Good day, everyone, and welcome to today's Marriott International's fourth quarter 2021 earnings call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and one on your touchtone phone. Please note, this call may be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Jackie Burka, Senior Vice President of Investor Relations.
Thank you. Good morning, everyone, and welcome to Marriott's fourth quarter 2021 earnings call. On the call with me today are Betsy Dahm, our Vice President of Investor Relations, Leeny Oberg, our Chief Financial Officer and Executive Vice President, Business Operations, and Tony Capuano, our Chief Executive Officer.
Thanks, Jackie. Before we begin our prepared remarks, I wanted to take a moment and reflect on this day, which marks the one-year anniversary of Arne's passing. I know everyone on this call, especially our Marriott associates, miss our dear friend and inspirational leader a great deal. We can take comfort knowing his amazing legacy lives on in the incredible work of the thousands of people around the world who wear a Marriott name badge. Let me turn the call back over to Jackie to get us underway in discussing this quarter's results.
Let me quickly 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 our comments. Statements in our comments and the press release we issued earlier today are effective only today and will not be updated as actual events unfold. Please also note that unless otherwise stated, our RevPAR, occupancy, and average daily rate comments reflect system-wide constant currency results for comparable hotels and include hotels temporarily closed due to COVID-19.
RevPAR occupancy and ADR comparisons between 2021 and 2019 reflect properties that are defined as comparable as of December 31st, 2021, even if they were not open and fully operating for the full year 2019, or they did not meet all the other criteria for comparable in 2019. Additionally, unless otherwise stated, all comparisons to pre-pandemic or 2019 are comparing the same time period in each year. 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. Tony?
Thanks, Jackie. We're very pleased with the remarkable progress we made in 2021 across the entire global portfolio, despite the ongoing challenges of the COVID-19 pandemic. We finished the year on a real high note, with the emergence of Omicron having a limited impact on results in the fourth quarter. In December, global ADR was 3% above 2019 levels, and occupancy for the month gained further ground compared to December of 2019, driving global RevPAR to an 11% decline versus 2019. This was a 53 percentage point improvement from the RevPAR decline in January of 2021. In the fourth quarter, global RevPAR was 19% lower than pre-pandemic levels. Global occupancy for the quarter came in at 58%, 12 percentage points below 2019, while ADR was only 2% shy of 2019 levels.
In the U.S. and Canada, fourth quarter RevPAR declined 15% compared to 2019. Results were driven by strong ADR, which was less than 2% below pre-pandemic levels. Further strengthening of already robust leisure travel and steady improvement in the recovery of business transient and group demand also helped results. Fourth quarter group room revenue in the U.S. and Canada was down 32% versus 2019, a 9 percent point improvement from the third quarter decline. With booking windows still much shorter than usual, in the quarter-for-quarter bookings were up 45% versus the fourth quarter of 2019. Group cancellations ticked up late last year and early this year due to Omicron, mostly for arrival dates in January and February. Those cancellations have slowed more recently. New group bookings have also been gaining momentum, especially in the year-for-year.
In fact, just last week, Salesforce held a large company meeting in New York City that was booked just one month before the event. It was the largest internal meeting Salesforce has held since the start of the pandemic, with over 25,000 room nights across 11 of our properties. While special corporate demand in the U.S. and Canada was still well below 2019 levels, there was gradual improvement in the fourth quarter. Relative to pre-pandemic levels, bookings in the quarter were down 33%, 11 percentage points better than the decline in the bookings in the third quarter. Weekly bookings around the end of last year were impacted by Omicron, but they have recovered since the trough in early January.
All of our international regions, except for Greater China, posted sequential RevPAR recovery from the third to the fourth quarter as more borders reopened and travel restrictions eased. Greater China's fourth quarter 27% RevPAR decline compared to 2019 was in line with the decline in the third quarter, as their zero COVID policy once again resulted in the lockdown of several cities. The Middle East and Africa, or MEA region, performed particularly well in the fourth quarter, really demonstrating the resilience of travel demand. With relatively high vaccination rates and low travel restrictions during the quarter, the Middle East has become a safe, easy place to visit. Led by strength in the UAE, fourth quarter RevPAR in MEA rose 8% in 2019, driven by 20% higher ADR. Excuse me, 8% above 2019, driven by 20% higher ADR.
Fourth quarter occupancy in MEA topped 65%, the highest of our regions. Leisure demand was remarkably strong, benefiting from a significant increase in international visitors. Room nights from international guests rose nearly 60% from the third to the fourth quarter. Throughout the pandemic, strengthening our valuable loyalty platform and engaging with our Marriott Bonvoy members have been key areas of focus. In the fourth quarter of 2021, 52% of room nights globally and 58% of room nights in the U.S. and Canada were booked by Bonvoy members. Global membership grew to over 160 million members at year-end, driven by strong digital sign-ups. Turning to development, both room additions and signings were strong in 2021, despite ongoing challenges associated with the pandemic.
Despite industry-wide pre-construction and construction delays, some labor shortages and supply chain issues, we added a record 86,000 gross rooms and 517 properties, leading to 6.1% gross rooms growth for the year. Our global net rooms growth was 3.9%, above our previous expectation, given deletions were toward the low end of those expectations. Our deletion rate for 2021 was 2.1%, or 1.2% excluding the exit of 88 Service Properties Trust hotels. We are also pleased that we continue to grow our share of rooms globally. In 2021, around 15% of all global new-build rooms opened under our brands, compared to our year-end room share of 7%.
