Marriott International, Inc. (MAR) Earnings Call Transcript & Summary

Welcome to the Marriott International, Inc. 2021 Annual Meeting of Stockholders. To begin the meeting, I'd like to introduce the Executive Chairman and Chairman of the Board, Mr. Bill Marriott.

Good morning. I'm Bill Marriott, and I'm Executive Chairman and Chairman of the Board of Marriott International. It's my pleasure to welcome you to 2021 annual meeting of shareholders. Thank you for joining us today. As is our custom, we will conduct the business portion of the meeting first and then answer questions at the end of the meeting, though we may not be able to answer every question, we'll do our best to provide responses to as many as we can, and we will address all unanswered questions after the meeting. Now I'd like to call officially the meeting to order. The time is now 11:03 a.m. Eastern Time. Let me introduce the members of the Board of Directors. First, there is our new Chief Executive Officer, Tony Capuano. We also have Debbie Marriott Harrison, Fritz Henderson, Eric Hippeau; Larry Kellner, Debbie Lee, Aylwin Lewis, David Marriott, Meg McCarthy, George Muñoz, Horacio Rozanski and Susan Schwab. In addition, our new President, Stephanie Linnartz, our Corporate Secretary, Andy Wright; and Leeny Oberg, our Chief Financial Officer; and our Executive Vice President and General Counsel, Rena Reiss, are on the call. I'd like to start the meeting today by acknowledging a dear friend of mine, Arne Sorenson. All of our hearts were broken when he tragically passed away last February from pancreatic cancer. This year would have been his 25th anniversary with Marriott. Sometimes in life, you get lucky enough to cross paths with someone who makes your journey better. Arne was one of those people. I met Arne when he was just 33 years old. He was a trial attorney with a law firm that was representing Marriott. What struck me about Arne was that he was such a good counselor. The cases involved really complicated financials but Arne explained them with ease and the way that almost anyone could comprehend them. After the case was up, I convinced Arne to join Marriott. He agreed but only if we could offer him a new challenge outside the field of law. I quickly agreed, recognizing in Arne, someone who is going to bring the same dedication and talent to whatever role he was given. He worked in development, acquiring the Renaissance Hotel portfolio in 1997 before moving on to become Chief Financial Officer 2 years later. Over the years, I knew Arne would take the company to new heights, culminating in the Starwood acquisition in 2016, making us the world's largest hospitality company. I will always be grateful for my friendship with Arne and for having been able to work with such a talented executive. My life is better for having known him. In Arne's honor, the J. Willard and Alice S. Marriott Foundation, together with Howard University, established the Marriott-Sorenson Center for Hospitality Leadership on February 24, 2021. Our family foundation is providing a $20 million endowment to launch a center at Howard University, one of the nation's leading historically black colleges and universities. In addition, Marriott International announced creation of the Arne Sorenson Hospitality Fund, which will supply some of the programmatic and career development elements of the center. The fund is dedicated to helping the industry build leadership and talent in hospitality. Marriott pledged the first donation of $1 million and is inviting other companies, organizations and individuals from all industries to support this effort. The Marriott-Sorenson Center for Hospitality Leadership expands the education and professional opportunities for Howard students and also to develop future executives in our industry. We can think of no better tribute to Arne than educating and advancing future leaders of our industry. Our thoughts remain with Sorenson family as we all mourn Arne Sorenson. Arne was a friend and mentor and champion for many people at Marriott. As noted, 2 of these people are on the call today. Tony Capuano and Stephanie Linnartz. Both were appointed to their new positions by the Board of Directors last February. Tony and Stephanie worked directly with Arne for decades, and they are well prepared to advance the strategy Arne put in place. The company is in great hands. Now I'd like to talk about 2 additional changes involving the Board of Directors and want to recognize David Marriott and Horacio Rozanski, who joined the Board on March 15. They are included in today's slate of nominees for election. Both bring decades of experience and a wealth of knowledge in key areas that will be tremendous resource for the company as we focus on the continued recovery from COVID-19 pandemic. Horacio is President and CEO of Booz Allen Hamilton. David most recently was President of U.S. Full-Service Managed Hotels, he's been with the company since 1999 and has served a number of executive positions. As we announced last year, David agreed to step down from his most recent role in anticipation of this assumption of the position of Chairman of the Board in 2022 when I transition to the role of Chairman Americas, and welcome to David and Horacio. Our Corporate Secretary has reported to me that in compliance with our bylaws, the mailing of the notice of this meeting began on April 5, 2021, to stockholders of record as of March 12. He also reports a majority of the issued and outstanding shares are represented in this call. Accordingly, a quorum exists. The polls are now open on all matters. As first order of business, I'd like to discuss only appropriate matters to be voted on as set forth in the proxy statement. That matters are item 1, 2, 3 and 4 on our proxy statement as described in the agenda. Let's proceed with the ballot vote. As you know, stockholders were able to vote by mail, phone or online before today's meeting. You may also do so now online. If anybody wishes to vote at this time, please do so by using the voting button. [Voting]

The polls are now closed. While we're waiting for the results to be tallied. Tony will share his thoughts with us. Tony?

