Marriott International Class A Common Stock 2026 Q2 Earnings Call

Please go ahead. Good morning everyone, welcome to Marriott's second quarter 2026 earnings call.

On the call with me today are Tony Capuano, our President and Chief Executive Officer, Jen Mason, our Executive Vice President and Chief Financial Officer, and Pilar Fernandez, Senior Director of Investor Relations. Before we begin, I would like 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. Unless otherwise stated, our RevPAR, occupancy, average daily rate, and property-level revenues comments reflect system-wide constant currency results for 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. Now I will turn the call over to Tony.

Thanks, Jackie, good morning everyone. We reported a very strong second quarter this morning, with RevPAR and financial results above our prior expectations. We grew net rooms by 4.5% over the 12 months ending June 30th, further expanding our industry-leading global portfolio to over 1.8 million rooms across more than 10,000 properties. Second quarter global RevPAR rose 3.4%. RevPAR in the U.S. and Canada region rose 5%, the highest quarterly increase in 13 quarters, with strength in World Cup and non-World Cup markets. Excluding the World Cup, second quarter RevPAR rose 4%. Luxury and resort hotels continued to lead in the region in the quarter with luxury RevPAR up over 9%. Importantly, strength was pervasive across chain scales with select service RevPAR increasing over 4%. With the conflict in the Middle East weighing on results, second quarter international RevPAR declined slightly year-over-year.

RevPAR in EMEA declined just over 5%, as solid performance in Europe was offset by a meaningful decline in the Middle East. RevPAR in Europe rose over 4% in the second quarter, driven by strength in leisure, particularly in the Mediterranean countries, including Italy, Spain, and Greece. Middle East RevPAR declined 43% in the quarter, a bit better than prior expectations on better than expected domestic leisure demand. Second quarter RevPAR in APAC rose over 5%. While Middle East travel quarter disruptions did weigh on select APAC markets in April, RevPAR surpassed our previous expectations in May and June, thanks to improved flight capacity as well as strong intra-regional demand. RevPAR in Greater China rose over 3%, led by strong inbound leisure demand recovery as our hotels continued to gain share in an uneven consumer spending environment. Luxury, Hong Kong, Taiwan, and Hainan remained the key drivers.

RevPAR in CALA rose 3% in the second quarter, driven by strong luxury and leisure demand across the Caribbean. Looking ahead, as Jen will discuss further, with strong broad-based demand generally expected to continue, we are raising our full year 2026 guidance range to 3%-3.5% global RevPAR growth. Let's turn to results by customer segment. In the second quarter, leisure RevPAR rose 5% globally and 7% in the U.S. and Canada. Group RevPAR rose 3% globally and 4% in the U.S. and Canada. Second quarter business transient RevPAR rose 2% globally and 3% in the U.S. and Canada. Within business transient in the U.S. and Canada, government RevPAR increased 5%, benefiting from easier year-over-year comparisons. Non-government business transient RevPAR rose 3%, with mid-single-digit ADR increases offsetting slight declines in room nights.

On the development front, we experienced record global signings in the first half of the year. Our global pipeline grew nearly 7% year-over-year to a new record of approximately 629,000 rooms at the end of June. We led the industry with over 279,000 rooms under construction, including pending conversions. Conversions, including multi-unit deals, remain a significant driver of growth, representing 34% of signings and 40% of openings in the first half of the year. One multi-unit deal to highlight. In June, we announced a strategic agreement to introduce Series by Marriott to Greater China, with plans to add approximately 100 hotels under this collection brand, with the first openings expected later this year. Our growing pipeline and strong momentum in conversions, we still expect net rooms to grow in the mid-single-digit range over the next few years.

Our compound annual growth rate since the end of 2023 is 5.2%. Our full-year 2026 net rooms growth is now more likely to be towards the low end of our previous 4.5%-5% range, primarily due to construction delays in the Middle East and including our typical assumption of between 1% and 1.5% room deletions. We grow our global portfolio, we are also intensely focused on working with our hotel owners, who are foundational to our business, to help strengthen hotel-level economics and drive owner returns and long-term value across the system. As part of these efforts, we've implemented productivity enhancements from our prior enterprise-wide efficiency exercise, and we continue to identify ways to enhance top-line performance and improve productivity at the hotel level. Let me outline some of the specific steps we've taken.

At the beginning of the year, we lowered loyalty charge-out rates across our global system by roughly 5% to what we believe are the lowest in the industry across all chain scales. In addition, earlier this year, we enhanced owner reimbursement for Bonvoy redemption stays on high-demand nights. We have also introduced streamlined brand standards, which simplify operations and reduce costs, and we have rolled out flexible renovation scopes that focus on customer-facing elements of the hotels. As Jen will discuss further, we are also now planning to roll out a new ITR, or Intent to Recommend incentive, in the U.S. and Canada that will provide a fee discount for top hotels that receive strong guest satisfaction scores.

I am also pleased to announce that we recently executed new long-term agreements for our co-branded credit card program in the U.S. with our valued, longstanding, market-leading partners, JPMorgan Chase and American Express. These agreements reflect the strength of the Marriott Bonvoy brand and the extraordinary value of our brand portfolio, the continued growth of our global lodging system, and the powerful combination of scale and engagement represented by our cardholders and more than 295 million loyalty program members. Additionally, we continue to make great progress in our multi-year technology transformation, while increasingly leveraging AI across the enterprise to help deliver revenue to owners more efficiently, as well as elevating the guest experience and automating workflows for associates.

In June, we began our phased rollout of Ask Bonvoy, our AI-powered conversational search experience on marriott.com and the Marriott Bonvoy app, reflecting our commitment to using technology to enhance the customer experience, strengthen engagement with our members, and drive greater operational efficiency. With our well-respected brands and industry-leading scale, we are also working closely with Google and other leading AI platform providers as their travel search and commerce tools evolve. Before I end my prepared remarks, I want to thank our Marriott teams around the world. Our results today would not have been possible without their hard work and dedication. Now I will turn the call over to Jen for more details on our financial results.

Jen? Thanks, Tony. I'll start by reviewing our strong second quarter results.

Second quarter total growth fee revenues increased 13% year-over-year to $1.58 billion, reflecting higher RevPAR, rooms growth, and increases in co-branded credit card fees and residential branding fees. Incentive management fees, or IMFs, rose 6% to $212 million in the second quarter, led by a significant increase in the U.S. and Canada, which more than offset a meaningful decline in EMEA due to the Middle East. Owned, leased, and other revenue net of owned, leased, and other expenses totaled $49 million, compared to $78 million in the second quarter of last year, primarily due to a $27 million property-related litigation accrual, as well as lower termination fees. Second quarter G&A rose 5% year-over-year, primarily due to timing of compensation costs. Adjusted EBITDA increased 13% to $1.59 billion, and adjusted diluted EPS rose 20% to $3.19.