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Marriott International Reports Fourth Quarter 2018 Results

BETHESDA, Md., Feb. 28, 2019 /PRNewswire/ --

HIGHLIGHTS

  • Fourth quarter reported diluted EPS totaled $0.92, compared to $0.31 in the year-ago quarter.  Fourth quarter adjusted diluted EPS totaled $1.44, a 32 percent increase over fourth quarter 2017 adjusted results;
  • Full year 2018 reported diluted EPS totaled $5.38, a 40 percent increase from prior year results.  Full year 2018 adjusted diluted EPS totaled $6.21, a 48 percent increase over full year 2017 adjusted results;
  • Fourth quarter 2018 comparable systemwide constant dollar RevPAR rose 1.3 percent worldwide, 4.0 percent outside North America and 0.2 percent in North America;
  • Full year 2018 comparable systemwide constant dollar RevPAR rose 2.6 percent worldwide, 5.5 percent outside North America and 1.5 percent in North America;
  • The company added more than 80,000 rooms during 2018, including over 9,900 rooms converted from competitor brands and nearly 36,400 rooms in international markets;
  • In 2018, Marriott signed agreements for a record 125,000 rooms, increasing the company's worldwide development pipeline to a record 478,000 rooms as of year-end, including nearly 23,000 rooms approved, but not yet subject to signed contracts;
  • Fourth quarter reported net income totaled $317 million, compared to $114 million in the year-ago quarter.  Fourth quarter adjusted net income totaled $497 million, a 23 percent increase over prior year adjusted results;
  • Adjusted EBITDA totaled $864 million in the quarter, a 10 percent increase over fourth quarter 2017 adjusted EBITDA;
  • Full year 2018 reported net income totaled $1,907 million, a 31 percent increase compared to prior year results.  Full year 2018 adjusted net income totaled $2,201 million, a 38 percent increase over prior year adjusted results;
  • Adjusted EBITDA totaled $3,473 million for full year 2018, an 11 percent increase over full year 2017 adjusted EBITDA;
  • For full year 2018, Marriott repurchased 21.5 million shares of the company's common stock for $2.8 billion, including 3.0 million shares for $336 million during the fourth quarter.

Marriott International, Inc. (MAR) today reported fourth quarter 2018 results.

Arne M. Sorenson, president and chief executive officer of Marriott International, said, "Our team delivered solid results in 2018 even as we worked to complete the integration of Starwood Hotels & Resorts.  Our rooms grew by nearly 5 percent, net; worldwide revenue per available room, or RevPAR, increased nearly 3 percent; general and administrative expenses rose only 1 percent; and adjusted earnings per share surged 48 percent.  We ended the year with a record 1.3 million rooms operating under our 30 leading lodging brands.  During the year, we reduced operating costs for owners, increased the value of our loyalty program for customers, and improved guest "intent to recommend" scores.

"We continue to grow our market share of industry rooms.  According to STR, our worldwide market share of rooms at year-end 2018 stood at 7 percent, while our share of rooms under construction totaled a leading 20 percent.  We expect rooms growth will accelerate, as we signed contracts for a record 125,000 rooms in 2018 and our development pipeline increased to a record 478,000 rooms.  Select-service signings were especially strong in North America, particularly for Residence Inn, Fairfield Inn & Suites, and Courtyard.

"In the fourth quarter, North America systemwide RevPAR increased 0.2 percent and worldwide systemwide RevPAR increased 1.3 percent.  North American RevPAR growth in the quarter was impacted by labor strikes in eight North American markets and weaker than expected transient demand for the industry.

"We expect North America RevPAR will increase 1 to 2 percent in the first quarter, reflecting the impact of the government shutdown offset by a favorable calendar comparison.  Outside North America, RevPAR growth is expected to moderate slightly in the first quarter due to the slower economic growth outlook in the Asia Pacific region.

"For the full year 2019, we expect North America and worldwide RevPAR growth of 1 to 3 percent and rooms growth of roughly 5.5 percent, net.  This should yield an increase in total fee revenue of 5 to 7 percent, despite foreign exchange headwinds.  It should also enable us to return at least $3 billion to shareholders in share repurchases and dividends in 2019, even assuming no asset sales for the year.

"We are pleased that, just over two years since the acquisition, the integration of Starwood is nearly complete.  With the announcement of our new loyalty brand, Marriott Bonvoy, just a few weeks ago, customers are enjoying the meaningful benefits of the combined company.  I am very grateful for all the hard work and dedication of Marriott associates around the world who made the integration happen."




Fourth Quarter 2018 Results

In the 2018 first quarter, the company adopted Accounting Standards Update 2014-09.  Please see the "Accounting Update" section of this release for more information.

Marriott's reported net income totaled $317 million in the 2018 fourth quarter, compared to 2017 fourth quarter reported net income of $114 million.  Reported diluted earnings per share (EPS) totaled $0.92 in the quarter, compared to reported diluted EPS of $0.31 in the year-ago quarter.

Fourth quarter 2018 adjusted net income totaled $497 million, a 23 percent increase over 2017 fourth quarter adjusted net income of $403 million.  Adjusted diluted EPS in the fourth quarter totaled $1.44, a 32 percent increase from adjusted diluted EPS of $1.09 in the year-ago quarter.  See page A-3 for the calculation of adjusted results.  Adjusted results exclude merger-related costs and charges, cost reimbursement revenue, and reimbursed expenses.  Adjusted results for the 2018 fourth quarter also exclude adjustments to the provisional tax charge resulting from the U.S. Tax Cuts and Jobs Act of 2017 (Tax Act).  Adjusted results for the 2017 fourth quarter also exclude the Avendra gain and the provisional tax charge resulting from the Tax Act.

Base management and franchise fees totaled $743 million in the 2018 fourth quarter, an 8 percent increase over base management and franchise fees of $688 million in the year-ago quarter.  The year-over-year increase in these fees is primarily attributable to unit growth, higher credit card branding fees and higher RevPAR.

Fourth quarter 2018 incentive management fees totaled $167 million, a 4 percent decrease compared to incentive management fees of $174 million in the year-ago quarter.  The year-over-year decrease largely reflects the impact of labor strikes, unfavorable comparisons in the Middle East, and unfavorable foreign exchange, partially offset by new units and higher net house profit at most hotels.

Owned, leased, and other revenue, net of direct expenses, totaled $88 million in the 2018 fourth quarter, compared to $89 million in the year-ago quarter.  Compared to the year-ago quarter, results were negatively impacted by $14 million from hotels sold during or after the fourth quarter of 2017.  That negative impact was mostly offset by higher termination fees year-over-year.

Depreciation, amortization and other expenses totaled $62 million in the 2018 fourth quarter, compared to $53 million in the year-ago quarter.  The $9 million increase largely reflects the unfavorable comparison to a $7 million adjustment related to Legacy-Starwood IT systems in the year-ago quarter.

General, administrative, and other expenses for the 2018 fourth quarter totaled $242 million, compared to $270 million in the year-ago quarter.  The year-over-year decrease largely reflects cost synergies, partially offset by the $7 million expense in the 2018 fourth quarter for the company's supplemental investments in its workforce.  Those supplemental investments totaled $51 million for full year 2018.

In the 2018 fourth quarter, the company incurred $28 million of expenses and recognized $25 million of insurance proceeds related to the data security incident it disclosed on November 30, 2018.  The $3 million of net expenses are reflected in either the Reimbursed expenses or Merger-related costs and charges lines of the Statements of Income, which have been excluded from adjusted net income, adjusted EPS and adjusted EBITDA.

Gains and other income, net, totaled $3 million, compared to $657 million in the year-ago quarter.  Gains and other income, net, in the 2017 fourth quarter reflected the $659 million Avendra gain.

Interest expense, net, totaled $88 million in the fourth quarter compared to $58 million in the year-ago quarter.  The increase is largely due to higher interest rates and debt balances, and lower interest income.

Equity in earnings for the fourth quarter totaled $8 million, compared to $11 million in the year-ago quarter.  The year-over-year decrease largely reflects the $5 million gain on the sale of a hotel in a North American joint venture in the 2017 fourth quarter.

