‘Steady as she goes’ for Marriott

BETHESDA, Maryland – Considering the choppy economic data impacting the global economy, Marriott International leadership during their 1Q25 earnings call sounded pretty bullish about near term prospects after reporting strong 1Q25 global RevPAR growth of 4.1% with the U.S. and Canada coming in better than expected at +3.3% with luxury and full-service hotels outperforming select-service properties.

While it guided marginally lower for full-year 2025, mostly due to expected continued reduced government nights, there was buoyancy in demand with each region of the world outperforming expectations.

Capuano noted that while government business is very soft, the big consulting firms, which have been some of the biggest laggers in post-COVID recovery, provided a nice pickup in first quarter business.

We are not assuming a recession scenario and we expect to continue to see pretty solid demand on a global basis and for more weakness in the U.S. and Canada. The 50-basis point reduction in guidance really is reflective of these comments, which is tougher visibility into the back half of the year given the relatively short booking window.

Tony Capuano

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Development activity remained robust with record first quarter global signing, and Marriott grew net rooms 4.6% over the trailing 12 months through March.

For the quarter, ADR was up 3% and was occupancy up one percentage point system-wide. After strong results in January and February, Marriott’s March performance was much weaker with President and CEO Tony Capuano citing the “shock and awe” of the new U.S. administration’s governmental layoffs and announced tariffs.

However, CFO and Executive Vice President of Development Leeny Oberg quickly suggested that by normalizing March and April results by excluding the impact of Easter, Marriott witnessed a sequential improvement over those two months, “which is encouraging.” Backing out Easter, RevPAR in March and April was up about 1% (year-over-year) in the U.S. and Canada, she said.

“The hope, embedded in our assumptions, is steady as she goes,” Capuano added. “We are not assuming a recession scenario and we expect to continue to see pretty solid demand on a global basis and for more weakness in the U.S. and Canada. The 50-basis point reduction in guidance really is reflective of these comments, which is tougher visibility into the back half of the year given the relatively short booking window.”

Oberg also said Marriott experienced weaker select-service and extended-stay demand in the U.S. in March, mainly driven by lower leisure transient demand, given the less certain macro environment. “Notably, the uncertainty did not impact results in our higher chain scale hotels, and we did not see signs of trade down from our higher-end customers during the quarter,” she said.

Globally, group was again a standout customer segment with RevPAR up 8% globally and in the U.S.

Looking ahead to 2026 on group business, Marriott is tracking up about 7% — reasonably well split between occupancy and average rates, according to Capuano.

First quarter business and leisure transient each grew 2% globally and 1% in the U.S., with growth driven by ADR increases.

International results

International RevPAR strength, up nearly 6% led by growth in APEC, and higher gross fees led Marriott International’s earnings beat, but 2Q25 guidance was slightly below consensus and the full-year outlook was off modestly with Adjusted EBITDA down just over 1% versus prior forecasts.

APEC was, in fact, the star performer with first quarter RevPAR up 11% driven by strong ADR growth and higher demand from international guests. Growth was broad based across the region with RevPAR increases of 16% and 17% in India and Japan, respectively.

The fact that the market is being so driven by domestic Chinese demand, and the way that we’re performing there, I think, is reflective of the manner in which that domestic Chinese traveler has embraced our portfolio.

Tony Capuano

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CALA RevPAR rose 7% led by strong luxury and resort results. EMEAA RevPAR jumped 6% on solid increases in ADR as well as occupancy with strong transient demand from both in country and cross border.

First quarter RevPAR in Greater China declined 2% due to the weaker macro environment and tough year-over-year comparisons, though it did come in ahead of Marriott’s prior expectation primarily as a result of strong domestic demand.

When asked about potential geopolitical fallout in China, Capuano wasn’t too concerned, suggesting Marriott is woven into the economy there with 600-plus hotels in operation, almost the entirety of its more than 400 hotel pipeline Chinese owned and a vast majority of associates domestic.

“I don’t think there is a view that we are just a big American company,” he expanded. It is viewed, in many ways, as a Chinese business. The fact that the market is being so driven by domestic Chinese demand, and the way that we’re performing there, I think, is reflective of the manner in which that domestic Chinese traveler has embraced our portfolio.”

Pipeline update

While Marriott marginally lowered its 2025 RevPAR guidance range, it still expects strong net rooms growth for the year, and the future.

First quarter signings were up 35% year-over-year and the pipeline hit more than 587,000 rooms at the end of the quarter, with 42% of pipeline rooms under construction.

Eventually we’ll see more availability of new construction debt. My expectation, however, is you won’t see the same sort of parallel slowdown in conversions.

Tony Capuano

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Conversions, including multiunit opportunities, remain a significant driver of growth, representing about one-third of both signings and openings in the quarter. Capuano added that he is optimistic about global conversion volume being more of a steady state, as opposed to a cyclical component of their growth story.

“Eventually we’ll see more availability of new construction debt. My expectation, however, is you won’t see the same sort of parallel slowdown in conversions,” Capuano said. He cited as reasons historically low levels of incremental new supply growth in the U.S. and a subset of Marriott brands that are really well suited to conversions.

He added that Marriott has development teams with resources specifically focused on conversions – not just individual asset conversions, but portfolio conversions, where they’ve had a really strong run.

Capuano also said they see a large global runway for growth for the newly acquired citizenM brand.

“There’s enthusiasm about the positioning of the brand,” Capuano added. “As we talk with the owners of citizen, the thing I believe they found so intriguing about this partnership is the ability to plug into Leeny’s extraordinarily strong network of developers around the world and really accelerate the growth of the platform the way they always envisioned.”

Looking closer at growth prospects, especially on the full-service side, Capuano said the most encouraging metric was Marriott signing more rooms in 1Q25 than any Q1 in its history.

“The vast majority of our owner-franchisee community are long-term investors in the sector they are not necessarily getting spooked by some of this short-term turbulence,” he said. “They’re excited, particularly here in the U.S. and Canada, about a continuation of historically low additions to supply and what that means for them in terms of opportunities. They are, to be sure, a bit frustrated about the relative lack of availability debt financing for new construction, but they are quite bullish on the long term.”

Oberg said that Marriott expects conversions to remain around 30% of the pipeline, adding that while owners are evaluating what’s going on with their construction costs, they haven’t seen the pace of construction starts drop.

As Marriott’s system grows, Capuano added that it is not unreasonable to assume that the absolute amount of key money they put out will go up. Interestingly, he added, in 2024 the average amount of key money per deal came down.