Development Environment
Q: What's the current state of the development environment and impact of interest rates and construction costs?
A: Deal volume is encouraging with strong momentum in submissions for new builds and conversions. Positives include expected interest rate relief and a more active hotel transaction market in the back half of 2024. Challenges include lender compliance with proposed regulations affecting debt availability for new construction, but entry into mid-scale helps as debt procurement is more manageable. Growth in Asia Pacific and Middle East remains robust and unaffected by debt fluctuations. Construction costs have eased slightly with lower year-over-year increases.

Operating EPS Outlook
Q: Why is operating EPS outlook lower than consensus despite EBITDA, unit growth, and capital return being in line?
A: The lower EPS outlook is mainly due to a higher book tax rate, about 1-point increase, and adjustments for anomalies like the extra termination fee in '23 and litigation reserve. Adjusting for these, the adjusted EPS growth in '24 looks close to double digits.

RevPAR Guidance by Segment
Q: Do you expect luxury and upper upscale to lead RevPAR growth in 2024? Is there room for ADR increases in upper upscale?
A: Yes, the premium segment will benefit most from increased demand. Special corporate rates are growing, with high single-digit growth in '23 and expected strong mid-single-digit rate growth in '24. Group pace is strong at 11%, contributing to growth in rooms and ADR. Luxury continues to perform well, with global luxury RevPAR up 10% in Q4 '23 vs. Q4 '22, and there is opportunity for rate and occupancy improvements.

Conversions and Growth Strategy
Q: How are conversions contributing to growth, and are there changes in strategy or geography?
A: Conversions are important for growth, especially with constrained debt markets for new construction. In 2023, 25% of openings and 40% of signings were conversions. These include both conversions from other brands and independents, leveraging soft brands like Luxury Collection, Autograph, and Tribute. There's increased conversion activity in markets like Asia Pacific, which historically were more new-build oriented.

MGM Transaction and Fee Contribution
Q: Can you review the MGM transaction and its fee contribution for this year?
A: The MGM transaction involves a modest amount of G&A, with all hotels transitioning to Marriott systems in Q1. Fee contribution will start in Q1 and ramp up over the year, based on a percentage of hotel revenues fitting into the franchise fee model. No specific numbers are provided.

Capital Investment and Sheraton Chicago
Q: Is the $500 million investment in Sheraton Chicago all cash out the door? How much of the $1 billion is unidentified capital expenditure?
A: Yes, the $500 million is cash out the door, expected in Q4 2024. Of that, $200 million relates to purchasing the underlying land (CapEx), and the rest reflects a liability established years ago. The unidentified capital expenditures within the $1 billion to $1.2 billion are quite modest.

Large Corporate Bookings
Q: Do you expect large corporate group bookings to improve or remain impaired?
A: On the business transient side, large corporates are lagging compared to pre-pandemic levels but show incremental growth quarter-over-quarter. For group bookings, the pace is strong, with 75% of expected group business for '24 already on the books (up from 65% a year ago), and group pace is at 11% for '24 and 12% for '25 in the U.S., indicating strong corporate and other group demand.

SG&A Costs Increase
Q: Why were SG&A costs higher than the Q3 guidance? Was it due to IP restructuring or bad debt?
A: The increase is largely due to timing, including the litigation reserve, fluctuations in closing deals, travel expenses, staffing ramp-up, and performance-related compensation. There was also timing in receivables analysis. For next year, SG&A is expected to be flat to up 2%, reflecting these items.

Net Unit Growth Outlook
Q: Are you expecting acceleration in RevPAR and net unit growth in 2025 to meet prior guidance?
A: Growth should be viewed over a multiyear period. The MGM rooms slipping into early '24 illustrate timing impacts. We ended '23 with 4.7% net unit growth and expect a higher number this year due to MGM openings. Confident in delivering mid-single-digit CAGR of about 5% to 5.5% over three years, as previously discussed. No major changes to long-term outlook; confident in RevPAR expectations.

Fundamental Growth Algorithm
Q: Is the mismatch between room growth, RevPAR growth, and fee growth expected to continue beyond 2025?
A: No, the fundamental model of RevPAR plus fees continues to work well. Anomalies in 2023 affected comparisons, but overall growth in rooms and strong IMF growth contribute positively. Non-RevPAR fees are expected to grow 9–10% in 2024. The growth and fee algorithm remains consistent.

Changes Since Investor Day
Q: What's changed in the multiyear algorithm since the Investor Day in September?
A: Very little has changed; 2023 ended up very strong, exceeding guidance by $6 million, providing a higher base. The fundamental equation of RevPAR growth plus net rooms growth and operating leverage continues to work. G&A as a percentage of gross fees improved from around 25% in 2019 to under 20% now, showing continued operating leverage. Focus on improving efficiency remains.

IMF Payers Percentage
Q: What percentage of North American properties were earning IMF in 2023 compared to peak levels?
A: In 2023, 31% of U.S. and Canada properties were earning IMFs versus 56% at peak. For managed full-service hotels, 40% earned IMFs in '23 versus 45% at peak. Limited service hotels had a significant drop due to hotels leaving the system. Internationally, 68% of properties earned IMFs in '23, close to the 72% in 2019, indicating a return to similar levels.

China Development Momentum
Q: What's the outlook for development momentum in China? Has it changed recently?
A: Momentum in China remains strong with encouraging trends in deal approvals, signings, and under-construction projects. Paused projects during the pandemic have resumed construction. Growth in Greater China is expected to be high single digits, reflecting strong demand for brands.

Mid-scale Owner Profile
Q: What's the owner profile for mid-scale brands? Are they existing or new owners?
A: The owner profile is similar to other segments, including both existing Marriott franchisees and new owners. There's a great mix, with enthusiasm from multi-unit owners and those new to the Marriott system.

Credit Card Fees Growth
Q: What's driving the expected growth in credit card fees in 2024? Is it new sign-ups or increased spend?
A: Growth is primarily driven by an increase in the number of cardholders, with strong acceptance of the Bonvoy credit card in markets like Japan. The growth rate is expected to be similar to 2023 at 9–10%. Existing cardholder spend contributes minimally to growth.

Potential Tuck-in Acquisitions
Q: Are there interesting tuck-in M&A opportunities, and how does the math compare to stock trading levels?
A: The company remains open to acquisitions that add something unique to the portfolio or accelerate growth in certain regions but maintains price discipline. There's interest in both tuck-in acquisitions and organic growth, and Marriott will continue to evaluate opportunities that make strategic and financial sense.

Conversion Activity in China
Q: How is the new franchising agreement in China expected to drive growth?
A: The agreement is expected to convert a number of hotels over time, contributing to overall growth in China, but no specific time frame or impact was provided. Signings in Greater China are encouraging, reflecting strong demand for brands.