This share is expected to continue as we had 18% of all global rooms under construction at the end of 2021, more than twice our current share of open rooms. Our development team signed franchise and management agreements for approximately 92,000 rooms during 2021, and our year-end global pipeline totaled roughly 485,000 rooms. The composition of our pipeline dovetails nicely with current demand trends. Leisure demand has led to recovery, and we are well-positioned to continue growing our lead in resort destinations, including in the high-growth all-inclusive space. We've also been seeing strong preference for our luxury properties. With luxury rooms accounting for more than 10% of our pipeline, we are poised to further expand our industry-leading portfolio in this valuable high-fee segment.
Conversions were a significant growth driver in 2021, accounting for 21% of room additions and 27% of signings. With the breadth of our roster of conversion-friendly brands across chain scales and the meaningful top and bottom line benefits associated with being part of our system, we anticipate that conversions will remain an important contributor to growth over the next several years. For 2022, we expect gross rooms growth to approach 5% and deletions of 1%-1.5%, leading to anticipated net rooms growth of 3.5%-4%. While signing activity has been picking up nicely, 2022 gross room additions are expected to be impacted by the diminished construction starts the industry has experienced throughout the pandemic, particularly here in the U.S.
As a reminder, average construction timelines are currently around two years for limited service deals and often longer for full service deals. Yet given the improving global environment, the attractiveness of our brands, our strong development activity, our conversion momentum, and our industry-leading pipeline, we are confident that over the next several years, we will return to our pre-pandemic mid-single-digit net rooms growth rate. Before I turn the call over to Leeny, I did want to share a few highlights of the company's ESG efforts over the course of the year. The Board of Directors and our management team are keenly focused on these important areas, as we're committed to making a positive and sustainable impact in the communities where we live and work.
In June, as part of our diversity, equity, and inclusion efforts, we announced we were setting new internal diversity goals for our group of Vice Presidents and above. The new targets aim to achieve global gender parity by 2023, an acceleration of our prior timetable, and to increase representation of people of color in the U.S. to 25% by 2025. In July, we updated our human trafficking awareness training, which will be made widely available to the entire industry. More than 900,000 associates have now taken training in this area. In September, we pledged to set science-based emissions reduction targets in line with the 1.5 degrees Celsius emissions scenarios. As I finish my first year as CEO, I want to again thank our incredible associates for all their hard work through these challenging times.
I've spent most of the last few months on the road, traveling across the U.S. from New York to Los Angeles, and also abroad, and have seen firsthand their dedication to serving our guests. I'm so proud of all we've accomplished over the last year and continue to be very optimistic about our outlook for 2022 and beyond. Leeny?
Thank you, Tony. Our fourth quarter results reflect the clear resilience of travel, our strong focus on cost containment, and the benefits of our asset-light business model. Gross fee revenues reached $831 million in the fourth quarter. Our non-RevPAR related franchise fees were again particularly strong, totaling $186 million in the fourth quarter, 19% ahead of 2019 levels, driven by robust global card spending and new account acquisitions, as well as outstanding performance in our branded residential business. Incentive management fees or IMFs totaled $94 million in the quarter. Just under half of these fees were earned at resort properties, with IMFs from our comparable luxury resorts up almost 45% compared to the fourth quarter of 2019.
Our owned and leased portfolio generated $19 million of profits, a nice increase from a loss of $50 million in the fourth quarter of 2020 as results improved at hotels in the U.S. and Europe. Our operating teams have done extraordinary work to adapt quickly and return these hotels to break- even profitability or better despite continued lower- than- normal occupancy levels. G&A and other expense totaled $213 million in the fourth quarter, higher than prior expectations as a result of higher compensation costs, including true-ups and higher legal expenses. For full year 2021, G&A and other came in at $823 million, 12% lower than full year 2019, reflecting ongoing savings resulting from our significant restructuring activities in 2020.
At the hotel level, we have partnered with our owners and franchisees throughout the pandemic, working diligently to lower costs, bring down break-even occupancy levels, and drive cash flow. With the recovery well underway, we're committed to delivering consistent and positive guest experiences while keeping hotel operating costs down. Many of the cost reduction and productivity enhancement initiatives we've put into place will be maintained as occupancies rebound. While the labor environment is slowly improving, we're keeping a close eye on wage and benefit inflation. We're optimistic that our cost reduction efforts could mitigate inflation in future years. As always, we are also carefully managing cash outlays at the corporate level. We were pleased with our cash flow generation during 2021 and with our year-end liquidity position of over $4.8 billion, which covers near-term debt maturities with significant cushion.
Our full- year cash flows from the loyalty program were positive before considering the reduced payments received from the credit card companies. After factoring in these reduced payments, which effectively repaid around 1/3 of the total $920 million we received in 2020, loyalty cash flows were modestly negative. Looking ahead to 2022, there is still too much uncertainty and volatility to give specific RevPAR or earnings guidance. I will again share some general observations and provide color on certain specific items where we do have some visibility. I'll start with some thoughts on the first quarter of 2022. Omicron meaningfully impacted global group and business transient demand in January, historically the lowest occupancy month of the year.
