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Below is an ongoing record highlighting notes from select MAR investor presentations and earnings calls (newest content shown first).

Barclays Gaming and Lodging Conference, 12/5/2018


Interview with Leeny Oberg, Chief Financial Officer

  • Starwood guest database breach
    • On September 8, 2018, we received an alert from an internal security tool about an authorized attempt to access Starwood guest database
    • We investigated it with expert security advisors and learnt that there has been unauthorized access to it since 2014
    • In the process of the investigation, the unauthorized party had copied and were taking steps to remove data from the system
    • We tried to figure out what it was that they had access to since they had encrypted the data that they copied. We decrypted it and saw what it was on Nov 19th
  • Handle on what the cost would be for the data breach?
    • Too soon to tell for sure, but clearly would expect material costs associated with it
    • We do have cyber-insurance and are looking into the elements of our coverage
  • How do you address this going forward?
    • Bad guys getting more sophisticated by the day. We have stepped up our efforts in data security
  • Customer engagement since linking Starwood and Marriott loyalty programs
    • Too soon to tell on trends since August 18th
  • Credit card agreements with Chase and Amex
    • Renegotiated these agreements and chunk of increase in credit card profits are a function of the renegotiation
    • Take-up on new consumer card and luxury card have exceeded our expectations so far
    • We have raised our estimate of credit card profits this year and really pleased with how that’s going
  • Cost savings for hotel owners
    • Early 2017 was low hanging fruit like procurement
    • Shooting for 50 bps margin improvement in 2019
    • More recently, OTA contracts and combining loyalty programs and getting synergies out of those
    • Program services fund – different mechanism for charging hotels for mandatory programs and services
  • Q4 RevPAR guidance – booking window for foreign tourists
    • Transient booking window is 11 days
    • International travelers are only 4-5% of nights in the US and biggest chunk of that is from Canada and Mexico
    • Nov and Dec are softest months of the quarter due to holiday season, so Oct is biggest month of the quarter
  • Transient weakness in September?
    • September was a bit of a surprise. Hard to pinpoint exactly what it was.  One possibility was that the yoy comparison of the hurricanes were tougher than anticipated.  Holiday timing was an element of it.  Weather may have had an impact
    • October for the industry seemed to rebound nicely, so seeing how it goes
  • North America RevPAR 1-3% growth
    • Overall, driven by trends in the economy. GDP continues to be a fantastic bellwether.  Annual GDP has a better correlation than quarterly GDP.  There is an expectation of a bit lower GDP growth in 2019 but not meaningfully lower
  • Corporate negotiated rates up in mid-single digits
    • Economic growth is solid but it’s not accelerating, so puts you in a position where there is still quite a bit of competition for this business
  • AsiaPac growth
    • Still strong GDP growth which generates a lot of lodging demand
    • Increase in traveler generally amongst the population with a growing middle class. Desire on part of Chinese consumer to travel within China and outside of China
    • Other economies in the region continue to grow well
  • China RevPAR growth
    • This year, expect to see higher end of mid-single digit and in 2019, solidly in the mid-single digit growth range
  • Ability to sign new construction deals in US as labor and land costs increase
    • We certainly like conversions which has been mid-teens production (10-15% of rooms)
    • New signings could be impacted but not seeing it yet
    • Really pleased with continued pace of signings in the US. There is still financing for strong brands in good markets and that continues to go well
    • Seeing strong signings with AC, Tribute
    • Developers are more comfortable with limited service as are the banks, so meaningfully more limited service development in urban areas than 10 years ago
    • For example, much more limited service supply in New York
  • Brands in China / Asia
    • Think you’ll see Fairfield take off in Asia
  • New brand standard for Sheraton
    • We are probably two-third to three-quarters of the way through talking with Sheraton owners about plans for their hotels
    • Reaction to new prototype has been strong
    • MAR bought the Phoenix Grand Sheraton and are undertaking a $40mm renovation
    • Sheraton brand is now above fair share and moving in the right direction
  • RevPAR index for Sheraton
    • It is above 100 and “boat is floating higher” everywhere…don’t talk about it per region
  • Impact to supply from higher construction and labor?
    • 8-1.9% supply growth for US. Thought it could be 2-2.1% at the start of the year
    • Don’t see deals dropping out – see it taking longer
    • It has slowed it a little bit
    • Outside of the US, geopolitical reasons can impact how things get built and opened
  • Reduce room night allocation to OTA during high demand periods?
    • Fits well with strategy to have direct relationship with consumer and to drive profitability of the hotels
    • Does mean there was a bit of slowing in growth of OTA business on high demand nights
    • 13-14% commission to OTAs vs. $5 for a direct booking
  • Expedia
    • We continue to work with them and our inventory still appears on EXPE but can’t say anything on the contract negotiations
  • Asset sales
    • We start the year with expectation of no asset sales, but we have had $400-500mm of asset dispositions this year
    • Have also had strong inflows from the loyalty program
  • Leverage ratio
    • Have managed to 3.0-3.25x previously but now targeting 3.0-3.5x as we’ve moved into an asset light model
    • Would open up capacity for share repurchase a bit

