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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Q&A Session

Operator: At this time, the floor is now open for questions. [Operator Instructions] Our first question comes from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley: Hi. Good morning, everyone. Thanks for taking my questions. Leeny or Tony, I’d love to dig in actually on China a little bit. I thought the comment in Leeny’s prepared remarks about a little bit of the slowdown you’re seeing there was incremental. So, my questions are twofold. One, are you seeing that continue at all into April? If you could give us just kind of a little bit of a real-time feel? And Tony, I’m sure you’ve probably been over that region, so maybe if you could help us break it down by, is this in Hong Kong, Macau, or is this sort of more broadly across some of the cities? And then, secondarily, probably as importantly, is any of this translating into what you’re seeing on the development front? Thank you very much.

Leeny Oberg: So, let me answer the latter part first because that’s very easy to point out and that is absolutely no impact on the development front. Matter of fact, as Tony pointed out, we actually had a tremendous quarter of signings in Greater China in the first quarter as well as APEC for that matter. So, really excellent continued demand for our brands and from owners there. Q1 was a little interesting in Greater China, Shaun, a little bit of a tale of each month. And from that standpoint, you had a really strong domestic demand coming in January and February, and with the Chinese New Year, but also reflecting the fact that last year, in Q1, for example, Hainan was seeing stunning increase in demand, all domestic, as they were coming out of COVID.

So, when you think about it for the full quarter, Hainan actually had a decline in RevPAR year-over-year, although, very strong demand. And in Hong Kong and Macau, with much more relaxed restrictions, we had almost 30% increase in RevPAR in Q1. So, super strong. The Tier 1 cities were very strong, classic Shenzhen, Shanghai, Beijing, they did really well. It’s really where we saw interestingly in March, the new Tier 1 cities is where I think you were seeing the impact of the overall macroeconomic picture in China, where it wasn’t quite as strong as we might have expected. But again, overall, still really strong RevPAR for Greater China at 6%. And again, for the full year, we still expect nice strong RevPAR for Greater China, but yes, 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.

Tony Capuano: And Shaun, the only maybe qualitative observation I would share with you, and I’ll try to underpin it with one statistic, I was there recently, I was in Shenzhen, I was in Hong Kong, and I was in Macau. And while it certainly does not feel as balanced and populated with international visitors as maybe we were accustomed to in a pre-pandemic world, it felt better than when I was there a year ago. And 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 is improving steadily and the availability of airline seats is improving steadily. But I think over time, that represents some additional upside for us as more and more international visitors return to China.

Shaun Kelley: Thank you so much.

Tony Capuano: Of course.

Operator: Thank you. Our next question will come from Stephen Grambling with Morgan Stanley. Please go ahead.

Stephen Grambling: Hey there. Would love to just clarify a couple of things on the guidance. On the fee increase to the guidance, is that all IMFs, or is there any change as we think about non-RevPAR-related contributions? And then, I would love to just hear some of the moving parts for the increase on the owned and lease side too.

Leeny Oberg: Yeah, sure, absolutely. So, again, I’ll do one of the last ones first, and that is, this does not — this increase in fees does not reflect an increase in the non-RevPAR-related fees. We still do expect really strong growth as we talked about the 9% to 10% year-over-year in those fees, but not an increase in those from our prior guidance. I would say, Stephen, it’s about 75% of the increase is from IMFs, really overwhelmingly essentially entirely from our international markets. Just to give you a sense, a year ago in the first quarter, international was 58% of our IMFs. And this year in the first quarter, it was 64%. And again, just as an example, in APEC, 90% of our managed hotels paid IMF in the first quarter and in CALA, it was almost 80%.

So, they both saw some really nice increases. So, we clearly outperformed particularly in the IMF space. The remainder of the growth is really a reflection of non-RevPAR-related growth fees. For example, when you have in international and hotels, very strong food and beverage sales, et cetera, where we’re also getting fees as well as the ramp-up of our fast-growing segments in Asia Pacific. When you think about a new hotel that’s ramping up, we’re getting nice fee growth there as well, but 75% is really from the IMFs, and obviously, including the outperformance in Q1.

