Marriott International, Inc. (MAR) on Q2 2021 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Marriott International’s Second Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. Jackie Burka: Thank you. Good morning, everyone. And welcome to Marriott’s second quarter 2021 earnings call. On the call with me today are Tony Capuano, our Chief Executive Officer; Leeny Oberg, our Executive Vice President and Chief Financial Officer; and Betsy Dahm, our Vice President of Investor Relations. I will 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. Statements in our comments and the press release we issued earlier today are effective only today and will not be updated as actual events unfold. Please also note that unless otherwise stated, our RevPAR, occupancy and ADR comments reflect system-wide constant currency results for comparable hotels and include hotels temporarily closed due to COVID-19. RevPAR, occupancy and ADR comparisons between 2021 and 2019 reflect properties that are defined as comparable as of June 30, 2021, even if they were not open and operating for the full year 2019 or they did not meet all the other criteria for comparable in 2019. 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. Tony Capuano: Thanks, Jackie, and good morning, everyone. I am very pleased with our second quarter results and the accelerating pace of the global recovery. The tremendous overall improvement we saw in both occupancy and rate in the quarter demonstrate a basic premise. People love to travel and to stay in our hotels. Demand grew steadily throughout the second quarter. Worldwide occupancy gained 6 percentage points in the month of June, compared to May and top 55%. Average daily rate in June was down only 13% from June two years ago. As a result, global RevPAR has risen meaningfully and swiftly from the depths of the pandemic when RevPAR was down 90% to down just 38% in June compared to the same month in 2019. Recovery timelines vary by region, given uneven vaccination trends, virus case loads and travel restrictions. Yet we remain encouraged by the incredible resilience of travel demand, demonstrated by the rapid return of guests in areas where rules have been eased and people feel they can travel safely. Leeny Oberg: Thank you, Tony. Our second quarter results reflected the strong pace of the global recovery and the incredible resilience of our business model. Worldwide occupancy came in at 51%, a significant increase of 13 percentage points over the first quarter of this year. We also saw a meaningful improvement in our average daily rate decline versus pre-pandemic levels, with ADR down 17% in the quarter compared to the second quarter of 2019. Operator: Your first question comes from the line of Shaun Kelley with BoA. Shaun Kelley: Hi. Good morning, everyone. I was… Tony Capuano: Good morning. Shaun Kelley: Good morning, Tony. I was wondering if we could just talk a little bit about the development environment. I was just hoping you can give us a little bit more color, obviously it looks like the NUG increase was primarily driven by reduction in deletions. But maybe help us look out a little further, 2022, 2023. How are the conversations going and how do you think excluding the SBC component, the outlook has looked or changes versus maybe 90 days ago? Tony Capuano: Of course. Thanks, Shaun. As we mentioned in the prepared remarks, we are increasingly confident in our ability to deliver at the top end of our range in 2021. I think, when we look at factors like the number of rooms we have under construction, more than 200,000 rooms, the lowest fallout we have seen from the pipeline in about three years, the accelerated pace of conversions, we are increasingly optimistic that we can get back to a mid single-digit net unit growth pace. But as you have seen with some of the data coming out of STR around the slowdown in U.S. construction starts, the reality is the impact of those reduced construction starts will make it challenging for us to get back to that mid single-digit level over the next year or two. Shaun Kelley: Tony, just as the follow-up to mid single-digit being more of a medium-term target, but just for the next year or two construction starts probably limiting maybe a little bit below that range. Is that the way to think about it? Tony Capuano: Yeah. I think that’s right. I think we are guiding to about 3.5% net unit growth, excluding the impact of SVC in 2021, and then 2022 and 2023 will be the years that we think will be impacted by that drop in construction start activity in the U.S. Shaun Kelley: Thank you very much. Tony Capuano: Of course. Operator: Your next question… Leeny Oberg: Shaun, just one follow-up and that’s that we do believe that, while we are constrained by these lower construction starts that the industry has seen in the U.S., that we are going to be able to offset some of this through conversions and we are really pleased with the pace of conversion signings and the conversations that we are seeing on that front. Hard to be specific at this point about exactly where that leaves us, but that, again, as Tony said, we are confident about getting back to the mid single-digit rooms growth rate. Shaun Kelley: Thank you. Operator: Your next question comes from the line of Joe Greff with JPMorgan. Joe Greff: Hi. Good morning, everybody. Tony Capuano: Good morning. Joe Greff: Just one the -- you touched on this a little bit in terms of the