Yahoo Finance Marriott International, Inc. (NASDAQ:MAR) Q1 2024 Earnings Call Transcript
Marriott International, Inc. (NASDAQ:MAR) Q1 2024 Earnings Call Transcript May 1, 2024
Marriott International, Inc. misses on earnings expectations. Reported EPS is $2.13 EPS, expectations were $2.16. Marriott International, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, everyone, and welcome to today's Marriott International First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Please note, today's call will be recorded and I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Jackie McConagha, Senior Vice President, Investor Relations. Please go ahead.
Jackie McConagha: Thank you. Good morning, everyone, and welcome to Marriott's first quarter 2024 earnings call. On the call with me today are Tony Capuano, our President and Chief Executive Officer; Leeny Oberg, our Chief Financial Officer and Executive Vice President, Development; and Betsy Dahm, our Vice President of Investor Relations. Before we begin, I would like to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Unless otherwise stated, our RevPAR, occupancy, average daily rate, and property-level revenues comments reflect system-wide constant currency results for comparable hotels, and all changes refer to year-over-year changes for the comparable period.
Statements in our comments and the press release we -- the press release we issued earlier today are effective only today and will not be updated as actual events unfold. You can find our earnings release and reconciliations of all non-GAAP financial measures referred to in our remarks today on our Investor Relations website. And now, I will turn the call over to Tony.
Tony Capuano: Thanks, Jackie, and good morning, everyone. 2024 is off to a solid start as Marriott continues to deliver great experiences to travelers around the world. First quarter global RevPAR rose 4.2% with ADR increasing around 3% and occupancy reaching almost 66%, up nearly 100 basis points year-over-year. While overall industry RevPAR growth is normalizing post-COVID, we continue to gain RevPAR index across our portfolio and increase our market share of global hotels. Once again, we saw RevPAR growth across all three of our customer segments, group, leisure transient, and business transient. Group, which comprised 24% of global room nights in the first quarter, was again the strongest customer segment. Compared to the year-ago quarter, group RevPAR rose 6% globally.
Full year 2024 worldwide group revenues were pacing up 9% year-over-year at the end of the first quarter, with a 5% increase in room nights and a 4% rise in average daily rate. Leisure transient accounted for 42% of worldwide room nights in the quarter. Globally, both leisure demand and ADR growth have remained remarkably resilient, driving leisure RevPAR up 4% year-over-year. Business transient, which contributed the remaining 34% of global room nights in the first quarter, had a 1% increase in RevPAR. We are making great progress on the multi-year digital and technology transformation of our three major systems: reservations, property management, and loyalty. Through this transformation, we expect to unlock new revenue opportunities, further strengthen our efficient operating model, enhance Marriott Bonvoy, and elevate the associate and customer digital experience.
We still expect to begin rolling out our new cloud-based systems to properties next year. In the meantime, we're enhancing the digital experiences that matter most to customers, primarily how they shop and book through our channels. We also recently celebrated the five-year anniversary of Marriott Bonvoy, which added nearly 7 million members during the quarter and had around 203 million members at the end of March. Member penetration of global room nights reached record highs in the first quarter, at 70% in the US and Canada, and 64% globally. Since its introduction, Marriott Bonvoy has evolved to become a travel and loyalty platform, encompassing a portfolio of more than 30 brands across nearly 8,900 properties and other travel offerings such as Homes and Villas by Marriott Bonvoy and the Ritz-Carlton Yacht Collection.
Marriott Bonvoy also spans numerous additional collaborations and member benefits, including co-brand credit cards in 11 markets and counting, and access to a broad range of unique, curated experiences through Marriott Bonvoy Moments, including select Taylor Swift Eras Tour concert performances. Looking ahead, we continue to focus on new ways to enhance the platform, and connect with our members in their daily lives and across their traffic journeys. We had a very busy first quarter on the development front. We added a record 46,000 net rooms, growing our distribution by 7.1% compared to the end of the first quarter last year. MGM collection with Marriott Bonvoy has now launched with 16 properties in Las Vegas and other key US cities now available on our system.
While it is still early days, we've been extremely pleased with the initial booking pace and Marriott Bonvoy room contribution, which have both outpaced expectations. While the financing environment in the US and Europe is still challenging, we have strong momentum in global signings after a record 2023 and have tremendous optimism for the full year. Both Greater China and APEC had notable deal production in the first quarter. Year-over-year, our open and pipeline rooms grew 6.7%, excluding the addition of our 17,000 City Express rooms. Conversions, including multi-unit opportunities, continue to be a meaningful driver of growth, representing 30% of global signings in the first quarter. Our new midscale brands, City Express by Marriott, Four Points Express, and StudioRes, are seeing significant developer interest.
Earlier this year, we signed our first City Express deal in the region since acquiring the brand, and we are in multiple deal discussions for other properties across the CALA region. We have also now opened our first Four Points Express in Turkey, and have other properties in the pipeline. We also recently signed our first midscale deal in the APEC, a portfolio of more than a dozen hotels that are expected to be added to our system later this year. In the US and Canada, we have commitments for around 140 StudioRes properties and are actively working on deals for over 100 more. Additionally, in about a month, we look forward to unveiling details on our next exciting brand launch, a conversion friendly midscale brand in the region. As always, I've spent much of my time this year traveling around the world.
