Ready when you are. We're rolling right along here, from the world's largest vacation ownership business to Tony Capuano, 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 four questions that we're trying to ask everybody. It might be the topic that you're a little bit for the fireside chats, but that's really on demand.
Yeah.
We'd love to just hear what's your latest read on industry demand and as you look over the longer term, maybe put that into context.
In Q1 earnings, we talked about global RevPAR being up a little over 4%. It was a little over 3% in our largest market, U.S. and Canada, up over 6% internationally. It might be the Q1 earnings call where I talked about April the most, just because January, February were very strong. We saw 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. April looked pretty good. 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 U.S. and Canada was down a little less than a point.
If you adjust for Easter timing, we were up about 2. It feels like that bit of shock we saw in March is stabilizing a little bit. The challenge is really the booking window today. For group, where we have more medium-term visibility, group was the bright shining segment in Q1. We were up 8%. Both leisure and business transient were up 2% in the quarter, but the transient booking window is sub three weeks. I think we are feeling cautiously optimistic. The one caveat to that feeling is how quickly that can change given the shortness of the booking window. When you talk with our operators, I think generally they are optimistic. Their uneasiness, to the extent they have it, is because the booking is happening so late.
I think that reflects a little bit of uncertainty in the consumer's mind.
So just to make sure I understand that.
Yeah.
Yeah, totally. It sounds like the longer duration bookings, maybe there was a bit of a pause, but then the closing is stronger?
No, I mean, group, you know, books out quite a bit.
Yeah.
That's where we have the most medium-term visibility.
Got it.
On the two transient segments, it's just a really short booking window.
Right.
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 dust finally settles. We'll have to look at it month to month because of the shortness of the booking.
If we zoom out from the macro and just think about some of the tools at your disposal, what are some of the things that you're doing to try to drive demand or drive the business longer term?
Yeah. 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. The most consistent refrain we heard from them is, "Won't you let us book even further out?
Mm-hmm.
Because as the size of these associations grow, there's 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.
We continue to feel good about group pace. On the transient side, lots 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 demand.
You referenced dates and space. I wanna get to space 'cause that would be a big, big topic in terms of development.
Yeah.
Before we do, one of the other areas that I think has been under a little bit of pressure has been midscale RevPAR, especially in the U.S.. What's going on there? What's your assessment of that situation? Could that impact development in the limited-service space?
Yeah. There's a lot in there. Let me try and tackle it. We just got into the midscale space, so it's a little early to give you really strong trends. StudioRes, which we talked about, our extended stay midscale platform, actually opened their first new-build hotel yesterday.
down in Fort Myers, Florida. I think 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 personal economic headwinds they're trying to navigate.
Makes sense. The other area that I think has had some question marks is international, certainly 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, you know, how much of that's coming into the U.S. versus U.S. going out.
Yeah. On a global basis, we actually are ahead of where we were pre-pandemic. Twenty to 21% of total global room nights are represented by cross-border travel.
In the U.S., as you would expect, in Q1, we saw inbound from Canada down about 5%. Overall inbound, international inbound to the U.S., was exactly where we expected it to be, which would suggest any falloff we saw coming in from Canada was more than offset by inbound from other international destinations.
Right. I imagine people may even be switching where their trips are going, maybe strength in Canada, you know, staying locally.
Yeah.
Or things like that.
Great.
So maybe let's shift to development.
Okay.
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.
Yeah.
Just broader inflation. You know, what's the Marriott pitch? How is that resonating? How's that maybe changed?
Yeah. 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 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 98-year history.
Q1 of 2025, in terms of development volume, was the highest Q1 we've had in 98 years. 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 and are voting with their development budgets in a long-term belief in travel and tourism.
How does that optimism or that commitment, you know, differ by region or by chain scales?
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.
That development community appears to have that same long-term perspective and long-term confidence in the prospects for travel demand. Across chain scales, some of that is really by region and impacted heavily by the necessity of conventional financing. If you go to many of the markets in Asia Pacific, many of the markets 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 U.S., 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.
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?
Yeah. A few things. I can only speak to how I think about our positioning to capture.
Conversions, which the last number of quarters have represented 30%-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. 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 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.
A decade or longer ago, you would've come to me with a conversion for St. Regis, and I would've said, "Great. In two years, when you've completed your renovation.
Yeah.
We'll put it in the system." In select instances, we might say, "Let's plug you into the reservation system now as The Stephen, not as a St. Regis, and then we'll flip it in the system.
