Executive Summary / Key Takeaways

• Marriott International, a global hospitality leader operating under an asset-light model, demonstrated solid performance in Q1 2025 with 4.1% worldwide RevPAR growth, driven by strong international demand and a resilient U.S. group segment, despite some U.S. transient softness.
• The company's strategic focus on expanding its diverse brand portfolio, particularly in the high-growth luxury and mid-scale segments, coupled with record development signings and a robust pipeline, positions it for continued net rooms growth approaching 5% in 2025.
• Marriott Bonvoy, the industry-leading loyalty program with nearly 237 million members, and a significant multi-year digital and technology transformation are key competitive advantages expected to enhance operational efficiency, elevate guest experience, and unlock new revenue streams.
• While macroeconomic uncertainty, particularly concerning U.S. government travel and broader transient demand, has led to a slight reduction in full-year 2025 RevPAR guidance (1.5%-3.5%), management maintains confidence in Adjusted EBITDA ($5.3B-$5.4B) and Adjusted EPS ($9.82-$10.19) outlook, supported by G&A savings and non-RevPAR fee growth.
• Marriott's strong balance sheet, significant cash flow generation, and commitment to returning approximately $4 billion to shareholders in 2025 underscore its financial resilience and focus on delivering shareholder value amidst a challenging yet opportunity-rich global market.

A Global Hospitality Powerhouse Adapts to Evolving Tides

Marriott International stands as a titan in the global hospitality sector, operating an expansive portfolio of over 30 brands across 144 countries and territories. Its foundational strength lies in an asset-light business model, primarily generating revenue through management and franchise fees rather than direct property ownership. This structure provides inherent flexibility and capital efficiency, allowing the company to scale its brand presence and leverage its powerful network effects with relatively lower capital intensity compared to asset-heavy peers. The company's history, approaching its 100th anniversary, is marked by strategic expansion, including significant acquisitions like Starwood and targeted entries into new segments such as the affordable mid-scale tier with the City Express brand and apartment-style accommodations via a partnership with Sonder (SOND). These moves have shaped a diversified offering designed to capture a wide spectrum of traveler needs and trip purposes across various economic cycles.

In the competitive landscape, Marriott holds a leading position, particularly in scale and brand breadth, which provides a significant advantage over rivals like Hilton (HLT), Hyatt (H), IHG (IHG), and Accor (AC). Its vast network of properties and diverse brand offerings allow it to capture a larger share of global travel demand. While competitors like Hilton may boast technological efficiencies in certain areas, Marriott's strategic investments in its core technology platforms aim to enhance its own operational capabilities and guest experience. The company's industry-leading loyalty program, Marriott Bonvoy, serves as a critical competitive moat, fostering deep customer engagement and driving repeat business, a key differentiator in attracting and retaining travelers compared to loyalty programs offered by peers. Despite challenges in securing financing for new construction that affect the broader industry, Marriott has demonstrated an ability to capture a leading share of new build starts in the U.S., reflecting owner preference for its brands and revenue-generating capabilities.

A core strategic pillar underpinning Marriott's future growth and competitive edge is its multi-year digital and technology transformation. This initiative focuses on modernizing the company's fundamental systems: reservations, property management, and the Marriott Bonvoy loyalty platform. While specific quantifiable performance targets for the technology itself are not detailed, the stated goals are ambitious and aim to deliver tangible benefits. Management expects this new platform, which is slated to begin rolling out to select brand hotels in the back half of 2025, to significantly strengthen the efficient operating model, enhance the functionality and appeal of Marriott Bonvoy, and elevate the digital experience for both associates and customers. Critically for investors, the transformation is anticipated to unlock new revenue opportunities. This includes enabling enhanced functionality such as booking specific room types and amenities in advance and facilitating seamless shopping across lodging, food and beverage, spa, and other non-lodging products, thereby increasing capture rates and potentially driving higher average spend per customer. This technological evolution is designed to reinforce Marriott's competitive position by improving operational efficiency for owners and providing a more integrated and personalized experience for guests, directly contributing to the company's long-term growth strategy and financial performance potential.