While we saw minimal disruption to leisure travel, global RevPAR for the month declined 31% compared to January 2019, primarily due to lower occupancy as rate was just 4% below 2019. We expect to see the recovery pace pick up nicely in February and March, given weekly bookings across customer segments have now returned to pre-Omicron levels. However, with some countries reinstituting strict travel restrictions earlier this year, we could see first quarter 2022 RevPAR compared to 2019 levels take a step back from the 19% decline in the fourth quarter of 2021 versus 2019. We then expect significant forward progression in the global recovery each quarter through the end of the year. Following the temporary Delta-related slowdown during the third quarter of last year, demand picked up meaningfully through the end of last year.
That bolsters our optimism that by the end of the year, the 2022 fourth quarter gap to 2019 fourth quarter RevPAR will narrow meaningfully compared to the 19% decline in the fourth quarter of 2021. As additional markets reopen and more employees return to the office, we expect robust ADR, sustained strong leisure transient demand, and significant improvement in business transient and group. We also expect to see growth in trips that blend business and leisure. International travelers getting back on the road should also drive further improvement in RevPAR. In 2019, nearly 20% of global room nights were from cross-border guests. So far, most global demand during the pandemic has come from domestic visitors.
Cross-border room nights in 2021 were down more than 60% compared to 2019, while domestic room nights were down 16% over the same time period. Our fourth quarter performance in the Middle East illustrates how impactful the return of international travel can be. We're encouraged by the swift pickup in booking activity that we've seen in the last few weeks in places that are opening up, such as Thailand and the Cayman Islands. Turning to fees, at current RevPAR levels, we expect the sensitivity of a 1% change in full year 2022 RevPAR versus full year 2021 could be around $25 million-$30 million of fees. As we've seen, the relationship is not linear given the variability of IMFs and the inclusion of non-RevPAR related franchise fees.
This sensitivity is no longer compared to 2019, as the compounding impact from new rooms growth contributions makes the comparison less relevant three years out. In 2022, we expect continued growth from our non-RevPAR related fees driven by higher contributions from credit card fees. We also anticipate profit growth from our owned and leased portfolio as the global environment improves. For the full year, interest expense net is anticipated to be roughly $350 million, and our core tax rate is expected to be around 23%. G&A and other expenses could total $860 million-$880 million, still well below 2019 levels, but higher on a year-over-year basis, primarily due to higher compensation costs and assumed higher travel expenses. As always, driving cash flow will be a priority in 2022.
We anticipate full- year investment spending of $600 million-$700 million, which includes roughly $250 million for maintenance, capital, and our new headquarters. We expect cash flows from loyalty to be slightly positive in 2022 before factoring in the reduced payments received from the credit card companies. We made great progress in improving our credit ratios during 2021 and remain focused on bringing our leverage in line with our target of 3x-3.5x adjusted debt to Adjusted EBITDA. Assuming the recovery continues largely as anticipated, we could be in a position to restart capital returns in the back half of 2022. We would likely begin by paying a dividend with a payout ratio a bit below our traditional 30%.
We could then see more meaningful levels of capital returns, including share repurchases along with dividends in 2023 and beyond. Over the last two years, our business has been tested in ways we never could have imagined. We're incredibly proud of how our teams have adapted and how well our company has performed. We made significant progress in 2021 and are excited about continued recovery and our growth opportunities ahead. Tony and I are now happy to take your questions. Operator?
At this time, if you would like to ask a question, please press the star and one on your touch tone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one if you would like to ask a question, and we will take our first question from Shaun Kelley with Bank of America.
Hi, good morning, everyone. Good morning, Tony and Leeny.
Morning.
Morning.
Tony, I just wanted to start with development activity. Thank you for the net unit growth guidance, and I think it makes sense relative to where we are in the development cycle. I sort of wanted to get your sense a little bit longer term. You know, do you think this is the bottom and these levels are pretty sustainable just given where we are in the broader kind of CapEx and development cycle? Or do you think you know, just help us think through maybe 2023 and, you know, are the levels you know, again, gonna be consistent with that? Could we even be a little bit better, or do we need to be cautious there just given the timing on openings in full service?
Thanks, Shaun. Well, we've said the last couple quarters, the ripple effects of the pandemic create less visibility beyond 2022 than we might like. With that said, I think you heard the momentum on signings in my prepared remarks. We continue to see good volume on the conversion front. In the short term, obviously, we've got a bit of challenges in terms of construction starts, particularly in the U.S. In some ways, that causes us to think about it as a when, not an if. In fact, one of the statistics we look at most closely is fallout from the pipeline. If we were seeing wholesale project cancellations, that might cause us to think differently about the medium to long term.
In fact, what we saw in 2021 was about 6.5% lower than our average fallout over the last decade.
Really encouraging. Then maybe just as my follow-up, your comment on, you know, the RevPAR cadence leaning in your prepared remarks, was interesting as we get to kind of the 4Q 2022 area. Just any possibility that we could actually see maybe a month or a point in 2022 where we actually return to, 2019 levels of RevPAR? Kind of, what's your sense about that cadence? That's it for me.
Thanks very much. It is interesting when you look at December, for example, the U.S. and Canada in the month of December was down only 6 percentage points compared to 2019. It is absolutely the case that you could see, depending on the mix of business and exactly how countries open up and kind of the classic occupancy from a seasonal pattern standpoint. I could imagine that it's possible that you have that happen, Shaun. I think, though, so much of this really depends on the global picture in terms of the pace of the recovery. You need lots of things happening on all the points of business, not just leisure, but also special corporate as well as group to see us get to that delightful place.
