Ladies and gentlemen, thank you for being here. Welcome to the Marriott International’s Second Quarter 2020 Earnings Conference Call. All participant lines are in a listen-only mode. It is now my pleasure to hand the call over to Mr. Arne Sorenson to start. Please proceed, sir.

Good morning, everyone. And welcome to our second quarter 2020 conference call. I hope everyone is safe and healthy during these difficult times. Joining me today this morning are Leeny Oberg, Executive Vice President and Chief Financial Officer; Jackie Burka McConagha, our Senior Vice President-Investor Relations; and Betsy Dahm, Vice President-Investor Relations. I want 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. Statements in our comments and in the press release we issued earlier today are effective only today and will not be updated as actual events unfold. Please also note that unless otherwise stated, our RevPAR and occupancy comments reflect system-wide constant currency and year-over-year changes, and include hotels temporarily closed due to COVID-19. 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. The lodging industry continues to be profoundly impacted by the COVID-19 global pandemic, and the current operating environment remains quite challenging. Second quarter worldwide RevPAR was down 84%. While April fell 90%, the toughest year-over-year comparison on record. Demand has risen steadily since then. RevPAR declined 85% in May, 78% in June; and 70% in July. Many of our hotels that were temporarily closed due to COVID-19 have now reopened. Today, 9% of our global properties remain closed compared to more than 25% in April. Since April occupancy levels have increased each month in every region around the world albeit at varying rates. Global occupancy in July hit 31% for all hotels, increasing 19 percentage points from April. And occupancy in July for the hotels that were open for each of the last four months reached 39%, growing 23 percentage points over that period. There is still no visibility around when RevPAR could return to 2019 levels; however, the global industry trends experienced over the last couple of months give us confidence that people will continue to increase their travel. We are optimistic that the second quarter will mark the bottom and the worst is now behind us. Greater China, which represents 9% of our rooms, over 90% of which are managed, is leading the recovery, and has seen rapid improvements in occupancy and new bookings. With the virus mostly contained at this point, many domestic travel restrictions have been lifted; and the number of daily passenger domestic flights is now around 80% of pre-COVID levels. While leisure and drive-to-destinations led the initial recovery; it is encouraging to see business transient as well as group also picking up nicely. Occupancy levels in Greater China have reached 60%, up significantly from the single digit levels in mid-February; and much closer to the 70% we saw at the same time last year. RevPAR has followed a similar trajectory; after declining 85% year-over-year in February, RevPAR in Greater China improved to down 34% in July; averaging over 10 percentage points of improvement per month. At the current rate of recovery and assuming no wide resurgence of COVID-19, the Greater China market could approach 2019 occupancy and RevPAR levels as early as next year, even assuming limited international guests. In 2019, nearly 80% of its room nights were sourced from guests within China. Trends in the rest of Asia Pacific are improving at a slower pace as countries are in various phases of reopening and as certain borders remain closed. But the recovery of travel in Greater China demonstrates the resiliency of demand once there is a sense that the virus is better under control, and restrictions can be safely lifted. In North America, 96% of our hotels are now open. We are experiencing a steady recovery across all chain scales, although the rate of recovery within markets and by hotel type has varied tremendously. In 2019, domestic travelers accounted for 95% of North American room nights, a benefit in the current environment. Leisure demand has been strong in resort areas, as well as in secondary and tertiary drive-to-markets; not surprisingly our extended stay hotels have experienced the fastest pace of recovery. New bookings in North America have been building nicely, led by near-term leisure transient reservations. Despite the recent surge in cases in some states, consumers are increasing their travel. While U.S. airline passenger traffic is still well below last year's levels; the number of air travelers in the last two weeks of July has more than tripled compared to the first two weeks of May. And system-wide North America RevPAR continued to improve in July to a year-over-year decline of 69%, which is seven percentage points better than June. Historically leisure has made up roughly one-third of our total room nights in North America. The more interesting part of this statistic is that the monthly variance in that percentage is actually quite small. In 2019, the estimated proportion from leisure was around 36% during the summer, and only declined to 32% in September and October. We expect that solid leisure demand will continue through Labor Day in North America and could continue into the fall, as employers and schools alike operate remotely. Business transient and group demand in North America while lagging are showing very early signs of improvement. For now, the group bookings outside of those associated with our caregiver and first responder programs tend to be mostly smaller ones such as weddings or travel sports teams. Our Europe, Middle East and Africa region or EMEA and our Caribbean and Latin America region or CALA posted the lowest occupancy levels and steepest RevPAR declines in the