus rest of the U.S. and you see about an 800 basis points different. These are Smith travel numbers rooms available in other words, a supply growth were up 2.5% in.
The top 25 markets and they were up 1.7% in the rest of the markets Interestingly rooms sold in both.
Top 25, and the rest of the U.S. were up 1.9%. So you look at the relative difference between those and I think that probably explains the bulk of it I think it's possible during peak leisure times that you've got a little bit of movement of the American traveler abroad, maybe that we've lost a little bit of share to the U.S. of the international travel coming coming here too.
But I don't think Thats very clear and I would think that the supply dynamic is probably more more significant than anything else Anthony the share of international visitors coming from outside to the U.S. has stayed really stable between four and 4.5% over the last year. So although we're still seeing tremendous growth from places like China that still down well under a half a percent of the travelers and in Europe . As an example, close to two thirds of those.
Visitors in Europe come from Europe , So while at the margin, there's maybe a little movement here and there that the numbers are fairly steady.
Got it thanks, and you highlighted improvement in Revpar growth that the legacy store brands.
Do you think all the various integration issues are behind you and.
The new brands actually start to outperform over the next few quarters.
Generally, yes, I think the integration is very much stabilized and obviously, we look at this week by week Weve been gratified to see that.
SPG legacy SPG portfolio has grown index 10 of the last 12 weeks.
And it's a good it's a good sign that.
The system and stabilize the hotel teams are increasingly getting comfortable with those systems, whether they are operated managed hotels are franchised hotels.
Salesforce is stabilized and so we're quite optimistic about the future.
Great. Thank you.
Your next question comes from the line of Moody's Rose with Citi.
Hi, Good morning, I wanted to ask you a little more about your.
Expansion into all inclusive space you know now that you have.
It's kind of multi year project underway and it looks like it one was or would you anticipate that other independent owners in that space will come to you with conversion opportunities that this kind of a platform that Marriott will look to.
Support and grow if you've done more.
With some of your new brand initiatives and how do you see that unfolding over the next couple of years. Yeah. We don't we don't have a forecast for you today about how big this business will get over time, but we do know that it is increasingly popular among the leisure traveler.
Caribbean broadly Caribbean Basin is his biggest market in the world for it but you've got a growing markets in the Mediterranean.
Area as well as Asia Pacific and obviously, our brands are well known in those markets as well.
I think as we talk to our development team, we should see both conversions.
Of competitor branded hotels, we should see Newbuilds that joined our system and I suspect, we'll see a few hotels.
These markets that were all inclusive is popular.
Convert if the physical setting allows from a European plan hotel to all inclusive hotels and so I think we will see that this is organic growth we have over the last number of years looked at a few M&A opportunities in this space.
I have not managed to score them really at this point in time.
And have decided to proceed with the organic growth with some very strong partners that were excited about proceeding with.
And I think we'll have we'll have good performance in this space in the years to come.
Okay. Good.
And then I just also wanted to ask you a few more months inside of home sharing under your belt, maybe you could just talk about it.
What you're seeing in terms of the overall additions to the platform and anything you're hearing from owners either positive negative or or maybe not purchased neutral well, let's let's start by by recognizing how recently, we've gotten into this business and how small it is still as we said 2500 homes in our prepared remarks that is.
Tiny compared to many of the other platforms that are out there, although interestingly when you look at.
Various portfolios of home home rentals folks have tried to slice them into higher end portfolios and those higher end portfolios tend to be meaningfully smaller than the gross numbers that are out there I think what we've discovered so far has by and large confirmed our thesis.
And it is firstly that.
Our leisure customers are already experimenting in the home sharing space and they are very appreciative of having a loyalty linkage.
Firstly and secondly, they are very appreciative of having brand and quality service behind it.
And too often we've heard from those customers that when they're traveling with groups are a larger family or in circumstances in which our home rental mix.
Sense.
As far too often just a crapshoot, whether the experience will be a good win or not.
And then what they're telling US is we really want you to have more choice.
For us because we think you can deliver and are delivering something which is.
Got it got a quality associated with it that makes it not a crapshoot, but something we count on.
And we're seeing the overwhelming majority of bookings and again there they are relatively small so far but coming out of the Marriott Bon voyage.
Program and with the loyalty linkage.
I think our owners, particularly in the United States are interested in how this will grow and whether this.
Sort of ends up being.
If you.
Competing supply if you will.
And we're working our way through that I think the moment, 95% of our units are.
