Marriott CEO Anthony Capuano and CFO Leeny Oberg shared seven striking shifts, I thought, during the hotel company’s fourth quarter earnings call.

They’re seeing surging leisure rates, a move to last-minute bookings, and are managing a major tech overhaul for the business. Swelling Bonvoy membership is driving revenue – from both hotel owners and banks. How that will pair with growth from lower-end chains, and in light of still-sluggish business travel, remains unclear.

1. Rates are up for leisure travelers. 44% of room nights are leisure, and it’s Marriott’s strongest performer. Revenue per available room “rose 6% globally and 4% in the U.S. and Canada, driven by gains in both room nights and [average daily rate]” and across all business segments, according to Capuano.

   

2. But guests are booking much later. In fact, guests are now booking within 3 weeks of arrival
   and that’s made projections harder. “The booking windows are still relatively short, kind of sub-three weeks, and so the ability to predict there, maybe we don’t have as much visibility as we might like or we’ve had historically.”

   

3. Marriott is claiming leadership in lower-end hotels due to lower fees. Owners like the “simple bundled affiliation costs” Marriott is offering to low-end properties, and they believe their fees for these are “the lowest in the industry.”

   We continue to have strong owner interest in all of our midscale brands given their compelling brand design, the power of our revenue engines, and their simple bundled affiliation costs which we believe are the lowest in the industry. At the end of the year, we had over 300 open and pipeline Four Points Flex, Studio Res and City Express by Marriott properties just a year and a half after entering the midscale tier.

4. Everyone is a Marriott member now. Marriott “added over 31 million new members to our loyalty program last year, growing to nearly 228 million members at year end. Bonvoy member penetration of room nights achieved historic highs in the fourth quarter at 73% in the U.S. and 66% globally.”

   This isn’t as good as it sounds at first blush. This is not ‘customers loyal to Marriott’ or even ‘people engaged in the Bonvoy program.’ If you want to save 2% on your room, you need to join the Marriott program for member rates. So one-off guests join the program.

   However, this is great for Marriott because hotels are paying Marriott a premium for every hotel member that stays. Converting someone who was going to stay anyway into a program member generates higher revenue. The promise was that ‘member rates’ would mean guests book direct with Marriott instead of Expedia, and to some extent that happens, but it also converts direct booking guests into direct booking members at higher cost to owners.

   

5. Their next beat was and membership growth is great for the credit card pipeline. They can market to members and turn them into credit card customers. Here’s Capuano:

   As we grow that member base and our global portfolio and add travel-adjacent products and collaborations, like our 33 co-brand credit cards and tie-ups with partners like Uber and Starbucks, we are deepening engagement with our members and capturing more of our customer’s share of wallet. Driven by a strong increase in global card spend, our co-brand credit card fees rose nearly 10% last year.

   And here’s CFO Leeny Oberg,

   Co-brand credit card fee growth could be a couple hundred basis points lower than the nearly 10% growth in ’24, primarily due to the normalization of international card fee growth

6. Marriott is about to undergo a huge tech transition and it will involve their reservation system, their property management systems, as well as their loyalty management system. This will begin to roll out later in the year and take a couple of years to complete. Capuano it means being able to sell more things to more guests:

   [E]lements of that tech transformation will start to roll out later this year. We’ve talked about this a bit in the past – we think there are far reaching impacts to this transformation to all the constituents we serve, starting with Marriott associates. The simplicity and the streamlined training, we think will be a big advantage as we go out there and try to attract best-in-class talent, especially from a next generation workforce.

   For our guests, we think the transformation will create tremendous capacity at the hotel level, so that our associates can better engage the guests in person. It will also meaningfully help our call agents and their ability to help with broader travel planning questions, and then we think for the owners, really advantages or opportunities both on the revenue and expense side.

   Certainly on the expense side, we expect there to be enhanced efficiency, but one of the things that our owner community is most excited about, there are a wide range of products and services that we offer our guests every day beyond guest rooms – food and beverage, spa, golf, etc. The ease with which a guest can shop across all of those categories on our new reservations platform, we believe represents meaningful revenue upside for our owners.

7. Business travel isn’t actually back Oberg starts with the positive spin, that “business transient has recovered to 2019 levels, just in a little bit different form. The small and medium sized businesses came back faster than the largest corporates.”

   Of course that’s only some businesses whose business travelers are back, and back to levels from six years ago – not to trend (where business travel would have grown to by now). They still see fewer room nights than 2019 for large companies.

   Leisure growth has offset this – but digging in more granularly and while occupancy is up that relies much more heavily on Thursday – Sunday nights but according to Oberg, “Monday-Tuesday-Wednesday are still the nights whose occupancy has not recovered.”

   That’s easy to understand. The archetypal road warrior was the out Monday morning / back Thursday night consultant who spent the week at client offices. That travel hasn’t returned, because even where companies have ‘returned to office’ that doesn’t mean every employee, every day, and so it’s not necessary to have as many consultants physically on-site either. With the Monday – Thursday road warrior at lower levels than before that’s going to affect occupancy for Monday, Tuesday, and Wednesday nights.

   

Marriott’s Q4 call illustrates the company’s balancing act between soaring leisure demand and the slow return of business travel, leveraging loyalty growth, midscale expansion, and a large-scale tech transformation to drive future profitability.

Notably missing is any discussion of the company’s role in taking care of guests. Each time “guest” is mentioned in the call, it’s as a number (one time, as survey data) or as someone they can sell to, whether it’s more rooms, “food and beverage, spa, golf, etc.” or a more automated way in which the “guest can shop.” And it doesn’t seem to be code-switching for analysts, either.