Marriott International (MAR) Q2 2018 Earnings Conference Call Transcript

Marriott International, Inc. (MAR -0.87%)
Q2 2018 Earnings Conference Call
August 7, 2018, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the Marriott International's Second 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. [Operator Instructions] Thank you.

I would now like to turn the conference over to Mr. Arne Sorenson, President and Chief Executive Officer. Please go ahead, sir.

Arne M. Sorenson -- President and Chief Executive Officer

Good morning, everyone. Welcome to our second 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, August 7, 2018, and will not be updated as actual events unfold. Y9u can find slides for today's discussion on our website at www.marriott.com/investor or in our 8-K filing.

In our discussion today about the income statement, we will talk about results excluding merger related costs, reimbursed revenues and related expenses, a year-to-date net adjustment to the tax charge related to the U.S. Tax Cuts and Jobs Act of 2017, and the year-to-date adjustment to the Avendra gain. 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. Our second quarter was terrific. Adjusted earnings per share rose 56% to $1.73 with better than expected fee revenue, owned leased results, and G&A expenses. Adjusted EBITDA increased 15% and cash returned to shareholders totaled nearly $1 billion. As an encore to our first quarter strength, worldwide systemwide RevPAR rose 3.8% in the quarter, at the high end of our guidance.

In North America, we continued to see strength in leisure and corporate demand, particularly in the energy, retail, and professional services sectors. Systemwide RevPAR in North America increased 3.1% in the second quarter, with RevPAR at luxury hotels up nearly 4%. Transient RevPAR rose 2.5% in the quarter, with higher room rates associated with group compression. Group RevPAR rose 4.5%, reflecting the shifting Easter holiday.

Group attendance trends improved while food and beverage revenue rose nearly 5%. Group pace for comp and non-comp hotels for 2018 is up at a mid single-digit rate. For comp hotels alone, pace is up at a low single-digit rate. Given today's very high occupancy rates, we expect transient RevPAR will grow faster than group in the near term. At the same time, year-to-date our group revenue bookings for all future periods is up over 17%.

RevPAR growth exceeded 5% in the quarter in New Orleans, Orlando, South Florida, San Francisco, and Houston, and increased at a double-digit rate in Toronto and Vancouver. RevPAR in New York rose nearly 4% with higher retail and special corporate demand, particularly from tech companies and higher international arrivals.

We expect 2018 RevPAR for North America systemwide comparable hotels will increase 2-3%. For the first half of 2018, we reported RevPAR growth of 2.7%. We believe RevPAR growth in the first half of 2018 would've been a bit slower, roughly 2.5%, if we adjust for last year's inauguration and the lingering impact of the 2017 hurricanes. For the second half of 2018, we expect reported North American systemwide comparable RevPAR will grow 1.5-2%. If we similarly adjust our second half RevPAR growth estimate for the midweek independent stay and the tough comparison to last year's hurricanes, we believe RevPAR growth would again be roughly 2.5%. In other words, our topline forecast is steady as she goes.

On the international front, the growth in demand continues to be impressive, with price gains as well as occupancy improvements. Systemwide constant dollar RevPAR in our Asia Pacific region increased 9% in the second quarter, while RevPAR in greater China rose 10% on very strong retail demand. The 2018 Beijing Motor Show increased occupancies in that city while Hong Kong and Macau benefited from strong leisure demand, particularly from mainland China.

RevPAR in Indonesia increased 17% as demand returned to Bali. RevPAR in Japan increased 7% on strong retail demand, while in India, greater group business in gateway cities also increased RevPAR by 7%. For the second half, we expect RevPAR in the Asia Pacific region to continue to grow at a high single-digit rate, albeit a bit more modestly than in the first half.

In the Middle East and Africa region, systemwide constant dollar RevPAR declined 4% in the second quarter due to the earlier timing of Ramadan and continued political tension in parts of the region. RevPAR in Africa rose nearly 9% with strength in Algeria, Nigeria, and Egypt. By the way, I just returned from a visit to our properties in Egypt and Algeria. There is a lot of enthusiasm for Marriott there and a lot of room for future growth. In the third quarter, we expect RevPAR in the MEA region will increase at a mid single-digit rate, benefiting from the timing of Ramadan, while fourth quarter RevPAR is likely to be flat to modestly lower.

In Europe, the World Cup was played in Russia for the first time and we saw considerable last-minute demand. Congratulations to the French team on winning their second World Cup title. Across Europe, systemwide constant dollar RevPAR rose 5% in the second quarter, driven by strong results in Russia, France, and Turkey. UK RevPAR was flattish, likely due to lingering concerns about Brexit, RevPAR growth in Spain and Italy was weaker, as many Europeans shifted their spring holiday stays to other venues. For the second half of the year, we believe RevPAR in Europe will continue to increase at a middle single-digit rate. While Italy is likely to remain weak, Spain will benefit from easier comparisons. Paris should be strong and we expect Turkey will continue to improve.

In the Caribbean and Latin American region, RevPAR rose 8% in the quarter. RevPAR for hotels in the Caribbean increased at a low double-digit rate as they continued to benefit from lower industry supply following last year's hurricanes. RevPAR in Mexico declined modestly, reflecting traveler concerns about security. In the third quarter, we expect RevPAR in the region will increase at a mid single-digit rate, driven by stronger results in Mexico on an easy comparison to last year's earthquake. In the fourth quarter, RevPAR should moderate as hurricane damaged hotels reopen and comparisons become tougher.

Worldwide, we expect third and fourth quarter RevPAR will increase 2.5-3% and 2018 RevPAR will improve roughly 3-4%. While we're encouraged by 2018 results, we are even more excited about our longer-term prospects. From a competitive viewpoint, we've never been better positioned. We lead the industry in number of rooms and distribution, geographically, and across chain scales. Our brands are powerful. Our already premium RevPAR index increased 120 basis points in the last 12 months and is likely to continue to climb.

Our three loyalty programs lead the industry and are getting better. We expect to unify our loyalty programs on August 18th. While we will retain all three loyalty program brand names until next year, customers will experience them as one great program. Guests will earn points faster, achieve elite status sooner, and redeem points more easily and without blackout dates. Also, on August 18, we will introduce full portfolio inventory on Marriott's direct channels, including our websites and mobile apps, which will enable guests to conveniently search for any of our hotels on all of our website and apps based on brand, tiers, distance, price, amenities, transportation, nearby attractions, and points of interest.

With over 6,700 properties, we are positioned to take care of guests, whether they are on a Midwest road trip, making a sales call in Johannesburg, or enjoying a luxury resort getaway in the South Pacific. This growing breadth of product and the growing number of earning and redemption opportunities increases the value of our loyalty program as guests don't need to look further than our properties virtually anywhere they may travel.

In addition to earning and redeeming points at our hotels, Marriott Moments offers guests local activities and experiences from sporting events and concerns to cooking and tennis lessons. In the second quarter, Marriott Moments' revenue nearly tripled from first quarter levels, enhancing returns to owners and increasing guest engagement and loyalty. Loyalty programs make lodging demands sticky. A loyalty program with significant luxury destinations and experiences is magnetic. Dreams about luxury Hawaiian holidays are motivating, particularly for travelers who spend a meaningful part of their lives on the road.

In 2017, the 477 properties in our seven luxury brands represented just 9% of our rooms worldwide, but 17% of our loyalty point redemptions. Our luxury brands also contribute 19% of our property based gross fee revenue, which could equate to nearly $600 million in 2018. Like loyalty and luxury, our booking engines are also a significant competitive advantage. Guests can book our hotels directly through our websites, apps, call centers, group sales offices, or on property.