second quarter. Severe restrictions following rising rates of COVID cases in many countries combined with a much higher dependence on international travelers in these regions have suppressed demand in these regions. In 2019, the percentage of room nights from international travelers was around 40% in Europe, 50% in the Middle East and Africa; and 60% in CALA. 75% of our hotels in EMEA and 70% in CALA were closed for most of the second quarter. Trends in both regions have started to improve recently as the prevalence of cases drops and border restrictions ease. Many of our hotels in these regions are welcoming guests again with under 30% remaining temporarily closed. On the development front, owners are showing great interest in our brands with Greater China again out in front. Greater China contributed nearly one-third of deal signings in the first half of the year with the entire Asia-Pacific region accounting for roughly half of all signings. Owners in the region are taking a long-term view on the market. Year-to-date, we have signed 30% more deals in Asia Pacific than we did in the first half of 2019. The pace of signings is not as robust in other regions around the world largely due to the lackluster lending environment and owner uncertainty. We canceled one of our monthly deal approval meetings in the spring, which reduced our signings year-to-date, but we are having productive conversations with owners and franchisees, who want to move forward. Some are hoping to see lower construction costs in the weaker economic environment for new builds, while others are interested in conversions to our brands. Our pipeline totaled approximately 510,000 at the end of the second quarter with over 230,000 rooms under construction or around 45%. The pipeline is 1% lower than at the end of the first quarter with the slowed signings and a few more projects than usual put on hold. While construction activity has resumed in most parts of the world, we still expect some openings will be delayed due to slower construction timelines and supply chain issues related to COVID-19. There is uncertainty surrounding future worldwide room's growth, but given current trends; we could see net room's growth between 2% and 3% in 2020. The final result will depend a great deal on the way the pandemic plays out around the world in the remainder of the year. Over the last several months, we have enhanced our liquidity position and materially reduced our cost structures at both the corporate and property level. We are in constant dialogue with our owners and franchisees, and are working together to navigate these extremely challenging times. As demand returns, we are adjusting our operating protocols and ramping up our business in a thoughtful way. First and foremost, we are focused on the health and safety of our associates, and guests and on communicating these important efforts. We continue to enhance our cleanliness guidelines to meet the health and safety challenges presented by COVID-19. We have mandated that all hotels have electrostatic sprayers to help quickly disinfect public areas, and all properties must submit a monthly commitment to clean certification. And we are increasingly leveraging technologies like mobile check-in, mobile key; and mobile chat between guests and hotel associates to reduce face-to-face interactions, while amplifying operational efficiencies. Additionally, we've announced that guests are required to wear face coverings in the public spaces of our hotels in the Americas, a policy that is also currently in place for associates globally. We are stepping up our marketing efforts around the globe as demand improves. Each region is carefully monitoring social, economic and travel trends, and implementing a phased-in approach based on local consumer sentiment and travel intent. With over 143 million members globally, Marriott Bonvoy, our award-winning Global Loyalty Program underpins all our marketing strategies. We remain focused on engaging our members with targeted email campaigns, and various promotions; such as points accelerators on our co-brand credit cards for gas, dining and groceries; gift card discounts and our current Bonvoy boutiques sweepstakes for items like bedding and robes. For elite members, we have extended their status through early 2020, and in June credited their accounts with a one-time deposit of elite night credits; allowing them to reach the next tier faster. Before I turn the call over to Leeny, I must take a moment to say how proud I am of our incredible team of associates around the world. This has been a time of tremendous stress and uncertainty yet our teams continue to impress and inspire me. I also want to comment on the current social justice movements. As we said in our recent statement, we stand against racism. We believe that racism must be eradicated. Our company believes in equality, justice and putting people first no matter what they look like, where they come from; what their abilities are or who they love. My management team and I are deeply committed to building on our historic commitment to diversity, and to do more to champion diversity, equality and inclusion; both within our company and within the broader community. In closing, while this was by far the most challenging quarter in the history of our company; I am pleased with our progress. I believe we can look forward to a brighter future for travel and for Marriott. With our unparalleled portfolio of 30 global brands, superior loyalty programs; strong liquidity position and the best team in the business, I am optimistic about the trajectory of our business in the months and years ahead. And now Leeny, who has ably led our finance team to buttress our liquidity and to set Marriott up with the strength it needs to survive this crisis, will talk more about our financials.

