Earnings call transcript: Marriott Q1 2025 beats forecasts, stock rises

Marriott International, with a market capitalization of $69.39 billion, reported robust financial results for the first quarter of 2025, surpassing market expectations with an EPS of $2.32 against a forecast of $2.26 and revenue of $6.26 billion exceeding the anticipated $6.20 billion. Following the announcement, the company’s stock rose by 1.91% in pre-market trading, reflecting investor confidence in Marriott’s strategic direction and operational performance. According to InvestingPro analysis, the company maintains impressive gross profit margins of 81.87% and has shown strong returns over the last month.

Key Takeaways

• Marriott exceeded EPS and revenue forecasts for Q1 2025.
• Stock price increased by 1.91% following the earnings report.
• Acquisition of CitizenM signals growth in the luxury segment.
• Full-year RevPAR growth guidance was lowered.
• Digital transformation continues to enhance operational efficiency.

Company Performance

Marriott International demonstrated strong performance in Q1 2025, with global RevPAR rising by 4.1%, surpassing the upper end of its guidance. The company reported a 5% increase in gross fee revenues and a 7% rise in adjusted EBITDA. These results underscore Marriott’s ability to navigate a challenging economic environment and capitalize on growth opportunities, particularly in the luxury segment.

Financial Highlights

• Revenue: $6.26 billion, up from the forecasted $6.20 billion.
• Earnings per share: $2.32, exceeding the forecast of $2.26.
• Adjusted EBITDA: $1.22 billion, a 7% increase year-over-year.
• Gross fee revenues: $1.28 billion, up 5% year-over-year.

Earnings vs. Forecast

Marriott’s Q1 2025 earnings outperformed analyst expectations, with a 2.65% EPS surprise and a 0.97% revenue beat. This performance is consistent with Marriott’s historical trend of exceeding forecasts, driven by strategic initiatives and strong operational execution.

Market Reaction

The positive earnings report led to a 1.91% increase in Marriott’s stock price, with the current trading price at $252. Trading at a P/E ratio of 29.72, the stock’s movement reflects investor optimism and aligns with the broader positive sentiment in the hospitality sector. The price remains comfortably within its 52-week range of $204.55 to $307.52, suggesting stability. InvestingPro’s comprehensive analysis indicates the stock is currently fairly valued, with analyst targets ranging from $205 to $330, and the platform’s Financial Health Score rates the company as "GOOD."

Outlook & Guidance

Despite the strong quarterly performance, Marriott adjusted its full-year RevPAR growth guidance to 1.5-3.5%, down from previous estimates. The company remains optimistic about its growth prospects, with net rooms growth approaching 5% following the CitizenM acquisition. InvestingPro analysis shows the company operates with a moderate level of debt and maintains strong cash flow generation, with nine analysts recently revising their earnings expectations for the upcoming period. Discover more exclusive insights and detailed financial metrics with an InvestingPro subscription. Group bookings for 2026 are tracking up 7%, indicating continued strength in group and business transient segments.

Executive Commentary

CEO Tony Capilano stated, "We reported strong first quarter results this morning despite an uncertain macroeconomic environment," highlighting Marriott’s resilience. CFO Leeny Oberg noted, "Luxury makes up 10% of our existing rooms... with almost 10% in our pipeline," emphasizing the company’s focus on expanding its luxury offerings.

Risks and Challenges

• Lowered RevPAR guidance may impact investor sentiment.
• Challenges in Greater China with a 2% decline in RevPAR.
• Macroeconomic uncertainties could affect future performance.
• Supply chain issues and market saturation in certain regions.
• Potential impact of geopolitical tensions on international travel.

Q&A

During the earnings call, analysts inquired about Marriott’s strategy in China and the impact of demographic shifts on luxury travel demand. Executives expressed confidence in the Chinese market and highlighted the growing demand for luxury travel as key drivers of future growth.

Full transcript - Marriott International Inc (MAR) Q1 2025:

Conference Operator: day, everyone, and welcome to today’s Marriott International First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note this call may be recorded. It is now my pleasure to turn the conference over to Jackie McConaughey, Senior Vice President of Investor Relations.

Please go ahead, ma’am.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International: Thank you. Good morning, everyone, and welcome to Myriad’s first quarter twenty twenty five earnings call. On the call with me today are Tony Capilano, our President and Chief Executive Officer Lainie Oberg, our Chief Financial Officer and Executive Vice President, Development and Pilar Fernandez, our Senior Director of Investor Relations. Before we begin, I would like to 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 your comments.

Unless otherwise stated, our RevPAR occupancy, average daily rate, and property level revenues comments reflect system wide constant currency results for comparable hotels, and all changes refer to year over year changes for the comparable period. Statements in our comments and the press release we issued earlier today are effective only today and will not be updated if actual events unfold. 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 Capilano, President and Chief Executive Officer, Marriott International: Thanks, Jackie, and good morning, everyone. We reported strong first quarter results this morning despite an uncertain macroeconomic environment, and each of our regions outperformed our expectations. Development activity remained robust with record first quarter global signings and we grew net rooms 4.6% over the trailing twelve months through March. First quarter global RevPAR rose 4.1%, just above the top end of our 3% to 4% guidance range, with ADR increasing 3% and occupancy rising one percentage. RevPAR in The US and Canada region rose over 3% with our luxury and full service hotels meaningfully outperforming select service properties.

Thanks to solid demand across both group and transient guests. International RevPAR was up nearly 6% led by growth in APAC. APAC’s First Quarter RevPAR rose 11% driven by strong ADR growth and higher demand from international guests. Growth was broad based across the region with RevPAR increases of 1617% respectively in its two largest markets, India and Japan. RevPAR in Cali rose 7% led by strong luxury and resort results.

