Ladies and gentlemen, thank you for standing by, and welcome to Marriott International Second Quarter 2014 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to Arne Sorenson, President and Chief Executive Officer. Please go ahead, sir.

Good morning, everyone. Welcome to our second quarter 2014 earnings conference call. Joining me today are Carl Berquist, Executive Vice President and Chief Financial Officer; Laura Paugh, Senior Vice President, Investor Relations; and Betsy Dahm, Senior Director, Investor Relations. As always, before we get into the discussion of our results, let me first 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 events -- 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, July 30, 2014, and will not be updated as actual events unfold. You can find the reconciliation of non-GAAP financial measures referred to in our remarks on our website at www.marriott.com/investor. Our second quarter results were outstanding. Both worldwide comparable hotel RevPAR and gross room additions increased 6%. Carl will address our RevPAR performance. I want to talk today about why we place such a significant focus on growing distribution. While broad distribution obviously drives sales, it also allows us to leverage our sales and marketing resources, our branding efforts, our reservation system and our frequent traveler program. It provides our customers with greater choices and better products wherever they choose to travel, and it delivers greater efficiency and profitability to our owners, all of which drive higher shareholder value. In recent years, we ramped up our efforts to drive distribution. We decentralized our development organization, opening local development offices to get closer to the market, to customers and to our owners. We added resources. Since 2009, we increased our number…

Thanks, Arne. For the 2014 second quarter, worldwide systemwide RevPAR increased 5.8%, the high end our expectation. Adjusting for certain items I'll discuss in a minute, diluted earnings per share totaled $0.71 compared to our guidance of $0.63 to $0.68, a $0.06 peak to the midpoint of our guidance. Roughly $0.01 to $0.02 came from better fee revenue, primarily incentive fees. Roughly $0.01 to $0.02 came from the owned, leased and other line with better-than-expected branding fee and about $0.03 to $0.04 came from G&A, largely due to the favorable timing of development spending and lower bad debt expense. Adjusted operating income rose 21% in the quarter and our adjusted operating margin increased to 47%. We adjusted our second quarter reported earnings per share with 3 items totaling $0.07: a $7 million pretax foreign currency loss associated with the Venezuelan Bolivar on the G&A line; a $15 million pretax impairment on the depreciation, amortization and other expense line; and an $11 million pretax litigation reserve on the equity line. In North America, second quarter systemwide RevPAR increased 6%, at the high end of our expectations, a particularly impressive performance given the roughly one point negative impact of the shifting Easter holiday. Systemwide room rates increased nearly 4%. Our RevPAR growth in the Western U.S. was strong. We saw improving trends in many East Coast markets. Our company-operated hotels in Miami, Fort Lauderdale, Tampa, Nashville and Boston, all reported RevPAR growth in the second quarter, north of 9%. RevPAR in Greater Washington exceeded our expectations, rising 2%. RevPAR in Greater New York increased over 3% despite significant supply growth in the city. Group demand is looking very good. Marriott hotel group bookings made in the second quarter for the next 12 months increased 8%. Meetings that took place in the second…

[Operator Instructions] Your first question comes from the line of Robin Farley of UBS.

It was a great quarter versus your guidance. I wonder if you could give us a little color, though. When you look at North American RevPAR, up 6%, and we look at Smith Travel data for the U.S. up about 8%. So I don't know if it was the Canadian currency that caused the kind of seemingly relative underperformance, or if you could just give a little color around that.

You're right. There's a lot of things that go into this, Robin. The Smith Travel numbers are not a measure of comp store performance. They're essentially a measure of the industry in a given market. And obviously, that is probably the biggest apples-to-oranges comparison. Now beyond that, of course, you get geographic distribution and some other things which go with it. We use one market to illustrate that. in New York, we had comp RevPAR growth for our hotels of plus 3.5%. If we included non-comp hotels that are in New York, in our system, our RevPAR number would've been plus 7.4%. Smith Travel was about plus 5%, if I remember correctly -- 5.5%. And Smith Travel, essentially, is doing a measure, which is more like that 7.4% measure to us. That's not a fair measure for us to look at the way our hotels are performing, because if you include non-comp hotels that are ramping dramatically from prior year performance, simply because they're brand-new, we're not really getting a fair measure of what comp hotels are doing in the market. And so that is a big distinction between what we report and what I think most of the other companies in the industry report compared to what Smith Travel reports. We've talked about this in prior calls, of course. We look at RevPAR index as being the most important measure of the relative performance of our hotels. That is a rolled up figure. Each hotel has got a typically comparative group of about 5 hotels that it measures its performance against. And when we look at our brands in the United States, every brand we have is posting higher RevPAR index year-to-date than prior year. So we think we're performing extremely well and in no way losing ground to the industry.

