Good day, everyone, and welcome to the Marriott International Q4 2024 Earnings Call. Please note today's call will be recorded. It is now my pleasure to turn today's conference over to Jackie McConagha, Senior Vice President of Investor Relations.

Thank you. Good morning, everyone, and welcome to Marriott's Fourth 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 Pilar Fernandez, our new Senior Director of Investor Relations. Before we begin, I would like to remind everyone that many of our comments today are 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 revenue comments reflect system-wide constant currency results or comparable hotels, and all changes refer to year-over-year changes for the comparable period. Statements in our comments and 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.

Thanks, Jackie, and good morning, everyone. Marriott had excellent results in 2024, reflecting continued robust demand from customers, owners, and franchisees for our more than 30 brands. For the full year, we achieved net rooms growth of 6.8%, and global RevPAR rose over 4%. We ended the year on a high note with fourth quarter worldwide RevPAR increasing 5%. ADR rose 3%, and occupancy increased over 1 percentage point. All of our regions produced better RevPAR growth than we had previously expected, with strength across all of our customer segments. The U.S. and Canada saw its best quarterly RevPAR growth for the year with a fourth quarter RevPAR rising over 4%, primarily driven by a higher ADR. The drop in occupancy around November's U.S. selection was not as severe as we had anticipated, with demand rebounding quickly after the election. International RevPAR rose over 7% in the quarter, driven by a 4% rise in ADR and a 2 percentage point gain in occupancy. APAC RevPAR increased 12.5%, led by strong growth in Japan, India, and Thailand, aided by strong cross-border demand, especially from Greater China. RevPAR in the EMEA region rose 8%, with broad-based growth across the region led by strong leisure demand. RevPAR in Greater China declined 2%, better than prior expectations, as the region benefited from the recent expanded visa-free transit policy and better-than-anticipated demand across multiple holidays and citywide events. By region, RevPAR growth was positive in Tier 1 cities, Hong Kong, Macau, and Taiwan, while Hainan Island again saw the largest RevPAR decline. Hainan was again impacted by weak domestic leisure demand as wealthier travelers continue to vacation across other parts of the region. However, Hainan did see nice sequential improvement with RevPAR down 16% in the quarter compared to down 24% in Q3. Turning to trends by customer segment, leisure, which comprises the largest portion of global room nights at 44%, had its strongest RevPAR growth quarter of the year and was the fastest-growing of our customer segments. Fourth quarter leisure RevPAR was 6% globally and 4% in the U.S. and Canada, driven by gains in both room nights and ADR with strength across all tiers from luxury to select service. Business transient contributed 33% of global room nights in the fourth quarter. Solid gains in ADR drove business transient RevPAR up 3% globally and up 4% in the U.S. and Canada. Group RevPAR, which comprised 23% of room nights, rose 3% in the quarter. As expected, this was group's lowest growth quarter of the year due to fewer group events in the U.S. around November's election and a decline in group RevPAR in Greater China. Looking at full year 2024, all customer segments experienced solid RevPAR growth on a global basis. Group increased an impressive 8%, while leisure and business transient rose 3%, respectively. As Leeny will discuss during her remarks, we are pleased with the solid momentum we have in our business as we start off 2025. At the end of 