Marriott International Reports Solid Fourth Quarter Results

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Feb 14, 2008

Marriott International Reports Solid Fourth Quarter Results

BETHESDA, Md., Feb 14, 2008 /PRNewswire-FirstCall via COMTEX News Network/ --


    Full Year Highlights:
    -- Full year management and franchise fee revenue totaled a record
       breaking $1.4 billion in 2007, up 17 percent over the prior year;
    -- Incentive management fees reached an all-time record $369 million
       during the year, 31 percent higher than 2006 levels.  Over 67 percent
       of company-operated hotels earned incentive management fees in 2007
       compared to 62 percent in 2006.  Hotels outside the United States
       contributed 36 percent of incentive management fees in 2007;
    -- Adjusted diluted earnings per share from continuing operations, which
       excludes the impact of the 2007 second quarter ESOP settlement, totaled
       $1.89 for 2007, an increase of 15 percent over last year.  Diluted
       earnings per share as reported was $1.75 for the full year;
    -- Worldwide systemwide comparable revenue per available room (REVPAR)
       rose 7.6 percent (6.5 percent using constant dollars).  Average Daily
       Rates increased 7.5 percent (6.4 percent using constant dollars).
       Occupancy remained strong at 73 percent;
    -- In North America, company-operated comparable REVPAR rose 6.2 percent
       during 2007 and house profit margins increased 160 basis points to near
       record levels;
    -- Over 31,000 rooms opened in 2007, including nearly 7,800 rooms outside
       the United States.  Eighteen percent of total room openings were
       conversions from competitor brands;
    -- The company's worldwide pipeline of hotels under construction, awaiting
       conversion or approved for development increased to a record 125,000
       rooms compared to 100,000 rooms a year ago and 115,000 rooms in the
       third quarter of 2007;
    -- Marriott repurchased 41 million shares of the company's common stock in
       2007 for nearly $1.8 billion.  The company repurchased over $5 billion
       of the company's common stock over the past three years.

       Fourth Quarter Highlights:
    -- Fourth quarter 2007 earnings per share from continuing operations
       totaled $0.62, up 19 percent from the fourth quarter of 2006;
    -- Fourth quarter management and franchise fee revenue rose 19 percent
       over the prior year.  Incentive management fees increased 31 percent;
    -- Worldwide company-operated comparable REVPAR rose 9.2 percent (7.0
       percent using constant dollars) and worldwide company-operated house
       profit margins increased 130 basis points during the quarter;
    -- In North America, company-operated comparable REVPAR increased 6.2
       percent and house profit margins rose 140 basis points;
    -- Outside North America, company-operated comparable REVPAR increased
       15.5 percent (8.5 percent using constant dollars) with double-digit
       growth in Southeast Asia, Latin America, Europe and the Middle East;
    -- Approximately 10,800 rooms opened during the fourth quarter, including
       over 2,500 rooms converted from competitor brands.  Twenty-five percent
       of rooms opened in the quarter are outside the United States;
    -- Marriott repurchased 12 million shares of the company's common stock
       for $462 million during the fourth quarter.


Marriott International, Inc. (NYSE: MAR) today reported diluted earnings per share (EPS) from continuing operations of $0.62 in the fourth quarter of 2007, up 19 percent from the fourth quarter of 2006. Income from continuing operations was $236 million for the quarter, an 8 percent increase over the prior year. The company's EPS guidance for the 2007 fourth quarter, disclosed on October 4, 2007, totaled $0.61 to $0.63.

Pre-tax charges during the quarter included an approximately $12 million non-cash loan loss reserve related to one property and a $5 million reserve for a leveraged aircraft lease. The fourth quarter results also reflected $13 million in higher legal costs.

J.W. Marriott, Jr., Marriott International's chairman and chief executive officer, said, "2007 was another terrific year. Significant unit growth, REVPAR gains, and property-level margin improvement combined to deliver record management and franchise fee earnings. We recently celebrated our 3,000th hotel in November, the JW Marriott Beijing, and we introduced two new brands, Edition and Nickelodeon, which position us well for the travelers of the future. With our owners and franchisees, we opened 31,000 rooms during the year and, despite a tight credit market, drove our pipeline of hotels under construction, awaiting conversion or approved for development to a record 125,000 rooms.

"Around the world, customer satisfaction levels rose as our guests enjoyed a record number of newly renovated hotels. We introduced either new lobby or guest room enhancements -- and sometimes both -- in six of our brands. Our Marriott and Renaissance hotels are rolling out next-generation lobbies throughout our system. Our limited-service brands are also changing, with guest room and lobby enhancements designed to drive guest satisfaction and owner profitability.

"Looking ahead, we've never been better positioned to tackle short-term economic challenges nor more optimistic about our long-term prospects. While we're carefully watching economic trends, our expected unit growth for 2008 is strong, customers love our brands, and owners and franchisees prefer our portfolio more than ever. Almost 40 percent of our full-service hotels, including Ritz-Carlton, are located outside the U.S. and 60 percent of the full-service hotels in our pipeline are outside the U.S.

"Our strategy of managing and franchising hotels under solid, long-term agreements is proven. Over the years, we've shown that this business model results in profits that are less volatile than owning properties. And our brands' strength continues to accelerate unit growth without significant capital investment by us. Marriott's pre-tax return on invested capital rose to a record 25 percent in 2007."

In the 2007 fourth quarter (16-week period from September 8, 2007 to December 28, 2007), REVPAR for the company's comparable worldwide systemwide properties increased 8.1 percent (6.6 percent using constant dollars). Comparable worldwide company-operated properties experienced 9.2 percent (7.0 percent using constant dollars) REVPAR growth over the year ago quarter.

North American REVPAR for the company's comparable company-operated properties rose 6.2 percent in the fourth quarter of 2007, largely driven by a 5.6 percent increase in rate and a slight increase in occupancy to 70 percent. For the calendar quarter ended December 31, 2007, REVPAR at North American company-operated properties increased 7.0 percent.

Fourth quarter international company-operated comparable REVPAR increased 15.5 percent (8.5 percent using constant dollars), including a 13.9 percent increase in average daily rate (7.0 percent using constant dollars) and a 1.0 percentage point improvement in occupancy to 76.0 percent. Strong international economic growth continues to drive global travel.

In the fourth quarter, Marriott added 70 new properties (10,787 rooms) to its worldwide lodging portfolio, including 12 new hotels (2,697 rooms) outside the United States. Worldwide, 13 properties (2,832 rooms) exited the system during the quarter. At quarter-end, the company's lodging group encompassed about 3,000 properties and timeshare resorts for a total of over 535,000 rooms.

MARRIOTT REVENUES totaled $4.1 billion in the fourth quarter, an 8 percent increase from the same period in 2006. Base management and franchise fees rose 15 percent to $339 million as a result of REVPAR improvement and unit expansion. In addition, base management fees reflected $4 million in proceeds from business interruption insurance. Incentive management fees rose 31 percent to $126 million, driven by strong REVPAR, higher property-level house profit margins and $9 million of business interruption insurance proceeds. A record 600 company-operated hotels earned incentive management fees in the 2007 fourth quarter, including 165 properties outside the United States. Incentive management fees from North American Full-Service hotels rose 35 percent in the quarter while incentive management fees from North American Limited-Service properties rose 59 percent over the prior year.

Strong room rates, moderating utility costs, and improved productivity drove margins during the quarter. Worldwide company-operated comparable house profit margins increased 130 basis points. House profit margins for comparable North American company-operated properties grew 140 basis points and house profit per available room increased nearly 10 percent.

Owned, leased, corporate housing and other revenue, net of direct expenses, increased 25 percent in the fourth quarter, to $65 million, primarily driven by higher profits at owned and leased properties, including strong results at the Ritz-Carlton hotels in St. Thomas and Tokyo and the Renaissance Jaragua Hotel in the Dominican Republic.

