Smedes Rose: Okay. Thank you.
Operator: Thank you. Our next question comes from Dan Politzer with Wells Fargo. Please go ahead.
Dan Politzer: Thanks for taking my questions. Leeny, I think you mentioned that within group, the Fortune 100, you’ve seen the strongest quarter-over-quarter growth in quite some time. Can you maybe give a little bit additional color and how that maybe compares with the small and medium-sized business customers? And maybe remind us which typically leads the other within the cycle?
Leeny Oberg: So, a couple of things. One reminder that small and medium-sized businesses, that is probably the hardest segment to actually pinpoint all the specifics on the travel, but I think you did see — in Q1, you did see, relatively speaking, slightly lower percentage of small and medium-sized BT business across the portfolio showing up in the lower end. On the special corporate, on the larger company size, we absolutely continue to see recovery of that business. As you saw, for example, finance, the finance segment is now 8% up relative to 2019. You saw really strong continued momentum in manufacturing and communications. And actually, while accounting, consulting and technology are still down meaningfully compared to 2019, they also continue to see meaningful momentum into Q1.
When you think about the typical trends in a cycle, I think one quarter does not a trend make. We know that the month of March had some real calendar issues, and you also know that January tends to be a little [odd line] (ph) in terms of being able to determine trends because of the timing of when Christmas and New Years are. So, I think it will take a little time. We aren’t expecting a big difference. You may remember that we used to have, pre-COVID, kind of a 60-40 split between classic negotiated grade versus the small and medium, then it flipped coming out of COVID, and now I would say we’re kind of more towards the 55-45, with the small and medium still being the 55%. But yes, from a relative growth perspective, we did see that it was the special corporate end of things that really grew.
Dan Politzer: Got it. Thanks. And just for my follow-up, I think non-RevPAR fees, they were up maybe 6% in the quarter. I think you had been talking about them being down. And credit card fees in there, I think you also said we’re up. So, within that residence and timeshare and other bucket, was there a shift around in terms of the fees there from 1Q to maybe 2Q, or is there something else that we should be aware of?
Leeny Oberg: Yeah, I think as you’re probably familiar that our residential branding fees tend to be quite lumpy, literally can go from $10 million in one quarter down to $3 million the next quarter, because as units are sold, we burn those fees. They are one-time fees on the residential sales branding fees. So, if a unit sells out, we get them all at once. So, that is purely timing. For the full year perspective, we don’t anticipate anything different from what we thought before.
Dan Politzer: Understood. Thanks so much.
Operator: Thank you. Our next question comes from Bill Crow with Raymond James. Please go ahead.
Bill Crow: Hey, thanks. Good morning. I wanted to follow-up on Smedes’ question from earlier. And Tony, you talked about normalization in US demand and certainly we’ve written the same thing, but industry-wide demand has been flat to down over the past year, which really doesn’t seem so much as a normalization as it does a slowdown, especially given the economic growth, which is surprised to the upside. I’m just curious at what point do we start to worry about the consumer and maybe a changing spending pattern?
Tony Capuano: Yeah, a fair question. I might have a deeper concern if we were reporting to you US and Canada negative RevPAR. The fact that we were up 1.5% in the quarter, even with the holiday timing impact that Leeny described gives me some comfort. And if you kind of tick through the segments, leisure was flat relative to last year’s first quarter, but still meaningfully ahead of where we were back in 2019. In response to one of the earlier questions, I shared what I think are really encouraging statistics on the continued strength we’re seeing in group. We were talking to the team yesterday that it’s selling — doing advanced selling for the Gaylord Pacific project that’s under construction and they are hitting it out of the park.
I mean, they are seeing extraordinary volumes of demand on the group side. And then, even on business transient, I mean, to me, when I think about one of Leeny’s comments, the fact that the growth in the US and Canada, we saw large corporate business with our Top 100 accounts seeing the most sequential improvement we’ve seen in the last eight quarters. I throw all of that in the blender, and it does feel a little more like settling into a more normalized pattern versus a really systemic falling off the cliff.
Leeny Oberg: And if I can, I’m going to throw in a little bit of a glass half full relative to what I think seems like a little bit of a glass half empty question. And that is when we look at the rest of the year, we are looking both US and international, like gains in both occ and rate for the full year. We also saw that — in the first quarter, you saw through luxury, premium and select, you saw that you had generally rate and occ gains overall with the exception that in the select, you saw a slight decline in occ. But for the full year, we are expecting that we will continue to see growth. So, broadly speaking, we still feel like we really benefit from these different types of travel demand. There’s no doubt that we appreciate when group strengthens, when leisure quiets down a little bit, and there is overall more normalization of travel types than a couple of years ago, but when we think about the overall demand levels, we feel really good about it.