The reported provision for income taxes totaled $28 million in the fourth quarter, an 8.1 percent reported effective tax rate, compared to $920 million in the year-ago quarter, an 89 percent reported effective tax rate.  The 2017 fourth quarter reported tax provision reflects a $563 million charge related to the enactment of the Tax Act.  The lower reported effective tax rate in the 2018 fourth quarter largely reflects a lower corporate tax rate as a result of the Tax Act and favorable discrete items.




For the fourth quarter, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $864 million, a 10 percent increase over fourth quarter 2017 adjusted EBITDA of $789 million.  Compared to the prior year, adjusted EBITDA for the fourth quarter of 2018 was negatively impacted by $12 million from sold hotels.  See page A-11 for the adjusted EBITDA calculations.

Fourth Quarter 2018 Results Compared to November 5, 2018 Guidance

On November 5, 2018, the company estimated gross fee revenues for the fourth quarter would be $900 million to $910 million.  Actual gross fee revenues of $910 million in the quarter were at the high end of the estimate, largely reflecting greater than expected credit card branding fees and fees from new units.

Marriott estimated an adjusted effective tax rate of 19.2 percent for the 2018 fourth quarter.  The adjusted provision for income taxes totaled $106 million in the fourth quarter, a 17.6 percent effective rate.  The tax rate was lower than expected partially due to favorable discrete items.

The company estimated adjusted EBITDA for the fourth quarter would total $847 million to $862 million.  Actual adjusted EBITDA of $864 million reflects unit growth, stronger than expected credit card branding fees and lower than expected general, administrative, and other expenses.




Selected Performance Information

The company added 146 new properties (23,942 rooms) to its worldwide lodging portfolio during the 2018 fourth quarter, including The Westin Maldives Miriandhoo Resort, The Abu Dhabi EDITION and the W Costa Rica – Reserva Conchal.  Twenty-two properties (5,188 rooms) exited the system during the quarter.  At year-end, Marriott's lodging system encompassed 6,906 properties and timeshare resorts with more than 1,317,000 rooms.

The company added 494 new properties (80,255 rooms) to its worldwide lodging portfolio during 2018.  One hundred and seven properties (21,176 rooms) exited the system during the year.

At year-end, the company's worldwide development pipeline totaled 2,882 properties with more than 478,000 rooms, including 1,150 properties with approximately 214,000 rooms under construction and 141 properties with nearly 23,000 rooms approved for development, but not yet subject to signed contracts.

In the 2018 fourth quarter, worldwide comparable systemwide constant dollar RevPAR increased 1.3 percent (a 0.1 percent increase using actual dollars).  North American comparable systemwide constant dollar RevPAR increased 0.2 percent (flat using actual dollars), and international comparable systemwide constant dollar RevPAR increased 4.0 percent (a 0.3 percent increase using actual dollars) for the same period.

Worldwide comparable company-operated house profit margins were flat in the fourth quarter, reflecting solid cost controls and synergies from the Starwood acquisition offset by the impact of modest RevPAR growth and higher wages.  House profit margins for comparable company-operated properties outside North America rose 20 basis points and North American comparable company-operated house profit margins decreased 20 basis points in the fourth quarter.

For full year 2018, worldwide comparable systemwide constant dollar RevPAR increased 2.6 percent (a 2.9 percent increase using actual dollars).  North American comparable systemwide constant dollar RevPAR increased 1.5 percent (a 1.6 percent increase using actual dollars), and international comparable systemwide constant dollar RevPAR increased 5.5 percent (a 6.5 percent increase using actual dollars) for the same period.

Worldwide comparable company-operated house profit margins increased 40 basis points for full year 2018, largely due to higher RevPAR, solid cost controls, and synergies from the Starwood acquisition.  House profit margins for comparable company-operated properties outside North America rose 70 basis points and North American comparable company-operated house profit margins increased 10 basis points over 2017.

Balance Sheet

At year-end, Marriott's total debt was $9,347 million and cash balances totaled $316 million, compared to $8,238 million in debt and $383 million of cash at year-end 2017.

In November 2018, the company issued $550 million of floating rate Series Y Senior Notes due in 2020, $350 million of Series Z Senior Notes due in 2023 with a 4.15 percent interest rate coupon, and $300 million of Series AA Senior Notes due in 2028 with a 4.65 percent interest rate coupon. The company expects to use the net proceeds for general corporate purposes.

Marriott Common Stock

Weighted average fully diluted shares outstanding used to calculate both reported and adjusted diluted EPS totaled 345.7 million in the 2018 fourth quarter, compared to 369.9 million shares in the year-ago quarter.

The company repurchased 3.0 million shares of common stock in the 2018 fourth quarter for $336 million at an average price of $113.85 per share.  For full year 2018, Marriott repurchased 21.5 million shares for $2.8 billion at an average price of $130.67 per share.  Year-to-date through February 28, the company has repurchased 2.4 million shares for $300 million at an average price of $126.31 per share.  The company suspended repurchases for a time due to the data security incident and the loyalty accounting matter described below.

On February 15, 2019, the board of directors increased the company's authorization to repurchase shares by 25.0 million for a total authorization of 33.3 million shares as of February 28, 2019.

Accounting Update

In the 2018 fourth quarter, the company identified certain immaterial errors related to loyalty program accounting, which resulted in the understatement of cost reimbursement revenue, net of reimbursed expenses, in the first three quarters of 2018.  The company will provide revised information for each of the first three quarters of 2018 in its 2018 Annual Report on Form 10-K (Form 10-K), which the company expects to file with the SEC on March 1, 2019.  The revised amounts will increase net income by $99 million for the first three quarters of 2018 combined.  The revisions do not impact adjusted EPS, adjusted EBITDA nor the company's cash position.

In the 2018 first quarter, the company adopted Accounting Standards Update 2014-09 (the new revenue standard), which changes the GAAP reporting for revenue and expense recognition for franchise application and relicensing fees, contract investment costs, the quarterly timing of incentive fee recognition, and centralized programs and services, among other items.  While the new revenue standard results in changes to the reporting of certain revenue and expense items, Marriott's cash flow and business fundamentals are not impacted.  A discussion of revenue recognition changes can be found in the 2017 Form 10-K the company filed on February 15, 2018, which is available on Marriott's Investor Relations website at http://www.marriott.com/investor.

The company has elected to use the full retrospective method in the adoption of the new revenue standard.  As such, the company's financial statements in SEC filings will show prior year quarterly and full year results as if the new revenue standard had been adopted on January 1, 2016.  The company furnished a Form 8-K on July 25, 2018, which presented the effect of adoption of the new revenue standard on Marriott's 2017 quarterly and full year unaudited results of operations and related financial measures.

In the first quarter of 2019, the company plans to adopt Accounting Standards Update 2016-02 (the new lease standard), which brings substantially all leases onto the balance sheet, including operating leases.  While the company is still assessing the potential impact of this new accounting standard on its financial statements, it anticipates no impact to the Income Statements or Statements of Cash Flows.  A discussion of the expected impact of the lease changes can be found in the company's 2018 Form 10-K, which the company expects to file on March 1, 2019.




2019 Outlook

The following outlook for first quarter and full year 2019 does not include merger-related costs and charges, cost reimbursement revenue or reimbursed expenses, which the company cannot accurately forecast and which may be significant.

For the 2019 first quarter, Marriott expects comparable systemwide RevPAR on a constant dollar basis will increase 1 to 2 percent in North America, 2 to 4 percent outside North America, and 1 to 3 percent worldwide.

The company assumes first quarter 2019 gross fee revenues will total $885 million to $905 million, a 5 to 7 percent increase over first quarter 2018 gross fee revenues of $845 million, including an estimated $9 million of unfavorable foreign exchange.  The company anticipates first quarter 2019 incentive management fees will decrease at a low single-digit rate over first quarter 2018 incentive management fees of $155 million due to unfavorable foreign exchange and the ongoing impact of reduced bookings resulting from the fourth quarter 2018 labor strikes.