labor challenges and labor costs going up. So when we look at the 2Q results and we are looking at your reported results, is there a lag in sort of the operating cost structure, particularly with labor relative to the revenue recovery? Is the exit rate coming out of the 2Q in cost structure, is that something that’s more significant than the reported results because of potential add? Leeny Oberg: Well, as you know, that’s going to overwhelmingly show up in IMF, Joe, from a standpoint of kind of the way that the quarter’s operating profit works at the hotels. So, and as you might imagine, with owners’ priorities in the U.S., we didn’t have a very high percentage of hotels earning incentive fees yet. The biggest growth in incentive fees was in Asia-Pacific, and frankly, the labor cost pressures are much, much lower there. So, honestly, I don’t think that there is a meaningful impact at all relative to the really rapid increase in occupancy that then necessitated that we get our employment levels in the hotels up as quickly as possible, and as you said, I think, there is a little bit of a lag there. But I don’t think it had any sort of impact on the profits for the quarter. Joe Greff: Great. Thank you. And then, you mentioned, a group pace for the first quarter and second quarter of maybe you gave it and I missed it, but did you talk about full year 2022 pace? Tony Capuano: Yes. The, sorry, Joe, the -- yeah, we talked a bit about 2022 pace and I think the -- there’s a couple of encouraging things. When we look at booking pace, we continue to see volumes increasing pretty measurably into 2022, and maybe just as encouraging, if not more encouraging is the pace of ADR growth that we are seeing for 2022 bookings. In fact, if you look at group bookings beyond -- in 2022 and beyond, ADR is actually about 3% ahead of what we were booking back in 2020 for the following year. So the ADR pricing power that we are seeing in group in 2022 and beyond is very encouraging. Joe Greff: Thank you very much. Operator: Your next question comes from the line of Thomas Allen with Morgan Stanley. Thomas Allen: Thanks. Just you have seen some really encouraging trends out of China. Can you just talk about like the pluses and minuses of using China as a comp, like how does your China business differ from kind of your global business? Thanks. Leeny Oberg: So, Thomas, it’s a good question and I will say a couple of things. I think one of the things that is the most consistent in Greater China and the U.S. is the reality that the overwhelming percentage of travelers that stay at our hotels in those two regions are domestic. And so we are seeing -- obviously, you are seeing some of the same trends in the U.S. that we saw earlier in Mainland China, which is that when people feel comfortable to travel, the demand picks up really, really quickly, albeit with leisure being the strongest. And clearly, that is quite helpful for the hotel’s occupancy levels, because they are not traveling outside their country. But I will say that, I think, the trends have been remarkably similar in terms of the pace of ADR recovery at the same time. And I think the other thing that I will point out that is interesting is that in Mainland China you do see markets, when they do have a pop in some COVID cases, they do shutdown demand very quickly, because the cities are closed down. We haven’t obviously seen that same impact in the U.S., because the population is more varied in terms of kind of the travel and the way cities are shut down or not shut down. So in that regard, it’s perhaps been a little bit more fluid in the U.S. But we have seen really terrific similarities in these markets where the occupancy is so much based on domestic travel. I think the other thing I will point out is that the F&B recovery in Greater China, I think, does point out the real strength of our hotel brands there, and that, I think, has been really impressive as well. Thomas Allen: Thanks again. Just a quick follow-up, you mentioned RevPAR was down 16% in July versus 2019. Is that U.S. only or is that global, and if it’s one of them, can you give us the other two? Leeny Oberg: Yes. Tony Capuano: That’s U.S. only. Leeny Oberg: Yeah. Thomas Allen: Do you have a global number? Leeny Oberg: We don’t have. Jackie Burka: Yeah. Leeny Oberg: No. We don’t. And that was just for the first three and half weeks. Just to be clear, that wasn’t for the month of July. As you know, this is all in real-time that we are pulling this together. So we don’t have all those numbers quite yet, and again, as we said, that was for the U.S. Thomas Allen: I appreciate all the color. Thank you. Operator: Your next question comes from the line of Robin Farley with UBS. Robin Farley: Thanks. I have a question about margins, but first, if I could just clarify Tony’s comment about guidance for this year for unit growth at 3.5%. I thought I him say excluding the Service Properties Trust, but you meant including that, right? Tony Capuano: Yeah. Sorry. That’s right. So excluding the impact of our SVC, our guidance would be 4% to 4.5% and we guide to the high end of that. If you would account for the impact of those 88 SVC hotels, it would be 3% to 3.5% and we are guiding towards the high end of that range. That’s correct. Sorry if I misspoke. Robin Farley: I just -- thanks. I just wanted to clarify that. And is the sort of higher end of the 3% to 3.5% range from fewer removals, is it a