UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A10-K
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended December 31, 20202023
or
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File No. 1-13881
MARRIOTT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | | 52-2055918 |
(State or other jurisdiction of
| | (IRS Employer
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10400 Fernwood Road7750 Wisconsin Avenue | | Bethesda | | Maryland | | 2081720814 |
| (Address of Principal Executive Offices) | | (Zip Code) |
(Registrant’s Telephone Number, Including Area CodeCode) (301) 380-3000
Securities registered pursuant to Section 12(b) of the Act:
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| Securities registered pursuant to Section 12(b) of the Act: |
| Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange on Which Registered |
| Class A Common Stock, $0.01 par value | | MAR | | Nasdaq Global Select Market |
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ☒ | | Accelerated filer | o | | Emerging growth company | o |
| Non-accelerated filer | o | | Smaller reporting company | ☐ |
| | | Emerging growth companyo | | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of shares of common stock held by non-affiliates at June 30, 2020,2023, was $23,156,431,539.$45,768,892,728.
There were 324,414,150289,485,338 shares of Class A Common Stock, par value $0.01 per share, outstanding at February 10, 2021.6, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement prepared for the 20212024 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.
EXPLANATORY NOTE
We filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 with the Securities and Exchange Commission (“SEC”) on February 18, 2021 (the “Original Filing”). This Amendment No. 1 on Form 10-K/A (this “Amendment”) is being filed solely to amend Part II, Item 8, “Report of Independent Registered Public Accounting Firm” of the Original Filing to correct a typographical error in Ernst & Young LLP’s (“EY”) financial statement audit opinion (the “Audit Opinion”). Both management and EY concluded at the time of the Original Filing, as stated in management’s report on internal control over financial reporting (“ICFR”) and EY’s attestation report on ICFR, that Marriott’s ICFR was effective as of December 31, 2020. However, EY’s Audit Opinion incorrectly referred to EY’s separate attestation on ICFR as having expressed an “adverse” opinion thereon, when it should have referred to such attestation report on ICFR as having expressed an “unqualified” opinion thereon. This Amendment corrects that typographical error in the Audit Opinion by replacing the word “adverse” with the word “unqualified.”
Except as described above, no other changes to the Original Filing are included in this Amendment. This Amendment speaks only as of the date of the Original Filing, and the Amendment does not modify or update the disclosures presented in the Original Filing other than as noted above, and does not reflect events occurring after the Original Filing.
MARRIOTT INTERNATIONAL, INC.
FORM 10-K TABLE OF CONTENTS
FISCAL YEAR ENDED DECEMBER 31, 20202023
Throughout this report, we refer to Marriott International, Inc., together with its consolidated subsidiaries, as “we,” “us,” “Marriott,” or the “Company.” In order to make this report easier to read, we also refer throughout to (1) our Consolidated Financial Statements as our “Financial Statements,” (2) our Consolidated Statements of (Loss) Income as our “Income Statements,” (3) our Consolidated Balance Sheets as our “Balance Sheets,” (4) our Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (5) our properties, brands, or markets in the United States and Canada as “U.S. & Canada,” and (6) our properties, brands, or markets in our Caribbean and Latin America, region, Europe, Middle East and Africa, segment,Greater China, and Asia Pacific segmentexcluding China regions, as “International.” In addition, references throughout to numbered “Notes” refer to the Notes to our Financial Statements, unless otherwise stated.
Cautionary Statement
All statements in this report are made as of the date this Form 10-K is filed with the U.S. Securities and Exchange Commission (the “SEC”). We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise. We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information available to us through the date this Form 10-K is filed with the SEC. Forward-looking statements include information related to the possible effects on our business of the coronavirus pandemic and efforts to contain it (“COVID-19”), including the performance of the Company’s hotels; Revenue per Available Room (“RevPAR”) and occupancyfuture demand trends and expectations; the nature and impact of contingency plans, restructuring plans and cost reduction plans;our expectations regarding rooms growth; our expectations regarding our ability to meet our liquidity requirements; our expectations regarding COVID-19’s impact on our cash from operations; our capital expenditures and other investment spending expectations; statements related to leadership changesour expectations regarding future dividends and the structure of the Company’s management operations;share repurchases; and other statements throughout this report that are preceded by, followed by, or include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “foresees,” or similar expressions; 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 evolving risks and uncertainties that we may not be able to accurately predict or assess, including the risks and uncertainties we describe belowin Part I, Item 1A, “Risk Factors,” of this report and other factors we describe from time to time in our periodic filings with the SEC. Risks that could affect our results of operations, liquidity and capital resources, and other aspects of our business discussed in this Form 10-K include the duration and scope of COVID-19, including the availability and distribution of effective vaccines or treatments; its short and longer-term impact on the demand for travel, transient and group business, and levels of consumer confidence; actions governments, businesses and individuals have taken or may take in response to the pandemic, including limiting or banning travel and/or in-person gatherings or imposing occupancy or other restrictions on lodging or other facilities; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies, travel, and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; the ability of our owners and franchisees to successfully navigate the impacts of COVID-19; the pace of recovery when the pandemic subsides or effective treatments or vaccines become widely available; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps we and our property owners and franchisees have taken and may continue to take to reduce operating costs and/or enhance certain health and cleanliness protocols at our hotels; the impacts of our employee furloughs and reduced work week schedules, our voluntary transition program and our other restructuring activities; competitive conditions in the lodging industry; relationships with customers and property owners; the availability of capital to finance hotel growth and refurbishment; the extent to which we experience adverse effects from data security incidents; and changes in tax laws in countries in which we earn significant income.
As discussed in this Form 10-K, COVID-19 is materially impacting our operations and financial results. COVID-19, and the volatile regional and global economic conditions stemming from it, and additional or unforeseen effects from the COVID-19 pandemic, could also give rise to or aggravate the other risk factors that we identify within Part I, Item 1A of this report, which in turn could materially adversely affect our business, liquidity, financial condition, and results of operations. Further, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.
PART I
PART I
Item 1. Business.
Corporate Structure and Business
We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and timeshareother lodging properties under numerous brand names at different price and service points. Consistent with our focus on management, franchising, and licensing, we own or lease very few of our lodging properties.properties (less than one percent of our system).
The following table shows our portfolio of brands at year-end 2020.2023.
We discuss our operations in the following three reportable business segments: United States and Canada (“U.S. & Canada”), Asia Pacific, and Europe, Middle East and Africa (“EMEA”). Our Caribbean and Latin America (“CALA”)two operating segment does notsegments, both of which meet the applicable accounting criteria for separate disclosure as a reportable business segment,segment: (1) U.S. & Canada and we include its results in “Unallocated corporate and other.” In the 2020 fourth quarter, we changed the name of our largest segment from “North America” to “U.S. & Canada.” Other than the name change, we made no other changes to the composition of this segment.(2) International. In January 2021,2024, we modified our reportable segment structure as a result of a change in the way management intends to evaluate results and allocate resources within the Company. Beginning with the 20212024 first quarter, we will report the following twofour operating segments: (1) U.S. & Canada, (2) Europe, Middle East, and International.Africa, (3) Asia Pacific excluding China, and (4) Greater China. Our Caribbean and Latin America operating segment will not meet the applicable criteria for separate disclosure as a reportable business segment, and as such, we will include its results in “Unallocated corporate and other.” See Note 1514 for more information.
COVID-19
COVID-19 has had an unprecedented impact on the travel industry and the Company. As the virus and efforts to contain it spread around the world, demand at our hotels dropped significantly. While 2020 generally got off to a great start, we saw sudden, sharp declines in hotel occupancy, beginning in Greater China in January 2020 and then extending around the world. In April 2020, comparable systemwide constant dollar RevPAR experienced a record decline, decreasing 90 percent worldwide compared to the prior year period, and 27 percent of our hotels were temporarily closed. Although business at our hotels improved throughout the remainder of 2020 as compared to the extremely low levels in April 2020, COVID-19 continues to constrain recovery and to have a significant negative impact on demand. COVID-19 also resulted in significantly lower new room additions than we had budgeted for 2020 and historically high levels of cancellations by group and other travelers for future periods. As a result, our revenues and profitability declined dramatically in 2020 compared to 2019.
We continue to take substantial measures to mitigate the negative financial and operational impacts of COVID-19 for our hotel owners and our own business, and we remain focused on taking care of our guests and associates. We have made significant changes to our business and enhanced our liquidity position, while remaining focused on how to best position ourselves for recovery and for growth over the longer term. At the property level, we implemented plans to help our hotel owners and franchisees reduce their cash outlays and mitigate costs, and we implemented a multi-pronged platform to elevate cleanliness standards and hospitality norms for the health and safety of our guests and associates. At the corporate level, we made significant cuts in general and administrative costs and spending on capital and other investments. We have substantially completed our above-property restructuring program, and we have implemented and are continuing to develop restructuring plans to achieve cost savings specific to each of our company-operated properties. With the steps we have taken, and any additional measures we may take to adapt our operations and plans to the evolving situation, along with the power of our Marriott Bonvoy loyalty program, our strengthened liquidity position, and our incredible team of associates around the world, we believe that our business is well positioned now and for the future.
For further information about COVID-19’s impact to our business, see Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Acquisition of Starwood Hotels & Resorts Worldwide
On September 23, 2016 (the “Merger Date”), we completed the acquisition of Starwood Hotels & Resorts Worldwide, LLC, formerly known as Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), through a series of transactions (the “Starwood Combination”), after which Starwood became an indirect wholly-owned subsidiary of the Company. We refer to the Starwood business and brands that we acquired as “Legacy-Starwood.”
