Marriott at Morgan Stanley Conference: Growth Amid Uncertainty

On Tuesday, June 3, 2025, Marriott International (NASDAQ:MAR) presented at the Morgan Stanley 3rd Annual Travel & Leisure Conference 2025. Tony Capuano, President and CEO, outlined Marriott’s strategic initiatives and industry outlook. The company expressed cautious optimism about demand, while also acknowledging short booking windows as a challenge. Marriott highlighted its focus on leveraging its Bonvoy platform and strategic partnerships to drive growth.

Key Takeaways

• Marriott reported a global RevPAR increase of over 4% in Q1, with international growth leading at over 6%.
• The company achieved record deal signings and room development in 2024, with Q1 2025 marking the highest development volume in its history.
• Marriott is investing in AI to enhance customer engagement and anticipates $80 to $90 million in net administrative savings.
• The company aims for a 5.5% net unit growth over the next three years, focusing on luxury and upper upscale segments.
• Strategic partnerships, such as the integration of MGM, are expected to influence growth and development timelines.

Financial Results

• Q1 Global RevPAR: Up over 4%, with US & Canada up over 3% and international up over 6%.
• April RevPAR: Global up over 2% (closer to 3% when adjusted for holiday timing), international up 9%, and US & Canada down slightly less than 1% (up about 2% adjusted for Easter).
• Development Milestones: Record-setting deal production in 2024 and highest Q1 development volume in 2025.

Operational Updates

• Group Segment: Q1 Group RevPAR increased by 8%, with a focus on collaboration with corporate and association meeting planners.
• Transient Segment: Noted a booking window of less than three weeks, utilizing promotions through the Bonvoy platform.
• Brand Portfolio Expansion: StudioRes opened its first new build in Fort Myers, Florida, while conversion-friendly brands like Tribute and Autograph are emphasized.

Technology Initiatives

• AI Deployment: Marriott is using AI in customer engagement centers and running an AI incubator to test applications.
• New PMS System: Reduced front desk agent training from 40 hours to 2 hours, enhancing operational efficiency.
• Partnerships: Seamless integration with Uber and Starbucks enhances guest experiences.

Future Outlook

• Net Unit Growth: Targeting a 5.5% CAGR over the next three years, with a pipeline comprising 38% luxury and upper upscale rooms.
• Conversion Strategy: Expect conversions to remain robust, even in a strong economy, with many bypassing the pipeline due to rapid integration.
• Technology Rollout: New platforms to be tested in a unique Antarctic hotel, with broader rollout in select brands later this year.

Q&A Highlights

• Net Unit Growth Concerns: Addressed potential revenue growth impacts, emphasizing the value of luxury and upper upscale segments.
• AI Impact: AI is anticipated to enhance direct bookings and challenge the relevance of OTAs.
• System Fund Transformation: On track with technology upgrades, including a new platform for booking various hotel services.

In conclusion, Marriott’s strategic focus on technology and partnerships positions it for growth despite industry challenges. For further insights, refer to the full transcript below.

Full transcript - Morgan Stanley 3rd Annual Travel & Leisure Conference 2025:

Unidentified speaker, Interviewer: Ready when you are. Well, we’re we’re rolling right along here. The world’s largest vacation ownership business to Tony Capuana, president and CEO of Marriott, the world’s largest hotel company. Tony, thanks for being here. Of course.

I’m gonna start off with one of the the four questions that we’re trying to ask everybody. They might be the topic that you’re a little bit for the fireside chat, but, that’s really on demand. So Yeah. I’d love to just hear what’s your latest read on industry demand and as you as you look over the longer term, maybe put

Tony Capuano, President and CEO, Marriott: that into context. So, in q one earnings, we talked about global RevPAR being up a little over 4%. It was a little over 3% in our largest market, US and Canada, up over 6% internationally. Might be the the q one earnings call where I talked about April the most, just because January, February were very strong. We saw the the demand side take a little bit of pause in March as they tried to wrap their heads around the sort of macro state of play.

But April looked pretty good. We, on a global basis, we saw RevPAR up in April a little over 2%. If you adjust for some of the holiday timing, it was up closer to 3%. International, with the benefit of the shifting holiday, was actually up 9% in April, and US and Canada was down a little less than a point. But if you adjust for Easter timing, we were up about two.