Performance Amidst Macro Crosscurrents

Marriott's first quarter 2025 results underscore its ability to perform solidly despite a complex macroeconomic backdrop. Worldwide comparable systemwide RevPAR increased 4.1% year-over-year, a performance just above the top end of the company's prior guidance range. This growth was fueled by a 2.9% increase in Average Daily Rate (ADR) and a 0.7 percentage point improvement in occupancy. The performance was notably strong internationally, where RevPAR grew 5.9%, reflecting robust demand across APEC (up 10.9%), EMEA (up 5.9%), and CALA (up 7.2%). In the U.S. and Canada, RevPAR rose over 3%, primarily driven by strength in the group customer segment, with luxury and full-service properties outperforming select-service hotels.

However, the quarter also revealed some areas of softness, particularly in the U.S. during March, where demand in certain customer segments, notably U.S. government business (down 10% year-over-year in RevPAR) and select-service leisure transient, showed signs of weakening. Management noted that this uncertainty did not impact results at higher chain scale hotels, and there were no signs of trade-down from higher-end customers. Despite the March softness, preliminary April results in the U.S. and Canada showed sequential improvement when adjusted for the Easter holiday shift, suggesting a degree of stabilization.

Financially, the asset-light model translated solid RevPAR performance into a 5% year-over-year increase in gross fee revenues in Q1 2025, reaching $1.28 billion. This was driven by higher RevPAR, rooms growth, an 8% increase in co-brand credit card fees, and a significant boost from residential branding fees due to timing. Incentive management fees (IMF) saw a slight 2% decline, primarily due to decreases in Greater China and EMEA offsetting gains in APEC. Operating expenses saw some favorable trends, with general, administrative, and other expenses decreasing 6% year-over-year, largely due to lower compensation costs, reflecting the early benefits of the enterprise-wide efficiency initiative. Interest expense increased 18% to $192 million, driven by higher debt balances from recent Senior Notes issuances. Net income for the quarter was $665 million, up from $564 million in the prior year, benefiting from a lower effective tax rate (13.0% vs. 22.4%) primarily due to a release of tax reserves. Adjusted EBITDA for the quarter was $1.22 billion, a 7% increase year-over-year.

The company's balance sheet remains sound, with $546 million in cash and equivalents at quarter-end and significant borrowing capacity under its $4.5 billion credit facility, which includes a leverage covenant that the company currently satisfies.

Strategic Growth and the Development Engine

Marriott's growth story is fundamentally tied to the expansion of its system, and the development engine continues to demonstrate robust momentum. The company added approximately 12,200 net rooms in the first quarter of 2025, contributing to a 4.6% net rooms growth over the trailing 12 months. The development pipeline reached a record size of over 587,000 rooms at the end of Q1 2025, representing approximately 3,800 properties. This pipeline is geographically diverse, with over half the rooms located outside the U.S. and Canada, reflecting global growth opportunities.

A key driver of this pipeline and recent openings is conversions, which represented about one-third of both signings and openings in the first quarter. This focus on conversions is particularly advantageous in the current environment where challenging financing conditions and elevated construction costs can impede new builds. Owners are increasingly opting to convert existing properties to Marriott brands, drawn by the strength of the company's revenue engines and the power of the Marriott Bonvoy loyalty program. Marriott's strategic push into the mid-scale segment with brands like City Express by Marriott and StudioRes is also gaining traction, attracting significant owner interest and contributing to pipeline growth, particularly in markets where demand for affordable, reliable lodging is strong.

The recent announcement of the agreement to acquire the citizenM brand for $355 million is a prime example of Marriott's strategic initiative to expand its portfolio through targeted acquisitions that complement existing brand strengths. Expected to close later in 2025, this transaction will add citizenM's portfolio of 36 open hotels and 600 pipeline rooms under long-term franchise agreements, accelerating Marriott's expansion in the lifestyle select and select-service segments. This acquisition, along with organic brand development and a continued focus on high-value segments like luxury and branded residences, underscores Marriott's commitment to providing a diverse range of options for both guests and hotel owners, reinforcing its competitive position and fueling future net rooms growth.

Outlook and the Road Ahead

Looking ahead, Marriott's outlook for the remainder of 2025 reflects a blend of continued global strength and specific regional caution. The company updated its full-year worldwide RevPAR growth guidance to a range of 1.5% to 3.5%. This represents a 50 basis point reduction at the midpoint compared to prior guidance, primarily due to a more cautious outlook for the U.S. and Canada region in the second through fourth quarters. This revised U.S. outlook is based on expected continuation of declines in U.S. government demand, slightly slower growth from U.S. select service hotels driven by lower transient demand, and marginally lower expectations for U.S. Group growth.