In 2017, two-thirds of our transient business was booked through one of our direct channels, with more than half of these direct bookings on our websites or apps. We have been in encouraging direct digital bookings using specialty loyalty member pricing and our next generation yield management system, focused on nights when occupancy rates are high. Because of our efforts, revenue booked on our branded websites and mobile apps increased materially faster than our revenue booked through the OTAs in the second quarter.

For hotel owners, we continue to improve productivity as well as recognize synergy savings from the Starwood acquisition. We recently reduced commission rates for intermediary group business, which should improve house profit margins for our Best in Class convention and resorts network hotels. In the third quarter, most owners should see additional savings as we make further reductions in loyalty charge out rates. For hotels hosting loyalty redemptions, we have announced a new sliding scale reimbursement approach. We believe this will reduce incentives for hotels to cut room rates at the last minute.

Finally, beginning in 2019, we plan on implementing a program services fee to bundle above property charges, including reservations, sales and marketing, revenue management, and mobile guest services. The program services fee should be simpler, more flexible, and more predictable for owners and we believe it will further reduce costs to most of our hotels.

This leads to development. According to STR, we continue to have the largest pipeline of rooms under development in the world, including more luxury and upper upscale rooms, than our next three competitors combined. We opened a record 23,000 rooms during the second quarter and our inventory of rooms under construction worldwide advanced to more than 213,000 rooms. We added nearly 40,000 signed or approved rooms to the development pipeline in the second quarter. At the same time, we also removed 14,000 rooms from the pipeline that had not made enough progress toward construction starts. At quarter end, our pipeline stood at roughly 466,000 rooms, a few thousand rooms higher than last quarter and roughly 25,000 rooms higher than at the end of the second quarter of 2017.

Worldwide, our pipeline emphasizes the higher value lodging tiers as we begin at midscale and extend to luxury. Our luxury brands alone represent 11% of our pipeline. Of the tiers in which we play, our brands represent 30% of industry rooms under construction worldwide and nearly 45% of industry rooms under construction in North America. To ensure that we are driving real value, our development team's success is measured both on meeting targets for net presents value as well as number of rooms signed.

When we announced our intention to acquire Starwood in late 2015, we noted the driving force behind the transaction was growth. The acquisition would provide an opportunity to create value by combining the distribution and strengths of Marriott and Starwood, enhancing our competitiveness in a quickly evolving marketplace. With the significant accomplishments at Marriott since that announcement, we believe we are on our way to realizing that promise. These accomplishments are due to the efforts of many people at Marriott. With the upcoming launch of our combined loyalty program, I want to express our gratitude to the entire loyalty organization, our information technology team, our marketing group, and everyone on property throughout the system who have been working toward this day. Thank you.

So, for more about the quarter, let's turn the call over to Leeny.

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

Thank you, Arne. For the second quarter of 2018, adjusted diluted earnings per share totaled $1.73, 56% over the prior year quarter and $0.38 over the midpoint of our guidance. Roughly $0.02 of the outperformance came from better than expected gross fee revenue, $0.02 came from better than expected performance on the owned lease line, largely termination fees. $0.07 came from better than expected general and administrative expenses, including lower than expected profit sharing contribution and favorable timing. $0.24 came from gains on the sale of assets, including the sale of a hotel in a joint venture, and $0.03 came from favorable discreet tax items.

In the second quarter, gross fee revenues totaled $951 million, an 12% increase year-over-year, largely from unit growth, RevPAR gains, and higher incentives and branding fees. Credit card fees alone totaled $93 million, compared to $59 million in the prior year, while other non-property fees, including timeshare fees and residential branding fees, declined 3% to $38 million. With a weaker U.S. dollar, second quarter fee revenue benefited from $7 million favorable impact from foreign exchange net of hedges.

Compared to our expectations, fee revenue outperformance by $11 million at the midpoint, largely due to better than expected performance of franchise hotels and stronger than expected incentive fees in North America and Europe.

Worldwide house profit margins for company-operated hotels improved 60 basis points in the second quarter, on a 4.1% increase in managed hotel RevPAR. Our teams around the world have done a fantastic job as we continue to recognize property level cost savings from procurement, productivity, and other merger synergies.

Owned, leased and other revenue, net of expenses, totaled $89 million in the second quarter, a 9% decline from the prior year. Property dispositions reduced owned leased results in the quarter by $21 million year-over-year, somewhat offset by higher termination fees and higher profits from owned and leased full service hotels in North America and Europe. Owned. Leased and other revenue, net of expenses, was $9 million higher than expectations, largely due to higher termination fees.

General and administrative expenses declined 7% in the second quarter, largely due to synergies associated with the Starwood acquisition. Second quarter G&A was $33 million better than guided. We expected our profit sharing match would total $25 million in the second quarter, following $35 million recognized in the first quarter. The actual amount of second quarter profit sharing match was $2 million, as enrollments lagged expectations. We expect the impact of additional profit sharing enrollments and related expenditures will total $18 million in the second half of 2018 as we shift some of the previously anticipated spending to the back half of the year.

As a reminder, we currently estimate the total cost of this program is $110 million. One-half of it is being funded by our gain on the sale Avendra, with $55 million impacting our G&A line in the full year 2018. This expense will not recur in 2019. Dispositions exceeded $400 million in the quarter and gains on asset sales totaled $119 million. We sold the Sheraton and Westin hotels in Fiji, the Sheraton Montreal, the Chicago Tremont, our interest in a joint venture which owned the Royal Orchid in Thailand and the W Mexico City, and our interest in a joint venture which owns land parcels in Italy. Another of our joint ventures sold the Ritz-Carlton Toronto, and we recorded our share of the gain on the equities and earnings line on that transaction.

You may recall that in late 2016 we outlined a target of $1.5 billion of asset recycling by year-end '18. With the completion of these asset sales this quarter, along with the sales of other hotels, joint venture interests, and loan repayments in earlier periods, our asset recycling has surpassed this two-year target, already reaching nearly $1.8 billion. We've secured both long-term management agreements and, where needed, commitments for significant renovations for nine of the ten hotels sold since late 2016.

Equity and earnings totaled $21 million in the quarter and included a $10 million gain on the sale of the Ritz-Carlton Toronto hotel. This transaction also included a commitment for a renovation of the property. Net interest expense increased $14 million in the second quarter due to higher interest rates on our commercial paper balances, higher debt levels, and lower interest income. Second quarter adjusted EBITDA rose 15% to $939 million, despite a $17 million negative impact from sold assets.

Looking ahead, we expect worldwide constant dollar systemwide RevPAR will increase 2.5-3% in each of the third and fourth quarters, yielding 3-4% RevPAR growth for the full year. Nearly half of our 466,000-room pipeline is under construction. Over half is outside North America and 41% is in the upper upscale and luxury tiers. While not shown on Slide 10, 45% of the rooms pipeline is company managed, but less than 10% of the pipeline is subject to an owner priority return.

For the full year, we continue to expect gross openings to yield about 7% growth. Our new signings remain robust, and the number of rooms under construction has increased more than 20% since the second quarter of 2017. We continue to have more rooms under construction than any competitor.

For 2018, deletions are running close to 2%, a bit higher than typical. While there are different stories for every hotel, we are completing workouts of legacy Starwood properties and are being more aggressive in addressing product quality issues. We expect the pace of deletions will slow in 2019. On a net basis, this yields roughly 5% net worldwide rooms growth in 2018.