That is helpful. I wonder, do you have a rough estimate of what your non-comp RevPAR growth will be? In other words, the New York City example was helpful. I mean, do you have a ballpark for what your U.S. would've looked like on that basis?

I don't at my fingertips, but that may be something we can provide you supplementary later.

Next question comes on the line of Nikhil Bhalla of FBR. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: Just a question on the franchised select service space, so your RevPAR on the company-operated numbers -- on the company-operated stores was a little bit higher but still below where STR was. And then the franchised hotels themselves, non-company-operated, was even lower. So can you just give us some color around what the dynamics may be?

Yes, I mean, you can notice that you have that aspect in the limited service and you have the opposite in the full service. So I think the Marriott brand, for example, the franchisees posted higher RevPAR than we did with the managed portfolio. And the biggest factor in both of those circumstances will be geographic distribution. We are relatively richer, both with total distribution and with managed distribution in markets like Washington, and our franchisees are. And so that has an impact there. That is less pronounced in the limited service space. And as a consequence, you can see a shift in the other direction. Nikhil Bhalla - FBR Capital Markets & Co., Research Division: So in the select service space, your numbers were just quite below where STR was. I think STR, for the quarter, was around 8.5% in the upscale space. Your -- so franchise hotels were more in the 6-plus percent range. Was there a specific geography, like Washington, D.C., that impacted those numbers in or around that? Or is it just something else going on?

Well, it would be both inclusion of the Smith Travel numbers of our non-comp hotels, which we do not include in our numbers, as well as geographic distribution and differences in the portfolio. Again, I think RevPAR index is a much more telling indication of performance than the headline comparison of our brand numbers to the Smith Travel's industry numbers.

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

So Arne, we've seen the limited service segment outperform luxury and upper upscale all year, both industry-wide, and certainly within your portfolio. Just wondering what do you think is driving the outperformance and how sustainable do you think it is?

Well, I think -- good question. We look at those figures and do not interpret them as relative weakness in luxury and upper upscale. And I think that's probably the first thing to point out. Luxury business seems to be strong, seems to be growing. Index is growing. We see that both in the U.S. numbers and global numbers. I think beyond that, you kind of -- probably a couple of things which tend to drive this a little bit. In Q2, we have our group business, for example, growing only 1%, and we suspect that group business would've been more like 5% if Easter hadn't been in Q2. That has a disproportionate impact on group business compared to transient and leisure business. That's going to tend to impact the higher end more. Obviously, the Courtyards and the limited service hotels have some group business, but it tends to be more of a leisure quality, to the extent they have it and they have much less than a service hotel has. And then lastly, I think we see in the Courtyard brand, as an example, some great momentum that is coming from the completion of the renovations of that brand's lobbies. I think we've got 800-or-so that have been redone. Customers are reacting very well to that, and we are getting some outsized growth. I suspect that to be as good as well.

Okay, that's helpful. And Carl, regarding your capital return, you increased that by $100 million. Just wondering what drove that. And I know it's likely a board decision, but what's the likelihood of further increases later in the year? I'm greedy, I'm greedy, sorry.

All right. It's just, as we look at our model and as we look at our capital allocation strategy and policies, we've been pretty disciplined on that, and we look at what we're going to invest over the next 12 to 24 months. We look at growth in EBITDA, our debt capacity, and we look at -- with that stronger EBITDA and our disciplined leverage, we had an additional capacity, and that's why we moved it up a bit.