Marriott expects first quarter 2019 owned, leased, and other revenue, net of direct expenses, could total $50 million.  This estimate reflects lower year-over-year termination fees of roughly $25 million but does not reflect any asset sales that may occur in the first quarter of 2019.

The company assumes first quarter 2019 general, administrative, and other expenses could total $215 million to $220 million, a 11 to 13 percent decline from first quarter 2018 expenses of $247 million.  First quarter 2018 general, administrative, and other expenses included a $35 million expense for the company's supplemental investments in its workforce.

The company expects first quarter 2019 diluted EPS could total $1.30 to $1.35, down 3 percent to up 1 percent compared to first quarter 2018 adjusted diluted EPS of $1.34.  First quarter adjusted 2018 results include $53 million ($0.11) of asset sale gains in gains and other income, net.  First quarter 2019 guidance does not assume any asset sale gains in gains and other income, net.

Marriott expects first quarter 2019 adjusted EBITDA could total $820 million to $845 million, a 6 to 10 percent increase over first quarter 2018 adjusted EBITDA of $770 million.  This estimate does not reflect any asset sales that may occur in the first quarter of 2019.  See page A-12 for the adjusted EBITDA calculation.

For the full year 2019, Marriott expects comparable systemwide RevPAR on a constant dollar basis will increase 1 to 3 percent in North America, 2 to 4 percent outside North America, and 1 to 3 percent worldwide.

Marriott anticipates net room additions of roughly 5.5 percent for full year 2019, which assumes deletions of 1 to 1.5 percent.

The company assumes full year 2019 gross fee revenues will total $3,830 million to $3,910 million, a 5 to 7 percent increase over 2018 gross fee revenues of $3,638 million, including $15 million to $20 million of unfavorable foreign exchange.  Full year 2019 estimated gross fee revenues include $410 million to $420 million of credit card branding fees, compared to $380 million for full year 2018.  The company anticipates full year 2019 incentive management fees will increase at a low single-digit rate over 2018 full year incentive management fees of $649 million.

Marriott expects full year 2019 owned, leased, and other revenue, net of direct expenses, could total $280 million to $290 million.  This estimate reflects stronger results at owned and leased hotels, offset by $45 million to $50 million of lower year-over-year termination fees.  This outlook for full year 2019 does not reflect any asset sales that may occur during the year.

The company assumes full year 2019 general, administrative, and other expenses could total $910 million to $920 million, a 1 to 2 percent decrease from full year 2018 expenses of $927 million.  Full year 2018 general, administrative, and other expenses included a $51 million expense for the company's supplemental investments in its workforce, which is not expected to repeat in 2019.

The company expects full year 2019 diluted EPS could total $5.87 to $6.10, a 2 to 5 percent decline from 2018 adjusted diluted EPS of $6.21.  Full year adjusted 2018 results include $183 million ($0.44) of asset sale gains in gains and other income, net and $65 million ($0.21) of asset sale gains in equity in earnings.  Full year 2019 guidance does not assume any asset sale gains in either gains and other income, net, or equity in earnings.

Marriott expects full year 2019 adjusted EBITDA could total $3,615 million to $3,715 million, a 4 to 7 percent increase over 2018 adjusted EBITDA of $3,473 million.  See page A-13 for the adjusted EBITDA calculation.



First Quarter 20191

Full Year 20191

Gross fee revenues

$885 million to $905 million

$3,830 million to $3,910 million

Contract investment amortization

Approx. $15 million

Approx. $60 million

Owned, leased and other revenue, net of direct expenses

Approx. $50 million

$280 million to $290 million

Depreciation, amortization, and other expenses

Approx. $55 million

Approx. $215 million

General, administrative, and other expenses

$215 million to $220 million

$910 million to $920 million

Operating income

$645 million to $670 million

$2,915 million to $3,015 million

Gains and other income

Approx. $0 million

Approx. $5 million

Net interest expense

Approx. $95 million

Approx. $385 million

Equity in earnings (losses)

Approx. $10 million

Approx. $25 million

Earnings per share - diluted

$1.30 to $1.35

$5.87 to $6.10

Effective tax rate

21 percent

 23 percent

1The outlook provided in this table does not include merger-related costs and charges, cost reimbursement revenue or reimbursed expenses, which the company cannot accurately forecast and which may be significant.



The company expects investment spending in 2019 will total approximately $500 million to $700 million, including approximately $225 million for maintenance capital.  Investment spending also includes other capital expenditures (including property acquisitions), new mezzanine financing and mortgage notes, contract acquisition costs, and equity and other investments.  Assuming this level of investment spending and no additional asset sales, at least $3 billion could be returned to shareholders through share repurchases and dividends in 2019.

Marriott International, Inc. (MAR) will conduct its quarterly earnings review for the investment community and news media on Friday, March 1, 2019 at 10:00 a.m. Eastern Time (ET).  The conference call will be webcast simultaneously via Marriott's investor relations website at http://www.marriott.com/investor, click on "Events & Presentations" and click on the quarterly conference call link.  A replay will be available at that same website until March 1, 2020.

The telephone dial-in number for the conference call is 706-679-3455 and the conference ID is 4365548.  A telephone replay of the conference call will be available from 1:00 p.m. ET, Friday, March 1, 2019 until 8:00 p.m. ET, Friday, March 8, 2019.  To access the replay, call 404-537-3406.  The conference ID for the recording is 4365548.

Note on forward-looking statements:  This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including our RevPAR, profit margin and earnings outlook and assumptions; the number of lodging properties we expect to add to or remove from our system in the future; our expectations regarding the estimates of the impact of new accounting standards; our expectations about investment spending and tax rate; and similar statements concerning anticipated future events and expectations that are not historical facts.  We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those we identify below and other risk factors that we identify in our most recent quarterly report on Form 10-Q or annual report on Form 10-K.  Risks that could affect forward-looking statements in this press release include changes in market conditions; changes in global and regional economies; supply and demand changes for hotel rooms; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; the extent to which we can continue to successfully integrate Starwood and realize the anticipated benefits of combining Starwood and Marriott; the extent to which we experience adverse effects from the data security incident; changes in tax laws in countries in which we earn significant income, including guidance that may be issued by U.S. standard-setting bodies on how provisions of the Tax Act will be applied or otherwise administered; and changes to our estimates of the impact of the new accounting standards.  Any of these factors could cause actual results to differ materially from the expectations we express or imply in this press release.  We make these forward-looking statements as of February 28, 2019.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Marriott International, Inc. (MAR) is the world's largest hotel company based in Bethesda, Maryland, USA, with more than 6,900 properties in 130 countries and territories. Marriott operates and franchises hotels and licenses vacation ownership resorts. The company's 30 leading brands include: Bulgari®, The Ritz-Carlton® and The Ritz-Carlton Reserve®, St. Regis®, W®, EDITION®, JW Marriott®, The Luxury Collection®, Marriott Hotels®, Westin®, Le Méridien®, Renaissance® Hotels, Sheraton®, Delta Hotels by MarriottSM, Marriott Executive Apartments®, Marriott Vacation Club®, Autograph Collection® Hotels, Tribute Portfolio™, Design Hotels™, Gaylord Hotels®, Courtyard®, Four Points® by Sheraton, SpringHill Suites®, Fairfield Inn & Suites®, Residence Inn®, TownePlace Suites®, AC Hotels by Marriott®, Aloft®, Element®, Moxy® Hotels, and Protea Hotels by Marriott®.  The company now offers one travel program, Marriott Bonvoy™, replacing Marriott Rewards®, The Ritz-Carlton Rewards®, and Starwood Preferred Guest®(SPG).  For more information, please visit our website at www.marriott.com, and for the latest company news, visit www.marriottnewscenter.com and @MarriottIntl.

IRPR#1

Tables follow

 

MARRIOTT INTERNATIONAL, INC.

PRESS RELEASE SCHEDULES

TABLE OF CONTENTS

QUARTER 4, 2018

































































Consolidated Statements of Income - As Reported









A-1

















Non-GAAP Financial Measures












A-3

















Total Lodging Products














A-4

















Key Lodging Statistics














A-7

















Adjusted EBITDA














A-11

















Adjusted EBITDA Forecast - First Quarter 2019










A-12

















Adjusted EBITDA Forecast - Full Year 2019










A-13

















Explanation of Non-GAAP Financial and Performance Measures






A-14


 

 


MARRIOTT INTERNATIONAL, INC.