timing factor or in other words or were there properties that sort of were not maybe in compliance with brand standards that came back into compliance and won’t be removed in 2021 or is it just that some of the removals are sort of pushed into 2022? Tony Capuano: No. I think really, Robin, it’s a byproduct of as the year advances, we have more and more visibility on both fronts, in terms of the timing of the individual openings and the status of projects going out -- potentially going out of the system. Robin Farley: Okay. Great. Thanks. And then the margin clarification or question. Leeny you mentioned 200 basis points ahead of 2019. I think it was for -- in Greater China. And I think when you have talked about potential for margin improvement in the U.S. You have maybe sort of said you wouldn’t necessarily expect a big increase or a big change in the margin when RevPAR is recovered. Is that still the case? In other words, should we think about the -- some of the -- this sort of 200 basis points of margin in the example you used in China, is that kind of temporary maybe because brand standards aren’t what they were in 2019 or I am just trying to square that with… Leeny Oberg: Sure. Robin Farley: … sort of previous comments. Thank you. Leeny Oberg: Sure. So a couple of things. First of all, I was speaking about Mainland China, and there, I think, the interesting thing is that, with RevPAR back to essentially similar levels in 2019, we are producing GOP margins that are 200 basis points better. So I think that shows you some of the work that we have been able to do on the cost management side and productivity enhancement side that would tell you that those are kind of good margins to think about going forward. I think in the U.S., Robin, the interesting thing here is that we have got a lot of those similar productivity and cost enhancements that we have done here, which would lead you to some similar sort of conclusions. I think the thing you have to think about is how quickly do labor costs and benefit cost increase. So as we talked about before, if ADR recovers really quickly, and you have got these productivity and cost enhancements in place, you have probably got a similar opportunity in the U.S. for those similar kinds of numbers that we talked about in Mainland China. But, again, a lot of this depends on how quickly it all comes back in the U.S. and also what’s going on with wage rates and benefit costs. Robin Farley: Okay. Great. Thank you very much. Operator: Your next question comes from the line of Smedes Rose with Citi. Leeny Oberg: Hi, Smedes Smedes Rose: Hi. How are you? I was just hoping you could give a little more color on the kind of the composition of the group improvement you are seeing in 2022, maybe any changes on a regional basis, maybe potentially away from larger, higher cost cities or if you are seeing anything just in terms of the kind of corporations or they tend to be smaller, is it larger? Maybe just some color on what you are seeing on any kind of forward bookings? Tony Capuano: Sure. So as you know, group is a complex group of subsets of types of groups. Where we are seeing really significant acceleration is on social. In fact, in many ways, social group demand is largely back to pre-pandemic levels. We are not seeing rapid recovery in city-wide yet, the sort of big-box convention hotel city wides that we enjoyed pre-pandemic. And then the fall, I think, will be quite telling as we look for more conventional corporate group demand to return. The only other comment I might make… Smedes Rose: Okay. Tony Capuano: … Smedes is that, we are seeing in the year for the year group bookings stronger than what we have typically experienced in a pre-pandemic environment. Smedes Rose: Okay. Thank you. Tony Capuano: You are welcome. Smedes Rose: And can I just ask just to kind of follow-up on the question about margin. As you guys make decisions around housekeeping, would that be kind of the key driver for potential margin improvement for owners is possible the elimination or significant reduction in housekeeping or are there other items on the table that would be very important towards potentially driving margin expansion at the property level? Tony Capuano: Smedes, you can expect us to continue to try to strike the right balance between the expectations of our guests as they get back on the road and the financial realities that our owners and franchisees face. We will continue to be guided by guest preference and it is quite interesting when you read some of the verbatims that we hear from our guests. Some of our guests that are dipping their toes back into travel are still a bit hesitant about having housekeepers in the room and they appreciate the choice of housekeeping at their discretion. Others are vaccinated and feeling encouraged about the safety of travel and they would prefer a more conventional housekeeping solution. And so, I think, whether it’s housekeeping protocols, whether it’s food and beverage service, we will continue to evaluate and evolve those service levels by market and by quality tier around the world. Smedes Rose: Okay. Thank you. Tony Capuano: You are welcome. Operator: Your next question comes from the line of Stephen Grambling with Goldman Sachs. Stephen Grambling: Hey, Tony and Leeny. Tony Capuano: Good morning. Leeny Oberg: Hi, Stephen. Stephen Grambling: Good morning. How are you? Leeny Oberg: Great. Tony Capuano: Great. Stephen