Stephen Grambling: Got it. That’s helpful. I’ll jump back in the queue. Thank you.

Operator: Thank you. Our next question comes from Joe Greff with JPMorgan. Please go ahead.

Joe Greff: Good morning, everybody.

Tony Capuano: Hi, Joe.

Joe Greff: Leeny — hi, Tony. Leeny, in your prepared remarks, you went through the three main customer segments going through your full year ’24 outlook. And you talked about leisure seeing slow, but still positive RevPAR growth. I think that was on a worldwide global basis. What’s baked in for US leisure RevPAR growth for the balance of the year?

Leeny Oberg: So, generally speaking, we do see leisure, relatively speaking, at the lower end of the growth, but still being positive, but I would put it towards the lower end. Group is going to be the home run hitter, again, for the full year. We do see BT being up as well and continuing to progress. As you know, Joe, in Q1, obviously, BT was weaker because of the month of March, but when we look at it overall for the year, we do expect BT to continue to gain ground. And if I can, I’m going to go back for one second and ask — answer Shaun’s question on owned/leased, which the increase in guidance there is overwhelmingly from a stronger performance in our international owned/leased hotel portfolio. Sorry, Joe, I’m going to hijack your question there to make sure I answer what I was asked before.

Tony Capuano: And I think, Joe, to further answer your question, the differences we’re seeing in leisure in the US and Canada relative to global leisure are broadly reflective of demand patterns we’re seeing across segments. If you look at the guidance we’re giving, we’re not changing our RevPAR guidance, but it’s shifting a little bit. We’re seeing a little more normalization in the US and Canada, but continued increases in strength in the international markets, and I think that applies specifically to your question on the leisure.

Joe Greff: Great. And then, Tony, I think in your prepared comments, you were talking about the MGM licensing deal. I think you used the words extremely pleased and it’s outpacing expectations. Can you talk a little bit what that specifically means and maybe kind of throw, I don’t know, if it’s adoption measures or share of occupancy? Any kind of details would be helpful.

Tony Capuano: Yeah, not yet, Joe. I mean, I think it’s so early. We just brought them on the platform. So, it’s more anecdotal than anything else. My guess is Bill and our friends at MGM will talk about it from their perspective as well. But having done these sorts of deals over the years, both parties have expectations about how quickly we’ll start to get traction on booking volumes and Bonvoy penetration, and we make some assumptions as we do those deals, and I think it’s safe to say from Marriott’s perspective, those expectations have been exceeded in the early days.

Joe Greff: Great. Thanks very much.

Tony Capuano: Of course.

Operator: Thank you. Our next question will come from Patrick Scholes with Truist Securities. Please go ahead.

Patrick Scholes: Great. Thank you. Wonder if you can talk a little bit about how 2025 and 2026 group revenue pace is looking, maybe break that out both by occupancy and ADR, certainly seeing a very good group business this year, but comps do get harder going forward, and I’m curious if you could give us some color on the future years for that segment. Thank you.

Tony Capuano: Yeah. So, Patrick, it’s early to start talking about 2026, but I’ll try to give you some visibility into group pace in 2025. Right now, we’re tracking up about 13% and it is driven by both gains in demand and ADR. We’re up about 7% in definite rooms and up about 5% in ADR.

Patrick Scholes: Okay. Thank you.

Tony Capuano: You’re welcome.

Operator: Thank you. Our next question will come from Brandt Montour with Barclays. Please go ahead.

Brandt Montour: Good morning, everybody. Thanks for taking my question.

Tony Capuano: Good morning.

