Marriott International Reports Third Quarter 2018 Results

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Nov 5, 2018

Marriott International Reports Third Quarter 2018 Results

BETHESDA, Md., Nov. 5, 2018 /PRNewswire/ --

HIGHLIGHTS

  • Third quarter reported diluted EPS totaled $1.38, a 7 percent increase from prior year results.  Third quarter adjusted diluted EPS totaled $1.70, a 62 percent increase over third quarter 2017 adjusted results.  Adjusted results exclude merger-related adjustments,cost reimbursement revenue, and reimbursed expenses
              
  • During the 2018 third quarter, EPS included $0.26 from gains on asset sales ($71 million pretax reflected in Gains and other income, net and Equity in earnings);
           
  • Third quarter 2018 comparable systemwide constant dollar RevPAR rose 1.9percent worldwide, 5.4 percent outside North America and 0.6 percent in North America;
                
  • The company added more than 18,000 rooms during the third quarter, including over 1,500 rooms converted from competitor brands and approximately 10,000 rooms in international markets;
              
  • At quarter-end, Marriott's worldwide development pipeline increased to roughly 471,000 rooms, including nearly 50,000 rooms approved, but not yet subject to signed contracts;
              
  • Third quarter reported net income totaled $483 million, flat compared to prior year results.  Third quarter adjusted net income totaled $598 million, a 51 percent increase over prior year adjusted results;
          
  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $900 million in the quarter, a 12 percent increase over third quarter 2017 adjusted EBITDA.  Third quarter 2018 gross fee revenues totaled $932 million, a 13 percent increase from prior year gross fee revenues;
              
  • Marriott repurchased 6.7 million shares of the company's common stock for $841 million during the third quarter.  Year-to-date through November 5, the company has repurchased 20.8 million shares for $2.7 billion.

Marriott International, Inc. (NASDAQ: MAR) today reported third quarter 2018 results.

Arne M. Sorenson, president and chief executive officer of Marriott International, said, "It's been just over two years since the completion of the Starwood acquisition.  We are in the home stretch on integrating the companies and are pleased with the results.  On August 18, we integrated our loyalty programs creating one powerful, unified program, allowing our 120 million members to earn, book, and redeem across more than 6,700 hotels.  At the time of the acquisition, we stated our goal to recycle assets totaling more than $1.5 billion by the end of 2018.  We have already exceeded that goal, recycling more than $1.8 billion since the deal closed.

"In the third quarter, we were pleased to post gross fee revenues growth of 13 percent and adjusted EBITDA growth of 12 percent, as worldwide comparable systemwide hotel RevPAR increased roughly 2 percent.  Our results in the third quarter highlight the resiliency of our asset light model and our ability to generate cash.  Year-to-date through November 5, we have already returned more than $3.1 billion to shareholders through dividends and share repurchases and now believe we could return roughly $3.7 billion in 2018.

"It has been gratifying to see broad associate participation in Marriott's retirement savings plans.  Approximately 80 percent of eligible associates participated in and will receive a supplemental, one-time company match of up to $1,000.  Our associates are our most important assets, serving our guests every day.  We recognize their extraordinary efforts and, with this incentive, encourage them to save for the future. 

"We expect Marriott's fourth quarter 2018 comparable systemwide RevPAR on a constant dollar basis will increase roughly 2 percent worldwide, roughly 1 percent in North America, and 5 to 6 percent outside North America.  Our forecast for RevPAR in North America reflects an estimated 110-basis-point headwind due to the 2017 hurricane relief efforts in Texas and Florida and it also reflects the slightly weaker than expected transient demand the industry experienced during September.  Trends in most international markets are expected to remain strong. 

"For full year 2019, based on our early budgeting analysis, we expect comparable systemwide RevPAR on a constant dollar basis will increase 2 to 3 percent worldwide, 1 to 3 percent in North America, and 3 to 5 percent outside North America

"For the full year 2018, we anticipate our number of rooms will increase nearly 7 percent gross while room deletions should total nearly 2 percent, resulting in net rooms growth of roughly 5 percent for the year.  For the full year 2019, we anticipate gross room additions will increase at a rate similar to 2018, but deletions should moderate to 1 to 1.5 percent for the year, resulting in net rooms growth acceleration to roughly 5.5 percent."

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

Marriott's reported net income totaled $483 million in the 2018 third quarter, compared to 2017 third quarter reported net income of $485 million.  Reported diluted earnings per share (EPS) totaled $1.38 in the quarter, a 7 percent increase from reported diluted EPS of $1.29 in the year-ago quarter.

