Good morning. My name is Brandy and I will be your conference operator today. At this time, I would like to welcome everyone to the Marriott International First Quarter 2018 Earnings Conference Call. All lines have been placed on-mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the conference over to Mr. Arne Sorenson, the CEO of Marriott International. You may begin your conference.

Good morning, everyone. Welcome to our first quarter 2018 earnings conference call. Joining me today are Leeny Oberg, Executive Vice President and Chief Financial Officer; Laura Paugh, Senior Vice President, Investor Relations; and Betsy Dahm, Senior Director, Investor Relations. First let me remind everyone that many of our comments 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. Forward-looking statements in the press release that we issued last night along with our comments today are effective only today May 9, 2018 and will not be updated as actual events unfold. This quarter, we have provided a set of slides to assist with today's discussion. You can find them on our website at www.marriott.com/investor or in our 8-K filing. In our discussion today, we will talk about results excluding merger related costs, reimbursed revenues and related expenses, a net adjustment to the tax charge related to the U.S. Tax Cuts and Jobs Act of 2017 and an adjustment to the Avendra gain. GAAP results appear on Page A-1 of the earnings release, but our remarks today will largely refer to the adjusted results that appear on the non-GAAP reconciliation pages. Of course you can find our earnings release and reconciliations of all non-GAAP financial measures referred to in our remarks also on our website. So, let's get started. We were very pleased with our results in the first quarter. Worldwide, systemwide constant dollar RevPAR increased 3.6%, beating the top-end of our guidance by 60 basis points. Gross fee revenues rose 11% and adjusted earnings per share increased 40%. Let's talk about the regions. Systemwide…

Thank you, Arne. For the first quarter of 2018, adjusted diluted earnings per share totaled $1.34 compared to $0.96 in the year-ago quarter. Both first quarter 2018 and first quarter 2017 reflect the new revenue recognition accounting standard. We expect to have the remaining 2017 quarters and the 2017 full year income statement reflecting the new rules available to you later this quarter. In the first quarter, gross fee revenues totaled $845 million, an 11% increase year-over-year largely from unit growth, RevPAR gains and higher incentives and branding fees. Credit card fees alone totaled $86 million, up 58% while other non-property fees including application and re-licensing fees, timeshare fees and residential branding fees increased 6% to $38 million. With a weaker U.S. dollar, first quarter fee revenue also benefited from a nearly $8 million favorable impact from foreign exchange net of hedges. Worldwide house profit margins for company-operated hotels improved 70 basis points on a 4.0% increase in managed hotel RevPAR. In North America, margins declined slightly on a 1.4% increase in company-operated hotel RevPAR. Despite the modest RevPAR growth and significant wage growth, we were able to hold on to our North America house profit margins due to procurement savings, productivity improvement and the roll-out of shared services to more hotels. We estimate efficiency improvements and synergies contributed an average of 50 basis points to worldwide property level margins in 2017 and our goal is to add another 50 basis points apart from the impact of RevPAR growth on average in 2018. Beginning in the third quarter, we expect to standardize loyalty charge-out rates by chain scale with most brands benefiting from even lower charge-out rate. Owned, leased and other revenue, net of expenses totaled $70 million in the first quarter, a 3% decline from the prior year. The…

Thank you. Your first question comes from the line of Smedes Rose of Citi.

Thank you. Good morning. I wanted to ask you, I guess specifically on your pipeline, it was up around 5,000 rooms sequentially. I realize it's still a big number, but it's a little lower in terms of growth than it has been. And I was just wondering if you could talk about, you mentioned the higher construction cost, if that's impacting your pipeline or if there's anything else in particular going on in the quarter. And along with that, your deletions seemed a little higher than usual as well.

Yeah, those are all perfectly fair questions. I think the best news around development pipeline we've put in the prepared remarks, which is the signing of about 10% more deals in Q1 than Q1 last year, which was gratifying to us. I mean, we have talked before about the fact that we think organic industry growth in the United States in terms of new signings probably peaked in 2015-2016 timeframe. Obviously, we've got some new brands. I would call out particularly Moxy and AC that are driving some of that signup as well as the sort of rebooting of Element and Aloft, which should give us the ability to compete better than the industry as a whole. But there is a lot of growth that's occurred in the United States and I think as a consequence, having some increase in the number of signings was again a gratifying thing for us to see. We did, as we do every quarter, look through the entire development portfolio. We culled some deals that we were less confident would ultimately get completed, and of course, in culling those deals, we bring down a little bit offset to the signings we've signed. So, we had a little bit less growth in the total pipeline in Q1. In terms of the deletions, each one is its own story. I think I've looked through every individual hotel that left the system in first quarter of 2018. It's never a surprise to see that many of those hotels are not contributing much in fees, in part because they are either at the end of their contract life and not necessarily competing as well or participating in markets that are under a bit more pressure or to some extent because they weren't contributing sort of their fair share, we were less interested in having them stay in the system. And all those things sort of go into this calculation. But I think all things considered, we still saw some modest growth in the pipeline. And we're sticking tight with the 5.5% to 6% net unit growth, which again this year we'll open more rooms than we did last year. Last year, we opened more than we opened the year before. And I suspect the odds are that next year we'll open more rooms than we open in 2018.