Company-Operated Properties
At year-end 2020,2023, we had 2,1492,096 company-operated properties (585,132(589,078 rooms), which included properties under long-term management or lease agreements with property owners (management and lease agreements together, the “Operating Agreements”), and properties that we own, and home and condominium communities for which we manage the related owners’ associations.own.
Terms of our management agreements vary, but we earn a management fee that is typically composed of a base management fee, which is a percentage of the revenues of the hotel, and an incentive management fee, which is based on the profits of the hotel. Our management agreements also typically include reimbursement of costs of operations (both direct and indirect). Such agreements are generally for initial periods of 1520 to 30 years, with options for us to renew for up to 10 or more additional years. Our lease agreements also vary, but may include fixed annual rentals plus additional rentals based on a specified percentage of annual revenues that exceed a fixed amount. Many ofIn many jurisdictions, our Operating Agreements aremay be subordinated to mortgages or other liens securing indebtedness of the owners. Many of our Operating Agreements also permit the owners to terminate the agreement if we do not meet certain performance metrics, financial returns fail to meet defined levels for a period of time, and we have not cured those deficiencies. In certain circumstances, some of our management agreements allow owners to convert company-operated properties to franchised properties under our brands.
For the lodging facilitiesproperties we operate, we generally are responsible for hiring, training, and supervising the managers and employees needed to operate the facilitiesproperties and for purchasing supplies,incurring operational and administrative costs related to the operation of the properties, and owners are required to reimburse us for those costs. We provide centralized reservationprograms and services, such as our Marriott Bonvoy loyalty program, reservations, and advertising, marketing, and promotional services, as well as various accounting and data processing services, and owners are also required to reimburse us for those costs.costs as well.
Franchised and Licensed Properties
We have franchising and licensing arrangements that permit hotelproperty owners and operators to use many of our lodging brand names and systems. Under our hotel franchising arrangements, we generally receive an initial application fee and
continuing royalty fees, which typically range fromfour to seven percent of room revenues for all brands, plus twoup to threefour percent of food and beverage revenues for certain full-service brands. Franchisees contribute to our marketing and advertisingcentralized programs and pay fees for use ofservices, such as our centralized reservation systems.Marriott Bonvoy loyalty program, reservations, and marketing.
We also receive royalty fees under license agreements with Marriott Vacations Worldwide Corporation, (“MVW”), our former timeshare subsidiary that we spun off in 2011, and its affiliates (collectively, “MVW”), for certain brands, including Marriott Vacation Club, Grand Residences by Marriott,brands. The Ritz-Carlton Destination Club, Westin, Sheraton, and for certain existing properties, St. Regis and The Luxury Collection. We receive license fees we receive from MVW consistingconsist of a fixed annual fee, adjusted for inflation, plus certain variable fees based on sales volumes.
Finally, we receive royalty fees under agreements for The Ritz-Carlton Yacht Collection®.
At year-end 2020,2023, we had 5,4936,563 franchised and licensed properties (837,912 rooms)(994,354 rooms and timeshare units).
Residential
We use or license certain of our trademarks for the sale of residential real estate, often in conjunction with hotel development, anddevelopment. We receive one-time branding fees for salesupon the sale of sucheach branded residential real estateunit by others. Third-party owners typicallythe third-party developers who construct and sell the residences, with limited amounts, if any, of our capital at risk. We have used or licensedalso typically receive continuing management fees for managing the JW Marriott, The Ritz-Carlton, Ritz-Carlton Reserve, W, The Luxury Collection, St. Regis, EDITION, Bulgari, Renaissance, Le Méridien, Marriott, Sheraton, Westin, Four Points, Delta and Autograph Collection brand names and trademarks forrelated homeowners’ association. At year-end 2023, we had 126 branded residential real estate sales.
communities (13,948 residential units). Intellectual Property
We operate in a highly competitive industry and our brand names, trademarks, service marks, trade names, and logos are very important to the development, sales and marketing of our properties and services. We believe that our brand names and other intellectual property have come to represent the highest standards ofoutstanding quality, care, service, and value to our customers, guests, and the traveling public. Accordingly, we register and protect our intellectual property where we deem appropriate and otherwise protect against its unauthorized use.
Brand Portfolio
We believe that our brand portfolio offers the most compelling range of brands and hotels in hospitality. Our brands are categorized by style of offering - Classic and Distinctive. Our Classic brands offer time-honored hospitality for the modern traveler, and our Distinctive brands offer memorable experiences with a unique perspective - each of which we group into threefour quality tiers: Luxury, Premium, Select, and Select.Midscale.
Luxury offers bespoke and superb amenities and services. Our Classic Luxury hotel brands include JW Marriott, The Ritz-Carlton, and St. Regis. Our Distinctive Luxury hotel brands in our portfolio include W Hotels, The Luxury Collection, W Hotels, EDITION, and Bulgari.Bvlgari.
Premium offers sophisticated and thoughtful amenities and services. Our Classic Premium hotel brands include Marriott Hotels, Sheraton, Delta Hotels by Marriott, Marriott Executive Apartments, and Marriott Vacation Club. Our Distinctive Premium hotel brands include Westin, Autograph Collection Hotels, Renaissance Hotels, Le Méridien, Autograph Collection,Tribute Portfolio, Gaylord Hotels, Tribute Portfolio,Design Hotels, and Design Hotels.Apartments by Marriott Bonvoy.
Select offers smart and easy amenities and services, with our longer stay brands offering amenities that mirror the comforts of home. Our Classic Select hotel brands include Courtyard, Fairfield, Residence Inn, Fairfield by Marriott, SpringHill Suites, Four Points, TownePlace Suites, and Protea Hotels. Our Distinctive Select hotel brands include Aloft Hotels, AC Hotels by Marriott, Moxy Hotels, and Element Hotels.
Midscale offers limited services and Moxy.essential amenities at a more affordable price point. Our Midscale brands, which are Classic brands, include City Express by Marriott and Four Points Express by Sheraton, which opened its first hotel in the 2024 first quarter.
The following table shows the geographic distribution of our brands at year-end 2020:2023:
| | U.S. & Canada | Europe | Middle East & Africa | Asia Pacific | Caribbean & Latin America | Total |
| | U.S. & Canada | | | | U.S. & Canada | Europe | Middle East & Africa | Asia Pacific Excluding China | Greater China | Caribbean & Latin America | Total |
| Luxury | Luxury | Luxury |
JW Marriott® | JW Marriott® | Properties | 34 | 7 | 6 | 42 | 13 | 102 | JW Marriott® | Properties | 35 | 8 | 11 | 28 | 23 | 16 | 121 |
| Rooms | 18,658 | 2,205 | 3,325 | 15,574 | 3,597 | 43,359 | Rooms | 19,261 | 2,523 | 4,299 | 8,832 | 9,219 | 4,296 | 48,430 |
The Ritz-Carlton® | The Ritz-Carlton® | Properties | 39 | 13 | 36 | 8 | 109 | The Ritz-Carlton® | Properties | 42 | 12 | 15 | 23 | 18 | 9 | 119 |
| Rooms | 11,833 | 3,080 | 3,523 | 8,754 | 2,081 | 29,271 | Rooms | 12,787 | 2,703 | 3,979 | 4,544 | 5,159 | 2,007 | 31,179 |
The Luxury Collection® | | The Luxury Collection® | Properties | 17 | 40 | 13 | 28 | 5 | 10 | 113 |
| Rooms | 5,408 | 5,756 | 2,493 | 6,822 | 1,488 | 1,461 | 23,428 |
W® Hotels | W® Hotels | Properties | 24 | 7 | 5 | 16 | 7 | 59 | W® Hotels | Properties | 25 | 10 | 7 | 11 | 7 | 71 |
| Rooms | 7,182 | 1,423 | 1,850 | 4,245 | 1,752 | 16,452 | Rooms | 7,295 | 2,122 | 2,316 | 2,754 | 3,905 | 1,752 | 20,144 |
The Luxury Collection® (1) | Properties | 17 | 48 | 10 | 30 | 14 | 119 |