Two bedrooms and above it which are obviously quite distinct from a hotel room.
But we'll we'll be transparent with them about this and make sure they understand how we're growing.
And we're we're optimistic about the future, but we don't really have any forecast where yet.
Okay. Thank you appreciate it.
Your next question comes from the line of David Katz with Jefferies.
Hi, good morning, everyone.
Arnie good to hear your voice.
I wanted to maybe ask a bit more of a general question about the quarter.
We were all trying to sort of process, what exactly is sort of happening in the economy in your case.
There is.
And integration in a broad range of initiatives underway.
And I just wonder if any of that second category is having any impact whatsoever on some of the adjustments that you've made.
In in the guidance today, and whether that's something you could talk about.
Yeah, I mean, let me jump in here and tell me, whether you you think differently I think the.
Q2 numbers.
For the obviously the quarter, we've reported came in a bit light compared to what we anticipated certainly for mid point a quarter ago.
But I would attribute the 100% of that or or very very very heavy majority of add to economic conditions demand conditions, particularly not to anything thats integration related and similarly, when we look at Q3 and Q4, we've obviously never given any guidance on Q3 or Q4, specifically until.
This quarter, where because we've only got two quarters left basically both quarters come out with specific guidance, but I think the adjustments that we've made in EBIT and EPS for the balance of the year.
Our very much driven by the economic environment, lower revpar expectations beam by by far the most significant piece of that it does have a a IMF flavor in some markets because now.
Of the U.S. revpar coming down a little bit and it's got an FX piece that.
Is it a little bit worse, too, but I think we are not.
In any material respects related to our.
Continuing integration efforts or sort of our internal story.
Turning to you discrete no agreed.
And if I can ask one other short question.
More and more we hear read and actually hearing you talk about sort of the notion of alternative accommodations and.
Just trying to think through.
Where the boundaries are.
And this opportunity.
Are we we're looking at home rentals right.
One more and more we're hearing about hybrid models.
How big an opportunity is this really or are we just engaging in it.
You know in more of a temporary faddish way, yes, I don't I mean, I think the reason we're in it is weve concluded it is not a temporary fab.
If you look at Expedia booking an air Bnb to name three obvious players in the home rental space.
Baby Scott millions of units on their platform and some are making.
Quite decent economics from from these platforms and I think this is this is a space in the.
Broader travel sector that we and other lodging companies as well as other participants in the sector have been watching for the last number of years.
And it's become painfully clear crystal clear to us that this is not some fab that's going to disappear tomorrow, but this is something that is here to stay I think we are seen at the same time the evolution of a number of these platforms either from home sharing two other spaces, if they've started at home sharing or broadening into other aspects of the travel sector because of.
The usefulness of technology across different elements of that travel sector and for us, particularly the.
Value of the Marriott Bon voyage and loyalty program.
Two.
Sure provide an umbrella if you will across a number of different.
Areas of travel and we said this a quarter ago, and we probably said it last year actually when we started our pilot in the home sharing space. When we look at Merian Banville way members, we see.
You know probably approaching 30% that had already experimented with home sharing.
And we're giving us feedback about the value we could bring to this space and we thought this was a good space to get in so we got into it.
Not as of fat and not simply as a test, but we got into it because we think it's a place where we can.
Have a presence we can provide more solutions to our loyalty members when they travel.
For different purposes, and we think we can make good economics overtime.
Thank you very much good luck. Thank you.
Your next question comes from the line of Thomas Allen with Morgan Stanley .
I'm just following up on the economic environment.
You highlighted that demand was a bit softer than expected in the quarter, but you also have had really strong group bookings for future periods, having set up 6% into Q.
Can you just.
Claim why those two things are happening at the same time, they don't totally logically make sense to me. Thanks.
Yes, I mean, I think that's a fair a fair question the.
And here is something which is.
I think probably at least in part internal.
About the portfolio, we've built I mean, obviously, if you look back over the last.
Three or four years, you see starwood, which was put up for sale.
With a auction process in early 2015, ultimately, culminating in our signing the acquisition agreement and in.
November of 2015, if memory serves.
Not closed until almost a year later.
And as a consequence, you end up with some distraction inevitably and then some post closing change to the way the sales force works in.
Which is particularly relevant to group.
And that that.
Distraction and disruption if you will is well behind us we've got a sales team, which has been integrated and stabilized and they are lapping in some respects the.
Organization that has been been input put in place because it was more than a year ago.