In EMEA, RevPAR rose 6% on solid increases in ADR as well as occupancy with strong transient demand from both in country and cross border guests. First quarter RevPAR in Greater China declined 2% due to the weaker macro environment and tough year over year comparisons, though it did come in ahead of our prior expectation, excuse me, primarily as a result of strong domestic demand. This quarter group was again the standout customer segment. Group RevPAR rose 8% both globally and in The US. First Quarter business transient and leisure transient each grew 2% globally and 1% in The US with growth driven by ADR increases.

While RevPAR trends internationally were strong throughout the quarter, our U. S. And Canada regions saw softer growth in March, particularly

Analyst: in

Tony Capilano, President and Chief Executive Officer, Marriott International: the select service segment. We operate a cyclical business and there is no doubt that today we are in a period of heightened macroeconomic uncertainty, especially here in The U. S. With many concerned about slowing economic activity and lower consumer confidence. Throughout our long history, we’ve shown our agility and resilience while also continuing to deliver solid system growth throughout economic cycles.

As Leeny will discuss in greater detail, against this macro backdrop, we are lowering our guidance for full year RevPAR growth by 50 basis points due to a more cautious outlook in our U. S. And Canada region. In whatever environment we find ourselves, we remain focused on driving returns in our hotels and executing our proven long term growth strategy. You can see in our first quarter G and A results, the positive benefit from the work we did last year to enhance our efficiency and productivity across the company.

While we are marginally lowering our 2025 RevPAR guidance range, we still expect strong net rooms growth for the year and the future. Owners continue to show preference for our brands. Our global signings have been excellent so far this year, despite uncertainty around construction costs and the challenging financing environment in The U. S. And Europe.

Our first quarter signings were up 35% year over year. Our pipeline totaled a record of over 587,000 rooms at the end of the quarter with 42% of pipeline rooms under construction. Conversions including multi unit opportunities remain a significant driver of growth, representing about one third of both signings and openings in the quarter. I’m also very excited about our recent Citizen M announcement and the expected addition of this unique lifestyle portfolio to our system later this year. This transaction builds on our commitment to expand our industry leading global portfolio to provide even more exciting and innovative options for guests and hotel owners.

Comprised of over 8,500 open rooms and 600 pipeline rooms, CitizenM is a differentiated brand with unique characteristics that we believe will be a great complement to our existing lifestyles, select brands, AC, Moxie and Aloft. CitizenM is known for its tech savvy in hotel experience, highly efficient use of space and focus on art and design. And we see a large runway of growth for the brand in markets around the world. Our powerful industry leading Marriott Bonvoy loyalty program had nearly two thirty seven million members at the March. Marriott Bonvoy member penetration rose again, reaching a record of 68% of room nights globally.

Honoring our members appetites for experiences, we recently launched our newest global ad campaign titled You Are The Greatest Souvenir, which showcases our wide range of offerings and celebrates travel’s power in creating lasting memories. We’re also continuing to make great progress on the multi year digital and technology transformation of our reservations, property management and loyalty systems. We expect this new technology platform to further strengthen our efficient operating model, enhance Marriott Bonvoy and elevate both the associate and customer digital experience. It is also expected to unlock new revenue opportunities through enhanced functionality and options such as booking specific room types and amenities in advance and seamless shopping across lodging, F and B, spa and other non lodging products. As always, I’ve spent much of my time so far this year traveling around the world.

I have visited properties and spent time with associates in every one of our regions. And I’ve seen firsthand their ability to adapt to changes in their markets and their dedication to delivering outstanding experiences to our guests. I want to express my gratitude to all of our global associates for their hard work and dedication. And now I’ll turn the call over to Leeny for more details on

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: our results. Leeny? Thank you, Tony. As Tony noted, first quarter RevPAR increased just over 4%. Looking more closely at how we finished the quarter, RevPAR in March rose 2% globally.

March RevPAR for our international regions was a bit ahead of our prior expectations, rising 2.4% or 5% excluding the impact of grommeton. After January and February results were stronger than we expected, demand in The US did soften in March, primarily due to a 10% year over year decline in US government RevPAR. RevPAR in The US and Canada region rose 2% year over year, which included a nice benefit from the timing of Easter. In 2024, the US government segment contributed around 4% of The US and Canada region’s room nights at an ADR that was 21% lower than the region’s average. To a lesser extent, we also experienced softness in select service and extended stay demand in The US in March, mainly driven by lower leisure transient demand given the less certain macro environment.

Notably, the uncertainty did not impact results at our higher chain scale hotels, and we did not see signs of trade down from our higher end customers during the quarter. While we do not have final results for April yet, it looks like year over year RevPAR excluding the impact of Easter in both months in The US and Canada improved sequentially from March to April. First quarter total gross fee revenues increased 5% year over year to $1,280,000,000 The increase reflects higher RevPAR, rooms growth, an 8% increase in co brand credit card fees, and a significant increase in residential branding fees related to the timing of unit sales. Currency had a negative $8,000,000 impact on first quarter gross fees, in line with our expectation. Incentive management fees, or IMF, fell 2% to $2.00 $4,000,000 in the first quarter, with roughly twothree earned by international hotels.

Increases in APAC were offset by declines in Greater China and in EMEA, partly due to a few properties converting from managed to franchised. IMF in The US and Canada were relatively in line with last year. First quarter G and A declined 6% year over year, primarily due to lower compensation costs. Adjusted EBITDA totaled $1,220,000,000 an increase of 7%. Now let’s talk about our outlook for the second quarter and the full year, which assumes the Citizen M transaction closes in the back half of the year.

