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    MAR
    Earnings call· Mar 2025(Q1 FY25)

    MARRIOTT INTERNATIONAL INC /MD/ Q1 FY25 earnings call MAR

    May 6, 2025 Source

    Executive summary

    Marriott Q1 FY25 — Strong International RevPAR and Record Pipeline Signings Despite US Softness

    Marriott delivered strong first-quarter results, exceeding expectations with robust international RevPAR growth and record development activity. Despite an uncertain macroeconomic environment, particularly in the U.S. & Canada, the company is leveraging its global portfolio and loyalty program. The full-year outlook was adjusted to reflect U.S. softness, but long-term growth strategies remain on track, supported by the upcoming citizenM acquisition and digital transformation.

    Highlights

    5

    • Global RevPAR increased 4.1% in Q1 FY25, just above the guidance range, driven by 3% ADR growth and 1 percentage point occupancy rise.

    • Record first quarter global signings were up 35% year-over-year, contributing to a pipeline of over 587,000 rooms.

    • Net rooms grew 4.6% over the trailing 12 months through March, with full-year 2025 net rooms growth expected to approach 5% with citizenM.

    • International RevPAR rose nearly 6%, led by APAC at 11% growth, with India and Japan seeing 16% and 17% increases respectively.

    • Marriott Bonvoy loyalty program reached nearly 237 million members by end of March, with member penetration hitting a record 68% of room nights globally.

    Concerns

    3

    • Full-year RevPAR growth guidance was lowered by 50 basis points to 1.5% to 3.5% due to a more cautious outlook in the U.S. & Canada region.

    • U.S. & Canada region saw softer RevPAR growth in March, particularly in the select-service segment, and a 10% year-over-year decline in U.S. government RevPAR.

    • Greater China RevPAR declined 2% in Q1 FY25 due to a weaker macro environment and tough year-over-year comparisons.

    Guidance & targets

    22
    CategoryTargetConfidence
    Global RevPAR growth
    1.5% to 2.5%
    high materiality
    Medium
    Global RevPAR growth
    1.5% to 3.5%
    high materiality
    Medium
    Gross fee revenues
    3% to 4% range
    medium materiality
    Medium
    Adjusted EBITDA growth
    3% to 5%
    high materiality
    Medium
    Gross fee revenues
    $5.4 billion to $5.5 billion
    high materiality
    Medium
    Incentive management fees (IMF)
    relatively in line with last year
    medium materiality
    Medium
    Co-brand credit card fee growth
    a couple of hundred basis points lower than the nearly 10% growth in 2024
    medium materiality
    Medium
    Residential branding fees
    decline nearly 50%
    medium materiality
    Medium
    Timeshare fees
    around $110 million
    medium materiality
    Medium
    Owned, leased and other revenue, net of expenses
    $345 million to $355 million
    medium materiality
    Medium
    G&A expense decline
    8% to 10%
    medium materiality
    Medium
    G&A expense
    $965 million to $985 million
    medium materiality
    Medium
    Adjusted EBITDA growth
    6% to 9%
    high materiality
    Medium
    Adjusted EBITDA
    $5.3 billion to $5.4 billion
    high materiality
    Medium
    Adjusted diluted EPS
    $9.82 to $10.19
    high materiality
    Medium
    Effective tax rate
    around 26%
    medium materiality
    Medium
    Underlying full year core cash tax rate
    low 20s percent range
    medium materiality
    Medium
    Net rooms growth
    approach 5%
    high materiality
    Medium
    Long-term global net room growth
    mid-single-digit range
    high materiality
    High
    Total investment spending
    $1.36 billion to $1.46 billion
    medium materiality
    Medium
    Capital returns to shareholders
    around $4 billion
    high materiality
    Medium
    Net debt-to-EBITDA range
    3 to 3.5x
    medium materiality
    Medium

    Segment performance

    12
    SegmentRevenueYoYQoQMargin
    Global
    RevPAR just above the top end of 3% to 4% guidance range.
    ADR increase: 3%Occupancy increase: 1 percentage point
    		—4.1%——
    U.S. & Canada
    Luxury and full-service hotels meaningfully outperformed select service properties. March saw softer growth, particularly in select-service segment.
    		—3%——
    International
    Led by growth in APAC. Demand trends remained strong in all regions except Greater China.
    		—6%——
    APAC
    Driven by strong ADR growth and higher demand from international guests. Broad-based growth.
    		—11%——
    India
    One of APAC's two largest markets.
    		—16%——
    Japan
    One of APAC's two largest markets.
    		—17%——
    CALA
    Led by strong luxury and resort results.
    		—7%——
    EMEA
    Solid increases in ADR and occupancy with strong transient demand.
    		—6%——
    Greater China
    Due to weaker macro environment and tough year-over-year comparisons, but came in ahead of prior expectation due to strong domestic demand.
    		—-2%——
    Group
    Strongest growth in customer segment, both globally and in the U.S.
    		—8%——
    Business Transient
    Global growth driven by ADR increases.
    		—2%——
    Leisure Transient
    Global growth driven by ADR increases.
    		—2%——