| Rooms | 5,090 | 7,092 | 2,369 | 7,715 | 1,188 | 23,454 |
St. Regis® | St. Regis® | Properties | 10 | 7 | 6 | 20 | 3 | 46 | St. Regis® | Properties | 11 | 6 | 13 | 10 | 13 | 5 | 58 |
| Rooms | 1,968 | 1,002 | 1,788 | 4,811 | 448 | 10,017 | Rooms | 2,169 | 768 | 3,222 | 2,068 | 3,462 | 693 | 12,382 |
EDITION® | EDITION® | Properties | 4 | 3 | 1 | 3 | — | 11 | EDITION® | Properties | 5 | 3 | 2 | 1 | 19 |
| Rooms | 1,209 | 381 | 255 | 852 | — | 2,697 | Rooms | 1,379 | 819 | 638 | 496 | 646 | 180 | 4,158 |
Bulgari® | Properties | — | 2 | 1 | 3 | — | 6 |
| Rooms | — | 143 | 120 | 260 | — | 523 |
Bvlgari® | | Bvlgari® | Properties | — | 4 | 1 | 2 | — | 9 |
| Rooms | — | 332 | 121 | 157 | 201 | — | 811 |
| Premium | Premium | Premium |
Marriott Hotels® | Properties | 340 | 100 | 26 | 90 | 29 | 585 |
| Rooms | 133,972 | 25,946 | 8,110 | 30,008 | 7,789 | 205,825 |
Marriott® Hotels | | Marriott® Hotels | Properties | 337 | 77 | 29 | 47 | 65 | 32 | 587 |
| Rooms | 132,856 | 21,990 | 9,083 | 14,893 | 22,781 | 8,461 | 210,064 |
Sheraton® | Sheraton® | Properties | 183 | 62 | 30 | 136 | 31 | 442 | Sheraton® | Properties | 168 | 51 | 32 | 56 | 99 | 30 | 436 |
| Rooms | 70,245 | 16,900 | 9,299 | 49,399 | 8,613 | 154,456 | Rooms | 64,923 | 14,279 | 9,234 | 16,525 | 38,791 | 8,442 | 152,194 |
Westin® | Westin® | Properties | 130 | 17 | 7 | 58 | 13 | 225 | Westin® | Properties | 134 | 17 | 8 | 38 | 31 | 15 | 243 |
| Rooms | 52,705 | 5,686 | 1,839 | 17,751 | 3,819 | 81,800 | Rooms | 54,820 | 5,787 | 2,030 | 10,813 | 10,360 | 4,347 | 88,157 |
Autograph Collection® | | Autograph Collection® | Properties | 153 | 77 | 15 | 19 | 3 | 37 | 304 |
| Rooms | 31,321 | 10,010 | 2,402 | 4,277 | 426 | 12,448 | 60,884 |
Renaissance® Hotels | Renaissance® Hotels | Properties | 87 | 33 | 4 | 43 | 9 | 176 | Renaissance® Hotels | Properties | 88 | 28 | 5 | 15 | 30 | 9 | 175 |
| Rooms | 28,880 | 7,846 | 1,035 | 14,972 | 2,745 | 55,478 | Rooms | 28,041 | 6,491 | 1,476 | 3,801 | 10,704 | 2,745 | 53,258 |
Le Méridien® | Le Méridien® | Properties | 22 | 16 | 22 | 47 | 2 | 109 | Le Méridien® | Properties | 25 | 16 | 23 | 33 | 19 | 3 | 119 |
| Rooms | 4,748 | 4,997 | 6,588 | 12,683 | 271 | 29,287 | Rooms | 5,489 | 5,156 | 6,841 | 7,756 | 5,225 | 562 | 31,029 |
Autograph Collection® Hotels (2) | Properties | 123 | 54 | 7 | 12 | 13 | 209 |
| Rooms | 25,449 | 6,468 | 1,640 | 3,245 | 3,751 | 40,553 |
Delta Hotels by Marriott® (Delta Hotels®) | Delta Hotels by Marriott® (Delta Hotels®) | Properties | 77 | 5 | 1 | 2 | — | 85 | Delta Hotels by Marriott® (Delta Hotels®) | Properties | 92 | 31 | 6 | — | 4 | 2 | 135 |
| Rooms | 18,226 | 728 | 360 | 978 | — | 20,292 | Rooms | 21,730 | 5,446 | 1,443 | — | 1,529 | 366 | 30,514 |
Gaylord Hotels® | Properties | 6 | — | 6 |
| Rooms | 9,918 | — | 9,918 |
Tribute Portfolio® | | Tribute Portfolio® | Properties | 66 | 25 | 5 | 11 | 4 | 7 | 118 |
| Rooms | 10,725 | 3,096 | 584 | 1,096 | 986 | 640 | 17,127 |
Gaylord® Hotels | | Gaylord® Hotels | Properties | 6 | — | 6 |
| Rooms | 10,220 | — | 10,220 |
Design Hotels® | | Design Hotels® | Properties | 11 | 65 | 8 | 6 | 4 | 17 | 111 |
| Rooms | 1,605 | 4,782 | 750 | 389 | 783 | 393 | 8,702 |
Marriott Executive Apartments® | Marriott Executive Apartments® | Properties | — | 4 | 10 | 18 | 2 | 34 | Marriott Executive Apartments® | Properties | — | 3 | 13 | 9 | 11 | 2 | 38 |
| Rooms | — | 361 | 1,116 | 3,161 | 240 | 4,878 | Rooms | — | 212 | 1,841 | 1,297 | 1,735 | 240 | 5,325 |
Tribute Portfolio® | Properties | 26 | 11 | — | 8 | 3 | 48 |
| Rooms | 4,571 | 1,139 | — | 1,106 | 155 | 6,971 |
Design HotelsTM | Properties | 5 | 7 | — | 12 |
| Rooms | 853 | 799 | — | 1,652 |
Select | Courtyard by Marriott® (Courtyard®) | Properties | 1,058 | 72 | 8 | 79 | 41 | 1,258 |
| Rooms | 146,913 | 13,551 | 1,684 | 18,454 | 6,717 | 187,319 |
Residence Inn by Marriott® (Residence Inn®) | Properties | 854 | 13 | 3 | — | 4 | 874 |
| Rooms | 105,273 | 1,569 | 294 | — | 544 | 107,680 |
Fairfield by Marriott® | Properties | 1,061 | — | 58 | 13 | 1,132 |
| Rooms | 99,901 | — | 9,300 | 1,863 | 111,064 |
SpringHill Suites by Marriott® (SpringHill Suites®) | Properties | 488 | — | 488 |
| Rooms | 57,590 | — | 57,590 |
Four Points® by Sheraton (Four Points®) | Properties | 158 | 19 | 16 | 83 | 19 | 295 |
| Rooms | 23,836 | 2,913 | 4,058 | 21,636 | 2,500 | 54,943 |
TownePlace Suites by Marriott® (TownePlace Suites®) | Properties | 446 | — | 446 |
| Rooms | 45,320 | — | 45,320 |
Apartments by Marriott BonvoyTM | | Apartments by Marriott BonvoyTM | Properties | — | 1 |
| Rooms | — | 107 |
| | U.S. & Canada | Europe | Middle East & Africa | Asia Pacific | Caribbean & Latin America | Total |
| | U.S. & Canada | | | | U.S. & Canada | Europe | Middle East & Africa | Asia Pacific Excluding China | Greater China | Caribbean & Latin America | Total |
| Select | | Select |
Courtyard by Marriott® (Courtyard®) | | Courtyard by Marriott® (Courtyard®) | Properties | 1,066 | 75 | 11 | 60 | 53 | 47 | 1,312 |
| Rooms | 147,091 | 13,984 | 2,304 | 12,107 | 13,865 | 7,609 | 196,960 |
Fairfield by Marriott® (Fairfield®) | | Fairfield by Marriott® (Fairfield®) | Properties | 1,153 | — | 71 | 48 | 18 | 1,290 |
| Rooms | 109,445 | — | 9,527 | 7,834 | 2,576 | 129,382 |
Residence Inn by Marriott® (Residence Inn®) | | Residence Inn by Marriott® (Residence Inn®) | Properties | 861 | 27 | 7 | — | 8 | 903 |
| Rooms | 105,911 | 3,205 | 1,117 | — | 1,213 | 111,446 |
SpringHill Suites by Marriott® (SpringHill Suites®) | | SpringHill Suites by Marriott® (SpringHill Suites®) | Properties | 547 | — | 547 |
| Rooms | 64,774 | — | 64,774 |
Four Points by Sheraton® (Four Points®) | | Four Points by Sheraton® (Four Points®) | Properties | 154 | 20 | 21 | 46 | 50 | 18 | 309 |
| Rooms | 22,965 | 3,284 | 5,136 | 10,796 | 14,459 | 2,332 | 58,972 |
TownePlace Suites by Marriott® (TownePlace Suites®) | | TownePlace Suites by Marriott® (TownePlace Suites®) | Properties | 503 | — | 503 |
| Rooms | 51,063 | — | 51,063 |
Aloft® Hotels | Aloft® Hotels | Properties | 134 | 10 | 8 | 30 | 10 | 192 | Aloft® Hotels | Properties | 162 | 10 | 12 | 17 | 14 | 17 | 232 |
| Rooms | 19,619 | 1,614 | 2,006 | 6,732 | 1,679 | 31,650 | Rooms | 23,457 | 1,669 | 2,744 | 4,301 | 3,230 | 2,769 | 38,170 |
AC Hotels by Marriott® | AC Hotels by Marriott® | Properties | 73 | 84 | 1 | 4 | 14 | 176 | AC Hotels by Marriott® | Properties | 117 | 92 | 2 | 6 | 1 | 18 | 236 |
| Rooms | 12,337 | 10,854 | 188 | 1,296 | 2,254 | 26,929 | Rooms | 19,386 | 12,529 | 286 | 1,775 | 135 | 2,867 | 36,978 |
Protea Hotels by Marriott® (Protea Hotels®) | Properties | — | 74 | — | 74 |
| Rooms | — | 7,851 | — | 7,851 |
Moxy® Hotels | | Moxy® Hotels | Properties | 35 | 87 | — | 8 | — | 138 |
| Rooms | 6,572 | 16,416 | — | 1,561 | 1,495 | — | 26,044 |
Element® Hotels | Element® Hotels | Properties | 55 | 2 | 6 | — | 65 | Element® Hotels | Properties | 83 | 1 | 7 | 3 | 5 | — | 99 |
| Rooms | 7,387 | 293 | 437 | 1,253 | — | 9,370 | Rooms | 11,522 | 160 | 1,189 | 572 | 1,151 | — | 14,594 |
Moxy® Hotels | Properties | 21 | 47 | — | 6 | — | 74 |
| Rooms | 4,149 | 9,227 | — | 1,159 | — | 14,535 |
Residences and Timeshare | Protea Hotels® by Marriott | | Protea Hotels® by Marriott | Properties | — | 1 | 62 | — | 63 |
| Rooms | — | 72 | 6,539 | — | 6,611 |
| Midscale | | Midscale |
City Express by Marriott TM | | City Express by Marriott TM | Properties | — | 150 |
| Rooms | — | 17,431 |
| | Residences | |
| | Residences | |
| | Residences | Residences | Properties | 59 | 9 | 3 | 13 | 10 | 94 |
| Rooms | 6,258 | 313 | 308 | 1,700 | 576 | 9,155 | Residences | Properties | 69 | 11 | 14 | 17 | 2 | 13 | 126 |
| Timeshare | Properties | 72 | 5 | — | 5 | 9 | 91 |
| Rooms | 18,905 | 919 | — | 455 | 2,476 | 22,755 |
| Residences | | Residences | Rooms | 7,416 | 540 | 1,969 | 2,999 | 302 | 722 | 13,948 |
| 5,965 | 799 | 343 | 567 | 525 | 492 | 8,691 |
| Subtotal Rooms | | | Subtotal Rooms | 979,631 | 144,131 | 74,036 | 130,158 | 159,871 | 86,659 | 1,574,486 |
| | Total Properties | 5,606 | 657 | 264 | 848 | 267 | 7,642 |
| Total Rooms | 942,995 | 127,449 | 60,043 | 237,499 | 55,058 | 1,423,044 |
Timeshare (1) | |
| Timeshare (1) | | Timeshare (1) | Properties | | | | | | | 93 |
| Rooms | | | | | | | 22,745 |
Yacht (1) | | Yacht (1) | Properties | | | | | | | 1 |
| Rooms | | | | | | | 149 |
| Total Properties | | | Total Properties | | | | | | | 8,785 |
| Total Rooms | | | | | | | 1,597,380 |
(1)Includes twoWe exclude geographical data for Timeshare and Yacht as these offerings are captured within “Unallocated corporate and other.”