Given our worldwide RevPAR and unit growth assumptions, we expect gross fee revenue for the third quarter will total $915-935 million, an 11-13% increase over the prior year. Our fee revenue estimate assumes nearly $5 million in favorable foreign exchange impact in the third quarter. We expect owned leased and other revenue, net of direct expenses, will total roughly $65 million in the third quarter, which reflects stronger hotel results and higher termination fees, as well as a $23 million negative impact from sold hotels. Our guidance assumes no further asset sales beyond those that have been completed.

G&A should total $235-240 million in the third quarter, including roughly $10 million for our additional contribution for profit sharing. These assumptions yield $1.27-1.32 adjusted diluted earnings per share for the third quarter, 21-26% higher than our 2017 third quarter adjusted EPS of $1.05.

For the fourth quarter, we expect gross fee revenue will total $929-944 million, including a roughly $10 million benefit from foreign exchange. Results from owned, leased and other revenue, net of direct expenses, should total roughly $91 million in the fourth quarter, reflecting stronger hotel results, higher termination fees, and a roughly $5 million benefit from our purchase of the Sheraton Grand Phoenix, offset by a $13 million negative impact from sold hotels.

G&A should total $236-241 million in the fourth quarter, reflecting continued synergies associated with the merger, as well as an $8 million profit sharing match. We expect our tax rate in the fourth quarter will benefit from some discreet items, which should lower the tax rate for that quarter to roughly 20%.

Fourth quarter adjusted diluted earnings per share should total $1.47-1.52, a 35-39% increase over 2017 fourth quarter adjusted EPS. For the full-year 2018, we believe gross fee revenue could total $3.64-3.675 billion, a 10-12% increase. Incentive fees could increase at a roughly 10% rate and credit card branding fees could total $360-380 million for the year.

Our estimate of full year owned, leased, and other revenue, net of direct expenses, includes stronger hotel results, higher termination fees, and an $80 million negative impact from the sale of assets. Our estimate for adjusted EBITDA assumes a $67 million negative impact from the sale of assets.

Full year 2018 G&A should total $935-945 million. Compared to our prior guidance, our G&A has decreased modestly for 2018, reflecting lower estimating profit sharing contribution, somewhat offset by higher workload and costs associated with changes to accounting rules and higher compensation expense. These assumptions yield $5.81-5.91 adjusted diluted earnings per share for 2018, a 38-40% increase over adjusted EPS of $4.21 in 2017.

We expect adjusted EBITDA will total $3.45-3.495 billion, a 10-12% increase over the 2017 adjusted EBITDA. Investment spending for 2018 could total $800-900 million, an increase of $200 million from our last forecast, due to the $255 million purchase of the Sheraton Grand Phoenix, offset by reductions in other spending. Maintenance spending in 2018 should total $225 million.

Year-to-date, we've recycled more than $500 million of capital through asset sales and loan repayments. We've repurchased over 14 million shares from January 1 through yesterday, for approximately $1.9 billion. With the benefit of higher anticipated earnings and cash flow, we now expect to return over $3.1 billion to shareholders through share repurchases and dividends in 2018. Our balance sheet remains in great shape. At June 30, our debt levels were consistent with our targeted credit standard of 3-3.25 times adjusted debt to adjusted EBITDAR.

We appreciate your interest in Marriott. So that we can speak to as many of you as possible, we ask that you limit yourself to one question and one follow-up.

...

We'll take your questions now.

Questions and Answers:

Operator

[Operator Instructions] Your first question is from Harry Curtis with Instinet.

Harry Croyle Curtis -- Instinet LLC -- Analyst

Most of the questions we've been getting surround the reduced NUG growth estimate. I wonder if you could give us more detail on a couple of things, which include -- first of all, is this a one-time surge in deletions? How long might this last? It sounds to me like you feel that the deletion rate normalizes next year, but to what degree do you have confidence in that? How much visibility have you got there?

Arne M. Sorenson -- President and Chief Executive Officer

Thanks, Harry. Good morning. First, let me say NUG -- I think you're referring to net unit growth as opposed to another brand. We have a few brands, but NUG is not one of them. You're right to raise the question. From our guidance a quarter ago, we have assumed a higher level of deletions this quarter than we did then. It's important that we all try to understand what's driving that. The place I would start is not about deletions, but about development. I think the core question which should be addressed here is, what does it say, if anything, about our owning partners' appetite to grow with us and to affiliate their hotels with us. What we're seeing on the development side is a much more powerful indication of the strength of our brands than anything that the deletion data would tell you.

In Q2, for example, we added 40,000 new rooms to the pipeline in newly approved deals or newly signed deals that had not been counted before. 241 hotels. If you do the math, that's a hotel a little more frequently than once very nine hours. That shows you that, around the world, our owners are saying, "These are brands that we want to affiliate with and we're prepared to put substantial capital behind that desire."

In the last quarter, we've continued to make progress on a number of things, which ultimately impact deletions. Each hotel is its own story. The deletions in the second quarter were only about 18 hotels, but they are the most recent ones that left our system. We see that about 20% of them, by definition older assets, are contract expirations. While contracts, when they expire, can often be renewed, the core issue there is usually does it make sense for additional capital to be invested in those hotels to bring them up to current standards or are they beyond that point from an economic perspective. Typically, at expiration, it's a meaningful question. So, we lost some hotels from that perspective.

About 30% of rooms that came out in the second quarter were because of hurricanes or earthquakes. While they may come back into our system at some point in time, we looked at the circumstances of those hotels and thought it could be years before the reenter our system. Rather than keep them in our unit count, let's take them out.

And, the balance in the quarter -- and the increase in the deletion estimate for the year -- is driven by a mix of product quality issues. They can be quite unique sometimes, but it's driven by the economics of each individual hotel. While we would like to keep hotels in the system if they can be brought up to standards, if they can't get the capital business necessary in order for them to stay in the system, we'd just as soon that they left. Sometimes we have a different point of view with our owners about the positioning of these assets and we work through that and see if we can't come to a resolution that makes the most sense.

I think the last thing I'd say here, we do not think this is a new deletion rate that we're going to experience for years to come. We think this is a mix of pushing product quality issues. It is a mix, to some extent, of dealing with some unresolved legacy workout issues that were within the Starwood portfolio when we closed the transaction. Some of those deals had not been resolved and we're working our way through them toward resolution. We'll get back more to the 1-1.5% deletion range that we talked about the last couple of years for the years to come.

Harry Croyle Curtis -- Instinet LLC -- Analyst

That's helpful. Maybe just a little bit more history here. When you acquired Starwood, the brand that seemed to be the most in need of attention was the Sheraton brand. Perhaps you could help us by giving your perspective on a scale of 1-10. Where do you believe the Sheraton brand is relative to where you want it to be within the next year or so?

Arne M. Sorenson -- President and Chief Executive Officer

We're making great progress on Sheraton. We've had lots of dialogue with our Sheraton owners around the world. About a year ago, we settled on a prototype for the regular guest room in the Sheraton brand. In June of this year, we rolled out a new idea for the public space for the Sheraton brand, which we did at the lodging conference in New York, first of June. We've had tremendous response from our owners and franchisees to what we're doing with the brand.

When we look at the portfolio around the world, we see about 75% of the Sheraton portfolio is on its way toward meeting those brand standards. That includes those that are already there as well as hotels which are scheduled for renovation or maybe even under renovation, leaving about a quarter. We're in discussions with most of those owners to see if we can't get to a place where the renovation is going to be done to bring it up to brand standards. It's in that bucket, that we have some deletions from the system, which we're certainly happy to take because long-term we think we're going to strengthen the brand.