Third quarter 2018 adjusted net income totaled $598 million, a 51 percent increase over 2017 third quarter adjusted net income of $397 million.  Adjusted net income excludes merger-related adjustments, cost reimbursement revenue, and reimbursed expenses.  Adjusted diluted EPS in the third quarter totaled $1.70, a 62 percent increase from adjusted diluted EPS of $1.05 in the year-ago quarter.  See page A-3 for the calculation of adjusted results.

Base management and franchise fees totaled $781 million in the 2018 third quarter, a 14 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 higher RevPAR, unit growth, and higher credit card and residential branding fees.

Third quarter 2018 incentive management fees totaled $151 million, a 9 percent increase compared to incentive management fees of $138 million in the year-ago quarter.  The year-over-year increase is largely due to higher net house profit at properties in Europe and the Asia Pacific region.

Owned, leased, and other revenue, net of direct expenses, totaled $82 million in the 2018 third quarter, flat compared to the year-ago quarter.  Compared to the year-ago quarter, results largely reflect higher termination fees and stronger results at several owned and leased hotels in North America, offset by the $23 million negative impact from hotels sold during or after the third quarter of 2017.

General, administrative, and other expenses for the 2018 third quarter totaled $221 million, compared to $205 million in the year-ago quarter.  The year-over-year $16 million increase largely reflects $7 million of incremental profit-sharing contributions in the 2018 third quarter and the unfavorable comparison to a $6 million state tax incentive recognized in the 2017 third quarter.

Gains and other income, net, totaled $18 million, compared to $6 million in the year-ago quarter. The year-over-year $12 million increase largely reflects an adjustment to the gain on the 2018 second quarter sale of two hotels in Fiji.

Equity in earnings for the third quarter totaled $61 million, compared to $6 million in the year-ago quarter.  The 2018 third quarter includes a $55 million gain on a joint venture's sale of the JW Marriott hotel in Mexico City.

Interest expense, net, totaled $81 million in the third quarter compared to $64 million in the year-ago quarter.  The increase is largely due to higher interest rates and debt balances, and lower interest income.

The provision for income taxes totaled $85 million in the third quarter, a 14.9 percent effective tax rate, compared to $253 million in the year-ago quarter, a 34.3 percent effective tax rate.  The lower effective rate in the 2018 third quarter largely reflects the effects of the U.S. Tax Cuts and Jobs Act of 2017, benefits relating to the sale of two hotels in Fiji, a joint venture's sale of the JW Marriott hotel in Mexico City, and $11 million of favorable discrete items. 

For the third quarter, adjusted EBITDA totaled $900 million, a 12 percent increase over third quarter 2017 adjusted EBITDA of $806 million.  Compared to the prior year, adjusted EBITDA for the third quarter of 2018 reflects the $19 million negative impact from sold hotels.  See page A-11 for the adjusted EBITDA calculations.

Third Quarter 2018 Results Compared to August 6, 2018 Guidance

On August 6, 2018, the company estimated gross fee revenues for the third quarter would be $915 million to $935 million.  Actual gross fee revenues of $932 million in the quarter were towards the high end of the estimate, largely reflecting greater than expected credit card and residential branding fees, partially offset by weaker than expected RevPAR and unfavorable foreign exchange. 

Marriott estimated owned, leased, and other revenue, net of direct expenses, for the third quarter would total approximately $65 million.  Actual results of $82 million in the quarter were higher than estimated, largely due to higher than expected termination fees.

The company estimated general, administrative, and other expenses for the third quarter would total $235 million to $240 million.  Actual expenses of $221 million in the quarter were lower than expected, largely due to timing and lower than anticipated incremental profit-sharing contributions.

The company estimated gains and other income for the third quarter would total approximately $3 million.  Actual gains of $18 million in the quarter were higher than expected, due to an adjustment to the gain on the 2018 second quarter sale of two hotels in Fiji.

The company estimated equity in earnings for the third quarter would total approximately $7 million.  Actual equity in earnings of $61 million in the quarter were higher than expected, largely reflecting a $55 million gain on a joint venture's sale of the JW Marriott hotel in Mexico City.

The company estimated adjusted EBITDA for the third quarter would total $845 million to $870 million.  Actual adjusted EBITDA of $900 million was higher than expected due to strong credit card and residential branding fee revenue, higher than expected termination fees, and lower than expected general, administrative, and other expenses.