Your next question comes from the line of Ryan Meliker of MLV & Co. Ryan Meliker - MLV & Co LLC, Research Division: Just a couple of quick things. One, I was hoping you could talk about your 3Q outlook for North America of plus 6% to 8%, you mentioned that group is expected to be stronger in 3Q. Is that driving that uptick in North America for your expectations? Or is it that the transient is coming in much stronger than maybe it was last quarter?

Well, I think it's more really about group than transient, although in saying that, let's recognize that transient was strong in the second quarter and we expect it to continue to be strong in Q3 and Q4. I'm just trying as I answer this to pull out, to make sure that I have the right data in front of me. We see almost 10%, 9% and change group bookings over and above last year's bookings for Q3. And Q4 is meaningfully weaker on the group side. So as we sit here today, we would guess that in North America, RevPAR will be higher in Q3 than in Q4 because of group. Now we'll see how group fills in for Q4 between now and when Q4 actually takes place, but that group business is a big reason for the 6% to 8% guidance that we've given for Q3. Ryan Meliker - MLV & Co LLC, Research Division: Okay, that's helpful. And then just one other quick question. So your incentive management fees were up a very robust, I think, 28% in the quarter. You mentioned -- Carl mentioned in his initial commentary that we're looking at high-teens incentive management fee growth this year. I guess, how do we think about what was driving that robust 28% growth in the quarter? Is it this RevPAR? Is it the fact that -- does North American RevPAR up 6% to 8% in 3Q drive outsized incentive fee growth in 3Q as well? How should we think about things going forward this year and then into next year in terms of what a run rate growth rate is for those IMF?

Sure. If you think about the second quarter, I think you had, as we mentioned, we had more hotels paying incentive fees in the second quarter. We also had timing. You have the seasonality in the second quarter, so you have some timing in those incentive fees as well, which would drive benefit in the second quarter, and that -- that'll come back as we go through the rest of the year, bring it down to mid to high teens. I think those were the 2 big major items to think about. Ryan Meliker - MLV & Co LLC, Research Division: And is mid to high teens a good run rate at RevPAR levels like what you're seeing this year?

Yes, and in fact, at the investor conference on September, we'll talk a little more about our expectations of incentive fees over the next couple of years to give you a little more feel for how we see the long-term playing out relative to incentive fees with all the growth. If you think about, in the second quarter, the 40% of our hotels that we're paying, the gross from last year's number, which I think was 30%...

34%.

34%. International hotel is still about 2/3 of them are paying. They were 2/3 last year. Now we have more international hotels, and we have more physical hotels paying. There's about 2/3 of them, whereas the domestic hotels, more of those started paying as we continue to grow our EBITDA, so to speak. But we'll give you more color on that at the investor conference, what we see over the next 3, 4 years.

The next question comes from the line of Shaun Kelley of Bank of America.

Carl, maybe just a follow-up on incentive management fee, not to steal your thunder for September, but the question we get a lot is just where are we in the progress of some of the limited service portfolios? And I think, it was already mentioned, you are starting to see some very strong limited service RevPAR growth. So are we starting to get to the point where margins on some of those portfolios are reaching that owners' priority level and starting to kind of get into the money on incentive management fees? Or we're just not quite there yet?

No. In the second quarter, we had an increase in the number of incentive -- a number of limited service hotels paying versus last year, albeit it was not a big increase. You got to remember, each hotel, the amount being paid is that significant. But as you have growth and as RevPAR continues to grow, those margins expand. And as I said, Shaun, we'll get into some of that for you in September at the meeting.

Okay. And I guess my follow-up or second question would just be, Arne, in the prepared remarks, you talked a little bit about some of your commitment behind SG&A and your continued focus on cost. It seems like you did a good job of finding some offsets to the currency impact. Could you just talk a little bit about -- I mean, as you look forward to more like 2015 and 2016, do you think that a lower overall run rate is possible as you focus on development, but maybe find other areas to kind of -- to maybe not trim, but certainly remain pretty disciplined on? Or how do you see SG&A trending in a slightly longer period of time?

