The operator introduces the Marriott International Q2 2024 Earnings call and explains the format. Senior Vice President of Investor Relations, Jackie McConagha, introduces the speakers and reminds listeners of the risks and uncertainties involved in forward-looking statements. President and CEO, Tony Capuano, shares the company's strong performance in the second quarter with high travel demand and a 6% increase in net rooms.

In the second quarter, global RevPAR (revenue per available room) increased by almost 5%, with average daily rate rising by 3% and occupancy reaching 73%. The US and Canada saw a 4% increase in RevPAR, with all chain scales experiencing positive growth. Internationally, RevPAR grew by over 7%, with Asia Pacific (excluding China) leading the way with a 13% increase. RevPAR also saw strong growth in EMEA (10%) and CALA (9%). The City Express portfolio in Mexico has outperformed the market and Bonvoy penetration is improving. Greater China saw a decline of 4% in RevPAR due to macroeconomic pressures and an increase in outbound high-end travelers. However, the company outperformed its peers and gained RevPAR index across the region. The global RevPAR index also rose in the quarter. The company is narrowing its global RevPAR growth range to 3-4% for the full year, mainly due to expected weakness in Greater China.

In the second quarter of the year, all three of Marriott's customer segments (group, leisure transient, and business transient) saw growth in revenue per available room (RevPAR) due to increases in both room nights and average daily rate (ADR). Group remained the strongest segment, with a 10% increase in RevPAR. The business transient segment also saw a 4% increase in RevPAR, driven by demand from small and medium sized corporates. Marriott Bonvoy, the company's loyalty program, continues to grow with over 210 million members and partnerships in Japan, China, and CALA. Member penetration of global room nights also reached record highs in the second quarter.

Marriott is proud of their recent collaboration with Starbucks and their focus on providing excellent experiences for their guests. Their global portfolio is growing faster than the industry average and they have added over 15,500 net rooms in the past quarter. Their pipeline is also growing, with over 559,000 rooms in development. Conversions are a major driver of growth, with 37% of openings and 32% of signings coming from conversions in the second quarter. Construction starts in the US and Canada have also increased by 40% compared to last year. Marriott has recently signed three luxury conversion deals, including the renowned Resort at Pelican Hill and Turtle Bay Resort, which is joining the Ritz-Carlton brand. Their momentum in the mid-scale space is also strong, with developers showing interest in their new brands.

The company has signed deals for several of its brands, including City Express, Four Points Express, and StudioRes. They are also pursuing various opportunities for growth. The second quarter saw an increase in gross fee revenues and adjusted EBITDA. The company expects global RevPAR to grow in the third quarter and for the full year, with stronger growth in international markets compared to the US and Canada.

The primary change in the four-year outlook is negative RevPAR growth expected in Greater China for the rest of the year. This is due to weak demand and pricing trends, with the third quarter expected to see the most decline. However, the US and Canada are expected to have relatively steady RevPAR trends in the back half of the year. Worldwide RevPAR growth is still anticipated, driven by strong group revenue and improvement in business and leisure revenues. Gross fee growth is expected to be in the 6% to 8% range in the third quarter. However, there may be reductions in IMFs and negative currency impact from a strong dollar. G&A expenses are expected to rise just 1% to 2% year-over-year.

Marriott International expects strong growth in full-year adjusted EBITDA, effective tax rate, and adjusted EPS. They are pleased with the signings and openings of new properties, and project a net rooms growth of 5.5% to 6%. The company plans to invest $1 billion to $1.2 billion in technology and property renovations, with a focus on elevating their three major tech platforms. Their capital allocation philosophy remains the same, with a commitment to maintaining an investment grade rating, investing in growth, and returning excess capital to shareholders. They expect to generate strong levels of cash and have a low leverage ratio. Approximately $4.3 billion is expected to be returned to shareholders for the full year.

The paragraph discusses the factors that led to a decrease in Marriott's RevPAR and EBITDA in the second half of the year. The decrease is primarily due to a drop in business in Greater China, which has a disproportionate impact on fees. The company's outlook for the future remains optimistic.

Shaun Kelley asked about the RevPAR guidance and Leeny Oberg clarified that the third quarter would be the weakest for China. However, when looking at the numbers, the implied guidance for the fourth quarter is even weaker than the third. Oberg explained that this is likely due to group timing.

Shaun asks Leeny about the weaker Q4 and if there is any cause for concern. Leeny explains that while China only makes up a small percentage of their rooms, there is a decrease in group bookings in the US and Canada due to the election. However, the overall RevPAR growth for the back half of the year is expected to be similar to the first half. Tony adds that historical softness around election time is expected, but this year it is bleeding into the week after the election as well.

The speaker discusses the impact of softening demand in China on the development and signing of new projects. They mention that there has been no slowdown in signings and construction, and attribute this to the long-term prospects of travel in China and the continued belief of owners in the market. They also note that there has been increased appetite for strong brands in China, including conversions, during this weaker period.

Smedes Rose from Citi asks about the weakness in Hawaii and if it is isolated to Maui or seen across all regions. Leeny Oberg, speaking on behalf of Marriott, confirms that Maui is experiencing slower recovery due to the strong dollar and the recent tragedy in Lahaina. She also mentions that the percentage of hotels paying incentive fees in North America is the same as last year, while in China it has decreased. Overall, 61% of managed contracts for Marriott are currently paying incentive fees.