Selected Performance Information

The company added 106 new properties (18,121 rooms) to its worldwide lodging portfolio during the 2018 third quarter, including The Barcelona EDITION, the W Kuala Lumpur, and the JW Marriott Panama.  Forty properties (6,520 rooms) exited the system during the quarter.  At quarter-end, Marriott's lodging system encompassed 6,782 properties and timeshare resorts with nearly 1,299,000 rooms.

At quarter-end, the company's worldwide development pipeline totaled 2,790 properties with roughly 471,000 rooms, including 1,139 properties with more than 212,000 rooms under construction and 293 properties with nearly 50,000 rooms approved for development, but not yet subject to signed contracts.

In the 2018 third quarter, worldwide comparable systemwide constant dollar RevPAR increased 1.9 percent (a 1.2 percent increase using actual dollars).  North American comparable systemwide constant dollar RevPAR increased 0.6 percent (a 0.4 percent increase using actual dollars), and international comparable systemwide constant dollar RevPAR increased 5.4 percent (a 3.2 percent increase using actual dollars) for the same period.

Worldwide comparable company-operated house profit margins increased 20 basis points in the third quarter, largely due to solid cost controls and synergies from the Starwood acquisition, despite modest RevPAR growth and higher wages.  House profit margins for comparable company-operated properties outside North America rose 50 basis points and North American comparable company-operated house profit margins decreased 10 basis points in the third quarter. 

Balance Sheet

At quarter-end, Marriott's total debt was $9,327 million and cash balances totaled $373 million, compared to $8,238 million in debt and $383 million of cash at year-end 2017.

Marriott Common Stock

Weighted average fully diluted shares outstanding used to calculate both reported and adjusted diluted EPS totaled 350.6 million in the 2018 third quarter, compared to 376.6 million shares in the year-ago quarter.

The company repurchased 6.7 million shares of common stock in the 2018 third quarter for $841 million at an average price of $125.78 per share.  Year-to-date through November 5, the company has repurchased 20.8 million shares for $2.7 billion at an average price of $131.19 per share.

Accounting Standards Update

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.

2018 Outlook

The following outlook for fourth quarter and full year 2018 does not include merger-related costs and charges, cost reimbursement revenue, or reimbursed expenses, which the company cannot accurately forecast (except for depreciation classified in reimbursed expenses) and which may be significant.  Full year 2018 outlook also excludes the net tax charge and the increase in the Avendra gain, which were reported in the first half of 2018.

For the 2018 fourth quarter, Marriott expects comparable systemwide RevPAR on a constant dollar basis in North America will increase roughly 1 percent, reflecting an estimated 110-basis-point headwind to last year's hurricane relief efforts.  Compared to the estimate the company provided on August 6, this fourth quarter RevPAR guidance for North America reflects some uncertainty related to transient demand weakness the industry experienced in September.   The company expects fourth quarter comparable systemwide RevPAR on a constant dollar basis will increase 5 to 6 percent outside North America and roughly 2 percent worldwide.

The company assumes fourth quarter 2018 gross fee revenues will total $900 million to $910 million, a 4 to 6 percent increase over fourth quarter 2017 gross fee revenues of $862 million.  Compared to the estimate the company provided on August 6, this estimate largely reflects unfavorable foreign exchange impact and lower than previously expected worldwide comparable systemwide constant dollar RevPAR. 

The company assumes fourth quarter 2018 general, administrative, and other expenses could total $245 million to $250 million, including a $6 million expense for incremental profit-sharing contributions. Compared to the estimate the company provided on August 6, this general, administrative, and other expenses estimate reflects the unfavorable timing of spending that had been expected in the 2018 third quarter.

Marriott expects fourth quarter 2018 adjusted EBITDA could total $847 million to $862 million, a 7 to 9 percent increase over fourth quarter 2017 adjusted EBITDA of $789 million.  This estimate reflects the roughly $11 million negative impact from sold hotels but does not reflect additional asset sales that may occur.  See page A-12 for the adjusted EBITDA calculation.

For the full year 2018, Marriott expects comparable systemwide RevPAR on a constant dollar basis will increase roughly 2 percent in North America, roughly 6 percent outside North America, and roughly 3 percent worldwide.

Marriott anticipates gross room additions of nearly 7 percent, or roughly 5 percent, net of deletions, for full year 2018. 