Thank you, Mr. Marriott. I appreciate your kind words. Let me add my welcome to our 2021 annual meeting of stockholders. I also want to remind you that some of our remarks 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. When we last convened this meeting, the world, including our company, was grappling with an unprecedented crisis. COVID-19 has impacted our business to an extent we never imagined, making 2020, by far, the most challenging year in our company's history. Full year worldwide RevPAR declined 60%, with average occupancy of just over 35% compared to 73% for the full year 2019. Throughout the year, many of our associates and their families battled COVID-19, and we were incredibly saddened that some of them lost their lives to this virus that has claimed far too many. Our hearts go out to them and to everyone affected by the pandemic, and we offer a sincere thank you to our associates, owners and franchisees, frontline workers and all others who have sacrificed so much in the global fight to contain the disease. Marriott reacted swiftly to address and mitigate the impact of the pandemic on our business. We shored up our balance sheet and enhanced our liquidity, reduced costs, both above property and at the hotel level and adjusted many of our operating protocols with a focus on elevating our cleanliness standards. We are pleased with the progress we have made in weathering the storm to date. While the pandemic is not yet over, more and more people are getting vaccinated every day, giving us hope that we're getting closer to normalcy. The timing of the full recovery cannot be predicted and recovery time lines are going to vary greatly by region, but we have seen encouraging improvements in occupancy. There is clearly a lot of pent-up demand for travel, and we're optimistic about the return of travel. Throughout these challenging times, we have remained focused on the 3 key pillars of our business: our associates, our customers and our owners and franchisees. Collectively, they are the foundation upon which our recovery will be built. Without a doubt, we have more work ahead as we continue to navigate through the pandemic. We continue to have great confidence in the strength of Marriott International. As containment measures continue and more vaccines are distributed, we look forward to the global recovery with optimism. We know that our guests are eager to get on the road and to get together in person. So many life events have been postponed, weddings, reunions, anniversaries, countless opportunities for colleagues and clients to meet, gather and build stronger relationships have had to wait. There is simply no virtual replacement for people being together in person. We believe we are well positioned to meet the needs of all of our guests as soon as they are ready to travel again. We will continue to focus on leveraging our unrivaled global portfolio of more than 7,600 properties, the strength of our 30 brands, the power of the Marriott Bonvoy program and the determination and excellence of our global team of associates to recover with strength and to drive future growth. Before I close, I want to acknowledge how proud we are, of the various ways our associates responded to the events of 2020. From the very earliest days of the pandemic, our associates adjusted our social impact and sustainability efforts to address the urgent needs of the times. Around the globe, our hotels donated food, cleaning supplies and essential items like gloves and toiletries to frontline and medical workers as well as local families and community groups. Some of our hotels opened their doors to nonprofit organizations that needed large event spaces in order to adhere to social distancing protocols and still meet an increase in demand for their services. As an example, a number of our properties partnered with the American Red Cross to host nearly 300 blood drives, which collected more than 8,000 units of blood. The Gaylord National Resort & Convention Center just outside of Washington, D.C., donated 40,000 square feet of space to the capital area food bank to support food storage and packaging operations. Together with American Express and JPMorgan Chase, we provided $10 million worth of free hotel stays to frontline health care workers. Marriott International will mark its 94th anniversary in a few weeks. I know I speak for Mr. Marriott, Stephanie and the rest of the executive team when I say we are all humbled and honored to lead this great company. It is now my pleasure to turn the meeting back over to Mr. Marriott.

Thank you, Tony. Now Tony, Leeny and I would be happy to answer your questions. Some questions were submitted before the meeting. You are also invited to submit questions now by typing them in to ask a question or Q&A box and hit submit. As a reminder, any questions submitted to be pertinent to Marriott International and the meeting matters and must be in accordance with the meeting rules of conduct, which are posted on the meeting website.

Okay. We received a number of similar questions related to COVID-19, which we've grouped together in a few categories. The first question is, "how has Marriott responded to the COVID-19 pandemic and how is it thinking about operations and service levels in a post COVID-19 world?"