Despite the moderated U.S. outlook, international markets (excluding Greater China) are expected to maintain strong demand trends, with full-year RevPAR growth anticipated to be meaningfully stronger internationally than in the U.S. and Canada. Greater China RevPAR is expected to be around flat year-over-year for the full year. By customer segment globally, Group is still expected to be the strongest performer (pacing up 6% for the full year as of March-end), followed by business transient (low single-digit growth), and leisure transient (flat to low single-digit growth).

For the second quarter of 2025, global RevPAR is expected to increase 1.5% to 2.5%, impacted by the timing of Easter. Gross fee growth in Q2 is projected to be 3% to 4%, influenced by lower residential branding fees year-over-year and slight IMF declines due to renovations. Adjusted EBITDA for Q2 is expected to increase 3% to 5%. For the full year 2025, gross fees are anticipated to be between $5.4 billion and $5.5 billion, with IMFs expected to be relatively in line with the prior year. Full-year Adjusted EBITDA is projected to be $5.3 billion to $5.4 billion (a 6% to 9% increase), and Adjusted diluted EPS is expected to range from $9.82 to $10.19. These figures are supported by the anticipated $80 million to $90 million in G&A savings from the enterprise-wide efficiency initiative and a less meaningful negative FX impact compared to prior expectations.

Marriott is increasing its full-year 2025 net rooms growth expectation to approach 5%, incorporating the rooms from the citizenM acquisition. Total investment spending for 2025 is projected to be $1.36 billion to $1.46 billion, including the $355 million for citizenM. Excluding this acquisition, investment spending is expected to be $1 billion to $1.1 billion, encompassing higher technology spending (largely reimbursable) and owned/leased property renovations. The company remains committed to returning capital to shareholders, expecting approximately $4 billion in total returns in 2025 through dividends and share repurchases, while maintaining leverage in the lower part of its target range (3x to 3.5x net debt to EBITDA).

Risks and Considerations

While Marriott's asset-light model and global scale provide resilience, the business remains cyclical and exposed to macroeconomic fluctuations. The current period of heightened uncertainty, particularly in the U.S., poses a risk to lodging demand. The observed softness in U.S. government travel and certain transient segments in March 2025 highlights this vulnerability, and a continuation or exacerbation of these trends could further impact RevPAR performance. Goldman Sachs' (GS) recent downgrade of Marriott to "neutral," citing macro volatility and consumer pressures, underscores this concern, noting that the outlook does not fully account for a potential recession.

Limited visibility into the back half of the year due to short booking windows means that demand trends could change quickly, potentially deviating from current assumptions. Challenges in securing financing and elevated construction costs continue to present headwinds for new hotel development, although Marriott's focus on conversions helps mitigate this to some extent. The ongoing litigation and potential regulatory investigations related to the 2018 Starwood data security incident also represent a contingent liability, though the company does not believe it will impact long-term financial health. Furthermore, while the enterprise-wide efficiency initiative and technology transformation are expected to yield benefits, execution risks inherent in large-scale organizational and system changes could impact the timing or magnitude of these improvements.

Conclusion

Marriott International's first quarter 2025 results and updated outlook paint a picture of a global hospitality leader demonstrating resilience and strategic agility amidst a complex operating environment. The company's asset-light model, extensive brand portfolio, and powerful Marriott Bonvoy loyalty program provide a strong foundation and competitive advantages that continue to drive market share gains and robust development activity, particularly through conversions and strategic expansion into high-growth segments like luxury and mid-scale.

Despite facing macroeconomic crosscurrents, including softening U.S. government and certain transient demand, Marriott's international markets remain strong, and its group business shows encouraging forward pacing. The company's commitment to enhancing efficiency through its enterprise-wide initiative and investing in a transformative technology platform positions it to drive future profitability and unlock new revenue opportunities. While near-term RevPAR guidance reflects a degree of caution, particularly in the U.S., the overall financial outlook remains solid, supported by cost savings and non-RevPAR fee growth. Marriott's disciplined capital allocation strategy, prioritizing investment-grade rating, accretive growth, and significant shareholder returns, underscores its financial health and focus on long-term value creation, making it a compelling consideration for investors seeking exposure to a leading player navigating the evolving global travel landscape.