The company assumes full year 2018 gross fee revenues will total $3,628 million to $3,638 million, a 10 percent increase over 2017 gross fee revenues of $3,295 million.  Full year 2018 estimated gross fee revenues include $370 million to $380 million of credit card branding fees, compared to $242 million for full year 2017.  The company anticipates full year 2018 incentive management fees will increase at a mid to high single-digit rate over 2017 full year incentive management fees of $607 million.

Marriott expects full year 2018 owned, leased, and other revenue, net of direct expenses, could total approximately $331 million.  This estimate reflects the $80 million negative impact from sold hotels, stronger results at owned and leased hotels, and higher year-over-year termination fees, but does not reflect additional asset sales that may occur. 

The company assumes full year 2018 general, administrative, and other expenses could total $930 million to $935 million.  This estimate assumes a $50 million expense for the company's investments in its workforce, in large part the supplemental, one-time retirement savings match of up to $1,000 per eligible participating associate.  This expense will not recur in 2019. 

Marriott expects full year 2018 gains and other income could total approximately $188 million, reflecting assets sold to date.

Marriott expects full year 2018 adjusted EBITDA could total $3,456 million to $3,471 million, a 10 to 11 percent increase over 2017 adjusted EBITDA of $3,131 million.  This estimate reflects the roughly $68 million negative impact from hotels sold in 2017 and to date in 2018 but does not reflect additional asset sales that may occur in 2018.  See page A-13 for the adjusted EBITDA calculation.


Fourth Quarter 20181

Full Year 20181

Gross fee revenues

$900 million to $910 million

$3,628 million to $3,638 million

Contract investment amortization

Approx. $15 million

Approx. $59 million

Owned, leased and other revenue, net of direct expenses

Approx. $90 million

Approx. $331 million

Depreciation, amortization, and other expenses

Approx. $60 million

Approx. $224 million

General, administrative, and other expenses

$245 million to $250 million

$930 million to $935 million

Operating income

$665 million to $680 million

$2,741 million to $2,756 million

Gains and other income

Approx. $3 million

Approx. $188 million

Net interest expense

Approx. $90 million

Approx. $320 million

Equity in earnings (losses)

Approx. $10 million

Approx. $105 million

Earnings per share - diluted

$1.37 to $1.41

$6.15 to $6.18

Core tax rate2


 22.6 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 (except for depreciation classified in reimbursed expenses) and which may be significant. Full year 2018 outlook excludes the net tax charge resulting from the Tax Act and the increase in the Avendra gain, which were reported in the first half of 2018.
2Guidance for Full Year 2018 reflects the impact of employee stock-based compensation excess tax benefits.  The company expects the effective tax rate will be 19.2 percent for Fourth Quarter 2018 and 19.8 percent for Full Year 2018.

The company expects investment spending in 2018 will total approximately $750 million to $850 million, including approximately $200 million for maintenance capital and $255 million for the purchase of the Sheraton Grand Phoenix.  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, roughly $3.7 billion could be returned to shareholders through share repurchases and dividends in 2018.

Marriott International, Inc. (NASDAQ: MAR) will conduct its quarterly earnings review for the investment community and news media on Tuesday, November 6, 2018 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 November 6, 2019.

The telephone dial-in number for the conference call is 706-679-3455 and the conference ID is 5388797.  A telephone replay of the conference call will be available from 1:00 p.m. ET, Tuesday, November 6, 2018 until 8:00 p.m. ET, Tuesday, November 13, 2018.  To access the replay, call 404-537-3406.  The conference ID for the recording is 5388797.

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 and the new tax law; 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; changes to our provisional estimates of the impact of the U.S. Tax Cuts and Jobs Acts of 2017; 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 November 5, 2018.  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. (NASDAQ: MAR) is the world's largest hotel company based in Bethesda, Maryland, USA, with more than 6,700 properties in 129 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 also operates award-winning loyalty programs: Marriott Rewards®, which includes The Ritz-Carlton Rewards®, and Starwood Preferred Guest®. 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 3, 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 - Fourth Quarter 2018


A-12

















Adjusted EBITDA Forecast - Full Year 2018


A-13

















Explanation of Non-GAAP Financial and Performance Measures


A-14

 


MARRIOTT INTERNATIONAL, INC.