    Operational metrics

    23
    Total gross fee revenues
    $1.28 billion5% year-over-year increase
    Q1 FY25

    Increase reflects higher RevPAR, rooms growth, co-brand credit card fees, and residential branding fees.

    Co-brand credit card fees growth
    8%year-over-year increase
    Q1 FY25

    Contributed to total gross fee revenues increase.

    Residential branding fees
    significant increase
    Q1 FY25

    Related to the timing of unit sales, contributed to total gross fee revenues increase.

    Currency impact on gross fees
    -$8 million
    Q1 FY25

    Negative impact, in line with expectations.

    Incentive management fees (IMF)
    $204 million2% decrease
    Q1 FY25

    Increases in APAC offset by declines in Greater China and EMEA (partly due to conversions from managed to franchise). IMF in U.S. & Canada relatively in line with last year.

    G&A decline
    6%year-over-year
    Q1 FY25

    Primarily due to lower compensation costs.

    Adjusted EBITDA
    $1.22 billion7% increase
    Q1 FY25

    Totaled $1.22 billion.

    U.S. government RevPAR decline
    10%year-over-year
    March FY25

    Primary driver of U.S. demand softness in March.

    U.S. government room nights
    4%
    2024

    Contribution to U.S. & Canada region's room nights.

    U.S. government ADR
    21% lowerthan region's average
    2024

    ADR for U.S. government segment compared to region's average.

    Average booking window for transient customers
    around 3 weeks
    current

    Transient customers represent around 3/4 of total room nights.

    Group pace
    up 6%
    Full Year FY25

    Pacing at the end of March, expected to moderate a bit.

    Group pace
    up 7%
    FY26

    Forward bookings for 2026, reasonably well split between occupancy and average rates.

    Above property savings from enterprise-wide initiatives
    $80 million to $90 million
    FY25

    Expected to yield cost savings to owners and franchisees.

    Investment spending excluding citizenM
    $1 billion to $1.1 billion
    Full Year FY25

    This is the expected total investment spending excluding the citizenM transaction.

    International room night mix
    6%70 basis points higher than full year 2024
    Q1 FY25

    Every month of Q1 saw higher international mix than prior year.

    Canadian inbound room nights
    down 5%
    Q1 FY25

    Impacted, but strong inbound demand from other countries made up for the decline.

    Hotels paying incentive fees
    60%vs 61% a year ago
    Q1 FY25

    Worldwide percentage of hotels paying incentive fees.

    Hotels paying incentive fees
    21%vs 20% a year ago
    Q1 FY25

    Percentage of hotels paying incentive fees in U.S. & Canada, slightly higher YoY.

    Luxury tier rooms
    10%
    current

    Luxury makes up 10% of existing rooms.

    Luxury tier rooms in pipeline
    almost 10%
    current

    Almost 10% of pipeline rooms are luxury hotels.

    Greater China rooms
    10%
    current

    Greater China is 10% of existing rooms.

    Greater China pipeline rooms
    18%
    current

    Greater China is 18% of the pipeline.

    Industry KPIs

    3
    MetricValueDetails
    Comparable sales comps4.1%%
    Group booking pace booking window8%%
    Net unit growth development pipeline4.6%%

    Product announcements

    1
    ProductTypeDetails
    citizenMexpansion

    Deals & partnerships

    1
    citizenMAddition of lifestyle hotel portfolio to Marriott's system.

    citizenM is a differentiated brand with unique characteristics that will complement existing lifestyle select brands (AC, Moxy, Aloft). It is known for its tech-savvy in-hotel experience, efficient use of space, and focus on art and design. Marriott sees a large runway of growth for the brand globally.

    Risks & headwinds

    5
    Uncertain macroeconomic environmentFull Year FY25

    Full-year RevPAR guidance lowered by 50 basis points

    Mitigation: Agility and resilience, focus on driving returns and executing long-term growth strategy.

    Slowing economic activity and lower consumer confidenceQ1 FY25, expected to continue through FY25

    U.S. & Canada RevPAR softer in March, particularly in select-service segment; U.S. government RevPAR down 10% YoY in March

    Mitigation: Monitoring booking trends, not assuming a recession, focusing on strong demand in international regions and higher chain scale hotels.