Thank you. And then, as a follow-up, I wanted to ask you on your Tribute portfolio. You mentioned you're testing it. I guess how long would you be testing before you sort of enter in a more formal way into this business? And I mean what kind of scope do you think this could reach over few years and just to be a more meaningful piece of earnings over time?

Well, we're going to take this a step at a time. I think within a few months, we should be able to learn considerable lessons from what we're doing in London. And if it goes well and we're quite optimistic, it will, we'll look at extending that to other cities. Our plan for timesharing – for home sharing, excuse me, is to learn as we go here a little bit. But we want to make sure we are delivering a high quality service experience and we want to make sure we're delivering whole homes. So that it is, if you will, the higher end of the market. It's a place where branding can make a difference. It's a place where we can deliver an experience both in terms of service and quality that we want our customers to have. And it's a place where we can feel really good about connecting it to the loyalty program. Now, by the way, in the whole home space, it's also meaningfully different from a standard hotel room, which makes it a more comfortable place for us to add. But I think we'll watch this as we go. We'll obviously keep you posted on the way this is developing, but we're off to a great start in the first few weeks that we've been engaged with this in London. We're getting great response from our customers, and we feel good about it.

Thank you.

You bet.

Your next question comes from Robin Farley of UBS.

Great. Thanks. I wanted to ask...

Good morning.

...on two things. Good morning. First is on corporate negotiated rates. I wonder if you could talk about where you expect them to come in for the year in terms of a 1% increase. And also were a lot of those negotiations done before you saw the improvement in business travel that now you've seen in Q1. In other words, are those maybe at rates that wouldn't reflect where you'd want them to be for the year? And then I also had a question on margins, which was just that looking at your North American margin was basically flat with 2% RevPAR growth. And I wanted to ask how sustainable that is as you talked about some of the cost saves from the combination and kind of that 50 basis points that that would add hopefully this year as well. Is that enough to keep margins flat at 2% RevPAR growth? Thanks.

Leeny will take the margin question here, but let me make a couple of comments on the special corporate rates. We had special corporate rate growth of about 3% in Q1, which all things considered is not bad. I think your second question is fair though. Obviously, we negotiate special corporate accounts typically in the fall. And to the extent that we are more optimistic about the economy collectively now than we were in the fall, we presumably could do a bit better in those negotiations if they were happening today than we did last fall. But that's hardly a stark difference. And let's take a reminder here. I think Marriott is performing extraordinarily well. Marriott's business model is performing extraordinarily well. We feel meaningfully better about our prospects today than we did a quarter ago. But we're still talking about 2% to 3% RevPAR growth in the U.S. for full year 2018. We're not changing numbers to sort of a mid to high single-digit number which obviously is something we've seen in some prior economic environments. And of course that 2% to 3% RevPAR growth that continues to put a premium on making sure we're driving rates and now for Leeny making sure what we can on the cost side.

So on the margin side Robin, you look at Q1 at 1.4% managed RevPAR growth. That was absolutely essentially entirely from rate which does help us to the extent of trying to hold on to as much margin as we can. However, we have typically thought about needing about 3% RevPAR growth to hold onto margin. And from that standpoint with the synergies that we're getting from the Starwood acquisition, I think that number is probably a little bit better. But I think to assume 2% and flat margins that would be a great goal to shoot for that we obviously would try to do. But it would be right at the edge of being able to hold onto margin including the synergy benefits to be able to do that.

Okay, great. Thank you very much.

You bet.

Your next question comes from Shaun Kelley of Bank of America.

Good morning everyone. This is Dariush on for Shaun.

Hey, how are you.

Good, thanks. How are you? So following up on Smedes' question on net unit growth, looking out to 2019, do you think net unit growth could actually reaccelerate as elevated deletions from Starwood subside? And to what extent do you see rising cost across the construction environment as an offset?