Brandt Montour: So, I wanted to talk — good morning. I wanted to talk a little bit about construction activity. Your pipeline went up, looks like, nicely quarter-over-quarter if you back out MGM out of the construction pipeline. And so, I guess, Tony, is there a sense that there’s been any change in the developer mood with this sort of latest notion that the Fed could be on hold for longer, and maybe you could talk through the lens of US starts?

Tony Capuano: Sure. So, maybe I’ll go — I’ll follow Leeny’s trend of going in reverse order. I’ll talk a little bit about the pipeline and then let Leeny provide some insights on both developer sentiment and construction starts. I agree with your observation. I think the trends on the pipeline are really encouraging. And the thing that was really encouraging to me, if you look at the pipeline and just compare Q1 ’24 to Q1 ’23, because it’s a decent apples-to-apples comparison because neither of those would have had MGM, we’re up 9% year-over-year on the pipeline. And I think that’s reflective of some of the broad trends that Leeny described in her prepared remarks.

Leeny Oberg: And when you think about the kind of the overall environment, I think you’ve got a couple of things going on. You’ve still got a constrained lending environment, certainly in the US and Europe. I think at the same time though, there is more confidence in a steadier economic picture, if you will. So that we are, for example — we’ve seen an increase in-construction starts in the US of about 25% compared to a year ago. So, really seeing nice pickup as people start to move forward, and look at a more positive environment with, perhaps, not quite as much volatility. And again, as Tony is always quick to remind everyone, this is a long-term business where folks are used to weathering the economic cycles and recognize that if there’s a great place to put a hotel with strong demand of fundamentals, it’s good to get it going, especially with a beautiful new product.

So, from that perspective, we feel really good. We added 31,000 rooms to our pipeline in the first quarter and really had a strong momentum around the world in terms of developer interest across all the brands.

Brandt Montour: That’s super helpful. And then, just as a quick follow-up, maybe not so quick, Tony, you mentioned gain — that you guys gained RevPAR index. Is there any brands or regions or segments you would highlight where you’re taking the most share?

Tony Capuano: Yeah. So, certainly, I think the strength of our luxury footprint is an area where we continue to lengthen our lead. We’re pleased with RevPAR index and the substantial premium that we enjoy really across the portfolio. I think the one maybe caveat I would give you is that as our scale continues to grow, I don’t know that RPI is as informative as it might have been a decade or two ago, particularly in a post-Starwood world, we’ve got many competitive sets now where the bulk of the set is our own distribution. And so, I don’t know that it’s as relevant, but it’s certainly a metric we track and we’re certainly pleased with the continued progress that we make.

Leeny Oberg: The only thing I’ll add to it is that as we look over time, we are very pleased to see these RevPAR indices really globally, and also generally in the — within the continents at some of the strongest levels that we’ve seen over time. So I think it’s a great sign of the power of Bonvoy and our brands to see that it’s kind of consistently some of the strongest numbers that we’ve seen over time.

Tony Capuano: And when you look at the regions of the world that are outperforming, I’ll use APEC as an example, one of the powerful drivers to the strength of our index in a market like that is our leading footprint. I mean, when you look across some of the best-performing markets there, having the industry’s largest footprint in markets like India, Japan, South Korea is helping us drive really strong RevPAR performance.

Brandt Montour: Great. Thanks so much, everyone.

Tony Capuano: You’re welcome.

Operator: Thank you. Our next question comes from Richard Clarke with Bernstein. Please go ahead.

Richard Clarke: Hi, good morning. Thanks for taking my question. Maybe just to start off with, you made a couple of comments about strong outbound travel out of the US and China. How well hedged do you see yourself for that? Do those consumers stay in Marriott Hotels when they travel to other cities? Or if that normalizes, is that become then a tailwind for you if domestic travel begins to pick back up again?

Tony Capuano: Yeah, it’s a great question. I think the way I would answer it is to point to the comments I made at the outset about Bonvoy penetration. It is not a coincidence against the backdrop of the environment you described that we set all-time records for Bonvoy penetration, both in the US and globally. And to me, the strength of the loyalty platform, combined with the breadth of our footprint in the international destinations where our guests want to travel, I think does create a tailwind for us.