RevPAR index for the brand is now above fair share, which has moved a bit since we closed. I think it's got significant movement ahead of it, if we can deliver the kind of capital and reinvention of the brand that's necessary. I think we feel really good about the momentum we've got for plans for the hotels. In terms of the customer experience, we have to get more of these renovations completed and available before they will start to see the average experience at the Sheratons move materially.

Harry Croyle Curtis -- Instinet LLC -- Analyst

Very helpful. Thank you.

Operator

Your next question is from David Beckel with Bernstein Research.

David James Beckel -- Sanford C. Bernstein & Co. LLC -- Analyst

Thanks for the question. I'll ask a high-level question about RevPAR expectations this time relative to last quarter. A lot has happened geopolitically. Are you hearing anything from executives that would cause you to be more concerned about the back half relative to the last time we spoke?

Arne M. Sorenson -- President and Chief Executive Officer

We were very deliberate about using the phrase steady as she goes in the prepared remarks. I think we could probably describe good news and bad news here. For the optimists on this call who are saying, "We had a 4% GDP print in the United States in Q2, that should drive faster RevPAR growth, maybe even in Q2" -- maybe you should build that into your Q3 or Q4 numbers. We have not seen that higher GDP growth show up in higher demand, either in our system or in the industry. If you look at Smith Travel Data, rooms sold in the United States, which is demand -- in Q1, demand was up 3%. In Q2, demand was up 3.1%. So, essentially identical and, in many respects, our system very much shows the same thing. When you adjust for the calendar anomalies, I think our first two quarters, one was 2.3% and one was 2.5% RevPAR growth -- essentially identical numbers.

Similarly, when we look at Q3 and Q4, if you're worried that the 1.5-2% US systemwide number is concerning, don't. It is not a sign of softening. It is very much an impact of the calendar or comparison anomalies. July 4th midweek, you've already heard about from other companies in the space. We have some shifting holidays, but probably the most significant thing in the back half of the year is the RevPAR comparisons get tougher because of the strength of the hurricane recovery efforts in Houston and Florida, particularly, last year. When you adjust for those things, we see in our guidance, built in, about a 2.5% RevPAR growth for the balance of the year.

So, it's very much steady as she goes. We see under that probably still somewhat greater strength in the leisure segment. In the group space, the corporate group is stronger than the associate group. And, the corporate transient is probably right in the middle.

David James Beckel -- Sanford C. Bernstein & Co. LLC -- Analyst

That's very helpful. Thanks. The group booking strength that you've seen. How much of that relates to the reduction in commissions and folks wanting to try to book group activity in advance of that change?

Arne M. Sorenson -- President and Chief Executive Officer

That's a really important point to raise. Our group bookings in the first quarter, for all future periods were very, very strong. One of the reasons, perhaps the most significant reason for that, was our reduced commission rates took effect April 1st. So, with a number of group intermediaries, they were accelerating their efforts to make sure they were booking before lower commission rates impacted them. Similarly, when you look across the industry, you had a number of other companies decide that they would reduce group commissions, too. None of those lower group commission levels are in place yet. I think they will be rolling in for some other companies effective in the fall or the first of the year.

So, that will have a little bit of a dynamic to the way group business is booked. Having said that, I think many of the end consumers for group business are not ambivalent about what the group commission levels are, but they're going to be much more interested in where they should hold their meeting, both in terms of services and facilities, and we think we'll continue to compete very well in that space.

David James Beckel -- Sanford C. Bernstein & Co. LLC -- Analyst

Thanks so much.

Operator

Your next question is from Smedes Rose with Citi.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Hi. Thanks. With the loyalty program now on a path to be more fully integrated from the consumer perspective, it seems like the next phase of the Starwood acquisition is maybe going to be measured by what happens on the revenue side versus on the expense side, which is largely behind you now. How will you think about communicating to the street your gains, presumably in market share or RevPAR index -- or is that something you can provide now as a baseline so that we can measure? Or, you can talk about, a year from now, where that is?

Arne M. Sorenson -- President and Chief Executive Officer

Yeah, we love the optimism in your question and we have the same optimism. We think going to one set of channel platforms -- so, that's the websites, apps, and the rest of it -- as well as one loyalty program, all of which happens August 18th, will be a powerful positive for the system. As we mentioned, we won't get to one name for the loyalty program until sometime early in 2019, but we will have one program as of the 18th of August. That means that loyalty members can get credit for elite status for stays in the Marriott and Starwood hotels, Previously, you had to earn your status in one platform or the other.

It also means that points being earned and being redeemed don't need to be transferred between accounts. And maybe, most powerfully, it means that customers will show up on our website and will see the whole portfolio instead of having to toggle back and forth between two different portfolios. We think all of those should drive increased share of wallet and greater strength in the loyalty program. We'll be looking at measures like size of the loyalty program, number of members. We'll be looking at contribution of the loyalty program to hotels and we'll be looking at RevPAR index.

It's a very hard thing to predict what the upside's going to be, but we're optimistic that we will see greater strength from this stronger loyalty program. And, we'll do our best to communicate with you about the actual results we achieve.

One other thing I'll mention. We don't think we're done on the cost side. Leeny mentioned the 60 basis point margin growth in both international markets and the US market in Q2. That is, we think very strong performance given the relatively modest RevPAR levels. We also have some further cost synergies, which we'll be rolling out to the hotels in the balance of 2018, and we know that we're going to deliver efficiencies into 2019 and 2020. We want very much to drive both topline and margin improvement for the portfolio of hotels in the next couple of years.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Okay. That's helpful. Some owners have talked about poor sales bookings at formerly managed Starwood hotels, transitions around the sales force. Is that process largely finished now? Is there any additional detail you can add from your perspective versus what we've heard from owners?

Arne M. Sorenson -- President and Chief Executive Officer

Yeah. So, we've seen a few of those comments and a couple of references to this in some of the early notes that were published. The best indication about the way hotels are performing is RevPAR index numbers. RevPAR is a rollup of each hotel's performance against typically the five or six hotels that are most relevant in their competitive set. Typically, those are going to be similarly positioned in the chain scales, in the same geographic market. Sometimes, if they're in the luxury space or in the group space, the geography could be a little bit broader in order to get hotels that are similar. But, they're the hotels that have been picked by Marriott and by the owners to say, "Okay, this is the group that is most germane to assessing the relative performance of this hotel."

We have increased index about 120 basis points over the last 12 months, which with a portfolio of this size and the kind of work that's been under way on integration and all of the other things, is fabulously strong results. The loyalty program has not been merged yet, so we think we have upside ahead of us. Also, you can look at a little less precise data, but RevPAR growth for the legacy Marriott hotels and the legacy Starwood hotels. I think it's interesting to note that the legacy Starwood hotels are posting RevPAR growth numbers that are comparable if not even a little bit higher than the legacy Marriott hotels.

Before getting to the comments that have been made by some other companies, we have a portfolio of hotels -- about 70 hotels, if memory serves -- that we describe as our convention resort network. They tend to be the big hotels. They are the ones most reliant on the salesforce because they are most reliant on group. And, when we look at the performance of those hotels, both legacy Marriott and legacy Starwood hotels, we see RevPAR index up a full point in the last three months and a bit more than a full point in the last 12 points.