2024, global group revenues were pacing up 6% for 2025 and 10% for 2026 on increases in both room nights and average daily rate. Shifting to development, 2024 was another terrific year. Net rooms grew 6.8%, helped by the addition of around 38,000 rooms from our agreement with MGM and approximately 9,000 rooms from Sander. Conversions were again a large driver of growth in 2024, contributing about a third of our signings and over half of our openings. Our industry-leading global lodging portfolio now exceeds 1.7 million rooms across 144 countries and territories. With a record of over 1,200 deals signed last year, we ended the year with over 577,000 rooms in our pipeline. In the U.S. and Canada, our largest market, we led the industry in growth room additions with around a third of all rooms opened during the year flying one of Marriott's flags. While financing in the U.S. remains particularly challenging for new construction, we also had the leading share of new build construction starts in 2024 as banks have shown preference for deals associated with our strong brands and an experienced player like Marriott. During the year, we also meaningfully expanded the breadth and depth of our portfolio across customer tiers, from luxury to mid-scale and across both traditional and alternative lodging product offerings. We continue to have strong owner interest in all of our mid-scale brands, given their compelling brand design, the power of our revenue engines, and their simple bundled affiliation costs, which we believe to be the lowest in the industry. At the end of the year, we had over 300 open and pipeline Four Points Flex, Studio Res, and City Express by Marriott properties, just 1.5 years after entering the mid-scale tier. We also continue to expand our incredible luxury portfolio with the opening of several notable hotels, including the St. Regis on the Bund in Shanghai and W's in Prague and Sao Paulo. In the nontraditional lodging space, in December, we announced our plan to launch an outdoor-focused collection, anchored by founding deals with postcard cabins and trail-2 innovative outdoor hospitality brands. Ellman, the second luxury superyacht in the Ritz-Carlton Yacht collection, had its maiden voyage in the Mediterranean last September; our third superyacht, Luminare, is expected to set sail this summer with itineraries in the Mediterranean, Asia, Alaska, and Canada. Our focus on offering fantastic travel experiences for every trip purpose is key to ensuring that Marriott Bonvoy remains the industry's leading travel platform. We added over 31 million new members to our loyalty program last year, growing to nearly 228 million members at year-end. Bonvoy member penetration of room nights achieved historic size in the fourth quarter at 73% in the U.S. and 66% globally. As we grow that member base and our global portfolio and add travel-adjacent products and collaborations, like our 33 co-brand credit cards and tie-ups with partners like Uber and Starbucks, we are deepening engagement with our members and capturing more of our customers' share of wallet. Driven by a strong increase in global card spend, our co-brand credit card fees rose nearly 10% last year. Our digital channels, mobile in particular, remain key drivers of direct booking at a lower cost to our owners. In 2024, Marriott Bonvoy app downloads rose nearly 30% year-over-year. We're excited about enhancing the customer experience across all our digital channels through the multiyear digital transformation we have underway that we expect to begin rolling out a little later this year. Before I turn the call over to Leeny to discuss our financial results in more detail, I want to thank our teams around the world for their hard work and dedication and for making Marriott a place where innovation and excellence thrive.

