How Marriott is ‘attacking’ the franchise model

BETHESDA, Maryland — When asked during Marriott International’s Q4 2025 earnings call about the current economic model for owners and how the company is making the math pencil for both existing and potential franchisees, Anthony Capuano had to admit that the brand companies and hotel owners are still at dramatically different stages of post-COVID recovery.

“The reality is, while you've seen tremendous performance from the big global brand companies, we recognize and focus every day on the fact that the owner and franchise community is at a different stage in their recovery from the damage done by the pandemic,” he said.

That means Marriott is constantly thinking about examining and “attacking” every variable in the equation that drives owner returns, Capuano said.

“We have got to do everything in our power to ensure that those returns recover and recover quickly,” he said. “We'll continue to look at every aspect of the affiliation costs and see what we can do to try and drive margins.”

We have got to do everything in our power to ensure that those returns recover and recover quickly. We’ll continue to look at every aspect of the affiliation costs and see what we can do to try and drive margins.

Anthony Capuano

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Capuano said that also means that Marriott is, in some ways, open to “looking with a blank sheet of paper” at the entire hotel operating model.

“[That includes] the services we provide, the staffing models that we use, how we schedule, how we purchase,” he said. “All of the things that influence the profitability at the property level are being evaluated.”

Marriott saw overall RevPAR grow 1.9% in Q4, powered by international growth despite stagnant growth in the U.S. and Canada (RevPAR in Q4 grew 6% internationally and dropped 0.1% in the U.S. and Canada). For full-year 2025, Marriott saw 2% RevPAR growth, with 5.1% growth internationally and a 0.7% increase in the U.S. and Canada.

Capuano said global RevPAR in December was 2.8%, the strongest year-over-year monthly growth since last February. Not surprisingly, that growth was led by strong leisure demand, particularly for Marriott’s luxury and resort hotels. He said Q4 RevPAR was strongest in APEC (up nearly 9%) and EMEA (up 7%, including 17% growth in the UAE).

Capuano said growth in the U.S. and Canada was flat with luxury driving gains, offset by declines in the select-service tier leisure transient, largely due to a meaningful decline in government RevPAR in the quarter (down over 30% during the 43-day US government shutdown).

NUG driven by conversions

Net unit growth was 4.3% year-over-year for the full year 2025, with approximately 1,200 development deals and about 163,000 rooms signed globally, of which over 30% were conversions.

Capuano said it’s a combination of factors that gives him confidence about continued momentum going forward in conversions. He said part of it is the selection of conversion brands Marriott has right now, but another is the speed the company can get conversions through its system, noting that 75% of Marriott’s conversions open within 12 months of signing.

“The organization has rallied around a level of creativity in terms of how we both identify and close transactions for conversions and how we get them open,” he said.

Marriott CFO Leeny Oberg, serving in her final earnings call before retiring in March, said the company has seen “a bit” more key money required across all tiers to help get some deals done, especially at the higher end of the chain.

We don’t have an issue with having to constrain key money when we have great deals come to us. We have, as you know, the free cash flow to absolutely go and spend it however... So that financial discipline to make sure that we're getting great ROI is very important overall.

Leeny Oberg

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“We also have a distinctly strong pipeline in luxury and full service, which at the margin tends to have a bit more key money, but generates meaningfully higher fees and NPV from that perspective,” she said. “When I look at the overall new development, the [key money] numbers relative to last year for new development are not meaningfully different.

“We don't have an issue with having to constrain key money when we have great deals come to us. We have, as you know, the free cash flow to absolutely go and spend it however,” she said, noting that deals where Marriott uses key money historically have yielded more value than deals without key money. “So, that financial discipline to make sure that we're getting great ROI is very important overall.”

Capuano said that while the aggregate amount of key money Marriott used may have increased, the amount per deal signed last year was lower than in 2019 and about flat with 2024.

“That's a good illustration of the continued discipline we apply to the deployment of capital,” he said.

Other results

Marriott also issued full-year 2026 guidance, including worldwide RevPAR growth of 1.5-2.5% and net unit growth of 4.5-5%. The guidance also included 2026 gross fee revenue growth of $5.895-5.955 billion and adjusted EBITDA growth of 8-10%.

R.W. Baird analyst Michael Bellisario said Marriott’s earnings were incrementally positive on the better-than-expected international performance.

“All the focus will be on Marriott's 2026 guidance, in our view, which is well above Baird/Street expectations, particularly gross fee revenues and adjusted EBITDA (both +3% versus estimates). The upside variance is due to better co-branded credit card fees from higher assumed spending and a higher royalty rate earned (not from incremental economics due to a renewal, negotiations for which remain ongoing, according to Marriott).”

Analyst Patrick Scholes of Truist Securities said his company sees upside in Marriott’s earnings primarily from the announcement of its 35% YOY growth in co-branded credit card fees.

“[This is] a material acceleration from what we believe was a high single-digit growth rate of the past two years and this without an announced new credit card deal,” he said.