Yes. There is obviously, aspects of our business, which are quite complicated and are hard to describe real pithily. But the financial model is very, very simple, and really, that is about driving same store performance, which is really RevPAR growth. Obviously, margins is impactful as it relates to incentive fees. It's driving unit growth. It's getting leveraged through G&A, and then it's using the balance sheet and the capital that we've got available for it. And we have a very simple focus on each of those 4 things, including G&A, and we are absolutely committed to growing G&A lower, meaningfully lower, than we're growing the fee line, so we get that P&L leverage and the impact of that on earnings per share. We'll give you a 3-year model when we're together in September, and that 3-year model is going to tell you how we think, under a range of scenarios, those 4 things perform, how does RevPAR perform, what happens with EBIT growth, what kind of range for G&A kind of growth and what are we going to do with all the money that we produce between now and the end of that 3-year period.

Your next question comes from the line of Harry Curtis of Nomura.

Carl, were going to have one more go at the incentive management fee question. What percentage of your hotels that aren't paying an incentive management fee today would be paying if you got another 5% to 7% lift in RevPAR?

I don't have that in front of me, Harry, so I don't want to hazard a guess on that. So I think we'll just wait until September and give us the opportunity to give you this information in context about the overall model, the 3-year model, and what we see.

Then on to the next question. You commented about the outlook for group, and up 5%. I wasn't sure if that was for '14 or '15.

Carl had in his prepared remarks one statistic. I'll give you a second one. But in Q2, group business booked for the next 12 months, so that will be Q3 and Q4 this year and Q1 and Q2 next year. It was up about 8%. Business booked also in Q2 for months 13 to 24, so that would be the last 2 quarters of 2015 and the first 2 quarters of 2016, is also up about 8%, a sign that the group bookings are really coming in at a very healthy pace.

So if we parse -- I'm sorry. Go ahead, Laura.

S Booking pace for 2014, over 2013, is up 5%.

Okay, that was the number. So my question was, then, if we extend that out to '15, how would that pace and position look like for '15?

Right now, pace for '15, it's really early to be computing pace for '15. But it's about 5% single digits. Clearly, mid-single-digit, maybe a little lower right now, but right about that neighborhood. It's early.

And it typically accelerates as we get closer, correct?

Hopefully.

Hopefully.

Our next question comes from the line of Thomas Allen of Morgan Stanley.

So it's interesting that you're optimistic on your RevPAR being driven by group, as 3Q is typically a slower period for conventions and group bookings. So can you give us any color on why that's changing and maybe on any metrics you can give us on kind of what percentage of room nights are you expecting to be group in 3Q '14 versus the other quarters this year, and then what's the typical seasonality behind -- typical seasonality between quarters?

I think your comments are generally right. I mean I think obviously, Q3 is July, August and September. July and August are not huge group months. Now remember, group is sometimes corporate group, which tends to be much weaker in the summer than it would be in the spring or the fall. So you've also got association business, some of which is more value-focused, and as a consequence, you pick up some of that, even in the summertime months. But you're right that group tends to be less in those 2 months. September is a fine month for group business. It's a fine month for business travel as well. I mean it's back-to-school for that age, but it's also back to work in many respects for the rest of our society and economy. And just as -- I said this before, but group is strong with that 9-plus percent increase from last year for Q3. But transient is strong as well. And both of those things, we think, will be contributing to that 6% to 8% growth in Q3.

Just quickly on your leverage position, there's a big debate, with longer periods, around what kind of what the right leverage for them is. Just curious for an update on where you feel you are in the eyes of rating agencies versus where you want to be? And also just with the addition of apartment sales, do you have plans for the use of the cash there once you do realize it?

Sure. When we look at our leverage, as you know, we're a rated company BBB, and we wanted to stay rated. That keeps us in the commercial paper market, gives us a very efficient capital structure to finance our business. So we manage part of our capital allocation strategy to maintain that rating. To do that, we believe a 3 to 3.25 adjusted debt to adjusted EBITDA. As we've talked about before, the rating agencies adjust for leases, guarantees, et cetera and adjust the EBITDA accordingly, and they published that calculation, you can get it. So we managed to that. But we may float up and down between 3 and 3.25 and all that, depending on where we are in the cycle and all that. But we're pretty disciplined to stay within that area.