Given today’s uncertain macro backdrop, we have limited visibility into the back half of the year. The updated view that we’re sharing today does not incorporate a recession. It reflects our current booking trends and assumes that broadly speaking, they continue. It’s important to remember that we have short average booking window of around three weeks for our transient customers, which represent around three quarters of our total room nights. So demand could, of course, change quickly.

Global RevPAR is now expected to increase 1.5% to 2.5% in the second quarter, which includes a negative impact from Easter in April and a 1.5% to 3.5% growth for the full year. Our update incorporates lower than previously anticipated RevPAR growth in The US and Canada region for the second through fourth quarters of the year. This is primarily due to an expected continuation of declines in U. S. Government demand.

It also assumes slightly slower growth from U. S. Select service hotels due to lower transient demand and marginally lower group growth. Internationally, demand trends in all regions except Greater China have remained strong and we have not changed our outlook for international RevPAR. Full year RevPAR growth is expected to be meaningfully stronger internationally than in The U.

S. And Canada, even with Greater China RevPAR still anticipated to be around flat compared to last year. On a global basis, looking at full year RevPAR growth by customer segment, though each segment’s expectations have softened slightly due to lower U. S. And Canada assumptions, we continue to expect the strongest growth in group.

For the full year, group was still pacing up 6% at the March, but as usual, could moderate a bit over the remainder of the year. This is followed by business transient, which could be up low single digits, and then leisure transient, which could be flat to up low single digits. In the second quarter, gross fee growth could be in the 3% to 4% range. Growth will be impacted by the timing of residential branding fees, which are expected to be down nearly 60% year over year. IMFs are expected to see slight declines, primarily

Tony Capilano, President and Chief Executive Officer, Marriott International: due

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: to renovations at certain properties in The US and Canada region. Adjusted EBITDA is expected to increase 3% to 5%. For the full year, we expect gross fees of 5,400,000,000.0 to $5,500,000,000 with IMF still expected to be relatively in line with last year. We still expect gross fee growth of around 5% at the midpoint, despite the midpoint of our full year RevPAR growth outlook coming down 50 basis points. This is primarily due to a less meaningful negative FX impact from a weakened dollar and a small fees contribution from Citizen M in the back half of the year.

Additionally, with two thirds of our IMS coming from international markets where there is often no owner’s priority and the change in our full year RevPAR expectation coming from US and Canada, as I noted, our IMF outlook is not changing. For the full year, co brand credit card fee growth is still expected to be a couple hundred basis credit points lower than the nearly 10% growth in 2024. Residential branding fees are still anticipated to decline nearly 50% solely due to the timing of unit sales, while timeshare fees are still expected to be around $110,000,000 Owned, leased, and other revenue net of expenses is still expected to total $345,000,000 to $355,000,000 relatively in line with twenty twenty four’s results, somewhat impacted by a larger number of renovations at our owned and leased hotels. 2025 gs and A expense is still anticipated to decline 810% to $965,000,000 to $985,000,000 This decline is the result of the expected 80,000,000 to $90,000,000 of above property savings from our enterprise wide initiative to enhance our effectiveness and efficiency across the company that is also expected to yield cost savings to our owners and franchisees. Full year adjusted EBITDA could increase between six percent and nine percent to roughly $5,300,000,000 to $5,400,000,000 Full year adjusted diluted EPS could total $9.82 to $10.19 We still anticipate EPS growth will be impacted by an expected effective tax rate of around 26% compared to under 25% in 2024, reflecting certain international tax rate changes.

Our underlying full year core cash tax rate is still anticipated to be in the low 20s percent range. Let me also share some sensitivities to help you with modeling. The sensitivity of a 1% change in full year 2025 US RevPAR versus 2024 could be around 35,000,000 to $40,000,000 of total RevPAR related fees. The impact of a 1% change in full year 2025 global RevPAR versus 2024, assuming equal changes across all hotels around the world, could be around 50,000,000 to 60,000,000 On the back of the Citizen M transaction, we now expect our 2025 net rooms growth to approach 5%. As we look ahead with our strong momentum in global signings, we still expect long term global net rooms growth in the mid single digit range.

Total investment spending is anticipated to be $1,360,000,000 to 1,460,000,000.00 with spending excluding the $355,000,000 for the Citizen M transaction still expected to total 1,000,000,000 to $1,100,000,000 Our capital allocation philosophy remains the same. We’re committed to our investment grade rating, investing in growth that is accretive to shareholder value, and then returning excess capital to shareholders through a combination of a modest cash dividend, which has risen meaningfully over time, and share repurchases. We’re pleased with the company’s strong first quarter cash flow performance and outlook. Given strong cash flow generation, we still expect full year capital returns to shareholders to be around 4,000,000,000 even after factoring in the $355,000,000 for the CitizenM transaction, while maintaining our leverage in the lower part of our net debt to EBITDA range of three to 3.5 times. Tony and I are now happy to take your questions.

Operator?

Conference Operator: Thank you very much. We’ll go first this morning to Michael Bellisario of Baird.

Analyst: Thanks. Good morning, everyone.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Good Just

Analyst: to start on the macro, can we just zoom in on the sort of weaker select service performance that you noted? I mean, how much of that do you think is regional versus the Easter shift impacting demand patterns? And then just more broadly, any more thoughts there would be helpful, especially in light of the fact that you said you’re not seeing any trade down effect.