Pass yourself in there.
Yeah. Once that conversion is done. I think you throw all of that into the blender. I mean, you know, I was in development for most of my career. I've never seen a better position to take advantage of the opportunities in conversions. 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 fade into the background and a big uptick in new build. When you started to see some economic weakness from a macro perspective.
Right.
You'd see a slowdown in new build and a spike in conversions. I actually think that all of the factors that I described, even when the economy is booming, I don't anticipate a pullback in conversions. I think that is gonna be a strong and consistent part of our growth story going forward.
And from a financial standpoint, are conversions just as attractive in terms of whether it's fees per room, free cash flow per room, or even as we think about the duration of these contracts?
Yeah. I don't think they have to be meaningfully different.
Yeah.
than a new build, other than you're generating those fees much more quickly.
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.
International's talking about the success of that deal.
Mm-hmm.
is still opportunity to grow it. What are some of the key learnings from that? Are there more opportunities for these types of deals? Maybe it is not specifically, you know, casino business.
Sure.
But just.
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 and the world's largest gaming company together in a unique partnership is something I'd love to do. I would do 1,000 out of 1,000 times. I don't think there are hundreds of those sorts of opportunities.
And when you think about the way we structured the transaction, it had to reflect the strength and the value that both of those brands brought to the relationship. If we saw another unicorn out there, we would certainly get excited about exploring whether we could make something work. I think that'll be in the small minority of the types of transactions we do in the future.
Sticking with the development, 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?
Yeah. In some ways, I always worry that that's the question our partners ask. The reason I say that, if we're doing our job well.
Development partners.
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 markets, the U.S. and Canada, is plus or minus high teens, low 20s. Outside the United States and Canada, it's in the low single digits. In terms of decades-long runway, I think there's a longer runway outside the U.S., but the U.S. will continue to be a really significant contributor. If you look at our global pipeline of, you know, approaching 600,000 rooms, 55% of that is international, but embedded in that statistic, 45% is still domestic.
Is there any limiting factors when we look at different markets in terms of how they're structured or otherwise? I don't wanna lead the witness too much, but.
Yeah.
Yesterday, we had a panel where I won't say who it was, but somebody said you had the opportunity. Marriott specifically has an opportunity to hoover up hotels in Europe. I'm curious if there's things that.
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. You saw that we announced StudioRes just a week or so ago, and that platform was led by a terrific portfolio conversion in Asia Pacific. Four Points Flex and what we're doing there certainly represents a meaningful opportunity for growth for us, in many markets, but Europe in particular.
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.
Sure.
That made that successful, then why is it then gonna be even more successful with Marriott?
Yeah. A couple things. In terms of where it fits in our brand architecture, we really like the positioning between Moxy and AC, whereas, and there are, to be sure, some similarities in physical product between Moxy and AC. I think if I had, in colloquial terms, to describe how they're distinctly positioned, Moxy 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 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. Maybe the other, the more macro, comment I would make, it's not particularly pioneering for us. We have 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 14 years ago. 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.
You touched on this a little bit, but what drives that decision to buy versus build? And maybe why is this environment different than history? 'Cause it sounds like conversion opportunities and development opportunities. Where does that.
You talk from Marriott's perspective.
Yeah.
Yeah. 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 Moxy, and blending that all the way back to the days of acquiring powerhouse brands like Residence Inn, Ritz-Carlton, I mentioned AC. 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 global growth platform.
Yeah.
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 Protea Hotels, AC Hotels both fit the bill there. Or if you just think there's a really strategic opportunity and you wanna move quickly.
Mm-hmm.
to get into that space and fill out a gap in your brand architecture.
One of the questions we're asking everybody is really around AI.
Mm-hmm.
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?
Yes.
Is the short answer.
Yes. I mean, I think, I-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. 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. On the margin side, again, I think it is, sort of embedded in the idea of advancing technology that we can find operating efficiencies.
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.
Mm-hmm.
As a business, but also your owners?
Yeah. If 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.
Yeah.
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. 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 Leeny provided an update on the Q1 call to the impact of some of the work we did last year. Through Q1, we are certainly on track to deliver the $80 million-$90 million 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.
Great. We still have some time left. If people have questions in the audience, gotten a couple out there over the past day, but people have been shy. Up here in the front, we've got one.
Thanks. How do we think about 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 job offers?