And do you have an estimate for where you are right now?

We're probably right around that 3%.

3x.

Yes, 3x, not 3%. 3x. And then your question on the proceeds for the condos that we're selling down in Miami, we don't have anything on our '14 guidance relative to the cash related to those condos. We expect the total sellout to generate somewhere between $150 million and $175 million in that neighborhood. Those things will close as we sell them probably well into '15. And cash is fungible relative to how we use the cash, so that will go into our model relative to our capital allocation strategy, no different than any other recycled cash.

I suspect we've had conversations not just with all of you in these calls, but many of you in smaller settings, probably 90% of you over the last decade or so, about leverage levels and returning capital to shareholders. And I think, for us, it's a very steady approach. Carl talked about the 3 to 3.25x debt to EBITDA. We have always factored in lease exposure and guarantee exposure as we do that calculation. We have, in the fullness of time and the cyclicality of our business, looked at whether or not we could bring those leverage levels down as we get farther in an economic recovery or economic growth period. We've reflected, I think, with many of you, about whether or not we could have, in hindsight, been better about not buying back stock in the final year or 2 of the growth cycle, so that we have more dry powder in the down cycle. And I think, in all fairness, we do not pretend to have expertise around timing the market or timing the economic cycle. In lots of respects, that's your job more than it is ours, particularly when it comes to a broader economic aspect as opposed to our business by itself. And so what that means is, I think that we think at 3 to 3.25x, it leaves us plenty of flexibility, even in the downturn, so you look at how far RevPAR fell in 2009, our 3 to 3.25 drove us only about up to 3.8, 3.9.

Yes, about 4.

And within -- because of the cash we produce in our business, we were quickly back down to 3 and 3.25 and we've put the company in absolutely no pressure, and we are extremely comfortable that at those leverage -- levels, virtually, anything that we've seen in the past, if they were thrown at us again, we think we'll be well equipped to handle. And we are a bit more bullish at this point than we've been at prior times because we no longer have a capital-intensive timeshare business, which has volatility that the lodging business, particularly in base and franchise fees, does not have. But many of you have already tried to talk with us about incentive management fees this morning, and we know why you're interested in that. But one of the things that's interesting observation is our fee stream is much less risky today than it was in 2007 or in 2000 because the percentage of fees that are being contributed from U.S. incentive fees of our total fees is much lighter than it was before. And so we think even in a similar RevPAR environment that we suffered in 2009 or in 2002 as an example, our performance, P&L performance and cash flow performance should be less volatile than it's been before, and that gives us even more comfort that are 3 to 3.25, we are exactly levered the way we should be. And we'll continue to use the leverageability that comes from growing EBITDA and the cash flow that comes from recycling capital investments and from annual cash flow contribution of our business gets returned to our shareholders, to the extent it's not able to be invested in value-enhancing investments that we could think.

Your next question comes from the line of Patrick Choles of SunTrust.

You considered this quarter and the last quarter, that's a slowdown in the fourth quarter on group. And you briefly mentioned that it's possibly from the holidays. I'm just curious if there's anything else you think might be going on there, because I can understand, with the timing of holidays in October, but I don't see it in November and December and even in January. Why the big deceleration in group RevPAR in the fourth quarter?

Yes, there is a different timing of Hanukkah, obviously, and that has some impact, but it's not massive. We talked about this internally, and one of the jokes I like to say when the team says it's a holiday pattern, I say, okay, that's because Christmas is on the 25th this year. Obviously, that holiday does not change. I think to some extent, there is a -- over time, you get some strong months and some weak months, and there's not a very strong explanation for it. There's not a very clear explanation for it. I think it would be concerning if we weren't seeing the kinds of bookings that we saw in Q2 and even prior quarters. And what those bookings tell us is, fourth quarter is a little bit of a sport. It's been weak for a while. It's a little bit weaker. I suspect, even though we may reclaim some ground, that we'll see that group business is, when the fourth quarter is over, was weaker in the fourth quarter than the third quarter, and that'll have some impact on RevPAR. But I think we'll head into next year and we'll have strong quarters and the group business that we're booking now will show up and we'll do really well.

