Marriott 4Q15 Earnings Call Notes

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Acquired Starwood

“the biggest Marriott news in 2015 was our announced acquisition of Starwood. The transaction is on track and we expect to close around mid-year 2016.”

Not going to try to put everyone on the same property management systems

“it won’t surprise you to know there are many systems. On the property level, the property management systems, they both have the same core engine running them. And I think actually unlike in prior deals, we will not try and move all of one portfolio of hotels to some other property management system from the one that they’ve got, and instead find a way to make those systems communicate above the property in a way that hopefully will be much easier.”

Anxiety in the marketplace leads us to forecast more conservatively

“Let me just talk a little bit more about the philosophy around our RevPAR guidance from 3% to 5% for 2016 which has been noted obviously in a number of early reports that have come out of that, that’s a point lower than what we thought a quarter ago. What’s changed between then and now, I think, we look at a world in which there’s obviously more anxiety in the marketplace. There’s a bit more anxiety about what GDP growth is going to look like in 2016 and as a consequence, we’ve been a bit more conservative in the forecast that we provided.”

The sky is not falling when we look at our data

“what we see is, again, reasonably encouraging. The sky is not falling when we look at our data. That is profoundly the case when you look at group business but it is also very much the case when you look at transient business. We mentioned the 2.5% transient demand in January. We look at U.S. system-wide RevPAR numbers and they were up a hair over 3% in the month of January…all things considered, that’s not bad and we’d expect February to be better.”

Not seeing any cause for concern in group bookings

“No, we’re not. The only thing we’ve seen and we mentioned this in the prepared remarks is we are seeing a bit of a lengthening of the group booking window. So we talked about how in the fourth quarter we had an increase in group bookings for all future periods of about 10%. Actually, when you look at that by year, 2016, 2017 and 2018, the weakest booking year-over-year would be 2016. That is not a function of a slowdown in demand. That is a function of the fact that bookings are already up 7%, and there’s not that much space left.”

China doing much better than you read in the papers

“Let me start with the Asia piece, particularly China. Obviously, we’ve been bombarded with news about the Chinese economy over the last couple of quarters. Most of it not very positive in what we read in the papers here. And obviously a big chunk of that is related to their manufacturing and export business. To some extent, it’s related to their infrastructure spending, and to some extent to their financial markets and financial institutions. I think underneath all of that you’ve got China continuing to move towards a consumer economy. You’ve got a growing middle class that has resources to expend on things other than bare necessities. And as a consequence, I think we see in our industry and certainly at Marriott, stronger performance in China than you might expect from reading that newspaper.”

What we see so far in 2016 makes us positive about China

“Obviously, it is a very big market. And so the performance in different cities will vary from place to place. We had some of the numbers in our prepared remarks. Shanghai continues to be a very strong market all the way through 2015. Hong Kong, by contrast, has been a market which has been under pressure, in part because of the political implications of some of the street protests and other decisions that are made that derive from that. But then you look at other markets like Japan. China visitation to Japan was up something like 25% or 30% last year, if memory serves. And it is driving great performance in our Japanese hotels. And you see that sort of growth in outbound China business continuing to perform really well. And what we see so far in 2016 continues to make us quite positive about China.”

Kathleen Kelly Oberg – Chief Financial Officer & Executive VP

In most cases it’s so expensive to hedge currencies that you’re better off with the risk

“I mean, in terms of – no, in terms of the debt that Marriott takes on, no. I think we’re always looking at kind of new ideas on the hedging side and hedging the fees but to be quite honest in many cases the costs of those hedge are so prohibitive that it’s really better off to stick with the risk.”

Not expecting the same volatility in 2016 as 2015

“Now, I will also say that we do – we are hopeful that the dollar doesn’t strengthen at the same kind of rate that it did in 2015 in 2016 and I think our forecast does take into consideration that we’re not expecting quite the same level.”