So it it feels like that that bit of shock we saw in March is stabilizing a little bit. But the challenge is really the booking window today. So for group, where we have more medium term visibility, group was the bright shining segment in q one. We were up 8%. Both, leisure and business transient were up two in the quarter.

But the transient booking window is sub three weeks. So I think we’re feeling cautiously optimistic. And the one caveat to that feeling is how quickly that that, can change given the shortness of the booking window. When you talk with our operators, I think generally they’re optimistic. They just their uneasiness to the extent they have it is because they’re you know, the booking is happening so late.

And I think that reflects a little bit of of uncertainty in the consumer’s mind. So I I so just to make sure I understand that. Yep.

Unidentified speaker, Interviewer: Yeah. Totally. It sounds like the longer duration bookings, maybe there was a bit of a pause, but then the close in is stronger.

Tony Capuano, President and CEO, Marriott: No. I mean, group, you know, books out quite a bit, and so that’s where we have the most medium term visibility.

Unidentified speaker, Interviewer: Got it.

Tony Capuano, President and CEO, Marriott: On the two transient segments, it’s just a really short booking window. Right. So we’re encouraged by what we saw in April. We don’t have May numbers yet. We have some preliminary numbers that look like we’re sort of right on our expectations, maybe a little, to the upside on those numbers, when the the dust finally settles.

But we’ll have to look at it month to month because of the shortness of the booking.

Unidentified speaker, Interviewer: If if we zoom out from the macro and just think about some of tools at your disposal, what are some of things that you’re doing to try to drive demand or drive the business longer term?

Tony Capuano, President and CEO, Marriott: Yes. So on group, I think it’s really about working so closely with both corporate and association meeting planners on dates and space. I was in San Francisco last week this week, with about 200 association travel managers. And the the most consistent refrain we heard from them is won’t you let us book even further out? Because as the size of these associations grow, there is a a subset of hotels that can accommodate those groups, and they’re feeling a bit frustrated about dates and space, which is a nice problem for us to have.

But we continue to feel good about group pace. On the transient side, lots of of promotions and highlighting of destinations through the Bonvoy platform, you know, looking working with our continent leadership on limited time offers to try to fill in gaps in in demand.

Unidentified speaker, Interviewer: So you you referenced space and space. I wanna get to space because that might be a big big topic in terms of development. Before we do, one of the other areas that I think has been under a little bit of pressure has been mid scale RevPAR, especially in The US. What’s going on there? What’s your assessment of that situation?

And could that impact development in the limited service space?

Tony Capuano, President and CEO, Marriott: Yeah. So there’s a lot in there. Let me try and tackle it. The we just got into the mid scale space, so it’s a little early to give you really strong trends. Studio res, which we talked about our extended stay mid scale platform actually opened their first new build hotel yesterday Wow.

Down in Fort Myers, Florida. I think the the lower ends of the chain scale are seeing a little more headwind, but more so in pricing. I mean, demand feels okay in that space. I think the lower income households continue to prioritize travel, but they’ve got some some economic personal economic headwinds they’re trying to navigate.

Unidentified speaker, Interviewer: Makes sense. The other area that I think has had some question marks is international, from the airlines, which I think are gonna be coming up next. Maybe remind us how much of your overall demand comes from, broadly speaking, international, inbound, outbound, and how much that’s coming into The US versus US going out?

Tony Capuano, President and CEO, Marriott: Yes. So on a global basis, we actually are ahead of where we were pre pandemic. Twenty twenty one percent of total global room nights are represented by cross border travel. In The US, as you would expect in q one, we saw inbound from Canada down about 5%. But overall inbound international inbound to The US, was exactly where we expected it to be, which would suggest any fall off we saw coming in from Canada was more than offset by, inbound from other international destinations.

Unidentified speaker, Interviewer: Right. I imagine people may even be switching where their trips are going, maybe strength in Canada, you know, staying locally or things like that. Great. So maybe let’s shift to development, which I think the big question that I hear from investors is why would somebody wanna build a hotel today? Usually, it’s because of concerns around borrowing costs and or just broader inflation.

So, you know, what’s the Marriott pitch? How is that resonating? How is that gonna be changed?

Tony Capuano, President and CEO, Marriott: Yeah. So maybe I’ll start with the second question. How is it resonating? The good news is our, loyal group of owners and franchisees around the world. They understand the cyclicality of the industry where they’re investing.

