The paragraph describes the start of Marriott International's Third Quarter 2024 Earnings Conference Call. The operator sets the call to listen-only mode until the floor is opened for questions later. Jackie McConagha, along with other key executives including CEO Tony Capuano and CFO Leeny Oberg, is introduced. Jackie notes that many comments will be forward-looking statements with risks and uncertainties, as detailed in SEC filings. Key metrics such as RevPAR, occupancy, and average daily rate are discussed on a constant currency basis for comparable hotels. The earnings release and non-GAAP measures are available on Marriott's Investor Relations website. Tony Capuano then highlights that Marriott's third-quarter results show continued business momentum, with nearly 6% net room growth year-over-year.

In the quarter, global Revenue Per Available Room (RevPAR) increased by 3%, supported by a 2.5% rise in Average Daily Rate (ADR). The group segment was the top performer, with a 10% year-over-year increase in RevPAR. Global group revenues are expected to remain steady in the fourth quarter due to the U.S. election but are projected to grow by 8% for 2024 and 7% for 2025. Business transient RevPAR rose by 2%, while leisure transient RevPAR remained flat compared to last year, though still higher than 2019 levels. In the U.S. and Canada, RevPAR grew by over 2%, with luxury and full-service hotels outperforming select service properties. Internationally, RevPAR increased by 5%, with strong growth in Europe, the Middle East, Africa, and Asia Pacific, excluding China, driven by events like the Paris Olympics and demand from U.S. travelers. Cross-border travel has surpassed pre-pandemic levels. However, Greater China's RevPAR fell by 8% due to economic challenges affecting domestic leisure demand.

The paragraph discusses Marriott's performance and strategic initiatives. Despite challenges such as severe weather and high-end guests traveling elsewhere, Marriott hotels outperformed peers in Greater China and globally, increasing their RevPAR index. The Marriott Bonvoy loyalty program saw record enrollment, reaching over 219 million members, with new collaborations enhancing engagement. Development is thriving, with 16,000 net rooms added in Q3, totaling over 1.67 million rooms globally. A strong signing activity continues, including a significant conversion deal with Sonder for 9,000 rooms, enhancing longer stay options in key markets. The new City Express by Marriott brand targets transient mid-scale markets in the U.S. and Canada, attracting significant owner interest.

The company anticipates signing agreements and opening new locations in the coming months, expanding its presence in the mid-scale market segment globally. They are proud of their strong growth and progress, emphasizing the strength of their Marriott Bonvoy program and commitment to global expansion. The company is implementing an enterprise-wide initiative to boost efficiency and empower local teams, aiming for increased profitability and value. They project annual pre-tax cost reductions of $80-90 million starting in 2025 and expect $100 million in charges mainly in Q4 2024. With growth opportunities across over 30 brands, they remain confident in their competitive edge. Additionally, gross fee revenues increased by 7% to $1.28 billion in the third quarter.

The paragraph discusses the financial performance and outlook for a hospitality company. It reports an 11% increase in IMF to $159 million, driven by higher fees in the U.S. and Canada, and strong growth in APAC and CALA regions, despite a $5 million decline in Greater China. G&A expenses rose by 15% due to reserves related to a U.S. hotel and litigation costs. Despite these expenses, third-quarter adjusted EBITDA grew by 8% to $1.2 billion, with adjusted EPS increasing by 7% to $2.26. For the fourth quarter and full year 2024, Global RevPAR is expected to grow by 2% to 3% and 3% to 4%, respectively. RevPAR growth is anticipated to be higher in international markets than in the U.S. and Canada, where the growth is expected to be consistent with the third quarter. The paragraph notes that the U.S. elections are forecasted to negatively impact RevPAR growth in November. Greater China is projected to continue experiencing negative growth due to weak demand and pricing trends. Gross fee growth in the fourth quarter is expected to be between 4% and 5%.