Timeshare sales and services revenue increased 2 percent in the 2007 fourth quarter on strong services and financing revenue offset by lower development revenue. Strong revenue in the 2006 quarter reflected several projects reaching reportability thresholds. In the 2007 quarter, timeshare sales and services revenue, net of direct expenses, declined 5 percent. Gain on the sale of timeshare notes totaled $36 million in the fourth quarter of 2007 and $37 million in the year ago quarter. In the guidance provided in October 2007, the company stated that it expected fourth quarter timeshare sales and services revenue, net of direct expenses, to decline 14 to 17 percent. Stronger than expected results reflected favorable marketing and selling costs and higher financing profits.

Timeshare segment results reflect timeshare sales and services revenue, net of direct expenses, as well as base fees, equity earnings, minority interest and general and administrative expenses associated with the timeshare business. Timeshare segment results increased 16 percent reflecting strong equity earnings from the Kapalua joint venture in Hawaii and lower timeshare general and administrative spending.

Although fourth quarter timeshare and fractional prices rose nearly 6 percent, timeshare contract sales declined 26 percent to $366 million. The 2006 quarter benefited from a $150 million surge in residential and fractional contract sales in Hawaii when a new project received final government approval. Compared to prior guidance, fourth quarter 2007 contract sales reflected lower than expected volume at projects in the Western United States and Florida, somewhat offset by stronger sales in Asia.

GENERAL, ADMINISTRATIVE and OTHER expenses for the fourth quarter totaled $250 million, a 5 percent increase compared to the prior year, reflecting $13 million in higher legal costs.

GAINS AND OTHER INCOME totaled $20 million and included $10 million of gains on the sale of real estate, an $8 million gain from the sale of a stock investment and $2 million of preferred returns from joint venture investments and other income. The prior year's fourth quarter gains totaled $21 million and included $12 million from the sale of an interest in a joint venture, $5 million of gains from the sale of real estate, and $4 million of preferred returns from joint venture investments and other income.

INTEREST EXPENSE, net of INTEREST INCOME, increased $21 million to $45 million, primarily due to higher interest rates and higher average borrowings, including $400 million of senior debt issued during the 2007 fourth quarter.

The provision for loan losses totaled $17 million in the fourth quarter reflecting a $12 million reserve for a loan at one property and a $5 million reserve for an aircraft leveraged lease.

EQUITY IN EARNINGS (LOSSES) reflects Marriott's share of income or losses in equity joint venture investments. The $5 million increase in equity in earnings was primarily driven by improved results at a timeshare joint venture project in Kapalua, Hawaii.

DISCONTINUED OPERATIONS

Production of synthetic fuel ceased in the fourth quarter. Therefore, financial results for that business are shown as discontinued operations for 2006 and 2007. The estimated phase-out for 2007 tax credits was 71 percent due to higher average oil prices for the year. This increase in estimated phase-out for the full year offset income from synthetic fuel operations recorded in the first three quarters of 2007.

FULL YEAR 2007 RESULTS

For the full year 2007, adjusted income from continuing operations totaled $751 million, an increase of 5 percent, and adjusted diluted earnings per share from continuing operations was $1.89, an increase of 15 percent. Adjusted income from continuing operations and adjusted diluted earnings per share exclude the impact of the 2007 second quarter settlement agreement with the Internal Revenue Service and the Department of Labor relating to the company's leveraged Employee Stock Ownership Plan. As reported, diluted earnings per share was $1.75.

MARRIOTT REVENUES totaled $13 billion in 2007, an 8 percent increase from 2006. Total fees in 2007 were $1,428 million, an increase of 17 percent over the prior year, reflecting unit, REVPAR and incentive management fee growth. Worldwide company-operated comparable property-level margins rose 150 basis points during 2007, approaching record levels and driving incentive management fees higher. In 2006, the company recognized base management fees of $5 million and incentive management fees of $10 million that were based on prior period results but not earned and due until 2006. In 2007, incentive management fees included $17 million that were based on prior period results but not earned and due until 2007. In addition, in 2007 Marriott recognized incentive management fees of $13 million and base management fees of $6 million related to business interruption insurance proceeds.

Owned, leased, corporate housing and other revenue, net of direct expenses, totaled $178 million in 2007 compared to $183 million in 2006. Results were impacted by fewer owned hotels and lower termination fees during 2007, partially offset by higher affinity card revenue and branding fees. Termination fees totaled $19 million in 2007 compared to $26 million in 2006.

Timeshare sales and services revenue increased 11 percent to $1,747 million in 2007 on strong development, services and financing revenue. Timeshare sales and services revenue, net of direct expenses, totaled $350 million in 2007 and exceeded February 2007 guidance of $320 million to $330 million. Stronger than expected performance reflected strong demand at resorts in Maui, Las Vegas and Frenchmen's Cove, which achieved reportability thresholds during the year, as well as higher than expected financing income. Timeshare segment revenue and segment results increased 12 percent and 9 percent, respectively, during 2007.

Timeshare contract sales in 2007 declined 14 percent to $1,401 million. Results in 2006 benefited from $287 million of residential contract sales, largely at project launches in Hawaii and San Francisco. In contrast, 2007 residential contract sales totaled $49 million.

GENERAL, ADMINISTRATIVE and OTHER expenses in 2007 included $35 million of expenses associated with the ESOP tax settlement.

GAINS AND OTHER INCOME totaled $97 million in 2007 and included gains of $39 million from the sale of real estate, $12 million of gains associated with the forgiveness of debt, an $18 million gain from the sale of a stock investment, $13 million of gains on the sale of the company's interests in five joint ventures and $15 million of preferred returns from several joint venture investments and other income. Prior year gains of $74 million in 2006 included gains of $26 million from the sale of real estate, $2 million of gains from the sale or refinancing of real estate loans, $15 million of preferred returns from several joint venture investments, $25 million from the redemption of preferred stock in a joint venture and $43 million of gains on the sale of the company's interests in six joint ventures. These 2006 gains were partially offset by a $37 million non-cash charge to adjust the carrying amount of a straight-line rent receivable associated with a land lease that has been sold.

INTEREST EXPENSE, net of INTEREST INCOME, increased $71 million primarily due to higher average borrowings in 2007 compared to 2006, including the issuance of $750 million of senior debt, and higher interest rates.

EQUITY IN EARNINGS increased $12 million, to $15 million, largely due to improved results at the timeshare joint venture project in Kapalua and the reopening of a hotel in Mexico following Hurricane Wilma in 2005.

BALANCE SHEET

At year-end 2007, total debt was $2,965 million and cash balances totaled $332 million, compared to $1,833 million in total debt and $191 million of cash at year-end 2006.

The company repurchased 41 million shares of common stock in 2007 at a cost of nearly $1.8 billion. The remaining share repurchase authorization as of year-end 2007 totaled 33 million shares.

OUTLOOK

The company expects worldwide systemwide comparable REVPAR and North American company-operated comparable REVPAR to increase 3 to 5 percent in 2008. Assuming only modest increases in North American house profit margins and roughly 30,000 new room openings, the company expects total fee revenue for the full year of approximately $1,490 million to $1,520 million, an increase of 4 to 6 percent. Adjusting 2007 fees for receipt of business interruption proceeds of $19 million, $17 million of incentive fees based on prior periods' results and relicensing fees about $10 million higher than those anticipated in 2008 due to fewer expected transactions, total fee growth is expected to be 8 to 10 percent over 2007.

The company expects timeshare sales and services revenue, net of expenses, to decline 6 to 10 percent in 2008 reflecting projects near sellout and startup costs associated with new projects beginning sales. Timeshare contract sales are expected to increase 15 to 20 percent as four new projects begin sales in 2008. Timeshare segment results are expected to total $300 million to $315 million in 2008, roughly flat with 2007.

Based upon the above assumptions, the company expects 2008 EPS to total $2.00 to $2.10.

For the first quarter of 2008, the company expects worldwide systemwide comparable REVPAR to increase 3 to 5 percent and North American company- operated comparable REVPAR to increase 2 to 4 percent. Comparable worldwide house profit margins are expected to be flat. Expected first quarter results reflect the impact of the timing of the Easter holiday and the December 29, 2007 start of Marriott's 2008 fiscal first quarter.

In the first quarter, the company expects timeshare sales and services revenue, net of direct expenses, to total $7 million to $12 million reflecting start up costs at new projects and tough comparisons to the 2007 quarter. In the year ago quarter, a significant amount of contract sales associated with a Hawaiian project became financially reportable. First quarter contract sales are expected to be flat to up 5 percent.