CONSOLIDATED STATEMENTS OF INCOME - AS REPORTED


FOURTH QUARTER 2018 AND 2017


(in millions except per share amounts, unaudited)






















As Reported


As Reported 10


Percent





Three Months Ended


Three Months Ended


Better/(Worse)





December 31, 2018


December 31, 2017


Reported 2018 vs. 2017



REVENUES









Base management fees


$                                           288


$                                           284


1



Franchise fees 1


455


404


13



Incentive management fees


167


174


(4)



Gross Fee Revenues


910


862


6



Contract investment amortization 2


(14)


(16)


13



Net Fee Revenues


896


846


6



Owned, leased, and other revenue 3


409


443


(8)



Cost reimbursement revenue 4


3,984


3,962


1



  Total Revenues


5,289


5,251


1












OPERATING COSTS AND EXPENSES









Owned, leased, and other - direct 5


321


354


9



Depreciation, amortization, and other 6


62


53


(17)



General, administrative, and other 7


242


270


10



Merger-related costs and charges


91


59


(54)



Reimbursed expenses 4


4,151


4,091


(1)



  Total Expenses


4,867


4,827


(1)












OPERATING INCOME


422


424


-












Gains and other income, net 8


3


657


(100)



Interest expense


(94)


(72)


(31)



Interest income 


6


14


(57)



Equity in earnings 9


8


11


(27)












INCOME BEFORE INCOME TAXES


345


1,034


(67)












Provision for income taxes


(28)


(920)


97












NET INCOME


$                                           317


$                                           114


178












EARNINGS PER SHARE









  Earnings per share - basic


$                                          0.93


$                                          0.31


200



  Earnings per share - diluted


$                                          0.92


$                                          0.31


197












Basic Shares


341.9


365.1





Diluted Shares


345.7


369.9






















1

Franchise fees include fees from our franchise agreements, application and relicensing fees, licensing fees from our timeshare, credit card programs, and residential branding fees.




2

Contract investment amortization includes amortization of capitalized costs to obtain contracts with our owner and franchisee customers, and any related impairments, accelerations, or write-offs.




3

Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, and other revenue.


4

Cost reimbursement revenue includes reimbursements from properties for property-level and centralized programs and services that we operate for the benefit of our hotel owners. Reimbursed expensesinclude costs incurred by Marriott for certain property-level operating expenses and centralized programs and services.




5

Owned, leased, and other - direct expenses include operating expenses related to our owned or leased hotels, including lease payments and pre-opening expenses.


6

Depreciation, amortization, and other expenses include depreciation for fixed assets, amortization of capitalized costs incurred to acquire management, franchise, and license agreements, and any related impairments, accelerations, or write-offs.




7

General, administrative, and other expenses include our corporate and business segments overhead costs and general expenses.


8

Gains and other income, netincludes gains and losses on the sale of real estate, the sale or impairment of joint ventures and investments, and results from other equity investments.




9

Equity in earnings include our equity in earnings or losses of unconsolidated equity method investments.


10

On January 1, 2018, we adopted ASU 2014-09. This column reflects our recast 2017 results under the new accounting standard.






A-1



 

 


MARRIOTT INTERNATIONAL, INC.


CONSOLIDATED STATEMENTS OF INCOME - AS REPORTED


FOURTH QUARTER YEAR-TO-DATE 201810AND 2017


(in millions except per share amounts, unaudited)






















As Reported10


As Reported 11


Percent





Twelve Months Ended


Twelve Months Ended


Better/(Worse)





December 31, 2018


December 31, 2017


Reported 2018 vs. 2017



REVENUES









Base management fees


$                                        1,140


$                                        1,102


3



Franchise fees 1


1,849


1,586


17



Incentive management fees


649


607


7



Gross Fee Revenues


3,638


3,295


10



Contract investment amortization 2


(58)


(50)


(16)



Net Fee Revenues


3,580


3,245


10



Owned, leased, and other revenue 3


1,635


1,752


(7)



Cost reimbursement revenue 4


15,543


15,455


1



  Total Revenues


20,758


20,452


1












OPERATING COSTS AND EXPENSES









Owned, leased, and other - direct 5


1,306


1,411


7



Depreciation, amortization, and other 6


226


229


1



General, administrative, and other 7


927


921


(1)



Merger-related costs and charges


155


159


3



Reimbursed expenses 4


15,778


15,228


(4)



  Total Expenses


18,392


17,948


(2)












OPERATING INCOME


2,366


2,504


(6)












Gains and other income, net 8


194


688


(72)



Interest expense


(340)


(288)


(18)



Interest income 


22


38


(42)



Equity in earnings 9


103


40


158












INCOME BEFORE INCOME TAXES


2,345


2,982


(21)












Provision for income taxes


(438)


(1,523)


71












NET INCOME


$                                        1,907


$                                        1,459


31












EARNINGS PER SHARE









  Earnings per share - basic


$                                          5.45


$                                          3.89


40



  Earnings per share - diluted


$                                          5.38


$                                          3.84


40












Basic Shares


350.1


375.2





Diluted Shares


354.2


379.9






















1

Franchise fees include fees from our franchise agreements, application and relicensing fees, licensing fees from our timeshare, credit card programs, and residential branding fees.




2

Contract investment amortization includes amortization of capitalized costs to obtain contracts with our owner and franchisee customers, and any related impairments, accelerations, or write-offs.




3

Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, and other revenue.


4

Cost reimbursement revenue includes reimbursements from properties for property-level and centralized programs and services that we operate for the benefit of our hotel owners. Reimbursed expensesinclude costs incurred by Marriott for certain property-level operating expenses and centralized programs and services.




5

Owned, leased, and other - direct expenses include operating expenses related to our owned or leased hotels, including lease payments and pre-opening expenses.

6

Depreciation, amortization, and other expenses include depreciation for fixed assets, amortization of capitalized costs incurred to acquire management, franchise, and license agreements, and any related impairments, accelerations, or write-offs.




7

General, administrative, and other expenses include our corporate and business segments overhead costs and general expenses.


8

Gains and other income, netincludes gains and losses on the sale of real estate, the sale or impairment of joint ventures and investments, and results from other equity investments.




9

Equity in earnings include our equity in earnings or losses of unconsolidated equity method investments.


10

Results for the 2018 full year reflect the correction of certain immaterial errors of cost reimbursement revenue and reimbursed expenses in the 2018 first, second, and third quarters. For more information, see our Annual Report on Form 10-K, which the company expects to file on March 1, 2019.




11

On January 1, 2018, we adopted ASU 2014-09. This column reflects our recast 2017 results under the new accounting standard.






A-2



 

 


MARRIOTT INTERNATIONAL, INC.


NON-GAAP FINANCIAL MEASURES


($ in millions except per share amounts)




























The following table presents our reconciliations of Adjusted operating income, Adjusted operating income margin, Adjusted net income, and Adjusted diluted EPS, to the most directly comparable GAAP measure. Adjusted total revenues is used in the determination of Adjusted operating income margin.






