Tony Capilano, President and Chief Executive Officer, Marriott International: Yeah, maybe I’ll make a couple of broad macro comments and then we might give you a little more granular response to your answer. We came out of the start of the year really strong. January and February were terrific. March, as Leanie mentioned in her prepared remarks, we saw a little bit of softness around the edges of The US and Canada. And it was as if, the travel community felt a little bit of shock and awe from the early days of the administration.

One of the things that’s encouraging to us, you heard Leeny talk about preliminary April results and if you normalize March and April by excluding the impact of Easter, you saw sequential improvement from March to April, which is encouraging. So the hope is and embedded in our assumptions is a bit of steady as she goes. Leaning mentioned, we’re not assuming a recession scenario. We expect to continue to see pretty solid demand on a global basis, a little more weakness in The U. S.

And Canada. And the 50 basis point reduction in guidance really is reflective of Leede’s comment, which is tougher visibility into the back half of the year given the relatively short booking window.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Yes. The only thing I’ll add is when you think about the impact of Easter, that ends up being almost kind of around two fifty basis points for the month or close to 1% for the quarter. And that’s really across all U. S. And Canada.

The other thing that’s interesting is that when you take March and April together, so you look at it 25 over ’24, which really then if you look at those months together, which negates the impact of Easter, you see RevPAR going up 1% in US and Canada. Obviously, has been higher. And the point that I want to kind of emphasize there is that we do believe March had some almost a bit of a one time impact from the shock of the government layoffs as well as a lot of tariff announcements, etcetera. And the sequential improvement that Tony talked about is something that we see continuing with the one caveat that we do believe that the biggest impact of our reduction in RevPAR in The US and Canada for the rest of the year is all about continued reduced government nights.

Analyst: Got it. That’s helpful. And then just one follow-up on CitizenM. What’s the owner’s commitment to build or convert more hotels for that brand? That’s all for me.

Thank you.

Analyst: Yes. I mean, I think

Tony Capilano, President and Chief Executive Officer, Marriott International: it’s less of a commitment and just really profound enthusiasm about the positioning of the brand. Among as we talked with the owners of CitizenM, the thing I believe they found so intriguing about this partnership is the ability to plug in to lean these extraordinarily strong network of developers around the world and really accelerate the growth of the platform the way they always envisioned.

Conference Operator: Thank you. Go next now to Shaun Kelley of Bank of America.

Analyst: Hi, good morning everyone. Tony or Leeny, maybe we could tackle the development side of the equation. Obviously, your comments, it looks like your activity in the quarter were very encouraging. But could you help us dig in a little bit, particularly on the full service side, just how are conversations like in The U. S.

Right now? What are some of the risks around just slippage with tariffs or kind of uncertainty? And how are developers sort of reacting to what we consider the run rate here in March and April once some of this uncertainty has kicked in a little bit? Thank you.

Tony Capilano, President and Chief Executive Officer, Marriott International: Sure. So again, maybe I’ll start at a high level and then let Leeny get more detail. Me, Sean, the most encouraging metric on growth that we shared was we signed more rooms in Q1 than in any Q1 in our history. So that in many ways reinforces a theme we’ve talked about the last number of quarters, which is the vast majority of our owner and franchisee community are long term investors in the sector, not necessarily getting spoofed by some of this short term turbulence. They believe in the long term opportunity and the long term demand trends in travel.

They’re excited, particularly here in The U. S. And Canada about a continuation of historically low additions to supply and what that means for them in terms of opportunities. They are to be sure a bit frustrated about the relative lack of availability and debt financing for new construction, But they are quite bullish on the long term.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: And a couple of comments for you, Sean. One is to reinforce what Tony was saying is that our signings were up very nicely in every continent around the world except for one. And that was solely because they had a very large multi unit deal a year ago in the first quarter. And so when you kind of look at year over year increases in signings that were over 30% compared to the year ago quarter, I think it continues to demonstrate the real momentum. We continue to have a view that conversions will be around 30%, and that has continued to be the case in signings.

And then kind of lastly, I’ll touch on your point about under construction, which is there’s no doubt that owners are evaluating what’s going on with their construction costs and how they’re thinking about kind of the elements of kind of raw materials, etc. But we haven’t seen the pace of construction starts drop. Are they still below twenty nineteen levels? Absolutely. Marriott had the most new construction starts in The US and Canada in 2024 in The US, and we’re pleased with what we see.

But there is no doubt, to your question, quite a bit of watching to see what looks to be the impact on construction costs. But for the moment, it’s steady as she goes in The US and Canada for new constructions.

Tony Capilano, President and Chief Executive Officer, Marriott International: And then Sean, maybe just one other statistic to further reinforce the confidence within our owner community. Generally, we’re seeing fallout from the pipeline pretty consistent with what we’ve seen historically. But interestingly in Q1 and to be sure one quarter doesn’t make a trend, but fallout was about half of our typical quarterly average. So the strength of the pipeline continues to be pretty encouraging.

Analyst: Thank you. And then maybe just as a very brief follow-up. But Tony, ’s some high level concerns out there about just sort of U. S. Brands operating in China, specifically given the specific trade tensions there.

Could you just kind of think about help us think about your positioning there? How do you kind of navigate that as a CEO? Just a few thoughts on that. And that’s it for me. Thank you.

Tony Capilano, President and Chief Executive Officer, Marriott International: Thank you, Sean. Yes. So we’ve talked about this a bit in the past. To me, one of the things that gives me a lot of confidence about the long term opportunity for China, which is in fact our second largest market. We really are woven into the economy there, almost the entirety of our 600 plus hotel operating portfolio, almost the entirety of our more than 400 hotel pipeline is Chinese owned.