Based upon the above assumptions, the company expects EPS for the 2008 first quarter to total $0.32 to $0.36.



                                First Quarter 2008        Full Year 2008
                                ------------------        --------------
    Total fee revenue         $310 million to $315   $1,490 million to $1,520
                               million                million
    Owned, leased, corporate  $35 million to $40     $170 million to $180
     housing and other         million                million
     revenue, net of direct
     expenses
    Timeshare sales and       $7 million to $12      $315 million to $330
     services revenue,         million                million
     net of direct
     expenses(1)
    General, administrative   $160 million to $170   $775 million to $785
     and other expenses        million                million
    Operating income          $182 million to $207   $1,190 million to $1,255
                               million                million
    Gains and other income    Approx $5 million      Approx $30 million
    Net interest expense(2)   Approx $30 million     Approx $155 million
    Equity in earnings        Approx $20 million     Approx $55 million
     (losses)
    After-tax minority        Approx $3 million      Approx $6 million
     interest
    Earnings per share        $0.32 to $0.36         $2.00 to $2.10
    Tax rate                  35.5 percent           35.5 percent

    1 - Includes an estimated $90 million of timeshare note sale gains for
        full year 2008
    2 - Net of interest income


The company expects investment spending in 2008 to total approximately $1.1 billion to $1.2 billion, including $60 million for maintenance capital spending, $525 million to $575 million for capital expenditures and acquisitions, $175 million to $200 million for timeshare development, $15 million to $25 million in new mezzanine financing and mortgage loans for hotels developed by owners and franchisees, and $275 million to $290 million in equity and other investments (including timeshare equity investments).

Marriott International, Inc. (NYSE: MAR) will conduct its quarterly earnings review for the investment community and news media on Thursday, February 14, 2008 at 10 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 the "Recent Investor News" tab and click on the quarterly conference call link. A replay will be available at that same website until February 14, 2009. The webcast will also be available as a podcast from the same site.

The telephone dial-in number for the conference call is 719-325-4770. A telephone replay of the conference call will be available from 1 p.m. ET, Thursday, February 14, 2008 until 8 p.m. ET, Thursday, February 21, 2008. To access the replay, call 719-457-0820. The reservation number for the recording is 7280416.

Note: This press release contains "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earnings trends; statements concerning the number of lodging properties we expect to add in the future; our expected share repurchases and investment spending; 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 the duration and extent of growth in the economy and the lodging industry; supply and demand changes for hotel rooms, vacation ownership, condominiums, and corporate housing; competitive conditions in the lodging industry; relationships with clients and property owners; the availability of capital to finance hotel growth and refurbishment; and other risk factors identified in our most recent annual or quarterly report on Form 10-K or 10-Q; any of which could cause actual results to differ materially from those expressed in or implied by the statements herein. These statements are made as of the date of this press release, and 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. (NYSE: MAR) is a leading lodging company with about 3,000 lodging properties in the United States and 67 other countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Bulgari brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club, Horizons, The Ritz-Carlton Club and Grand Residences by Marriott brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; and operates conference centers. The company is headquartered in Washington, D.C., and had approximately 151,000 employees at 2007 year-end. It is ranked as the lodging industry's most admired company and one of the best places to work by FORTUNE(R). The company is also a 2006 U.S. Environmental Protection Agency (EPA) ENERGY STAR(R) Partner. In fiscal year 2007, Marriott International, Inc. reported sales from continuing operations of $13 billion. For more information or reservations, please visit our Web site at www.marriott.com.

                                    IRPR#1

                                Tables follow



                         MARRIOTT INTERNATIONAL, INC.
                       CONSOLIDATED STATEMENT OF INCOME
                   (in millions, except per share amounts)

                                              Sixteen Weeks Ended
                                           -------------------------   Percent
                                           December 28, December 29,   Better/
                                                2007        2006       (Worse)
                                           ------------ ------------   -------
    REVENUES
    Base management fees                        $203        $173           17
    Franchise fees                               136         121           12
    Incentive management fees                    126          96           31
    Owned, leased, corporate housing and
     other revenue(1)                            416         354           18
    Timeshare sales and services(2)              536         526            2
    Cost reimbursements(3)                     2,672       2,528            6
                                           ------------ ------------
       Total Revenues                          4,089       3,798            8

    OPERATING COSTS AND EXPENSES
    Owned, leased and corporate housing -
     direct(4)                                   351         302          (16)
    Timeshare - direct                           410         393           (4)
    Reimbursed costs                           2,672       2,528           (6)
    General, administrative and other(5)         250         237           (5)
                                           ------------ ------------
       Total Expenses                          3,683       3,460           (6)
                                           ------------ ------------

    OPERATING INCOME                             406         338           20


    Gains and other income(6)                     20          21           (5)
    Interest expense                             (57)        (38)         (50)
    Interest income                               12          14          (14)
    (Provision for) reversal of loan losses      (17)          -            *
    Equity in earnings (losses)(7)                 6           1          500
                                           ------------ ------------
    INCOME FROM CONTINUING OPERATIONS BEFORE
     INCOME TAXES AND MINORITY INTEREST          370         336           10
    Provision for income taxes                  (134)       (116)         (16)
    Minority interest                              -          (1)         100
                                           ------------ ------------
    INCOME FROM CONTINUING OPERATIONS            236         219            8

    Discontinued operations - Synthetic
     Fuel, net of tax(8)                         (60)          1       (6,100)
                                           ------------ ------------
    NET INCOME                                  $176        $220          (20)
                                           ============ ============
    EARNINGS PER SHARE - Basic
       Earnings from continuing operations     $0.65       $0.56           16
       Losses from discontinued operations     (0.17)          -            *
                                           ------------ ------------
       Earnings per share                      $0.48       $0.56          (14)
                                           ============ ============

    EARNINGS PER SHARE - Diluted
       Earnings from continuing operations     $0.62       $0.52           19
       Losses from discontinued operations     (0.16)          -            *
                                           ------------ ------------
       Earnings per share                      $0.46       $0.52          (12)
                                           ============ ============
    Basic Shares                               363.6       394.8
    Diluted Shares                             383.1       419.9

    * Percent can not be calculated.

    1 - Owned, leased, corporate housing and other revenue includes revenue
        from the properties we own or lease, revenue from our corporate
        housing business, termination fees and other revenue.
    2 - Timeshare sales and services includes total timeshare revenue except
        for base fees, cost reimbursements, real estate gains and joint
        venture earnings. Timeshare sales and services includes gains on the
        sale of timeshare note receivable securitizations.
    3 - Cost reimbursements include reimbursements from lodging properties for
        Marriott funded operating expenses.
    4 - Owned, leased and corporate housing - direct expenses include
        operating expenses related to our owned or leased hotels, including
        lease payments, pre-opening expenses and depreciation, plus expenses
        related to our corporate housing business.
    5 - General, administrative and other expenses include the overhead costs
        allocated to our segments, and our corporate overhead costs and
        general expenses.
    6 - Gains and other income includes net gains on the sale of real estate,
        gains on note sales or repayments (except timeshare note
        securitizations gains), gains on the sale of joint ventures, and
        income from cost method joint ventures.
    7 - Equity in earnings (losses) includes our equity in earnings (losses)
        of unconsolidated equity method joint ventures.
    8 - Discontinued operations relates to our Synthetic Fuel business which
        was shut down and substantially all the assets liquidated at
        December 28, 2007.