Thank you, Tony. I'll start by reviewing our solid financial performance. Fourth quarter total gross fee revenues grew 7% to $1.3 billion, primarily due to higher RevPAR, room additions, a 13% increase in credit card fees, and a near doubling of residential branding fees. Incentive management fees decreased year-over-year as strength in APAC was offset by declines in Greater China and in the U.S. and Canada. The decline in the U.S. and Canada was primarily driven by lower fees in Maui given the timing of fee recognition in the prior year. G&A declined 12% year-over-year to $289 million, primarily due to lower administrative bad debt and litigation expenses. Fourth quarter adjusted EBITDA grew 7% to $1.29 billion. At the hotel level, profit margins at our worldwide managed hotels rose 110 basis points in the quarter and 40 basis points for the year, helped by continued productivity improvements. We are also pleased that our guest surveys indicated that customer satisfaction continued to rise with our 2024 intent to recommend scores increasing in every one of our regions. For the full year, gross fees and adjusted EBITDA both increased 7%. We were pleased that with the power of our strong cash-generating asset-light business model and our disciplined investment, we returned over $4.4 billion to shareholders through a combination of dividends and buybacks. I'll now talk about our 2025 expectations, starting with net rooms growth. With our industry-leading pipeline and strong momentum in conversions, we expect net rooms growth of 4% to 5%. Conversions, of course, can enter the system quickly. Conversions that were added to our system in 2024 have been in the pipeline for 14 months on average, and nearly 20% of conversions opened so quickly, they were not in any quarter-end pipeline number. Over the 3-year period from year-end '22 to year-end '25, we continue to expect net rooms to grow at a compound annual growth rate of 5% to 5.5%, as we discussed at our 2023 Investor Meeting. For the full year '25, we expect global RevPAR growth of 2% to 4%. With the exception of Greater China, RevPAR growth in international regions, though continuing to normalize, is again expected to be higher than in the U.S. and Canada. We currently anticipate RevPAR in Greater China to be roughly flat year-over-year. As Tony discussed, we're off to a great start with January RevPAR rising 6% globally. The sensitivity of a 1 percentage point change in full year 2025 RevPAR versus 2024 could be around $50 million to $60 million of RevPAR-related fees and $5 billion in owned leased profits. For the full year, gross fees could rise 4% to 6% to around $5.4 billion to $5.5 billion. Co-brand credit card fee growth could be a couple of hundred basis points lower than the nearly 10% growth in '24, primarily due to the normalization of international card fee growth. Residential branding fees could decline nearly 50%, solely due to the timing of unit sales. While timeshare fees as usual are expected to be relatively in line with the prior year at around $110 million. FX is expected to negatively impact gross fees by roughly $25 million. Owned, leased and other revenues, net of expenses, is expected to total $345 million to $355 million, relatively in line with 2024's results, somewhat impacted by a larger number of renovations at our owned and leased hotels. 2025 G&A expense is anticipated to decline 8% to 10% to $965 million to $985 million. This decline is the result of the expected $80 million to $90 million of above property savings from our enterprise-wide initiative to enhance our effectiveness and efficiency across the company. As we previously noted, this process should also yield cost savings to our owners and franchisees. In December, we announced that we would reduce our loyalty charge-out rates by roughly 5%. Full year adjusted EBITDA could increase between 6% and 9% to roughly $5.3 billion to $5.4 billion. Full year adjusted diluted EPS could total $9.82 to $10.19. EPS growth will be impacted by an expected effective tax rate of around 26%, compared to under 25% in 2024, reflecting certain international tax rate changes. Our underlying core cash tax rate is anticipated to remain in the low 20s percent range. For the first quarter, global RevPAR could increase 3% to 4%, benefiting from Easter shifting from March to April this year, as well as January's inauguration and the Super Bowl in New Orleans benefiting the U.S. and Canada. First quarter gross fees could increase 2% to 3.5%. Solid growth in management and franchise fees are expected to be partially offset by a decline in IMS partly due to a decline in Greater China, given their strong first quarter a year ago, as well as certain properties in the U.S. and Canada undergoing renovations. First quarter owned, leased, and other revenue net of expenses of around $55 million is expected to decline year-over-year, primarily due to the elegant portfolio undergoing renovations as well as the timing of termination fees. We expect $1 billion to $1.1 billion of investment spending in 2025. There are 3 major areas of expected spending that are each around 1/3 of this total. The first bucket is another year of higher than historical investment in technology. Over half of this investment is associated with the multiyear transformation of our property management, reservations, and loyalty systems, the overwhelming portion of which is expected to be reimbursed over time. The second bucket is spending for our owned lease portfolio. This spending is expected to be above historical levels in '25 with about half of the expected investment driven by the completion of renovations on the elegant portfolio in Barbados as well as renovations on a handful of other hotels. We expect to sell the elegant portfolio after renovations are complete, subject to long-term contracts to remain in our system. The last bucket is expected investment in our contracts, largely for new units as we continue to expand our global portfolio. Our capital allocation philosophy has not changed. We're committed to our investment-grade rating and investing in growth that's accretive to shareholder value. Excess capital is returned to shareholders through a combination of share repurchase and a modest cash dividend, which has risen meaningfully over time. In 2025, we expect another year of strong capital returns of approximately $4 billion. Full guidance assumptions and details for the first quarter and the full year are in the press release.