CONSOLIDATED STATEMENTS OF INCOME - AS REPORTED


THIRD 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)





September 30, 2018


September 30, 2017


Reported 2018 vs. 2017



REVENUES









Base management fees


$                                           279


$                                           269


4



Franchise fees 1


502


419


20



Incentive management fees


151


138


9



Gross Fee Revenues


932


826


13



Contract investment amortization 2


(13)


(11)


(18)



Net Fee Revenues


919


815


13



Owned, leased, and other revenue 3


397


433


(8)



Cost reimbursement revenue 4


3,733


3,830


(3)



  Total Revenues


5,049


5,078


(1)












OPERATING COSTS AND EXPENSES









Owned, leased, and other - direct 5


315


351


10



Depreciation, amortization, and other 6


52


54


4



General, administrative, and other 7


221


205


(8)



Merger-related costs and charges


12


28


57



Reimbursed expenses 4


3,879


3,650


(6)



  Total Expenses


4,479


4,288


(4)












OPERATING INCOME


570


790


(28)












Gains and other income, net 8


18


6


200



Interest expense


(86)


(73)


(18)



Interest income 


5


9


(44)



Equity in earnings 9


61


6


917












INCOME BEFORE INCOME TAXES


568


738


(23)












Provision for income taxes


(85)


(253)


66












NET INCOME


$                                           483


$                                           485


-












EARNINGS PER SHARE









  Earnings per share - basic


$                                          1.39


$                                          1.30


7



  Earnings per share - diluted


$                                          1.38


$                                          1.29


7












Basic Shares


346.7


372.3





Diluted Shares


350.6


376.6






















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 expenses include 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, net includes 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


THIRD QUARTER YEAR-TO-DATE 2018 AND 2017


(in millions except per share amounts, unaudited)






















As Reported


As Reported 10


Percent





Nine Months Ended


Nine Months Ended


Better/(Worse)





September 30, 2018


September 30, 2017


Reported 2018 vs. 2017



REVENUES









Base management fees


$                                           852


$                                           818


4



Franchise fees 1


1,394


1,182


18



Incentive management fees


482


433


11



Gross Fee Revenues


2,728


2,433


12



Contract investment amortization 2


(44)


(34)


(29)



Net Fee Revenues


2,684


2,399


12



Owned, leased, and other revenue 3


1,226


1,309


(6)



Cost reimbursement revenue 4


11,491


11,493


-



  Total Revenues


15,401


15,201


1












OPERATING COSTS AND EXPENSES









Owned, leased, and other - direct 5


985


1,057


7



Depreciation, amortization, and other 6


164


176


7



General, administrative, and other 7


685


651


(5)



Merger-related costs and charges


64


100


36



Reimbursed expenses 4


11,693


11,137


(5)



  Total Expenses


13,591


13,121


(4)












OPERATING INCOME


1,810


2,080


(13)












Gains and other income, net 8


191


31


516



Interest expense


(246)


(216)


(14)



Interest income 


16


24


(33)



Equity in earnings 9


95


29


228












INCOME BEFORE INCOME TAXES


1,866


1,948


(4)












Provision for income taxes


(375)


(603)


38












NET INCOME


$                                        1,491


$                                        1,345


11












EARNINGS PER SHARE









  Earnings per share - basic


$                                          4.23


$                                          3.55


19



  Earnings per share - diluted


$                                          4.18


$                                          3.51


19












Basic Shares


352.8


378.5





Diluted Shares


357.1


383.2






















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 expenses include 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, net includes 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-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 


Nine Months Ended







Percent






Percent



September 30,


September 30,


Better/


September 30,


September 30,


Better/



2018


20171


(Worse)


2018


20171


(Worse)


Total revenues, as reported

$              5,049


$              5,078




$            15,401


$            15,201




Less: Cost reimbursement revenue

(3,733)


(3,830)




(11,491)


(11,493)




Less: Other merger-related adjustments2

-


(3)




-


(3)




Adjusted total revenues**

1,316


1,245




3,910


3,705

















Operating income, as reported

570


790




1,810


2,080




Less: Cost reimbursement revenue

(3,733)


(3,830)




(11,491)


(11,493)




Add: Reimbursed expenses

3,879


3,650




11,693


11,137




Add: Merger-related costs, charges, and other 3

12


22




64


96




Adjusted operating income **

728


632


15%


2,076


1,820


14%















Operating income margin

11%


16%




12%


14%




Adjusted operating income margin **

55%


51%




53%


49%

















Net income, as reported

483


485




1,491


1,345




Less: Cost reimbursement revenue

(3,733)


(3,830)




(11,491)


(11,493)




Add: Reimbursed expenses

3,879


3,650




11,693


11,137




Add: Merger-related costs, charges, and other 3

12


22




64


96




Less: Gain on sale of Avendra

-


-




(6)


-




Income tax effect of above adjustments

(43)


70




(69)


112




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

-


-




22


-




Adjusted net income **

$                 598


$                 397


51%


$              1,704


$              1,197


42%















Diluted EPS, as reported

$                1.38


$                1.29




$                4.18


$                3.51




Adjusted Diluted EPS**

$                1.70


$                1.05


62%


$                4.77


$                3.12


53%














**

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

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

2

Other merger-related adjustments include Starwood purchase accounting revisions.