Grambling: So you mentioned -- great, a number of things about the Bonvoy brand extensions and creating value there, as well as the strength of non-RevPAR related fees, including the credit card fees. How do you think about the growth of this segment going forward and how closely it’s tied or not tied to kind of the core business, whether that’s net unit growth or RevPAR going forward? Leeny Oberg: So just broadly speaking, the non-RevPAR fees, Stephen, are made up of kind of a variety of things. But the biggest chunk of them that make up -- again when you think about it going back to 2019, call it, $579 million, the biggest chunk is obviously the credit card. And that is going to overwhelmingly relate to both the number of cardholders and the amount they spend on their co-brand cards. And as we talked about today, their spending has actually gone back to 2019 levels, and you saw the similar thing happened to our co-brand fees. So I think both the power of Bonvoy combined with sort of general level of consumer spend and health of the economy, particularly obviously the U.S. and fees are overwhelmingly driven by the U.S. cardholders, is how you should think about that. I think you are going to continue to see outsized growth in our residential branding fees, although they are obviously meaningfully smaller. But timeshare fees is much more of a stable number because, as you know, those are overwhelmingly fixed. So I think the biggest driver is really how you think about consumer credit card spend on our co-brand cards. Stephen Grambling: So, I guess, as a follow-up, is there an opportunity to monetize or generate credit card fees or other types of fees in the international markets where it hasn’t been as much of a contributor? Leeny Oberg: Yes. So they are just -- they are meaningfully smaller depending on kind of the economic structure of the credit card business in those various countries. And obviously, the U.S. is a very, very large market. So, yes, we are, and we expect to continue to see increases in our international credit card co-brand card fees. And as we talked about in this insurance, travel insurance business that we are entering into, we should also be able to benefit there as well. But I would not expect them to be meaningful in terms of Marriott’s overall earnings stream. Stephen Grambling: Great. And if I can sneak one other follow-up on just on the IMF, you referenced that only a few North America kind of above that under priority level. Is there any kind of level of occupancy recovery or specific markets that we really need to see to start seeing those starts to be earned again? Leeny Oberg: Well, honestly, they range all over the map. Just to give you a sense, when you go back to 2019, we basically were in a position where our full service hotels about half of them were earning incentive fees, and overall, for the U.S., it was, call it, 56% when you take in our limited service and there you obviously had occupancies up into the 70s. But, otherwise, I will say it’s a big mishmash depending on the specifics. The counter to that is as we described in Greater China, where we are at 77% earning in the year-to-date numbers for IMF and back in 2019, it was at 86%. So you can see that they behave much more in line with base fees, while in the U.S., you really have a ways to go before we back to earning meaningful incentive fees from the U.S. Stephen Grambling: That’s super helpful. Thanks so much. Operator: Your next question comes from the line of David Katz with Jefferies. Tony Capuano: Good morning, David. David Katz: Hi. Good morning, everyone. I wanted to take a little longer term look, Leeny, and wonder what would have to happen and how you might be thinking about getting back into the capital returns game and whether we would have a shot at maybe recommending a dividend by the end of the year and how you might be thinking about the setup for these items next year, which is sort of what we are used to with Marriott? Leeny Oberg: Sure. Absolutely. I think, as you pointed out, David, we are seeing tremendous progress. Our credit ratios are absolutely improving literally month-by-month and we are really pleased with the progress. First and foremost, we want to get our credit ratios back in line with being a strong investment-grade credit. That is the first priority and we are well on our way and so I do think we are going to be talking about capital return sooner rather than later. As you know, David, so much of this is around the pace of continued global vaccination rates, as well as restrictions on travel and consumers’ comfort with travel, both domestically and internationally, as well as people returning to their offices, et cetera. So as we said, we can’t predict and give you RevPAR and earnings outlooks in specifics. But if we continue to see really strong progress like we have been seeing, we could absolutely imagine that we are talking about capital return later on in 2022. Exactly when we are able to count on that and have a discussion with our Board on that topic remains to be seen. But you certainly can envision a scenario that, assuming things continue to progress, if that is the case. David Katz: If I can follow that up, three 3 times to 3.5 times was usually a target. Is there any qualification around that that we should be thinking about today? Leeny Oberg: No. Except to say that we, again, would want to feel like we are squarely staying