This is the danger about speculating already in an answer to a question about maybe having more opening in 2019 than 2018. I think we will – we think that's possible because you just look at the pipeline and look at the years in which we signed the deals. We will have more hotels coming out of that development pipeline in 2019 than in 2018. So I think the gross openings globally could well be higher next year than they are this year. In terms of deletions, it's probably too much to ask for at the moment. I'll anticipate maybe a question talking about Sheraton for a second. We are making really good progress with the Sheraton brand. We've talked to you in the past few quarters about focusing first on the lowest 25 hotels and then the lowest 50 hotels in the U.S. If you look at the lowest 100 hotels in the U.S. which is really half of the Sheraton portfolio nearly three quarters of those are well on their way to being resolved. A handful of those leaving the system, most of them being renovated or will be renovated before long. Now, it will take a year or two to get those renovations done, but we feel really good about the way that is continuing to move. We'll have to give you as we get closer to 2019 a better sense for deletions next year. But I would think that the 1% to 1.5% deletion is the kind of number you should expect steady state not necessarily a material change from that. And then the last thing hinted at in your question was really about construction delays. We are seeing really tight construction markets. Obviously, that is about labor, but it's also about a lot of what is going on in the construction space. You've got both in Florida and Texas significant hurricane recovery work underway. You've got some infrastructure work that is happening across the United States. And you've got a fairly robust real estate business and all of that is putting pressure on construction resources which makes construction both bit more expensive and has it take a little bit longer. The other thing that we're seeing in our pipeline is we have – a few years ago, we would have skewed a bit more towards a prototypical suburban limited service hotel. I think today even in our limited service pipeline, we're seeing more of that be custom, more of that be urban and those projects obviously take longer to get completed than the prototypical suburban construction. The good news in all of this is the projects are moving forward. And so while they get stretched out a little bit we know they're coming and we know they'll open up into the system.

Thanks a lot for the color. And just as a quick follow-up probably for Leeny, looking at G&A and the expected $70 million of expense related to employee profit share matching in 2018, can G&A in 2019 actually be down in absolute dollars or does inflation put you closer to flat to up?

Yeah. So we're getting ahead of ourselves as we think about 2019. But I think a more kind of classic steady state G&A by the time we get to 2019 is fair. So if you obviously think about a number that is when you're thinking about without the $70 million, you're looking at $875 million sort of number. That then you would argue that that could potentially be lower than the printed number of the $945 million in 2018.

Thank you.

Your next question comes from the line of David Beckel of Bernstein Research. David James Beckel - Sanford C. Bernstein & Co. LLC: Hi. Thanks for the question. I just want to Arne ask you about conversations you've been having. Clearly the business environment is looking up. I'm wondering does that have more to do with actual cash in the coffers increasing because of the tax reform or more about expectations of forward economic growth improving?

I think they are related to some extent. And the answer is both. Obviously we talk to a lot of our customers who participate in the economy in every industry. And I think from the time Tax Reform Act was passed you've seen a step up in optimism. And the query we often give to our customers is, is it just optimism or are you actually seeing improved business conditions? And it's a majority that say, no, no, no we're actually seeing improved business conditions. And we are actually making decisions which are the effect of our more bullish impact. It is not simply about attitude but it's about things that are actually happening. Now to be fair, you look at earnings growth across the industry, look at the first quarter results across the U.S. corporate sector and you see great earnings growth. A big chunk of that is tax and people are paying less in tax and therefore their earnings are moving. But you're seeing – more often than not you're also seeing companies report revenue growth. And that's something that has been missing from the last few years of our economic recovery. So you put all those things together and it does seem like we are in again a meaningfully better place in the economy than just three or six months ago. David James Beckel - Sanford C. Bernstein & Co. LLC: That's helpful. Thanks. And as a quick follow-up just on the home sharing agreement just to follow-up on the last question, what is it that ultimately got you over the hump? I feel like you've been analyzing that opportunity for quite a while, so I'd love to know what finally got you to decide to get your feet wet. And secondarily, it sounds like you're pretty optimistic about what you'll find. Is there any circumstance at which you decide not to move ahead with this arrangement?

Well, let's take the last one first. Of course until we complete this first task we're not going to make any definitive decisions. We wouldn't have made the test unless we felt like it was likely to lead to a positive outcome however. And so we are hopeful that we'll find stuff here that confirms our suspicion and we'll move forward. We've obviously watched this space for the last number of years. We've been asked by all of you about the impact of this space and what it means. There are a couple of general comments I'd make, see many of the folks who started in this business started with a business model, which fundamentally did not comply with law in most, in many I should say, cities and states and countries. And it's one thing for a start-up to engage in a business that really does not comply with law, it's another thing altogether for a 90-year old company like Marriott to step into a business, which is fundamentally illegal. And as a consequence, one of the reasons we didn't jump into this quickly is we thought this is a business that is not made for us. We have now figured out that we can run this business in a way that does fully comply with law. It will include payment of lodging taxes, so that it's a level playing field with the hotel business. It will very much include complying with local regulatory requirements on number of nights homes can be let in this way and make that work. I think the other thing that we've observed is that as some of these platforms have grown into millions and millions of units, there is almost a paralyzing array of choices and the lack of branding and the lack of real attributes of quality around service and product makes this a area where we think we can bring our brands, we can bring our service and product focus, and deliver something which is simply a better product and much of what is out there. And then, of course, lastly we think there's a strong loyalty connection, which obviously can be helpful here. The home sharing business skews overwhelmingly to leisure travel, not to business travel. The loyalty space obviously, particularly around redemptions, but it could be around point earning as well, is we think an advantage we've got that should bode us well in this space. David James Beckel - Sanford C. Bernstein & Co. LLC: Very helpful. Thank you.