At the same time, I think we feel great about the momentum. The other comment I'll make is when you see countries open up their restrictions, the kind of jolt that our reservation centers feel is impressive. I do think that momentum gives us confidence that we could see this resilience continue to build.
Thank you.
We will take our next question from Robin Farley with UBS. Your line is now open.
Great. Thanks. Just thinking about the visibility of recovery, can you give us some insight into what group bookings for the second half look like? Because, you know, understandably, of course, Q1 would have been, you know, very disrupted by Omicron. But for second half, how is that compared to 2019 levels, you know, in terms of. It seems like at some point there should be an accumulation of groups that haven't met in a while and that, you know, that should start to look good. I'm just wondering if you can see that turning point yet in your future group bookings.
Yeah. Thanks, Robin. Maybe I'll refresh some of the data that we shared with you last quarter. I'm gonna give you some comparisons between at the end of 2019 what we saw as definite bookings on the books for 2020 and 2021, and how that compares at the end of 2021, what we see on the books for 2022 and 2023. At the end of December of 2021, as we looked at definite bookings for 2022, we were down just a shade under 22% compared to end of 2019 for 2020. When we look at what's on the books for 2023 at the end of 2021, we're down just a shade under 15% versus what we had on the books at the end of 2019 for 2021.
To your specific question, we are seeing steady and encouraging forward bookings in the group segment. You know, the other thing I would point out, Robin, you heard in my prepared remarks the comment about that big piece of Salesforce business that was booked just one month before. We expect to continue to see improvement from the levels I just described to you because we're seeing more short-term bookings, and that's been the trend over the last number of weeks and months.
Just to add one more point, Robin. You know, when you look at Q1, understandably with Omicron, clearly you're looking at a weaker group picture than you are as you get into Q3, which is meaningfully better. So, your point is well taken that it should move as we go through the year. I think the other part that is just fantastic is that rate, both in 2022 and 2023 already from what's on the books, is up 3%-4%.
Okay, great. No, that's helpful. Just one follow-up question is in terms of the visibility of just sort of business transient or, you know, transient in total, has that moved out? I know it's tough after the last six weeks because maybe it was moving out and now contracted a little bit. How far in advance, you know, I feel like pre-pandemic, you used to talk about a 30-day booking window, and maybe last year it was like a seven-day booking window. Just wondering if you're seeing transient, you know, a little more visibility or a little bit of improvement in the pace of that. Thanks.
The booking window has extended, but it is not the way it was back in 2019. It's improved, but it is still the case that we're you know not back to where we are. I think you know clearly in Q1, Robin, January is a great example where you saw especially corporate, particularly weaker with what was going on with Omicron. I think part of this, you're gonna see it get more visibility as we get farther and farther into the year. But it is a bit better than it was in 2020.
Robin, let me just give you a little more granular information to try to address your question. This is a global number, but if you look at the global booking window, it really got the shortest in the second quarter of 2020, where it was down to five years.
Exactly.
Excuse me, five days. If you look at fourth quarter of 2021, it had risen to about 17 days. To Leeny's point, certainly not back to where we were pre-pandemic, but trending in the right direction.
Oh, great. No, that's very helpful data. Thank you.
You're welcome.
We will take our next question from Joe Greff with JP Morgan. Your line is now open.
Good morning, everyone.
Morning.
Morning, Joe.
Throughout much of last year, leisure demand was fairly inelastic to rate, you and the industry saw fairly robust rate gains, as you alluded to this morning. Can you talk about leisure price elasticity thus far in 2022, and in your forward bookings, and are there any changes relative to last year, i.e., are you seeing demand become more sensitive for the rate gains, maybe more pronounced in markets or chain scale segments where service levels might be constrained by labor availability?
Of course. Obviously we're early in the year, but maybe a good indication that addresses your question as we gear up for President's Day weekend here at the end of the week. This is U.S. data, but the RevPAR numbers are pacing up about 12% ahead of where we were in 2019 for Friday through Sunday. To your specific question about pricing power, ADR is pacing up about 20% versus 2019.
Great. A follow question on new development. Can you talk about the cadence of net rooms growth or net rooms growth rate this year? Is it even throughout the year? Is it more, you know, heavy in the second half? Lastly, how does the full- service- to- less- service mix of net new room development in 2022 compare to that mix the last couple of years? Thank you.
Of course. What I will tell you is pretty consistent for the last decade or more is our transactors. They are a big fourth quarter team. We tend to see a big pop in signings volume in the fourth quarter. Because our conversion volume was meaningfully higher in 2021 versus history, when you have a deal like Sunwing, which I think was in the second quarter, that can impact the quarter-to-quarter numbers. Fourth quarter tends to be the biggest volume of signings.
For openings, Joe, you know, I think we definitely saw in Q4 of this year that you clearly saw a bunch of owners wanted to get ahead of this recovery that's moving forward. We had a great fourth quarter. We have traditionally, it's been fairly steady unless there is a certain, you know, group of hotels that have all kind of come on at the same time. I would say, you know, we've always tended to have some quarter-to-quarter variations, but that it should march forward fairly squarely throughout the quarters on the opening side. I guess the only other thing to point out is just a reminder that construction for a limited service hotel takes, broadly speaking, two years, and full service takes longer.
As you start to think about 2020 and recognize that as you get into Q3 of 2020, you were in the depths of the pandemic and starting to really see the impact on construction starts, you know, that will start to obviously then have an impact as you go into 2022.
Thank you.
Thanks, Joe.
