Marriott International, Inc. (MAR) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A session highlight strong financial metrics, optimistic guidance, and strategic growth initiatives such as AI and new partnerships. While there are some uncertainties, such as the Middle East conflict, the overall outlook is positive with expected improvements in RevPAR, co-branded credit card fees, and a solid capital return plan. These factors suggest a positive stock price reaction over the next two weeks.
Key Financial Performance
Global RevPAR Increased by 4.2% year-over-year. Reasons include strong ADR growth and increased demand in various regions, such as APAC and Greater China.
RevPAR in U.S. and Canada Increased by 4% year-over-year. Luxury and resort hotels led the growth, with luxury RevPAR rising nearly 7% and select service RevPAR increasing 3.5%.
RevPAR in APAC Rose over 7% year-over-year. Driven by strong ADR growth and increased demand from Chinese guests.
RevPAR in Greater China Increased nearly 6% year-over-year. Growth led by Hong Kong and Hainan Island, which were both up around 20% due to strong ADR growth.
RevPAR in CALA Rose 2% year-over-year. Growth led by record leisure results in the Caribbean, partially offset by a decline in Mexican luxury resorts.
RevPAR in EMEA Increased over 3% year-over-year. Growth in Europe and Africa was partially offset by a decline in the Middle East, where RevPAR declined over 30% in March due to the conflict.
Leisure RevPAR Rose 6% globally and 5% in the U.S. and Canada year-over-year. Growth attributed to strong leisure demand.
Group RevPAR Increased 5% globally and in the U.S. and Canada year-over-year. Reasons not specified.
Business Transient RevPAR Rose 1% globally and 2% in the U.S. and Canada year-over-year. Growth partially offset by mid-single-digit declines in government room nights and slight declines in other BT room nights.
Total Gross Fee Revenues Increased 12% year-over-year to $1.43 billion. Growth driven by higher RevPAR, rooms growth, a 37% increase in co-branded credit card fees, and an over 70% increase in residential branding fees.
Incentive Management Fees (IMF) Rose 9% year-over-year to $222 million. Growth led by a 13% increase in the U.S. and Canada.
Owned Leased and Other Revenue (Net) Increased 21% year-over-year. Growth due to higher termination fees and strong results at Elegant Hotels in Barbados and other portfolio hotels.
General and Administrative (G&A) Expenses Rose 5% year-over-year. Increase primarily due to timing of compensation costs, partially offset by lower litigation expenses.
Adjusted EBITDA Increased 15% year-over-year to $1.4 billion. Reasons include higher gross fee revenues and strong performance across various metrics.
Adjusted Diluted EPS Rose 17% year-over-year to $2.72. Growth attributed to strong adjusted EBITDA and reduced share count.
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Operating Highlights
Lefay brand introduction: Marriott announced that Lefay, its first brand dedicated exclusively to luxury wellness, is expected to enter its portfolio later this year.
AI-powered tools: Marriott is rolling out AI-powered desktop assistance at customer engagement centers and using AI for guest pre-arrival communications. They are also planning a phased rollout of a natural language search experience on their website and app by the end of Q2 2026.
Global pipeline growth: Marriott's global pipeline rose over 5% year-over-year to a record of nearly 618,000 rooms, with 43% under construction.
Expansion in Vietnam: Signed an agreement with Sun Group to add 10 hotels across 8 brands in Vietnam.
Expansion in Europe: Signed deals to bring Series by Marriott to Europe, including 6 projects in Italy and 5 in the United Kingdom.
Technology transformation: Transitioned the 1,000th hotel to a new tech ecosystem, automating multiple processes to enhance owner returns and improve service quality.
Marriott Bonvoy loyalty program: The program reached nearly 283 million members, with new co-branded credit cards launched in Indonesia and Brazil.
AI integration strategy: Marriott is optimizing content for generative AI services and collaborating with multiple players in the AI space to enhance customer engagement and direct booking channels.