And then the second thing I think as you look at the portfolio. We've got of groups space in the United States and we've got the ability that our customers increasingly see to offer not just a handful, but a couple of handfuls of alternatives within our system.
That give them some price variability location variability brand variability in the like.
And I think all of those things roll together are.
Propelling if you will the group bookings that were we are beginning to experience I think when you look at year over year performance. We've also got to factor in that there has been a shift in group Commission payments.
From roughly 10 to roughly 7%.
So we look when we're measuring this not just at what the comparison was 2018 because depending on the month you are looking at that can be helped or hurt in year over year comparisons, but we're also looking at the comparison 2017.
Which is sort of a stabilize year in some respects and we see good healthy growth against both of those baseline. So we're encouraged by it.
I don't think I think is probably more our story than it is.
Industry dynamic because of the two factors I've talked about.
But it's something that we were gratified by.
That makes sense. Thanks, and then just as my follow up when we look at the pipeline you had approximately 40000 rooms approved but not yet signed last quarter, you had 25000 rooms, so up about 60%.
I'm expecting that there is a big big additions I assume from them from from the.
From the all inclusive, but anything else going on there that that's worth highlighting.
Well as you know Thomas they kind of bounce back and forth. If you look last year at the second quarter. For example that same statistic was 41000 room. So.
In terms of approved but not yet signed so they kind of go up and down depending on exactly the timing of the final signing of the contract.
Medifast Thats, all ive closings at the beginning and at the end of the year and beginning of the year right exactly yes. Okay. Thank you because of the timing of the franchise circularly as you often signed fewer deals in the first quarter to you the second.
Totally makes sense. Thank you.
Your next question comes from the line of Patrick Scholes with Suntrust.
Hi, good morning, everyone. Good morning.
Just taking a look at the property level Revpar results, especially for the company operated North America. It looks like Sheraton was a bit of an underperformer I'm just curious how much of that can be explained by any property improvement plans.
That you folks are pushing on those hotels. Thanks.
Yes. Good question I would encourage you first to look at the Sheraton system wide numbers, not the shirt and manage numbers, particularly in North America. The Sheraton managed portfolio is quite small as a percentage and so youre going to get.
Numbers, there which are.
Significantly impacted by the precise location of that portfolio, which is the risk in any smaller portfolio, but it but to be fair. If I think if you look at North American.
Sheraton performance said I think we reported point.
8% negative.
For the quarter, you've got a number of things going going into that I think.
Probably worth mentioning that globally. The Sheraton brand is performing quite well with index about flat in.
The quarter.
And that's probably a better sign of the strength of the brand them.
The North American numbers I think in North America, you've got.
Some shifting we've we've jettison some probably more hotels in the U.S. proportionally them outside.
And we do have some renovation activity, which is underway, which.
May or may not be substantial enough to pull those hotels out of the comp set and then of course, we've got a single loyalty program and so we've got customers now that have got.
More choice across more brands.
And they are experimenting.
With that in that and I think we will see overtime that.
These.
Brand numbers, probably revert a bit more towards the mean.
Okay. Thank you then just a quick light hearted follow up question, there's been a little bit of a media attention about.
Keeping housekeepers Arnie I'm wondering do you tip your housekeepers I, absolutely tip housekeepers on business and leisure travel and have for many any years and I can't imagine not.
Okay. Thank you.
You bet.
Your next question comes from the line of Stephen Grambling with Goldman Goldman Sachs.
Hi, Thanks, two quick follow ups or ask.
Okay first on owned assets.
As international markets, such as Europe , and South America been holding in a bit better I think you had previously kind of put on hold some of the assets sales, particularly in South America. How are you thinking about the additional owned assets and potentially selling.
So thanks, Steven we certainly do expect additional asset sales in the future as you know they are impossible to predict in terms of timing.
We talked about the fact that we've got Phoenix on the market and we've got several others that we continue to to work very hard on I think the reality is there are still probably.
Some markets where.
Even though there may be some improvement, it's still probably not right in terms of not just the revpar environment, but just as importantly, the transaction environment, what that what the buyer and financing environment looks like and I think you'll probably still find that several of the ones.
In South America fit that category and the other thing I'll point out Stephen is we've got a couple of these assets that have interesting characteristics to them like unusual ground leases et cetera that that aren't as much based on geography of the asset, but something in the structural part of the asset that makes that.
A bit more challenging to sell not to say, we don't think that we ultimately can't but that we just got to work through some of those issues.
Fair enough and maybe changing gears, a little bit you had called out.