Thank you, Arne. And I hope all of you and your families are staying well. I also want to express my appreciation to all our associates around the globe for their dedication during these unprecedented times. This morning, I will review our second quarter results and current trends. There's still too much uncertainty around the timing and trajectory of the recovery to give P&L guidance for the rest of the year. But I'll provide an update on the monthly cash burn model that I shared with you on our first quarter call. As Arne noted, second quarter global RevPAR was down 84%. Second quarter gross fee revenues totaled $234 million, comprised of $40 million from base management fees; $182 million from franchise fees and $12 million from Incentive Management Fees or IMF. In the first quarter, we did not record any IMF given a significant uncertainty regarding hotel level full year performance. In the second quarter, we had more information and could better predict where hotel performance will warrant IMF recognition for the full year, and as such we recorded IMF fees. The majority of IMF's recognized in the second quarter were at hotels in Asia Pacific, where there is generally no owner's priority with Greater China particularly strong. Almost 65% of Greater China's hotels had positive gross operating profit in the second quarter due to increasing demand, and our ability to control costs. In 2019, over one third of our incentive fees were from Asia Pacific. Within franchise fees, unsurprisingly our non-RevPAR related fees were the most resilient totaling $107 million in the second quarter, down 27% from a year ago. Credit card fees declined due to lower card spend compared to last year, while total fees from timeshare and residential branding were relatively flat. Second quarter G&A improved by 22% year-over-year and by 35% excluding bad debt. Bad debt expense is primarily based on our estimate of future credit losses, and is not a reflection of current cash losses. The significant reduction in net administrative expenses demonstrates the many steps we've had to take to reduce our cost structure to align with the decline in revenues in this low RevPAR environment. These steps have included furloughs, reductions in executive pay; and reduced work weeks throughout the organization. We reported positive adjusted EBITDA of $61 million, which includes $36 million of bad debt expense. We were pleased with our lack of cash burn during the second quarter, especially in light of the 84% decline in RevPAR. The additional monthly fees we earned moving from our 90% RevPAR decline cash burn model to the actual 84% RevPAR decline were better than the $2 million per point per month estimate we gave a quarter ago; as a result of incentive management fees and better credit card fees. Favorable timing of investment spending and cash taxes during the quarter was also helpful. Lastly, strong working capital management and loyalty cash inflows contributed to our overall positive cash position. Given that many of our programs and services are funded by revenue-based charges, we are billing the hotels vastly less than a year ago. We have had to dramatically cut our costs to match this decline in revenues, while still providing the required services. We've been able to reduce current breakeven profitability rates at our hotels around the world by 3 to 5 percentage points of occupancy to help our owners preserve cash. From a working capital perspective, owners and franchisees are largely finding enough liquidity to pay these lower bills albeit more slowly than usual. We continue to work with those owners and franchisees that are challenged to pay on time and for many have set up short-term payment plans. So far this year, we have had only a few hotels go into foreclosure, but our management and related agreements protect us. And historically we have held on to most franchise agreements in that situation as well. The cash burn scenario that I'll outline today is just one scenario, and not an estimate of actual results. Please remember that assumptions for certain line items are not paid out evenly throughout the year; so our averages over a number of months this year. Our overall cash flow is comprised of those at the corporate level, and those associated with our net cost reimbursement. The model I walked you through a quarter ago assumed a year-over-year global RevPAR decline of 90% as we experienced in April. It included monthly averages for several categories of spending like taxes and investment spending; and yielded total net cash outflows of around $145 million to $150 million per month. We've updated this analysis assuming a worldwide RevPAR decline of 70% as we experienced in July. The revised model results in monthly cash outflows of about $85 million, a significant improvement of around $65 million a month; 45% better than the prior scenario. Roughly three quarters of the improvement is at the corporate cash flow level; largely as a result of additional fees due to higher RevPAR. In today's scenario, total monthly fees could be about $110 million per month versus the $60 million to $65 million in fees assuming RevPAR down 90%. The impact of a one-point change in RevPAR in our revised model would be roughly $2 million to $2.5 million of fees a month, though the sensitivity is not completely linear given IMS. Improving RevPAR is likely to coincide with higher credit card fees as well. The monthly cash flows at the corporate level include cash G&A costs, investment spending, cash interest; cash tax payments, and cash outflows for our owned and leased hotels. Despite the revised RevPAR assumption, the total outflow from these items has not changed meaningfully from the $155 million we described a quarter ago. Although there are some key timing differences to point out. Cash taxes in 2020 will primarily be paid in the third quarter, while cash interest will be higher in the fourth quarter given the schedule of interest payments for our senior notes. Total investment spending for the full year is expected to be roughly $400 million to $450 million with higher outlays in the second half of the year versus the first half. The lumpiness of these cash flows will naturally impact our cash balances in the third and fourth quarters. All-in-all, the 70% RevPAR decline scenario yields an average total corporate cash burn of roughly $45 million per month, about half of the $90 million to $95 million presented in the scenario a quarter ago. While the absolute cash burn numbers in this model still reflect a tough operating environment; the sizable improvement demonstrates the strong cash flow characteristics inherent in our asset-light business model. The remaining one-third of the cash burn improvement comes from our net cost reimbursement. Today's scenario yields cash outflows of about $40 million a month for this category versus outflows of $55 million in the original scenario. The improvement is primarily due to better matched timing of our cash outlays and reimbursements, as well as continued collections of receivables. This is partially offset by slightly lower cash contributions from loyalty, given redemptions are expected to pick up as occupancy improves. Note that this model does not currently include any severance and other payments associated with our global restructuring initiatives. It's extremely difficult to have to undertake these efforts, which include a voluntary transition program announced in the second quarter, as well as additional job eliminations. The extent of the decline in our business, and our expectation that it will take time for demand to return fully require these measures. We currently expect the total cash charges related to our above-property restructuring activities around $125 million to $145 million. In the second quarter, we recognized $26 million of costs related to these efforts of which $6 million was in restructuring and merger-related charges on our P&L, and $20 million was included in reimbursed expenses. We're still working through the details, but currently expect these restructuring efforts will reduce total above-property controllable costs, which includes both corporate G&A and program and services costs by roughly 25%. We'll know more about the specific impact on G&A as we work through the 2021 budget process. We're also developing restructuring plans to achieve cost savings specific to each of our company-operated properties, including our owned and leased hotels. We expect to implement these plans over the next couple of quarters. In addition to focusing on preserving cash, we've substantially boosted our liquidity, and extended our average debt maturities. During the quarter, we raised $2.6 billion of long-term debt and $920 million of cash through amendments to our credit card deals. As part of our liability management, the $1 billion raised in June was largely used to tender and retire a portion of our near-term debt maturities. At quarter end, our cash and cash equivalents on hand was around $2.3 billion; adding that cash to the undrawn capacity of our revolver of approximately $2.9 billion and deducting around $800 million of commercial paper outstanding; our net liquidity was approximately $4.4 billion at the end of the second quarter. We believe our strong liquidity position, cash flow from operations and access to capital markets comfortably position us to meet our short and long-term obligations. While there is still a lot of uncertainty, and there are many factors impacting our business outside of our control; we are very pleased with the progress we have made in the areas we can control. Many of the steps we have taken have been painful, but the company is in a solid position to navigate through these challenging times. The global recovery may take longer than any of us would like, but the strong recovery in Greater China and trends in the rest of the world show the resilience of lodging demand and make us hopeful about the future. We all look forward to traveling again and to welcoming all of you at our hotels. Thank you for your time this morning. And we'll now open the line for questions.