Three Months Ended 


Twelve Months Ended







Percent






Percent



December 31,


December 31,


Better/


December 31,


December 31,


Better/



2018


20173


(Worse)


20184


20173


(Worse)


Total revenues, as reported

$              5,289


$              5,251




$            20,758


$            20,452




Less: Cost reimbursement revenue

(3,984)


(3,962)




(15,543)


(15,455)




Less: Other merger-related adjustments1

-


-




-


(3)




Adjusted total revenues**

1,305


1,289




5,215


4,994

















Operating income, as reported

422


424




2,366


2,504




Less: Cost reimbursement revenue

(3,984)


(3,962)




(15,543)


(15,455)




Add: Reimbursed expenses

4,151


4,091




15,778


15,228




Add: Merger-related costs, charges, and other 2

91


59




155


155




Adjusted operating income **

680


612


11%


2,756


2,432


13%















Operating income margin

8%


8%




11%


12%




Adjusted operating income margin **

52%


47%




53%


49%

















Net income, as reported

317


114




1,907


1,459




Less: Cost reimbursement revenue

(3,984)


(3,962)




(15,543)


(15,455)




Add: Reimbursed expenses

4,151


4,091




15,778


15,228




Add: Merger-related costs, charges, and other 2

91


59




155


155




Less: Gain on sale of Avendra

-


(659)




(6)


(659)




Income tax effect of above adjustments

(83)


197




(117)


309




Add: U.S. Tax Cuts and Jobs Act of 2017

5


563




27


563




Adjusted net income **

$                 497


$                 403


23%


$              2,201


$              1,600


38%















Diluted EPS, as reported

$                0.92


$                0.31




$                5.38


$                3.84




Adjusted Diluted EPS**

$                1.44


$                1.09


32%


$                6.21


$                4.21


48%














**

Denotes non-GAAP financial measures. Please see pages A-14 and A-15 for information about our reasons for providing these alternative financial measures and the limitations on their use.


1

Other merger-related adjustmentsinclude Starwood purchase accounting revisions.

2

Merger-related costs, charges, and otherincludes Starwood merger costs presented in the "Merger-related costs and charges" caption of our Income Statement and net purchase accounting revisions.


3

On January 1, 2018, we adopted ASU 2014-09. This column reflects our recast 2017 results under the new accounting standard. 

4

Results for the 2018 full year reflect the correction of certain immaterial errors of cost reimbursement revenue and reimbursed expenses in the 2018 first, second, and third quarters. The errors had no impact on our Adjusted operating income, Adjusted operating income margin, Adjusted net income, Adjusted diluted EPS, or Adjusted EBITDA non-GAAP measures. For more information, see our Annual Report on Form 10-K, which the company expects to file on March 1, 2019.




A-3


 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS

As of December 31, 2018









North America

Total International

Total Worldwide


Units

Rooms

Units

Rooms

Units

Rooms

 Managed 

766

242,301

1,107

297,817

1,873

540,118

 Marriott Hotels 

125

66,870

168

49,606

293

116,476

 Sheraton 

28

23,606

184

63,201

212

86,807

 Courtyard 

240

38,356

96

20,765

336

59,121

 Westin 

45

24,808

69

21,333

114

46,141

 The Ritz-Carlton 

38

10,969

55

15,002

93

25,971

 The Ritz-Carlton Serviced Apartments 

-

-

5

697

5

697

 JW Marriott 

16

10,038

49

19,382

65

29,420

 Renaissance 

27

11,574

57

17,823

84

29,397

 Le Méridien 

3

570

72

19,801

75

20,371

 Residence Inn 

110

16,897

6

643

116

17,540

 Four Points 

1

134

72

18,677

73

18,811

 W Hotels 

24

6,965

28

6,904

52

13,869

 The Luxury Collection 

5

2,234

50

8,867

55

11,101

 St. Regis 

9

1,739

30

6,902

39

8,641

 Aloft 

1

330

37

8,798

38

9,128

 Gaylord Hotels 

6

9,918

-

-

6

9,918

 Delta Hotels 

25

6,764

-

-

25

6,764

 Fairfield by Marriott 

7

1,539

31

4,777

38

6,316

 SpringHill Suites 

31

4,988

-

-

31

4,988

 Marriott Executive Apartments 

-

-

30

4,440

30

4,440

 Protea Hotels 

-

-

36

4,327

36

4,327

 Autograph Collection 

5

1,307

8

1,722

13

3,029

 TownePlace Suites 

17

1,948

-

-

17

1,948

 Element 

1

180

6

1,253

7

1,433

 EDITION 

2

567

6

1,301

8

1,868

 Moxy 

-

-

4

599

4

599

 Tribute Portfolio 

-

-

3

559

3

559

 Bulgari 

-

-

5

438

5

438

 Franchised 

4,133

597,379

508

109,437

4,641

706,816

 Courtyard 

768

102,219

72

13,390

840

115,609

 Fairfield by Marriott 

933

86,513

8

1,459

941

87,972

 Marriott Hotels 

213

66,300

53

15,301

266

81,601

 Residence Inn 

678

80,246

7

963

685

81,209

 Sheraton 

160

47,594

63

17,912

223

65,506

 SpringHill Suites 

383

43,971

-

-

383

43,971

 Westin 

83

27,074

25

7,865

108

34,939

 TownePlace Suites 

371

37,283

-

-

371

37,283

 Four Points 

151

22,881

47

7,452

198

30,333

 Autograph Collection 

90

18,911

55

12,296

145

31,207

 Renaissance 

60

17,213

27

7,423

87

24,636

 Aloft 

107

15,966

14

2,258

121

18,224

 The Luxury Collection 

12

2,850

41

7,718

53

10,568

 Delta Hotels 

36

8,141

2

562

38

8,703

 Le Méridien 

16

3,417

16

4,246

32

7,663

 JW Marriott 

12

5,643

6

1,624

18

7,267

 Moxy 

11

2,235

22

4,743

33

6,978

 Tribute Portfolio 

18

4,285

10

1,077

28

5,362

 Element 

30

4,208

2

293

32

4,501

 Protea Hotels 

-

-

37

2,770

37

2,770

 The Ritz-Carlton 

1

429

-

-

1

429

 Bulgari 

-

-

1

85

1

85


A-4


 

 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS

As of December 31, 2018









North America

Total International

Total Worldwide


Units

Rooms

Units

Rooms

Units

Rooms

 Owned/Leased 

29

8,281

34

8,814

63

17,095

 Sheraton 

2

1,474

4

1,830

6

3,304

 Courtyard 

19

2,814

4

894

23

3,708

 Marriott Hotels 

3

1,664

5

1,625

8

3,289

 Westin 

1

1,073

-

-

1

1,073

 W Hotels 

1

509

2

665

3

1,174

 Protea Hotels 

-

-

7

1,168

7

1,168

 Renaissance 

1

317

3

749

4

1,066

 The Ritz-Carlton 

-

-

2

553

2

553

 JW Marriott 

-

-

1

496

1

496

 St. Regis 

1

238

1

160

2

398

 Residence Inn 

1

192

1

140

2

332

 The Luxury Collection 

-

-

2

287

2

287

 Autograph Collection 

-

-

2

247

2

247

 Unconsolidated Joint Ventures 

49

8,447

102

12,749

151

21,196

 AC Hotels by Marriott 

49

8,447

96

12,330

145

20,777

 Autograph Collection 

-

-

6

419

6

419

 Residences 

59

6,959

30

2,998

89

9,957

 The Ritz-Carlton Residences 

37

4,854

11

950

48

5,804

 W Residences 

9

1,078

4

478

13

1,556

 St. Regis Residences 

7

585

7

593

14

1,178

 Westin Residences 

3

266

1

264

4

530

 Bulgari Residences 

-

-

3

366

3

366

 Sheraton Residences 

-

-

2

262

2

262

 The Luxury Collection Residences 

2

151

2

85

4

236

 EDITION Residences 

1

25

-

-

1

25

 Timeshare* 

70

18,313

19

3,873

89

22,186

Grand Total

5,106

881,680

1,800

435,688

6,906

1,317,368















*Timeshare property and room counts are included on this table in their geographical locations.  For external reporting purposes, these counts are captured in the Corporate segment.


