Marriott 3Q16 Earnings Call Notes

Marriott International (MAR) Q3 2016 Results

NA demand continues to moderate

“Clearly, North American demand growth continues to moderate. In the third quarter, hotels with the weakest RevPAR were generally in oil and gas markets, or in gateway cities affected by continued weak international visitation, or impacted by new supply.”

Group business has been worse than anticipated

“Yeah, I mean, I think it’s faster than we would have expected. If you go back to the full year, I think we started – and Laura can maybe pull this out as we talk – but I think we started 2016 with group business up almost 10% for 2017 compared to where we were at the first of 2015 for 2016. And I think we cautioned folks that that was not likely to hold because as we got farther into the year, we would see that we could book less because we had less capacity. And so we expected that we would tail down towards the maybe mid to high single digits. But I think the experience in the last quarter or so going from roughly 7% to roughly 2% is worse than we anticipated.”

Companies are cautious probably reflect the anemic GDP growth environment that we’ve been operating in

“I think there are a couple of – one positive thing that can be said next to that, when you look at bookings done in Q3 for all future periods, we were up about 8%, if memory serves. So people are still making commitments on group business and there’s good growth. But when you look at the near term, when you look at group bookings in the year for the year, or you look at group bookings for the next 12 months, we see less robustness there. And to us that’s a sign of some caution by corporate customers probably particularly who – in the sense that’s where group business gets most like corporate transient business too. And there I think we’re seeing companies be just a bit cautious and probably reflect the sort of anemic GDP growth environment that we’ve been all operating in.”

30 brands post starwood

” We’ve said a couple of things here that are sort of obvious. I think if we had not merged with Starwood, would we be trying to build 30 brands from scratch? I think the answer is probably not. At the same time, having done this deal, the 30 brands all exist. They all have substantial capital that has been invested in them, particularly by the hotel owners who have made deliberate bets about which flag they put on their hotels. And we don’t have the power to, nor the desire to, try and convince them that those bets have not been good bets.”

Going to market with brands as a portfolio

“I think the other thing that’s really important to recognize here is the biggest expense from a brand perspective, in theory, is about marketing the brands. And, obviously, that’s the most expensive when each brand has to be marketed on its own. And in that context, you would want as much definition as you could have between brands. And it would still be expensive to go out and market each one alone. I think in many respects that’s no longer our model, if it ever was. I think the principal model today is we go to market through our loyalty platform, through our dot com site, through our app. And those things allow us to essentially market a portfolio and offer through that portfolio an incredible range of choice to our customers, which drives, actually, conversion from looking to booking that much higher and makes the economics of each brand better, not weaker. And so you put all that together, and I think that’s why we conclude that we’re going to keep these brands and we’re going to continue to grow them. I don’t really think that there are material incremental costs to having a brand given that that’s the business model that we have.”