Our first question comes from Joe Greff of JPMorgan.

Good morning, everybody. Nice to hear your voices and thank you for all the information. Arne, I found fascinating your comments about the new signings in Greater China. Can you talk about what's driving that? And can you talk about that maybe the construction cost environment there? And the new signings, how do they compare versus the year ago in that geography?

The statistic we mentioned in the prepared remarks shows that our signings are up about 30% in Asia Pacific compared to last year, primarily driven by China. It's important to recognize that while the market recovery in China is progressing well, the lingering effects of COVID-19 are still felt, especially with the recent reassertion of restrictions in Beijing. However, these measures are implemented quickly, and overall, the Chinese population is returning to travel. This has led to increased confidence in the market's future. Marriott has performed exceptionally well in China, particularly following our merger with Starwood a few years ago. Our presence in the luxury and upper upscale market is very strong, with a dominant RevPAR index position. We're also increasing our share in new developments in these segments, along with growth in the moderate tier through brands like Courtyard and Fairfield. In contrast, our total pipeline in the United States is down 1%, indicating that we are still in the early stages of reacting to COVID-19. There is uncertainty regarding the recovery path, and while people are hopeful that we will overcome these challenges, questions remain about the duration of the situation, lender responses, and supply chain issues in the U.S.

And can you talk about within the pipeline? Obviously, it was down a little bit sequentially and China obviously added on a growth room's basis. How much did you revisit and just come to the conclusion that the likelihood is less today than a few months ago or six months ago or do you think those discussions accelerate from here? How do you view that?