A-5


 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS

As of December 31, 2018









North America

Total International

Total Worldwide

Total Systemwide

Units

Rooms

Units

Rooms

Units

Rooms

 Luxury 

177

48,874

311

73,553

488

122,427

 JW Marriott 

28

15,681

56

21,502

84

37,183

 The Ritz-Carlton 

39

11,398

57

15,555

96

26,953

 The Ritz-Carlton Residences 

37

4,854

11

950

48

5,804

 The Ritz-Carlton Serviced Apartments 

-

-

5

697

5

697

 The Luxury Collection 

17

5,084

93

16,872

110

21,956

 The Luxury Collection Residences 

2

151

2

85

4

236

 W Hotels 

25

7,474

30

7,569

55

15,043

 W Residences 

9

1,078

4

478

13

1,556

 St. Regis 

10

1,977

31

7,062

41

9,039

 St. Regis Residences 

7

585

7

593

14

1,178

 EDITION 

2

567

6

1,301

8

1,868

 EDITION Residences 

1

25

-

-

1

25

 Bulgari 

-

-

6

523

6

523

 Bulgari Residences 

-

-

3

366

3

366

 Full-Service 

950

343,146

865

250,563

1,815

593,709

 Marriott Hotels 

341

134,834

226

66,532

567

201,366

 Sheraton 

190

72,674

251

82,943

441

155,617

 Sheraton Residences 

-

-

2

262

2

262

 Westin 

129

52,955

94

29,198

223

82,153

 Westin Residences 

3

266

1

264

4

530

 Renaissance 

88

29,104

87

25,995

175

55,099

 Autograph Collection 

95

20,218

71

14,684

166

34,902

 Le Méridien 

19

3,987

88

24,047

107

28,034

 Delta Hotels 

61

14,905

2

562

63

15,467

 Gaylord Hotels 

6

9,918

-

-

6

9,918

 Tribute Portfolio 

18

4,285

13

1,636

31

5,921

 Marriott Executive Apartments 

-

-

30

4,440

30

4,440

 Limited-Service 

3,909

471,347

605

107,699

4,514

579,046

 Courtyard 

1,027

143,389

172

35,049

1,199

178,438

 Residence Inn 

789

97,335

14

1,746

803

99,081

 Fairfield by Marriott 

940

88,052

39

6,236

979

94,288

 SpringHill Suites 

414

48,959

-

-

414

48,959

 Four Points 

152

23,015

119

26,129

271

49,144

 TownePlace Suites 

388

39,231

-

-

388

39,231

 Aloft 

108

16,296

51

11,056

159

27,352

 AC Hotels by Marriott 

49

8,447

96

12,330

145

20,777

 Protea Hotels 

-

-

80

8,265

80

8,265

 Moxy 

11

2,235

26

5,342

37

7,577

 Element 

31

4,388

8

1,546

39

5,934

 Timeshare* 

70

18,313

19

3,873

89

22,186

 Grand Total 

5,106

881,680

1,800

435,688

6,906

1,317,368








*Timeshare property and room counts are included on this table in their geographical locations.  For external reporting purposes, these counts are captured in the Corporate segment.


A-6


 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

In Constant $












Comparable Company-Operated North American Properties














Three Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy


Average Daily Rate

Brand


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

JW Marriott


$162.31

1.3%


71.6%

-0.9%

pts.


$226.84

2.6%

The Ritz-Carlton


$267.85

3.4%


71.8%

-1.0%

pts.


$373.05

4.8%

W Hotels


$253.18

1.2%


77.7%

-3.6%

pts.


$325.92

5.8%

Composite North American Luxury1


$253.63

2.0%


72.9%

-2.3%

pts.


$347.84

5.3%

Marriott Hotels


$147.22

0.9%


72.0%

-0.4%

pts.


$204.47

1.5%

Sheraton


$141.39

-0.9%


71.7%

-3.4%

pts.


$197.23

3.8%

Westin


$157.24

-1.4%


71.6%

-1.3%

pts.


$219.52

0.4%

Composite North American Upper Upscale2

$145.97

0.2%


72.0%

-1.1%

pts.


$202.86

1.8%

North American Full-Service3 


$164.02

0.7%


72.1%

-1.3%

pts.


$227.44

2.5%

Courtyard


$95.75

-1.0%


68.2%

-1.3%

pts.


$140.36

0.9%

Residence Inn


$117.23

0.3%


75.6%

-0.4%

pts.


$155.05

0.8%

Composite North American Limited-Service4

$101.57

-0.6%


70.7%

-1.0%

pts.


$143.57

0.8%

North American - All5


$144.15

0.4%


71.7%

-1.2%

pts.


$201.09

2.1%























Comparable Systemwide North American Properties














Three Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy


Average Daily Rate

Brand


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

JW Marriott


$165.73

2.0%


72.4%

-1.0%

pts.


$228.91

3.3%

The Ritz-Carlton


$267.85

3.4%


71.8%

-1.0%

pts.


$373.05

4.8%

W Hotels


$253.18

1.2%


77.7%

-3.6%

pts.


$325.92

5.8%

Composite North American Luxury1


$240.27

2.3%


73.2%

-2.0%

pts.


$328.30

5.1%

Marriott Hotels


$122.36

1.3%


68.3%

-0.4%

pts.


$179.13

1.9%

Sheraton


$107.34

-0.7%


67.0%

-2.4%

pts.


$160.09

2.8%

Westin


$143.66

-0.4%


70.4%

-1.1%

pts.


$204.07

1.2%

Composite North American Upper Upscale2

$125.43

0.7%


69.1%

-0.8%

pts.


$181.40

2.0%

North American Full-Service3 


$136.64

1.0%


69.5%

-1.0%

pts.


$196.48

2.4%

Courtyard


$94.70

-0.2%


68.4%

-1.0%

pts.


$138.37

1.3%

Residence Inn


$108.80

-0.3%


75.1%

-0.9%

pts.


$144.85

0.9%

Fairfield by Marriott


$74.92

-1.2%


66.6%

-1.2%

pts.


$112.50

0.5%

Composite North American Limited-Service4

$91.37

-0.8%


69.7%

-1.4%

pts.


$131.13

1.2%

North American - All5


$111.00

0.2%


69.6%

-1.2%

pts.


$159.43

1.9%












1 Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, and EDITION.

2 Includes Marriott Hotels, Sheraton, Westin, Renaissance, Autograph Collection, Delta Hotels, Gaylord Hotels,

  and Le Méridien.  Systemwide also includes Tribute Portfolio.

3 Includes Composite North American Luxury and Composite North American Upper Upscale.

4 Includes Courtyard, Residence Inn, Fairfield by Marriott, SpringHill Suites, TownePlace Suites, Four Points, Aloft, Element, and AC Hotels by Marriott.  Systemwide also includes Moxy.

5 Includes North American Full-Service and Composite North American Limited-Service.


A-7


 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

In Constant $












Comparable Company-Operated International Properties














Three Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy


Average Daily Rate

Region


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

Greater China


$95.61

3.5%


73.1%

0.5%

pts.


$130.84

2.9%

Rest of Asia Pacific


$133.38

8.6%


76.8%

2.0%

pts.


$173.73

5.8%

Asia Pacific


$109.64

5.8%


74.5%

1.0%

pts.


$147.26

4.3%












Caribbean & Latin America


$131.49

8.6%


64.6%

-1.2%

pts.


$203.56

10.7%

Europe


$135.89

5.5%


72.3%

0.7%

pts.


$187.95

4.6%

Middle East & Africa


$113.81

-5.9%


70.2%

1.5%

pts.


$162.01

-8.0%












International - All1


$118.27

3.8%


72.4%

0.9%

pts.


$163.41

2.5%












Worldwide2


$131.17

1.9%


72.0%

-0.2%

pts.


$182.11

2.1%























Comparable Systemwide International Properties














Three Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy


Average Daily Rate

Region


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

Greater China


$95.07

3.5%


72.5%

0.6%

pts.


$131.13

2.7%

Rest of Asia Pacific


$131.24

7.2%


76.5%

1.4%

pts.


$171.49

5.2%

Asia Pacific


$111.00

5.4%


74.3%

0.9%

pts.


$149.45

4.1%












Caribbean & Latin America


$102.10

6.8%


62.1%

-1.7%

pts.


$164.37

9.7%

Europe


$124.73

5.7%


72.9%

1.0%

pts.


$170.99

4.2%

Middle East & Africa


$108.45

-5.6%


69.6%

1.2%

pts.


$155.91

-7.2%












International - All1


$113.66

4.0%


71.7%

0.7%

pts.


$158.46

3.0%












Worldwide2


$111.77

1.3%


70.2%

-0.7%

pts.