Thank you, Andy. And let me start by saying thank you to all our stockholders, for your questions, your comments and your engagement. We've responded to the pandemic on numerous fronts, but let me talk about just a few of our operational efforts and focus on the safety of our associates and guests. From the start, we focused on elevating our already demanding cleanliness standards to ensure that both guests and associates feel safe in our hotels. We then moved quickly to create a global cleanliness council consisting of in-house and outside experts in food and water safety, hygiene and infection prevention and hotel operations. We also rolled out enhanced technologies at our properties, including electrostatic sprayers and the highest classification of disinfectants recommended by the centers for disease control and the World Health Organization to sanitize surfaces throughout our hotels with increased frequency. We actively monitor and evolve our solutions to ensure a continued focus on the health and safety of our guests and associates. We're leveraging contactless technologies to reimagine the guest experience during COVID while amplifying operational efficiencies. We're encouraging guests to use mobile check in and checkout, mobile key, mobile dining and 2-way text chat whenever possible and wherever available. In March of this year, we announced a pilot program for contactless arrival kiosks at several select-service hotels across the country and the launch of a proof-of-concept for contactless grab-and-go marketplaces. Planning is underway to scale the contactless arrival kiosks across the U.S. and expand contactless grab-and-go marketplace proof-of-concept to test in high-traffic environments.

Thank you. Our next question along similar lines. We received a number of questions asking about Marriott's masks and vaccinations policies as well as what the company is doing in the global fight against the virus. Can you discuss those issues?

Of course. We'll continue to rely on the health experts when it comes to which measures we keep in place and which measures may be lifted in a post-COVID environment. We think widespread vaccination is the key to minimizing the spread of COVID-19 and allowing more people to feel safe traveling again. We all have a role to play to make sure travel is safe for everyone, including those individuals who are not vaccinated. We all need to be responsible travelers following guidelines from health officials as they evolve. We recently announced a vaccination care program, which provides a financial award to our associates at managed U.S. and Canadian properties who get vaccinated against COVID-19. Employees will receive the equivalent of 4 hours of pay upon completion of the vaccination. Additionally, in the U.S., we're working with both public and private sector groups in the healthcare space to help advance the distribution of vaccines by using hotel space as vaccination locations.

Several stockholders asked about how long it will take for occupancy to return to normal as the COVID-19 vaccine is more widely available? And what is the company doing to capitalize on the increase in the demand for travel that will most likely occur when we emerge from the pandemic?

While global RevPAR is still well below pre-pandemic levels due to the impact of COVID-19, we have seen demand rebound from the lows seen early in the pandemic, and more and more, as I mentioned earlier, people are getting vaccinated. As we've talked about, we've been especially encouraged by the recovery we've seen in Mainland China as the virus has been perceived to be contained. We can't predict for certain when occupancy will reach pre-pandemic levels, but there's clearly a lot of pent-up demand for travel. In the meantime, we're ensuring that we're well positioned to capture that pent-up demand. Our marketing teams are using advanced localized and personalized marketing strategies, utilizing our direct channels to help capture more leisure as well as leisure travel as the lines between work and home blur. We're especially focused on leveraging our powerful Marriott Bonvoy loyalty program to engage with our Bonvoy members and on enhancing the platform through new and expanded collaborations and opportunities that help make Bonvoy even stickier. During the pandemic, we've made sure we've engaged with our loyalty members to keep them thinking about us and travel more broadly.

For our next question, we've grouped together several similar questions we received related to the company's dividend. In short, when will the company resume paying a dividend?

We'll have to see. It's too early to say. As you know, given the significant impact of COVID-19 on our business, the company halted share repurchases in February of 2020 and suspended its quarterly dividend beginning in the second quarter of 2020 to help preserve liquidity. Additionally, we received a covenant waiver for our $4.5 billion credit facility, which we expect will preclude us from returning cash to shareholders until the first quarter of 2022 at the earliest. When we think about when we can resume dividends or share repurchases, there are a range of factors we consider, including the level of improvement in business conditions, the restrictions under our credit facility and our overall leverage levels. We remain committed to being an investment-grade company.

Our next question is from [Bernard Viola]. Mr. [Viola] asks, "now that the company is under new leadership, are you anticipating a drop in the stock?"

We have great confidence in the strength of Marriott and our tremendous leadership team. Tony has been with the company for 25 years and played a tremendous role in Marriott's growth over the last decade. He's a wonderful leader and together with Stephanie, Leeny and the rest of our exceptional leadership team who combined have almost 100 years of experience with the company, we believe Marriott could not be in better hands. Excellent.

Our next question is from [Mark Fagley], who asks, is there a vision for Marriott to keep a specific percentage of managed properties versus franchise properties? Will Marriott go to a franchise only model at some time in the future?

