Marriott International, Inc. — 2024 Q1

So let me answer the latter part first because that's very easy to point out, and that has absolutely no impact on the development front. Matter of fact, as Tony pointed out, we actually had a tremendous quarter of signings in Greater China in the first quarter as well as APAC for that matter. So really excellent continued demand for our brands and from owners there.

And Shaun, the only maybe qualitative observation I would share with you, and I'll try to underpin it with one statistic. I was there recently. I was in Shenzhen, I was in Hong Kong, I was in Macau. And while it certainly does not feel as balanced and populated with international visitors as maybe we were accustomed to pre-pandemic world, it felt better than when I was there a year ago.

Yes, sure. Absolutely. So again, I'm going to do one of the last ones first, and that is this does not -- this increase in fees does not reflect an increase in the non-RevPAR-related fees. We still do expect really strong growth as we talked about the 9% to 10% year-over-year in those fees, but not an increase in those from our prior guidance. I would say, Stephen, it's about 75% of the increase is from IMF really overwhelmingly essentially entirely from our international markets.

Well, so generally speaking, we do see leisure relatively speaking, at the lower end of the growth, but still being positive. But I would put it towards the lower end. Group is going to be the home run hitter. Again, for the full year, we do see BT being up as well and continuing to progress. As you know, Joe, in Q1, obviously, BT was weaker because of the month of March.

And I think, Joe, the further answer to your question, the differences we're seeing in leisure in the U.S. & Canada relative to global leisure are broadly reflective of demand patterns we're seeing across segments. If you look at the guidance we're giving, we're not changing our RevPAR guidance, but it's shifting a little bit.

Yes. Not yet, Joe. I mean I think it's so early. We just brought them on the platform. So it's more anecdotal than anything else. My guess is, Bill, and our friends at MGM will talk about it from their perspective as well. But having done these sorts of deals over the years, both parties have expectations about how quickly we'll start to get traction on booking volumes and Bonvoy penetration. And we make some assumptions as we do those deals. And I think it's safe to say from Marriott's perspective, those expectations have been exceeded in the early days.

Yes. So Patrick, it's early to start talking about 2026, but I'll try to give you some visibility into a Group pace in 2025. Right now, we're tracking up about 13%, and it is driven by both gains in demand and ADR. We're up about 7% in definite rooms and up about 5% in ADR.

Sure. So maybe I'll go follow Leeny's trend of going in reverse order. I'll talk a little bit about the pipeline and then let Leeny provide some insights on both developer sentiment and construction starts. I agree with your observation. I think the trends on the pipeline are really encouraging. And the thing that was really encouraging to me, if you look at the pipeline and just compare Q1 '24 to Q1 '23, because it's a decent apples-to-apples comparison because neither of those would have had MGM, were up 9% year-over-year on the pipeline. And I think that's reflective of some of the broad trends that Leeny described in her prepared remarks.

And when you think about the kind of the overall environment, I think you've got a couple of things going on. You've still got a constrained lending environment, certainly in the U.S. and Europe. I think at the same time though, there is more confidence in a steadier economic picture, if you will, so that we are, for example, we've seen an increase in construction starts in the U.S. at about 25% compared to a year ago. So really seeing nice pickup as people start to move forward and look at a more positive environment with perhaps not quite as much volatility.

Yes. So certainly, I think that the strength of our luxury footprint is an area where we continue to lengthen our [ lead ]. We're pleased with RevPAR Index and the substantial premium that we enjoy really across the portfolio. I think the one maybe caveat I would give you is that as our scale continues to grow, I don't know that RPI is as informative as it might have been a decade or 2 ago.

The only thing I'll add to it is that as we look over time, we are very pleased to see these RevPAR indices really globally and also generally in the -- within the continent at some of the strongest levels that we've seen over time. So I think it's a great sign of the power of Bonvoy and our brands to see that it's kind of consistently some of the strongest numbers that we've seen over time.

And when you look at the regions of the world that are outperforming, I'll use APAC as an example. One of the powerful drivers to the strength of our index in a market like that is our leading footprint. I mean when you look across some of the best-performing markets there, having the industry's largest footprint in markets like India, Japan, South Korea is helping us drive really strong RevPAR performance.