We will take our next question from Thomas Allen with JP Morgan. I'm sorry, from Morgan Stanley. Your line is now open.
It's okay. Your non-RevPAR fees have been really encouraging, and, Leeny, thanks for the commentary that you expect growth in 2022. Can you just give us a little bit more color there? I think I calculate that your 2021 non-RevPAR fees were about 15% above 2019 levels. You know, what's giving you the confidence that that should continue to grow? Thank you.
Yeah. First of all, thanks very much. Just as a reminder that our credit card fees make up roughly 2/3 of our non-RevPAR related fees, and obviously that's a big driver. You know, they ended up 4% over 2019 levels for the full year in 2021, and that was with a really quite a weak Q1 as we were still in the heaviest part of the pandemic. As we continue to see great card acquisitions and credit card average spend, I think we feel very good about those. I think residential branding fees, that business has been doing extremely well, and we expect to continue to see strong openings of those, which is when we get the fees.
We continue to have application relicensing fees as obviously our business continues to grow on the franchise side. We feel quite confident in the growth of that fee stream based on a continued strong economy.
Just a follow-up, yeah, not asking for 2023 guidance, but you know, when we think about starts, right, like there is some impact with starts on at least the new, but like for residential branding fees, for example, does that look like it's gonna continue to grow as you go, you know, past 2022?
No, that's a good reminder, actually, Thomas, to remember that while we do get annual management fees, that is the smaller part of the fee stream that we get from residential, and those are overwhelmingly one-time fees that we get when the unit is ready for occupancy. In that regard, even in 2022, I would expect our fees to be a little bit lower than they were in 2021 because in 2021 it was you know, we just had so many sales in residential. I expect them to be a bit lower, although still meaningfully higher than our traditional levels of residential branding fees.
Yes, you're right, they're lumpy because you can have one unit of 100 units that goes into sales and closes literally within a quarter or two, and then another one might not happen for two more quarters. It is likely to be lumpy. Again, overall, we're really pleased with new signings that we're getting in the residential branded business. I think you'll continue to see that business grow very nicely.
Thank you.
We'll take our next question from Patrick Scholes with Truist Securities. Your line is now open.
Great. Thank you. Good morning, everyone.
Good morning.
Good morning.
Good morning. Tony, I have a question, then a follow-up question. Tony, my first question, a high-l evel question. Last year in March and April, we certainly saw a very large acceleration in U.S. leisure demand. You know, what that means is we certainly have a very tough comp for U.S. leisure demand coming up. You know, as far as your intuition, Tony, you know, do you think U.S. leisure demand, you know, once we hit those tough comps in April onwards, could actually eclipse last year's very strong levels? Just curious what you think about that.
Of course. Thanks, Patrick. Well, we continue to be really optimistic that there's still a significant tailwind for leisure demand. I think part of that is because of the evolution of the way folks work. The incremental flexibility that you're seeing in working from home, working from anywhere, has been an accelerant for leisure demand. If anything, we expect further acceleration in that regard. Then when we look at our forward bookings, we already have more leisure on the books for months further out than we did in the same months last year. We continue to be quite bullish on accelerated growth in leisure. Remember, leisure was already growing much more rapidly than business transient, even pre-pandemic.
Maybe the last part of my answer would be, you heard Leeny talk a little bit about how modest cross-border travel has been. We've really only seen domestic leisure travel. As more and more borders open, we think that influx of international leisure travel will also serve to accelerate the pace of leisure demand growth.
Okay. Thank you. That's definitely encouraging and, good point on, the international. Shifting gears on my follow-up question here, certainly it's been, tough sledding, for the hotel industry in China due to the zero- COVID policy. You know, with RevPAR really still significantly down in China, have you seen any impact on your pipeline given how much the industry is struggling in China? Thank you.
That's a good question. Thankfully, the answer is no. We continue to see really strong momentum both on the signings and the openings front. I think in many ways, our owners and partners in China are the mirror image of our owners and partners in other areas of the world. They don't try to time the market for the next quarter or two. They tend to be long-term investors. Many of the projects that are getting done are parts of larger mixed-use projects, and the hotel components, in some ways, define those projects, so they are critically important. We've not seen any sort of meaningful slowdown, quite the contrary. We continue to see really strong demand for our brands from a development perspective across China.
Okay. Good to hear. Thank you very much.
Just one quick follow up.
Oh, go ahead.
One quick follow-up for you on that. When you look at how many rooms we've currently got in Greater China, it's around 140,000, and our pipeline is only about 20%-25% less than that for the pipeline for Greater China. It's really you know, you're looking at doubling that business, potentially in not too long.
Excellent. Good to hear. Thank you.
Thank you.
We will take our next question from Smedes Rose with Citigroup. Your line is now open.
Hi. Thanks. I wanted to just circle back on your commentary around conversion activity, which I think you said was about 18,000 rooms in 2021. I know you had said that you think it'll continue to be strong, but can you maybe do you think it can surpass what you saw in 2021? Maybe you can talk a little bit about where you're seeing the sort of conversions coming from on a regional basis. Is it mostly U.S. or?
Sure. So I will remind you that one of the most significant contributors to our conversion volume in 2021 was the conversion of about 7,000 all-inclusive rooms in the Caribbean with Sunwing. I raise that not to apologize. Those sorts of large portfolio conversion opportunities are a meaningful part of our strategy and something that we'll continue to look for. In terms of baseline conversions, we are seeing elevated interest from the owner and franchise community for our brands. We expect to see really strong volume continuing into 2022 and beyond.