there, i.e., that the market is -- the lodging recovery has stabilized, that things have gotten to a position where reaching that 3 times to 3.5 times is something that we foresee being very solid going forward. But think that other than that there’s no additional constraints. David Katz: Got it. Thank you so much. Good luck. Leeny Oberg: Sure. Operator: Your next question comes from the line of Richard Clarke with Bernstein. Richard Clarke: Hi. Good morning. Thanks for taking my question. Tony Capuano: Good morning. Richard Clarke: Just want to ask a quick question on the gap between your gross and net unit growth. I think you have done about 19,900 exits in the first half and if I look at the gap between your net unit growth that would imply you need to do about 15 -- a bit more than 15,000 exits in the second half. That’s about double what you did in the second half of 2019 and actually even ahead of the exits you had in the second half of 2020. So is there anything in particular -- anything particular that’s coming out there? Is it just conservative or anything you could mention on that? Tony Capuano: No. I mean, I think, we continue to expect to see deletions for the full year in that 1% to 1.5% rate. They -- excluding the impact of SVC, obviously, in terms of baseline deletions, they tend to ebb and flow a little bit from quarter-to-quarter. But on a full year basis, we are increasingly comfortable with that guidance of 1% to 1.5% deletions, excluding SVC. Richard Clarke: Okay. That makes sense. So are you saying that the deletions in Q2, the sort of 2,000 or so 2,500 exits, that’s a particularly low number and there might be a bit of a catch-up from that in the second half? Leeny Oberg: Yeah. They do -- they are really quite variable during the year. You could have one quarter with 7,000. You could have one quarter with 1,000. So it’s really it varies and we do look at this region by region very carefully and looking at expirations and how things are going. So it is -- continues to be, as Tony said, it continues to be our best estimate at this point. It is clearly better than where we were earlier in the year, because again, we had a wider range that we were considering, and we have been able to firm up that range so that we feel better to say that we will be in the space that says we would be at the top end of that 3% to 3.5% range. And I should add, part of the comfort around that is with the openings as well that we have greater visibility on the openings and we are extremely pleased with the openings in the second quarter and year-to-date. Richard Clarke: Wonderful. Thank you very much. Tony Capuano: Thank you. Operator: Your next question comes from the line of Dori Kesten with Wells Fargo. Dori Kesten: Thanks for… Tony Capuano: Good morning. Leeny Oberg: Hi, Dori. Dori Kesten: Hey, Leeny. Given the trends that you have seen in new signings in opening schedule, when would you expect to see the pipeline resume quarter-over-quarter growth? I think in the last downturn you saw about six quarters of compression? Tony Capuano: Yeah. Again, I might give a different version of the answer I just gave on deletions. The pipeline tends to ebb and flow a little bit. Some of the indicators we look at, development committee volume for instance and we are starting to see an acceleration in our volume of deals, particularly in June and July in our biggest markets, specifically in the U.S. and Canada and in China and I think that is encouraging for us. The other thing is, remember, more than 25% of our volume right now is in conversions and because of the quick turn on those conversions, often those get signed and opened and never even make their way into the pipeline. And so that adds to some of the quarter-to-quarter variability as well. Dori Kesten: Okay. And can you just remind us what the difference is in fees between a -- between your pipeline that’s luxury versus flex service on average? Tony Capuano: Sorry. The difference in fees, you said? Dori Kesten: Yeah. The -- like the long-term expectations of what a risk can own for you guys versus a residence? Tony Capuano: Sure. I mean setting aside the fact that there can be pretty wide variations from market-to-market, the rule of thumb we have shared in the past is that a luxury hotel stabilized annual fees could be as much as 10 times the annual fees of a select-service hotel like a Fairfield Inn. Dori Kesten: Okay. Thanks, Tony. Tony Capuano: You are welcome. Thank you. Operator: Your next question comes from the line of Michael Bellisario with Baird. Tony Capuano: Good morning, Michael. Leeny Oberg: Good morning. Michael Bellisario: Thanks. Good morning, everyone. Just two part questions, I wanted to focus on Bonvoy. I am not sure you mentioned it, what was the occupancy contribution during the quarter? And then the bigger picture question, maybe just, how are you thinking about further broadening the platform and value proposition for guests? Is there any renewed interest in travel adjacencies, partnerships or any other brand holes in the portfolio -- the brand portfolio that you are seeing, really just kind of what are your plans to add more value for greater share of everyone’s travel wallet today? Tony Capuano: Great. Well, let me try to take both of those and Leeny may chime in as well. On your first question, Bonvoy penetration continues to recover. In Q2, we were almost 50%, 49.5% to be precise. That was a significant