Yes, it's a great question. I think the way I would answer it is to point to the comments I made at the outset about the Bonvoy penetration. It is not a coincidence against the backdrop of the environment you described that we set all-time records for Bonvoy penetration, both in the U.S. and globally. And to me, the strength of the loyalty platform, combined with the breadth of our footprint in the international destinations where our guests want to travel, I think does create a tailwind for us.

And the only thing I'll add is kind of the interesting fact that we're really essentially back to where we were in terms of cross-border penetration. And while it may vary a bit here and there, we clearly still got lower cross-border penetration in China. And we've got, in some other areas, a bit higher. I think CALA was particularly high in Q1. In the U.S., it's very steady as she goes, where we've got basically only 5% of the customers in the U.S. are coming from outside the U.S. And that broadly speaking, our global distribution is just tremendously helpful as folks find the places they want to go within our system. But that overall, a lot of the variations really don't drive that big of a change in RevPAR.

Well, without a question, on the long list of loyalty metrics we look at, I think we have enthusiasm about having the industry's largest platform. But from my perspective, it goes much deeper than that. Size is important, of course. Engagement to me is a much more important facet of the program and the work that we are doing to drive that engagement through our large, powerful and growing credit card portfolio through the breadth of experiences that we offer our members, those are the powerful drivers of engagement with our members.

I think the penetration is, obviously, critically important as you look at making sure that you are helping your customers understand the value of the program and of all the options that they have, whether it be going to 141 countries or actually thinking about things like Ritz-Carlton Yacht and things like the Bonvoy moments that Tony talked about. So a number is a number but I think it's -- it can actually not be a true guide for the power of a program.

I just wanted to ask a little bit more about the trends you're seeing in the U.S. It sounds like you revised your U.S. expectations down a little bit, and it sounds like that's primarily due to the leisure component, maybe more people going abroad staying with your hotel there. And I get that your worldwide RevPAR outlook hasn't changed. But is there anything else you're seeing in the U.S. that you can share that maybe led you to expect a little bit lower coming out here nationwide for the year? Or is it all just because of what you're seeing on the leisure side?

Yes. No, it's absolutely solely because of what we're seeing on the leisure side. And again, we still do expect to see that it roughly will be up a little for the year, but on the leisure side. But we do view that BT and group are absolutely as strong as we expected. And leisure is still fine. But when you look at the change, which I would say kind of broadly speaking, maybe a point lower in the U.S. than we expected a quarter ago, and maybe a little bit more than one point higher internationally kind of gets us to roughly the same place from a RevPAR picture globally.

Okay. And then I just wanted to ask you, you mentioned in your opening remarks a conversion-friendly brand. Could you just talk a little bit more about that, kind of what are you targeting there? And is that primarily, I guess, for the U.S. or?

Sure. No, it's global. And I think while we have a terrific track record of doing conversions across many of the brands in the portfolio, when we find ourselves in an environment like this where conversions are particularly important given some of the challenges in the debt markets. We feel like our transactors are very well armed with brands like the 3 soft brand platforms. So Luxury Collection, Autograph, Tribute. Great examples where they have a level of flexibility, not on quality, but on aesthetic that is particularly appealing to a broad cross-section of the owner and franchisee community.

So a couple of things. One reminder that small and medium-sized businesses, that is probably the hardest segment to actually pinpoint all the specifics on the travel. I think you did see in Q1, you did see relatively speaking, slightly lower percentage of small- and medium-sized BT business across the portfolio, showing up in the lower end. On the special corporate on the larger company side, we absolutely continue to see recovery of that business, as you saw, for example, finance. The finance segment is now 8% up relative to 2019. You saw a really strong continued momentum in manufacturing and communications.

Yes. I think as you're probably familiar that our residential branding fees tend to be quite lumpy. Literally can go from $10 million, one quarter down to $3 million next quarter because as units are sold, we burn those fees. They are onetime fees on the residential sales, branding fees. So if a unit sells out, we get them all at once. So that is purely timing. For the full year perspective, we don't anticipate anything different from what we thought before.

Yes. That's a fair question. I might have a deeper concern if we were reporting to U.S. & Canada, negative RevPAR. The fact that we were up 1.5% in the quarter, even with the holiday timing impact that Leeny described gives me some comfort. And if you kind of tick through the segments, leisure was flat relative to last year's first quarter, but still meaningfully ahead of where we were back in 2019.