India today and had referenced it on some other calls that more it seems like than in the past can you give us a bit more detail on on that market as we think about how significant it could become and perhaps talking to how contracts and owner base there are similar or different to other markets.
Yeah, we're about.
We can check this may be if they've got the details I think we're probably about a 115 or 120 hotels open and operating in India today, and probably another few dozen that are in the development pipeline.
We have got.
A good stable of owners many of which have got.
Multiple hotels with us.
They tend often to have a.
Power within a particular region or city of India as opposed to across across the country as a whole.
It's obviously, a very big and very diverse.
Come country, and the economy and culture.
And so you end up with a somewhat different partners from place to place.
I think the the bulk of whats happening in India is the growth of their economy.
Which which obviously is.
Fairly small at least in per capita terms quite small.
Compared to China, and the United States, but its growing meaningfully year over year the lodging business is.
Still small I mean, I think one of the one of the stats I love to talk about what I am with our our friends from India is that there are.
Maybe a 175000.
Tell rooms in the country of India.
The Indian expatriate community in the United States owns over 2 million hotel rooms in the U.S.
And it just gives you a sense of how much growth is yet to come from India. So we are very bullish on it we think we're getting.
Leading market share both in terms of hotels opened but also tells coming in the development pipeline.
Brands are strong and we think that the prospects for that economy are quite strong in the years ahead.
Great. Thanks, so much.
Your next question comes from the line of Vince people with Cleveland Research.
Hi, I wanted to come back to group versus transient.
I think last quarter group was up three in transient is flattish and maybe I Miss bones, but I was curious what they were from two Q and then as you think about this whole year. How do you think we've been transient change 1% to 2%.
Targeted domestic range, yes. The four Q2 group that is a north American number not a not a global number obviously these dynamics vary very much from part of the world the part of the world but.
In Q2 group was modestly negative co at minus 1%.
And so the the transient both.
Business and leisure transient and group would would make up the difference between that and the Revpar numbers we posted.
Great. Thanks, and then maybe getting a little bit more into the second half outlook. It implies that pick up just curious how much of that is related to easier compares and have you already started to see that come through in July .
The most significant thing in terms of comparisons year over year would be the strikes that we experience.
In the United States, which was by and large at Q4 phenomenon.
I can't tell you that there was no strike activity at the tail end of Q3, but if there was it was extraordinarily modest.
We do have some shifting holidays Q3 has helped a bit by.
Timing of Jewish holidays.
Fourth quarter is hurt a little bit by the timing of those holidays and of course, we called out the Russian World Cup, which is.
Relevant to the.
European numbers that we will post your I think those are the the principal comparisons, but by and large none of those factors are yet at play in in the third quarter.
Believe it or not then Q3, you've also got a bit of a day of week shifting.
The holidays, but you've got a day of week shifting in Q3 that is also helpful.
Thanks.
Your next question comes from the line of Bill Crow with Raymond James.
Good morning, Ernie Els Veny.
Morning.
Is it good morning is it unreasonable to ask if the increased redemptions.
On the leisure front.
Points redemptions.
Is a leading indicator of weakness on the consumers part.
I don't think so.
I think if anything we've continued to see the leisure business be robot.
And in general worldwide far properties.
I think again you see this in general economic trends as well, which is that although for example in the U.S. you've got lower GDP growth than expected. We're also seeing very strong consumer spend.
And.
Low unemployment so from that perspective people are taking vacations there.
Feeling good about their prospects.
Until.
I'm told it recently at the stock market was doing pretty well.
And we're seeing people go and stay in our hotels on their vacations and I think when you had the merger of the programs you had a tremendous opportunity for SPG members to try out great New legacy Marriott hotels, and vice versa, and we have seen that in the data that that is exactly what's happening so I.
I also think given they're staying at expensive hotels I think there was a view that there was an opportunity to to get in and make some bookings for your vacation early using your points and make sure you got those great Hotel. So we we don't see it as a sign in particular of.
Weakness.
Sounds like my summer vacation.
Already in earning.
Making any predictions a crapshoot today.
Clearly, but is there anything out there that you could see today that would tell you that the industry should be anything different than a zero to 2% Revpar environment as we look into 2020.
No I mean, it is our best it's our best set of estimates, obviously or we wouldn't put them out there now we havent, obviously said anything other than in our analyst conference about 2020 in 2021, we'll get to that probably a quarter from now I think the thing Thats interesting and one of the internal debates that we have is we have not had a long period of time in which we've had.