We'll take our first question from Shaun Kelley with Bank of America.

Tony, Leeny, I was hoping you could just update us on your cost transformation and efficiency program, if you could. What did you learn from that? What areas have been a focus? We've heard a little bit about select service management. What has been the response from the ownership community and internally?

Sure. Well, thanks for the question, Shaun. It's early, and the resultant impact on our org structure and model have just been established. So I would say most of my responses are a bit qualitative. Internally, there is energy across the enterprise about how streamlined our decision-making will be as a result of this, particularly in the field. I've heard parallel enthusiasm from the owner and franchisee community. Their ability to engage with the continent teams who they deal with daily makes them feel empowered, and I think they have high hopes for improving our relationship with the owner and franchisee community.

And then maybe, Leeny, just as a quick follow-up, the investment spending buckets are a bit higher than what was outlined back at the Analyst Day a couple of years back. Could you expand on that a little bit, what's kind of different than your expectations a little while ago? When do you expect to see reimbursed spending especially for technology?

Yes. Sure, Shaun. When I outlined those three buckets, as I pointed out, the first is largely around investing in our owned leased properties. That is higher than normal due to our investment in the Barbados properties, which will be largely this year and should be completed at the end of this year, making up about $100 million of that overall amount. We've also got significant renovations in leased properties which are not typical and should not be expected to continue on a regular basis. Over the next couple of years, you will see a normalization to the $800 million to $900 million that we believe is appropriate post '25 and post the transformational tech investments that we're making. The tech investments, we expect to start rolling out later in '25. As we progress through implementation over the years, the owners will see a return in their reimbursed depreciation calculations reflecting these CapEx expenditures.

We'll take our next question from Patrick Scholes with Truist Securities.

What do you feel is your appetite for additional tuck-in acquisitions this coming year? Or would you view this year more as a digestion of previous acquisitions?

Sure. Just as Leeny talked about our capital allocation philosophy remaining intact, I’d say the same applies to your question. Over the last decade, we've identified gaps in our brand portfolio or geographic footprint that we thought could be effectively filled through tuck-in acquisition. In some instances, we filled those gaps through the development of organic platforms. We will continue to evaluate both the breadth of the brand portfolio and our expanding global footprint, and if we believe there's an opportunity to fill those gaps, we will certainly consider a tuck-in acquisition. However, we will apply the same rigor in evaluating the economics. You should assume that the vast majority of our growth will be organic.

Okay. And as a follow-up, I've seen news articles about Canadian and Mexican travelers canceling reservations or pulling back their travel plans due to recent political tensions related to tariffs. Is that something you are seeing as well?

Yes. It would be too soon to say that we're seeing anything of note. Just a reminder, overall, the U.S. and Canada is overwhelmingly driven by domestic travelers. The two largest international markets of travelers coming to the U.S. are from Canada and Mexico, but they make up a very small part overall — about 1% to 2% of our nights in the U.S. We'll see over time, but it’s too early to say; it remains a very small part of our business in the U.S.

We'll take our next question from Conor Cunningham from Melius Research.

Can you just talk about the tech migration? Can you explain how that's going to be implemented and its implications for your business going forward? I assume it will benefit 2026.

Sure. As we mentioned in the prepared remarks, elements of that tech transformation will start to roll out later this year. We've talked about this in the past. We anticipate far-reaching impacts to all the constituents we serve. Starting with Marriott Associates, we believe the simplicity and the streamlined training will be a big advantage in attracting best-in-class talent, especially from a next-generation workforce. For our guests, we anticipate this transformation will create tremendous capacity at the hotel level so our associates can better engage the guests in person. It will also significantly enhance our call agents’ ability to assist with broader travel planning questions. For the owners, we expect enhanced efficiencies regarding revenue and expenses alike. Importantly, our older community is excited about the wide array of products and services we offer our guests beyond guest rooms. The ease with which a guest can shop across all categories on our new reservations platform represents meaningful revenue upside for our owners.

Just one more thing to add: given the size and scale of this transformation — which involves our reservations, property management systems, and loyalty program — you should expect this to roll out over several quarters.