                         MARRIOTT INTERNATIONAL, INC.
                       CONSOLIDATED STATEMENT OF INCOME
                   (in millions, except per share amounts)

                                             Fifty-Two Weeks Ended
                                           ------------------------    Percent
                                           December 28, December 29,   Better/
                                                 2007         2006     (Worse)
                                           ------------ ------------   -------
    REVENUES
    Base management fees                         $620         $553         12
    Franchise fees                                439          390         13
    Incentive management fees                     369          281         31
    Owned, leased, corporate housing and
     other revenue(1)                           1,240        1,119         11
    Timeshare sales and services(2)             1,747        1,577         11
    Cost reimbursements(3)                      8,575        8,075          6
                                           ------------ ------------
       Total Revenues                          12,990       11,995          8

    OPERATING COSTS AND EXPENSES
    Owned, leased and corporate housing -
     direct(4)                                  1,062          936        (13)
    Timeshare - direct                          1,397        1,220        (15)
    Reimbursed costs                            8,575        8,075         (6)
    General, administrative and other(5)          768          677        (13)
                                           ------------ ------------
       Total Expenses                          11,802       10,908         (8)
                                           ------------ ------------

    OPERATING INCOME                            1,188        1,087          9


    Gains and other income(6)                      97           74         31
    Interest expense                             (184)        (124)       (48)
    Interest income                                38           49        (22)
    (Provision for) reversal of loan losses       (17)           3       (667)
    Equity in earnings (losses)(7)                 15            3        400
                                           ------------ ------------
    INCOME FROM CONTINUING OPERATIONS BEFORE
     INCOME TAXES AND MINORITY INTEREST         1,137        1,092          4
    Provision for income taxes                   (441)        (380)       (16)
    Minority interest                               1            -          *
                                           ------------ ------------
    INCOME FROM CONTINUING OPERATIONS             697          712         (2)

    Discontinued operations - Synthetic
     Fuel, net of tax(8)                           (1)           5       (120)
                                           ------------ ------------
    INCOME BEFORE CUMULATIVE EFFECT OF
     CHANGE IN ACCOUNTING PRINCIPLE               696          717         (3)

    Cumulative effect of change in
     accounting principle, net of tax(9)            -         (109)       100
                                           ------------ ------------
    NET INCOME                                   $696         $608         14
                                           ============ ============
    EARNINGS PER SHARE - Basic
       Earnings from continuing operations      $1.85        $1.76          5
       Earnings from discontinued operations        -         0.01       (100)
       Losses from cumulative effect of
        change in accounting principle              -        (0.27)       100
                                           ------------ ------------
       Earnings per share                       $1.85        $1.50         23
                                           ============ ============
    EARNINGS PER SHARE - Diluted
       Earnings from continuing operations      $1.75        $1.65          6
       Earnings from discontinued operations        -         0.01       (100)
       Losses from cumulative effect of
        change in accounting principle              -        (0.25)       100
                                           ------------ ------------
       Earnings per share                       $1.75        $1.41         24
                                           ============ ============

    Basic Shares                                376.1        404.1
    Diluted Shares                              397.3        430.2

    * Percent can not be calculated.

    1 - Owned, leased, corporate housing and other revenue includes revenue
        from the properties we own or lease, revenue from our corporate
        housing business, termination fees and other revenue.
    2 - Timeshare sales and services includes total timeshare revenue except
        for base fees, cost reimbursements, real estate gains and joint
        venture earnings. Timeshare sales and services includes gains on the
        sale of timeshare note receivable securitizations.
    3 - Cost reimbursements include reimbursements from lodging properties for
        Marriott funded operating expenses.
    4 - Owned, leased and corporate housing -- direct expenses include
        operating expenses related to our owned or leased hotels, including
        lease payments, pre-opening expenses and depreciation, plus expenses
        related to our corporate housing business.
    5 - General, administrative and other expenses include the overhead costs
        allocated to our segments and our corporate overhead costs and general
        expenses.
    6 - Gains and other income includes gains and losses on the sale of real
        estate, gains on note sales or repayments (except timeshare note
        securitizations gains), gains and losses on the sale of joint
        ventures, and income from cost method joint ventures.
    7 - Equity in earnings (losses) includes our equity in earnings (losses)
        of unconsolidated equity method joint ventures.
    8 - Discontinued operations relates to our Synthetic Fuel business which
        was shut down and substantially all the assets liquidated at December
        28, 2007.
    9 - Cumulative effect of change in accounting principle, net of tax is
        associated with the adoption, in the 2006 first quarter, of Statement
        of Position 04-2, "Accounting for Real Estate Time-sharing
        Transactions" which was issued by the American Institute of Certified
        Public Accountants.



                         Marriott International, Inc.
                              Business Segments
                               ($ in millions)

                                             Sixteen Weeks Ended
                                           -------------------------   Percent
                                           December 28, December 29,   Better/
                                                 2007         2006     (Worse)
                                           ------------ ------------   -------
    REVENUES

    North American Full-Service                $1,709       $1,586         8
    North American Limited-Service                657          618         6
    International                                 538          478        13
    Luxury                                        528          450        17
    Timeshare                                     627          644        (3)
                                           ------------ ------------
      Total segment revenues(1)                 4,059        3,776         7
    Other unallocated corporate                    30           22        36
                                           ------------ ------------
      Total                                    $4,089       $3,798         8
                                           ============ ============

    INCOME FROM CONTINUING OPERATIONS

    North American Full-Service                  $154         $141         9
    North American Limited-Service                124          109        14
    International                                 105           77        36
    Luxury                                         28           19        47
    Timeshare                                     116          100        16
                                           ------------ ------------
      Total segment financial results(1)          527          446        18
    Other unallocated corporate                   (95)         (87)       (9)
    Interest income, provision for loan losses
     and interest expense                         (62)         (24)     (158)
    Income taxes                                 (134)        (116)      (16)
                                           ------------ ------------
      Total                                      $236         $219         8
                                           ============ ============

    1 - We consider segment revenues and segment financial results to be
        meaningful indicators of our performance because they measure our
        growth in profitability as a lodging company and enable investors to
        compare the revenues and results of our lodging operations to those of
        other lodging companies.



                         Marriott International, Inc.
                              Business Segments
                               ($ in millions)

                                              Fifty-Two Weeks Ended
                                           --------------------------  Percent
                                           December 28,  December 29,  Better/
                                                2007          2006     (Worse)
                                           ------------  ------------  -------
    REVENUES

    North American Full-Service                $5,476        $5,196        5
    North American Limited-Service              2,198         2,060        7
    International                               1,594         1,411       13
    Luxury                                      1,576         1,423       11
    Timeshare                                   2,065         1,840       12
                                           ------------  ------------
      Total segment revenues(1)                12,909        11,930        8
    Other unallocated corporate                    81            65       25
                                           ------------  ------------
      Total                                   $12,990       $11,995        8
                                           ============  ============

    INCOME FROM CONTINUING OPERATIONS

    North American Full-Service                  $478          $455        5
    North American Limited-Service                461           380       21
    International                                 271           237       14
    Luxury                                         72            63       14
    Timeshare                                     306           280        9
                                           ------------  ------------
      Total segment financial results(1)        1,588         1,415       12
    Other unallocated corporate                  (287)         (251)     (14)
    Interest income, provision for loan
     losses and interest expense                 (163)          (72)    (126)
    Income taxes                                 (441)         (380)     (16)
                                           ------------  ------------
      Total                                      $697          $712       (2)
                                           ============  ============

    1 - We consider segment revenues and segment financial results to be
        meaningful indicators of our performance because they measure our
        growth in profitability as a lodging company and enable investors to
        compare the revenues and results of our lodging operations to those of
        other lodging companies.



                         MARRIOTT INTERNATIONAL, INC.