increase. We went as low as about 43% at the bottom of the pandemic. But it’s still a couple of points shy of where we were pre-pandemic at about 52%. But the pace of penetration recovery, I think, is quite encouraging. And then on your second question, I think, we continue to look for opportunities to make the program stickier to engage with our customers even as they start to get back into travel and we tried to give you a few examples. I think the new travel insurance program is an example. The Uber partnership, I think, is a terrific example. The new branded credit cards are a good example. And then just the number of app downloads that we are seeing with the Marriott Bonvoy app. I think all of those point to our efforts and the, excuse me, the success of those efforts in trying to grow engagement among our Bonvoy members. Michael Bellisario: Helpful. Thank you. Tony Capuano: Of course. Thank you. Operator: Your next question comes from the line of Vince Ciepiel with Cleveland Research. Tony Capuano: Good morning. Leeny Oberg: Good morning, Vince. Vince Ciepiel: Good morning. Thanks for taking my question. A lot of mine have been answered, but one thing I am trying to get a little bit more clarity on, as it relates to your perspective, the trajectory of U.S. RevPAR. I think you mentioned in the first few weeks of July down only 16, ADR impressive only down 2. It sounds like leisure is really contributing nicely to that. I am just curious how you are thinking about the handoff through the second half from leisure into more corporate and group, and just how sustainable that July run rate is? Tony Capuano: Well, certainly, the fall is going to be fascinating to watch, as more and more schools open for in-person learning, as more and more companies get back to the office. I think the data that is perhaps most telling from our perspective is some of the statistics we shared with you on special corporate bookings. As we mentioned, those bookings rose 23% in June as we compare to May. And then again, it’s just the first three and half weeks of July, but we saw another 27% increase in those first three and half weeks of July versus the same three and half weeks in June. And so the magnitude and the steadiness of the growth in special corporate bookings I think is quite encouraging. And then you have heard us talk about this before, this blending of trip purpose continues to be a real and measurable phenomenon and we think it’s good for our business and we think it will continue well beyond the end of the pandemic. With all that said, we will continue to be vigilant as we watch the pace of vaccinations around the world, the effectiveness of those vaccinations relative to the Delta variant and monitor the impacts of that on our business. Vince Ciepiel: Great. And one follow-up, if I may, with that ADR number in July, I think the recovery in ADR has been progressing really nicely and probably better than a lot of folks thought going into this year. Curious what do you attribute that progress in ADR too and how sustainable do you think that is through the second half? Tony Capuano: Well, we certainly look at the pace at which demand is recovering and the amount of pent-up demand is maybe best illustrated by the pricing power we are seeing in rate. We knew we would have that in leisure, but it’s really encouraging to see that pricing power extend to both business transient and group. And in China, obviously, we have seen ADR come back at the same time and so you throw all that in the blender, it’s really encouraging, and I think, it’s just driven by the sheer volume of demand. Leeny Oberg: The only other thing I will add to that is the reality that so much of this depends on macroeconomic factors. And so as consumer confidence and consumer spending and general economic growth continue, that will be an important part of being able to continue to see this growth in demand and that has also -- always had an impact on how companies do their group bookings, do their business trips, et cetera, and that is another element of this price power. Vince Ciepiel: Thanks. Operator: Your next question comes from the line of Bill Crow with Raymond James. Tony Capuano: Good morning, Bill. Bill Crow: Hi. Good morning. Thanks. Leeny Oberg: Hi, Bill. Bill Crow: Good morning. First, a clarification, I think, it was Smedes had asked about 2022 group segmentation. And I think your answer was about -- it was largely a social with little evidence of city wides coming back, was that really more about 2021 or is that still 2022? Leeny Oberg: We will get Jackie to get back to you with super specific. But I think the reality, Bill, overall, if you are still seeing big chunks of association, corporate and government nights in 2022. But at the margin, where we are seeing the strongest kind of in the period, for the period demand is in both the smaller and medium-sized groups, as well as the social groups, where, in many cases, they have put off having events for a year and now coming forward. But, again, when we think about the big chunks of business, we have still got, I mean, you -- I am sure you have heard from Gaylord about their bookings. There’s still a wide swath across all the big segments of group business for 2022. The other thing to point out is that we still are in a position where the room nights are -- the current pace for group is still down for 2022. It’s just down a lot less than it used to be