They are typically investing with a very long term horizon. These are assets with decades long useful life, and they tend to look at those investments through that lens. Notwithstanding some of the the instability from a macro perspective, notwithstanding some of the economic headwinds, we signed more deals and rooms in 2024 than in any year in our ninety eight year history. Q one of twenty five in terms of development volume was the highest q one we’ve had in ninety eight years. And so what that would suggest is, while your question is a fair one, why invest in hotels?

It would be a more relevant question to somebody that was sort of jumping in and out of real estate sectors trying to time the market. For those who are investing long term in in the sector, they fundamentally believe that are voting with their development budgets in a long term belief in travel and tourism.

Unidentified speaker, Interviewer: How does that optimism or that commitment check, you know, differ by region or by chain scales?

Tony Capuano, President and CEO, Marriott: Yeah. So, not much by region, to be honest. From a pure kinda operating business perspective, RevPAR perspective, the softest market we see right now is Greater China. And those record volumes of deal production that I talked about occurred in Greater China as well. And so, again, that development community appears to have that same long term perspective and long term confidence in in the prospects for travel demand.

Across chain scales, some of that is is really by region and and impacted heavily by the the necessity of conventional financing. So if you go to many of the markets in Asia Pacific, many of the markets in in The Middle East, where those developers are not seeking traditional debt financing, we see, growth across the chain scales including strong luxury growth. In a market like The US where most of the projects do in fact require conventional financing, if you’re an optimist, you look and you say thank goodness that the strength of our brands and the track record of our development partners is allowing us to capture a disproportionate share of the new construction debt financing that’s out there. The problem is it’s not flowing as freely as we would like, and so there’s still a bit of constriction there.

Unidentified speaker, Interviewer: Makes sense. Seems like every brand is also describing an emphasis or a focus on growing conversions. Are there competitive advantages to think about that are different for conversions versus new development?

Tony Capuano, President and CEO, Marriott: Yes so a few things I I can only speak to to how I think about our positioning to capture conversions which the last number of quarters have represented 30 to 40% of both signings and openings for us. Why are we having such good traction? I would say, number one, we have a really compelling stack of conversion friendly brands across quality tiers. To be sure, we do conversions across most of the brands in the portfolio, but there are some think about the soft brands like Tribute and Autograph and Luxury Collection. Think about Delta.

Think about Four Points Flex. These are brands that are ideally suited for conversions. Number two, I think we have sharpened our focus and our approach around conversions to be very owner friendly in terms of the speed with which we can respond, in terms of the the practicality and pragmatism that we bring to PIPs and timing of renovations and the like. And in selected instances, our willingness to be creative with some tools like what we call white label. So a decade or longer ago, you would have come to me with a conversion for, Saint Regis.

And I would have said, great. In two years, when you’ve completed your renovation

Unidentified speaker, Interviewer: Yeah.

Tony Capuano, President and CEO, Marriott: We’ll put it in the system. In select instances, we might say, let’s plug you into the reservation system now as the Steven, not as a, Saint Regis, and then we’ll flip it in Yeah. Once that conversion is done. So I think you throw all of that into the the blender. I I I mean, you know, I was in development for most of my career.

I’ve never seen us better positioned to take advantage of the opportunities and conversions. And the other thing I would say to you, I used to think what a terrific business we had. In strong economic times, you would see recessions stay or, conversions fade into the background and a big uptick in new build. Then when you started to see some economic weight weakness from macro perspective Right. You’d see a slowdown in new build and a spike in conversions.

I actually think that all the factors that I described, even when the economy is booming, I don’t anticipate a a pullback in conversions. I think that is gonna be a strong and consistent part of our growth story going forward.

Unidentified speaker, Interviewer: And and from a financial standpoint, our conversions just as attractive in terms of whether it’s heat room, free cash flow per room, or even as we think about the duration of these contracts.

Tony Capuano, President and CEO, Marriott: Yeah. I don’t think they have to be meaningfully different, than a new build other than you’re generating those fees much more quickly.

Unidentified speaker, Interviewer: Right. Okay. The other thing that we’ve heard, in terms of development, but it’s more distribution in some ways is these partnership and licensing deals. Yeah. MGM’s talking about the success of that deal and still opportunity to grow it.