                                Total Lodging Products(1)
    --------------------------------------------------------------------------
                             Number of Properties     Number of Rooms/Suites
                             --------------------     ----------------------
                                             vs.                         vs.
                         Dec. 28, Dec. 29, Dec. 29, Dec. 28, Dec. 29, Dec. 29,
    Brand                  2007     2006    2006      2007     2006     2006
    -------------------- -----------------------------------------------------

    Domestic Full-Service
    ---------------------
      Marriott Hotels &
       Resorts              342      340       2    136,348  136,097      251
      Renaissance Hotels &
       Resorts               71       65       6     26,117   25,106    1,011
    Domestic Limited-Service
    ------------------------
      Courtyard             693      650      43     96,759   91,226    5,533
      Fairfield Inn         529      513      16     46,930   46,030      900
      SpringHill Suites     176      152      24     20,445   17,684    2,761
      Residence Inn         528      494      34     62,805   58,973    3,832
      TownePlace Suites     141      123      18     14,122   12,368    1,754
    International
    -------------
      Marriott Hotels &
       Resorts              178      179      (1)    52,196   51,307      889
      Renaissance Hotels &
       Resorts               70       71      (1)    22,817   23,120     (303)
      Courtyard              74       83      (9)    14,021   14,300     (279)
      Fairfield Inn           8        5       3        947      559      388
      SpringHill Suites       1        1       -        124      124        -
      Residence Inn          18       17       1      2,611    2,313      298
      Marriott Executive
       Apartments            18       18       -      2,905    3,027     (122)
      Ramada                  2        2       -        332      332        -
    Luxury
    ------
      The Ritz-Carlton -
       Domestic              36       35       1     11,627   11,616       11
      The Ritz-Carlton -
       International         32       25       7      9,591    7,790    1,801
      Bulgari Hotels &
       Resorts                2        2       -        117      117        -
      The Ritz-Carlton
       Residential           17        -      17      1,707        -    1,707
      The Ritz-Carlton
       Services Apartments    2        -       2        387        -      387
    Timeshare(2)
    -----------
      Marriott Vacation
       Club                  46       45       1     10,896   10,512      384
      The Ritz-Carlton
       Club - Fractional      7        5       2        388      398      (10)
      The Ritz-Carlton
       Club - Residential     3        2       1        144      148       (4)
      Grand Residences by
       Marriott - Fractional  2        2       -        248      248        -
      Grand Residences by
       Marriott -
       Residential            1        1       -         65       65        -
      Horizons by Marriott
       Vacation Club          2        2       -        444      372       72
                          ------------------------  -------------------------
    Sub Total Timeshare      61       57       4     12,185   11,743      442
                          ------------------------  -------------------------
    Total                 2,999    2,832     167    535,093  513,832   21,261
                          ========================  =========================


           Number of Timeshare Interval, Fractional and Residential Resorts(2)
           -------------------------------------------------------------------
                                                                     In Active
                                                     Total(3)          Sales
                                                     --------        ---------
    100% Company-Developed
    ----------------------
      Marriott Vacation Club                            45                24
      The Ritz-Carlton Club and Residences               6                 4
      Grand Residences by Marriott and Residences        3                 3
      Horizons by Marriott Vacation Club                 2                 2

    Joint Ventures
    --------------
      Marriott Vacation Club                             1                 1
      The Ritz-Carlton Club and Residences               4                 4
                                                     -------------------------
    Total                                               61                38
                                                     =========================

    1 - Total Lodging Products excludes the 2,156 and 2,046 corporate housing
        rental units as of December 28, 2007 and December 29, 2006,
        respectively.
    2 - Includes products in active sales which may not be ready for
        occupancy.
    3 - Includes resorts that are in active sales and those that are sold out.
        Residential properties are captured once they possess a certificate of
        occupancy.



                         Marriott International, Inc.
                            Key Lodging Statistics

              Comparable Company-Operated International Properties(1)
    --------------------------------------------------------------------------

                     Four Months Ended December 31, 2007 and December 31, 2006
                     ---------------------------------------------------------
                                                                Average Daily
                                  REVPAR         Occupancy           Rate
                     ---------------------------------------------------------

    Region                     2007  vs. 2006  2007  vs. 2006   2007  vs. 2006
    --------------------------------------------------------------------------
    Caribbean & Latin America $124.79  14.2%  74.8%   3.7% pts. $166.81  8.6%
    Continental Europe        $145.74  10.1%  76.9%   1.0% pts. $189.57  8.7%
    United Kingdom            $167.23   5.2%  78.1%  -1.4% pts. $214.00  7.1%
    Middle East & Africa      $104.19  15.1%  72.2%   5.7% pts. $144.39  6.0%
    Asia Pacific(2)           $121.60   6.1%  76.2%  -0.2% pts. $159.51  6.5%

    Regional Composite(3)     $136.77   8.4%  76.5%   0.9% pts. $178.87  7.1%


    International Luxury(4)   $211.48   9.3%  72.0%   2.5% pts. $293.69  5.5%

    Total International(5)    $144.54   8.5%  76.0%   1.0% pts. $190.18  7.0%

    Worldwide(6)              $123.72   7.0%  71.7%   0.6% pts. $172.43  6.1%



                 Comparable Systemwide International Properties(1)
    --------------------------------------------------------------------------
                     Four Months Ended December 31, 2007 and December 31, 2006
                     ---------------------------------------------------------
                                                                Average Daily
                                  REVPAR         Occupancy           Rate
                     ---------------------------------------------------------

    Region                     2007  vs. 2006  2007  vs. 2006   2007  vs. 2006
    --------------------------------------------------------------------------

    Caribbean & Latin America $112.41  12.4%  73.5%   3.4% pts. $152.88  7.2%
    Continental Europe        $141.52   9.3%  75.4%   2.2% pts. $187.76  6.1%
    United Kingdom            $164.37   4.9%  77.9%  -1.2% pts. $210.97  6.5%
    Middle East & Africa      $102.10  15.5%  71.6%   5.7% pts. $142.63  6.3%
    Asia Pacific(2)           $122.65   5.2%  76.4%  -0.5% pts. $160.54  5.9%

    Regional Composite(3)     $132.92   7.7%  75.8%   1.2% pts. $175.47  6.0%


    International Luxury(4)   $211.48   9.3%  72.0%   2.5% pts. $293.69  5.5%

    Total International(5)    $139.63   7.9%  75.4%   1.3% pts. $185.11  6.0%

    Worldwide(6)              $103.51   6.6%  70.8%   0.2% pts. $146.29  6.3%

    1 - International financial results are reported on a period basis, while
        International statistics are reported on a monthly basis. Statistics
        are in constant dollars for September through December. Excludes
        North America (except for Worldwide).
    2 - Does not include Hawaii.
    3 - Regional information includes Marriott Hotels & Resorts, Renaissance
        Hotels & Resorts and Courtyard properties. Includes Hawaii.
    4 - International Luxury includes The Ritz-Carlton properties outside of
        North America and Bulgari Hotels & Resorts.
    5 - Includes Regional Composite and International Luxury.
    6 - Includes international statistics for the four calendar months ended
        December 31, 2007 and December 31, 2006, and North American statistics
        for the sixteen weeks ended December 28, 2007 and December 29, 2006.
        Includes Marriott Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels &
        Resorts, Renaissance Hotels & Resorts, Residence Inn, Courtyard,
        TownePlace Suites, Fairfield Inn and SpringHill Suites properties.



                         Marriott International, Inc.
                            Key Lodging Statistics

              Comparable Company-Operated International Properties(1)
    --------------------------------------------------------------------------
                   Twelve Months Ended December 31, 2007 and December 31, 2006
                   -----------------------------------------------------------
                                                                Average Daily
                                  REVPAR         Occupancy           Rate
                   -----------------------------------------------------------

    Region                     2007  vs. 2006  2007  vs. 2006   2007  vs. 2006
    --------------------------------------------------------------------------
    Caribbean & Latin America $128.25  12.7%  76.5%   2.4% pts. $167.56  9.2%
    Continental Europe        $129.34   7.7%  74.4%   1.3% pts. $173.92  5.8%
    United Kingdom            $158.08   5.2%  77.8%   0.1% pts. $203.27  5.2%
    Middle East & Africa       $99.57  16.8%  73.3%   4.8% pts. $135.74  9.1%
    Asia Pacific(2)           $111.15   7.8%  75.2%  -0.8% pts. $147.79  8.9%

    Regional Composite(3)     $127.44   8.2%  75.7%   0.8% pts. $168.30  7.0%


    International Luxury(4)   $212.54  12.2%  72.7%   4.0% pts. $292.24  6.1%

    Total International(5)    $136.29   8.9%  75.4%   1.2% pts. $180.73  7.2%

    Worldwide(6)              $121.34   7.0%  73.5%   0.5% pts. $165.19  6.2%



                 Comparable Systemwide International Properties(1)
    --------------------------------------------------------------------------
                   Twelve Months Ended December 31, 2007 and December 31, 2006
                   -----------------------------------------------------------
                                                                Average Daily
                                  REVPAR         Occupancy           Rate
                   -----------------------------------------------------------