3

Merger-related costs, charges, and other includes Starwood merger costs presented in the "Merger-related costs and charges" caption of our Income Statement and


net purchase accounting revisions.




A-3

 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS

As of September 30, 2018









North America

Total International

Total Worldwide


Units

Rooms

Units

Rooms

Units

Rooms

 Managed 

820

248,479

1,123

298,231

1,943

546,710

 Marriott Hotels 

126

67,809

168

49,924

294

117,733

 Sheraton 

28

23,611

184

63,247

212

86,858

 Sheraton Residences 

-

-

2

262

2

262

 Courtyard 

240

38,356

95

20,436

335

58,792

 Westin 

45

24,808

67

21,049

112

45,857

 Westin Residences 

1

65

1

264

2

329

 The Ritz-Carlton 

38

10,958

55

14,992

93

25,950

 The Ritz-Carlton Residences 

35

4,554

11

950

46

5,504

 The Ritz-Carlton Serviced Apartments 

-

-

5

697

5

697

 JW Marriott 

16

10,038

49

19,382

65

29,420

 Renaissance 

27

11,774

57

17,839

84

29,613

 Le Méridien 

4

720

72

19,828

76

20,548

 Residence Inn 

110

16,897

6

643

116

17,540

 Four Points 

1

134

72

18,603

73

18,737

 W Hotels 

24

6,965

26

6,254

50

13,219

 W Residences 

9

1,078

4

478

13

1,556

 The Luxury Collection 

6

2,294

51

8,959

57

11,253

 The Luxury Collection Residences 

-

-

1

21

1

21

 St. Regis 

10

1,990

29

6,651

39

8,641

 St. Regis Residences 

7

585

7

593

14

1,178

 Aloft 

1

330

35

8,444

36

8,774

 Gaylord Hotels 

5

8,411

-

-

5

8,411

 Delta Hotels 

25

6,764

-

-

25

6,764

 Fairfield Inn & Suites 

6

1,432

27

4,187

33

5,619

 SpringHill Suites 

31

4,988

-

-

31

4,988

 Marriott Executive Apartments 

-

-

31

4,613

31

4,613

 Protea Hotels 

-

-

35

4,175

35

4,175

 Autograph Collection 

5

1,307

8

1,722

13

3,029

 TownePlace Suites 

16

1,839

-

-

16

1,839

 Element 

1

180

6

1,253

7

1,433

 EDITION 

2

567

5

1,046

7

1,613

 EDITION Residences 

1

25

-

-

1

25

 Moxy 

-

-

4

599

4

599

 Bulgari 

-

-

5

438

5

438

 Bulgari Residences 

-

-

2

123

2

123

 Tribute Portfolio 

-

-

3

559

3

559


A-4

 

MARRIOTT INTERNATIONAL, INC.