The vast, vast majority of the associates working in those hotels are domestic Chinese associates. And so I don’t think there is a view in that market that we are just a big American company. I mean, is viewed in many ways as a Chinese business. The fact that the market is being so driven by domestic Chinese demand and the way that we’re performing there, think is reflective of the manner in which that domestic Chinese traveler has embraced our portfolio.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Thank you. Sure.

Conference Operator: Thank you. We’ll go next now to David Katz of Jefferies.

David Katz, Analyst, Jefferies: Hi, good morning. Thanks for taking my question.

Tony Capilano, President and Chief Executive Officer, Marriott International: Good morning.

David Katz, Analyst, Jefferies: Good morning. So I wanted to drill down just a bit on the NUG guidance, which is four to five inclusive of Citizen M and noting your commentary that it’s pushed toward the higher end, could you just talk through maybe the puts and takes of if Citizen M is adding 50 basis points, is there a reasonable thought that it could have risen to 4.5 to 5.5? And what, if anything, changed that may have altered the thinking there?

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Yeah, sure. No, I think it’s the reality, David, that we start at the beginning of the year with as wide a range as we do, given you’re at the very beginning of the year. It’s absolutely no other change to our view, except that we’re farther in the year, we’ve got greater visibility, and this is our best thinking at the moment that with Citizen M, we’re approaching 5%, so no change compared to a quarter ago.

David Katz, Analyst, Jefferies: Got it. And if I can ask one other quick follow-up with respect to the guidance. In going through it, a number of the metrics came down a very small amount, but the EPS remained the same. Is there anything to that other than just one quarter farther down the road with some buybacks? Or is there any other movement in there?

It looked like the tax rate’s the same, etcetera.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: No, I think as I talked about in my comments, we basically had, yes, a reduction in RevPAR, which obviously has its impact on fees, but we had several other items that basically helped get us back to that $10 midpoint for EPS. One of it is a little bit less FX impact, negative FX impact as the dollar has weakened a little bit. You do have a little bit of assumption of citizen and fees, assuming that the deal closes in the back half of the year. And then as I talked about on IMS, because we are not changing international RevPAR and those IMS really flowed through without the owner’s priority. The IMF picture for the company, even with the change in RevPAR, is not changing.

And so you put all those together, and as you know, a number of our other areas stay the same relative to owned and leased and G and A. And that frankly puts you right back at the $10 midpoint for EPS. EBITDA, that midpoint lowered ever so slightly by $10,000,000 and that is solely a function of a refinement of a couple add backs that we have in our EBITDA, one being reimbursed depreciation on reimbursed costs that impacted that. So again, overwhelmingly no change.

David Katz, Analyst, Jefferies: Understood. Thank you very much.

Conference Operator: Thank you. We’ll go next now to Steven Grambling of Morgan Stanley.

Steven Grambling, Analyst, Morgan Stanley: Hi, thanks. Maybe just to follow-up on the pipeline conversation. I think there’s been some questions around both fees per room over time as well as key money or the need to lend associated with development. I’d love to hear just how you think about the fee per room kind of trajectory that’s embedded within the pipeline and any capital support, whether it’s contract acquisition costs or otherwise and how you see that changing over time? Thanks.

Tony Capilano, President and Chief Executive Officer, Marriott International: Sure. Maybe I’ll take the key money one and you can take the fees per room. On the key money, to be sure, particularly given the growing importance of conversions across the industry, you are seeing incrementally more use of key money. It tends to be more frequently used in the upper quality tiers, luxury and upper upscale. Although occasionally we’ll see it come down a category or two, particularly for some of the larger customer urban deals.

As our system grows and grows meaningfully, not unreasonable to assume that the absolute amount of key money will go up. But interestingly in 2024, the average amount of key money per deal came down a bit. And so I think the takeaway from that should be, we continue to use the same rigor and discipline that we always have in evaluating when and if we should use some measure of Marriott balance sheet capacity to drive growth. And as we’ve talked about frequently, we tend to use Marriott capital in deals that drive disproportionately high fees.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: And on the fees per key, obviously the kind of the basics are first that fees per key are going to go up with RevPAR. So just to remind her that as RevPAR goes up, you’re going to get some natural growth there. Sure enough, our fees per key are increasing. I’ll also say that when you look at our overall pipeline, given we’re growing more internationally than we are in The US, and that is disproportionately full service, you’ve also got greater strength there supporting the continued growth in fees per key. Lastly, as you know, there are non RevPAR related fees, which also tend to grow a bit faster than RevPAR.

And you put that together, and I would say seeing fees per key continuing to grow, assuming the kind of RevPAR assumptions that we’ve given you would be our best estimate.

Steven Grambling, Analyst, Morgan Stanley: Super helpful. Maybe one other quick follow-up. Just on the co brand credit card. I’m curious if you saw anything in the spend on the co brand credit card that may suggest any kind of stocking up, more focus on goods or retail versus typical travel that may have occurred at any point during the quarter? Thanks.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: I think, and you’ve heard this I’m sure from the credit card companies as well, there continues to be, frankly from our perspective, a really positive continued interest in travel and a real prioritization of travel when people look at what they’re doing. Now there is a bit of a difference that we noted in our RevPAR, which is that leisure in the lower priced tiers was showing some signs of weaker demand. But in the credit card spend, I would say kind of nothing very meaningful or super obvious so far.

Tony Capilano, President and Chief Executive Officer, Marriott International: Great. Thanks so much. Thank you.

Conference Operator: We’ll go next now to Ari Klein of BMO Capital Markets.

Analyst: Thank you and good morning. Was hoping maybe you could talk a little bit about what you’re seeing with respect to inbound international travel to The US. And to the extent that is happening, other international markets benefiting?