$159.15

2.2%












1 Includes Asia Pacific, Caribbean & Latin America, Europe, and Middle East & Africa.

2 Includes North American - All and International - All.


A-8


 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

In Constant $












Comparable Company-Operated North American Properties














Twelve Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy


Average Daily Rate

Brand


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

JW Marriott


$178.07

0.7%


76.8%

-0.3%

pts.


$231.79

1.1%

The Ritz-Carlton


$276.13

4.4%


74.0%

0.1%

pts.


$373.25

4.2%

W Hotels


$249.18

1.8%


81.0%

-1.3%

pts.


$307.77

3.4%

Composite North American Luxury1


$258.71

3.3%


76.9%

-0.5%

pts.


$336.58

3.9%

Marriott Hotels


$153.97

2.3%


76.4%

0.3%

pts.


$201.45

1.9%

Sheraton


$145.39

2.0%


76.6%

-0.4%

pts.


$189.88

2.5%

Westin


$164.58

0.7%


75.7%

-0.3%

pts.


$217.50

1.0%

Composite North American Upper Upscale2

$151.44

1.9%


76.0%

0.0%

pts.


$199.35

1.9%

North American Full-Service3 


$169.44

2.2%


76.1%

-0.1%

pts.


$222.60

2.3%

Courtyard


$103.63

0.1%


72.6%

-0.5%

pts.


$142.82

0.8%

Residence Inn


$126.43

0.1%


79.2%

-0.7%

pts.


$159.65

1.0%

Composite North American Limited-Service4

$109.72

0.3%


74.9%

-0.4%

pts.


$146.55

0.8%

North American - All5


$150.42

1.8%


75.7%

-0.2%

pts.


$198.66

2.0%























Comparable Systemwide North American Properties














Twelve Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy


Average Daily Rate

Brand


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

JW Marriott


$179.40

1.7%


77.4%

-0.1%

pts.


$231.92

1.9%

The Ritz-Carlton


$276.13

4.4%


74.0%

0.1%

pts.


$373.25

4.2%

W Hotels


$249.18

1.8%


81.0%

-1.3%

pts.


$307.77

3.4%

Composite North American Luxury1


$245.35

3.5%


77.0%

-0.3%

pts.


$318.54

3.8%

Marriott Hotels


$130.21

2.0%


72.8%

0.2%

pts.


$178.97

1.7%

Sheraton


$115.07

1.3%


72.5%

-0.7%

pts.


$158.74

2.3%

Westin


$153.29

1.1%


75.3%

-0.4%

pts.


$203.66

1.6%

Composite North American Upper Upscale2

$132.64

1.8%


73.5%

-0.1%

pts.


$180.54

1.9%

North American Full-Service3 


$143.64

2.1%


73.8%

-0.1%

pts.


$194.59

2.2%

Courtyard


$102.38

0.6%


72.9%

-0.1%

pts.


$140.48

0.7%

Residence Inn


$117.52

0.9%


79.3%

0.1%

pts.


$148.27

0.7%

Fairfield by Marriott


$82.32

1.1%


71.6%

0.3%

pts.


$114.98

0.7%

Composite North American Limited-Service4

$99.29

0.9%


74.3%

0.0%

pts.


$133.61

1.0%

North American - All5


$118.51

1.5%


74.1%

-0.1%

pts.


$159.94

1.6%












1 Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, and EDITION.

2 Includes Marriott Hotels, Sheraton, Westin, Renaissance, Autograph Collection, Delta Hotels, Gaylord Hotels,

  and Le Méridien.  Systemwide also includes Tribute Portfolio.

3 Includes Composite North American Luxury and Composite North American Upper Upscale.

4 Includes Courtyard, Residence Inn, Fairfield by Marriott, SpringHill Suites, TownePlace Suites, Four Points, Aloft,
  Element, 
and AC Hotels by Marriott.  Systemwide also includes Moxy.

5 Includes North American Full-Service and Composite North American Limited-Service.


A-9


 

 

MARRIOTT INTERNATIONAL, INC.

KEY LODGING STATISTICS

In Constant $












Comparable Company-Operated International Properties














Twelve Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy



Average Daily Rate

Region


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

Greater China


$94.54

7.6%


72.3%

2.6%

pts.


$130.77

3.7%

Rest of Asia Pacific


$129.25

7.3%


75.6%

1.6%

pts.


$170.99

5.0%

Asia Pacific


$107.43

7.5%


73.5%

2.2%

pts.


$146.14

4.2%












Caribbean & Latin America


$131.52

8.6%


64.8%

0.1%

pts.


$202.84

8.5%

Europe


$151.86

4.8%


74.0%

0.7%

pts.


$205.15

3.8%

Middle East & Africa


$102.39

-1.8%


66.4%

2.4%

pts.


$154.17

-5.3%












International - All1


$118.86

5.2%


71.6%

1.7%

pts.


$165.91

2.7%












Worldwide2


$134.58

3.3%


73.7%

0.8%

pts.


$182.67

2.2%























Comparable Systemwide International Properties














Twelve Months Ended December 31, 2018 and December 31, 2017



REVPAR


Occupancy



Average Daily Rate

Region


2018

vs. 2017


2018

vs. 2017



2018

vs. 2017

Greater China


$93.96

7.5%


71.7%

2.7%

pts.


$131.07

3.5%

Rest of Asia Pacific


$128.40

7.0%


75.3%

1.6%

pts.


$170.43

4.7%

Asia Pacific


$109.14

7.2%


73.3%

2.2%

pts.


$148.90

4.0%












Caribbean & Latin America


$104.77

7.4%


63.2%

0.1%

pts.


$165.71

7.3%

Europe


$134.10

5.8%


73.0%

1.4%

pts.


$183.74

3.7%

Middle East & Africa


$98.38

-1.6%


66.1%

2.0%

pts.


$148.87

-4.6%












International - All1


$114.56

5.5%


70.9%

1.7%

pts.


$161.48

3.0%












Worldwide2


$117.37

2.6%


73.2%

0.4%

pts.


$160.37

2.0%












1 Includes Asia Pacific, Caribbean & Latin America, Europe, and Middle East & Africa.

2 Includes North American - All and International - All.








A-10


 

 


MARRIOTT INTERNATIONAL, INC.


NON-GAAP FINANCIAL MEASURES


ADJUSTED EBITDA


($ in millions)














Fiscal Year 2018



First
Quarter1


Second
Quarter 1


Third
Quarter 1


Fourth
Quarter


Total


Net income

$                 420


$             667


$             503


$             317


$           1,907


Cost reimbursement revenue

(3,776)


(4,048)


(3,735)


(3,984)


(15,543)


Reimbursed expenses

3,808


3,964


3,855


4,151


15,778


Interest expense

75


85


86


94


340


Interest expense from unconsolidated joint ventures

2


3


2


3


10


Tax provision

112


207


91


28


438


Depreciation and amortization

54


58


52


62


226


Contract investment amortization

18


13


13


14


58


Depreciation classified in reimbursed expenses

33


34


39


41


147


Depreciation and amortization from unconsolidated joint ventures

10


10


10


10


40


Share-based compensation

38


47


43


43


171


Gain on asset dispositions

(58)


(109)


(16)


(6)


(189)


Gain on investees' property sales

-


(10)


(55)


-


(65)


Merger-related costs and charges

34


18


12


91


155


Adjusted EBITDA **

$                 770


$             939


$             900


$             864


$           3,473













Increase over 2017 Adjusted EBITDA **

8%


15%


12%


10%


11%














Fiscal Year 2017 2



First
Quarter


Second
Quarter


Third
Quarter


Fourth
Quarter


Total


Net income

$                 371


$             489


$             485


$             114


$           1,459


Cost reimbursement revenue

(3,736)


(3,927)


(3,830)


(3,962)


(15,455)


Reimbursed expenses

3,696


3,791


3,650


4,091


15,228


Interest expense

70


73


73


72


288


Interest expense from unconsolidated joint ventures

1


3


2


4


10


Tax provision

123


227


253


920


1,523


Depreciation and amortization

51


71


54


53


229


Contract investment amortization

11


12


11


16


50


Depreciation classified in reimbursed expenses

32


33


28


33


126


Depreciation and amortization from unconsolidated joint ventures

11


10


10


11


42


Share-based compensation

35


41


42


37


155


Gain on asset dispositions

-


(24)


-


(659)


(683)


Merger-related costs and charges

51


21


28


59


159


Adjusted EBITDA **

$                 716


$             820


$             806


$             789


$           3,131
























** Denotes non-GAAP financial measures. See pages A-14 and A-15 for information about our reasons for providing these alternative financial measures and the limitations on their use.