TOTAL LODGING PRODUCTS

As of September 30, 2018









North America

Total International

Total Worldwide


Units

Rooms

Units

Rooms

Units

Rooms

 Franchised 

4,053

587,020

489

105,618

4,542

692,638

 Courtyard 

760

101,183

67

12,567

827

113,750

 Fairfield Inn & Suites 

918

84,808

7

1,323

925

86,131

 Marriott Hotels 

213

66,234

52

14,910

265

81,144

 Residence Inn 

665

78,755

5

666

670

79,421

 Sheraton 

162

48,120

62

17,758

224

65,878

 SpringHill Suites 

374

42,908

-

-

374

42,908

 Westin 

83

27,071

24

7,606

107

34,677

 Westin Residences 

2

201

-

-

2

201

 TownePlace Suites 

350

35,119

-

-

350

35,119

 Four Points 

146

22,320

46

7,186

192

29,506

 Autograph Collection 

88

18,895

52

11,795

140

30,690

 Renaissance 

59

16,816

27

7,423

86

24,239

 Aloft 

106

15,602

13

2,094

119

17,696

 The Luxury Collection 

12

2,850

41

7,527

53

10,377

 The Luxury Collection Residences 

1

91

1

64

2

155

 Delta Hotels 

34

7,719

2

562

36

8,281

 Le Méridien 

16

3,417

16

4,246

32

7,663

 Tribute Portfolio 

16

4,023

9

971

25

4,994

 JW Marriott 

11

4,958

6

1,624

17

6,582

 Moxy 

7

1,503

19

4,148

26

5,651

 Element 

28

3,943

2

293

30

4,236

 Protea Hotels 

-

-

37

2,770

37

2,770

 The Ritz-Carlton 

1

429

-

-

1

429

 The Ritz-Carlton Residences 

1

55

-

-

1

55

 Bulgari 

-

-

1

85

1

85

 Owned/Leased 

29

8,281

33

8,565

62

16,846

 Sheraton 

2

1,474

4

1,830

6

3,304

 Courtyard 

19

2,814

3

645

22

3,459

 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 

46

7,830

100

12,389

146

20,219

 AC Hotels by Marriott 

46

7,830

94

11,970

140

19,800

 Autograph Collection 

-

-

6

419

6

419

 Timeshare* 

70

18,297

19

3,873

89

22,170

 Marriott Vacations Worldwide 

51

11,249

15

2,406

66

13,655

 Vistana 

19

7,048

4

1,467

23

8,515

Grand Total

5,018

869,907

1,764

428,676

6,782

1,298,583








*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 September 30, 2018









North America

Total International

Total Worldwide

Total Systemwide

Units

Rooms

Units

Rooms

Units

Rooms

 Luxury 

176

48,184

307

72,045

483

120,229

 JW Marriott 

27

14,996

56

21,502

83

36,498

 The Ritz-Carlton 

39

11,387

57

15,545

96

26,932

 The Ritz-Carlton Residences 

36

4,609

11

950

47

5,559

 The Ritz-Carlton Serviced Apartments 

-

-

5

697

5

697

 The Luxury Collection 

18

5,144

94

16,773

112

21,917

 The Luxury Collection Residences 

1

91

2

85

3

176

 W Hotels 

25

7,474

28

6,919

53

14,393

 W Residences 

9

1,078

4

478

13

1,556

 St. Regis 

11

2,228

30

6,811

41

9,039

 St. Regis Residences 

7

585

7

593

14

1,178

 EDITION 

2

567

5

1,046

7

1,613

 EDITION Residences 

1

25

-

-

1

25

 Bulgari 

-

-

6

523

6

523

 Bulgari Residences 

-

-

2

123

2

123

 Full-Service 

946

342,293

857

249,448

1,803

591,741

 Marriott Hotels 

342

135,707

225

66,459

567

202,166

 Sheraton 

192

73,205

250

82,835

442

156,040

 Sheraton Residences 

-

-

2

262

2

262

 Westin 

129

52,952

91

28,655

220

81,607

 Westin Residences 

3

266

1

264

4

530

 Renaissance 

87

28,907

87

26,011

174

54,918

 Autograph Collection 

93

20,202

68

14,183

161

34,385

 Le Méridien 

20

4,137

88

24,074

108

28,211

 Delta Hotels 

59

14,483

2

562

61

15,045

 Gaylord Hotels 

5

8,411

-

-

5

8,411

 Tribute Portfolio 

16

4,023

12

1,530

28

5,553

 Marriott Executive Apartments 

-

-

31

4,613

31

4,613

 Limited-Service 

3,826

461,133

581

103,310

4,407

564,443

 Courtyard 

1,019

142,353

165

33,648

1,184

176,001

 Residence Inn 

776

95,844

12

1,449

788

97,293

 Fairfield Inn & Suites 

924

86,240

34

5,510

958

91,750

 SpringHill Suites 

405

47,896

-

-

405

47,896

 Four Points 

147

22,454

118

25,789

265

48,243

 TownePlace Suites 

366

36,958

-

-

366

36,958

 Aloft 

107

15,932

48

10,538

155

26,470

 AC Hotels by Marriott 

46

7,830

94

11,970

140

19,800

 Protea Hotels 

-

-

79

8,113

79

8,113

 Moxy 

7

1,503

23

4,747

30

6,250

 Element 

29

4,123

8

1,546

37

5,669

 Timeshare* 

70

18,297

19

3,873

89

22,170

 Marriott Vacations Worldwide 

51

11,249

15

2,406

66

13,655

 Vistana 

19

7,048

4

1,467

23

8,515

 Grand Total 

5,018

869,907

1,764

428,676

6,782

1,298,583








*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 September 30, 2018 and September 30, 2017



REVPAR


Occupancy


Average Daily Rate

Brand


2018

vs. 2017


2018

vs. 2017


2018

vs. 2017

JW Marriott


$160.46

0.3%


76.7%

-0.9%

pts.