Really low single digit revpar growth quarter after quarter and on some.
On some basis, we're in a little bit unchartered territory, and it's going to be interesting to see whether or not we can.
Continue to sort of run that balance which is a.
If you look at the industry numbers or you look at individual hotel company members in Q2.
We've got him in the U.S. a modest increase in an increase in 80 are and modest decrease in occupancy.
And that that requires a fair amount of balance and we've got lots of folks who are involved in pricing hotels in the industry and and.
Aggressively competing on a day to day basis.
And whether that precise balance stays or not is going to be something we watch and learn together I do think that the strength of GDP is still the single most important thing for us to look at.
And obviously, 2% GDP growth is not as good as three or 3.5% GDP growth, but the question. We have got to ask ourselves for 2020 and beyond is whereas GDP growing is it going to stabilize at 2% or trade wars or something else going to bring it down or are we going to get some clarification around these things that we get back to more normalized sort of three percentage environment.
All right. Thanks for your thoughts I appreciate it.
Your next question comes from the line of Brian Dobson with Nomura Instinet.
Good morning, Hi, Thanks for taking my question good morning.
So.
Some of your competitors have called out weakness in China as well do you think you could elaborate what you're on what you're hearing from your people on the ground there.
Regarding trends heading into next year.
Our <unk>, we don't have anything that's terribly insightful I think the.
Obviously, our revpar numbers in China were meaningfully better than the industry as a whole and I think thats a sign of our strength, but but the revpar numbers in China were not as good as they were a quarter ago and they were not as good as they were last year and so I think thats a sign that when you look at the average is rolling up across that very big country.
You are seeing somewhat more modest economic growth.
We've got very topical things right now trade war with China, being one and Hong Kong I think being another example.
On Kong performed fairly well in the second quarter, but obviously whats happening in the streets in Hong Kong today.
He is not a positive sign for travel into that market and so I suspect, we'll see that Hong Kong weakens.
And I think when you get to the trade war. The biggest question there is.
What does it mean for Chinese GDP growth not what does it mean for exports and imports, but what does it mean for Chinese GDP growth.
And that has to be evaluated in the context of a shift by China towards more of a consumer driven economy than they've ever experienced in years past.
And I think that makes our industry perform a bit better in China and for China outbound markets than other industries in China.
But I think all of those things put together and you've got some obvious risks in China, but you've also got.
Some good.
Albeit more modest, but you've got still continuing GDP growth and.
China has got levers to pull to make sure that they continue to trend stimulate their economy.
The only thing I'll add to that is that our rooms growth. There continues to be a really robust. So as we look at the the general pace of these rooms openings and our signings.
You know again continues to be strong demand on the part of owners.
For new hotels of ours.
Okay. Thanks, that's helpful. And then in terms of your balance sheet would you consider getting.
Little bit more aggressive to to retire shares.
You probably noticed in our comments that this quarter, we made a slight moderation in our comments from at least 3 billion to.
Approaching 3 billion and that's really a reflection of of not a fundamental difference in our point of view on capital return, but more just the reality that our loyalty program is going to use a bit more cash than we had expected and as you know we dropped EBITDA a little bit, but we continue to refine our working capital numbers. We also refined our investment spending numbers a little bit. So generally I would say that our approach is quite similar to where we were a quarter ago.
And where were comfortably in the our three to 3.5 times leverage range, which is where we want to be.
Okay. Thanks very much.
Your next question comes from the line of Michael LSR, you with Baird.
Good morning, everyone, Hey, good morning.
Just a follow up first on a prior question is there any marriott investment in the all inclusive deal.
We believe there might be some modest key money I don't remember in the context that not not material certainly.
Okay got it and just kind of along the same lines and maybe how you're thinking about using your balance sheet.
Any change in thinking about jumpstarting growth or needing to invest dollars to get projects across the finish line and in terms of the organic pipeline no. We continue to work with our partners and I think the majority of our deals come in with essentially no financial participation with us.
From US excuse me I think there are a couple of places where we would.
Life to do some things to.
Reposition brands I mean, the the Phoenix Sheraton, obviously as the most recent one that we've done.
I think we could see take you may.
Calculated bet or two albeit quite modest in terms of the size of our balance sheet to.
Prove.
Some proof points that we would like to prove on some of the brands that we are.
Trying to reposition and strengthen but nothing that I think would be material in any long term sense.
Thank you.
But.
Your next question comes from the line of Kevin Kopelman with Cowen and company.