    Region                     2007  vs. 2006  2007  vs. 2006   2007  vs. 2006
    --------------------------------------------------------------------------
    Caribbean & Latin America $117.20  11.7%  74.8%   2.8% pts. $156.76  7.5%
    Continental Europe        $126.01   7.3%  72.0%   1.2% pts. $174.93  5.4%
    United Kingdom            $155.27   5.1%  77.4%   0.3% pts. $200.65  4.7%
    Middle East & Africa       $96.95  17.0%  72.4%   4.9% pts. $133.98  9.0%
    Asia Pacific(2)           $111.92   7.0%  75.3%  -0.5% pts. $148.67  7.7%

    Regional Composite(3)     $123.78   7.8%  74.6%   1.0% pts. $166.03  6.3%


    International Luxury(4)   $212.54  12.2%  72.7%   4.0% pts. $292.24  6.1%

    Total International(5)    $131.36   8.4%  74.4%   1.3% pts. $176.57  6.6%

    Worldwide(6)              $103.19   6.5%  72.9%   0.1% pts. $141.60  6.4%


    1 - International financial results are reported on a period basis, while
        International statistics are reported on a monthly basis. Statistics
        are in constant dollars for January through December. Excludes North
        America (except for Worldwide).
    2 - Does not include Hawaii.
    3 - Regional information includes Marriott Hotels & Resorts, Renaissance
        Hotels & Resorts and Courtyard properties. Includes Hawaii.
    4 - International Luxury includes The Ritz-Carlton properties outside of
        North America and Bulgari Hotels & Resorts.
    5 - Includes Regional Composite and International Luxury.
    6 - Includes international statistics for the twelve calendar months ended
        December 31, 2007 and December 31, 2006, and North American statistics
        for the fifty-two weeks ended December 28, 2007 and December 29, 2006.
        Includes Marriott Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels &
        Resorts, Renaissance Hotels & Resorts, Residence Inn, Courtyard,
        TownePlace Suites, Fairfield Inn and SpringHill Suites properties.



                         Marriott International, Inc.
                            Key Lodging Statistics

              Comparable Company-Operated North American Properties
    --------------------------------------------------------------------------
                   Sixteen Weeks Ended December 28, 2007 and December 29, 2006
                   -----------------------------------------------------------
                                                                Average Daily
                                   REVPAR         Occupancy         Rate
                   -----------------------------------------------------------
    Brand                       2007  vs. 2006 2007  vs. 2006   2007  vs. 2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts   $128.23  6.1%  70.0%   0.1% pts. $183.31  5.9%
    Renaissance Hotels &
     Resorts                    $123.40  7.9%  70.0%   1.2% pts. $176.29  6.1%
    Composite North American
     Full-Service(1)            $127.47  6.4%  70.0%   0.3% pts. $182.20  5.9%
    The Ritz-Carlton(2)         $232.62  7.0%  68.7%  -0.1% pts. $338.59  7.1%
    Composite North American
     Full-Service & Luxury(3)   $138.26  6.5%  69.8%   0.3% pts. $197.99  6.1%
    Residence Inn                $93.60  5.1%  75.0%   0.8% pts. $124.83  4.0%
    Courtyard                    $88.19  5.4%  68.0%   0.1% pts. $129.65  5.3%
    TownePlace Suites            $60.95  8.5%  71.5%   1.3% pts.  $85.30  6.5%
    SpringHill Suites            $75.40  6.8%  70.0%   2.2% pts. $107.65  3.5%
    Composite North American
     Limited-Service(4)          $87.08  5.6%  70.2%   0.5% pts. $124.11  4.9%
    Composite - All(5)          $115.07  6.2%  70.0%   0.4% pts. $164.43  5.6%



                 Comparable Systemwide North American Properties
    --------------------------------------------------------------------------
                   Sixteen Weeks Ended December 28, 2007 and December 29, 2006
                   -----------------------------------------------------------
                                                               Average Daily
                                    REVPAR       Occupancy           Rate
                   -----------------------------------------------------------
    Brand                       2007  vs. 2006 2007  vs. 2006   2007  vs. 2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts   $112.62  6.3%  68.0%   0.0% pts. $165.66  6.3%
    Renaissance Hotels &
     Resorts                    $112.37  6.2%  69.3%   0.0% pts. $162.07  6.3%
    Composite North American
     Full-Service(1)            $112.58  6.3%  68.2%   0.0% pts. $165.11  6.3%
    The Ritz-Carlton(2)         $232.62  7.0%  68.7%  -0.1% pts. $338.59  7.1%
    Composite North American
     Full-Service & Luxury(3)   $119.87  6.4%  68.2%   0.0% pts. $175.72  6.4%
    Residence Inn                $92.85  5.6%  75.6%   0.0% pts. $122.88  5.6%
    Courtyard                    $87.62  6.3%  69.7%   0.4% pts. $125.71  5.7%
    Fairfield Inn                $59.30  6.8%  67.0%  -0.1% pts.  $88.50  6.9%
    TownePlace Suites            $61.13  4.9%  70.5%  -1.3% pts.  $86.76  6.8%
    SpringHill Suites            $74.22  5.3%  69.9%  -0.9% pts. $106.22  6.7%
    Composite North American
     Limited-Service(4)          $80.81  6.0%  70.7%   0.0% pts. $114.22  6.0%
    Composite - All(5)           $95.89  6.2%  69.8%   0.0% pts. $137.43  6.2%

    1 - Includes Marriott Hotels & Resorts and Renaissance Hotels & Resorts
        properties.
    2 - Statistics for Ritz-Carlton properties are for September through
        December.
    3 - Includes Marriott Hotels & Resorts, Renaissance Hotels & Resorts and
        Ritz-Carlton properties.
    4 - Includes Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites
        and SpringHill Suites properties.
    5 - Includes Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The
        Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace
        Suites, and SpringHill Suites properties.



              Comparable Company-Operated North American Properties
    --------------------------------------------------------------------------
               Fifty-two Weeks Ended December 28, 2007 and December 29, 2006
               ---------------------------------------------------------------
                                                                Average Daily
                                   REVPAR       Occupancy           Rate
               ---------------------------------------------------------------
    Brand                     2007  vs. 2006  2007  vs. 2006    2007  vs. 2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts $127.43  6.9%  72.6%   1.0% pts. $175.41  5.4%
    Renaissance Hotels &
     Resorts                  $124.17  5.9%  73.1%   0.4% pts. $169.93  5.4%
    Composite North American
     Full-Service(1)          $126.92  6.8%  72.7%   0.9% pts. $174.54  5.4%
    The Ritz-Carlton(2)       $239.67  7.5%  72.3%   0.1% pts. $331.48  7.3%
    Composite North American
     Full-Service & Luxury(3) $137.66  6.9%  72.7%   0.8% pts. $189.41  5.7%
    Residence Inn              $96.53  3.9%  77.7%  -0.5% pts. $124.24  4.6%
    Courtyard                  $89.69  4.9%  70.4%  -0.4% pts. $127.34  5.6%
    TownePlace Suites          $63.56  7.2%  74.2%  -1.1% pts.  $85.65  8.9%
    SpringHill Suites          $78.27  5.0%  72.6%   0.6% pts. $107.86  4.2%
    Composite North American
     Limited-Service(4)        $89.18  4.8%  72.7%  -0.4% pts. $122.63  5.4%
    Composite - All(5)        $115.60  6.2%  72.7%   0.3% pts. $159.01  5.8%