The company has adjusted its financial expectations, noting impacts on fees from hotel renovations and residential branding. They anticipate gross fee growth of 6% to 7%, with revenues net of expenses around $95 million. Full-year adjusted EBITDA is expected to increase by 6% to 7% and adjusted EPS is projected between $9.19 and $9.27, with a 25% tax rate. Investment spending is forecasted at $1.1 to $1.2 billion, focusing on technology transformation. The company plans to return $4.4 billion to shareholders, including a $500 million acquisition of the Sheraton Grand Chicago. They emphasize their asset-light model and commitment to capital allocation that enhances shareholder value.

In the paragraph, Marriott discusses its updated 2024 net room growth guidance, which was raised to 6% to 6.5% after signing a deal with Sonder. With better visibility, they now expect 2024 growth to be around 6.5%. They also maintain a solid three-year compound annual growth rate (CAGR) expectation of 5% to 5.5% from the end of 2022 to the end of 2025. During a Q&A session, Stephen Grambling from Morgan Stanley asks about the impetus behind recent efficiency measures at Marriott. Anthony Capuano, responding to Stephen, mentions that the company is embracing change from a position of strength, due to its strong momentum and substantial growth over the last decade, including expanding into over 60 new countries. Leeny Oberg is expected to address the details of the run rate in response to Stephen's question.

In the discussion, the speakers address cost savings and potential growth rates, highlighting the unpredictability of specifics for the next year as they are in the early budget planning stages. Stephen Grambling asks about the pipeline's improvements and room growth prospects, to which Anthony Capuano responds with a positive outlook for 2025, citing strong momentum in the luxury sector and growth in incentive management fees. Despite a focus on midscale markets, average fees per room are expected to grow in 2024 and 2025. The operator then introduces the next question from Shaun Kelley with Bank of America.

In the conversation, Shaun Kelley asks Leeny Oberg about the discrepancy in the company's fee algorithm, noting that the gross fee piece is slightly below expectations despite a RevPAR growth of 3% to 4% and net unit growth exceeding 6%. Leeny explains that several factors contribute to this gap, including the impact of lower year-over-year IMF, particularly in areas like Greater China, renovations, FX fluctuations, and variations in RevPAR. She acknowledges that fees will appear uneven on a quarterly basis but expresses confidence in the overall algorithm's effectiveness over time. Leeny is optimistic about future prospects, emphasizing strong room signings and conversions, which she believes will contribute positively to the fee equation moving forward.

The paragraph features a conversation primarily between Leeny Oberg and Shaun Kelley concerning SG&A (Selling, General, and Administrative expenses). Shaun seeks clarification on how to account for a $30 million one-time reserve and guarantee when calculating next year's base SG&A. Leeny confirms Shaun's understanding but cautions that it's too early to provide specifics, noting the need to consider various elements like normal increases in bad debt. She acknowledges the $31 million was unexpected in the normal SG&A run rate. Subsequently, Patrick Scholes asks Anthony Capuano about the impact of recent economic stimulus in China and its potential effect on RevPAR (Revenue Per Available Room) growth for the next year. Anthony is asked for his insights, given the uncertainties surrounding China's market performance.

The paragraph discusses the limited impact of economic stimulus on consumer performance metrics, particularly in the property sector in Greater China, which remains under stress. Despite this, there is robust activity in signings and openings, especially in select service brands, due to their capital efficiency. Looking forward to 2025, absent significant stimulus, performance may remain flat. Leeny Oberg adds that while Greater China’s revenue per available room (RevPAR) was slightly better than anticipated for Q3, it still declined significantly, though there is a marginal increase in cross-border travel into Tier 1 cities. Patrick Scholes acknowledges the update, and the discussion concludes.