So what are some of the key learnings from that? And are there more opportunities for these types of deals? And maybe it’s not specifically, you know, casino business, but

Tony Capuano, President and CEO, Marriott: as well, you and I have had a chance to talk about this a little bit. The expectation of the folks in this room is the vast vast majority of the rooms that we add to the system in the coming quarters and the coming years will be conventional management and franchise agreements. Now to be sure, we’re doing a lot of we’re making a lot of great progress on portfolio conversions, but those as well will continue to be standard terms and the sort of fees you’ve become accustomed to. MGM in many ways was a unicorn, and thank goodness we found that unicorn. The opportunity to bring the world’s largest lodging company, the world’s largest gaming company together in a unique partnership is something I’d love to do.

I would do a thousand out of a thousand times. I don’t think there are hundreds of those sorts of opportunities. And and when you think about the way we structured the transaction, it had to reflect the the strength and the value that both of those brands brought to the relationship. If we saw another unicorn out there, would certainly get excited about exploring whether we could make something work. But I think that’ll be in the small minority of the types of transactions we do in the future.

Unidentified speaker, Interviewer: Sticking with the development but there’s a perennial question are there any areas that you think or markets that are at saturation or what are the most attractive markets. To continue to develop?

Tony Capuano, President and CEO, Marriott: Yeah. The, in some ways, always I worry that that’s the question our partners ask. And the reason I say that, if we’re doing our job well partner. Yes. Yes.

If we’re doing our job well, their question should not be what market share of the room inventory does Marriott have in a given market. It should be how much demand is coming out of your revenue engines and your loyalty platform. From a macro perspective, our market share in our biggest market, The US and Canada, is plus or minus high teens, low twenties. Outside The United States and Canada, it’s in the low single digits. So in terms of decades long runway, I think there’s there’s a longer runway outside The US, but The US will continue to be a really significant contributor.

And if you look at our global pipeline of, you know, approaching 600,000 rooms, 55 of that is international, but embedded in that statistics, 45% is still domestic. Is there any limiting factors when you look at different markets in terms of how they’re structured or otherwise? And

Unidentified speaker, Interviewer: the witness too much, but yesterday, we had a panel where I won’t say who it was. The company said you had the opportunity. Marriott specifically has an opportunity opportunity to hoover up hotels in Europe. So I’m curious if there’s things that

Tony Capuano, President and CEO, Marriott: Yeah. I mean, certainly, when you look at the way we’ve thought about constructing our brand architecture, we continue to identify platforms that can be used to bring in whether they are individual asset conversions or portfolio conversions. Are you saw that we announced series just a week or so ago. And that platform was led by a terrific portfolio conversion. In Asia Pacific.

4 points flex and what we’re doing there, certainly represents a meaningful opportunity for growth for us, in many markets, but Europe in particular.

Unidentified speaker, Interviewer: Great. One of your recent acquisitions, CitizenM, maybe for those less familiar, give us a sense for what differentiates CitizenM’s in house experience and properties and that made that successful. Then why is it then gonna be even more successful with Yeah.

Tony Capuano, President and CEO, Marriott: So a couple things. In terms of where it fits in our brand architecture, we really like the positioning between Moxie and AC, whereas and and there are, to be sure, some similarities in physical product between Moxie and AC. I think if I had in colloquial terms to describe how they’re distinctly positioned, Moxie is edgier, a lot of fun, a little, irreverent in terms of its design aesthetic. CitizenM is much more design forward, much more sort of business focused, maybe accomplishment focused, and very tech forward. On on the long list of attributes of that brand and that transaction that got us excited, there are some things they do from a technology perspective really well.

The kiosk check-in that they’ve done is as good as I’ve seen in our industry. Many of us have struggled to check into a room with some sort of keypad to control everything, and either it’s broken or you can’t figure out how to make it work. They’ve got a very elegant, very simple solution that works quite well. And maybe the other the more macro, comment I would make. It’s not particularly pioneering for us.

We have a a pretty strong track record of identifying particularly in the lifestyle space, select brand platforms that we think we can scale. AC would probably be the best example of that. We acquired AC, which was largely a Spanish chain in 2011, so fourteen years ago. And if you look at the way we’ve grown that platform, just coincidentally, we’ve grown it at a CAGR of about 14% since acquisition in 2011.

