Marriott International, Inc. (MAR) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Quarter Performance: Marriott delivered a strong quarter with robust travel demand, 6% year-over-year net rooms growth, and a nearly 5% rise in global RevPAR. Occupancy reached 73%, up about 150 basis points from the previous year.

• International RevPAR Growth: RevPAR increased over 7% internationally, led by a 13% gain in Asia Pacific excluding China. Japan saw a remarkable 21% RevPAR rise.

• City Express Portfolio Outperformance: In 2024, the City Express portfolio significantly outperformed the overall Mexican market and Marriott's internal RevPAR expectations.

• Marriott Bonvoy Membership Growth: The Marriott Bonvoy loyalty program continued to expand, reaching over 210 million members by the end of June, with record-high member penetration of global room nights.

• Record Signings and Pipeline Growth: Marriott saw record signings in APEC and Greater China for the first half of the year, growing the pipeline to over 559,000 rooms worldwide.

Pessimistic Highlights

• RevPAR Decline in Greater China: RevPAR in Greater China declined roughly 4% in the quarter due to macroeconomic pressures and an increase in outbound high-end travelers.

• Softness in Hawaii: Incentive management fees in the US and Canada were flat year-over-year, partly impacted by continued softness in Hawaii.

• Lowered Full-Year Outlook: The global RevPAR range for the full year was narrowed to 3% to 4% growth, largely due to anticipated continued weakness in Greater China.

Company Outlook

• Third Quarter and Full-Year RevPAR Growth: Global RevPAR is expected to grow 3% to 4% in the third quarter and for the full year, with international markets expected to outperform the US and Canada.

• Gross Fee Growth: For the third quarter, gross fee growth is expected to be in the 6% to 8% range, with full-year gross fees potentially rising 6% to 7% to $5.1 billion to $5.2 billion.

• Adjusted EBITDA and EPS: Full-year adjusted EBITDA is now expected to rise between 6% and 8% to roughly $4.95 billion to $5 billion, with adjusted EPS expected to be between $9.23 and $9.40.

Q & A Highlights

• Q: Can you discuss the operating leverage and potential actions if the backdrop deteriorates further? (Stephen Grambling, Morgan Stanley)

  A: The drop in our outlook is largely related to Greater China, with a disproportionate impact on IMFs. The fundamental algorithm of fees per key rising over time remains unchanged. (Leeny Oberg)

• Q: What's driving the weaker Q4 RevPAR guidance, and is there any concern for Q4 trends? (Shaun Kelley, Bank of America)

  A: The primary change for Q4 is a bit lower group bookings around the election in the US and Canada. International markets are normalizing, but overall trends remain steady. (Leeny Oberg)

• Q: Is the softness in China impacting development conversations or signings? (Shaun Kelley, Bank of America)

  A: Record signings in the first half of the year in China show continued belief in long-term travel dynamics. Construction pace is encouraging, with no slowdown in development activity. (Tony Capuano)

• Q: Can you provide more detail on the weakness in Hawaii? (Smedes Rose, Citi)

  A: Maui is seeing the slowest recovery, impacted by the strong dollar and reduced Japanese travel. The tragedy in Lahaina has also had a significant impact. (Leeny Oberg)

• Q: How does the increase in US construction starts impact international starts, and what's the outlook for 2025 unit growth? (Joe Greff, JPMorgan)

  A: Construction starts are up 40% globally, with strong performance in conversions. The outlook for 2025 remains positive, with continued confidence in achieving 5% to 5.5% CAGR. (Leeny Oberg)

• Q: Can you discuss the impact of the MGM deal on unit growth and fee structures? (David Katz, Jefferies)

  A: The MGM deal is unique and doesn't materially change our approach to managed and franchise deals. The momentum in conversions is accelerating, supporting our net unit growth. (Tony Capuano)