Tony Capilano, President and Chief Executive Officer, Marriott International: Yeah, of course. So you know, the interesting thing, you look in aggregate, we’re actually about a point above where we were pre pandemic in 2019. About 20% of total room nights globally are from cross border guests. In The U. S, international room night mix in Q1 was about 6%, which was about 70 basis points higher than full year 2024.

Every month of Q1, including March, saw a higher international mix than the prior year. And to be sure, Canadian inbound was impacted. It was down about 5% in Q1, but strong inbound demand from other countries around the world more than made up for that decline.

Analyst: Thanks for that. Then just on the government, you mentioned some of the weakness you saw there in March, has that started to stabilize in April and any signs of weakness that government adjacent businesses, such as consultants?

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Yeah. So we have not don’t have all the details yet on April RevPAR. I think you certainly can expect that government continued to be down, but kind of as we entered the month, we weren’t seeing that it was starting to go down further, but it will take another month for that to kind of square away. And then as you think about the adjacent businesses, those depend a bit more on exactly which area they are serving. One interesting thing is that from the big consulting firms, which as you remember have been some of the biggest laggards relative to 2019, we saw some really nice pickup in their business, and obviously they have a very strong ADR as we came into Q1.

But again, when we think of generally the business travel that is related to government, that in The US would add one more percent of nights. So it’s not a really big part. The four percent that we describe in The US and Canada that is purely government related, that is the one where we were talking about RevPAR being down 10%.

Analyst: Thank you.

Conference Operator: We’ll go next now to Connor Cunningham of Melius Research.

Connor Cunningham, Analyst, Melius Research: Hi, everyone. Thank you. Just going back to group for a second. So you talked about the booking curve and how you have some limited visibility, but on group, it seems like you have a fair bit. So if you could just talk about how things have trended maybe into ’26, you’re are you seeing any hesitation there at all?

That would be helpful.

Tony Capilano, President and Chief Executive Officer, Marriott International: Thank you. Yeah, thanks for the question, Connor. So again, we’re a week into May, but if you look at the forward bookings into ’26 right now, definite change. We’re tracking it up about 7% for ’26 and reasonably well split between occupancy and average rates. About 4% up in rooms and about 3% up in ADR.

So as you heard in Leidy’s prepared remarks, right now we’re tracking up ’6 percent ’20 ’20 ’5, but up 7% into 26%.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: And the only thing I’ll note, when we talked about our RevPAR decline coming down overwhelmingly because of government, we did mention that there was an ever so slight impact from our expectations on growth for the rest of this year. And so if you look at where we were a quarter ago for U. S. Group pace compared to at the end of this quarter, it is ever so slightly down. So just barely down nowhere near a full percentage point.

So again, that was kind of built into our view of this lower RevPAR in US and Canada for the back half of the year.

Connor Cunningham, Analyst, Melius Research: Okay, that’s helpful. And then you’ve talked about stabilization into April. I’m just so let’s I know this is more of a hypothetical, but assuming that a broader market slowdown does occur, like, I mean, portfolio is obviously at a really good spot. You’ve talked about RevPAR holding up better than some of your peers. So I’m just trying to understand your priorities as you look at the portfolio in general, whether it’s through M and A conversions or anything like that.

Like, are there any areas in what you think you want to strengthen during a potential downturn? Just what were the priorities within that within that list? Thank you.

Tony Capilano, President and Chief Executive Officer, Marriott International: No, I think we want to continue to execute our growth strategy. It’s one of the both opportunities and challenges of being at nearly 150 countries. We’ve got very deliberate growth strategies. We intend to execute those growth strategies throughout the economic cycle. These are long term assets and we think about the stewardship and the management of these assets through a long term lens.

Okay. Thank you.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: You’re welcome.

Conference Operator: We’ll go next now to Patrick Scholes of Truist Securities.

Tony Capilano, President and Chief Executive Officer, Marriott International: Hi, good morning. Thank you. You had just mentioned the group pace tracking up 6%. I know that Ryman Gaylord had called out an uptick in attrition. Is that similar to what you’re seeing for your other brands?

And if so, where would you think that plus six actually settles out as far as actual revenue, assuming that there is attrition for your other brands? Thank you. Yeah, I mean, it’s early, Patrick, but right now, that’s not a trend we’re seeing across our broader group of state. Would that be an idiosyncratic issue to just the Ryman brand? Because I’m curious.

Thank you. Yeah, I mean, it’s a good question for Colin, obviously those are basically even hotels. They may behave slightly differently than the group portfolio more broadly, but we’re just not seeing it in the data at this point.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Just to give you an example, our group, 70% of our group is 100 people and over. So there is obviously very wide variations in the types of groups that are being held at our hotels. But again, broadly speaking, to the extent that we don’t have group end up where we are now at 6%, that is more because of in the year for the year booking timing, not because of attrition. As you know, every year as you move through the year, typically your group pace declines as you end up kind of filling in in the year for the year. So we don’t see that being a result of attrition.

Tony Capilano, President and Chief Executive Officer, Marriott International: Got you. Thank you. That makes sense. And I appreciate the color. Thank you.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Thanks, Patrick.

Conference Operator: We’ll go next now to Brant Montour of Barclays.

Analyst: Good morning everybody. Thanks for taking my question. Hi, how are you guys? I wanted to dig into conversions a little bit. You know, this is a segment that you know has had some counter cyclicality in the past historically.

Tony, you’ve been around this business for a long time and you’ve seen a couple cycles. Is the conversation that usually happens around increased conversions with your developers happening I. When things are slowing down, conversions pick up, that’s kind of the old adage. Are you starting to have those types of conversations or is it still a little too early for that?