The paragraph discusses the impact of various factors on the gross fee guidance for the full year, which has been lowered by $50 million to $100 million. The majority of this reduction is attributed to the performance of China, with a smaller portion affected by the US and foreign exchange. Construction starts in the US and Canada have seen a 40% increase, but there is no specific mention of construction starts outside of these regions.

The speaker discusses the growth in construction starts in various regions, including China, APEC, and EMEA. They note that financing continues to be a challenge in some areas, but overall, there has been a 40% increase in construction starts globally. They also mention the strong performance in converting rooms and the consistent number of rooms under construction. A question is then asked about the NUG guidance and the speaker explains that it should be looked at through a more updated lens, taking into account deals like the MGM deal, and that this may affect how fees are modeled in the future.

The speaker states that the recent MGM deal should not significantly change their approach to managed and franchise deals. They are pleased with the number of multi-unit deals they are signing, which are typical agreements with owners wanting to sign multiple properties with Marriott. The speaker also mentions that the MGM deal is going well and both companies are happy with the volume of leads and groups coming through their systems.

Brandt Montour asks Tony Capuano about group pace for 2025 and whether there has been any change in pace or booking hesitation due to the election. Capuano responds that while there has been a slight decrease in pace, group bookings remain strong. Montour also asks about the owned and leased portfolio, which has performed well in Europe and includes termination fees. Leeny Oberg adds that the portfolio has seen a modest increase in termination fees, but overall results are consistent. Dan Politzer from Wells Fargo asks the next question.

During a Q&A session, Dan Politzer asks about the unit growth for the company and if they are confident in achieving the 5% to 5.5% CAGR that was laid out at the Analyst Day last year. Leeny Oberg, the speaker, responds by stating that they can't discuss specifics for next year yet, but they believe the guidance is appropriate. She also mentions the rise of near-term openings due to conversions and adaptive reuse, as well as an uptick in construction starts. Dan Politzer then asks about the growth of leisure and Oberg explains that it is still growing slowly, but doesn't provide any further details.

The speaker agrees that leisure growth was only 2%, but it's still encouraging given the impact of COVID-19. Global leisure nights were up 2%, ADR was up 1%, and US and Canada leisure RevPAR was up 1%. There is a stronger performance in upper chain scales compared to lower chain scales. Leisure was the fastest segment to recover and has seen a 40% increase in RevPAR over the last five years. The speaker expects leisure to continue to grow for the full year. There is no indication that the sluggishness at the low end is affecting higher income levels.

The paragraph discusses the impact of COVID-19 on ancillary spend in the travel industry. It notes that while resort RevPAR (revenue per available room) has remained strong, ancillary spend has been softer than expected. This is attributed to consumers being more cautious with their spending, rather than trading down to lower quality accommodations. The data shows that luxury travel has actually seen an increase in occupancy, but there is concern about the balance of inbound and outbound international travel. Currently, inbound travel to the US is at pre-COVID levels, while outbound travel is slightly higher.

The speaker discusses the continued strong demand for travel from US and Middle Eastern travelers, with many going to Japan and Europe. They also mention the increase in global travel, which is seen as positive. The question then shifts to China, which has historically been a major source of travel demand globally. The speaker notes that while there has been some weakness in China, there are still many Chinese travelers leaving the country due to improved airlift opportunities. This has benefited hotels in other parts of Asia Pacific. However, travel to and from the US is not yet back to pre-COVID levels.

The company expects strong outbound demand from greater China, but overall travel spend has not recovered as quickly as expected due to the macroeconomic picture. The Chinese government's visa deals have helped with outbound travel, especially at the high end. The company's pipeline is mostly limited service new builds, with some full service conversions. Under-construction as a percent of pipeline is at 37%, lower than historic levels, but this is not due to churn as there is low dropout from the pipeline.

The availability of construction debt in the US is still limited compared to pre-pandemic levels, which has resulted in slower growth in new construction projects. However, conversions to existing properties are becoming a larger portion of the company's unit growth, and this trend is expected to continue and potentially accelerate in the future. The company is not yet ready to provide specific guidance for 2025, but they are seeing strong momentum in conversions and a growing interest from owners and franchisees in the company's revenue engines.

Tony Capuano, CEO of a hotel company, was asked about the company's visibility and booking trends in China compared to the US. He stated that while their visibility is good, the booking window is currently short, making it difficult to plan beyond the end of the year. He also provided an update on the company's trends for using key money for development, stating that the percentage of deals and amount of key money offered in 2023 is lower than in 2019, but the competitive environment is increasing. The company will only consider using key money in strategic deals with significant fee upside and has also started deploying it in lower quality tiers.

During a recent conference call, Marriott International executives discussed their outlook for ancillary spend and non-RevPAR fees. They noted that ancillary spend has decreased slightly across all segments, including leisure and group. However, credit card spend is still expected to increase by 10% in 2024. The company also mentioned their focus on adding new card holders and their progress in discussions and signings for lower-end chain scales. They plan to continue pursuing multi-unit development deals and may switch to single asset deals in the future.

Leeny Oberg, Marriott's Chief Financial Officer, is pleased with the large number of multi-unit conversion deals the company has been discussing and closing around the world. They have over 300 hotels under discussion with multi-unit developers in the mid-scale category, and more of these developers are starting construction. The call has now ended, and Marriott's CEO, Tony Capuano, thanks everyone for their interest and hopes they have a great rest of the summer.

This summary was generated with AI and may contain some inaccuracies.