There are a few important points to consider. Firstly, while it's premature to determine the exact nature of the recovery in the United States, it's also too early to abandon projects in the country. We are not at a stage where we've completely scrapped any projects. On the other hand, if you're lacking financing—whether it's debt or equity—after working on a project for some time, you may find it challenging to secure that financing now compared to before COVID-19. Furthermore, even if financing is in place, if construction hasn't commenced, you might choose to wait and see how things develop over the next few months. In April, we paused our hotel development committee meetings in the United States, as it felt like a strange time to introduce deals that we couldn't properly assess for their viability in terms of boosting our pipeline, and our partners felt the same way. Hence, we are in a wait-and-see mode. As the recovery progresses and we gain more confidence that COVID-19 is becoming a thing of the past, we anticipate that there will be long-term projects worth pursuing, likely benefiting from reduced construction and development costs. However, it will take some time before we gain clarity in the pipeline.

Our next question comes from Robin Farley of UBS.

Great. Thank you. Two questions; one is on the SG&A reductions that you outlined for this year, how sustainable is that into next year and forward? And then my other follow up is the commentary on business versus leisure travel. I know you mentioned September, October it's still decent levels compared to the summer. Could you quantify how Q4 looks versus Q3 that sort of business versus leisure travel mix? Thank you.

Yes, I will address the latter part first and then Leeny can follow up with details on G&A and other expenditures. We were interested in comparing leisure travel in the fall to the summer because there is more skepticism around corporate travel than leisure travel based on the early recovery period. Interestingly, leisure travel is only about five percentage points lower in its overall hotel mix in September and October compared to the summer, dropping from around 35% or 36% to approximately 32%. This indicates that leisure travel may continue to be a significant contributor to recovery as we move past Labor Day and into the fall. As for the corporate traveler, we've seen some interesting trends. Throughout the quarter, many in the industry, including Marriott, have noted leisure as the strongest segment, but remarkably, special corporate travel has increased about five percentage points in RevPAR decline year-over-year over the last two months when analyzing weekly data. We believe this is largely driven by business travel from smaller companies in the Midwest, which are less reliant on flying. It’s frustrating to observe large corporations deciding to keep offices closed for potentially another year; it seems to be a withdrawal from the economy. While we all need to make prudent decisions to protect our employees and avoid putting them in risky situations prematurely, it shouldn't take until the second quarter of 2021 to dictate office or travel policies. Overall, every segment of the recovery has shown improvement month over month, with leisure and drive being the strongest. We have seen a modest increase in government business and special corporate travel as well. People appear to be increasingly willing to travel more. Leeny, would you like to address the G&A question?

Sure and I'm going to tag on one other thing, Robin, I think you'd find interesting, which is that to remember that November and December typically actually see the pop-up back up to more summer-like levels for leisure, if you remember how a lot of people do their travel in November and December; so there again that that kind of goes to the same point. On G&A, you've clearly seen just substantial moves that we've made this year and really battening down the hatches and making sure that we're putting ourselves in a position to deal with the decline in revenues. What we've done with the work over the past few months is to really be thinking more broadly about restructuring the company to move forward knowing that it needs to be sustainable, and knowing that it needs to reflect the fact that it's going to take beyond 2021 at least to return to 2019 revenue levels. So in that regard there when you think about kind of broadly speaking if you remember back last quarter, and I talked about all the reimbursable; a bunch of them were pass-throughs, but there were about $4 billion of our reimbursable that are around delivering the programs and services to all of our hotels around the world and then obviously you've got G&A on top of that. And that is the very large part of cost that we have gone after to try to restructure, and put ourselves in a good position going forward. And that's where I think a 25% reduction in that full set of costs is what we're expecting. The details about exactly where that falls relative to G&A, we will work through the budgeting process; so I can't give you a specific number. I think for the rest of this year, as you know we've taken dramatic steps this year whether you call it reduced executive pay et cetera. So I think for the rest of this year you're going to continue to see these really dramatically low levels, but giving you kind of sustainable forward numbers; I think we'll work through that but I would expect them to be quite substantial.

Our next question comes from Thomas Allen with Morgan Stanley.

Thank you. Good morning. So, Arne, about three weeks ago you were quoted in the press as saying you were less optimistic than 30 days prior. Can I ask you that question again? How do you feel now?