In the above table, The Luxury Collection, Autograph Collection, and Tribute Portfolio include seven total properties that we acquired when we purchased Elegant Hotels Group plc in December 2019, which we currently intend to re-brand under The Luxury Collection brand followingsuch brands after the completion of planned renovations.
(2)Includes five properties acquired when we purchased Elegant Hotels Group plc in December 2019 which we currently intend to re-brand under the Autograph Collection brand following the completion of planned renovations.
Loyalty and Credit Card Programs
Marriott BonvoyTM® is our customertravel loyalty program and marketplace through which members have access to our diverse brand portfolio, rich benefits, and travel experiences. Members can earn points for stays at our hotels and other lodging offerings, such as Homes & Villas by Marriott BonvoyTM, a global offering focusing on the premium and luxury tiers of rental homes, as well as through purchases with co-branded credit cards and our travel partners. Members can redeem their points for stays at most of our properties, airline tickets, airline frequent flyer program miles, rental cars, products from Marriott Bonvoy Boutiques®, and a variety of other awards, including experiences from Marriott Bonvoy Moments®. We refer to our Marriott Bonvoy loyalty program throughout this report as “Marriott Bonvoy” or our “Loyalty Program.”
Our Loyalty Program rewards members with points toward free hotel stays, access to travel experiences through our Marriott Bonvoy Tours & Activities program, miles with participating airline programs, and other benefits.
We believe that our Loyalty ProgramMarriott Bonvoy generates substantial repeat business that might otherwise go to competing hotels. In each2023, over 60% of 2019 and 2020, approximately 50 percent of our global room nights were booked by Loyalty ProgramMarriott Bonvoy members. We strategically market to this large and growing guest base to generate revenue. See
We have co-branded credit cards associated with Marriott Bonvoy in 11 countries. In the “Loyalty Program” caption in Note 2 for more information.
WeU.S., we have multi-year agreements with JPMorgan Chase and American Express for our U.S.-issued, co-brand credit cards associated with our Loyalty Program.Express. We also license credit card programs internationally including in Japan, Canada, the United Kingdom, United Arab Emirates, Saudi Arabia, South Korea, Mexico, China, India, and Japan.Qatar. We generally earn fixed amounts that are generally payable at contract inception and variable amounts that are paid to us monthly over the term of the agreements primarily based on card usage, and weusage. We believe that our co-brandco-branded credit cards contribute tocreate a diverse revenue stream for the success of our Loyalty Program andCompany, reflect the quality and value of our portfolio of brands. In 2020, we signed amendmentsbrands, and contribute to the existing agreements for our U.S.-issued co-brand credit cards associated with our Loyalty Program. These amendments provided the Company with $920 million of cash from the prepayment of certain future revenues, the early payment of a previously committed signing bonus, and the pre-purchasestrength of Marriott Bonvoy pointsby creating value for our customers and other consideration.property owners and franchisees. Payments received under our co-branded credit card agreements represent a significant funding source for the Loyalty Program.
See the “Loyalty Program” caption in Note 2 for more information about our Loyalty Program and co-branded credit cards.
Sales and Marketing and Reservation Systems
Marriott.com, our international websites,the Marriott Bonvoy mobile app, and our other digital direct channels offer seamless digital experiences that complement the experience our customers enjoy at Marriott’s extensive portfolio of properties. We deliver customer-minded enhancements, including powerful in-stay capabilities through our mobile application allow for a seamless booking experience and easy enrollment in our Loyalty Program to book our exclusive Member Rates and participate in program benefits. The Company responded quickly and flexibly during the COVID-19 crisis to meet the needs of our guests by launching new programs,app, such as Work Anywhere with Marriott Bonvoy, as well as new Marriott web content, focused on providing current hotel and travel information regarding COVID-19. Our Look No Further® Best Rate Guarantee ensures best rate integrity, strengthening consumer confidence in our brand and giving guests access to the best rates when they book hotel rooms through our direct channels. We also remain focused on growing engagement levels with millions of guests by interacting with them through a
variety of channels, including our mobile application and digital guest services – contactless check-in and check-out, Mobile Key, chat, service requests, mobile key,dining, and more. In addition, we are focused on strengthening the Loyalty Program by attracting more members and localizing our experiences to reach new customers around the world. Our focus on creating frictionless experiences throughout our digital direct channels is foundational to our long-term digital and technology transformation, which aims to grow our loyal customer base and drive more direct bookings and more - across our hotel portfolio. Our digital strategy continues to focus on driving bookingsbusiness to our direct channels, which generally deliver more profitable business to hotels in our system compared to bookings made through intermediary channels. Through our direct channels, we aim to create a simple and efficient digital shopping and booking experience, while elevating our service through digitally-enabled guest services to generate superior guest satisfaction and enable more frictionless and memorable stays at our properties.hotels.
At year-end 2020,2023, we operated 20 hotel reservation19 customer engagement centers, seven in the U.S. and 1312 in other countries and territories, which handle reservation requests for our lodging brands worldwide, including franchised properties.territories. We own two of the U.S. facilities and either lease the others or share space with a company-operated property. Our reservation system manages inventory and allows us to utilize third-party agents where cost effective. Economies of scale enable us to minimize costs per occupied room.
We believe our global sales and revenue management organizations are a key competitive advantage due to our unrelenting focus on optimizing our investment in people, processes, and systems. Our above-property sales deployment strategy aligns our sales effortsis designed around howthe way the customer wants to buy and the strategic priorities of our hotels globally. Our strategy is focused on driving efficiencies, profitable revenue, and customer loyalty by leveraging customer relationships and reducing duplication of efforts by individual hotels and allowing us to cover a larger number of accounts.at the hotel level. We also utilize innovative and sophisticated revenue management systems, many of which are proprietary, which we believe provide a competitive advantage in pricing decisions, increasing efficiency and optimizing property-level revenue for hotels in our portfolio. Most of the hotels in our portfolio utilize web-based programs to effectively manage the rate set-up and modification processes whichprocesses. The use of these web-based programs provides for greater pricing flexibility, reduces time spent on rate program creation and maintenance, and increases the speed to market of new products and services.
Competition
We encounter strong competition both as ain the short-term lodging operator and as a franchisor. Other lodging management companies are primarily private management firms, but also include severalmarket from large national and international chains that own and operate their own hotels, operate hotels on behalf of third-party owners, and alsoor franchise their brands. Management contracts are typically long-term in nature, but most allow the hotel owner to replace the management firm if it does not meet certain financial or performance criteria.
Our direct digital channels also compete for guests with large companies that offer online travel services as part of their business model such as Expedia.com, Priceline.com, Booking.com, Travelocity.com, and Orbitz.com and search engines such as Google, Bing, Yahoo, and Baidu. Our hotels compete for guests with otherbrands, unaffiliated hotels, and online platforms, including Airbnb and Vrbo, that allow travelers to book short-term rentals of homes and apartments as an alternative to hotel rooms. We compete for guests in many areas, including brand recognition and reputation, location, guest satisfaction, room rates, quality of service, amenities, quality of accommodations, safety and security, and the ability to earn and redeem loyalty program points.
Our direct digital channels also compete for guests with online travel services platforms, such as Expedia.com, Priceline.com, Booking.com, Travelocity.com, Orbitz.com, and Ctrip.com, and search engines such as Google, Bing, Yahoo, and Baidu.
Affiliation with a brand is common in the U.S. lodging industry, andindustry. In 2023, approximately 72 percent of U.S. hotel rooms were brand-affiliated. Although we believe that our strong brand recognition assists us in attracting and retaining guests, owners, and franchisees. In 2020, approximately 72 percent of U.S. hotel rooms were brand-affiliated. Most of the branded properties are franchises, under which the owner pays the franchisor a fee for use of its hotel name and reservation system. In the franchising business,franchisees, we facecompete against many competitors that haveother companies with strong brands and guest appeal, including Hilton, IntercontinentalIHG Hotels Group,& Resorts, Hyatt, Wyndham Hotels & Resorts, Accor, Choice Radisson,Hotels, Best Western Hotels & Resorts, and others.
Outside the U.S., branding is much less prevalent, and mostmany markets are served primarily by independent operators, although branding is more common for new hotel development.development compared to the past. We believe that chain affiliation will continue to become more attractive in many overseas markets as local economies grow, trade barriers decline, international travel accelerates, and hotel owners seek the benefits of centralized reservation systems, marketing programs, and our Loyalty Program.loyalty programs.