Thank you, [Mark]. We don't have a specific ratio of managed to franchise properties that we're targeting. From an overall portfolio perspective, there will be hotels where it makes more sense to manage and others where it makes more sense to franchise. For instance, we tend to mostly franchise our select service and soft brands. However, in the luxury space, we overwhelmingly require management agreements in several brands, given the operational complexities of delivering the brand experience and to ensure the consistent delivery of that brand's promise to our guests.

For our next question, we've grouped together a number of similar questions we received from across the spectrum related to the company's political engagement policies and practices. Can you address the company's political engagement policies and practices?

Of course, we're a company founded in the United States and based here. We have tens of thousands of U.S. associates and hotels in cities all across the country, including right here in Washington. Marriott's Political Action Committee or PAC, is funded entirely by voluntary associate contributions and has long contributed to both Republicans and Democrats. When giving to elected officials, we are focused on their positions, on our policy priorities and their ability to address issues that are important to our business, our associates and the economy as a whole. Earlier this year, we made the decision to pause political giving from our PAC to senators and representatives who voted against certification of the election after the violent takeover of the capital. We've begun collaborating with peer companies via the business roundtable and other political action committees to share best practices and consider redefining our given criteria to help inform the lifting of that suspension. To be clear, Marriott is not a Republican corporation or a democratic one. We are nonpartisan. Our PAC will contribute to Republicans and Democrats, just as we will continue to work with both sides of the aisle on issues that are important to our country, our industry and our people.

Our next question is from [John Gallagher], Mr. [Gallagher] asks, "Marriott has world-class golf properties. What is the plan for expanding destination getaways and adding Marriott to more golf events?"

Thank you, [John]. As you may know, today, we manage 50 golf courses in 15 countries on 5 separate contents. And we have the St. Regis Bermuda course opening later this month. Marriott Golf continues to grow and seek out new golf destinations by coordinating with our global lodging development teams. We expect Marriott Golf properties will continue to service host sites for high-profile golf events, as in the past, with the PGA Tour, the LPGA Tour and the European tour.

Our next question is from [John de Huff], who asks, "while the list of directors is indeed impressive from a business related standpoint, isn't it time to have a strong Marriott associate representation on the board in order to offer a boots on the ground insight into the current culture and how it can be strengthened?"

Thank you, [John]. The Board spends a lot of time thinking about our culture and core values and the impact they have on our business success, and the Board believes that having a mix of directors with complementary qualifications, expertise and experience, including directors with industry experience and insight into our culture and core values is essential to meeting the Board's oversight responsibility. That's one reason we're so happy that we have the 2 new directors that joined our Board earlier this year: David Marriott, who previously served as our President of U.S. Full-service Managed by Marriott, grew up in the hospitality business and spent more than 20 years with the company in a variety of operational roles, bringing that very boots on the ground insight into our business and our culture that you asked about. And Horacio Rozanski, President and CEO of Booz Allen Hamilton, brings a strong background and track record of building culture and talent. The involvement of other Marriott family members on our Board, including, obviously, Mr. Marriott's leadership as our Chairman; and Debbie Marriott Harrison's membership on the Board and role as global cultural ambassador emeritus provide additional unique advantages to the company and the Board. It's also important, I think, to mention our inclusion and social impact committee, formerly known as the committee for excellence, which, among other responsibilities, is charged with assisting the Board in overseeing and strengthening our culture. The committee is chaired by Debbie Lee and is comprised of 5 board members and 13 officers and associates of the company, who provide great insights to this board level committee. Of course, we know success is never final. Our nominating and Corporate Governance committee annually evaluates the composition of the Board to see if there are areas where we can improve our mix of skills and experience. As a stockholder, you may always recommend any person for consideration as a nominee for Director as specified in the proxy statement.

Our next question is from [Dan Patito], who asks, "will Marriott continue to discount room rates in 2022 due to lagging demand?"

Thank you for your question, [Dan]. Our room rates are set dynamically based on the demand that we're seeing in each individual market, much of the decline in average daily rate that we have seen during the pandemic has been due to hotel and business mix. Our luxury average daily rate has held up quite well, given the relatively quicker return of leisure business. Our marketing strategies will continue to focus more on personalization and localization.

Our next question is from an unidentified stockholder who asks, "are you in favor of Marriott Hotels, rehiring employees who lost their jobs for no other reason than due to COVID?"

Marriott values the past service of former associates, including those separated due to the loss of business during the pandemic. As demand returns, we're working hard to restaff our hotels and plan to look to our former associates to source experienced talent for those available Marriott positions.