It's a valid question. I suppose it depends on whether you're considering the virus or the recovery in lodging and travel. My outlook on the virus remains unchanged from a month ago, which is why I expressed a more cautious view then compared to the month before. However, I feel more hopeful about the recovery of travel and our business. The daily news highlights why I feel this way. The virus numbers continue to be frustratingly high, especially in the United States, and they remain elevated. It’s challenging to observe the national situation and feel confident that we'll overcome this issue soon. Why do I have a more positive outlook for our business? If we look at the July numbers overall, as we've mentioned in our press release and prepared remarks, they indicate a strong resilience among American travelers and consumers despite the high virus numbers. For instance, at the beginning of July, we experienced a slight resurgence of the virus. However, the July 4th weekend was beneficial due to its focus on leisure travel. We noticed a brief slowdown right after the holiday, but as the month progressed, occupancy rates climbed each week by about a point or a point and a half compared to the previous week. By the end of July, occupancy was about five points better than in June within the U.S. This suggests that despite the continued concerns regarding the virus, American travelers and consumers—along with an increasing number of business travelers—are determined to resume their lives. There is a recognition that many people want to return to work and live normally again, although the ability to do so may vary depending on their office location. For example, New York has its unique situation, and it's important to remember that the dynamics in the United States as a whole differ from those in New York. In New York, many people do not rely on driving to work, and the environment is more focused on elevator traffic, which has posed challenges early in the pandemic. In contrast, much of the rest of the country relies on commuting by car and typically works in smaller buildings, making it safer to return. I believe people are more willing to get back to work and resume normal life, which is why I'm feeling more optimistic than I was a month ago.

And just as a follow-up. Are you more optimistic around your net unit growth as you were a quarter ago?

About the same I think. I think it is highly likely that we will see a bunch of these new projects take longer to get to opening than we thought before COVID-19. We mentioned this in one of the earlier questions. I think it's still hard to predict with certainty how much longer those things are going to take. But I think we'd be foolish to think that these projects are going to open as quickly as they would have before. We will have some increasing opportunities to offset that in the conversion space. And we've got conversations that are up in the conversion space. I would say there too it's a little early for conversions to actually start moving when you look at prior economic cycles conversion volume tends to step up in weaker environments, but it tends to step up with transactions stepping up. And by and large while there are increasing numbers of hotels that are out there under some pressure, we haven't seen many transactions take place yet. And I think as we do, we'll see our conversion ads step up as well.

Our next question comes from Shaun Kelley of BofA.

Hi, good morning, everyone. I was just wondering, Arne, maybe to stick with a little bit of the same theme. In the prepared remarks you mentioned just in general the business traveler outlook maybe being a little bit more positive, I think, you said for both business travel and group. Just any kind of more specificity if you could give around what you might be seeing? Is it really that drive-to piece, any certain markets or areas and particularly your thoughts on obviously the domestic piece of that would be helpful?

Yes. Looking at the U.S., I want to clarify the data. Special corporate bookings have increased by five points over the last eight weeks, but RevPAR for special corporate has improved from a decline of 85% eight weeks ago to a decline of 79% last week. These figures remain significantly negative. Conversely, the retail sector, where a lot of leisure travel is occurring, has seen a 15 point improvement, compared to the five point gain in special corporate, with its RevPAR down 57% versus the 79% decline for special corporate. There is measurable improvement week by week, and we expect this trend to continue. However, we anticipate a slower recovery for corporate travel compared to leisure, particularly in the fall, depending on the progression of the virus. Living in the Washington DC area, I've noticed the different dynamics. In smaller areas, businesses are fully operational with busy parking lots, whereas Central Washington remains quieter, likely due to local restrictions and conservative behaviors, including reliance on public transportation. Consequently, I believe business travel will gradually improve. Unless an unforeseen event occurs with the virus, both leisure and business travel should increasingly rebound each week throughout the fall, though corporate recovery will be slower in densely populated areas where caution is more prevalent.

Our next question comes from Patrick Scholes of Truist Securities, Inc.

Good morning, everyone. Thank you. Question on what you might expect for permanent hotel closures? What percent of your system just might not be around in a year or two? And then a follow-up on that is we noticed the EDITION Time Square closed really quickly once COVID hit. I'm wondering what was the reason for that closure?