Based on lodging industry data, we have an approximately 16 percent share of the U.S. hotel market (based on number of rooms) and we estimate less than a four percent share of the hotel market outside the U.S. (based on number of rooms). We believe that our hotel brands are attractive to hotel owners seeking a management company or franchise or other licensing affiliation because our hotels typically generate higher RevPAR than our direct competitors in most market areas. We attribute this performance premium to our success in achieving and maintaining strong guest preference. We believe that the location and quality of our lodging facilities, our marketing programs, our reservation systems, our Loyalty Program, and our emphasis on guest service and guest and associate satisfaction contribute to guest preference across all our brands.
Seasonality
In general, business at company-operated and franchisedour properties fluctuates moderately with the seasons. Business at some resort properties may be more seasonal depending on location.
Human Capital Management
Marriott’s long history of service, innovation, and growth wasis built on a commitmentculture of putting people first. We are committed to take careinvesting in our associates, with a focus on leadership development, competitive compensation, and creating a sense of people. Today, that commitment is known as TakeCare. Through our TakeCare commitment, we are dedicated to providing opportunity, community,well-being and purposebelonging for all associates.all.
At year-end 2020,2023, Marriott managed the employment of approximately 411,000 associates. This number includes 148,000 associates employed approximately 121,000 associatesby Marriott at properties, customer care centers, and above-property operations.operations, as well as 263,000 associates who are employed by our property owners but whose employment is managed by Marriott (which is common outside the U.S.). Approximately 98,000117,000 of thesethe associates employed by Marriott are located in the U.S., of which approximately 20,00019,000 belong to labor unions. Outside the U.S., some of our associates are represented by trade unions, works councils, or employee associations. These numbers do not include associates employed by our hotel owners (which is common outside the U.S.) or hotel personnel employed by our franchisees or other management companies hired by our franchisees. Marriott manages over 200,000 associates whois committed to conducting its business in accordance with high ethical and legal standards and expects our independent franchisees to develop responsible human capital management practices.
We are employed by hotel owners.
As a resultfocused on maintaining Marriott’s position as an employer of COVID-19’s impact on our industry and the significant decline in demandchoice both for hotel rooms, we had to take substantial measures to mitigate the negative financial and operational impacts for our hotel ownersjob seekers and our business. These measures included furloughingexisting associates. To attract talent, we are targeting new labor pools, optimizing our recruiting practices, and sharing our story of long-term career potential. At our headquarters in Bethesda, Maryland, we utilize a substantial number of our associateshybrid work model to allow for flexibility and implementing reduced work weeks for other associates. These furlough and reduced work week arrangements have ended at our above-property locations, but continue for a significant number of our on-property associates. In addition,choice to reduce operating costs and improve efficiency, we implemented restructuring plans impacting both on-property and above-property associates, which included a voluntary transition program for certain associates and the elimination of a significant number of positions. Our property-level restructuring plans are ongoing. As a result of COVID-19 and the uncertainty regarding when lodging demand and RevPAR levels will recover, the size of our global workforce remains in transition.
During this period of disruption for our industry, we continue to be focused onmeet the needs of our associates. corporate workforce. For hotel-based associates, we are innovating the way hotel jobs are structured, introducing more flexibility and choice through our integrated jobs program, which allows associates to have more cross-training and engaging roles.
We madeencourage continual feedback from our associates at all levels. We measure associate satisfaction through our Associate Engagement Survey, which gives all associates the opportunity to provide feedback about their work experience, providing valuable insights to drive improvements in our culture. Our associate engagement scores exceeded the “Best Employer” external benchmark in 2023, and we were recognized as a temporary policy changetop 10 company on the Fortune Best Companies to offer Company-subsidized health care coverageWork for in 2023, a list we have been on for 26 consecutive years.
Our human capital strategy is based on three signature elements – Growing Great Leaders, Investing in Associates, and Access to Opportunity.
Growing Great Leaders
We believe that associates at every level can inspire others through great leadership. In 2023, we launched our new Leadership Framework, designed to help us grow great leaders. It starts with leadership essentials that clearly define what great leadership means at Marriott, at all levels of the organization. We have also refreshed our leadership competencies, which have been integrated into our performance management process and leadership development programs. Our talent development strategy is designed to provide opportunities for our associates to develop and grow their careers with Marriott for the long term while driving the performance of our business.
Investing in Associates
We are focused on providing our associates with the tools, resources, and support they need to thrive – both personally and professionally. We provide our eligible U.S. associates on furlough and their families with access to reduce the required hours worked to allow eligible U.S. associates to continue to qualify for Company-subsidized health care coverage. Additionally, we implemented new policies and protocols designed to help minimize the spread of COVID-19 at our hotels and protect our on-property associates, such as requiring all associates to wear face coverings in indoor public areas, enhancing our already rigorous cleaning procedures, and maintaining social distancing protocols.
We have a comprehensive compensation and benefits program designed to reward our associates and enrich their well-being. Our policies and practices are designed to avoid pay inequities throughout an associate’s career. In the U.S., salary history inquiries are prohibited during our hiring process and pay equity audits are conducted periodically. In addition, Marriott is focused on the health and well-being of not only our associates, but their familiesofferings, such as well. In the U.S., we provide our associates with access to health care coverage, work/life support benefits, and other benefits that support families, including paid parental leaveofferings, such as a retirement savings and financial assistance to help with adoption fees. Weemployee stock purchase plan. Outside the U.S., we also offer comprehensive benefitscompensation and benefit programs for associates outside the U.S., the terms of whichthat vary based on the geographic market. Beginning in 2020, we offered associates free access to a digital tool designed to help with stress management and resiliency.
At Marriott, our associates’ career well-being is a top prioritymarket and we offerregularly evaluate these programs for competitiveness against the external talent market. Our TakeCare program provides associates with tools and resources to support our associates’ career goals, from entry level to management positions. Through skills training programs, professional development opportunitiestheir physical, mental, and other learning experiences, we provide associates with a multitude of choices for career and personal growth. We recently launched the Digital Learning Zone, focused on providing associates personalized unique learning paths.
Our company-wide diversity, equity, and inclusion program includes a range of initiatives and programs to support our efforts to make all stakeholders – associates, guests, owners, and suppliers – feel welcome. We have oversight and accountability measures in place to support our focus on equal employment, diversity and inclusion. The Inclusion and Social Impact Committee of our Board of Directors (the “ISI Committee”) helps drive accountability across the Company. Established in 2003, the ISI Committee is chaired by a member of our Board of Directors and comprised of certain other members of the Board and the Company’s senior management team. The ISI Committee assists the Board in carrying out its commitment and responsibilities relating to Marriott’s people-first culture and the Company’s efforts to foster associate well-being and inclusion.financial
well-being. In addition, pay equity is foundational to our compensation structures and practices. In the U.S., we conduct pay equity audits at least annually and make adjustments as needed.
Access to Opportunity
Our company-wide diversity, equity, and inclusion efforts include a range of initiatives and programs to support our goal to make all stakeholders (including associates, guests, owners, and suppliers) feel welcome and valued. The Inclusion and Social Impact Committee (“ISIC”) of our Board of Directors (“Board”), established over 20 years ago, helps drive accountability for these efforts across the Company. The ISIC assists the Board in providing oversight of the Company’s strategy, efforts, and commitments related to our people-first culture, associate well-being, inclusion, and other environmental, social and governance matters.
Sustainability and Social Impact
Guided by our 2025 sustainability and social impact goals, as well as the United Nations Sustainable Development Goals, we believe we have an opportunity to createare focused on creating a positive and sustainable impact wherever we do business. Our sustainability and social impact platform, Serve 360: Doing Good Inin Every Direction, is built around four focus areas: Nurture Our World; Sustain Responsible Operations; Empower Through Opportunity; and Welcome All and Advance Human Rights -– each with targets to drive our efforts through 2025. These targets reflect our goals to protect(1) support the resiliency and invest in the vitalitysustainable development of the communities and natural environments in whichwhere we operate, builddo business, (2) work to reduce our environmental impacts, design and operate sustainable hotels, and source responsibly, advancewhile mitigating climate-related risk, (3) facilitate workplace readiness and access to opportunity in our business, and (4) create a safe, welcoming world, including by working with organizations to educate and advocate on issues related to human rights throughout and mitigate climate-related risk. In 2020, many ofbeyond our programsbusiness.
Our sustainability strategy and initiatives focus on a wide range of issues, including designing resource-efficient hotels, implementing technologies to track and reduce energy and water consumption, as well as waste and food waste, increasing the switch from single-use toiletry bottlesuse of renewable energy, managing water-related risks, focusing on third-party sustainability certifications at the hotel-level, supporting innovative ecosystem restoration initiatives, focusing on responsible and local sourcing, and driving climate action.
Our climate action efforts include committing to larger, pump-topped bottles, were slowed dueset a near-term science-based emissions reduction target and a long-term science-based target to reach net-zero value chain greenhouse gas emissions by no later than 2050. In September 2023, we submitted our emissions reduction targets to the impactScience Based Targets initiative and are awaiting validation of COVID-19 onthe targets, which we expect later in 2024.