Tony Capilano, President and Chief Executive Officer, Marriott International: Yes, I mean it’s an interesting question. We talk about it a lot. I’m actually quite bullish. As you point out, for the bulk of my career in development, you could almost set your watch by the cycles. In strong economic environments, you saw new build activity spike and you saw conversion volume start to recede a bit.

And then as you started to enter into an area of actual or perceived economic weakness, new build would start to slow and you’d see a big uptick in conversions. Eventually, we’ll see more and more availability of new construction debt. My expectation however is you won’t see the same sort of parallel slowdown in conversion. Why do I believe that? A few reasons.

I think number one, we continue to be at historical low levels of incremental new supply growth in The US. Number two, while we consider conversions across almost every brand in the portfolio, we have a subset of brands that are really well suited to conversions. You think about our soft brands, you think about Delta, They are really ideal for quick efficient conversions. Number three, Leeny and her team have done a terrific job of populating our development teams with resources who are specifically focused on conversions. And I even go a layer deeper, not just individual asset conversions, but portfolio conversions where we’ve had a really strong run that I expect to continue.

And lastly, would tell you the nimbleness of the organization and the creativity, not in terms of budging on quality or standards, but the speed with which we are evaluating and executing against conversions. I throw all of that into the blender together and it causes me to be really optimistic about conversion volume being more of a steady state as opposed to a cyclical component of our node story.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Yeah. And the only thing I’d add to that is the reality that we are seeing more and more comfort around the world with conversion. This was really a trend that started, as you pointed out earlier, in economic cycles really in The U. S. And then with both the addition of brands as well as the realization of the kind of the improved performance on the top and bottom line when hotels join the Bonvoy system, we are seeing just meaningful increases in the percentages of conversions across every continent.

And that leads to Tony’s confidence around this being more of a continued trend rather than purely the cycle.

Analyst: That’s super helpful. Thanks for that. And then just a follow-up question if we could just hone in on China development. Just hoping for a

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: couple

Analyst: stats. The percentage of pipeline that’s China, the percentage of pipeline under construction of your pipeline under construction that’s China and then just sort of, you know, the stats sorry, the starts in the quarter, how that if that grew year over year or quarter over quarter or however you can show it.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Sure. So from the perspective of Greater China, it’s currently 10% of our existing rooms and 18% of our pipeline. We had another spectacular quarter of signings in Greater China, another big increase over last year, which was already a really outstanding quarter a year ago. As we’ve talked about before, there too we are broadening our range across segments. And in China there’s been terrific interest in particular in our select service brands.

And that when you look at owners wanting to think about diversifying their risk across tiers and across cities, and frankly across kind of per hotel dollars that they, or R and D, that they need to put to work, select service has been a great place for them to disproportionately add investment. So we’re very pleased with what we see there. And again, expect for that to continue. When you think about under construction, remember that China has an interesting kind of mix of not only just being classic new builds and also classic complete conversion from an existing hotel, but they also have a fairly sizable category of adaptive reuse. The building’s use has not been entirely determined but built about halfway or two thirds before the owner makes a decision about exactly what the function of the building is going to be.

So while conversions in the entire company typically are only in the pipeline for maybe a year, These adaptive reuse ones, which are a good chunk of our signings, can be closer to eighteen to twenty two months that are in our pipeline. But again, just as palpable room additions as any other.

Analyst: Excellent. Thanks, everybody.

Tony Capilano, President and Chief Executive Officer, Marriott International: Thank you.

Conference Operator: We’ll go next now to Duane Pfennigwerth of Evercore ISI.

Duane Pfennigwerth, Analyst, Evercore ISI: Hey, thanks. Good morning. Good morning. On your segmentation commentary, which I thought was helpful, group leading followed by BT, followed by leisure, A big if here, but if the trade overhang moderates and if the clouds begin to part, what segment do you feel like has the most potential energy or said differently, the biggest chance for reacceleration this year?

Analyst: Yes. I mean,

Tony Capilano, President and Chief Executive Officer, Marriott International: so much of this is driven by consumer confidence. So to the extent the clouds part in the way that you described, you’d think that would drive consumer confidence, which historically has driven an uptick in leisure demand. And I think similarly, you hear most business leaders across sectors talking about the challenges of forward planning given uncertainty. To the extent some of that uncertainty starts to evaporate, that could similarly provide some upside and confidence in BT. And I hope you are a fortune teller, but to the extent that happens, that will be our expectation.

Duane Pfennigwerth, Analyst, Evercore ISI: Big if admittedly, but just for my follow-up, I wanted to ask you about the concept of trade down, High end chain scale outperformance continues to be just remarkably sticky. Are you surprised at all we’re not seeing trade down? And how do you think about this cycle differently than past cycles? Thanks for taking the questions.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Yeah, sure. Absolutely. So one of the things that I’ve been studying is just looking at changes in demographics. So just to give you a perspective, in 02/2004, ’20 ’2 percent of The US population was 55 and over. That’s now 30%.

And when you think about total US household net worth of being a view of it’s in the ballpark of $170,000,000,000,000 that has gone from 61% being 55 and over in kind of that percentage of household network held in that age group. That’s gone up to 73%. So I do think the reality of some of these demographics and desire for travel is helping to add a base of demand that is perhaps a bit different than in prior recessions. Now again, all this depends on the severity of the recession if it occurs. Currently, you’re looking at GDP growth in The US, let’s call it, in the ballpark of 1.5.

And from that standpoint, we haven’t seen the trade down as you described. So we’ll need to see where the economy goes.