I definitely agree with you there. We always see sort of ebbs and flows in the up cycle here, and now it seems that fourth quarter is sort of the bit of softness and bouncing back.

Your next question comes from the line of Steven Kent of Goldman Sachs.

So 2 questions. First, can you just broadly discuss the need for sliver equity in mass financing to get hotels to join the system? And I guess the reason I'm asking is the Atlantis was surprising that you put capital into that one to get it to join the Autograph because the Autograph is such a great way to get independence to join, so it was a little odd to me to see that, and I just wanted to understand a little bit more on that, how big that could become, other -- whether you'd be doing other deals like that. And then separately, just because people have been asking about it, what about including the RevPAR index for the brands on a go-forward basis, maybe revisiting that issue, I think years ago you used to include it.

Yes. Well, let me sort of put the simplest answer on the Atlantis first. If we could do for them, we would do more of them gladly. We're thrilled with this deal. It is not just a big property which will be profitable for us, but it's a great property, and many of our customers, I think, will love having that as part of the system, whether it is to go and pay for a room or whether it's to redeem reward points and stay there. And obviously, that transaction happened in the context of a refinancing of that hotel by its owner, and we were glad to be able to participate in it with a $100 million mez loan, which will be repaid over time, and we'll retain a franchise contract which separately delivers strong returns to us.

I think it's a good example of the strength of our balance sheet and how we can be opportunistic to take advantage of once-in-a-lifetime type opportunities out there, because we have that flexibility and that power in our capital structure.

Right. I think generally, on the more typical deal, we're not seeing a meaningful shift in the need to put in capital. Now we do have some competitors who are trying to build brands that have smaller distribution, that are being aggressive about throwing capital around to try and influence the growth aims that they've got, and in some individual circumstances, we lose a deal or 2 because we're not willing to do that. But fortunately, in the broader scheme of things, our brands have got significant strength and they really -- the franchise contracts, particularly see first limited service hotels in the United States, by and large, require very, very little capital. With respect to your suggestion that we print RevPAR index every quarter, we'll keep our ears open on that. But I don't think we'll make any commitments at this point in time, but that may be something that we should be talking about as an industry.

Next question comes from the line of Joe Greff of JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: Most of my questions have been asked and answered. Just on your -- Carl, with respect to your high teens you have in '14 incentive management fee growth, if we were to bifurcate that between North America and international, what would those year-over-year growth rate targets look like?

Growth rate would be higher on domestic than it would be on international. In part, that's simply a function of the fact that domestic has been hit much harder than international has, because that's more volatile. And Carl was asked before about limited service contribution as an example. We're still getting less than 20% of our limited services managed hotels that are paying us incentive fees. And over time, hopefully, we'll see that, that grows. I don't have that year-over-year percentage growth, but I'm sure it's 20-plus in domestic land, and it would be probably be a little like low teens in international land.

Right. Joseph Greff - JP Morgan Chase & Co, Research Division: And then when you look at the top 3 drivers for North American incentive management fee growth for this year, how critical, how important has been the group? Was it really the group is not yet contributing much to that growth?

I think transient has been stronger, year-to-date stayed and paid, compared to group, which is what you should expect at this stage of the cycle. And so I think it would be probably not accurate to say that our incentive fee growth that we've experienced year-to-date is disproportionately driven by group. On the other hand, group has got an F&B contribution that transient doesn't have, and so that group growth is really important, probably it's about equal weighting, I guess.

The next question comes from the line of Bill Crow of Raymond James. William A. Crow - Raymond James & Associates, Inc., Research Division: Arne, I wanted to focus on unit growth, but before I do that, could you just clarify how much of your group business has accounted for Gaylord branded properties today?

What do you mean? William A. Crow - Raymond James & Associates, Inc., Research Division: Well, if you just looked at group as a total, how much is actually conducted within the Gaylord brand?