As we talk with our owners and franchisees, not only do they like the flexibility of some of our soft brands, they like the fact that we've got conversion-friendly platforms across multiple chain scales, and they are focused not just on the ability of the company's revenue engines to drive top line revenue, but also some of the margin efficiencies that result from affiliation with our brands.
Smedes, just as a reminder, 27% of our signings in 2021 were for conversions. One of the things that's been really gratifying to see is a number of owners who want to do a conversion, but with meaningful investment in the property.
Yeah. I think that's a great point, Leeny.
They may take 12 months to actually get open, but they're turning it into a you know beautiful representation of one of our brands and putting meaningful investment in it. Whether it opens specifically in 2022 or 2023, it's all gonna be great for our guests and frankly for our associates and for the owners.
That 27%, Smedes, was about 10 percentage points higher than what we saw in the signings in 2020 and in 2019.
Great. Thanks for that. Then I just wanted to ask you, when we were out at ALIS meetings, and we met with a lot of owners, and there you know continues to be a lot of discussion, as you guys have commented on as well, of helping to reduce their costs being affiliated with large brands. I'm just wondering, do you think there's a lot more to go there? Or do you feel like you're sort of streamlining the brand standards or changing sort of customer expectations is kind of reset now? Or how is sort of that sort of relationship sort of panning out? I mean, we heard frankly like just a broad range of commentary. I'm just wondering how you're seeing it from your side.
Sure. I think first of all, I think the partnership during the pandemic between us and our owners and franchisees has never been better in terms of trying to manage these dramatically lower occupancy levels. As I said in my comments, I think there is quite a bit of the savings that we've put into place that is permanent, that will mean kind of significantly lower costs and significantly better productivity as we move forward. Now, as you know, we've got the reality that for more complex hotels, there is a much higher percentage of costs that are labor- related. We're obviously seeing a lot of pressure on that side, just like every other industry in the U.S. We will continue to find ways to try to improve the margins.
Rising occupancy obviously always ultimately helps you when you're spreading costs at a hotel. But it also means you've also got to make sure to have enough people there to deliver the service that our guests expect, and we are committed to making sure that we deliver those experiences that bring them back to our hotels over and over. The last thing I'll mention is just the great part about our business is we do reprice our rooms every day. When you think about what's been going on with our ADR, that has been a fabulous mitigation of what's been going on the labor cost side. You know, we will certainly continue to find new ways, but we are determined to make sure to deliver what our customers want.
Thank you. Appreciate it.
We will take our next question from Michael Bellisario with Baird. Your line is now open.
Thanks. Good morning, everyone.
Good morning.
Just a question for you on loyalty and your top customers. Maybe help us understand how they are spending today versus pre-pandemic levels. When you think about the lifetime value of that, say, top-tier platinum customer, has your view changed on who that platinum customer is on a go-forward basis and all the-
Michael, sorry, you're breaking up. Can you start the question from the beginning?
Thanks. Can you hear me better?
Yes.
Just a question for you on loyalty and your top-tier customers. How are they spending today, and where are they spending differently versus pre-pandemic levels? When you think about lifetime value, say of a top-tier platinum customer, has your view changed on who that customer is going forward, given the changes in travel patterns today?
Michael, I apologize. You were breaking up a little bit. I think I heard your question. I think maybe our penetration rates, especially in the U.S., are maybe the best indication. You know, we were back to 57% penetration in the fourth quarter, which is almost back to where we were pre-pandemic. We're quite encouraged about the penetration rates, the passion, and the enthusiasm we see within the Bonvoy base. As you heard in my prepared remarks, the pace at which the program continues to grow.
I think one of the really exciting things for us was as our credit card platforms continue to grow, they really gave us a unique opportunity to stay engaged with those most valuable Bonvoy customers, even when they had hit the pause button on the volume of travel they experienced prior to the start of the pandemic.
Just to add fuel to Tony's fire, I'll mention two things. Number one, we have started doing credit card programs in other countries and found them to be really well received by the customers, and seeing nice card acquisitions on that front. Then also just when you think about the growth in our digital share, and that is very much tied to the Bonvoy platform. When you look at our digital share compared to 2019, the share of reservations has gone up almost 500 basis points on our digital channel. Overall, we've gone up 300 basis points in our direct channels, up to 76%. I think that all ties very well into the power of Bonvoy.
Next question.
We will take our next question from Richard Clarke with Bernstein. Your line is now open.
Good morning. Thanks for taking my questions. Just first, just following up from some of the questions you've had already on inflation, and particularly with regard to your incentive fees, and the owned and leased portfolio profitability. You know, if we get a full RevPAR recovery kind of into 2023, you know, is that enough to get the incentive fees back to pre-pandemic levels? Or, you know, what's the dynamics that will kind of keep us away from that? You know, a similar question on the owned and leased profitability, is inflation gonna hold back the recovery there?
Right. Couple things. You are right to point out that nominal level of RevPAR is not the same as real. When we think about it, for example, now, the real recovery of RevPAR is about 3 points worse, relative to the nominal just because of, in 2021, to your point about inflation. At the same time, one of the things I think is, what's been so impressive about the operating teams is, you know, we used to think about breakeven levels for a full service hotel of 40%-50% occupancy. What you're finding is that, with the great work that they've done on, managing the hotel in dramatically lower occupancies, that they've been able to return these hotels to either neutral profitability at dramatically lower levels of breakeven occupancy.