    Challenging financing environmentOngoing

    Developers frustrated about relative lack of availability in debt financing for new construction

    Mitigation: Owners are long-term investors, bullish on long-term opportunity; Marriott continues to use rigor and discipline in evaluating capital use for growth.

    Construction costsOngoing

    Owners evaluating what's going on with their construction costs and raw materials

    Mitigation: Pace of construction starts has not dropped, but developers are watching closely.

    International tax rate changesFull Year FY25

    Expected effective tax rate of around 26% in FY25, compared to under 25% in 2024

    Mitigation: Factored into EPS guidance.

    What to watch in Q2 FY25

    5

    U.S. & Canada RevPAR growth

    next quarter
    CurrentUp 2% in March (including Easter benefit)
    TargetSequential improvement from March to April (excluding Easter impact) to continue

    Why it matters

    Indicates whether the U.S. market is stabilizing after March softness and if macroeconomic concerns are easing or intensifying.

    While we do not have final results for April yet, it looks like year-over-year RevPAR, excluding the impact of Easter in both months, in the U.S. & Canada improved sequentially from March to April.

    Q&A highlights

    7

    What are the drivers behind the weaker select service performance in the U.S., including regional vs. Easter shift impacts, and how does this relate to the absence of trade-down effects?

    Management noted strong January and February, with March seeing softness in the U.S. & Canada, particularly in select service and government RevPAR (down 10%). They attributed this to initial 'shock and awe' from early administration actions and macroeconomic uncertainty. Preliminary April results showed sequential improvement when normalizing for Easter, and they are not assuming a recession, but rather a continuation of current booking trends with reduced government demand and slower select service growth. They emphasized no signs of trade-down from higher-end customers.

    “The biggest impact of our reduction in RevPAR in the U.S. & Canada for the rest of the year is all about continued reduced government nights.”

    asked by Michael Bellisario · answered by Kathleen Oberg

    2 min read5 chapters

    Detailed Narrative

    01

    Macroeconomic Headwinds and US Performance

    Marriott reported strong Q1 results despite an uncertain macroeconomic environment, particularly in the U.S. & Canada. While January and February were strong, demand in the U.S. softened in March, primarily due to a 10% year-over-year decline in U.S. government RevPAR and lower leisure transient📎 demand in select service and extended stay hotels. The company noted sequential improvement in U.S. & Canada RevPAR from March to April when normalizing for Easter, but the full-year RevPAR guidance was lowered by 50 basis points due to continued reduced government demand and slightly slower growth in U.S. select service.

    02

    International Strength and APAC Leadership

    International markets demonstrated robust performance, with International RevPAR increasing nearly 6% in Q1. APAC was a standout, rising 11% driven by strong ADR growth and higher international demand, with India and Japan seeing 16% and 17% RevPAR increases, respectively. CALA RevPAR rose 7% and EMEA RevPAR increased 6%. Demand trends in all international regions except Greater China have remained strong, and the outlook for international RevPAR has not changed, with full-year growth expected to be meaningfully stronger than in the U.S. & Canada.

    03

    Development Momentum and Pipeline Growth

    Development activity remained robust, with record first quarter global signings up 35% year-over-year. The pipeline reached a record of over 587,000 rooms at quarter-end, with 42% under construction. Conversions, including multiunit opportunities, continue to be a significant growth driver, representing about one-third of both signings and openings in the quarter. The company expects full-year net rooms growth to approach 5%, supported by the upcoming citizenM transaction and continued long-term mid-single-digit growth.

    04

    Digital Transformation and Loyalty Program

    Marriott is making significant progress on its multiyear digital and technology transformation, including new reservations, property management, and loyalty systems. This platform is expected to enhance operational efficiency, strengthen Marriott Bonvoy, and elevate the customer experience, unlocking new revenue opportunities through advanced functionality. The Marriott Bonvoy loyalty program continues to grow, reaching nearly 237 million members with a record 68% penetration of room nights globally, demonstrating strong member engagement.

    05

    citizenM Acquisition and Strategic Expansion

    The company announced the expected addition of the citizenM lifestyle portfolio to its system later this year. This transaction will add over 8,500 open rooms and 600 pipeline rooms, complementing existing lifestyle select brands like AC, Moxy, and Aloft. citizenM's tech-savvy in-hotel experience and focus on art and design are seen as having a large runway for global growth, further expanding Marriott's industry-leading portfolio.

    AI-generated summary of the company’s earnings call. Not investment advice.