Your next question comes from line of Joe Greff of JPMorgan.

Good morning, Joe.

Joe?

...hotel? Hello.

Here we go. Better start again.

Can you hear me? Sorry, this is Brandt on for Joe. So I just wanted to follow up on the managed hotels margin discussion. If you take it one step further. So looking forward you have group commission rates going lower right, you're rolling out a cohesive loyalty program later on in the year and then there's other costs that are lower for your owners given scale-related synergies. So to what extent are each of these factors embedded into your IMF forecast?

I would say generally they are. Obviously, we will always try to hope to do better. But as we also talked about, there's the reality of labor cost increases that are also a major element this year in our managed hotels, particularly in the U.S. So I would say that they are broadly included. The one thing I'll also say that's interesting is that for this year we're actually I would expect by the time we get for the full year that two-thirds, almost two-thirds of our IMFs will be from international hotels. And there again that – particularly in Asia Pacific, it's much more driven by what's going on with RevPAR since there aren't owner priority returns there. And that will be an interesting thing to watch. And I think you saw that clearly in Q1 with the outperformance in incentive fees with the very strong outperformance in Asia Pacific. And we similarly saw the one-third, two-third split in IMFs in Q1.

The other point to keep in mind is the group commissions reduction took effect for bookings after April 1, 2018, 90-plus percent of all group bookings for 2018 are on the books prior to that, maybe close to 95% if you think of as of April 1. So the commission reduction is not likely to have much of an impact in 2018. That will build over the years ahead as more new bookings get made.

Got it. That's helpful color. Thanks. And then a follow-up or a second question, which corporate customer segments are growing the fastest for you guys besides what you mentioned on the oil pads? And can you differentiate between volume and price?

Well, in general we're pleased with the price overall, I will say. From a rate perspective we just generally feel good. I think when you're talking about fundamental business, we continue to see the oil and gas from a percentage increased basis right at the top. But then for very steady kind of above average professional services and technology, I would put at the top of the list. We still continue to see good numbers for financial services, but not like the professional services and the technology and the oil and gas.

Great. Thank you very much.

Sure.

Your next question comes from Patrick Scholes of SunTrust.

Good morning.

Patrick?

Patrick, are you there?

Patrick, your line is open.

Hi. Good morning. Can you hear me?

Now we can.

Yeah. We can.

Great. Thank you. I apologize in advance, just a little bit of a devil's advocate question here. But as we think about your financial projections going forward, it seems that with the changes in the rewards program, a little bit of devaluation of the Starwood side of things, how do we think about customer attrition from the Starwood loyalty customers in that regard going forward?

Well, the response we've gotten from Marriott and Starwood customers has been overwhelmingly positive. And remember what goes into this calculation for every customer is starts with the value of the program. And the value of the program really is about both points earning and where can I use those points. We have with the new credit cards a powerful supercharged approach to collecting points. We have with the points earned for hotel stays maintained if not increased the value to the customers, including the SPG customers. And as a consequence we think that the value equation looks very good. There is a huge advantage to all of the customers in that now with one loyalty program it will be much easier to earn elite status and the breadth of choice for redemptions as well is simpler. And so think about the comparison to the airline industry, if you will. Depending on where you all live that is one of the significant factors that goes into which airline you tend to prefer, because if you're in Dallas, you're likely be an American person. If you're in Atlanta, you're likely to be Delta. If you're in Washington, you're probably more likely to be an United. We don't have that weakness in the sense that we are able to offer places to stay in 127 different countries around the world. We offer more choice than any other hotel loyalty program. And as a consequence, both on the earnings side and the redemption side, it is a pretty powerful flow. And lastly, and I hinted at this a bit in the prepared remarks, but when you look at, okay, do I want to earn all these points, one of the answers is, what can I use them for. And when you look at our distribution in the higher end of the market, luxury, lifestyle, resort destinations, the redemption options are dramatically better than any of our competitors. I think you roll all those things together and we are very optimistic that we will increase our share of wallet, not see any decrease in share of wallet of our loyalty customers. And we'll continue to grow that customer community from the 110 million or so that we're at today to a substantially bigger number.

Okay, thank you. That's it.

Thank you. Your next question comes from the line of Jared Shojaian of Wolfe Research.

Good morning, Jared.

Jared?

Can you hear me?