Unidentified speaker, Interviewer: So you touched on this a little bit, but what what drives that decision to buy versus build? And maybe why is this environment different than history? Because it sounds like conversion opportunities and development opportunities, where’s that

Tony Capuano, President and CEO, Marriott: You talk from Marriott’s perspective. Yeah. So different companies have different approaches. When I have the benefit of looking back over a decade or two, we’ve not been perfect, but I love the balance we’ve struck between developing organic growth platforms like Autograph, like Moxie, and blending that all the way back to the days of acquiring powerhouse brands like Residence Inn, Ritz Carlton, I mentioned AC. And so what drives that?

Some of it is about just being opportunistic. Right? You don’t have the luxury of an acquisition sitting idly by and available until it’s convenient with your schedule. If you see something that you think, represents a regional or a glow global growth platform. Yep.

If you think it will allow you to accelerate your geographic footprint in a market where you are not satisfied with your pace of organic growth, I think Prodia Hotels, AC Hotels both fit the bill there. Or if you just think there’s a really strategic opportunity and you wanna move quickly, to get into that space and and fill out a gap in your brand architecture.

Unidentified speaker, Interviewer: One of the questions we’re asking everybody is really around AI. Mhmm. You talked about technology being a piece of the CitizenM acquisition. How are you thinking about AI for your business? Is that a top line opportunity?

Bottom line?

Tony Capuano, President and CEO, Marriott: Yes. Is the short answer. I mean, I think, so I’m gonna ramble a little bit. I think number one, when we think about all facets of technology, certainly AI, there will be margin enhancement to be sure and efficiencies that come out of effective deployment of technology. But for our for Marriott and for the sector more broadly, a lot of it, we look at technology as a creator of capacity for our associates.

Every minute that they’re not spending, on older technology where tasks are automated creates capacity for them to better engage our guests. How are we doing it? We’ve been using AI for a while. If you think about our our, customer engagement centers, for instance, where folks are calling in for assistance in navigating the portfolio, Given the breadth of our global footprint, AI is a critical enabler of those sorts of conversations. We also have an, we’ve stood up an AI incubator that’s running dozens of test cases on where we can incorporate that sort of technology into both the property level and the above property level.

And again, I think on the top line, to the extent we have more capacity from our folks to help plan the entirety of the trip and sell not only rooms, but food and beverage, spa, golf, retail, residential, there’s a meaningful upside on the revenue side. And on the margin side, again, I think it is, sort of embedded in the idea of advancing technology that we can find operating efficiencies.

Unidentified speaker, Interviewer: I’ll I’ll maybe sticking with margins. Yeah. Generally speaking, how should investors be thinking about your margin progression from here? What are the not only for maybe Marriott Mhmm. As a business, but also your owners.

Yep.

Tony Capuano, President and CEO, Marriott: So I’m gonna go in reverse order because we spend a lot of time thinking about our owner economics. The reality is, you know, us knock on wood, assuming things are good, we’ll have another extraordinarily strong EBITDA year for the company. We spend about one second celebrating that and quickly pivot to the economics of our owners and franchisees. Because the reality is they are at a different stage of their recovery. And so everything that we focus on is how can we drive incremental top line and how can we find additional opportunities for margin improvement.

You know that we lowered out on a global basis the charge out rate for the Envoy, which was a direct positive impact to margins for all 9,500 of our hotels. We continue you know, the technology question is a great one in terms of how can we leverage our industry leading scale to find technology advantages that will drive hotel level margins. And we wake up every day looking at affiliation costs to identify whether there are other opportunities beyond what we did with Bonvoy charge out to try and have a direct impact on owner margins. At the corporate level, we obviously are seeing the benefit, and Leeney provided an update on the q one call to the impact of some of the work we did last year. And through q one, are certainly on track to deliver the 80 to $90,000,000 in net admin savings.

While that exercise was completed, that philosophical approach to operating our business is embedded in the leadership of the company, which is we should wake up every day trying to figure out if there are more effective, more efficient ways for us to operate at an above property level.

Unidentified speaker, Interviewer: Right. We still have some time left if people have questions in the audience. Got a couple out there over the past day, but people have been shy. Up here in the front, we’ve got one.

Unidentified speaker, Audience Member: Thanks. How how do we think about the the 5%, net unit growth contribution to fees over the next two years? Could the revenue growth be less than 5% because of the pipeline skew to low RevPAR chain scales and geographies?