In response to humanitarian crises, like war and natural disasters, our business. Nevertheless, hotels across the globe supportedoften look to support their local communities in need by donating funds, hotel stays, food, cleaning supplies, and other essential items and opening their doors to non-profits that needed large event spaces in order to adhere to social distancing protocols and still meet an increase in demand for their community-supporting services. Additionally, together with American Express and JPMorgan Chase, we provided $10 million worth of free hotel stays for frontline healthcare workers.volunteer hours. We deployedalso deploy our Marriott Disaster Relief Fund to provide essential items,support associates and their families impacted by crises, such as food vouchers,the earthquakes in Türkiye and Syria and fires in Maui, as well as charitable organizations providing relief on the ground. We also continue to Marriottfocus on our efforts to advance human rights, and we have trained 1.2 million associates in need. Notwithstanding the pandemic, we made progress toward our goal to train 100 percent of on-property personnel in human trafficking awareness by 2025,between 2016 and in collaboration with a leading anti-trafficking organization, we madeyear-end 2023. We have also donated our training open-sourced for free accessprogram to ourthe broader lodging industry, and beyond. In 2021, we expectthe training has been completed 1.6 million times by non-Marriott individuals between 2020 and year-end 2023. Additionally, in 2023, Marriott became a member of the Internet Watch Foundation and deployed technology to revise and implement sustainability and social impact programming that isblock websites with illegal child sexual abuse material from guest network access in most pertinent to the current operating environment, while helping us to address the growing expectations of our stakeholders, increase our operational efficiency and excellence, and enhance our reputation while mitigating risk and supporting the resiliency of our business.its U.S. & Canada hotels.
Government Regulations
As a company with global operations, we are subject to a wide variety of laws, regulations, and government policies in the U.S. and in jurisdictions around the world. Some of the regulations that most affect us include those related to employment practices; healthmarketing and safety;advertising efforts; trade and economic sanctions; competition; anti-bribery, anti-corruption, and anti-corruption; cybersecurity;anti-money laundering; intellectual property; cybersecurity, data privacy, data localization, data transfers, and the handling of personally identifiable information; competition; climate and the environment; health and safety; liquor sales; and the offer and sale of franchises; and liquor sales.franchises.
Internet Address and Company SEC Filings
Our primary Internet address is Marriott.com. On the investor relations portion of our website, Marriott.com/investor, we provide a link to our electronic filings with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to these reports. We make all such filings available free of charge as soon as reasonably practicable after filing. The information found on our website is not part of this or any other report we file with or furnish to the SEC.
Item 1A. Risk Factors.
We are subject to various risks that make an investment in our securities risky. The events and consequences discussed in these risk factors could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, liquidity, financial condition, and results of operations. In addition, these risks could cause results to differ materially from those we express in forward-looking statements contained in this Annual Reportreport or in other Company communications. These risk factors do not identify all risks that we face;face, and our operationsbusiness could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations.
Risks Relating to COVID-19Our Industry
COVID-19Our industry is highly competitive, which may impact our ability to compete successfully for guests has had a material detrimental impact. We operate in markets that contain many competitors. Our hotel brands and other lodging offerings generally compete with major hotel chains, regional hotel chains, independent hotels, and home sharing and rental services across national and international venues. Our ability to remain competitive and attract and retain business, group and leisure travelers depends on our businesssuccess in distinguishing and financial results,driving preference for our lodging products and such impact could continueservices, including our Loyalty Program, direct booking channels, consumer-facing technology platforms and may worsen for an unknown period of time.
COVID-19 has been and continues to be a complex and evolving situation, with governments, public institutionsservices, our co-branded credit cards, and other organizations imposing or recommending, and businesses and individuals implementing, at various times and to varying degrees, restrictions on various activities or other actions to combat its spread, such as restrictions and bans on travel or transportation; limitations on the size of in-person gatherings; closures of, or occupancy or other operating limitations on, work facilities, lodging facilities, food and beverage establishments, schools, public buildings and businesses; cancellation of events, including sporting events, conferences and meetings; and quarantines and lock-downs. COVID-19 and its consequences have dramatically reduced travel and demand for hotel rooms, which has and will continue to impactofferings. If we cannot compete successfully in these areas, our business, operations, and financial results. The extent to which COVID-19 impacts our business, operations, and financial results will depend on the
factors described above and numerous other evolving factors that we may not be able to accurately predict or assess, including the duration and scope of COVID-19; the availability and distribution of effective vaccines or treatments; COVID-19’s impact on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending; its short and longer-term impact on the demand for travel, transient and group business, and levels of consumer confidence; the ability of our owners and franchisees to successfully navigate the impacts of COVID-19; and how quickly economies, travel activity, and demand for lodging recovers after the pandemic subsides.
COVID-19 has subjected our business, operations andliquidity, financial condition, to a number of risks, including, but not limited to, those discussed below:
•Risks Related to Revenue:COVID-19 has negatively impacted, and will in the future negatively impact to an extent we are unable to predict, our revenues from managed and franchised hotels, which are primarily based on hotels’ revenues or profits. In addition, COVID-19 and its impact on global and regional economies, and the hospitality industry in particular, has made it difficult for hotel owners and franchisees to obtain financing on attractive terms, or at all, and increased the probability that hotel owners and franchisees will be unable or unwilling to service, repay or refinance existing indebtedness. This has caused, and may in the future continue to cause, some lenders to declare a default, accelerate the related debt, foreclose on the property or exercise other remedies, and some hotel owners or franchisees to declare bankruptcy. If a significant number of our management or franchise agreements are terminated as a result of bankruptcies, sales or foreclosures, our results of operations could be materially adversely affected. Hotel ownersFurther, new lodging supply in individual markets could have a negative impact on the hotel industry and hamper our ability to maintain or franchiseesincrease room rates or occupancy in bankruptcy may notthose markets.
Economic and other global, national, and regional conditions and events have sufficient assets to pay us termination fees or other unpaid fees or reimbursements we are owed under their agreements with us. Even if hotel owners or franchisees do not declare bankruptcy,in the significant decline in revenues for most hotels haspast impacted, the timely payment of amounts owed to us by some hotel owners and franchisees, and could in the future materially impact, the ability or willingness of hotel ownersour business, financial results and franchisees to fund working capital or pay us other amounts thatgrowth. Because we conduct our business on a global scale, we are entitled to on a timely basisaffected by changes in global, national, or at all, which would adversely affect our liquidity. If a significant numberregional economies, governmental policies (including in areas such as trade, travel, immigration, labor, healthcare, and related issues), and geopolitical, public health, social and other conditions and events. Our business, financial results and growth are impacted by weak or volatile economic conditions; pandemics and other outbreaks of hotels exit our system as a resultdisease; natural and man-made disasters; changes in energy prices, interest rates and currency values; political instability, geopolitical conflict, actual or threatened war, terrorist activity, civil unrest and other acts of COVID-19, whether as a result of a hotel owner or franchisee bankruptcy, failure to pay amounts owed to us, a negotiated termination,violence; heightened travel security measures, travel advisories, and disruptions in air and ground travel; and concerns over the exercise of contractual termination rights, or otherwise, our revenuesforegoing. These conditions and liquidity could beevents have in the past materially adversely affected. COVID-19 has also materiallynegatively impacted, and could in the future materially negatively impact, other non-hotel related sources of revenues for us,our business, operations, and financial results in many ways, including, for example our fees from our co-brand credit card arrangements, which have been and may continuebut not limited to, be affected by COVID-19’s impact on spending patterns of co-brand cardholders and acquisition of new co-brand cardholders. Also, testing our intangible assets or goodwill for impairments due to reduced revenues or cash flows could result in additional charges, which could be material.as follows:
•Risks Related to Ownedreducing revenues at our managed and Leased Hotels and Other Real Estate Investments:COVID-19 and its impact on travel has reduced demand at nearly allfranchised hotels, including our owned and leased hotels and properties owned by entities in which we have an equity investment. As a result, most of our owned and leased hotels, and properties in which we have an investment, are not generating revenue sufficientpotentially impacting their ability to meet expenses, which is including payment of amounts owed to us;
•adversely affecting our income and could in the future more significantly adversely affect the value of our owned and leased properties or investments. In addition, we have seen and could continue to see entities in which we have an investment experience challenges securing additional or replacement financing to satisfy maturing indebtedness. As a result of the foregoing, we have recognized, and may in the future be required to recognize, significant non-cash impairment charges to our results of operations.investments;
•Risks Related to Operations:Becauseaffecting the ability or willingness of the significant decline in the demand for hotel rooms, we have taken steps to reduce operating costs and improve efficiency, including furloughing a substantial number of our associates and implementing reduced work weeks for other associates, implementing a voluntary transition program for certain associates, eliminating a significant number of above-property and on-property positions, and modifying food and beverage offerings and other services and amenities. Such steps, and further changes we could make in the future to reduce costs for us or our hotel owners and franchisees to service, repay or franchisees (including ongoing property-level restructuring plans), may negatively impact guest loyalty, owner preference,refinance existing indebtedness or our ability to attract and retain associates, and our reputation and market share may suffer as a result. For example, loss of our personnel may cause us to experience operational challenges that impact guest loyalty, owner preference, and our market share, which could limit our ability to maintainsimilar obligations, including loans or expand our business and could reduce our profits. Further, reputational damage from, and the financial impact of, position eliminations, furloughs or reduced work weeks could lead associates to depart the Company and could make it harder for us or the managers of our franchised properties to recruit new associates in the future. In addition, if we or our hotel owners or franchisees are unable to access capital to make physical improvements to our hotels, the quality of our hotels may suffer, which may negatively impact our reputation and guest loyalty, and our revenue and market share may suffer as a result.We have received demands or requests from labor unions that represent our associates and
may face additional demands, whether in the course of our periodic renegotiation of our collective bargaining agreements or otherwise, for additional compensation, healthcare benefits or other terms as a result of COVID-19 that could increase costs, and we could experience labor disputes or disruptions as we continue to operate under our COVID-19 mitigation and recovery plans. COVID-19 could also negatively affect our internal control over financial and other reporting, as many of our personnel have departed the Company as a result of our voluntary transition program and position eliminations, and our remaining personnel are often working from home. In addition, new processes, procedures and controls could be required to respond to changes in our business environment.