I don't know. But just to be clear, I'm not sure it's really relevant. So when you look at our bookings this year, we talked about bookings being up 8% in Q2 for the next 12 months and another 8% for 2013 to 24 months out, those are comp hotel measures, so that's not a measure of all of the group revenue we put in, even on a bigger hotel base than we did a year ago, but it's essentially looking at -- taking that precise circumstance, we're probably looking at the Marriott hotel and resort brand in the United States. Comp hotels last year plus comp hotels this year, and that number increased by 8%. William A. Crow - Raymond James & Associates, Inc., Research Division: Got you. Yes, I think you had mentioned the Marriott branded hotels within that group commentary.

Right. William A. Crow - Raymond James & Associates, Inc., Research Division: Okay. On the -- just help us understand on the new unit growth, how have your return expectations changed this cycle compared to last cycle, the time to achieve that sort of return hurdle that you're looking for. Anything that's changed?

Well, generally not. I mean, we try and pay attention to the sort of fee contribution we get from hotels that are entering into our system, and obviously, we make more the higher the rate or the higher the RevPAR for any given hotel. So a Ritz-Carlton room is going to give us more dollars and fees that a FairField room, to state the obvious. But when we look at the sort of average contribution across the system, international versus domestic, new hotels versus old hotels, by and large, we're seeing a pretty steady contribution. We might be, depending on the stage of the cycle and the stage of the content, we might be getting a little bit more limited service growth in some markets than full-service growth. That will have an impact. But when you look at limited service versus existing limited service or new full-service versus existing full-service, we see a pretty steady contribution. And I think in terms of the ramp of hotels, that's heavily driven by demand trends in a given market. I was fascinated to see that a market like Shanghai, where we have 21, I think, comp hotels open, almost 8,200 hotel rooms in that city alone. Carl's comments indicated this, but RevPAR in Q2 in Shanghai for us was up over 12%. RevPAR index for our hotels was up almost 6 points in the quarter. But that, in Shanghai, I was looking into the details of the data, we opened a Marriott hotel in Pudong East last year in January. That hotel ramped and was over its fair share within 5 months. And we're now only 18 months into the performance of that hotel, and it's almost at 2x its fair share in the market. And that's a function both, I think, of our brand strength and our sales and marketing strength, but I think it's also function of the demand that's in that market. William A. Crow - Raymond James & Associates, Inc., Research Division: Right. So finally, Arne, any subtle changes just to pipeline, the makeup of the pipeline, less China, more U.S.; less limited service, more full service, anything like that, that we should be aware of?

Not dramatic. I mean, you look at -- obviously Protea, as that comes through the pipeline and now open to the system, skews the Q2 numbers significantly towards more international and towards more Africa or Middle East and Africa than prior numbers. But when you look at our 215,000 room pipeline, we're about 50% U.S. and about 50% international. And our view is that the world is rich with opportunities. We see Asia continuing to grow, a big market that's continuing to grow quite well, but we would no sooner write off the United States than -- we would fight against writing off the United States because we think there's great growth that's available here. We do -- we are pleased to see that the new brands we've started over the last 5 years or so are really gaining traction. We talked a lot about AC Hotels in the U.S. in last quarter's call, but that continues to grow extremely well. Autograph is growing particularly in Europe and the United States extremely well. MOXY is off to a great start. Additionally, we've now got 10 hotels in the pipeline, and we think that the relaunch of that brand is going very well. And so there may be a shift a little bit, or maybe a disproportionate amount of the growth is coming from this luxury and lifestyle brands that we've added, but we're really gratified to see that.

Your next question comes from the line of Jeff Donnelly of Wells Fargo.

Actually, just building on maybe Bill Crow's question on unit growth. And you might have touched on this, but was the driver behind the increased outlook in net room additions driven by transactions, like Protea? Or does it speak to maybe some component of it coming from a more confident outlook or a robust outlook for a new construction or conversion in this year and potentially longer?

Protea was in the numbers before. But if you think about Atlantis, Atlantis is 3,500 rooms, so that's 1/2 of 1% by itself.

And so it's more acquisitions than it is necessarily sort of increased demand?

It's -- I mean, it's both. You look at -- we held out this number of 290 hotels and 46,000 rooms signed year-to-date. It is a really powerful number. And the momentum that our development team has got is, I think, building as we speak. And so the Atlantises are sort of big and lumpy, and the Proteas are big and lumpy, in a good way. I don't mean that to sound negative. But you've also got, in the steady-state development space, good, really positive momentum.