All of that would say there is nothing systemically that we see that would suggest the integration is negatively impacting the system. Now, we've seen the comments made -- I won't go through each one of them or name which hotel I'm talking about. I thought it was interesting that one of the companies talked about a specific hotel and its relatively soft performance in Q2. We know by looking backwards, that that hotel had weak group bookings on the books well before Marriott acquired Starwood for these periods in 2018. In fact, in the second quarter of 2018, that hotel had an increase in bookings for future periods of 38% compared to prior times. And that's the first quarter, when they had the new integrated sales force working for it.

Each hotel is going to have a different story. We're not saying for a second that there couldn't be circumstances in which there has been staffing implications to the integration that's been done or there have been distractions or other issues. But, what we see generally across the system, is not an integration impact to the performance that we've had. But, just the reverse -- a remarkable strength in the midst of all the change which is under way.

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Thanks a lot for that detail.

Operator

Your next question is from Felicia Hendrix with Barclays.

Felicia Hendrix -- Barclays Capital, Inc. -- Analyst

Hi. Good morning. Along those lines, in terms of the puts and takes of the RevPAR results in the second quarter, to what extent were they impacted? What would have your RevPAR looked like if you wanted to smooth out for the sales force transition? Also, as you're thinking about your guidance for the third quarter, how much have you accounted for in the second half?

Arne M. Sorenson -- President and Chief Executive Officer

I won't repeat everything I just said, Felicia, but --

Felicia Hendrix -- Barclays Capital, Inc. -- Analyst

[Crosstalk] No, I don't want you to.

Arne M. Sorenson -- President and Chief Executive Officer

-- we do not think there was any impact. We do not think there is any impact in Q3 or Q4. To the extent that anybody's thinking the Q3 or Q4 guidance numbers we put out there are somehow lower than they would be because of integration concerns, that is not the case.

Felicia Hendrix -- Barclays Capital, Inc. -- Analyst

Okay. I heard you talk about index. I heard all of that. I just didn't know if there was a different way to translate it. Let's move on then. On the net unit growth, you gave guidance in April, so something happened in the quarter. So, how much of the greater than expected deletions were due to the Dubai hotels? Also, looking to 2019, can we expect that you get back to that net unit growth of closer to 5.5-6%?

Arne M. Sorenson -- President and Chief Executive Officer

Yeah. A few questions in there. Ironically, the deletions we experienced in Q2 were half as many rooms as we experienced in Q1. It might be more concrete to be able to look at the higher deletion number and what actually happened in Q2, the higher deletion guidance we've given you is based on what we anticipate in Q3 and Q4. The Dubai hotels you referenced are not in the Q2 numbers because they were not de-flagged until July 31st. That will be a Q3 number. We're anticipating, in Q3 and Q4, based on discussions under way as much as some decisions that have already been made and implemented, that for a mix of reasons we're going to see higher deletions. We've tried to call out product quality is certainly a piece of it and we are being tougher on that.

Another point that we have called out is there were a number of workout discussions that Starwood had not resolved, in part simply because of the pendency of our deal, or the sale of that company. Our teams have been working with owners to try and get those resolved. Those discussions sometimes lead to hotels leaving the system as opposed to staying in. The only last thing I'd say, I think -- and I don't want to be Pollyanna-ish about this -- when you look at something like what happened in Dubai, we are confident that each of the three brands we had represented there will be replaced with product we can be very proud of in that market in the fairly near term.

Felicia Hendrix -- Barclays Capital, Inc. -- Analyst

Okay, that's helpful. But, for modeling purposes, are you more comfortable in 2019 with that five number or with where you've been more recently?

Arne M. Sorenson -- President and Chief Executive Officer

We don't have a '19 number for you right now. We haven't built our '19 budget. I do think the deletions at 2% are likely to go back down into that 1-1.5% range. You should not view 2% as being the new expectation.

Felicia Hendrix -- Barclays Capital, Inc. -- Analyst

Okay. Thank you.

Operator

Your next question is from David Katz with Jefferies.

David Katz -- Jefferies & Co. -- Analyst

Good morning. I think we've covered the unit growth discussion fairly well. But, I want to address an issue. We've always looked at the Marriott brand and where it sits in the hierarchy with Sheraton and Westin and the degree to which those are either overlapping or bumping against each other in the development community. Can you give us a little color around how that is progressing? I know there was some repositioning around Sheraton early on.

Arne M. Sorenson -- President and Chief Executive Officer

I hope I understand your question, David. We have Marriott, Sheraton, Westin, JW Marriott, and Delta all in the upper upscale full-service space. Those brands come from two different legacy portfolios and they were often competing head to head. Now, each of those brands would've said that they were better than the competitor's brand's in the same space. They're all now part of ours. If what you're getting at is how do we essentially target each of those brands to minimize both the customer confusion and overlap, that's what our brand teams are hard at work at. And they're hard at work at it with our owner and franchise partners. Sheraton is the one we've talked about the most because Sheraton has needed it the most. I think what we're seeing is good buy in from our owners and franchisees to move the average quality of the Sheraton portfolio up meaningfully from what it was when we closed on the acquisition of Starwood.

It probably, on average, will be a fraction lower than where the core Marriott brand is. But, stress the words "on average" because, depending on the market, we will have one that's positioned a little bit differently than another. By definition, full service hotels have been opened and developed over many decades and location will still feel quite important to this. That's a comment that could easily be applied to the brands that have a bit more of a lifestyle flavor, too. We have Renaissance and Meridien that are both also in this full-service space. They are each being positioned true to the heritage that they have had.

I think we're making good progress on it. You can look at this and say it's a monumental task to get these brands with some distinctions between them, but we can also look at them and say it's an extraordinary opportunity to have this kind of distribution in an economically significant space and a space which is really important for our loyalty members and our group customers to have some choice and to have the kind of product and services that we can deliver across this portfolio. So, we wouldn't want to be without any single one of these brands.

David Katz -- Jefferies & Co. -- Analyst

Great. Thank you very much.

Operator

Your next question is from Patrick Scholes with SunTrust.

Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Hi. Good morning. On the previous earnings call, you had noted that your group revenue booking pace for luxury and upper upscales was up 1-2% for the second half of this year. What is that comparable figure stand at today?

Arne M. Sorenson -- President and Chief Executive Officer

About the same.

Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Unchanged? Okay. Thank you.

Operator

Your next question is from Robin Farley with UBS.

Robin M. Farley -- UBS Securities LLC -- Analyst

Thanks. On the issue of unit growth, I was looking in the slides. When you show conversions as a percent of your pipeline, it shows about 2%. One of your other large competitors is talking about conversions being about 20% of their pipeline. I don't know if you and they are measuring it in different ways, but that's such a big difference. Do you have any thoughts on why your conversion -- are you not capturing conversions or something, or are you just measuring it differently in these two metrics?

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

Sure. Certainly, definitionally, I'm not going to pretend to know how they're included. As you know, conversions can wander into your pipeline and stay there for a year and a half if there's a meaningful amount of work that needs to be done before it opens or it can literally flip overnight. So, we're still in the land where we take a 15-20% of our room openings come from conversions, which has been consistent over the time. That's the way it's been. When you think about our autograph brand as a terrific example, and our other soft brands, it's a terrific pipeline for us. But, in those situations, they very often don't enter into the pipeline.

Robin M. Farley -- UBS Securities LLC -- Analyst

Okay. That's helpful. Thanks. When you look at guidance for the second half, adjusting for what you've previously quantified as the impact of holiday shift and the hurricane driven demand, it looks like -- even though you're giving the same RevPAR guidance for Q3 and Q4, if you back out the comps from the prior year, you may be expecting an acceleration in underlying demand in Q4. Can you give any color around what you think would be driving that?