Yeah. I'm glad you asked the question because I think some of the activity we've done in mid-scale is commanding a lot of headlines, which is terrific. If you actually look at the composition of the pipeline at the end of Q1, 38% of the rooms in that pipeline are in the two highest chain scales, luxury and upper-upscale. 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 valuable, valuable quality tiers.
We got one in the back over here.
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 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?
Yeah. It's a great question. 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 spent a couple days with many of the most important players in the AI space. 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, it will challenge the OTAs to stay as relevant as they've been in recent history.
I'm gonna stick with, this could be technology. It might be marketing, but.
Sure.
You know, I often describe the system fund in the industry as being like the Rodney Dangerfield of the P&L of these companies. They just don't get any respect. It is a critical component of your competitive advantage.
Mm-hmm.
I think you mentioned the lowering the charge-out rate, is one example of where you can affect change. Where are you in the transformation project in terms of your technology transformation project? Timing and spend. And then also, what are some of the, you know, changes that owners can expect from that?
Sure. 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 does not exist in Antarctica. That is up and running, and we are testing out to make sure everything is working. So far, so good. Assuming that test continues to go well.
Stress testing.
Yes. We will start to roll out many of those systems in our select brand portfolio later this year. On track in terms of our schedule. In terms of 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, it's a 40-hour training regimen.
Is it staying MARSHA or would we have a new acronym?
I'm sure we'll have a new acronym. We have 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. 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. If you go to m.com today, it is a very efficient system to book a hotel room. 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 is a good way to think about how the new reservation system will work. 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 EDITION candle and the Ritz-Carlton bedding, all will be available on that platform. We think that generates a very significant upside opportunity for our owners.
I had asked a question about partnerships earlier, which was more on the distribution side, but does that unlock partnerships that are in the broader ecosystem?
Yeah. I mean, I think that maybe it just eases access, right? We have terrific Bonvoy partnerships with partners like Uber and Starbucks, and we continue to explore opportunities for other partnerships. I just think it makes a more seamless access to the benefits of those partnerships.
Great. 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.
Yeah.
As we think about the building blocks of RevPAR, net unit growth, other fees, margins, etc.
Yeah. Let me just talk about net unit growth for a minute. 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. 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.
Mm-hmm.
Was a perfect illustration of that fact. It was meant to come in in the fourth quarter of one 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 company's system. We talked at that meeting about having a target or, or an expectation of 5.5% 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 5.5%.
I guess you mentioned this a little bit on the development side then. How has the time to opening then changed? I realize that Marriott or MGM, that moved around a little bit in terms of maybe integrating it, but has hotel development extended the window in terms of when you go to the design?
Yeah. That's a good question. On new build, for a while, we'd 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. 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. One of the things you've heard Leeny and I talk about on the earnings call, it's a great problem to have, but many conversions never make it into the pipeline.
Mm-hmm.
Right? Because they get signed and open into the system and generating fees to, you know, in the quarter for the quarter.
Do we know what percentage that typically is of your total conversions?
20%.
20% of the conversions, which are 30% of.
30-40. Yeah.
30%-40% of the.
Never make it into the pipeline.
Just opened in the quarter.
Which is great.
One other follow-up on the question about.
Yeah.
Fees per room. Just remind us, you said there's the higher fees per room for the higher-end.
Mm-hmm.
Hotels, but also what's the dynamic for more international as we think about, I think, that more of those would be managed and franchised.
Yeah. 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? 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 mirror that. You are seeing a fairly significant shift towards the franchise side across Europe.
Great. One other one on the demand side since there was some volatility in the.
Yeah.
Beginning of the year. What are you typically looking out for to assess whether you would see a sharper, you know, pullback? What does that pullback playbook look like for the management?
Yeah. 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. It is quite interesting to me. Jackie and I were talking about this earlier today. I think it was a month or two ago that it was published that the U.S. hit a 52-year low in consumer confidence.
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 52-year low in consumer confidence. How do you think about RevPAR?" I do not know what my answer would've been. I'm fairly certain it wouldn't have been north of 4%.
Right.
RevPAR growth. One of the takeaways from our perspective, we talk often about this shift in consumer spending patterns. Pre-pandemic, you had younger demographics already 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. I think that shift is offsetting some of the indicators that would have historically led to much softer RevPAR trends.
Great. Any other questions from the room? We started a minute early. I guess we'll end one minute early.
Great.
Thank you, everybody. Thank you.
All right. Thank you all very much.
Tony, for all the.