I think that will really help offset on the inflation side. The other comment I'll make is on the incentive fee side is just the reminder that it depends a whole lot on where. Just when you think broadly speaking, we were at almost 72% of our hotels were earning IMF in 2019, and we're now still a tad under 50%. Where you see the biggest difference is really domestically in the U.S., and that is that with owners' priorities, that is gonna mean you really need to get back to those hurdles of levels of actual real profits before we're gonna get our incentive fees. Now, internationally, no surprise where you've got quite a bit more of hotels without the owners' priority.
They're already seeing dramatically higher percentages of hotels earning IMF. I think we've got some great potential in the international hotels where there have been such restrictions on entering the country, and they're more dependent on international travelers. I think of Asia-Pacific outside of China as an example there. In the U.S., I think as you heard me say in our comments, the IMFs that we're getting from the resorts have just been fantastic, and in many cases are already above 2019 levels. When you think about the large cities in the U.S. and their greater relative dependence on international travel, I think it delivers a lot of confidence that we will get back.
I just think predicting whether that is 2023 or not is probably a bridge too far, but certainly moving in the right direction.
Thanks. Just as a follow-up, last year you talked about trying to cut some of the kind of cost reimbursement fees for the underlying hotels to help out their profitability. At Q4, it looks like that cost reimbursement revenue is about 85% of 2019 levels. It's recovered basically in line with your other fees. Just where are we in that process of sort of lowering that sort of reimbursement contribution from the owners?
Couple things. One is a reminder that 85% of our reimbursed costs are based on the top-line revenues of the hotels. An overwhelming part, like for example, our sales and marketing fees are contractually set at a percentage of revenues of the hotels. They are by nature going to move up and down. The other thing is to recognize that we worked very hard on certain parts of the fees where we were able to impact kind of the fixed and floating component. That we do believe that there's more efficiency as we grow larger in terms of what we can do for the hotels.
As an example, when your digital share, your direct share of reservations is growing as well as it is, it's just a reminder that those are some of the lowest cost reservations for a hotel as possible. We did lower our fixed costs by roughly 30% for the system. As I said before, overwhelmingly, the charges are based on a function of hotel revenues.
Okay. Thank you.
We'll take our next question from Vince Ciepiel with Cleveland Research. Your line is now open.
Thanks for taking my question. You spoke about delivering the service that the guests expect. When I hear that, I think about Food and Beverage, I think about housekeeping. I'm curious kinda what percent of the way back you are as it relates to, you know, your breakfast buffets and select service hotels, your three meal a day restaurants and more full service. Can you remind us, you know, what percentage of guests are, or are you on the opt-in model, and what percentage of guests are opting in for housekeeping? Thanks.
Sure. On housekeeping, we continue to evolve our approach. Today, in our select tier hotels, it is an opt-in approach. Daily housekeeping is available at the discretion of the guest. At luxury, we are doing daily housekeeping. We're testing those options today. We're using those learnings to try and strike the right balance between guest expectations and economic realities for the owners. As we work through those tests, we intend to launch a definitive approach sometime here early in 2022.
Great. How about on the Food and Beverage side? What percentage of the way back are you there?
Yeah, we're here. We're getting there. We are largely back to where we were in the markets that have seen the most rapid recovery. If you are lucky enough to visit our hotels, particularly in resort destinations, you'll experience Food and Beverage services and offerings very similar to what you saw pre-pandemic. An example of that, we just had our Board meeting down in South Florida. Most of us had to order in-room dining because the restaurants couldn't offer us reservations prior to 10:45 P.M., and they were full. In those markets where we've seen demand recover more slowly, we are moderating the pace at which we bring back our Food and Beverage offerings, and trying to have that pace match the pace of demand recovery.
That makes a lot of sense. My second question's on distribution. With special corporate being down, I imagine OTA contribution is up. Can you just remind us? I think pre-pandemic, I think you were in the low double digits for OTA contribution. What did that end up being in 2021? Then I think your digital direct channel was growing pretty fast, maybe even faster than OTA. How has that evolved, and where do you see that going in 2022?
Sure. I'd say a couple things. That's just a reminder that in 2019, you also had, you know, special corporate is classically done through what we call GDS, and that is what is obviously taken the biggest dip. Now when you look at it's kind of their percentage share, they're down 600 basis points as compared to 2019. The OTAs are up with all this leisure business by 200 basis points, and they are at 14% in 2021. At the same time, direct share of total room nights is up to 76.3%, and that's actually up 340 basis points. Actually, our direct channels have grown meaningfully more than the OTAs. The OTAs have clearly, obviously, benefited from the leisure business.
GDS, classically more related to business travel, has been the one that has lost the most share. The only other thing that I'll mention here because I just find it interesting that also within the direct share growth is the movement off of voice to digital. I think that all makes sense when you think about our Bonvoy technology and our app and how many downloads we get that our guests are feeling more and more comfortable using the digital channel, which again is an incredibly efficient channel from a cost perspective and from a value delivery to the customer.
Great. Thank you.
We'll take our next question from Rich Hightower with Evercore. Your line is now open.
Hi, good morning, guys. Thanks for taking the question.
Morning.
Morning.
Just on the development pipeline, and as I think about, you know, supply chain delays and the like, you know, maybe help us understand, if we go back to the beginning of 2021, you know, what your outlook was for rooms growth at that time. You know, how many of those projects got delayed, you know, versus your original outlook and maybe pushed into 2022? Then likewise, you know, what sort of, you know, cushion do you give to the 2022 forecast as you think about, you know, ongoing delays and so forth?