and that it also -- we are seeing strong rate, where rate is actually up compared to 2019. And with each progressing quarter, you see those nights improve as you move farther and farther away from Q3 of 2021, where there’s still obviously some concern around these variants. Bill Crow: Thanks for that clarification. If you will, my question that I really wanted to address is housekeeping and how are the guest requests for nightly housekeeping trending? We had heard from someone else that they had doubled over the last three months to six months, where the guests are proactively asking for that? And then, I guess, the second part of that is simply -- should we expect that the guest facing experience at luxury and upper upscale hotels will be very similar to where it was eventually in 2019, and therefore, the best opportunity for margin improvement on the housekeeping side might be at select service hotels? Is that a fair way to think about it? Tony Capuano: Okay. Well, so there’s a few questions embedded in there. I think, on your first question, the housekeeping protocols will really continue to be driven by guest preference and will likely vary as you kind of move up and down the quality tiers. On your second point, I think I tend to agree with you that in the luxury and upper upscale tier, I think that the expectation -- the guest expectations should be much more similar to what they saw in a pre-pandemic environment. And then on your third question, I am not sure I necessarily agree with that for the simple reason that what’s driving margin. Certainly, there’s the cost side, but there is the topline piece as well, and while it’s a single data point, we saw over 4th of July weekend, U.S. resort ADR up about 10%. But if you carve out just the luxury tier -- Jackie has to keep me honest here, but I think we were up close to 35% in ADR and so at that sort of premium and rate, you should expect some meaningful margin improvement even if you are back to pre-pandemic service levels. Bill Crow: Yeah. Perfect. Appreciate it. Thank you for your time. Tony Capuano: Of course. Thank you. Operator: Our final question comes from the line of Patrick Scholes with Truist. Tony Capuano: Good morning, Patrick. Patrick Scholes: Hi. Hi. Good morning. One of the more controversial topics right now are -- is what percentage if any of business travel may be permanently lost, and certainly, a New York Times article yesterday throwing more fuel on that fire. I am wondering what your thoughts are around that question? Thank you. Tony Capuano: Well, again, we have shared a bunch of data points with you today that I think underpin our optimism about the return of business transient demand. I do think going forward this blending of trip purpose that you have heard me talk about, we continue to think it’s great for our business and our industry and we continue to think it’s here to stay for quite a while. We are optimistic about the return of business travel. We talk to about 700 corporate travel managers every month and we are hearing anecdotally from our customers, particularly those that are in customer service businesses, law firms, accounting firms, consulting firms, that it is critical to their business that they would be on the road and in-person with their customers. If anything going forward I do think it may be a bit more difficult to determine precisely looking at a guest walking through the lobby exactly what their trip purpose is. We are not asking you at the front desk are you here for business, are you here for leisure or both. But I do think you will see a lengthening of stay as a result of this blending of trip purposes. And in fact, that length of stay is measurable and we continue to see that through the second quarter of this year. Patrick Scholes: Okay. Thank you for the color. Tony Capuano: Of course. Thanks, Patrick. Operator: At this time, there are no further questions. I would like to turn the floor back to management for any additional or closing remarks. Tony Capuano: Great. Well, again, thank you all for your participation and interest this morning. I hope you hear our optimism about the pace of recovery we are seeing in many markets around the world. We are excited ourselves to be back on the road. We hope you are getting out there as well and we look forward to seeing you in our hotels in the weeks and months ahead. Thanks and have a great day. Operator: Thank you for participating in today’s conference call. You may now disconnect your lines at this time and have a wonderful day.
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Marriott Shares Slip 3% as Q3 Earnings Miss Estimates

Marriott International (NASDAQ:MAR) reported third-quarter earnings below analyst expectations and trimmed its full-year forecast, resulting in a more than 3% drop in share intra-day today. The hotel chain recorded adjusted earnings per share of $2.26, just missing the $2.31 consensus, while revenue reached $6.26 billion, narrowly under the anticipated $6.27 billion.

For 2024, Marriott lowered its earnings guidance to $9.19 to $9.27 per share, down from the previous range of $9.23 to $9.40, and below Wall Street's consensus of $9.36. Despite the adjusted forecast, Marriott saw encouraging growth in key performance indicators, with global comparable systemwide RevPAR rising by 3% year-over-year. International RevPAR growth led with a 5.4% increase, while U.S. & Canada RevPAR was up by 2.1%.