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Risk or Challenges
Middle East Conflict Impact: The ongoing conflict in the Middle East has significantly impacted RevPAR in the region, with a decline of over 30% in March. This has also affected nearby markets such as Cyprus and Azerbaijan. The conflict is expected to cause continued volatility and ongoing negative impacts on Middle East hotels, potentially reducing global RevPAR growth by 100 to 125 basis points for the full year.
APAC Market Challenges: Certain APAC markets, including India and the Maldives, have been affected by Middle East travel corridor disruptions. Additionally, softer long-haul demand into specific APAC markets reliant on Gulf hub connectivity has led to a reduced RevPAR outlook for the region.
EMEA RevPAR Decline: The Middle East conflict has led to a lowered RevPAR outlook for EMEA, with significant year-over-year declines expected in Middle East properties. This is anticipated to have a severe impact in the second quarter.
Mexico Market Weakness: The RevPAR outlook for CALA has been slightly reduced due to weaker performance in Mexico, particularly in luxury resorts.
Renovation Disruptions: Renovations at key properties, including W Barcelona and the Frankfurt Marriott, are expected to impact owned leased and other revenue negatively.
Hotel Sale Impact: The anticipated sale of a long-held hotel in the United States, despite remaining in the portfolio under a management agreement, is expected to affect owned leased and other revenue.
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Guidance & Outlook
Global RevPAR Growth: Marriott has raised its full-year global RevPAR guidance to 2% to 3%, reflecting strong performance in the first quarter and higher-than-anticipated growth in the U.S., Canada, and Greater China. However, RevPAR growth expectations have been slightly reduced for APAC and CALA regions due to softer demand and specific market conditions.
Middle East Impact: The ongoing conflict in the Middle East is expected to impact full-year global RevPAR growth by 100 to 125 basis points. The most severe decline in RevPAR for the Middle East is anticipated in the second quarter.
Gross Fee Revenue: Full-year gross fee revenue is projected to increase by 9% to 10%, reaching $5.93 billion to $5.99 billion. Co-branded credit card fees are expected to grow by approximately 35%, and residential branding fees are anticipated to increase by 45% to 50%.
Adjusted EBITDA: Full-year adjusted EBITDA is expected to grow by 9% to 11%, reaching $5.88 billion to $5.97 billion.
Adjusted Diluted EPS: Full-year adjusted diluted EPS is projected to grow by 14% to 16%, reaching $11.38 to $11.63.
Second Quarter Projections: For Q2, global RevPAR is expected to grow by 1.5% to 2.5%, gross fees are projected to rise by 10% to 11%, and adjusted EBITDA is anticipated to increase by 8% to 10%.
Investment Spending: 2026 investment spending is projected to be around $1.05 billion to $1.15 billion, with significant allocations to digital tech transformation and renovations at owned leased hotels. An anticipated investment in Lefay has increased the spending forecast.
Shareholder Returns: Marriott expects to return over $4.4 billion to shareholders in 2026 through share repurchases and dividends.
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Shareholder Return Plan
Cash Dividend: Marriott is committed to returning excess capital to shareholders through a combination of share repurchases and a modest cash dividend, which has risen meaningfully over time.
Share Repurchase: Marriott plans to return over $4.4 billion to shareholders in 2026 through share repurchases and dividends.
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Key Q&A
Q:What are the current trends in the U.S. market, and what is driving growth?
A:Anthony Capuano highlighted continued strength across segments in the U.S. and Canada, including leisure, group, and business transient (excluding government). He noted a resurgence in select service tiers with 3.5% RevPAR growth in Q1 and strength across sectors, including luxury. The World Cup is expected to have a 30-35 bps impact.
Q:What is the impact of the Middle East conflict on bookings and RevPAR?
A:Jennifer Mason stated that booking activity in the Middle East is recovering from March lows, but the impact will persist through the year. Q2 is expected to see a 50% reduction in RevPAR, with gradual improvement in Q3 and Q4. Q4 comparisons are tough due to strong performance last year driven by citywide events.
Q:What is driving the increase in investment spend, and how does AI factor into this?
A:Anthony Capuano clarified that the uptick in investment spend is tied to the new luxury wellness platform, Lefay. Jennifer Mason added that investment categories remain consistent, and AI is expected to create efficiencies and potential revenue opportunities without requiring significant incremental investment.