Tony Capuano, President and CEO, Marriott: Yeah. I’m glad you asked the question because I I think some of the the activity we’ve done in mid scale is commanding a lot of headlines, which is terrific. But if you actually look at the composition of the pipeline at the end of q ’1, ’30 ’8 percent of the rooms in that pipeline are in the two highest chain scales, luxury and upper upscale. So I would submit to you that actually in terms of how that net unit growth translates into fees, we feel pretty good given our strong concentration in the most valid valuable quality tiers.

Unidentified speaker, Interviewer: Yeah. One in the back over here.

Unidentified speaker, Audience Member: Thanks very much. Going back to the AI conversation, I’m curious. Do you think there’s a greater ability for you to have more direct bookings as as we kinda move forward and we see more AI agents, or do you think the relevancy of the OTAs like a Booking and Expedia stays really strong because they aggregate all the supply?

Tony Capuano, President and CEO, Marriott: That’s a great question. So I mentioned I was in San Francisco, earlier this week with a bunch of our association customers. I took advantage of being out there and and, spent a couple days with, many of the the most important players in the AI space. So I might defer to their point of view as opposed to share my own opinion. I think they are of a view that given the amount of focus that the travel space is getting from leaders in technology, that it will challenge the OTAs to stay as relevant as they’ve been in recent history.

Unidentified speaker, Interviewer: I’m gonna stick with, could be technology, might be marketing, but, you know, I often describe the system fund in the industry as being like the Rodney Dangerfield of the the p and l of these companies. They just don’t get any respect. But it’s a current critical component of your competitive advantage. I think you mentioned lowering the charge out rate is one example of where you can affect change. What where are you in the transformation project, computer technology transformation project, timing and spend?

And then also, what are some of the, you know, changes that owners can expect

Tony Capuano, President and CEO, Marriott: from that? So in terms of where we are, we are generally right on track with what we had planned. We are actually, testing all of our new platforms in a hotel that doesn’t exist in Antarctica. So that is up and running, and, we’re testing out to make sure everything’s working. So far so good.

And assuming that test continues to go well Stress testing. Yes. So we will start to roll out, many of those systems in our select brand portfolio later this year. So on track in terms of our schedule. In terms of the the potential benefit, again, it goes back to your earlier question about both the revenue and the expense side of the equation.

On the expense side of the equation, having state of the art efficient operating systems, I think, our owners are particularly excited about that. I’ll give you one small example that illustrates. If I hired one of you to be a front desk agent in one of our hotels today to learn the current Marsha system is a forty hour training. Right?

Unidentified speaker, Interviewer: Is it staying Marsha or would

Tony Capuano, President and CEO, Marriott: we renew acronym? I’m sure we’ll have a new acronym. There’s a whole department of people doing acronyms. If I hired you to be trained as a front desk agent on the new PMS system, it’s a two hour training. And so embedded in the rollout of this technology, there are lots of opportunities for margin enhancement.

The piece that gets talked about less, I think, is the revenue enhancement opportunity. And if you go to m.com today, it is a very efficient system to book a hotel room. But when you think of the breadth of products and services that we make available to our members and our guests, it is not particularly easy to take advantage of that on today’s platform. On the future platform, consumers who have been trained by Amazon to shop in multiple storefronts and drop each of those purchases into a single basket, that’s a good way to think about how the new reservation system will work. So the ability not just to book a room, but to book restaurant reservations, to book spa treatments, to book golf tee times, to buy the the addition candle and the Ritz Carlton bedding, all will be available on that platform.

And we think that generates a very significant upside opportunity for our owners.

Unidentified speaker, Interviewer: And I had asked a question about partnerships, earlier, which was more on the distribution side. But there are then that that unlock partnerships that are the broader ecosystem.

Tony Capuano, President and CEO, Marriott: Yeah. I mean, I think that maybe it just eases access. Right? We have terrific bond point partnerships with partners like Uber and Starbucks, and we continue to explore opportunities for other partnerships. But I just think it makes a more seamless access to the benefits of those partnerships.

Unidentified speaker, Interviewer: Right. And since the question was asked about the 5% room growth and how that translates, maybe you can just step back and remind us what the longer term algorithm looks like as we think about the building blocks of RevPAR, net unit growth, other fees, or Yeah.