Arne M. Sorenson -- President and Chief Executive Officer

I wouldn't interpret what we've said as expecting an acceleration. We're expecting steady as she goes. Adjusted for calendar and comparison issues, we see RevPAR for the first two quarters and last quarters of 2018 as essentially equivalent at about 2.5%.

Robin M. Farley -- UBS Securities LLC -- Analyst

I'm just thinking about Q4 versus Q3. I understand what you're saying about second half versus first half, but the impact of hurricane driven demand and holiday shift were greater in Q4. So, if we back that out, for Q4 to be at the same rate as Q3 seems like --

Arne M. Sorenson -- President and Chief Executive Officer

[Crosstalk] Well, you've got the July 4th timing in Q3 and there may be some -- I can't remember where the Jewish holidays are hitting and exactly how they're hitting. I know our pinpoint calculation for Q3 and Q4 are two-tenths of a point apart. Which, to be fair, is a smaller gap than our accuracy.

Robin M. Farley -- UBS Securities LLC -- Analyst

Okay. That's helpful. Thank you.

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

And, believe it or not, there can be also quarter-to-quarter, a day of week shift just in terms of how many Tuesday nights there are versus how many Sunday nights there are. And that also is a little bit of a factor between Q3 and Q4.

Robin M. Farley -- UBS Securities LLC -- Analyst

Okay. Thanks.

Operator

Your next question is from Bill Crow with Raymond James.

William "Bill" Crow -- Raymond James & Associates, Inc. -- Analyst

Good morning. Thanks. Arne, you mentioned in the formal remarks that something that weighed on the pipeline was taking hotels out of the pipeline that had yet to commence construction in a timely manner. I recall, back to the days when a lot of Starwood's peers were suspicious about the actual strength of their pipeline. Have you fully culled the Starwood portfolio and pulled out any of the phantom deals that were in there?

Arne M. Sorenson -- President and Chief Executive Officer

I wouldn't attribute that mostly to a legacy Starwood portfolio. I think that the 14,000 rooms we deleted in the quarter -- 13,000-14,000 -- from the pipeline, our team culls through that. I won't say that every quarter is as intense as the last one, but we were pretty aggressive in this quarter in going through and found, in both the legacy Starwood brands and legacy Marriott brands, that there were projects that had not moved fast enough. So, we pulled them out of the portfolio.

In some respects, it's a little bit bigger number than a typical quarter would be -- maybe meaningfully bigger -- but it's not a totally unusual thing to discover that the best laid plans are not coming to fruition with an owner someplace. I think, in the environment that we're in today, we've got still plenty of available capital to invest in new projects. Availability of debt probably is still plentiful, but equity requirements are maybe a little bit higher than they were before. Construction costs are a little bit higher than they were before. So, you end up with some folks who maybe signed that deal a year or two ago and they haven't moved forward. And, ultimately, they tell us they're not planning to move forward on it. We'd just as soon cull it out so we have that market to pursue with somebody else.

William "Bill" Crow -- Raymond James & Associates, Inc. -- Analyst

Great. NH hotels appears to be in play. What's your thought now that you've made such progress on the integration of Starwood? Are you ready to get back into the consolidation game or do you think Marriott's set for a while?

Arne M. Sorenson -- President and Chief Executive Officer

We will continue to look at opportunities that are available. As it relates to NH in particular, Hyatt discovered that Bill Heinecke has that company reasonably well tied up, so I don't think there's much point in talking about that one -- as if we would anyway. We'll see. We're appreciative of the way the Starwood deal has gone so far. We're also very appreciative of the way the organic growth story is going. But, as we sit here today, our share of the global hotel business is still not particularly huge. I think there is plenty of opportunity to continue to grow.

William "Bill" Crow -- Raymond James & Associates, Inc. -- Analyst

Great. Thank you.

Operator

Your next question is from Joe Greff with J.P. Morgan.

Joseph R. Greff -- J.P. Morgan Securities LLC -- Analyst

Good morning, everybody. On the deletions commentary, relative to a quarter ago, what is the amount of foregone fees relative to that incremental deletion amount? If you could, break that out between the workout category and the other category? I would imagine the incremental fees, or lost/foregone fees, are relatively low, but that could be perspective.

Arne M. Sorenson -- President and Chief Executive Officer

Leeny may have something specific on this. But, on the short-term, a hotel leaving the system, we may lose management or franchise fees. We may gain in the short-term termination fees. So, when you look at it, for example, in 2018, I'm not sure there's much impact. When you look at it longer term, there is impact. Those fees have left the system. Leeny, do you have numbers?

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

A couple of numbers for you, Joe. We certainly are diving down into how much is from workouts versus product. We don't have that level of detail. There are a whole host of different reasons. But, let's talk broadly. Termination fees have generally run call it $15-20 million a year. I think this year we're likely to be as much as double that, maybe even a little bit more based on the numbers you've heard us talk about today. From that perspective, you're clearly getting the extra kick. In the back half of the year, we did reduce our fees by close to $5 million, as a result of the terminations that we expect to have this year. That is impacting this year's earnings.

When you then think about full year '19, just to give you a broad sense of what the full year terminations could impact, if you're talking about -- again, call it very roughly 2% -- you could imagine it could impact hotel fees by a bit less than that because some of these hotels are not necessarily giving a lot of fees. So, somewhere between 1-2% of hotel fees that will be lost as a result of 2% terminations this year.

Joseph R. Greff -- J.P. Morgan Securities LLC -- Analyst

Understood. On the group pace for this year, is there a huge difference, or meaningful difference, between Starwood legacy properties and Marriott legacy properties?

Arne M. Sorenson -- President and Chief Executive Officer

No. The numbers are very close.

Joseph R. Greff -- J.P. Morgan Securities LLC -- Analyst

Great. Thank you.

Operator

Your next question is from Thomas Allen with Morgan Stanley.

Thomas Allen -- Morgan Stanley & Co. LLC -- Analyst

Good morning. First, on the G&A, you highlighted the Starwood synergies a couple of times. How is that tracking versus your $250 million guidance?

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

Sure. If you take the 2015 full year combined company adjusted for inflation, and then using our current expectation for the full year of 2018 and adjust out for the $55 million, it's pretty much close to on the button in terms of hitting the 250.

Thomas Allen -- Morgan Stanley & Co. LLC -- Analyst

Thanks. Do we think there could be incremental G&A synergies? Secondly, you touched on how you've outperformed your asset sale goal. You still own some legacy Starwood hotels. How should we think about the plans with what's left?

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

Sure. I'll do the second one first. Today, we own 14 hotels. They're split half and half between legacy MI and legacy Starwood. We are still completely devoted to our asset light model and continue to be engaged in selling those hotels. As you might imagine, they're not predictable in terms of the timing of those. That's why, as usual, we leave those out of any guidance going forward. But, we certainly are still going at it.

On the G&A synergy side, I think the low hanging fruit has definitely been taken. When we look forward, if you look at a global economy continuing to stay strong, clearly around the world you've got some wage pressure that you have to take into consideration when you look at how it might go in 2019. Certainly, when you include the $55 million this year, you can imagine that next year's G&A is lower than this year's printed number. But, also finding other big chunks of synergies is probably not realistic. But, I think continuing to be more and more efficient is. So, we will continue to go after that.

Thomas Allen -- Morgan Stanley & Co. LLC -- Analyst

Alright. Thank you.

Operator

Your next question is from Shaun Kelley with Bank of America.