•Risks Related to Expenses:COVID-19 has caused us to incur additional expenses and will continue to cause us to incur additional expenses in the future which are not fully reimbursed or offset by revenues. For example, we have already incurred certain expenses related to furloughs, our voluntary transition program and position eliminations, and we expect additional charges related to our property-level restructuring activities discussed in Note 3 in future periods.Also, if a hotel closes and has employees covered by an underfunded multi-employer pension plan, we may need to pay withdrawal liability to the plan as result of such closure if it is determined that there has been a complete or partial withdrawal from the plan, and we may be unable to collect reimbursement from the hotel owner. In addition, COVID-19 could make it more likely that we have to fund shortfalls in operating profit under our agreements with some hotel owners or fund financial guaranteesguaranty advances we have made to third-party lendersor for the timely repayment of all or a portion of certain hotel owners’ or franchisees’ debt related to hotels that we manage or franchise, beyond the amounts funded or the additional guarantee reserves recorded in 2020. them;
•COVID-19 also makesmaking it more likely our hotel owners or franchisees will default on loans we have made to them or will fail to reimburse usdifficult for guarantee advances. Our ability to recover loans and guarantee advances from hotel operations or from hotel owners or franchisees through the proceeds of hotel sales, refinancing of debt or otherwise may also affect our ability to recycle and raise new capital. Even in situations where we are not obligated to provide funding to hotel owners, franchisees or entities in which we have a noncontrolling interest, we may choose to provide financial or other types of support to certain of these parties, which could materially increase our expenses. While governments have and may continue to implement various stimulus and relief programs, it is uncertain whether existing programs will be effective in mitigating the impacts of COVID-19 and, with respect to future programs, to what extent we or our hotel owners or franchisees will be eligible to participate and whether conditions or restrictions imposed under such programs will be acceptable. As a result of COVID-19, we and our hotel owners and franchisees have experienced and could continue to experience other shortobtain financing on commercially acceptable terms, or longer-term impacts on costs, for example, related to enhanced health and hygiene requirements. These effects have and could continue to impact our ability to generate profits even after revenues improve.at all;
•Risks Related to Growth: Our growth has been, and may continue to be, harmed by COVID-19 and its various impacts as discussed above. Many current and prospectivecausing hotel owners and franchisees are finding it difficult or impossible to obtain hotel financing on commercially viable terms. COVID-19 has caused and may continue to cause some projects that are in construction or development to be unable to draw on existing financing commitments or secure additional or replacement financing to complete construction and additional or replacement financing that is available may be on less favorable terms. opening delays;
•COVID-19 has caused and may continue to cause construction delays due to government restrictions and shortages of workers or supplies. As a result, some of the properties in our development pipeline will not enter our system when we anticipated, or at all. We have seen, and may continue to see, opening delays and a decrease indecreasing the rate at which new projects enter our pipeline, and we may see an increase in the number of projects that fall out of our pipeline as a result of project cancellations or other factors. These effects on our pipeline have reduced and will continue to reduce our ability to realize fees or realize returns on equity investments from such projects. We expect we could potentially see more existing hotels exit our system as a result of COVID-19, and a significant number of such exits could negatively impact the overall growth of our system and our business prospects.pipeline;
•Risks Relatedcausing hotels to Liquidityexit our system;
•:increasing operating costs;
• In 2020, we maderequiring us to borrow or otherwise raise a significant borrowings under our $4.5 billion Credit Facility and completed offerings of $3.6 billion aggregate principal amount of senior notescash in order to preserve financial flexibility, in light of the impact on global markets resulting from COVID-19. We may be required to raise additional capital again in the future to fund our operating expenses and repay maturing debt. In 2020, we raised $920 million of cash through amendments to agreements with the U.S. issuers of our co-brand credit cards associated with our Loyalty Program,debt and this option to raise capital will likely not be available again to us in the near future and will reduce the amount of cash we will receive in the future from these card issuers, which may increase the need for us to raise additional capital from other sources. In addition, we have seen increases in our cost of borrowing as a result of COVID-19 and such costs may increase even further for a time we are unable to determine. If we are required to raise additional capital, our access to and cost of financing will depend on, among other things, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects, our credit ratings, and the outlook for the hotel industry as a whole. As a result of COVID-19, credit agencies have downgraded our credit ratings. If our credit ratings were tomanage debt maturities;
be further downgraded, or general market conditions were to ascribe higher risk to our credit rating levels, our industry, or our Company, our access to capital and the cost of debt financing will be further negatively impacted. The interest rate we pay on many of our existing debt instruments, including the Credit Facility and some of our senior notes, is affected by our credit ratings. Accordingly, a downgrade may cause our cost of borrowing to further increase. Additionally, certain of our existing commercial agreements may require us to post or increase collateral in the event of further downgrades. In addition, our latest amendments to our Credit Facility increase the minimum liquidity we are required to maintain for the duration of the waiver period as discussed in Note 10, andcausing the terms of future debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations or cause future financingborrowing to be unavailable due to our covenant restrictions then in effect. Also, if we are unable to comply with the covenants under our Credit Facility, the lenders under our Credit Facility will have the right to terminate their commitments thereundermore expensive or more restrictive; and declare the outstanding loans thereunder to be immediately due and payable. A default under our Credit Facility could trigger a cross-default, acceleration or other consequences under other indebtedness, financial instruments or agreements to which we are a party. There is no guarantee that debt financings will be available in the future to fund our obligations, or will be available on terms consistent with our expectations. Additionally, the impact of COVID-19 on the financial markets is expected to adversely impact our ability to raise funds through equity financings.
COVID-19•,adversely affecting associate hiring and the volatile regionalretention.
The conditions and global economic conditions stemming from COVID-19, as well as reactions to future pandemics or resurgences of COVID-19,events discussed in this risk factor could also give rise to, aggravate, and impact our ability to allocate resources to mitigate the other risks that we identify below, which in turn could materially adversely affect our business, liquidity, financial condition, and results of operations. Further, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.
Risks Relating to Our Industry
Our industry is highly competitive, which may impact our ability to compete successfully for guests with other hotel properties and home sharing or rental services. We operate in markets that contain many competitors. Each of our hotel brands and our home rental offering competes with major hotel chains, regional hotel chains, independent hotels, and home sharing and rental services across national and international venues. Our ability to remain competitive and attract and retain business and leisure travelers depends on our success in distinguishing the quality, value, and efficiency of our lodging products and services, including our Loyalty Program, direct booking channels, and consumer-facing technology platforms and services, from those offered by others. If we cannot compete successfully in these areas, our operating margins could contract, our market share could decrease, and our earnings could decline. Further, new lodging supply in individual markets could have a negative impact on the hotel industry and hamper our ability to increase room rates or occupancy in those markets.
Economic downturns and other global, national, and regional conditions could further impact our financial results and growth.Because we conduct our business on a global platform, changes in global, national, or regional economies, governmental policies (including in areas such as trade, travel, immigration, healthcare, and related issues), and geopolitical and social conditions impact our activities. Our business is impacted by decreases in travel resulting from weak economic conditions, changes in energy prices and currency values, political instability, heightened travel security measures, travel advisories, disruptions in air travel, and concerns over disease, violence, war, or terrorism.
As discussed in “Risks Relating to COVID-19,” our performance has been materially affected by some of these conditions and could be further materially affected if these conditions worsen, arise in the future, or extend longer than anticipated, or in other circumstances that we are not able to predict or mitigate. Even after COVID-19 subsides or effective vaccines or treatments become widely available, our business, markets, growth prospects and business model could continue to be materially impacted or altered.
Risks Relating to Our Business
Operational Risks
Premature termination of our management or franchise agreements could hurt our financial performance.performance. Our hotel management and franchise agreements may be subject to premature termination in certain circumstances, such as the bankruptcy of a hotel owner or franchisee, the failure of thea hotel owner or franchisee to comply with its payment or other obligations under the agreement, a failure under some agreements to meet specified financial or performance criteria that are subject to the risks described in this section, which we fail or electdo not to cure, or in certain limited cases, other negotiated contractual termination rights. Some courts have also applied agency law principles and related fiduciary standards to managers of third-party hotel properties, including us (or have interpreted hotel management agreements to be “personal services contracts”). Property owners may assert the right to terminate management agreements even where the agreements provide
terminate management agreements even where the agreements provide otherwise, and some courts have upheld such assertions about our management agreements and may do so in the future. When terminations occur for certain of these or other reasons, we may need to enforce our right to damages for breach of contract and related claims, which may cause us to incur significant legal fees and expenses. We may have difficulty collecting damages from the hotel owner or franchisee, and any damages we ultimately collect could be less than the projected future value of the fees and other amounts we would have otherwise collected under the management or franchise agreement. A significant loss of these agreements could hurt our financial performance or our ability to grow our business.
Disagreements with owners of hotels that we manage or franchise may result in arbitration or litigation or delay implementation of product or service initiatives.initiatives. Consistent with our focus on management and franchising, we own very few of our lodging properties. The nature of our responsibilities under our management agreements to manage each hotel and enforce the standards required for our brands under both management and franchise agreements may be subject to interpretation and willinterpretation. This has from time to time given rise to disagreements with hotel owners and franchisees, and may give rise to such disagreements which may include disagreementsin the future, including over the need for or payment for new product, service, or systems initiatives, the timing and amount of capital investments, and reimbursement for operating costs, system costs, or other amounts. Such disagreementsWe have seen, and may become more likely in the current environmentfuture see, an increase in such disagreements with hotel owners and franchisees during other periods when hotel returns are weaker. We seek to resolve any disagreements and to develop and maintain positive relations with current and potential hotel owners, franchisees, and real estate investment partners, but we cannot always do so. Failure to resolve such disagreements has resulted in arbitration or litigation, and could do so in the future. If any such litigation results in an adverse judgment, settlement, or court order, weWe could suffer significant losses, reduced profits, or constraints on our profits could be reduced, or our future ability to operate our business could be constrained.operations as the result of adverse dispute resolution outcomes.