It's been a pleasure to visit many of our amazing hotels and speak with our incredible associates. I want to express my gratitude to all of our associates for their continued hard work and dedication. As Leeny will now discuss further as part of her financial review, we are raising our full year 2024 earnings and capital returns guidance on the back of the strength of our diverse global portfolio, the continued resilient and steady demand for travel, our strong international performance, and our continued rooms growth. Leeny?
Leeny Oberg: Thank you, Tony. Our first quarter global RevPAR rose 4.2%. RevPAR in the US and Canada, where demand has normalized, rose 1.5%. Growth in the US and Canada was led by strong growth in large corporate business with our Top 100 accounts seeing the most sequential improvement in eight quarters. Leisure RevPAR was flat in the US and Canada with more customers going abroad to find warmer weather. Our quarterly RevPAR result in the region was impacted by negative growth in March due to the timing of Easter, given less business in group travel the week before the holiday. The impact on the month's RevPAR was roughly negative 300 basis points. Of course, we expect a similar favorable impact in April's RevPAR. First quarter international RevPAR increased 11%.
Growth was led by a remarkable 16.5% RevPAR gain in APEC, helped by strong macro trends, sustained leisure and business growth, and an uptick in cross-border demand, especially from Mainland China, as international airlift improved. RevPAR in CALA rose nearly 12% in the quarter with excellent leisure demand coming from the US. RevPAR grew 10% in EMEA with strong growth across most of our largest markets. Greater China experienced a 6% increase in RevPAR. While growth was strong in January and February, rising 10% for those two months, demand weakened a bit after the Chinese New Year, with slower macroeconomic growth and more outbound travel, especially from high-income travelers. First quarter total gross fee revenues were above our expectations, rising 7% year-over-year to $1.21 billion.
The increase reflects higher RevPAR, rooms growth, and 10% higher co-brand credit card fees. Global card acquisitions grew 18% and card spend rose 10%, driven by significant growth in our international card programs. Incentive management fees, or IMFs, rose 4%, reaching $209 million in the first quarter. Significant increases in each of our international regions were offset by a decline in the US and Canada, in part due to lower fees in [indiscernible]. First quarter adjusted EBITDA grew 4% to nearly $1.14 billion. Now, let's talk about our outlook for the full year. Our 2024 outlook still assumes continued sturdy travel demand and a continuation of current macroeconomic trends. Global RevPAR is expected to grow 4% to 5% in the second quarter, and 3% to 5% for the full year.
By customer segment, RevPAR growth is still anticipated to be driven by another year of strong growth in group revenue, continued improvement in business transient revenues, and slower, but still growing leisure revenues. RevPAR growth is expected to remain higher in our international markets than in the US and Canada. While our full year global RevPAR guidance is not changing compared to our prior expectations, we now expect higher year-over-year RevPAR growth in APEC, EMEA, and CALA and lower RevPAR growth in the US and Canada and Greater China. As a result, we are raising our full year adjusted EBITDA and adjusted EPS expectations, primarily due to higher IMFs from our international regions. In the second quarter, RevPAR growth benefits from Easter timing, fee growth is expected to be in the 7% to 8% range.
Our owned, leased, and other revenues net of expenses are anticipated to be lower than the prior year, largely as a result of a few favorable items in the year-ago quarter. For the full year, gross fees could now rise 7% to 9% to $5.2 billion to $5.3 billion with non-RevPAR-related fees rising 9% to 10%, driven by strong credit card and residential branding fee growth. The sensitivity of a 1% change in full year 2024 RevPAR versus 2023 could be around $50 million to $60 million of RevPAR-related fees. Owned, leased and other revenues, net of expenses, could now total $335 million to $345 million. We now expect 2024 G&A expense could rise 1% to 3% year-over-year. Recall that there are a few discrete one-time items from 2023 that are expected to offset wage and benefit increases.
Full year adjusted EBITDA is now expected to rise between 7% and 9% to roughly $5 billion to $5.1 billion. Our 2024 effective tax rate is expected to be just above 25%. 2024 adjusted EPS is now expected to be between $9.31 and $9.65. We still anticipate net rooms growth of 5.5% to 6% for the full year. Additionally, we remain confident in the three-year net rooms compound annual growth rate we discussed at last year's investor meeting of 5% to 5.5% from year-end 2022 to year-end 2025. For more details on second quarter and full year metrics, please see our press release. Our capital allocation philosophy remains the same. We're committed to our investment-grade rating, investing in growth that is accretive to shareholder value, and then returning excess capital to shareholders through a combination of a modest, but rising cash dividend and share repurchases.
For 2024, factoring in the $500 million of required cash in the fourth quarter for the purchase of the Sheraton Grand Chicago, given our higher adjusted EBITDA expectation, capital returns to shareholders could now be between $4.2 billion and $4.4 billion. Full year investment spending is still expected to total $1 billion to $1.2 billion. This includes another year of higher-than-historical investment in technology, the vast majority of which is expected to be reimbursed over time. As a reminder, the $500 million for the Sheraton Grand Chicago consists of $200 million of CapEx and $300 million elimination of a previously recorded guarantee liability. Investment spending is also expected to incorporate roughly $200 million for our owned lease portfolio.
It includes spending for the Elegant portfolio in Barbados as well as the renovations for the fabulous W Union Square in Manhattan. We'll ultimately look to recycle these assets and sign long-term management contracts after renovations are complete. Tony and I are now happy to take your questions. Operator?
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