Now we can. Go ahead.

Okay. Sorry. Phone issues. So we see the cost synergies in the SG&A line, but is there a way to quantify if you've captured any revenue synergies so far? And as we think about those revenue synergies pulling up following loyalty and reservation integration, where should we see evidence of that? Is it mostly just the RevPAR line? And if so, should we expect that you'll outperform on RevPAR in the following years just from those synergies?

Well, the RevPAR index which we actually I think as a lodging-focused investment community probably don't talk about as much as maybe we should. RevPAR index is the single measure that cuts through geographic distribution, cuts through reliance on group business, cuts through chain scale, and allows us to say, how are you competing against the market. And one of the reasons we don't talk about it as much is because it's not published in a way that allows you to see it quickly. You see the industry prognosticators reporting RevPAR. You see the companies reporting RevPAR. And we'll often talk about index, but we may not always talk about index. And if we talk about index, you can't necessarily pierce through what it is we're saying to have your own source of data for it. When we look at our performance from the time we closed the Starwood acquisition, so we're about 1.5 years in, we've been gratified to see that we have taken index steadily albeit modestly in those six quarters or so. And in some respects it's not surprising because we haven't yet merged those loyalty programs. And we're just completing the merging of the sales and revenue management teams. And those are the kinds of things that are most likely to drive the share of wallet. But it's been pretty positive nevertheless because you would also expect pulling two big companies like this together and two sales forces and the uncertainty that comes from that that there could be some distraction or some other things which would actually cause a dip in relative performance. And we haven't seen that. And we've seen good strength. As we get into the merging of these loyalty programs, which really is an August and later 2018 event, we are optimistic that we will see an increase of share of wallet and that should translate into index growth. And of course, we'll be talking about index growth as those numbers get put in the books. I think the other thing we look at, of course, is the strength of the credit card programs. We know already, based on the negotiations we've done with Chase and Amex that they are as excited as we are about the power of this platform. And we see that in the terms of the deals we've negotiated with them, but we also see that in the way we talk with them about the opportunities we have together to grow this program. And obviously, we'll be talking about the contribution to the system and to us from those credit card programs in the years ahead.

And I just want to add onto that, which is from the standpoint of the credit cards that Arne's talking about, remember that the credit card fees is just one component of the growth that we've got. We were able, through the renegotiation of this combined company credit card arrangement, to also increase the benefits to the customers as well as increased benefits to the owners and also increased benefits to the shareholders.

Got it. That's very helpful. Thank you. And then just as my follow up, you talked about the strength in the Asia Pacific region. Is your relationship with Alibaba translating into that performance right now? Or is the strength you're seeing mostly just other factors, be it demand or other issues? And then are you seeing more willingness from Chinese consumers to move up the chain scale? Is that helping you at all?

Well, the data from the Chinese traveler is uniformly positive. And remember, we've got – I think about within China first maybe, in Shanghai we must have something like 40 hotels open. Shanghai is the most international city in China. Our hotels are skewed dramatically towards the high end. And the bulk of our business in our China hotels, even in Shanghai, is Chinese. Now that's business travel as well as leisure travel, but you're seeing that the Chinese are participating in the high end of the market within China, and you're seeing the same thing in the China outbound markets. We're seeing good growth year-over-year. It is double-digit growth Chinese volume to essentially every market around the world. Not surprisingly, the biggest markets for Chinese outbound travel are going to be near to China; Macau, Hong Kong, Indonesia, Thailand to name a few, obvious – Australia, to name a few obvious choices, but it includes growth to Europe and growth to the United States as well. The Alibaba piece, we are certain it is contributing to us. It's hard for us to know exactly what percentage it's fueling. And that's something we will continue to watch with them as that JV platform gets more and more rolled out. We mentioned that some of these things are coming now, Alipay, but also the new storefront on Fliggy. And we did this for a reason. We think we can deliver real value to Alibaba's Chinese membership about 500 million strong, and we can drive great results for us and it should be successful for both of us. Still a little bit early, but I think it is clearly a positive.

All right. Thank you very much.

Yeah.

Your next question comes from the line of Stuart Gordon of Berenberg. Stuart J. Gordon - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Yeah. Good morning. Just curious on your development pipeline and just on the chain scales. Would we be right in assuming that they're broadly similar as geographic splits or how about particularly the upper upscale and luxury? Is it askew there to any particular region?

So let's – somebody can pull the...

Yeah.