If I can, I'm going to throw in a little bit of a glass half full relative to what I think seems like a little bit of a glass half empty question. And that is when we look at the rest of the year, we are looking both U.S. and international, like gains in both OCC and rate for the full year. We also saw that in the first quarter, you saw through luxury, premium and select, you saw that you had generally rate and OCC gains overall with the exception that in the select, you saw a slight decline in OCC..

I honestly couldn't quite hear the question.

Yes. I think the question is really just around U.S. travel versus international. I think, Bill, your comment about the continued strength of the dollar is a pretty relevant data point to consider. I was at the -- as you may or may not know, 2024 is the year of U.S.-Japan tourism. There's a big collaboration between the United States and Japan. And I met with the Japanese Ambassador on Monday of this week, and he talked about the extraordinarily strong flow of U.S. visitors to Japan and maybe innocently I asked him, how we can drive strong Japanese visitation to the U.S. And his response was, well, you can weaken the dollar against the yen.

So the only other thing I'll add is that one of the interesting parts is that when you look at Asia Pacific's RevPAR, while some of that benefits from Tony's comment about U.S. traveler, a whole lot of that is the reality that now China is opening up more for cross-border. So you are seeing global travel preferences, not just U.S. travelers. Interestingly, our U.S. proportion of domestic travelers has been remarkably consistent over time, where -- it was, for many years, it was roughly only 5% are from outside the U.S. and that the domestic business is overwhelmingly 95% U.S. traveler, and that is still the case now. So we aren't seeing that the U.S. business is really suffering from everybody leaving the U.S. I think it is more the reality of global growth travel in general.

Of course. I think, David, you and I have had the chance to talk in the past about our overarching growth strategy, and that strategy is really guided by this desire to make sure our portfolio offers the right product everywhere our guests want to travel for every trip purpose.

And the only thing I would add is that a lot of this is both market research and conversations with our owners and franchisees. So when you think about the supply that's out there, where supply is growing and where it is not, we definitely believe that there is some great opportunity for us to add more new Bonvoy members, choices for them across the spectrum. And then frankly, also need owner and franchisee demand for Marriott product that allows for conversions in markets that over time may have moved and changed, et cetera.

So a couple of things. I think, first of all, the algorithm absolutely works over time. You've got to be careful about looking quarter-to-quarter or kind of really looking at specifics that are happening in a printed number versus what the trend is over time because absolutely, over time, we believe then it proves out well.

So just as a reminder, conversions were roughly 30% of our signings this year in the first quarter, and we've got a very strong stream of conversions moving through the pipeline. So no, while we do see tremendous opportunity there, the kind of numbers that we've talked about and talked about last September did not include, assumed expectations, would be from this new brand on conversions. We said roughly 30% of the room adds ex-MGM would be from conversions, and we continue to believe that, but that's not really a change for us over the last couple of quarters.

Yes. Well, we better add another hour to the call to take the second part of your question, I think. Maybe the way I would answer the second part of your question, the -- on a global basis, travel and tourism thrives in relative stability. I think uncertainty around the election creates all sorts of question marks. We'll get through the election and then post results. We hope we'll settle into a little bit more stability. In terms of some of the policy issues that directly impact Marriott and travel more broadly, my sense is we will likely still end up with a bit of division in Congress. So you may not see strong moves one direction or the other. And I'm sorry, your first question was on impact of the election itself in D.C., I think.

Right. And generally speaking, I would say we do see that there is a dip in government travel after Labor Day and that group and business transient, obviously, is going to not be traveling during election week. But our forecast incorporates the experiences that we've seen before in presidential elections.

Right. So I'm going to do the second one first, which is that the Sheraton Grand Chicago it actually has had a rooms redo over the past 3 years. And so with the exception of, of course, what you normally need to do, I would not expect to see big CapEx spend beyond the norm as you move into 2025 on that hotel. We will be working on a comprehensive view of that hotel or public space, for F&B, for the rooms, et cetera.

Yes. I think it's a little hard to look at maybe individual industries. Probably the one demand source we're keeping a close eye on is government-related business, which in that tier, is quite relevant.

Great. Well, thank you again for your participation and interest. We all hope to see you on the road soon. Safe travels.