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

Good morning, guys. A lot of everything's been covered here. One high-level question, but it's one that has come up some. There's been a lot of press reports recently going into the August 18th combination on the loyalty program side. Arne, could you just talk at a high level at what you're doing to keep the highest level SPG members pleased and happy through this whole process? I know it's a very difficult balancing act, but from the consumer side -- and you have to think about multiple constituents here -- that was a core asset of Starwood when you acquired them. What are you doing to keep that customer happy throughout the program and transition?

Arne M. Sorenson -- President and Chief Executive Officer

It's something we've been focused since we announced the deal. The moment we announced in the fall of '15, we heard loud and clear from the SPG loyalists, "We love this program. Make sure you protect it for us." It has been a steady set of decisions and conversations since then, which have been aimed very much at doing that. Even before we closed on Starwood, we did a couple of things to the Marriott Rewards program to send the message to the SPG loyalists that we were going to protect some of their benefits. They included things like late checkout, which have not existed on the Marriott Rewards side before.

But, rather than simply say it to the SPG folks that we're going to do it, they would believe it more if we did it on the Marriott Rewards side. There were other similar decisions we made in that timeframe. When we got to the day of closing, we also did a number of things. One of the most important was the three to one points conversion ratio between SPG and Marriott Rewards. I think the SPG members looked at it and said, "That's a very fair conversion and it does well for us. We appreciate that."

In the last nine months or so, most intensively, we have focused on the economics of the program, which very much depend on the economics of the credit cards. With better credit card deals, we have found that we can deliver great value to the elite members and the basic members of both loyalty programs. We can deliver it at reduced expense to the hotels, therefore benefiting the hotel owners and franchisees. And Marriott can experience an increase in the credit card contribution to its own P&L.

While it would be too much to say that every single Marriott Rewards or SPG member has stood up and applauded, I think what we've heard from the bulk of that community is you've made a collection of decisions that cause us to feel very good about that program. That's what we've intended and I think we'll prove it in the way that ultimately it is used by our well over 100 million members and growing.

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

To stay on the same idea, the very highest level -- the Ambassador Program for Starwood, for instance -- is the value of that guest as -- when you think about it from your side -- as high as these super frequent people? Is there some exceptional value to that guest or is everything long and extreme because they also cost more to service? How are you balancing that ultimate elite member? When we read some of the reviews and the blog, and some of the articles that have been written, that's where the most discussion about the program comes up.

Arne M. Sorenson -- President and Chief Executive Officer

We love those elite folks. The Ambassador Program we've expanded into the Marriott side of the equation, too, because we think it is exactly the right kind of step for these most valuable customers. You take this a day at a time in some ways, and we won't really have proven it until we get to one program and have it working. But, I think the decisions that have been made are exactly the right ones. The community as a whole is responding extraordinarily well to it.

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

Thank you very much.

Operator

Your next question is from Jared Shojaian with Wolfe Research.

Jared Shojaian -- Wolfe Research LLC -- Analyst

Good morning, everyone. Thanks for taking my questions. You called out the $67 million impact for the asset sales in 2018, but can you give us what the number would look like for 2019 based on the sales you've done so far this year? I'm assuming that's a net number that includes the Sheraton and Phoenix purchase. Is that right?

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

First, we haven't done our budget yet for 2019, so it would be interesting to give you an expectation for the lost revenue overall for owned lease. But, on the hotels that we're selling this year, we can get you that number. I don't have a total here. We'll work on it and get it to you.

Jared Shojaian -- Wolfe Research LLC -- Analyst

Okay. And that is a net number? It does include the Sheraton and Phoenix?

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

Yeah, no.

Jared Shojaian -- Wolfe Research LLC -- Analyst

Okay. Switching gears, on China, I think your Asia Pacific RevPAR guidance is still pretty strong. Can you comment on whether you're seeing anything in China? I know you're talking about steady as she goes throughout the entire business, but could you comment on what you're seeing, especially in light of all the trade talk right now?

Arne M. Sorenson -- President and Chief Executive Officer

We're all listening to the trade talk, and it is anxiety producing in many respects. We've seen in terms of trading conditions for open hotels in China has been very comforting and performing well. There's no sign that the trade conversation is impacting performance. And, what we've seen on the development side has equally been reassuring in that -- undoubtedly because of strong hotel performance for existing and open hotels -- there continues to be a development appetite for Chinese real estate investors.

Remember, our business is substantially Chinese in that, of the hotels we have open in China, I can think of one that is not owned by a Chinese company. So, the bulk of the economics are very much driven for the benefit of Chinese real estate investors. They are often government affiliated companies, but not always. As a consequence, we may be in a somewhat different place in a trade conversation than the typical industry. Personally, my larger fear about the trade war potential is what it could do to GDP growth in the United States and, to some extent, to the cost for construction materials in the United States and other markets around the world.

That certainly has not seemed to manifest itself yet in US GDP numbers. It probably is starting to manifest itself in terms of some materials that are used for construction, but it's early on in that process and we'll have to see how it evolves.

Jared Shojaian -- Wolfe Research LLC -- Analyst

Alright. Thank you very much.

Operator

Your next question is from Rich Hightower with Evercore ISI.

Richard Allen Hightower -- Evercore ISI -- Analyst

Good morning, everybody. I want to hit back on the Starwood sales force integration issues from the last quarter. We've heard from at least a handful of owners -- not just one or two -- and we have yet to hear from your largest owner --

Arne M. Sorenson -- President and Chief Executive Officer

That's tomorrow, presumably.

Richard Allen Hightower -- Evercore ISI -- Analyst

Exactly. At the same time, everybody's got their own version of what may have led to weakness at individual hotels during whichever period we're talking about. If you had to fairly articulate the view of those owners with respect to this issue, what do you think a fair representation really is? Just so we can get clarity on this point.

Arne M. Sorenson -- President and Chief Executive Officer

You've heard from them directly and it would be inappropriate for me to speak for all of them. I think their views are not monolithic. It's interesting to note that one of the companies we heard talk about this in their public call had never raised the performance of the hotel that they raised in the call with us. As a consequence, our team hadn't really had a chance to engage in the dialogue with them.

Generally, though -- even in what we've seen in the conversations over the last week or two -- you see that the impact is viewed as transitory. They remain supportive of the transaction. They remain supportive of the notion that this transaction is going to deliver significant value to them from topline and bottom line synergies. Even more of this concern has been raised with respect to legacy Starwood hotels. A number of those folks have said, "We still believe the legacy Starwood hotels would benefit disproportionately from Marriott and Starwood coming together."

So, we don't hear this as -- obviously, we hear something. We hear the words that are being used. We don't want to say that there can't be instances in which there is some impact or there shouldn't be conversations to make sure we understand this as well as we possibly can understand it. But, when you look at the system as a whole, we do not see it showing up in our data. We don't see it in the RevPAR index numbers. We don't see it in the RevPAR year-over-year growth numbers. We don't see it in what the customers are telling us about the way they're booking. We'll do everything within our power to make sure that continues to be the case.

In the meantime, we'll deal with the owners who have called out concerns with respect to particular hotels and say let's make sure we understand them and make whatever decision needs to be made in order to have those hotels perform as well as they can perform.

Richard Allen Hightower -- Evercore ISI -- Analyst

Got it. Thanks for that color.

Operator

Your next question is from Carlo Santarelli with Deutsche Bank.

Carlo Santarelli -- Deutsche Bank -- Analyst

Thank you. As it pertains to the deletions, if you go back to your March of 2017 Analyst Day and frame maybe the change in the magnitude of the deletions from what your expectations were at that point relative to what you're currently seeing. Is that possible?