Yes. I'll start and then Arne feel free to jump in. So obviously this is all going to take some time. I think what you are seeing so far quite frankly is our dilutions are below average, if you look at where we were in the second quarter and in the first quarter it's below kind of even the 1% to 1.5% that we guided in normal times. Obviously, though it's really going to depend to some extent on how long the virus persists, and in which areas and to what extent. And then obviously the owner's ability to get through that. So I can't give you a specific sort of estimate, but I'll also say that so far we've seen really strong capabilities on the part of the owners to be able to find access to the liquidity they need to keep the hotels going, and the banks have shown a clear willingness to kind of essentially press pause for a while. And when you think about kind of the depth of what we've seen to have really only a very few hotels already in foreclosure. That I think demonstrates the fact that everybody wants to try to see their way through this. Now we clearly are going to see a bunch of foreclosures through all of this, but that doesn't necessarily mean the hotel is closed. I think in many cases what happens is the banks want to preserve the value of the asset in which case keeping the brand on it is the best way to do that and will do so. And the EDITION is a great example as you've described where the lenders have stepped in, and I think you could actually see that hotel reopen that you saw lots of urban full-service hotels close temporarily to kind of stop and reassess the situation; work really hard to figure out what the right occupancy breakeven is to be open or not open. And I think that you're seeing more and more of them open up. So it's obviously something that is very top of mind for us. We, our North America team and all the teams around the world for that matter are spending just an inordinate amount of time working with the owners; whether it's on kind of short-term payment plans or looking at the FF&E reserves or making sure there's a conversation about our bills and working through the other bills like property insurance et cetera, but again I do think that for the moment it's been a really good pattern for the hotels marching through it. But it does depend a lot on how long this lasts.

I believe Lenny expressed it well. To sum up, I would estimate that only a small number of our hotels globally will remain closed or fail permanently. In a portfolio of 7,500 to 8,000 hotels, even prior to COVID-19, there were a few hotels where profitability was not adequate for their long-term sustainability. Naturally, those are the hotels that Lenny and the team are addressing first during this crisis because they were struggling before. When something like this occurs, it compounds the issues. I actually think the EDITION Times Square is not a representative example; it’s a brand new and beautiful hotel. I’m hopeful that it will open and succeed. However, there are hotels in New York City that weren't profitable before the pandemic, and some of those might not reopen due to financial pressures such as labor costs and property taxes, making it tough for the owners to envision a path to profitability necessary to justify their operations. Nevertheless, I believe these situations are rare on a global scale in terms of the number of hotels and rooms. While owners are facing significant challenges, we must assist them in restoring profitability. Ultimately, I believe the best use of these real estate assets will remain as hotels, and they will reopen and continue to operate long-term.

Our next question comes from Stephen Grambling of Goldman Sachs.

Thanks. This is a bit of a crystal ball question, but how do you think about the impact of work from home, if the recent acceleration holds? And as part of this question, what has been the impact on corporate relationships or end markets where these trends were the most pronounced over the past 5 to 10 years? And if you were to maybe even peel back further, can you see whether those individual customers in those sectors have changed their leisure behavior along with it?

Those are good questions. Regarding the last one, I don't think we have enough data yet. Many business travelers are still not traveling and are instead relying on remote work and technology to manage their tasks from home. When people claim they'll never return to the office or travel, I would be cautious about taking that too seriously. We've heard similar sentiments during past crises, starting in the early 90s. While technology has certainly improved, in 2001, 2002, 2008, and 2009, there were also claims that we didn't need to travel as we previously did. This time, the context of remote work is different, but I think it's clear that over the past month, we've noticed growing frustration with remote work. This seems especially true for younger employees who depend more on being physically present for training, networking, and pursuing opportunities. Even for others, after a few months, people are realizing that remote work is not as effective. It's hard to maintain company culture, onboard new hires, or foster essential relationships with partners and customers. I believe we'll see more people expressing the need to get back to in-person interactions. There may also be greater flexibility regarding daily office attendance when not traveling, allowing for a blend of work and leisure. For instance, in the future, a week in Florida or a weekend in the Caribbean might not be strictly vacation anymore; I could possibly mix in some work during the trip. This merging of leisure and business could be beneficial for travel rather than detrimental. Overall, we expect travel demand will eventually return to past levels.

Our next question comes from Anthony Powell of Barclays.

Hi. Good morning. Question on group bookings, have you seen meeting planners start to book for the second half of next year or any part of next year? And how are you approaching on booking business for your hotels generally right now?