...chart for me as we talk. But we're right now, let's talk about our regions first. Right now, our existing hotels are about two-thirds in the United States and one-third outside the United States. And the pipeline is a bit more than half, not dramatically more than half, but a bit more than half outside the United States and about half in the United States. So we are in the pipeline skewing more than our existing distribution towards international markets. We mentioned in the prepared comments that our luxury and upper upscale share there is substantial, particularly when compared to the rest of the industry. But I think we are seeing globally the power of these Select brands. And so any market in the world, including the United States but also including Asia, we are seeing that the Courtyards and Fairfields and ACs and Moxys are becoming very attractive to our owning partners. And so I suspect that the pipeline is also skewing a bit more to Select-Service than our existing distribution in like-for-like markets. Remember though that as we're going to more international, the international markets in absolute terms are more full service in terms of the pipeline than the domestic ones. So that shift is probably not dramatic. Leeny, Laura, anything to add.

No, correct. No. Stuart J. Gordon - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Okay. Thanks. And just as a follow-up. I think in the prepared comments you mentioned that leverage is now at the lower end of your leverage range. And you've also said that you've a growing confidence in the economy. Should we be expecting that to migrate slightly up the way? Or are you more comfortable keeping it around about where it's just now through the next 12 months or so?

We continue to be comfortable in the 3.25 times range. The reality is with our continued asset sales and the various – you can't always plan exactly when that cash is coming in. We have tended over the last four quarters to be down closer to the bottom end of the 3.0 times. And the numbers that we actually gave in our guidance today, the modeling that we've used is actually at a 3.20 times coverage. So I guess to your point, yes, I think we're comfortable as we think about managing it towards the higher part of the 3.0 times to 3.25 times, but still obviously in that range. Stuart J. Gordon - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Great. Thank you very much.

Your next question comes from the line of Vince Ciepiel of Cleveland Research.

Great. I guess, kind of – good morning. Can you hear me?

Yeah.

Yeah. We can.

Okay, great. Yeah. So a longer-term question coming back to alternative accommodations. I think you mentioned some things changed regarding the legality as well as this kind of level playing field concept with regards to hotel tax, both of which raised your interest today versus a couple of years ago. But those changes aside, I was just curious for your perspective on where do you think consumer demand is at for alternative accommodations as well as the ability to browse for those stays, hotel and accommodation side-by-side. So I guess directly if the sharing program in London were to go well, could we at some point see hotel product and home sharing products side by side on marriott.com?

Yeah. I mean already in the London pilot essentially that is the case. If you search London, you can find a link up to Tribute Homes and be able to do both. And the notion, of course, here is driven by – it's our view. I think it's probably fairly undebatable that giving folks more choice is a positive thing. It is what has driven us to not just acquire Starwood but to try and compete with 30 different brands and have the kind of choice within the hotel space. And here we can offer a bit more choice, but again, choice that has the kind of quality we want to have connected to our system. And we think by having that loyalty program and that breadth of choice, we drive strength of all elements within that portfolio and think we can do more of that in the years ahead.

Great, thanks. And then a second question on the fee guide. Impressive going to, I think it's 11% or 12-ish, up about 300 bps, 400 bps from the prior. I was curious you mentioned RevPAR might be part of that move higher, units is relatively unchanged as is the credit card. Is it 1 point or 2 tailwind from FX? And then what type of headwind is there from non-hotel fees that you're kind of overcoming because when you add up the credit card, the FX, the RevPAR, and units, it almost seems to point to something in the teens.

Yeah. So let's kind of run through those. First of all you're right. FX is – we're kind of go back to the broad view of 1 point of RevPAR typically for us in the broadest sense is typically about $35 million. So if you say, okay, we got about 1.5 point increase that takes you up to over $50 million increase in fees. Then we've talked about an additional $25 million from FX. So roughly these are always hard because it depends on what happens with which currency. But just most broadly one percentage point change in the value of the dollar assuming it happens evenly gets you to about $11 million. And we've told you that our fee guidance has gone up $25 million relative to where we were before. So you've got the RevPAR, you've got the FX component. And then when you look at the non credit card related fees, the delta that we've talked about really overwhelmingly reflects the increase in the credit card fees. So if you remember now app fees and timeshare fees are largely fixed. Application relicensing fees now have to be amortized over time, so they don't jump up and down the way they used to when you were able to take them in from cash, so they're going to be pretty steady. And then residential branding fees are really a relatively smaller component. And while they may go up or down $5 million or $10 million, it's really the credit card, the $360 million to $380 million that overwhelmingly drives the growth in that section. And then the last point I'll make is that, when we think of our classic rule of the $35 million for 1 point of RevPAR, when you see that the outperformance in RevPAR is in Asia Pacific, that's obviously going to skew a little bit higher towards the IMF side of things given there's no owner priority. So I think that's part of what you're seeing is that we've increased our expected growth rate from IMFs fairly meaningfully as a result of the strong RevPAR performance, particularly in Asia Pacific.

Helpful, thank you.