Arne M. Sorenson -- President and Chief Executive Officer

I'm not sure it is. I think we can say that we've been talking to 1-1.5% deletions for a while. I think last year we were closer to 1% than 1.5%. So, in a sense, we were positively surprised. Maybe this is a little bit of a reversion to the mean in 2018. I'm not sure we can say much more than we already said. 1-1.5% for now -- and again, we will get to a point where we share a multiyear plan with you all again. But, until we get to next year's budget or to an analyst conference, 1-1.5% should still be your expectation for the foreseeable future.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. Thank you. On the group pace for all future periods, you stated plus 17%. That's the comparable number? Is that right?

Arne M. Sorenson -- President and Chief Executive Officer

No, no, no. That is group bookings year-to-date for all future periods.

Carlo Santarelli -- Deutsche Bank -- Analyst

Got it. Thank you very much.

Arne M. Sorenson -- President and Chief Executive Officer

But, that's bookings done in '18 for the first six months. That's not pace for all bookings from all time for future periods.

Carlo Santarelli -- Deutsche Bank -- Analyst

Understood. Thank you.

Operator

Your next question is from Vincent Ciepiel with Cleveland Research.

Vincent Ciepiel -- Cleveland Research Co. LLC -- Analyst

Thanks for taking my question. I want to touch on the Tribute portfolio for booking homes in London. As of the last call, you were only a few weeks in. Now that you have a few more months, what are your early learnings there? Would it surprise you to have other cities outside of London on that platform by this time next year?

Arne M. Sorenson -- President and Chief Executive Officer

Yeah. As a reminder, we launched, about 90-120 days ago, a pilot in London under the name Tribute Homes. It is a relatively small pilot in the sense that there are about 200 homes that are connected to our system. They are bigger than studio apartments. They're bigger than hotel rooms. They're whole home products. It's a product which feels different to us from both what we have in the traditional hotel space and what the typical product is that a number of the home sharing companies are focused on.

We wanted to provide loyalty linkage and a set of services that would make it more predictable and more consistent with a brand promise, if you will. Not just key delivery services, but housekeeping services and design and décor services which are delivered by our partner at London. We think it allows us to distinguish a little bit, both in terms of size and quality, from the average home sharing thing. Small pilot, though.

So far, it's gone great. Our loyalty customers seem to like it. Not surprisingly, it's a predominantly leisure buy. Because it's a leisure buy, it's a bit longer stay than we anticipated. So, the stay we're experiencing is closer to five nights on average. And the customer feedback has generally been quite good. We don't have anything to announce yet in terms of other markets, but it's certainly something we'll take a look at.

Vincent Ciepiel -- Cleveland Research Co. LLC -- Analyst

Great. Thanks. What percentage of the bookings are currently made through Marriott.com, SPG.com, and the apps combined when you roll it all up? And, as you move to one platform, are you expecting that that percent, which I think is growing each year, to accelerate in growth?

Arne M. Sorenson -- President and Chief Executive Officer

If you add property --

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

[Crosstalk] Three-quarters.

Arne M. Sorenson -- President and Chief Executive Officer

-- to it, it's about three-quarters of our business coming through our channels. Maybe 70% would be our channel. So, that would be calling the hotel, our call centers, and our digital platforms -- the dot-com sites or apps. I think we've seen over the last number of years that the digital channels have grown substantially. The voice channels, including our own, have declined. We're likely to see those trends continue. We do think, for share wallet reasons, having all the hotels show up on one platform -- that we should be able to drive enhanced growth in the digital platforms because everything will be there. We don't have a forecast for you on where those numbers are going, though.

Vincent Ciepiel -- Cleveland Research Co. LLC -- Analyst

Thanks.

Operator

And your final question is from Stuart Gordon with Berenberg.

Stuart Gordon -- Joh. Berenberg, Gossler & Co. KG (United Kingdom) -- Analyst

Good morning. Net unit growth, there are two sides of the equation. Everybody has been focused on the deletions. I was wondering, on the growth side, you've materially increased both the number and proportion of rooms and construction. Is there an opportunity for you to do better than the 285,000-300,000 gross -- the number you gave to the capital market?

Arne M. Sorenson -- President and Chief Executive Officer

Well, there are a few questions in there. I would say that we've been positively surprised by how strong the development pipeline is. This is a conversation we've been having for a few years, but we would have thought that US signings and approvals probably would not be as strong as they are today. We thought that 2016 was the peak organic growth. It probably still is peak organic growth. I don't think necessarily we're going to see the numbers move up from there. But, our partners in the United States continue to want to do more deals with us and that's been quite good.

The world is a big place. Some markets continue to perform quite robustly. Some are essentially more in the development space, either for economic reasons or for geopolitical reasons. You look at all those averages and compare it to what we shared at the analyst conference. We would say that deletions might be just a little bit higher than what we had before, but we'd have to go back and look at those three years. And, openings have shifted back by a quarter or two and that's because of length of the construction cycle. I think that latter factor is more likely to cause us to miss that 285,000- to 300,000-room number we used a year and a half ago. When was that conference?

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

March of '17.

Arne M. Sorenson -- President and Chief Executive Officer

More likely to miss it than we are to exceed it.

Stuart Gordon -- Joh. Berenberg, Gossler & Co. KG (United Kingdom) -- Analyst

Okay. Thanks. You've given some color before on the number of credit card customers you've got. Could you give us an update on how that has improved with the better terms and cross selling opportunities you have as a larger group?

Arne M. Sorenson -- President and Chief Executive Officer

Well, it is still new in the process. JP Morgan Chase has rolled out the new Visa card and the customer response has been great. They're in market. AmEx will not roll out it's new product until later this month. I think roughly the end of August -- I don't precisely remember the date. So, we don't have the customer reaction there yet. But, all things considered, we feel quite good about the strength of the program and the likelihood that it's going to grow in the future.

Alright. Thank you very much for your time and attention on the call. We appreciate your interest in Marriott and look forward to welcoming you into our hotels, wherever your travel takes you.

...

Operator

Thank you, Ladies & Gentlemen. This does conclude today's conference call. You may now disconnect.

Duration: 90 minutes

Call participants:

Arne M. Sorenson -- President and Chief Executive Officer

Kathleen Kelly "Leeny" Oberg -- Executive Vice President and Chief Financial Officer

Smedes Rose -- Citigroup Global Markets, Inc. -- Analyst

Robin M. Farley -- UBS Securities LLC -- Analyst

David Katz -- Jefferies & Co. -- Analyst

David James Beckel -- Sanford C. Bernstein & Co. LLC -- Analyst

Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Jared Shojaian -- Wolfe Research LLC -- Analyst

Stuart Gordon -- Joh. Berenberg, Gossler & Co. KG (United Kingdom) -- Analyst

Vincent Ciepiel -- Cleveland Research Co. LLC -- Analyst

Felicia Hendrix -- Barclays Capital, Inc. -- Analyst

William "Bill" Crow -- Raymond James & Associates, Inc. -- Analyst

Harry Croyle Curtis -- Instinet LLC -- Analyst

Shaun C. Kelley -- Bank of America Merrill Lynch -- Analyst

Joseph R. Greff -- J.P. Morgan Securities LLC -- Analyst

Richard Allen Hightower -- Evercore ISI -- Analyst

Thomas Allen -- Morgan Stanley & Co. LLC -- Analyst

Carlo Santarelli -- Deutsche Bank -- Analyst

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