                 Comparable Systemwide North American Properties
    --------------------------------------------------------------------------
                Fifty-two Weeks Ended December 28, 2007 and December 29, 2006
               ---------------------------------------------------------------
                                                                Average Daily
                                   REVPAR         Occupancy         Rate
               ---------------------------------------------------------------
    Brand                       2007  vs. 2006 2007  vs. 2006   2007  vs. 2006
    --------------------------------------------------------------------------
    Marriott Hotels & Resorts   $113.66  6.4%  70.8%   0.6% pts. $160.61  5.5%
    Renaissance Hotels &
     Resorts                    $112.96  5.1%  71.8%  -0.4% pts. $157.29  5.8%
    Composite North American
     Full-Service(1)            $113.56  6.2%  70.9%   0.5% pts. $160.10  5.5%
    The Ritz-Carlton(2)         $239.67  7.5%  72.3%   0.1% pts. $331.48  7.3%
    Composite North American
     Full-Service & Luxury(3)   $120.65  6.4%  71.0%   0.4% pts. $169.92  5.7%
    Residence Inn                $95.80  5.1%  78.2%  -0.8% pts. $122.44  6.1%
    Courtyard                    $89.53  5.6%  72.1%  -0.2% pts. $124.12  5.9%
    Fairfield Inn                $62.17  6.7%  70.5%  -0.3% pts.  $88.19  7.2%
    TownePlace Suites            $63.89  5.0%  73.5%  -2.4% pts.  $86.93  8.4%
    SpringHill Suites            $77.97  5.7%  73.2%  -0.6% pts. $106.49  6.5%
    Composite North American
     Limited-Service(4)          $83.37  5.6%  73.6%  -0.5% pts. $113.34  6.3%
    Composite - All(5)           $97.70  6.0%  72.6%  -0.2% pts. $134.62  6.2%


    1 - Includes Marriott Hotels & Resorts and Renaissance Hotels & Resorts
        properties.
    2 - Statistics for Ritz-Carlton properties are for January through
        December.
    3 - Includes Marriott Hotels & Resorts, Renaissance Hotels & Resorts and
        Ritz-Carlton properties.
    4 - Includes Residence Inn, Courtyard, Fairfield Inn, TownePlace Suites
        and SpringHill Suites properties.
    5 - Includes Marriott Hotels & Resorts, Renaissance Hotels & Resorts, The
        Ritz-Carlton, Residence Inn, Courtyard, Fairfield Inn, TownePlace
        Suites, and SpringHill Suites properties.



                          MARRIOTT INTERNATIONAL, INC.
                                TIMESHARE SEGMENT
                                 ($ in millions)


      Segment Results
                                            Sixteen Weeks Ended
                                         ------------------------    Percent
                                         December 28, December 29,    Better /
                                                2007         2006     (Worse)
                                         ------------------------   ---------

      Base fees revenue                          $13          $10         30
      Timeshare sales and services
       revenue, net of direct
       expense                                   126          133         (5)
      Joint venture equity income (loss)           6           (3)       300
      General, administrative and other
       expense                                   (29)         (40)        28
                                         -----------  -----------
        Segment results                         $116         $100         16
                                         ===========  ===========



      Sales and Services Revenue
                                            Sixteen Weeks Ended
                                         ------------------------    Percent
                                         December 28, December 29,    Better /
                                                2007         2006     (Worse)
                                         ------------------------   ---------

      Development                               $362         $378         (4)
      Services                                    90           79         14
      Financing                                   75           67         12
      Other revenue                                9            2        350
                                         -----------  -----------
        Sales and services revenue              $536         $526          2
                                         ===========  ===========



      Contract Sales(1)
                                            Sixteen Weeks Ended
                                         ------------------------    Percent
                                         December 28, December 29,    Better /
                                                2007         2006     (Worse)
                                         ------------------------   ---------
      Company:
        Timeshare                               $344         $314         10
        Fractional                                17           10         70
        Residential                              (15)           -          *
                                         -----------  -----------
          Total company                          346          324          7
      Joint ventures:
        Timeshare                                 10           10          -
        Fractional                                 8           46        (83)
        Residential                                2          116        (98)
                                         -----------  -----------
          Total joint ventures                    20          172        (88)
                                         -----------  -----------
          Total contract sales, including
           joint ventures                       $366         $496        (26)
                                         ===========  ===========

    * Percent can not be calculated.

    1 - Timeshare contract sales represent gross sales of timeshare,
        fractional, and residential products from both our wholly-owned and
        joint venture projects, before the adjustment for percentage-of-
        completion accounting.



                          MARRIOTT INTERNATIONAL, INC.
                                TIMESHARE SEGMENT
                                 ($ in millions)


      Segment Results
                                           Fifty-Two Weeks Ended
                                         ------------------------    Percent
                                         December 28, December 29,    Better /
                                                2007         2006     (Worse)
                                         ------------------------   ---------

      Base fees revenue                          $43          $34         26
      Timeshare sales and services
       revenue, net of direct expense            350          357         (2)
      Joint venture equity income (loss)          10           (2)       600
      Minority interest                            1            -          *
      General, administrative and other
       expense                                   (98)        (109)        10
                                         -----------  -----------
          Segment results                       $306         $280          9
                                         ===========  ===========


      Sales and Services Revenue
                                           Fifty-Two Weeks Ended
                                         ------------------------    Percent
                                         December 28, December 29,    Better /
                                                2007         2006     (Worse)
                                         ------------------------   ---------
      Development                             $1,208       $1,112          9
      Services                                   315          286         10
      Financing                                  195          171         14
      Other revenue                               29            8        263
                                         -----------  -----------
        Sales and services revenue            $1,747       $1,577         11
                                         ===========  ===========



      Contract Sales(1)
                                           Fifty-Two Weeks Ended
                                         ------------------------    Percent
                                         December 28, December 29,    Better /
                                                2007         2006     (Worse)
                                         ------------------------   ---------

      Company:
        Timeshare                             $1,221       $1,207          1
        Fractional                                44           42          5
        Residential                               (9)           5       (280)
                                         -----------  -----------
          Total company                        1,256        1,254          -
      Joint ventures:
        Timeshare                                 33           28         18
        Fractional                                54           68        (21)
        Residential                               58          282        (79)
                                         -----------  -----------
          Total joint ventures                   145          378        (62)
                                         -----------  -----------
          Total contract sales, including
           joint ventures                     $1,401       $1,632        (14)
                                         ===========  ===========

    * Percent can not be calculated.

    1 - Timeshare contract sales represent gross sales of timeshare,
        fractional, and residential products from both our wholly-owned and
        joint venture projects, before the adjustment for percentage-of-
        completion accounting.



                         MARRIOTT INTERNATIONAL, INC.
                         Non-GAAP Financial Measures

In our press release and schedules, and related conference call, we report certain financial measures that are not prescribed or authorized by United States generally accepted accounting principles ("GAAP"). We discuss management's reasons for reporting these non-GAAP measures below, and the tables on the following pages reconcile the most directly comparable GAAP measures to the non-GAAP measures (identified by a double asterisk on the following pages) that we refer to in our press release and related conference call. Although management evaluates and presents these non-GAAP measures for the reasons described below, please be aware that these non-GAAP measures are not alternatives to revenue, operating income, income from continuing operations, net income, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and/or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non- GAAP measures we report may not be comparable to those reported by others.

ESOP Settlement Charge. Management evaluates non-GAAP measures that exclude the charge associated with the 2007 settlement of issues raised during the IRS' and Department of Labor's examination of the employee stock ownership plan ("ESOP") feature of our Employees' Profit Sharing, Retirement and Savings Plan and Trust, including adjusted earnings per share and adjusted earnings before interest, taxes, depreciation and amortization, because these measures allow for period-over-period comparisons relative to our on-going operations before material charges. Additionally, these non-GAAP measures facilitate management's comparison of our results relative to on-going operations before material charges with that of other lodging companies. The settlement resulted in an after-tax charge of $54 million in the second quarter 2007 reflecting $35 million of excise taxes (impacting General, Administrative, and Other Expenses), $13 million of interest expense on those excise taxes and $6 million of income tax expense primarily reflecting additional interest.

Earnings Before Interest and Taxes. Earnings before interest and taxes (EBIT) reflects earnings excluding the impact of interest expense and tax expense. EBIT is used by analysts, lenders, investors and others, as well as by us, 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. Additionally, the tax positions of companies can 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 tax expense can vary considerably among companies.