Your next question comes from the line of Stephen Grambling of Goldman Sachs. Stephen Grambling - Goldman Sachs & Co. LLC: Hey, two questions. I guess the first will be a follow-up on the credit card fees. Just to be clear, I guess, did you recognize, I guess, an equal contribution in the first quarter relative to what you'd expect over the course of the year? Or should it be steady over each quarter?

You mean from a growth perspective year-over-year? Stephen Grambling - Goldman Sachs & Co. LLC: I guess, you can define it either as a contribution to growth or just absolute dollars?

In absolute, what did we talk about? $87 million?

$86 million in the first quarter.

Yeah, $86 million and we've talked about $370 million for the whole year. So that would give you that it would actually, which would make sense as you would expect it would grow a bit as you continue to see new cardholders and increased spend from consumers over time. But as we talked about before, again the increase year-over-year is overwhelmingly driven by the increased terms in the agreement. But yes, you would expect it to grow during the year. Stephen Grambling - Goldman Sachs & Co. LLC: Makes sense that's helpful. And then an unrelated follow-up. We've seen some changes in kind of search results through Google and other OTAs. I'm curious, if you've seen any changes there that impacted your direct booking trends and any color you can provide on that campaign? Thanks.

No, I think we're seeing a good stickiness with our efforts to drive direct bookings. We're seeing good growth on our digital platforms and trying to move that forward. And obviously those are the bag of features that we've talked about over the last few years, member only rates, some features that are available to loyalty members and not others. And I think as the loyalty program gets stickier and stronger with the credit card program, we should continue to see that those customers grow and those customers are much more inclined to book directly. And that's the case almost no matter what happens with the search algorithms or approach that some of these platforms are taking. If the customers know that it is clearly in their interest to book direct, they're going to find a way to book direct. Stephen Grambling - Goldman Sachs & Co. LLC: And have you provided the percentage that's booked through your app specifically and how that's growing? Thanks.

I don't know that we have, and I'm not sure we will this morning. But it won't surprise you that digital growth and the mobile growth as well as the app growth is very robust.

Overall digital reservations are just a hair over 26% for the year 2017 anyway. Total direct would be 72% through a combination of digital and on property including group bookings done at property and through the telephone. Stephen Grambling - Goldman Sachs & Co. LLC: Great. Thanks so much.

Your next question comes from the line of Felicia Hendrix of Barclays.

Hi, Felicia.

Hi. Just Leeny, on the credit card branding fees, I was just wondering is there any way to grow that? For example, is there a language in the contracts that would allow you to benefit from upside if spending is greater than expected?

Absolutely. Absolutely. But again, time will tell. We're introducing new cards. We just introduced the new Chase card. The new Amex card will come out in August. And from that perspective, we've looked forward to lots of folks signing up and using the card. But what's in this year's expectations of the $360 million to $380 million is a bit of a steady-as-she-goes cardholder usage and numbers of cardholders. And overwhelmingly the increase related to 2017 is because of the new terms. But yes, there's increased usage absolutely over time.

Okay. But so far just the $360 million to $380 million is representing that – so there could be upside to that?

Again it all depends...

Yeah. Right.

...on behavior of consumers. It's kind of this I would call completely normal not out of the ordinary sort of spend this year. But some normal growth because that's what we've seen over the past few years is some normal growth.

Okay. Thank you. And then Arne just a little bit earlier you were talking about the international part of your pipeline and how your exposure to international is better than your existing distribution. But just wondering how we should think about that going forward. Do you think you could get that percentage to something even higher like in the 60s or even higher? And then also you discussed the construction headwinds in the U.S. I'm just wondering if there's any headwinds in any of your international regions to talk about. I know we've talked about China in the past so maybe that and anything else.

I think it's a good question. I think this is a sort of a longer-term question. But I suspect over time we'll continue to see that international mix continuing to rise. It's a big world out there. Obviously, our distribution outside the U. S. is much lower in terms of percentage of the total industry than it is in the United States. And much of the rest of the world has got economic growth numbers and growth in the middle class numbers, which are more robust than the much more developed that exist in the United States. Obviously, though at the same time we're big in the United States and we're gratified to see that we're continuing to grow in the United States. And we don't want to turn off our focus on seizing the opportunities that are available to us in this market. So you won't find us basically shutting down, if you will, our willingness to continue to grow in the United States. In terms of construction delays and the like in other parts of the world, nothing probably as dramatic as the United States. It tends to depend on the robustness of the economy around the world and whether any of those economies have, if you will, more demand for construction materials or construction labor than they have supply. And I think generally that is much less the case in the rest of the world than it is here, certainly in terms of the material numbers. Now there are other factors that go into development in other parts of the world, it can take a long time to get permits. There may be much less – many more permits that are required in some markets. Sometimes that development process is not very transparent and we obviously got to make sure that we and our partners are navigating that in a way which meets our standards. And so sometimes that takes longer for us than it would in the United States. But generally we're not seeing a deterioration, if you will, in the speed of the development process in the rest of the world.