Yeah. I'll take a try at that one, and Leeny may chime in. You know, I think about the pipeline a little like a conveyor belt. You know, we've got some projects. One of the reasons that our openings were so strong in the fourth quarter is we saw some projects that in our earlier forecast we assumed would open Q1 2022, and they actually got done a little more quickly and opened in December. We do see some delays that come out the back end. I think, you know, the maybe the most relevant statistics are the pace at which shovels are going in the ground and the lengthening we've seen in the construction cycle.
You heard Leeny in her remarks talk about roughly 24 months start to finish as an average for our select service hotels here in the U.S. There's not a lot we can do to accelerate that. If anything, we've got some challenges with supply chain and the like, but that 24 months seems to be holding. It's one of the reasons we continue to be so focused on conversions in the year for the year.
You know, as Tony said, you know, we do, for what it's worth, when we build our budget, we do go project by project, country by country. It is a quite detailed estimate. As Tony pointed out, there are some that finish a little bit earlier and some that end up being a little bit later, and we do our best every year at estimating. The other part that I'll point out when we talked about where we were at the beginning of 2021 is that we actually expected deletions to be higher.
I think you all will remember that my comments then reflected probably about 50 basis points of an expected COVID-related hedge that it was hard to predict at that point where exactly all these hotels would go as we moved through the pandemic. I think happily, with a lot of work on everybody's part, including the owners, revenue management, and on the cost side, and the banks have been very good partners to work with as well, we have seen deletions come in better than we expected. That has also ended up helping the net rooms growth number even compared to where we were, you know, four months ago.
All right. That's really helpful color. If I could just add one follow-up, maybe back to, I think one of your responses on the leisure side, and thinking about demand and pricing power in that segment. You know, if we look at, you know, some of the non-traditional, you know, short-term rental companies, for instance, Airbnb and so forth, you know, everybody sort of talks about their leisure customer the same way. You know, a lot of this is, you know, the business has improved meaningfully with work from home and a hybrid workforce and all that kind of stuff.
I mean, would you say that there's more or less or about the same, you know, customer overlap as you think about your core leisure customer versus what we see in the short- term rental space, and how has that changed over the course of COVID?
Well, I think, if you look particularly at the performance we've seen in our luxury tier resorts and our full-service resorts, one of the things we hear from our customers pretty clearly, is their desire for a full complement of services and amenities. As we've said in response to versions of this question in the past, that's probably the most significant differentiator between our product offering and some of the short-term rental offerings that are out there.
The other thing I'll mention is it was clear, in the beginning of the pandemic when you were kind of imagining searches for people wanting to get away, there was a larger proportion of searches that were for places that are out of the way, truly, places where people felt comfortable going where they could be away from others. We have seen that gap narrow in terms of the searches for kind of classic room- sharing type places as well as hotels. We've seen that gap narrow, which I think makes sense given the progress as we move through the pandemic.
Great. Very helpful. Thank you.
We do have another question, and that will be from Stephen Grambling with Goldman Sachs. Your line is now open.
Hey, thanks for sneaking me in. On the owned and leased segment, can you give us a little bit more color on some of the puts and takes that could impact that segment, RevPAR and margin performance versus the system-wide trends in 2022? Maybe even tie in how you're thinking about any asset sales there, if possible, given how strong the transaction market has been.
Sure. You know, I think on the asset sales, you know, we will obviously continue to be opportunistic, Stephen. You know, it really depends on where the hotel is, both in terms of its stage of CapEx. As you know, in a number of hotels that we own, we really want to get them to be great representations of our brands. And in cases where the markets have really not recovered, we are not gonna feel compelled to rush that sale. So in that regard, it will really vary. We've also got JV interests, as you know. For example, our St. Regis Punta Mita JV was sold during 2021. That market was doing great. The hotel was in great shape, and we were able to get a really good sales price on that asset.
I think it really does depend a lot on the situation. Remember that owned lease also has termination fees, and that also I would expect not to be growing, but also to continue to provide somewhere in the ballpark of $40 million in fees a year. On the owned lease profits, I think you will continue to see progress, but do remember that we have a chunk of leased hotels. There you obviously need to get to where you're covering your fixed rent payment to the extent it is fixed rent, which will mean if it behaves a little bit more like a U.S. owner's priority, where there you need to get to a floor before you're actually getting any profit.
I think we look forward to seeing the numbers get better and better. In terms of getting back to the full levels of 2019, I think it'll take a little bit of time.
Makes sense. Perhaps as a big picture follow-up, Tony, now that we're coming up on the roughly one-year mark as you've taken over as CEO, I'm curious how you could characterize where your top priorities are now to position the company not only for this unique recovery, but longer term, and how they may have shifted over the course of the year, particularly given you've met with folks in the field more recently?
Sure. Thanks. I don't think they've shifted meaningfully. I mean, I think we are encouraged, as you've heard this morning, about the pace of demand recovery. The priorities really continue to revolve around our key constituents. Leading with our associates, certainly our guests, and as we've discussed at length this morning, the economic health of our owners.
Awesome. Thanks so much.
Okay. Well, thank you all for your questions this morning, for your continued interest in Marriott, and with increasing frequency, we look forward to seeing you on the road. Thanks, and have a great day.
This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.