In this exchange, Richard Clarke from Bernstein asks about the relationship between the increase in IMF (Incentive Management Fees) and RevPAR (Revenue Per Available Room) in the U.S., particularly questioning why an operating reserve was necessary. Leeny Oberg explains that the operating profit guarantee is unrelated to IMF. In Q3, strong performance in the U.S. and Canada, partly due to insurance payments from past hurricanes and successful large city-managed hotels, contributed to the good IMF results. In Asia Pacific, growth was noted outside of China, where there was weakness in RevPAR. For Q4, despite stable RevPAR, IMF is expected to decline slightly due to hotel renovations.

The paragraph involves a discussion about cost savings and key money trends in the context of franchise operations. Anthony Capuano mentions that they are looking at efficiencies and savings for franchise owners without specifically stating if it includes reducing fees. Robin Farley from UBS inquires about key money trends in relation to new unit growth. Leeny Oberg responds that the use of key money remains consistent, with about a third of deals involving key money, and the amount per deal is similar to past trends. Anthony Capuano adds that while the percentage of deals using key money has not changed, it is now being applied across a wider range of quality tiers. Lastly, Robin asks a follow-up housekeeping question regarding hurricane-related payments mentioned in the IMF context.

In the paragraph, Leeny Oberg discusses an unusual $70 million operating profit guarantee associated with Marriott's acquisition of Starwood, which was longer and more significant than typical guarantees. This guarantee reached its maximum exposure after considering years affected by COVID. Oberg notes that there are no other remaining profit guarantees of similar size or length. Additionally, she mentions that business interruptions in the U.S. and Canada are immaterial and not worth adjusting for, as they do not significantly impact the company's earnings. Finally, Robin Farley acknowledges the response, and the conversation moves to the next question from Joe Greff with JPMorgan.

In the paragraph, Joe Greff asks Leeny Oberg about the company's initiatives to improve efficiencies and reduce G&A costs, specifically regarding the expectation of achieving $80 million to $90 million in annual savings by 2025. Oberg confirms that these savings are indeed expected by 2025, starting from this year's cost base. She also addresses a question about investment spending for 2025, agreeing that the expected figure of $1.1 billion to $1.2 billion includes one-time items from this year, totaling $250 million, which are not anticipated to recur next year. These items include the purchase of Chicago's Grand Sheridan and land for Westin Peachtree to resolve a ground lease issue.

In the paragraph, Brandt Montour from Barclays asks Anthony Capuano about the special corporate negotiated rate talks for the upcoming year. Anthony mentions that they are early in the process but are targeting a mid-single-digit increase for 2025, which the teams feel good about. Leeny Oberg adds that the strengthening ADR has been beneficial. Brandt also asks about the impact of interest rate uncertainty on developers' capital planning. Anthony acknowledges that developers consider every variable affecting returns, but mentions that debt availability and high construction costs are more significant challenges than current interest rates.

In the paragraph, David Katz asks about leisure travel trends and net unit growth (NUG). Leeny Oberg mentions that Q3 leisure transactions were about flat compared to the previous year but performed well against 2019 levels, with luxury and premium segments slightly growing while select service saw a slight decline. Katz then asks about long-term NUG prospects, noting that different business models like Sonder or partnerships with Bonvoy and MGM have emerged. Anthony Capuano responds by saying that most new units will likely continue to follow traditional management and franchise agreements, which support their projected 5% to 5.5% growth in NUG over three years. He clarifies that Sonder, while unique, operates much like a traditional franchise agreement.

The paragraph discusses MGM's integration of two major brand families, emphasizing the creativity required for this merger and highlighting Bonvoy's momentum that attracts potential partners. David Katz and Dan Politzer engage in a Q&A, where Politzer inquires about leisure business expectations for 2025. Leeny Oberg responds that while they are in the budget process and examining granular details, they foresee 2025 to mirror the trends of late 2024, with consistent business travel and strong group activity, but only slight leisure growth, unless major economic changes occur. More detailed insights will be shared in February once the budget is completed.