1

Results for the 2018 full year and for the first, second, and third quarters of 2018 reflect the correction of certain immaterial errors of cost reimbursement revenue and reimbursed expenses in the previously reported 2018 first, second, and third quarters. The errors had no impact on our Adjusted operating income, Adjusted operating income margin, Adjusted net income, Adjusted diluted EPS, or Adjusted EBITDA non-GAAP measures. 




For more information, see our Annual Report on Form 10-K, which the company expects to file on March 1, 2019.

2

On January 1, 2018, we adopted ASU 2014-09. The table above reflects our recast 2017 results under the new accounting standard.




A-11


 


MARRIOTT INTERNATIONAL, INC.


NON-GAAP FINANCIAL MEASURES


ADJUSTED EBITDA FORECAST


FIRST QUARTER 2019


($ in millions)



















Range






Estimated
First Quarter 2019



First Quarter 2018**



Net income excluding certain items

$            445


$            464





Interest expense 

100


100





Interest expense from unconsolidated joint ventures 

-


-





Tax provision

115


121





Depreciation and amortization

55


55





Contract investment amortization

15


15





Depreciation classified in reimbursed expenses

35


35





Depreciation and amortization from unconsolidated joint ventures

10


10





Share-based compensation

45


45





Adjusted EBITDA **

$            820


$            845


$                                  770











Increase over 2018 Adjusted EBITDA **

6%


10%





















** Denotes non-GAAP financial measures. See pages A-14 and A-15 for information about our reasons for providing these alternative financial measures and the limitations on their use.











1

Guidance excludes cost reimbursement revenue, reimbursed expenses, and merger-related costs and charges, which the company cannot accurately forecast and which may be significant, except for depreciation classified in reimbursed expenses, which is included in the caption "Depreciation classified in reimbursed expenses" above.














A-12



 


MARRIOTT INTERNATIONAL, INC.


NON-GAAP FINANCIAL MEASURES


ADJUSTED EBITDA FORECAST


FULL YEAR 2019


($ in millions)



















Range






Estimated
Full Year 2019



Full Year 2018**



Net income excluding certain items

$         1,967


$         2,043





Interest expense 

415


415





Interest expense from unconsolidated joint ventures 

10


10





Tax provision

593


617





Depreciation and amortization

215


215





Contract investment amortization

60


60





Depreciation classified in reimbursed expenses

135


135





Depreciation and amortization from unconsolidated joint ventures

35


35





Share-based compensation

185


185





Adjusted EBITDA **

$         3,615


$         3,715


$                                3,473











Increase over 2018 Adjusted EBITDA **

4%


7%





















** Denotes non-GAAP financial measures. See pages A-14 and A-15 for information about our reasons for providing these alternative financial measures and the limitations on their use.












1

Guidance excludes cost reimbursement revenue, reimbursed expenses, and merger-related costs and charges, which the company cannot accurately forecast and which may be significant, except for depreciation classified in reimbursed expenses, which is included in the caption "Depreciation classified in reimbursed expenses" above.















A-13



 

MARRIOTT INTERNATIONAL, INC.
EXPLANATION OF NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

In our press release and schedules, and on the related conference call, we report certain financial measures that are not required by, or presented in accordance with, United States generally accepted accounting principles ("GAAP"). We discuss management's reasons for reporting these non-GAAP measures below, and the press release schedules reconcile the most directly comparable GAAP measure to each non-GAAP measure that we refer to. Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for revenue, operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, we may calculate and/or present these non-GAAP financial measures differently than measures with the same or similar names that other companies report, and as a result, the non-GAAP measures we report may not be comparable to those reported by others.
 
Adjusted Operating Income and Adjusted Operating Income Margin.  Adjusted operating income and Adjusted operating income margin exclude cost reimbursement revenue, reimbursed expenses, Starwood merger costs presented in the "Merger-related costs and charges" caption of our Income Statements, and net purchase accounting revisions. Adjusted operating income margin reflects Adjusted operating income divided by Adjusted total revenues. We believe that these are meaningful metrics because they allow for period-over-period comparisons of our ongoing operations before these items and for the reasons further described below.
 
Adjusted Net Income and Adjusted Diluted EPS. Adjusted net income and Adjusted diluted EPS reflect our net income and diluted earnings per share excluding the impact of cost reimbursement revenue, reimbursed expenses, merger-related costs, charges, and  other merger-related adjustments due to purchase accounting, the gain on the sale of our ownership interest in Avendra, and the income tax effect of these adjustments, and the impact of the U.S. Tax Cuts and Jobs Act of 2017. We calculate the income tax effect of the adjustments using an estimated tax rate applicable to each adjustment. We believe that these measures are meaningful indicators of our performance because they allow for period-over-period comparisons of our ongoing operations before these items and for the reasons further described below.
 
Adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("Adjusted EBITDA"). Adjusted EBITDA reflects net income excluding the impact of the following items: cost reimbursement revenue and reimbursed expenses, interest expense, depreciation (including depreciation classified in "Reimbursed expenses," as discussed below), amortization, and provision for income taxes, pre-tax transaction and transition costs associated with the Starwood merger, and share-based compensation expense for all periods presented. When applicable, Adjusted EBITDA also excludes gains and losses on asset dispositions made by us or by our joint venture investees.
 
In our presentations of Adjusted operating income and Adjusted operating income margin, Adjusted net income, and Adjusted diluted EPS, we exclude transaction and transition costs associated with the Starwood merger, which we record in the "Merger-related costs and charges" caption of our Income Statements, and other merger-related adjustments due to purchase accounting, to allow for period-over period comparisons of our ongoing operations before the impact of these items. We exclude cost reimbursement revenue and reimbursed expenses, which relate to property-level and centralized programs and services that we operate for the benefit of our hotel owners. We do not operate these programs and services to generate a profit over the contract term, and accordingly, when we recover the costs that we incur for these programs and services from our hotel owners, we do not seek a mark-up. For property-level services, our owners typically reimburse us at the same time that we incur expenses. However, for centralized programs and services, our owners may reimburse us before or after we incur expenses, causing temporary timing differences between the costs we incur and the related reimbursement from hotel owners in our operating and net income. Over the long term, these programs and services are not designed to impact our economics, either positively or negatively. Because we do not retain any such profits or losses over time, we exclude the net impact when evaluating period-over-period changes in our operating results.

A-14

MARRIOTT INTERNATIONAL, INC.
EXPLANATION OF NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

We believe that Adjusted EBITDA is a meaningful indicator of our operating performance because it permits period-over-period comparisons of our ongoing operations before these items and facilitates our comparison of results before these items with results from other lodging companies. We use Adjusted EBITDA to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provisions for income taxes can vary considerably among companies. Our Adjusted EBITDA also excludes depreciation and amortization expense which we report under "Depreciation, amortization, and other" as well as depreciation classified in "Reimbursed expenses" and "Contract investment amortization" in our Consolidated Statements of Income (our "Income Statements"), because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. Depreciation classified in "Reimbursed expenses" reflects depreciation of Marriott-owned assets, for which we receive cash from owners to reimburse the company for its investments made for the benefit of the system. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. We exclude share-based compensation expense in all periods presented to address the considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.
 
RevPAR. In addition to the foregoing non-GAAP financial measures, we present Revenue per Available Room ("RevPAR") as a performance measure. We believe RevPAR is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues. We calculate RevPAR by dividing room sales (recorded in local currency) for comparable properties by room nights available for the period. We present growth in comparative pro forma combined company RevPAR on a constant dollar basis, which we calculate by applying exchange rates for the current period to each period presented. We believe constant dollar analysis provides valuable information regarding our properties' performance as it removes currency fluctuations from the presentation of such results. 

A-15

Cision

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