On the composition of RevPAR, can you talk about ADRs versus occupancy? You had nice cadence in the fourth quarter, but how do you think about it for 2025?

Yes. This year, leisure was strong, up 8% for the full year, with business travel and leisure also seeing strong performance. Looking ahead to '25, I would estimate that group, currently pacing up at 6% for '25, will likely lead RevPAR growth with business transient steady and leisure flat to slightly up, primarily driven by ADR. We expect a little bit of occupancy gains as well, but it will be more heavily weighted towards ADR in '25 compared to this year.

We'll take our next question from Richard Clarke with Bernstein.

RevPAR plus net unit growth is 7.5%. You appear to be growing non-RevPAR fees a bit above that, but forecast gross fee growth of only around 5%. So what’s the bridge to that 5%?

Several elements are impacting fees that do not repeat annually. FX is a headwind of about $25 million, and lower residential branding fees could see a reduction of nearly 15%. Additionally, IMS will change slightly, primarily due to Greater China continuing to face challenges and renovations affecting U.S. and Canada revenues.

At your CMD, you guided to non-RevPAR fees growing 12% across 2024 and 2025. Where do you expect that to fall across those years?

There are many moving parts impacting non-RevPAR fees growth. Credit card fees will likely see a couple of hundred basis points lower than this year's nearly 10% growth, residential branding fees will drop from $80 million to roughly half, and timeshare fees should remain flat. These three factors are the biggest drivers.

We'll take our next question from Robin Farley with UBS.

On your unit growth guidance for the year, what percent do you expect to come from conversions versus new construction?

This year, we've seen significant conversions, reflecting over half of our new additions, and I expect around 30% to 40% of openings in '25 to come from conversions.

Regarding capital spending for new units, is that a mix of key money, some loans, and equity? How should we think about return on that?

We have various financial tools for those deals we believe will provide outsized volumes of fees. In the U.S. and Canada, key money is often the preferred tool. We have observed slightly less key money used per deal, but the absolute volume of dollars has grown significantly along with our system.

The makeup of investments in growth is overwhelmingly key money. Although we have debt service guarantees and operating profit guarantees from time to time, key money will make up the largest component.

We'll take our next question from Stephen Grambling with Morgan Stanley.

Can you compare your 2025 outlook versus September's Analyst Day? What surprised the upside and challenges? What does this mean for EBITDA and free cash flow growth?

The classic question is around the equation of rooms growth and RevPAR. With a goal of RevPAR and rooms growth around 7.5% to 8%, we see good growth opportunities moving forward. Some minor challenges related to FX and RevPAR in parts of the world, but the overall outlook remains very positive for capital returns and EBITDA growth.

The equation we laid out in September '23 has held up well. We feel confident in our ability to deliver a compound annual growth rate of 5% to 5.5% as we previously discussed.

Reflecting on our tax rate discussed earlier, we now project an effective tax rate of around 26% for '25 compared to under 25% in '24, considering jurisdictional changes. RevPAR has remained strong.

We'll take our next question from David Katz with Jefferies.

Can you walk us through key money terms in the market? If it's becoming more prevalent, do contracts lengthen?

The fundamental structure of our deal-making remains consistent; we focus on long-term stable contracts. We are not seeing deals where we are pressured to deviate materially from established base and incentive fees.

So, it seems like competition has increased, but you feel confident in the structure of management contracts?

Yes, we are making key money contributions that are performing well and continue to get a premium on contracts involving key money compared to those that do not.

We are seeing key money usage increase in lower quality tiers, but it's still prevalent in the highest quality tiers representing 40% of our pipeline.

We'll take our next question from Brandt Montour with Barclays.

I want to discuss the leisure segment, which sounded like a big surprise in the fourth quarter, yet guidance was more flat to up. Is that conservatism due to visibility?