Wells Fargo Maintains Equal-Weight Rating on Marriott International, Inc. (NASDAQ:MAR)

On October 22, 2024, Wells Fargo maintained its rating for Marriott International, Inc. (NASDAQ:MAR) at Equal-Weight, advising investors to hold their positions. At the time, Marriott's stock price was $264.97. Wells Fargo also raised Marriott's price target to $261 from $238, as highlighted by TheFly. This suggests a cautious optimism about Marriott's future performance.

Marriott International is a leading global hospitality company with a diverse portfolio of brands. Recently, Marriott and MGM Resorts International announced plans to convert a property on the Las Vegas Strip into the W Las Vegas, part of the W Hotels brand. This move is part of a strategic licensing agreement between the two companies, initially announced in July 2023. The conversion is expected to be completed later this year, enhancing Marriott's luxury offerings.

The collaboration with MGM Resorts is a testament to Marriott's strong brand portfolio and distribution channels, as noted by Steve Zanella, President of MGM Resorts Operations. The new W Las Vegas aims to provide a luxury lifestyle experience recognized globally, aligning with Marriott's strategy to expand its high-end offerings and attract affluent travelers.

In addition to its expansion efforts, Marriott has launched the "Connect Responsibly with Marriott Bonvoy Events" program. This initiative helps meeting planners incorporate sustainability into their events at participating Marriott Bonvoy hotels. The program offers Meeting Impact Reports and options to purchase carbon credits, promoting responsible practices and enhancing in-person connections.

Marriott's stock has seen a slight decrease of 0.24%, with a change of $0.63, trading between $263.26 and $266.44 today. Over the past year, the stock has fluctuated between a high of $266.58 and a low of $180.75. With a market capitalization of approximately $74.60 billion and a trading volume of 843,755 shares, Marriott remains a significant player in the hospitality industry.

Marriott International Q1 Earnings: Revenue Beats, EPS Misses

Marriott International's First-Quarter Results: A Mixed Bag with Strong Revenue Performance

Marriott International, symbolized as MAR:NASDAQ, recently unveiled its first-quarter results, which presented a mixed bag of outcomes. The company reported adjusted diluted earnings per share (EPS) of $2.13, slightly missing the mark against analyst expectations of $2.16. Despite this slight shortfall in EPS, Marriott demonstrated its robust revenue-generating capabilities by posting a revenue of $5.98 billion for the quarter, surpassing the forecasted $5.95 billion. This performance underscores Marriott's strength, particularly in international markets, where it continues to expand its presence through a diverse portfolio of hotels and lodging facilities.

The company's strategy of focusing on franchising and management contracts has played a pivotal role in its global expansion, allowing it to leverage its brand while minimizing direct investment risks. This approach has contributed to a notable growth in revenue per available room (RevPAR), with a worldwide increase of 4.2%. The international markets, in particular, saw an impressive 11.1% jump in RevPAR, highlighting the effectiveness of Marriott's strategy in these regions. Additionally, the company expanded its footprint by adding 46,000 new rooms, bringing its total to approximately 1.6 million rooms. This expansion is a testament to Marriott's aggressive growth strategy and its ability to attract franchisees and manage properties effectively across the globe.

Marriott's financial health is further evidenced by its adjusted EBITDA increase of 4% and a revenue growth of 6.4%, reflecting efficient operations and a strong market position. The company's commitment to returning capital to shareholders through dividends and share repurchases also signals confidence in its financial stability and future growth prospects. Moreover, the development pipeline remains robust, supporting the company's optimistic outlook on continued growth. Marriott's focus on expanding its global footprint and enhancing digital engagement through the Marriott Bonvoy app is expected to streamline the customer experience and foster loyalty among its 203 million members.

However, despite these positive developments, Marriott's stock performance over the past month has seen a -4.7% return, slightly underperforming against the Zacks S&P 500 composite's -4.1% change. This underperformance could be attributed to the market's reaction to the slight miss in EPS expectations and concerns over the number of managed rooms, which was below the two-analyst average estimate. Nonetheless, the company's stock price movement, with a recent decrease of 0.96% to close at $233.86, reflects the volatility and challenges in the hospitality sector. With a market capitalization of approximately $67.7 billion and a trading volume of 2,121,590 shares, Marriott remains a significant player in the industry, navigating through the complexities of global expansion and market expectations.