Bill Crow: That’s really helpful. If I could just do a follow-up — a quick follow-up here, I think there’s been a lot of optimism that — especially in the summer, we’d see the inbound, outbound travel relationship in the United States kind of normalize, and that would propel demand. And I’m just curious whether there’s been a shift in that thinking at all since you moved on the margin, your RevPAR growth, more in favor of international from domestic. Maybe the strong dollar is not helping things. Any thoughts you have there would be helpful.
Leeny Oberg: I honestly couldn’t quite hear the question.
Tony Capuano: Yeah, I think the question is really just around US travel staying domestic versus international. I think, Bill, your comment about the continued strength of the dollar is a pretty relevant data point to consider. I was at the — as you may or may not know, 2024 is the year of US-Japan tourism. There’s a big collaboration between the United States and Japan. And I met with the Japanese ambassador on Monday of this week and he talked about the extraordinarily strong flow of US visitors to Japan. And maybe innocently I asked him how we can drive strong Japanese visitation to the US. And his response was, “Well, you can weaken the dollar against the yen.” So, I do think it’s a relevant data point. It bodes well for our international distribution. And I think that is reflected in — while our overall RevPAR guidance hasn’t modified, you’re seeing meaningfully more strength in the international markets, for exactly that reason.
Leeny Oberg: So, the only other thing I’ll add is that, one of the interesting parts is that when you look at Asia Pacific’s RevPAR, while some of that benefits from Tony’s comment about US traveler, a whole lot of that is the reality that now China is opening up more for cross-border. So, you are seeing global travel preferences, not just US travelers. Interestingly, our US proportion of domestic travelers has been remarkably consistent over time, where it was — for many years, it was roughly only 5% from outside the US, and that the domestic business is overwhelmingly 95% US traveler, and that is still the case now. So, we aren’t seeing that the US business is really suffering from everybody leaving the US. I think it is more the reality of global growth travel in general.
Bill Crow: Great. Thank you both.
Operator: Thank you. Our next question will come from David Katz with Jefferies. Please go ahead.
David Katz: Hi, good morning, everyone. Thanks for taking my questions. Tony, one of the last notes that you dropped in was about your forthcoming conversion of brand. And not to steal any thunder, but if we could borrow a couple of cracks of lightning and just talk about sort of why, why now, what the sort of philosophical thought process is about sort of bringing that to market would be great.
Tony Capuano: Of course, and I think, David, you and I have had the chance to talk in the past about our overarching growth strategy, and that strategy is really guided by this desire to make sure our portfolio offers the right product everywhere our guests want to travel for every trip purpose, and we learn with increasingly fluence — increasingly frequency, excuse me, that more and more members and prospective members of Bonvoy for certain trip purposes seek the price point and the value proposition of platforms in the midscale tier. The reality is given the climate for new construction debt in the US, having a platform that can easily pivot between both new build and conversion opportunities, the timing seems ideal to launch something in that space. Leeny, I don’t know if you want to add anything.
Leeny Oberg: The only thing I would add is that, a lot of this is both market research and conversations with our owners and franchisees. So, when you think about the supply that’s out there, where supply is growing and where it is not, we definitely believe that there is some great opportunity for us to add more new Bonvoy members choices for them across the spectrum and frankly also meet owner and franchisees demand for a Marriott product that allows for conversions in markets that over time may have moved and changed, et cetera. So, we think it’s tremendous opportunity. As you know, StudioRes, which is also a new midscale brand for us is overwhelmingly new build and its extended stay. And we just think from our conversations that there’ll be great demand for us in this space as well.
Operator: Thank you. Our next question will come from Robin Farley with UBS. Please go ahead.
Robin Farley: Great. Thanks. When we think about — I think when investors think about the algorithm for sort of top-line growth, it’s usually unit growth plus RevPAR growth kind of getting to your top-line growth. And this quarter, that would have been the 4% plus 7% getting to 11%, but your top-line is more up in the sort of 6% to 7% range. And is there anything that you would say that how investors should think about that going forward? I know there’s sort of different types of rooms in your net unit growth. So, is that sort of RevPAR plus unit growth not the way to think about top-line? Thanks.
