China rebound has fits and starts; group business continues
to drive performance; interest rate uncertainty has less of an impact; strong
dollar bodes well for international markets.
Marriott International President and CEO Tony Capuano and
CFO/EVP of Development Leeny Oberg offered some interesting global color during
their first quarter earnings call on Wednesday, specifically as it relates to
performance momentum in China, group business trends and the ongoing impact of
interest rate uncertainty on pipeline.
Bigger picture, 1Q24 global RevPAR came in at +4.2% year-over-year
(YOY) with ADR increasing around 3% and occupancy reaching almost 66%, up nearly
100 basis points YOY.
Group business, which comprised 24% of global room nights in
the first quarter, was again the strongest customer segment. Compared to the
year ago quarter, group revenue rose 6% globally and full year 2024 worldwide
group revenues were pacing up 9% YOY at the end of the first quarter with a 5%
increase in room nights and a 4% rise in ADR.
Oberg said group business from finance companies was up 8%
relative to 2019 with addition momentum company from the manufacturing and
communication sector. Additionally, while accounting consulting and technology
are still down meaningfully compared to 2019, they also continue to see
meaningful momentum into 1Q24, she added.

Right now, we’re tracking up about 13% [in 2025 group pace], driven by both gains in demand and ADR. We’re up about 7% in definite rooms and about 5% in ADR.
Tony Capuano
Capuano also offered some visibility into group pace in
2025. “Right now, we’re tracking up about 13%, driven by both gains in demand
and ADR. We’re up about 7% in definite rooms and about 5% in ADR,” he said.
Business transient, which contributed 34% of global room nights
in the first quarter, had a 1% increase in RevPAR.
Marriott Bonvoy contribution reached record 1Q levels in
the U.S. and Canada (70% of room nights) and globally (64%).
International markets strong
Fully, 1.5% RevPAR growth in 1Q24 in the U.S. and Canada was
led by strong group and large corporate business with Marriott’s top 100
accounts seeing the most sequential improvement in eight quarters. Leisure was
flat in the U.S. and Canada with more customers going abroad to find warmer
weather.
More noteworthy was a 1Q24 RevPAR increase of 11% from
international markets, led by a remarkable 16.5% gain in Asia Pacific, excluding
China, led 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 strong leisure
demand coming from the U.S., while EMEA witnessed 10% RevPAR growth YOY with
strong growth 10% across most of the largest markets.
Even Greater China experienced a 6% increase in RevPAR with 10%
growth in January and February followed by weakened demand after the Chinese
New Year combined with slower macroeconomic growth and more outbound travel,
especially from high income travelers, according to Oberg.
Understanding China today
Interestingly and diving deeper into China demand and growth,
Oberg said that macros are having absolutely no impact on the development side.
“We actually had a tremendous quarter of signings in Greater China, as well as
APAC for that matter,” she said. “So, there’s really excellent continued demand
for our brands and from owners there.”

Overall, we had still really strong RevPAR for Greater China at 6%. For the full year, we still expect nice, strong RevPAR for Greater China. Yes, there is a bit of a view that the macroeconomic situation there may mean that RevPAR is a little bit lower than we expected a quarter ago.
Leeny Oberg
On China performance, Oberg said there was really strong
domestic demand coming in January and February, and with the Chinese New Year.
She also pointed to Hainan Island, which saw “stunning” increase in demand last
year in 1Q23 coming out of COVID, but while there was a decline in YOU RevPAR
in 1Q24, demand remained very strong.
“In Hong Kong and Macau, with much more relaxed restrictions,
we had almost 30% increase in RevPAR in 1Q24,” Oberg added. “In Tier 1 cities
(Shenzen, Shanghai, Beijing), we were very strong, too.”
In March, however, Oberg said the newer Tier 1 were seeing
the impact of the overall macroeconomic picture in China. “It wasn’t quite as
strong as we might have expected,” she said. “But again, overall, we had still
really strong RevPAR for Greater China at 6%. For the full year, we still expect
nice, strong RevPAR for Greater China. Yes, there is a bit of a view that the
macroeconomic situation there may mean that RevPAR is a little bit lower than
we expected a quarter ago.”
Capuano referenced recently being in Shenzhen, Hong Kong and
Macau. “While it certainly does not feel as balanced and populated with
international visitors as maybe we’re accustomed to in a pre-pandemic world, it
felt better than when I was there a year ago,” he said. “In fact, if you look
at the first quarter, international guests represented about 15% of our room nights
in Greater China. That compares to about 28% in the same quarter back in 2019.
So, it’s improving steadily and the availability of airlines seats is improving
steadily. Over time, that represents some additional upside for us as more and
more international visitors return to China.”
Sturdy 2024
For the full year, the 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 segments, RevPAR growth is still anticipated to be driven by
another year of strong growth in group revenues, continued improvement in
business transient revenues, and slower but still growing leisure revenue.
Oberg added that Marriott now expect higher RevPAR growth in
Europe, APAC and CALA, and lower RevPAR growth in the U.S., Canada and in
Greater China.
Marriott still anticipates rooms growth of 5.5% to 6% for
the full year. Additionally, Oberg added that Marriott remains confident that
the three-year net rooms compound annual growth rate will be 5% to 5.5% from
year-end 2022 to year-end 2025.

The thing that was really encouraging to me, if you look at the pipeline, and just compare 1Q24 and 1Q23 because it's a decent apples-to-apples comparison [minus the MGM room adds], we’re up 9% year over year on the pipeline.
Tony Capuano
On Wednesday’s call, Capuano added that Marriott will launch
a global, conversion-friendly midscale brand in about a month.
Encouraging pipeline
When asked about developers’ mood with continued delays in
interest rate cuts, Capuano said that while he agrees uncertainty does not help
development, he said trends in pipeline growth are encouraging.
“The thing that was really encouraging to me, if you look at
the pipeline, and just compare 1Q24 and 1Q23 because it's a decent apples-to-apples
comparison [minus the MGM room adds], we’re up 9% year over year on the
pipeline,” he said.
Oberg added that while there is still a constrained lending
environment, particularly in the U.S. and Europe, there is more confidence and
a steadier economic picture leading to an increase in construction starts in
the U.S. at about 25% YOY. “We’re seeing a nice pickup as people start to move
forward and look at a more positive environment where there is perhaps not
quite as much volatility... We added 31,000 rooms to our pipeline in the first
quarter and really had strong momentum around the world in terms of developer
interest across all brands.”
Lastly, the impact of the strong U.S. dollar was discussed,
and Capuano said Marriott is definitely seeing more strength in international
markets for exactly that reason.
Capuano referenced how 2024 is a year of cooperation between
U.S. and Japan tourism and how in a recent conversation the Japanese ambassador
told him about extraordinarily strong U.S. visitation to Japan. “And maybe
innocently, I asked him how we can draw drive strong Japanese visitation to the
U.S.,” Capuano continued. “And his response was ‘well, he can weaken the dollar
against the yen.’ So, I do think it’s a relevant data point and it bodes well
for our international distribution. That is reflected in our guidance.”
That said, Oberg reminded that U.S. domestic travel has been
remarkably consistent over time and remains so at 95% of business. “So, we
aren't seeing U.S. business really suffering from everybody leaving the U.S. I
think it is more the reality of global growth travel, in general,” she said.