The clearest trend we've observed is that customers with near-term group business are deferring their meetings more than canceling them. Most of our group clients still want to hold their meetings, which is why they are postponing instead of cancelling, and we've seen that business materialize eventually. These clients are engaged in planning their meetings and recognize their value and want to proceed with them. However, we have noticed that new bookings for future periods are not as strong as they were before. If clients have not yet committed to a meeting, they are less likely to do so until they have more clarity about the future. As a result, bookings for 2021 have not seen significant cancellations, while there have been notable cancellations for group business booked in 2020. I anticipate that we will continue to see cancellations for any business that hasn't yet been cancelled or deferred for the latter part of 2020 until we gain more confidence regarding the situation with the virus. Ultimately, once it's safe to hold group meetings, we will likely observe fewer deferrals of existing business, and we should see an influx of new business. Currently, group bookings for 2021 are down approximately 10% compared to what we would have had for 2020 a year ago. It seems likely that the first half of next year may be significantly weaker for group business than the second half, which is based on predictions concerning the virus and vaccine availability. As the virus diminishes and vaccine accessibility improves, we expect group business to start recovering.

Anthony, the only other thing I'd add is that for 2022 and beyond versus 2021, the rates of decline are meaningfully less. So when you think about the kind of the overall decline, it's nearer in where there's more concern, but when you look at corporate bookings beyond that, it's down much less.

Our next question comes from line of Michael Bellisario of Baird.

Good morning, everyone. I have a follow-up regarding your comments on net unit growth. Looking ahead, what does the distribution between managed and franchise growth look like? Are you more reluctant to take on managed properties now due to the significant working capital requirements we observed in the last quarter?

We are no more hesitant to take on manage than we were before, particularly in the luxury and full service space. But I think the question really has to be assessed from a global perspective, and I think given the relatively greater strength of Asia Pacific in our year-to-date adds to the pipeline, if anything we might skew just a tad more managed than franchise, but if you look at it like-to-like our new unit growth in the United States is going to tend to be select service, which is going to tend to be overwhelmingly franchise and obviously those numbers are down.

Our next question comes from line of Chad Beynon of Macquarie.

Hi. Good morning. Thanks for taking my question. Just wanted to ask about a booking window what you're seeing in the U.S? If that really changed at all in the last couple months, particularly going into July, if that's kind of still in under a week or if that's starting to expand beyond what we've seen? Thanks.

It is still very short term. It shouldn't surprise you because while the occupancy numbers have improved, there is still a general availability across the portfolio.

Sure. Believe it or not, there were a couple in Q2 from North America, but it's overwhelmingly from Asia Pacific, and there a whole lot of that's going to depend on Q4. So we need to get farther into the year, but as you might imagine for the North American hotels where you have an owner's priority under most any circumstance you're seeing absolutely massive decline in RevPAR in 2020, and so for this year I think it's hard to imagine that there's anything very exciting to talk about there. But then and when you start talking about rebound, and as demand comes back; I think one of the things that has been good to see is that as demand really picks up rate has also done what demand and supply show it to do, which is that it has also shown the qualities of being quite resilient. So when we think of kind of special corporate rates et cetera for next year. I think again it would point you to a potential view that as demand comes back you will see things pick up nicely. And again, as we've said there's been so much work on the cost side that kind of points to margins being able to be helpful as well. But I do think if you look at our history of North American recovery in IMF; it does take a while because of these owners' priorities.

It depends on what you're comparing it to; we should see improving profitability for owners as well as improved earnings and EBITDA for Marriott every month and quarter moving forward. While the absolute numbers reported this morning may not seem significant, I can say with a reasonable level of confidence that the second quarter of 2020 will likely be the worst quarter we've ever experienced. After that, things should start to improve. Regarding your question, we are nearing completion of re-baselining our business, which includes the hotels we manage for others and the activities of our franchisees. We manage more hotels in the luxury and full-service segments than any other company globally, providing various services that can be either localized or global. The hotels cover the costs of these services, and we also incur our own general and administrative expenses to support our brands and manage the company. As Leeny mentioned, we're targeting a 25% reduction in gross spending within both categories combined, which will serve as a new baseline for our growth. We aim to build from this base at a rate similar to what we achieved previously and are optimistic that RevPAR and fee growth for Marriott, along with EBITDA growth for our hotel owners, will outpace our cost growth in the coming years.

Ladies and gentlemen, we have reached the allotted time for questions. I will now turn the floor back over to Arne Sorenson for any additional or closing remarks.

All right. Well, I just say thank you everybody. We appreciate your interest and your time. And of course, look forward to welcoming you back to our hotels just as soon as you feel comfortable getting on the road, which we hope is very soon.

Thank you, ladies and gentlemen. This does conclude Marriott International's second quarter 2020 earnings conference call. You may now disconnect.