Leeny Oberg: So, a couple of things. I think first of all, the algorithm absolutely works over time. You’ve got to be careful about looking quarter-to-quarter or kind of really looking at specifics that are happening in a printed number versus what the trend is over time, because absolutely over time, we believe that it proves out well. And if you think about it this year, our rooms guidance 5.5% to 5.9% and a midpoint of 4% on RevPAR, and we’ve talked about gross fee revenues having a high of roughly 9%, I mean these are, even within the year, pretty close to that algorithm. So, we do believe that the algorithm works and really just have to look at it not just one year in isolation.
Robin Farley: Okay. Thank you. And then, just a follow-up question on conversions. And I don’t know what — I don’t know if you broke out the conversion percent outside of the MGM deal. And just sort of looking at the traditional conversions as a percent of total unit growth, but I think that your guidance for next year assumes an acceleration in conversions as a percent of unit growth. And is this the brand that you haven’t — that you’re going to launch that — in the midscale segment you mentioned is conversion friendly. Is that, in your mind, what investors should think of as the driver for that acceleration in conversions in ’25 versus ’24, or maybe there are other things that you haven’t yet talked about that other brands to come or something? But just wondering if that — if this upcoming one would be the main driver for that. Thanks.
Leeny Oberg: So, just as a reminder, conversions were roughly 30% of our signings this year in the first quarter and we’ve got a very strong stream of conversions moving through the pipeline. So, no, while we do see tremendous opportunity there, the kinds of numbers that we’ve talked about and talked about last September did not include assumed expectations would be from this new brand on conversions. We said roughly 30% of the room adds ex-MGM would be from conversions and we continue to believe that, but that’s not really a change for us over the last couple of quarters.
Operator: Thank you. Our next question will come from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Good morning. Thanks for taking my question. A two-parter from me on the — or ahead of the domestic election. I recall last presidential election, there was a little bit of softness in DC as people were just kind of out hustling elsewhere. Does that factor into 4Q? Should that be meaningful, or is that meaningless? And then, secondly on that, is there anything kind of hinged on the election that you’re looking at that could change the outlook in travel, based on what you’re seeing from the candidates? Thanks.
Tony Capuano: Yeah. Well, we better add another hour to the call to take the second part of your question, I think. Maybe the way I would ask — answer the second part of your question, on a global basis, travel and tourism thrives in relative stability. I think uncertainty around the election creates all sorts of question marks. We’ll get through the election and post-results we hope we’ll settle into a little bit more stability. In terms of some of the policy issues that directly impact Marriott and travel more broadly, my sense is we will likely still end up with a bit of division in Congress, so you may not see strong moves one direction or the other. And I’m sorry, your first question was on impact of the election itself in DC, I think?
Leeny Oberg: Right. And generally speaking, I would say we do see that there is a dip in government travel after Labor Day and that group and business transient, obviously, is going to not be traveling during election week, but our forecast incorporates the experiences that we’ve seen before in presidential elections.
Operator: Thank you. Our next question comes from Michael Bellisario with Baird.
Michael Bellisario: Thanks. Good morning, everyone. A question on your owned assets. When might we see some of those hotels get sold, especially international? I think the comment about an improved outlook would suggest maybe the market, or at least the transaction backdrop is better there. And if not, could you expand on that? And then, secondarily, any CapEx plans next year for the Sheraton Chicago, or should we expect a big year-over-year step-down in own CapEx? Thank you.
Leeny Oberg: Right. So, I’m going to do the second one first, which is that the Sheraton Grand Chicago, it actually has had rooms redo over the past three years. And so, with the exception of, of course, what you normally need to do, I would not expect to see a big CapEx spend beyond the norm as you move into 2025 on that hotel. We will be working on a comprehensive view of that hotel for public space, for F&B, for the rooms, et cetera, and ideally, would be working with a partner so that you can really, in essence, do it together so that it wouldn’t be on Marriott’s balance sheet, but that we would sell the hotel and then work towards what the hotel should look like with a partner. As you talk about the other owned/leased assets, as is often the case with the ones that are still on our balance sheet, each one has a bit of a story.
And so, for the ones that are in Caribbean and Latin America, for example, the Elegant portfolio, which we are midway through a very comprehensive capital improvement program, we’re thrilled with what is coming out of that and look forward to recycling that capital when it’s done with a view of how we think about the AI, the all-inclusive product for those hotels. So, continue to march along. The W Union Square, we’re very close to being finished with that renovation. Again, absolutely thrilled with the product. I encourage all of you to go by and for sure, make sure you stop by the living room, which has a spectacular bar. The rooms are incredible and we’re very excited about how that represents the W brand in North America. And so, yes, from that standpoint, before too long, we’ll be beginning to work on the process of determining when and at what price is the right time for the sale of that asset.