Third Quarter 2018 Earnings Call, 11/6/2018


  • Halfway through moving legacy Starwood hotels onto Marriott reservation system
  • Integrated the Starwood and Marriott loyalty programs on August 18, allowing members to earn, book, and redeem across 6700 hotels
  • Total loyalty membership is now 120mm. Post integration, had higher luxury redemptions and growing proportion of bookings from direct channels
  • Earlier this year, reduced intermediary commissions for group business from 10% to 7%
  • In North America, our revenue management systems now consider the distribution cost when deciding which channels to open up, resulting in a decline in OTA business on peak occupancy nights and an increase in direct bookings
  • Expect global RevPAR to be in the 2-3% range for 2019
  • We expected a negative comparison vs. last year’s hurricane pick up, but decline in US transient demand in September was more significant than anticipated
  • October looked better than Sept with better group business on the books but taking a more conservative view so forecasting 1% North America RevPAR growth for 4Q
  • Lodging supply growth forecasted to slow down in 2019 due to shortage of skilled laborers
  • We expect 2019 special corporate rates to rise at a low single digit rate
  • Expect 2019 North America RevPAR growth to increase 1-3% which reflects our continued “steady as she goes” view of lodging demand
  • Expect mid-single digit 4Q RevPAR Growth in Asia and Europe and expect 2019 mid-single digit RevPAR Growth in Asia and Europe
  • Middle East and Africa – expect low single digit decline in 4Q due to new supply in UAE and tough comparison to last year’s results at Ritz Carlton Riyadh and flat RevPAR in 2019
  • Development pipeline includes 471k rooms and 212k rooms under construction
  • 1 in 3 hotels under construction in the US will have a MAR flag
  • For 2018, we expect 7% gross room additions in 2019 and expect 2% room deletion, so expect roughly 5% rooms growth in 2018
  • For 2019 – 7% gross room unit growth and 1-1.5% deletions resulting in 5.5% unit growth
  • We do not see an economic downturn on the horizon
  • Strong unit growth should continue even if a downturn hit due to long construction cycles
  • Financial highlights
    • $932mm gross fee revenue, up 13% due to unit growth, RevPar gains, higher incentive fees, and branding fees
    • 3Q EBITDA of $900mm, up 12% despite $19mm negative impact from sold assets
    • 4Q – expect $900-910mm gross fee revenue, up 4-6% yoy
    • 4Q guidance is $30mm less than midpoint of prior guidance due to $10mm in FX headwind, $15mm in lower RevPAR estimate, and balance from lower branding fees
    • 2018 EPS of $6.15-6.18 and EBITDA growth of 10-11%
  • Incentive fees represent less than 20% of total fees with 2/3 of these fees coming from international markets which typically have no owner priority return, so it holds up better in a downturn
  • Q&A with Sell-side Analysts
  • Deal with Host Hotels?
    • Host as owner of 17 prominent hotels in our system is committing to significant renovation capital
    • MAR will be committing to $80mm of key money over four years to incentivize the renovation
  • Confidence in unit growth even when there is a downturn?
    • Hotels that will open in 2019 and 2020 are well underway – many of them already under construction
    • Intake of new deals into the development pipeline will slow openings but that will be a few years out
  • Home sharing trial?
    • Started in London 4-5 months ago and the plan in London is to work with a partner who curates the units available on our site. Those units would have a linkage to our loyalty program
    • Looked for units that are big enough to be distinct from a traditional hotel room and quality that would be good enough to have our brand associated with it
    • Saw really good result – 85% of bookings were our loyalty customers and mostly leisure business and accretive to our total business
    • Expanded to Phase 2 – Paris, Lisbon, Rome
  • Confidence in unit deletions stabilizing into 2019?
    • Much of the uptick in deletions in 2018 was from a few large negotiations such as a big portfolio of Gen 2 Fairfield Inns and 1700 rooms in Las Vegas
    • Overall, looking at 1-1.5% deletion level
  • Drivers for more conservative RevPAR view for Q4?
    • Driven by surprise in performance for September RevPAR in the US which can in 2% below what we thought it would be
    • Must of this slower Sept likely due to tough comparisons due to hurricane markets in Houston and Florida and Jewish holidays falling in the middle of the week
    • The Sept RevPAR of down 1% was 2% worse than what we thought, which gave us pause made us look at Q4 a bit more conservatively
    • October has been re-assuring
    • We see fairly good group bookings on the books for Q1 so we expect “steady as she goes” for 2019
  • October performance in Q4
    • October will be the strongest month of Q4 based on what we see currently
  • Buybacks and leverage?
    • Likely steady as she goes buybacks for 2019
    • Spoke with rating agencies about leverage range going to 3-3.5x from 3-3.25x
  • China performance and impact to pipeline from trade war?
    • Still good yoy growth in China and steady intake of deals into development pipeline
  • Distribution cost initiatives
    • Two initiatives. First was reduction in commission rates for group intermediaries, which is a US based issue
    • Second is the use of our new revenue management program which allows us to factor in cost of distribution so we can go after lower cost business (higher margin) even if rate is slightly lower
  • Do you have what you need in terms of wellness focus within the portfolio?
    • Westin and Element are probably the two most meaningful lifestyle brands but we continue to seek more distribution in that space
  • Percent of bookings that are now direct
    • Nearing 30% of our total business coming through direct digital channels
  • OTA mix
    • Over the last several years, OTA market share has gone up 1% per year but in Q3 that share was flat globally
  • Special corporate
    • Makes up 16% of full service and 20% of limited service business