And actually on Atlantis, do you feel that the affiliation with Cosmopolitan in Vegas and now, Atlantis, might open the door for you a little wider to consider more affiliations in the casino business or even a casino company out right?

I don't know. We are -- we've probably got a dozen casino hotels in our system when you look around the world. We have never been unwilling to do that. I think, obviously, we can deliver the most value at those hotels in guest room and group. We are not a casino company, and so to the extent, somebody's looking to us for a book of gamers or deep insight in the consumer business, I'm not sure that we would -- that's something we can offer. But if the hotels are good and they meet our brand standard and we can deliver real value on the group side and the transient room side, we'd be happy to take more.

And just one last question, just concerning Venezuela. I recognize you have just, I think, 3 hotels there. But did you have much cash in Venezuela? And how much of an impact do you think it's going to have to you in future quarters?

I think going forward, it's still going to be lumpy. They have -- that economy is very hyperinflationary economy. And every day, you read a little more about it and there are struggles and everything. We're not building a significant amount. I think our total investment after this revaluation is about $10 million right now, and -- or as of the end of the second quarter. And so obviously, that has risk, depending on what the government does and everything. We're managing close, but it's not a significant investment, so to speak.

The next question comes from Carlos Santarelli of Deutsche Bank.

Most of my questions have been answered. But I was wondering if you could just maybe briefly walk through some of the G&A changes in the quarter and how exactly and what will be shifting into the second half?

Sure. I think we have some timing items and development costs. In the second half, we have some integration costs that will be incurred relative to Protea. But probably 2 major items that we have in the second half timing that are different than the first half.

For Q3 versus Q4.

Yes, more towards -- yes, you're right, Laura, especially the integration cost.

Understood. And just on the dollar basis, some of the timing, some of the lower-than-expected spending, would you guys be able to quantify that for the 2Q period?

You mean, where? Well, it's more in the administrative departments, what we call a direct and indirect administrative. We just didn't incur as much as we thought we were. It wasn't a specific item so to speak, but more of just, as you look at your run rate, what you're incurring.

Your final question comes from the line of Chris Jones of TAG.

Just a quick question here, Arne. Just in the space of overall consumer, lodging has been sort of a relative bright spot, and certainly, RevPAR continues to be very strong here. So with that as a backdrop, how do you -- what sort of confidence do you have, that as ADR sort of continue to rise here, that we're going to continue to see sort of strong trends in demand that customers aren't going to sort of cry uncle here, as prices continue to push up, particularly in North American market?

Yes, I mean, there's no real sign of that kind of resistance. Now it's important to keep in mind that when we drive rates, so when we report a 3% or 4% ADR increase, that is both a like-for-like increase in rate, but it's also significantly a mix shift. And so one of the things we've seen, particularly mid-week, which is business travel time, is a shift of volume away from contract and special corporate business towards RAC rated business. And that mix drives a significant increase in the reported ADR for a hotel, even if the RAC rate itself has not changed very much. Now if you're a special corporate customer who no longer has special corporate access because you're too low rated before in a given hotel, you might not like that. As an example, not especially corporate one, but take government business as an example. In many markets, with the way occupancy has move, government rates are no longer available in full-service hotels in those markets. And as a consequence, government travelers have to end up at a Courtyard or Residence Inn or maybe they end up in a suburban Marriott. And that's sort of a natural part in the cyclicality of our business. I think we'll continue to see that rate growth will remain steady. And on some level, we talked about this in the last few quarters, at some level, we've been really surprised and very pleased to see occupancy continue to grow. We're at very high occupancy levels. And the higher they get, actually, the more ability we'll have to drive rate as opposed to last year.

At this time, there are no further questions. Mr. Sorenson, are there any closing remarks?

All right. Thank you, all. We appreciate your time and attention this morning and look forward to welcoming you soon into our hotels as you travel, and hope to see many of you in September for our analyst conference. Enjoy the rest of the summer.

Bye-bye.

Thank you for participating in Marriott International Second Quarter 2014 Earnings Conference Call. You may now disconnect.