Earnings Before Interest, Taxes, Depreciation and Amortization. Earnings before interest, taxes, depreciation and amortization (EBITDA) reflects EBIT excluding the impact of depreciation and amortization. Our management considers EBITDA to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business. EBITDA is used by analysts, lenders, investors and others, as well as by us, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. In addition to the items previously noted that are excluded in calculating EBIT, EBITDA further excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Adjusted EBITDA. Our management also evaluates adjusted EBITDA which excludes the synthetic fuel business for 2007 and 2006, as well as the $35 million charge in 2007 for excise taxes associated with the ESOP settlement. The synthetic fuel operations, discontinued in 2007, are not related to our core business, which is lodging. Accordingly, our management evaluates non- GAAP measures which exclude the impact of the synthetic fuel business because those measures allow for period-over-period comparisons of our on-going core lodging operations. In addition, these non-GAAP measures facilitate management's comparison of our results with the results of other lodging companies. Our management excludes the excise taxes associated with the ESOP settlement for the reasons noted above in the "ESOP Settlement Charge" caption.

Return on Invested Capital. Return on Invested Capital ("ROIC") is calculated as EBIT divided by average capital investment. We consider ROIC to be a meaningful indicator of our operating performance, and we evaluate this metric because it measures how effectively we use the money invested in our lodging operations. The calculation of EBIT adds back to income from continuing operations: 1) the provision for income taxes; 2) interest expense; and 3) timeshare interest representing previously capitalized interest that is a component of product cost. The calculation of invested capital adds back to total assets cumulative goodwill amortization to be consistent with the calculation for earlier years. Beginning with 2002, we stopped amortizing goodwill in conjunction with the adoption of FAS No. 142, "Goodwill and Other Intangible Assets." The calculation of invested capital deducts from total assets: 1) current liabilities as they will be satisfied in the short term; 2) assets associated with discontinued operations net of liabilities because the ROIC metric we analyze is related to our core lodging business (continuing operations); 3) deferred tax assets net of liabilities because the numerator of the calculation is a pre-tax number; and 4) timeshare capitalized interest because the numerator of the calculation is a pre-interest expense number.



                          MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
          Measures that Exclude the Second Quarter 2007 ESOP Settlement
                     (in millions, except per share amounts)


                                                   Fiscal Year 2007
                                         ------------------------------------

                                                                   Excluding
                                         As Reported ESOP Impact   ESOP **(1)
                                         ----------- -----------   ----------

    Operating income (loss)                   $1,188        $(35)     $1,223
    Gains and other income (expense)              97           -          97
    Interest income, provision for loan
     losses and interest expense                (163)        (13)       (150)
    Equity in earnings (losses)                   15           -          15
                                         ----------- -----------   ----------
    Income (losses) from continuing
     operations before income taxes
     and minority interest                     1,137         (48)      1,185

    Provision for income taxes                  (441)         (6)       (435)

    Minority interest                              1           -           1
                                         ----------- -----------   ----------
    Income (loss) from continuing
     operations                                 $697        $(54)       $751
                                         =========== ===========   ==========


    Diluted shares                             397.3       397.3       397.3

    Earnings per share - diluted               $1.75      $(0.14)      $1.89


    **  Denotes non-GAAP financial measures.

    1 - We refer to earnings per share excluding the ESOP impact as adjusted
        earnings per share, and we refer to income from continuing
        operations excluding the ESOP impact as adjusted income from
        continuing operations.



                           Marriott International, Inc.
                    Non-GAAP Financial Measure Reconciliation
                            Return on Invested Capital
                                 ($ in millions)

The reconciliation of income from continuing operations to earnings before income taxes and interest expense is as follows:

                                          Fiscal Year 2007
                                          ----------------
    Income from continuing operations                 $697
    Add:
      Provision for income taxes                       441
      Interest expense                                 184
      Timeshare interest(1)                             24
                                          ----------------
    Earnings before income taxes and
     interest expense **                            $1,346
                                          ================


    The reconciliation of assets to invested capital is as follows:

                                          Fiscal Year 2007  Fiscal Year 2006
                                          ----------------  ----------------

    Assets                                          $8,942            $8,588
    Add:
      Cumulative goodwill amortization                 128               128
      Current liabilities - discontinued
       operations                                       13                55
    Less:
      Current liabilities, net of current
       portion of long-term debt                    (2,701)           (2,507)
      Assets - discontinued operations                 (53)              (91)
      Deferred tax assets, net                        (863)             (865)
      Timeshare capitalized interest                   (19)              (19)
                                          ----------------  ----------------
    Invested capital **                             $5,447            $5,289
                                          ================  ================

      Average capital investment ** (2)             $5,368
                                          ================

      Return on invested capital **                    25%

      ** Denotes a non-GAAP financial measure.

    1 - Timeshare interest represents previously capitalized interest that is
        a component of product cost.
    2 - Calculated as "Invested capital" for the current year and prior year,
        divided by two.



                           MARRIOTT INTERNATIONAL, INC.
                           Non-GAAP Financial Measure
                            EBITDA and Adjusted EBITDA
                                 ($ in millions)

                                                   Fiscal Year 2007
                                        --------------------------------------
                                        First   Second  Third   Fourth
                                        Quarter Quarter Quarter Quarter Total
                                        ------- ------- ------- ------- ------
    Net income                             $182   $207     $131   $176   $696
    Interest expense                         33     52       42     57    184
    Tax provision                            14     42       52    207    315
    Depreciation and amortization            46     45       43     63    197
    Less: Depreciation reimbursed by
     third-party owners                      (4)    (4)      (4)    (6)   (18)
    Interest expense from unconsolidated
     joint ventures                           5      5        8      6     24
    Depreciation and amortization from
     unconsolidated joint ventures            6      7        6      9     28
                                        ------- ------- ------- ------- ------
    EBITDA**                               $282   $354     $278   $512  1,426

    ESOP Settlement - Excise Tax              -     35        -      -     35
    Discontinued operations adjustment
     (synthetic fuel)                        52     52       30    (15)   119
                                        ------- ------- ------- ------- ------
    Adjusted EBITDA**                      $334   $441     $308   $497 $1,580
                                        ======= ======= ======= ======= ======
    Increase over 2006
     Adjusted EBITDA                         3%     21%       3%    14%    11%
    The following items make up the
     discontinued operations
     (synthetic fuel)
    Pre-tax Synthetic Fuel operating
     losses (income)                        $54    $54      $32   $(13)  $127
    Synthetic Fuel depreciation              (2)    (2)      (2)    (2)    (8)
    EBITDA adjustment for discontinued
     operations (synthetic fuel)        ------- ------- ------- ------- ------
                                            $52    $52      $30   $(15)  $119
                                        ======= ======= ======= ======= ======


                                                   Fiscal Year 2006
                                        --------------------------------------
                                        First   Second  Third   Fourth
                                        Quarter Quarter Quarter Quarter Total
                                        ------- ------- ------- ------- ------
    Net income                              $61   $186   $141   $220     $608
    Cumulative effect of change in
     accounting principle                   173      -      -      -      173
    Interest expense                         27     30     29     38      124
    Tax provision                            56     85     82     63      286
    Tax benefit from cumulative effect of
     change in accounting principle         (64)     -      -      -      (64)
    Depreciation and amortization            40     42     44     62      188
    Less: Depreciation reimbursed by
     third-party owners                      (4)    (4)    (4)    (6)     (18)
    Interest expense from unconsolidated
     joint ventures                           5      6      5      7       23
    Depreciation and amortization from
     unconsolidated joint ventures            6      7      7      9       29
                                        ------- ------- ------- ------- ------
    EBITDA**                               $300   $352   $304   $393   $1,349

    Discontinued operations adjustment
     (synthetic fuel)                        24     11     (4)    44       75
                                        ------- ------- ------- ------- ------
    Adjusted EBITDA**                      $324   $363   $300   $437   $1,424
                                        ======= ======= ======= ======= ======

    The following items make up the
     discontinued operations
     (synthetic fuel)
    Pre-tax Synthetic Fuel operating
     losses (income)                        $31    $13    $(2)   $53      $95
    Pre-tax minority interest -
     Synthetic Fuel                          (5)     -      -     (1)      (6)
    Synthetic Fuel depreciation              (2)    (2)    (2)    (8)     (14)
    EBITDA adjustment for discontinued  ------- ------- ------- ------- ------
     operations (synthetic fuel)            $24    $11    $(4)   $44      $75
                                        ======= ======= ======= ======= ======

    **  Denotes non-GAAP financial measures.


SOURCE Marriott International, Inc.

http://www.marriott.com

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