Okay, great, helpful. Thank you.

You bet.

Your next question comes from the line of Bill Crow of Raymond James. Bill A. Crow - Raymond James & Associates, Inc.: Speaking of development, it seems like your development partners in the United States have to be taking a haircut on expected returns given the construction cost, the labor cost increases, higher financing costs et cetera. I'm just wondering, are they coming to you for relief from a contract help with financing? What are you hearing from the folks in the U.S.?

Yeah. It's a pretty astute question, Bill. I think you're right. I think we've seen the cost of land increase. We've seen the cost of construction increase. We've seen the development period which also drives cost obviously during the development process, cost of capital particularly increase. And I suppose we're now on the front edge of seeing the cost of debt increase with interest rates starting to move up. Debt still seems to be reasonably well available certainly for experienced developers. And as a consequence I think they can find the money to pursue this. I think at the same time there is a strong sense that even though the returns maybe have gotten a little bit less, the returns are still fairly healthy compared to returns available in other real estate classes, and maybe to some extent in other investment opportunities. And when you're looking at the Select-Service brands particularly there's less volatility in the performance of those hotels. There's increased proof that those hotels can last and be competitive for a number of decades. You've got obviously lots of private platforms that are participating in this development process. And with the miracle of compounding, these are still pretty attractive deals. And I think as a consequence that's why we're continuing to see the development pace be as strong as it is. Bill A. Crow - Raymond James & Associates, Inc.: All right. That's helpful.

The only last factor I'd put in there Bill is while RevPAR growth at 2% or 3%, not to use our numbers in the U.S. is not as – I mean we'd love to see it be 2 or 3 times that size, but it's not that robust. But nevertheless the hotels in absolute terms are trading at really pretty good numbers. Good occupancies, good performance and with the predictability that I talked about before I think these are still investments which are attractive to folks. Bill A. Crow - Raymond James & Associates, Inc.: No, that's fair. My follow up Arne is whether there's any benefit to Marriott from the Marriott Vacation Club acquisition of ILG?

Generally it will simplify things and as a consequence I think we're supportive of it. We've got good relationships with MVW and ILG. Leeny and team had already completed negotiations with both of those companies so that we were free to proceed with the merger of the loyalty programs and the websites and all the rest of it. So those restrictions were behind us. Nevertheless I think to be able to deal with one company and not have either one of them necessarily looking behind the curtains to see, always there are possibly something you've given to one that you haven't given to us, will simplify things a little bit. I don't think it'll be dramatic. Bill A. Crow - Raymond James & Associates, Inc.: Great. Thank you.

Your next question comes from the line of Wes Golladay of RBC Capital Markets.

Hi, everyone. Can we go back to the international IMFs? Can you talk about what the main drivers are that's driving that growth? Is it more rooms in the system? Is it a higher percentage of the rooms paying fees? Is it the operating profit growth? And then when you look at how much RevPAR growth you need for margin expansion?

So you got a bunch of things there. So obviously, when you've got RevPAR for example in China that gets close to 12% you're going to get pretty spectacular margin improvement there. And with every dollar of increased profits, we get a share because in Asia Pacific there's no owner's priority. So from that perspective I would say that the biggest chunk of the growth in IMFs is coming from Asia Pacific and their very strong performance. When you look at the overall kind of percentage you are seeing that kind of year-over-year compared to a year ago the percentage of hotels earning incentive fees internationally did go up 3 percentage points, went up from 68% to 71%. Overall for the company, actually down a little bit, because in the U.S. we had a couple of large limited service portfolios that with relatively speaking lower managed RevPAR growth they paid a lower percentage of incentive fees. But again, it was two-thirds, one-third and that is two-thirds of our IMFs coming from international, you're clearly seeing the benefit of the fact that most of those contracts do not have owner's priority. And I'd say from a unit growth perspective for ramping up hotels, you're getting a nice amount of IMFs but I would say that the RevPAR growth is the biggest driver.

Okay. And then when we look at that two-thirds or just the international component of the IMF, how much is the Asia Pacific region of that bucket?

We can get it for you. I don't have it.

Okay.

This is Laura. Give me a call after the call and I'll get that for you.

Okay.

I will say in general that our fees overall tend to be fairly well distributed relative to the room count, but you are going to find obviously particularly this time that Asia Pacific on the IMF side is going to be higher proportionately.

Okay. Thanks a lot.

Thank you. At this time, there are no further questions. I would now like to turn the floor back over to Arne Sorenson for any closing comments.

All right. Thank you all very much for your participation and your attention today. It's great as always to talk with you. Get out there and travel, we'd love to welcome you to our hotels.

Thank you. That does conclude today's conference call. You may now disconnect.