Leeny Oberg: And the only thing I’ll add is kind of the interesting fact that we’re really essentially back to where we were in terms of cross-border penetration, and while it may vary a bit here and there, we’ve clearly still got lower cross-border penetration in China, and we’ve got in some other areas a bit higher. I think CALA was particularly high in Q1. In the US, it’s very steady as she goes where we’ve got basically only 5% of the customers in the US are coming from outside the US, and that, broadly speaking, our global distribution is just tremendously helpful as folks find the places they want to go within our system. But overall, a lot of the variations really don’t drive that big of a change in RevPAR.

Richard Clarke: Okay, great. Maybe just as a follow-up on the loyalty comment there, one of your peers has been making, I guess, a bit of noise out the fact that they think they will overtake you in terms of total loyalty members. Is that a relevant metric to you? And is any of that tech investment you’re doing looking to engage a higher number of customers overall?

Tony Capuano: Well, without question, on the long list of loyalty metrics we look at, I think we have enthusiasm about having the industry’s largest platform, but from my perspective, it goes much deeper than that. Size is important, of course. Engagement to me is a much more important facet of the program, and the work that we are doing to drive that engagement through our large, powerful, and growing credit card portfolio, through the breadth of experiences that we offer our members, those are the powerful drivers of engagement with our members.

Leeny Oberg: I think the penetration is, obviously, critically important as you look at making sure that you are helping your customers understand the value of the program, and of all the options that they have, whether it be going to 141 countries or actually thinking about things like Ritz-Carlton Yacht and things like the Bonvoy Moments that Tony talked about. So, a number is a number, but I think it’s — it can actually not be a true guide for the power of a program.

Richard Clarke: Makes sense. Thank you.

Operator: Thank you. Our next question comes from Smedes Rose with Citi. Please go ahead.

Smedes Rose: Hi. Thank you. I just wanted to ask a little bit more about the trends you’re seeing in the US. It sounds like you’re — you revised your US expectations down a little bit and it sounds like that’s primarily due to the leisure component, maybe more people going abroad, staying with your hotels there, and I get that your worldwide RevPAR outlook hasn’t changed, but is there anything else you’re seeing in the US that you can share that maybe led you to expect a little bit lower coming out here nationwide for the year, or is it all just because of what you’re seeing on the leisure side?

Leeny Oberg: Yeah. No, it’s absolutely solely because of what we’re seeing on the leisure side. And again, we still do expect to see that it roughly will be up a little for the year, but we — on the leisure side, but we do view that BT and group are absolutely as strong as we expected. And leisure is still fine. But when you look at the change, which I would say kind of broadly speaking, maybe 1 point lower in the US than we expected a quarter ago, and maybe a little bit more than 1 point higher, internationally, kind of gets us to roughly the same place from a RevPAR picture globally. The other thing I’ll point out is we do expect that — our tiers across the segments in the US, we do expect that they will all be up for the year in terms of RevPAR from select-service all the way up through luxury. But again, to your point, yes, it was the leisure segment, it was a bit lower.

Smedes Rose: Okay. And then, I just wanted to ask, you mentioned in your opening remarks a conversion-friendly brand. Could you just talk a little bit more about that? Kind of what are you targeting there? Ais that primarily, I guess, for the US or…

Tony Capuano: Sure. No, it’s global. And I think while we have a terrific track record of doing conversions across many of the brands in the portfolio, when we find ourselves in an environment like this where conversions are particularly important given some of the challenges in the debt markets, we feel like our transactors are very well-armed with brands like the three soft brand platforms, so Luxury Collection, Autograph, Tribute great examples where they have a level of flexibility, not on quality, but on aesthetic, that is particularly appealing to a broad cross-section of the owner and franchisee community.