Tony Capilano, President and Chief Executive Officer, Marriott International: And Duane, just to underscore that with some Q1 statistics that really, I think illustrates some of the demographic trends that Levy’s watching. In Q1 globally, the luxury tier had the strongest occupancy growth of any tier where we operate. Similarly, the luxury tier had the strongest percentage ADR growth of any tier where we operate. And we’re really not seeing trade down at least through the first quarter of

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: the year. And again, I’ll play a little cheerleader here. Luxury makes up 10% of our existing rooms. Certainly the leader there. Then we also have almost 10% in our pipeline, our luxury hotels around the world.

So a strong continually growing range of great experiences for our Bonvoy members to have.

Duane Pfennigwerth, Analyst, Evercore ISI: Thank you.

Conference Operator: We’ll go next now to Robin Farley of UBS.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International0: Great, thank you. Just trying to think about the change in rooms under construction year over year. And you mentioned in the release that you’re kind of defining it a little bit differently with the conversion rooms in there. Is there a way to think about rooms under construction either without conversions in either period or counting conversions like all conversions? Just try to think about a comparable metric year over year to think about rooms under construction.

Thanks.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Yeah, no, I think we again define it that way, which makes sense because you really think about what under construction means, which are the ones that you expect to actually open fairly soon. So we think that makes the most sense.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International0: Okay. Thanks. And then maybe just on the IMF fees, it sounds like no change in your expectation for U. S. And Canada fee payers.

Can you just kind of unpack for us a little bit? Sometimes you’ve shared metrics about kind of what percent of hotels in The US are fee paying and kind of how that may have changed year over year. I don’t know if higher wage costs are impacting The US businesses. It sounds like there was no change in your expectation for those fees, just a little color behind that. Thank you.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Sure. Yes, in Q1, ’60 percent of our hotels worldwide were paying incentive fees. That compares to 61% a year ago. However, to your point, in The U. S.

And Canada, it’s 21% in the first quarter of twenty five as compared to 20% a year ago. So it’s actually ever so slightly higher and that’s in the full service space. Actually both full service and limited service. They went up a percentage point compared to a year ago. Internationally, broadly speaking, it ranges but in Asia it’s probably towards the low 80s percent earning incentive fees, maybe a little bit lower in the rest of the world because some of those hotels do have owner’s priority constructs in their contracts.

I’d say internationally, roughly speaking, it’s 75% kind of for the entire international portfolio, while in The US, as I mentioned, it’s 21.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International0: Okay. And I guess with the strength in luxury and full service, that’s actually where most of your fees would be coming from. And that’s the part that’s holding up, it sounds like.

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Actually, mean, fees coming strongly both from premium and luxury.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International0: Okay, great. Thank you.

Tony Capilano, President and Chief Executive Officer, Marriott International: Thanks, Robin.

Conference Operator: We’ll go next now to Lizzie Dove of Goldman Sachs.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International1: Hi there. Thanks for taking the question. You’ve been undergoing your digital transformation strategy the past couple of years. Curious if we could just get like a status update there, where you’re at with the rollout, when that might start to kind of hit, and how meaningful those benefits can be.

Tony Capilano, President and Chief Executive Officer, Marriott International: Yeah, of course. So we are making terrific progress led by Drew Pinto and his team. We are deep in testing as we speak. We expect to start rolling out to subpar select brands hotels in the back half of this year. And are really bullish as we’ve talked about in the prepared remarks about the impact we expect this is going to have on almost every facet of our business.

I think I was down in Nashville A Week ago with 5,000 of our select brand GMs. And it was the first time the team really let them touch and feel some prototypes of what these systems are going to look like. The enthusiasm was extraordinary. Enthusiasm about the efficiency it will bring to their operations. Enthusiasm about the advantages it will create in their ability to recruit especially next gen talent and enthusiasm about in the premium and luxury tiers, the opportunities that the new risk system will create to merchandise the breadth of services and products that our Bonvoy members want to purchase from us.

So both feet ahead is the short answer.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International1: Great. Then just to switch gears for a second on the non RevPAR side. Obviously you’ve mentioned in the past there’s a little bit of pressure there this year, mainly from the timing of the residential side. Maybe too early to ask, but are you expecting that to rebound in 2026 to some degree?

Leeny Oberg, Chief Financial Officer and Executive Vice President, Development, Marriott International: Yes, absolutely. It’s one of the things that Jackie and Valar can take you through. That business is growing incredibly well. Very pleased with the continued growth in signings that we have in residential around the world. But they are lumpy.

And as you saw in Q1, we had a couple developments that closed in the quarter and you have a bit of a waterfall of the fees. And then it depends on when the next under construction residential project is completed. And so yes, you absolutely should expect to see that number over time go up. We’ve talked about this year, just given the way the projects are closing, that we expect that number to be down almost $40,000,000 compared to a year ago. But again, broadly, over time, absolutely growing.

Jackie McConaughey, Senior Vice President of Investor Relations, Marriott International1: Great. Thank you.

Conference Operator: Thank you. And ladies and gentlemen, that is all the time we have for questions this morning. At this time, I’ll turn things back over to Tony for any closing comments.

Tony Capilano, President and Chief Executive Officer, Marriott International: Great. Well, as always, thank you for your continued interest in Marriott. Thanks for a great set of questions this morning and notwithstanding Leeny’s comments about a short booking window. Marriott.com, start booking Memorial Day and your summer travel, and we look forward to welcoming you around the world. Have a great day.

Conference Operator: Thank you. Again, ladies and gentlemen, that will conclude the Marriott International first quarter twenty twenty five earnings conference call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.

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