Our next question is why can't Marriott install a feature in its property management systems to ban guests who have purposely damaged rooms, were violent, caused the police to be called, et cetera?

The health and safety and personal security of Marriott associates and those who visit Marriott properties is critically important. We have well-defined and long-standing policies and practices related to health, safety and security, including policies related to removing or banning guests from the property. While banning guests should be reserved for really extraordinary circumstances, associates should always notify their immediate supervisor of any unsafe condition or procedure encountered in their work.

Our next question is, "why does Marriott allow resort fees when it is a top complaint among guests and most charges really give the guests no premium that justifies the charge?

Marriott's policy is to disclose the resort fees during the booking process so that it is reflected in the total price shown before the guest completes the reservation process. Resort fees remain separately and clearly stated, consistent with guidance from the FTC and clear to the guests prior to completing the reservation on Marriott channels. The resort fee is a distinct fee for certain features and activities that a resort offers like access to bicycles or beach chairs and it is a common practice in the industry to bundle amenities that would otherwise be charged individually.

Our next question is from Harold Zimmerman. Mr. Zimmerman asks, "are there any plans to reinstate shareholder discounts at Marriott properties?"

Thank you for your question, Harold. The shareholder discount program was discontinued in the mid-1990s, after we determined that it was not cost-effective, or feasible to manage. We don't have any plans at this time to reinstate the program.

Our next question is from an unidentified stockholder who asks, "are there programs in place to allow internships with JW Marriott for growth, paid or otherwise?"

Yes, there are. Marriott offers a variety of internship opportunities, and you can find information on those opportunities at careers.marriott.com.

Our next question is I looked up rates for a future trip and Marriott prices are high. How are you going to attract families and others with Airbnb as a competitor?

The home rentals have been around for a long time as an option for vacationers. We've always successfully competed against this segment and we feel good about our ability to continue to do so with our unparalleled collection of 30 brands at different price and service points. In addition, we have our own whole home rental platform. Homes and villas by Marriott International, or HVMI, which we believe is an attractive option for families and other travelers. The HVMI portfolio has resonated with customers who appreciate the assurances of the Marriott brand name, our larger home product, our focus on premium and luxury inventory, our commitment to cleanliness and the ability for loyalty members to earn and redeem points. Unlike Airbnb, every property in our system, whether a traditional hotel or whole home rental has the Marriott brand assurance behind it and must adhere to our brand standards.

Okay. Our next question is we are very excited about the Marriott-Sorenson Center for Hospitality Leadership. Who is the best person to contact, if we would like to donate our time to teach or volunteer our time in other ways?

So maybe I'll take that one. We're equally excited about the program. The best person to contact is Tricia Primrose, who leads our global communications and affairs, and we will make her contact information available after the meeting.

Okay. Our next question, we've grouped together a few questions we received related to the Equality Act. The question asks, Marriott has endorsed the Equality Act? Can you discuss Marriott's views on that act?

Of course, Marriott has endorsed the Equality Act to ensure that employees are protected from discrimination on the basis of sexual orientation and gender identity, which is consistent with our practices and values. We believe the Equality Act is an important step forward in the effort to ensure equality and fairness in the workplace, which is our primary focus in supporting the bill. We also support the ongoing deliberation that will continue as the U.S. Senate considers the legislation, which may address some of the concerns you've raised.

Okay. And our last question is how does Marriott's market share compare with competitors like Hilton or Westin?

Leeny, maybe I'll let you take that one.

Sure. So Westin, I'm happy to say is actually a part of Marriott. So that is part of the global Marriott system, and Marriott has a larger share of the market than Hilton. We globally have approximately 7% to 8% of the total global rooms, of which in the U.S., that's around 17% and outside the U.S. around 3%.

Okay. There are no further questions at this time. I turn the call back over to you for closing remarks. Mr. Marriott?

Thank you for your questions and your interest in the company. Here are the results of the voting based on preliminary voting results. Each of the Director nominees was elected. Item 2, the ratification of Ernst & Young LLP as the company's independent accounting firm for fiscal 2021 was approved. Item number 3, the advisory vote approved executive compensation was approved. And I am informed that the proposed amendments to the company's governance documents to move supermajority voting standards was not approved. We will provide final results figures unless the numbers are confirmed as filed by Broadridge. I'll now entertain a motion to adjourn.

Thank you, Mr. Marriott, I hereby move to adjourn the 2021 annual meeting of stockholders.

Is there a second?

Second.

The 2021 annual meeting of Marriott International stockholders has now adjourned. Thank you for your great support, your investment in the company and for being a member of our loyalty program or simply for staying with us. We consider you all a part of the extended Marriott family. Take care. Thank you.