Yes, that’s part of it. The booking windows remain relatively short — under three weeks — making predictions tough. However, I found the fourth quarter numbers very encouraging. Predictions of the demise of leisure have been persistent, but since '19, leisure RevPAR has recorded a 40% improvement. Therefore, the fourth quarter figures give me hope that this segment still has legs, while the future guidance reflects normalization.

The strong growth we’ve seen in leisure, particularly in luxury and resort hotels, indicates that we continue to do well. However, macroeconomic factors will always affect leisure trends, and we’ll be observing this closely moving forward.

On the key money side, can you discuss the availability of capital, which is a struggle post-COVID?

While rates are high, they have been for some time. The reluctance to lend on new construction largely relates to regulatory uncertainties rather than fundamentals. We are observing a modest uptick in construction starts and feel optimistic about new build prospects, especially given our leading share in the U.S. and Canada.

We'll take our next question from Duane Pfennigwerth with Evercore ISI.

Can you share your view on business travel recovery both in volume and revenue? Any insights on recovery by geography or industry?

Business transient has recovered to 2019 levels, although the recovery has varied. Small- and medium-sized businesses returned faster than large corporates, which are still behind 2019 levels. We expect additional recovery for larger corporate accounts in '25.

What are the structures of your co-brand relationships and their geographical presence?

Our largest partners are JPMorgan Chase and American Express, with relationships primarily in the U.S. However, we also partner with local banks in other countries, continuing to evaluate further opportunities. These are multiyear agreements and are always under discussion.

We'll take our next question from Bennett Rose with Citi.

Could you talk about your investments in the elegant portfolio and if you are seeking potential buyers? Are there challenges to selling an all-inclusive portfolio?

We don't have specific timelines. Post-COVID supply chain challenges have affected our ability to execute, but plans are in place to complete renovations in '25. We want to make it a clean sale with all necessary renovations complete and are evaluating various opportunities.

We've noticed an uptick in institutional investment in the all-inclusive space, which is a positive development for when we are ready to recycle this capital.

Did you complete the purchase of the Chicago Sheraton in the quarter? Will it be included in your owned and leased outlook going forward?

Yes, we did. We are now proud owners of the Sheraton Chicago, and we believe it will generate positive cash flow in our owned-leased line.

We'll take our next question from Ari Klein with BMO Capital Markets.

Regarding key money, is there an opportunity to be more aggressive since it's accretive to growth and you have a strong cost of capital?

Key money is a valuable tool in the right situations. We are careful to evaluate each transaction for its value creation. We remain disciplined and will not pursue growth for its own sake but are not shy about using that tool when appropriate.

We'll take our next question from Chad Beynon with Macquarie.

Can you touch on the growth of Bonvoy members? Where are you seeing that growth and did the MGM deal affect this?

We're experiencing growth globally, with property teams embracing efforts to add high-value members to the program. Our entry into the mid-scale tier opens opportunities for younger Bonvoy members starting their travel journey. We'll continue pushing at the property level in '25.

Can you talk about recovery in China beyond Tier 1 cities, particularly with the Chinese New Year nearby?

While we are optimistic, it's too early to comment on long-term recovery for lower-tier provinces. We are encouraged by Tier 1 city performance and some small signs of recovery, but we need to be cautious as this is heavily impacted by the timing of celebrations like the Chinese New Year.

Could you expand on international RevPAR and how it compares to the U.S., especially in Middle East or Europe applications?

Generally, RevPAR is closely tied to GDP performance. Some markets, like India, show a noticeably faster GDP growth resulting in double-digit room growth. Cross-border travel, fueled by a strong dollar, especially in Europe and Japan, indicates potential for superior RevPAR growth compared to the U.S.

That concludes our allotted time for questions. I'll turn the program back to Tony for any additional or closing remarks.

Thank you for your interest and your questions. Our teams are energized by fantastic performance in '24 and are excited to serve you across 144 countries around the world. Safe travels, and we’ll talk to you soon.

This does conclude today's program. Thank you for your participation, and you may now disconnect.