Tony Capuano, President and CEO, Marriott: Etcetera. So, let me just talk about net unit growth You’ll recall from our investor day, we indicated during that discussion that at least for our internal purposes, we tend to look at a multi year CAGR as a more relevant statistic around nug as opposed to a single window in time. And I think the last time you and I spoke, we talked about the fact that in some ways, the timing of the integration of MGM into our system was a perfect illustration of that fact. It was meant to come in in the January year for a variety of reasons that slipped into the second year.

If you were only looking at one of those years individually, you might have a misconception of the pace of the the company’s system. We talked at that meeting about having a target or or an expectation of five and a half percent net unit growth over that three year period. And as we get closer and closer to the end of that three year period, we feel more and more comfortable in our ability to deliver that five and

Unidentified speaker, Interviewer: a half percent. And I guess you you you mentioned this, a little bit on the development side then. How has the the time to opening then changed? I realized that Marriott or, MGM, that moved around a little bit in terms of maybe integrating it, but have hotel has hotel development extended the window in terms of when you go to

Tony Capuano, President and CEO, Marriott: the site? A good question. On new build, for a while, we’ve seen quarter over quarter pretty, consistent lengthening of the development cycle. I’ll defer to Jackie here, but I think that’s sort of stabilized and maybe even receded a month or two. So we’re we’re in a little more normal timeline, from kinda signing to opening on new build.

Conversions are much more fluid because each of them are unique. And one of the things you’ve heard Leeny and I talked about on the earnings call, it’s a great problem to have, but many conversions never make it into the pipeline. Right? Because they get signed and open into the system and generating fees, you know, in the quarter for the quarter. Do we do

Unidentified speaker, Interviewer: we know what percentage that typically is of your total conversions? 20% of the conversions, are 30% of

Tony Capuano, President and CEO, Marriott: 30 to 40. Yeah.

Unidentified speaker, Interviewer: 30 to 40% now.

Tony Capuano, President and CEO, Marriott: Never make it into the pipeline. Opening the corner.

Unidentified speaker, Interviewer: Which is great. And one other follow-up on on the question about fees per room. Just remind us, you you said there’s the higher fees per room for the higher end hotels, but also what what’s the dynamic for more international as we think about it? Think that more of those would be managed and franchised. So

Tony Capuano, President and CEO, Marriott: Yes. So in most of Asia, we have a much higher percentage managed. Remember, in many of those deals, however, the IMF does not have an owner stand aside. Right? So we are participating in the profits of the hotel from day one.

In The Middle East, we are disproportionately managed, but seeing a steady growth in the percentage of business that is franchised. Europe used to to mirror that. You’re seeing a a fairly significant shift towards the franchise side across Europe. Great. One other one on

Unidentified speaker, Interviewer: the demand side since there was some volatility in the beginning of the year. What are you typically looking out for to assess whether you would see a sharper, you know, pullback? And what does that pullback playbook look like for the management? Yeah.

Tony Capuano, President and CEO, Marriott: I think we look at the same leading indicators that all of you do. We watch GDP closely. We watch unemployment statistics. We are very focused every quarter watching quarterly earnings across sectors, particularly for those sectors that are big generators of demand. Unfortunately, as I mentioned, all of us gladly and willingly chose careers in a sector that is cyclical.

So we have a well tuned playbook. If we see ourselves go into a meaningful economic slowdown of where we can pull back to to ensure, we’re driving shareholder value. But it is quite interesting to me. The, Jackie and I were talking about this earlier today. Think it was a month or two ago that it was published that The US hit a fifty two year low in consumer confidence.

Unidentified speaker, Interviewer: Mhmm.

Tony Capuano, President and CEO, Marriott: And if you and I had been sitting here a year ago and you had said to me, imagine a circumstance where your biggest market gets to a 50 tier two year low in consumer confidence. How do you think about RevPAR? I’m fair I don’t know what my answer would have been. I’m fairly certain it wouldn’t have been north of 4% RevPAR growth. And so one of the takeaways from our perspective, we talk often about the shift in consumer spending patterns.

Pre pandemic, you had younger demographics already prior to prioritizing travel and experiences in how they deployed their disposable income. When we look at the credit card spending data today, that phenomenon has spread across demographics and feels pretty permanent. And I think that shift is offsetting some of the the, indicators that would have historically led to much softer RevPAR trends.

Unidentified speaker, Interviewer: Great. Any other questions from the room? Well, we started a minute early. I guess we’ll we’ll end one minute Thank you, everybody. Thank you.

You all very much. Tony for all the

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