The paragraph centers on a discussion about non-RevPAR fees and growth expectations. Leeny Oberg explains that the significant elements impacting these fees are credit cards, residential branding, and timeshare. The residential branding fees were particularly high in Q3 2024 compared to the previous year due to lump sum payments from development sales. Despite these variations, the company expects to achieve a 9% to 10% growth in non-RevPAR fees for the year. The conversation then shifts to Anthony Capuano addressing a question from Michael Bellisario regarding franchise sales and market share. Capuano emphasizes that expanding market share remains a primary focus.

The paragraph discusses the growth potential and conversion momentum within a company's family of brands. They believe their offerings are competitive and see strong growth potential, especially in the mid-scale segment. The company has been focusing on removing friction in the conversion process and dedicated resources to increase conversion volume, expecting continued activity in this area. Regarding macroeconomic factors, they discuss room night demand growth compared to GDP growth, noting any surprises and looking ahead to 2025, considering which segments might align better with GDP growth.

In the paragraph, the speaker discusses the ongoing normalization of the travel industry post-COVID in the U.S. and Canada, particularly in the leisure segment, where metrics like RevPAR have flattened compared to the previous year. There has been a compensatory rise in business transient group demand. Year-to-date, room nights have increased by 1% and ADR by 2% in Q3, indicating healthy overall demand. The speaker predicts continued prioritization of travel among customers across different segments, influenced by macroeconomic conditions. Additionally, there is an emphasis on the unexpected but strong and growing demand for group meetings, which aligns with the company’s strengths in its group hotel portfolio, offering positive business prospects.

In the paragraph, Smedes Rose from Citi inquires about capital return expectations in light of revenue forecasts for 2024 and 2025. Leeny Oberg responds, emphasizing the company's growth-focused philosophy and highlighting that their business model generates excess cash, allowing them to invest in growth while maintaining investment-grade leverage and returning excess capital to shareholders. Smedes then asks about potential hotel transaction activity and whether the company plans to sell owned assets in the coming year. Leeny indicates that they constantly evaluate their portfolio, mentioning specific properties like the W Union Square and an elegant portfolio in Barbados.

The conversation revolves around the state of consumer spending, particularly in the hospitality sector. Anthony Capuano responds to Lizzie Dove's question, noting that while food and beverage spending for meetings and events remains strong, there is a slight decline in spending at hotel outlets and lounges, though it is still growing significantly. However, this pullback is not observed in luxury hotels, where spending in outlets and lounges is robust, excluding Greater China due to earlier discussed reasons.

The paragraph discusses the state of the global luxury portfolio excluding China, where spending in outlets and balances has increased by 2%, consistent with the previous quarter's growth. Lizzie Dove inquires about the impact of renovation and residential branding fees on future budgets, asking if things will normalize by 2025. Leeny Oberg responds, noting renovations are ongoing but expects no significant impact on fee guidance. Chad Beynon then asks Anthony Capuano about the growth in convention business for 2025. Capuano explains that they see both renewed interest from existing companies and growth from industries that had previously paused, partly due to scheduling constraints and available dates and spaces.

The paragraph discusses the strong demand for City Express in North America, with potential franchisees eager to start signing deals. The demand is particularly strong, and the company is already receiving franchise applications and approvals. They expect to open the first locations in the next few months and see this as an opportunity to engage with franchisees they haven't worked with before. The conversation then shifts to a question about corporate travel spending amidst election-related and calendar disruptions, with a general positive outlook on its gradual increase.

The paragraph discusses Marriott's steady RevPAR growth in the business transient segment, highlighting recovery driven by increased travel from large corporations. The discussion shifts to Marriott Bonvoy memberships and booking channels. Direct bookings remain in the low 70% range, with 40% being digital. OTA contributions are steady at 12%-13%, while GDS has seen slight increases due to more corporate bookings. The shift from phone and in-person to digital bookings is noted. The excerpt concludes with closing remarks from Anthony Capuano, thanking participants for their interest and looking forward to future discussions.

The paragraph instructs that you can end the call now and wishes you a wonderful day.

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