Q:How is the group segment performing, and what impact will tech upgrades have?
A:Jennifer Mason reported that group performance is solid, with a 5% pace increase for the year. Anthony Capuano noted that tech upgrades, including AI, will benefit group RFP generation and improve experiences for guests, associates, and owners.
Q:What is driving the improvement in select service and broader U.S. demand?
A:Anthony Capuano attributed the improvement to factors like a pivot to domestic and drive-to destinations due to rising fuel prices, increased tax refunds, low supply growth, and a shift in consumer spending towards travel and experiences. Jennifer Mason added that these trends are positively impacting select brands.
Q:What are the trends in business transient travel and the World Cup's impact?
A:Anthony Capuano noted a 1% global increase in business transient RevPAR, driven by a 3% ADR increase despite a 2% decline in room nights. U.S. and Canada business transient RevPAR was up 2%. Jennifer Mason stated that the World Cup is expected to have a 30-35 bps global impact, with revenue pacing in line with expectations.
Q:What is the outlook for rooms growth, including conversions and the Middle East impact?
A:Anthony Capuano stated that 35% of signings and 40% of openings in Q1 were conversions, with strong growth in mid-scale brands. Jennifer Mason confirmed a 4.5%-5% global net unit growth outlook, with Middle East openings proceeding as planned despite the conflict, accounting for 4% of expected openings.
Q:What are Marriott's AI initiatives and their expected impact?
A:Anthony Capuano outlined Marriott's enterprise-wide AI strategy, including tools for sales, customer engagement, event planning, and marketing. Success will be measured by conversion rates, revenue impact, and efficiency improvements. Marriott is collaborating with Google and OpenAI to enhance its AI capabilities.
Q:What is the impact of AI on distribution and customer acquisition?
A:Anthony Capuano emphasized Marriott's scale advantage in data and content, which supports direct bookings and loyalty benefits. He noted that AI could reduce distribution costs and drive customers to proprietary channels, with pilots showing favorable cost benefits for owners and franchises.
Q:What is the expected recovery timeline for Middle East markets after the conflict?
A:Anthony Capuano stated that recovery timelines vary by conflict, but the impact on fuel prices and travel is being closely monitored. Middle East carriers account for 10% of global transit traffic, affecting markets like India. APAC expects the most significant impact in Q2, with improvement in the second half.
Q:What is driving the uplift in U.S. travel demand, and which segments are advancing the most?
A:Jennifer Mason reported strength across all chain scales and segments, with raised U.S. and Canada expectations. Business transient and select service are advancing the most, driven by tax refunds, low supply growth, and consumer spending shifts. The World Cup and midterm elections will impact Q2-Q4 trends.
Q:What is the status of credit card deal renegotiations, and when will benefits materialize?
A:Jennifer Mason stated that negotiations with Visa, Chase, and Amex are progressing well, with new deals expected by year-end. Benefits will materialize over time as cards are refreshed and relaunched, with significant upside expected in 2027.
Q:What are the trends in leisure travel, particularly for summer vacations?
A:Anthony Capuano noted anecdotal optimism for summer travel but highlighted the short booking window for transient business. Jennifer Mason added that U.S. international bookings slowed initially after the Middle East conflict but have since normalized.
Q:What is the addressable market for conversions, and how do fee structures compare?
A:Anthony Capuano stated that the addressable market for conversions is vast, with significant opportunities in markets like Europe. Fee structures for conversions are consistent with typical managed or franchise deals, and Marriott's platforms across quality tiers support aggressive conversion growth.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the expected recovery timeline for Middle East markets after the conflict, citing variability in conflict impacts and focusing on monitoring fuel prices and travel patterns. Additionally, they did not provide specific details on the economic model for AI-driven distribution changes, emphasizing ongoing experimentation and pilots instead.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ADR
AI
APAC
East RevPAR
Europe
Executive
Investor Relations
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Middle East
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President Chief
President Investor
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RevPAR Canada
RevPAR result
assistance
associate guest
booking
card
conflict Middle
construction
deal
engagement
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industry
inventory
leisure
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