$209.19

1.5%

The Ritz-Carlton


$251.88

4.6%


72.1%

-0.5%

pts.


$349.31

5.3%

W Hotels


$240.85

0.2%


82.7%

-1.2%

pts.


$291.38

1.6%

Composite North American Luxury1


$239.99

3.1%


76.7%

-0.9%

pts.


$312.95

4.3%

Marriott Hotels


$151.93

2.0%


78.3%

0.2%

pts.


$193.95

1.8%

Sheraton


$148.12

3.7%


79.8%

1.2%

pts.


$185.57

2.1%

Westin


$170.83

1.6%


78.8%

-0.4%

pts.


$216.75

2.1%

Composite North American Upper Upscale2

$150.72

1.7%


78.1%

-0.1%

pts.


$192.98

1.8%

North American Full-Service3 


$165.66

2.0%


77.9%

-0.2%

pts.


$212.75

2.3%

Courtyard


$106.53

-0.6%


74.8%

-1.2%

pts.


$142.48

1.0%

Residence Inn


$131.99

-0.2%


82.3%

-1.5%

pts.


$160.30

1.6%

Composite North American Limited-Service4

$113.25

-0.4%


77.4%

-1.1%

pts.


$146.39

1.0%

North American - All5


$148.99

1.5%


77.7%

-0.5%

pts.


$191.75

2.1%























Comparable Systemwide North American Properties














Three Months Ended September 30, 2018 and September 30, 2017



REVPAR


Occupancy


Average Daily Rate

Brand


2018

vs. 2017


2018

vs. 2017


2018

vs. 2017

JW Marriott


$166.92

1.4%


78.1%

-0.2%

pts.


$213.75

1.7%

The Ritz-Carlton


$251.88

4.6%


72.1%

-0.5%

pts.


$349.31

5.3%

W Hotels


$240.85

0.2%


82.7%

-1.2%

pts.


$291.38

1.6%

Composite North American Luxury1


$231.02

3.1%


77.3%

-0.8%

pts.


$298.81

4.2%

Marriott Hotels


$131.23

1.2%


75.2%

0.2%

pts.


$174.47

0.9%

Sheraton


$121.44

2.1%


76.3%

-0.6%

pts.


$159.19

2.9%

Westin


$156.70

1.2%


78.4%

-0.8%

pts.


$199.81

2.2%

Composite North American Upper Upscale2

$134.66

1.3%


76.2%

-0.3%

pts.


$176.70

1.7%

North American Full-Service3 


$144.05

1.6%


76.3%

-0.3%

pts.


$188.75

2.0%

Courtyard


$108.07

-0.6%


76.1%

-0.9%

pts.


$142.09

0.6%

Residence Inn


$125.72

0.1%


83.1%

-0.4%

pts.


$151.29

0.5%

Fairfield Inn & Suites


$89.70

-1.3%


76.0%

-1.3%

pts.


$118.05

0.4%

Composite North American Limited-Service4

$105.81

-0.5%


77.9%

-1.0%

pts.


$135.79

0.7%

North American - All5


$122.40

0.6%


77.2%

-0.7%

pts.


$158.49

1.5%












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 Inn & Suites, 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 September 30, 2018 and September 30, 2017



REVPAR


Occupancy


Average Daily Rate

Region


2018

vs. 2017


2018

vs. 2017


2018

vs. 2017

Greater China


$93.17

5.4%


74.4%

0.9%

pts.


$125.29

4.1%

Rest of Asia Pacific


$123.55

5.8%


76.4%

0.8%

pts.


$161.73

4.7%

Asia Pacific


$104.41

5.6%


75.1%

0.9%

pts.


$139.00

4.4%












Caribbean & Latin America


$106.04

6.4%


61.6%

-1.0%

pts.


$172.20

8.1%

Europe


$179.84

4.3%


79.7%

-0.1%

pts.


$225.65

4.4%

Middle East & Africa


$82.66

0.0%


64.2%

2.9%

pts.


$128.85

-4.5%












International - All1


$118.26

4.5%


73.1%

0.9%

pts.


$161.71

3.2%












Worldwide2


$133.50

2.8%