Great. Thanks for taking my question.
Just a couple of follow ups.
On the online travel agents they were down 2% globally.
For you how did that look in terms of North America versus international how are you thinking about that would teach and on the back half as you lap the rollout of your kind of more advanced yielding programs I suspect it was down more in the U.S. than the rest of the world but.
Somebody should.
Test test me and whether or not I've got that exactly right, but it is very much about what the factor you've talked about which is yielding and we are working with our OTA partners to make sure that we are getting business from them when we most need it.
And not necessarily taking that when we don't and generally I think thats working well.
Easing to keep yielding down.
Even as you kind of lap over that.
Yes, I don't know I mean, we'll have to watch that as we go forward. We did talk about the growth in our direct digital channels, we've talked about the great growth in our Marriott envoy penetration.
I think both of those things over time, if they those trend lines continue the way that we think they should continue.
Should make us less dependent on third party platforms I think at the same time that you've got an economic.
Underlying economic story here, which we'll have to watch and sort of evaluate but I think we are.
Trying to do the best we can in order to take business from these partners when it is particularly valuable to us.
But essentially not take it when we don't need it.
Thanks, and then just a quick follow up on the pipeline can you talk about or gross new approvals in signings.
Last couple of years, you are about 125000, I believe first half of this year strong, but down a little bit can you just give us kind of update on on the environment for approvals and filings and outlook for the year, Yes, I think generally we have been pleased by how robust the the.
Income in the pipeline is globally.
And.
I think there is a continued shift towards us maybe not towards us alone, but certainly.
Marriott has got a portfolio of quality brands and I think we are seeing.
Folks, particularly a more moderate economic climates, and we've got to make sure we've got the right quality.
I think also the brand lineup has been really powerful in the last few years when you look at.
AC by Marriott you'd look at Moxy hotels, you look at aloft and element and what's happening with those brands since we closed on the Starwood acquisition.
They are relatively.
Under represented or unrepresented in many markets around the world, including in North America, and I think we're seeing a number of our partners, who say that's a pretty interesting brand for me it's now in the.
Myriad portfolio, so I get the benefit of the loyalty program and the reservation system and the like.
And I want to be the one to take that brand in.
Given market and they're good brands for urban.
Theres, obviously more value in select development in urban markets as opposed to suburban markets.
And so I think thats one of the reasons that the pipeline demand has stayed as robust as it has.
Fantastic. Thanks, sorry, Thanks, Lynn you bet take care.
Your final question comes from the line of Chad Ben Beynon with Macquarie.
Hi, good morning, Thanks for taking my question.
Can you talk broadly about trends domestically with your booking window on leisure and transient we've heard from many of your competitors that this continues to compress and it's making it harder to forecast.
Revpar in really maximize gross profit margin any major.
Changes that you've seen in the past couple months, they're certainly not major I mean, it does that the margin on the transient side narrow a little bit better, but I would really say not enough to be noticeable.
And I think you've got if anything you've got a little bit of probably lengthening of the group group window I think the group bookings as we've talked about have been good.
One of the frustrations for for US over the years is we don't have that much forward looking data.
Because transient business, particularly business transient business.
He is a very near term minutes booking it always has been leisure transient can be quite a bit longer and group even longer still.
And by and large when we put together our AR.
Set of expectations for Q3 and Q4, we're looking at the data that we have.
Which obviously is more relevant to Q3 for example than it is to Q4.
But we don't have that much that gives us certainty about what's to come.
Okay. Thanks, and then on China.
There's a couple of things Theres the trade War and then there's the economic.
Declines that are going on you've talked a lot about the revpar, what about food and beverage sales.
What are you seeing there and do you think thats more closely tied to what's going on with.
The GDP picture or could that reverse after a trip trade war resolution is finalized. Thank you yeah I mean, we're seeing.
FNB, probably grow at modestly higher rates than rooms revenue.
In China I think the.
Food and beverage is going to skew, even a bit more towards Chinese to the Chinese consumer.
And.
Again, that's a sign of this the.
Probably shift towards a consumer economy and.
The importance of that from a local population that particularly in the key cities has got.
Resources to to do some of these things and they didnt in years past, So I don't think theres incremental risk in the food and beverage space.
Compared to the rest of the hotel.
Maybe just the opposite.
Thank you very much.
Alright. Thank you everybody for your time and patience. This morning, we appreciate your interest in Marriott and look forward to welcoming you on your travel come stay with us.
This does conclude today's conference call you may now disconnect your line.