On Thursday, Marriott International, Inc. Class A (NYSE:MAR) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
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Smedes Rose – Keefe, Bruyette & Wood: I just wanted to make sure I understand – the $20 million of lowered fee, I just want to be sure, it’s sounds like about nearly half of that reflects the FX and the balance is just due to slower results at international properties, is that correct?
Carl T. Berquist – EVP and CFO: Well, I think it’s – to be fair, it’s going to be less than that for FX. That FX number is a year-over-year number that we used, that $9 million, and the $20 million that we are talking about is basically compared to our prior guidance, so those are not quite apples-to-apples. But FX relicensing fees – relicensing fees by and large are driven by the sale of existing franchised hotels and that volume has been down a bit lower than we expected. A little bit softer REVPAR with some fine-tuning around individual assets and then the other thing that we didn’t talk about in our prepared remarks, the sale of the executive stay business and with that the elimination of that is mid-single digit number, millions of dollars on a full-year basis I think.
Smedes Rose – Keefe, Bruyette & Wood: When did you guys start to see the trend line for international business start to, I guess, deteriorate and therefore have to bring down your – the full year outlook for international, and does this bring into question the three-year outlook that you presented specifically for China just in June?
Arne M. Sorenson – President and CEO: We think on the second question it does not bring into question on a multiyear basis at all, and let’s stress the words we use in the prepared remarks. This is not a thematic reduction but driven by individual market dynamics. So we’ve talked about Shenzhen and Sanya as an example. When we look at the forecast that rolled out through our system here for the end of this quarter, what we saw was individual stories and every time we looked at it to see whether there was a theme, we really did not see a global slowdown theme, but what we saw was some individual markets, particularly some luxury hotels that were impacted either by supply or by some other specific market conditions.
Steven Kent – Goldman Sachs: Just on REVPAR for this quarter, I just want to understand your full-service and specifically your Marriott Hotel & Resorts brands. The Brand reported 6% REVPAR in the second quarter. That’s a deceleration from the 7% in Q1 and it’s also below Smith Travel results for the second quarter. So I understand the (DC) weighting but (DC) actually improved first quarter to second quarter. The group side should start to act better and now we’re talking about deal management issues as to one of the reasons why you didn’t get pricing. And I guess I’m trying to understand if there is more of a structural issue here or we’re back to having that question because you’re now below Smith Travel again?
Arne M. Sorenson – President and CEO: Yeah, and again Smith Travel, just as a reminder, is a really blunt instrument. So Smith Travel you’re looking at a broad number of hotels distributed across the United States in a way which is different from our distribution, and even though we are big, differences in our distribution between the industry as a whole and the performance at individual assets can have an impact on those numbers. So we feel great about the way our sales offices are working and the way our brand is resonating with customers. So I think the best indication of that is the data we’ve given you on group business and on special corporate, which are up substantially and there is no sign at all that we’ve got a problem associated with them. When we look at our headline REVPAR number and we look at the Smith Travel number, and again we can run as many theoretical adjustments to this as you can imagine, but the ones that are most significant to us are DC, which is about a point difference and couple of big hotels where renovations extended longer and had a more disruptive impact than we thought, and that’s probably about another half a point or so to the MHR number, maybe even seven-tenths of a point to the MHR number in Q2.
Steven Kent – Goldman Sachs: Just as a follow then on another issue that I’m concerned about that might be structural is incentive fees. (Incentive fee) growth was 12% in the quarter. We were looking for more like 20%. The REVPAR unit level profits don’t seem to be translating into that incentive fee growth, and I guess again, is there some kind of structural issue here where either the Courtyard or other property management contracts have been revised so much that we’re just not going to see the profit increases and those incentive increases as we would’ve seen in previous cycles, and it does seem like more of them are paying incentive fees, but the amount – dollar amount just doesn’t seem as much as we used to or we would’ve expected at this point?
Arne M. Sorenson – President and CEO: I think we still expect in full year 2012 that our incentive fees will be growing about 20%, and I think that’s a more important growth rate number to look at than what we put on the books in any particular quarter. Obviously, a few million dollars more of incentive fees in Q2 would give you a materially different year-over-year growth rate for that quarter and few a million dollars is easy to miss by because of stories in individual markets. There is not really anything happening here with the structure, I thought it was interesting that in Q2 our domestic incentive fees were higher than our international incentive fees, which is I think maybe the first we have seen that in a while and looks good and feels good, we know that the managed Residence Inn and courtyard portfolios in the United States have been under a massive renovation program, which as we get beyond that and those hotels no longer suffered from the renovation impact themselves, but ramp from that I think that’ll be helpful both in terms of the REVPAR performance of those assets, but also hopefully we’ll get back towards incentive fees at some point in time in the future. It’s a steady as she goes sort of comment from us at this point.
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