An increase in the use of third-party Internet services to book online hotel reservations could adversely impact our business.business. Some of our hotel rooms are booked through Internet travel intermediaries such as Expedia.com, Priceline.com, Booking.com, Travelocity.com, Orbitz.com, and Orbitz.com, as well as lesser-knownCtrip.com, and other online travel service providers. These intermediaries initially focused on leisure travel, but now also provide offerings for corporate travel and group meetings. Although our Best Rate Guarantee and Member Rate programs have helped limit guest preference shift to intermediaries and greatly reduced the ability of intermediaries to undercut the published rates at our hotels, intermediaries continue to use a variety of aggressive online marketing methods to attract guests, including the purchase by certain companies of trademarked online keywords such as “Marriott” from Internet search engines such as Google, Bing, Yahoo, and Baidu to steer guests toward their websites (a practice that has been challenged by various trademark owners in federal court).websites. Our business and profitability could be harmed to the extent that online intermediaries succeed in significantly shifting loyalties from our lodging brands to their travel services, diverting bookings away from our direct online channels, or through their fees, increasing the overall cost of Internet bookings for our hotels. In addition,At the same time, if we are not able to negotiate new agreements on satisfactory terms when our existing contracts with intermediaries (which generally have 2-two- to 3-three- year terms) come up for renewal, our business and prospects could be negatively impacted in a number of ways. For example, if newly negotiated agreements are on termsways, including by reducing bookings or making our brands less favorableattractive to our hotels than the expiring agreements, or if we are not able to negotiate new agreements and our hotels no longer appear on intermediary websites, our bookings could decline, our profits (and the operating profits of hotels in our system) could decline, and customers and owners may be less attracted to our brands. We may not be able to recapture or offset any such loss of business through actions we take to enhance our direct marketing and reservation channels or to rely on other channels or other intermediary websites.hotel owners.
Our growth strategy depends upon attracting third-party owners and franchisees to our platform, and future arrangements with these third parties may be less favorable to us, depending on the terms offered by our competitors.competitors Our growth strategy for adding lodging facilities. Adding properties to our system entails entering into and maintaining various arrangements with property owners. TheOur ability to attract and retain owners and franchisees and the terms of our management agreements and franchise agreements for each of our lodging facilities are influenced by contract terms offered by our competitors,the needs and preferences of owners and franchisees and the offerings otherwise available to owners and franchisees in the market, among other things. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future arrangements, renew agreements or enter into new agreements in the future on terms that are as favorable to us as those that exist today.
The growing significanceeffects of, or our operations outside of the U.S. makes us increasingly susceptiblefailure to the risks of doingcomply with, applicable laws, regulations and government policies may disrupt our business, internationally, which could lower our revenues, increase our costs, reduce our profits, disruptlimit our business,growth, or damage our reputation.A significant numberWe, the hotels that we franchise or manage, and the programs that we offer, are subject to or affected by a variety of rooms in our system are located outsidelaws, regulations and government policies around the globe, including, among others, those related to employment practices; marketing and advertising efforts; trade and economic sanctions; anti-bribery, anti-corruption, and anti-money laundering; intellectual property; cybersecurity, data privacy, data localization, data transfers, and the handling of personally identifiable information; competition; climate and the U.S.environment; health and its territories. Tosafety; liquor sales; the extent that our international operations continue to grow, this increasingly exposes us to the challengesoffer and riskssale of doing business outside the U.S., many of which are outside of our control,franchises; and which could materially reduce our revenues or profits, materially increase our costs, result in significant liabilities or sanctions, significantly disrupt our business, or significantly damage our reputation.credit card products. These challengeslaws, regulations, and risks include: (1) compliance withgovernment policies may be complex and change frequently and could have a range of adverse effects on our business. The compliance programs, internal controls, and policies we maintain and enforce may need to be updated regularly to keep pace with changing laws, regulations and government policies thatand may impactnot prevent our associates, contractors, or agents from materially violating applicable laws, regulations, and government policies. The requirements of applicable laws, regulations, and government policies, our failure to meet such requirements (including investigations and publicity resulting from actual or alleged failures), or actions we take to comply with such requirements or investigations could have significant adverse effects on our results of operations, such as foreign ownership restrictions, import and export controls, trade restrictions, and health and safety requirements; (2) compliance with U.S. and foreign laws that affect the activities of companies abroad, such as competition laws, cybersecurity and privacy laws, data localization requirements, currency regulations, national security laws, trade and economic sanctions, and other laws affecting dealings with certain nations; (3) the difficulties involved in managing an organization doing business in many different countries; (4) uncertainties asreputation, or ability to thegrow our business.
enforceability of contract and intellectual property rights under local laws; and (5) rapid changes in government policy, political or civil unrest, acts of terrorism, war, pandemics or other health emergencies, border control measures or other travel restrictions, or the threat of international boycotts or U.S. anti-boycott legislation.
Any failure by our international operations to comply with anti-corruption laws or trade sanctions could increase our costs, reduce our profits, limit our growth, harm our reputation, or subject us to broader liability. We are subject to restrictions imposed by the U.S. Foreign Corrupt Practices Act and anti-corruption laws and regulations of other countries applicable to our operations, such as the U.K. Bribery Act. Anti-corruption laws and regulations generally prohibit companies and their intermediaries from making certain payments to government officials or other persons in order to influence official acts or decisions or to obtain or retain business. These laws also require us to maintain adequate internal controls and accurate books and records. We have properties in many parts of the world where corruption is common, and our compliance with anti-corruption laws may potentially conflict with local customs and practices. The compliance programs, internal controls and policies we maintain and enforce to promote compliance with applicable anti-bribery and anti-corruption laws may not prevent our associates, contractors, or agents from acting in ways prohibited by these laws and regulations. We are also subject to trade sanctions and regulations administered by the U.S. Office of Foreign Assets Control, the U.S. Department of Commerce, and other U.S. government agencies, and authorities in other countries where we do business. Our compliance programs and internal controls also may not prevent conduct that is prohibited under these rules. The U.S. or other countries may impose additional sanctions at any time against any country in or with which, or persons or entities with whom, we do business. Depending on the nature of the sanctions imposed, our operations in the relevant country or with the relevant individual or entity could be restricted or otherwise adversely affected. Any violations of anti-corruption laws and regulations or trade sanctions could result in significant civil and criminal penalties, reduce our profits, disrupt or have a material adverse effect on our business, damage our reputation, or result in lawsuits or regulatory actions being brought against the Company or its officers or directors. In addition, the operation of these laws and regulations or an imposition of further restrictions in these areas could increase our cost of operations, reduce our profits, or cause us to forgo development opportunities, cease operations in certain countries, or limit certain business operations that would otherwise support growth.
Exchange rate fluctuations and foreign exchange hedging arrangements could result in significant foreign currency gains and losses and affect our business results.results. We earn revenues and incur expenses in foreign currencies as part ofin connection with our operations outside of the U.S. Accordingly, fluctuations in currency exchange rates may significantly increase the amount of U.S. dollars required for foreign currency expenses or significantly decrease the U.S. dollars we receive from foreign currency revenues. We are also exposed to currency translation risk because the results of our non-U.S. business are generally reported in local currency, which we then translate to U.S. dollars for inclusion in our Financial Statements. As a result, exchange rate changes between foreign currencies and the U.S. dollar affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a material negative effect on our financial results. We expectTo the extent that our international operations continue to grow, our exposure to foreign currency exchange rate fluctuations will grow as the relative contribution of our non-U.S. operations increases. Wegrow. Even though we enter into foreign exchange hedging agreements with financial institutions to mitigate exposure toarrangements for some of the foreign currency fluctuations, but these efforts may not be successful. These hedging agreements also do not cover all currencies in which we do business, do not eliminateexchange rate fluctuations could result in significant foreign currency risk entirely for the currencies that they do cover,gains and involvelosses and affect our results. Our hedging arrangements may also create their own costs and risks, of their own in the form of transaction costs, credit requirements, and counterparty risk.
Our business depends on the quality and reputation of our Company and our brands, and any deterioration could adversely impact our market share, reputation, business, financial condition, or results of operations.operations. Many factors can affect the reputation and value of our Company or one or more of our properties or brands, and the value ofincluding our brands, including service, food quality and safety, safety of our guests and associates, our approach to health and cleanliness, our approach to managing and reducing our carbon footprint, availability and management of scarce natural resources, supply chain management, ability to protect and use our brands and trademarks, diversity,trademarks; our properties’ adherence to service and other brand standards; our approach to, or incidents involving, matters related to food quality and safety, guest and associate safety, health and cleanliness, sustainability and climate impact, supply chain management, inclusion and belonging, human rights, and support for local communities.communities; and our compliance with applicable laws. Reputational value is also based on perceptions, and broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of us, our brands, and our hotels,properties, and it may be difficult to control or effectively manage negative publicity, regardless of whether it is accurate. While reputations may take decades to build, negative incidents can quickly erode trust and confidence, particularly if they result in adverse mainstream and social media publicity, governmental investigations, proceedings or penalties, or litigation. Negative incidents could lead to tangible adverse effects on our business, including lost sales, boycotts, reduced enrollment and/or participation in our Loyalty Program, loss of development opportunities, adverse government attention, adverse reaction from owners and franchisees, or associate retention and recruiting difficulties. Any material decline in the reputation or perceived quality of our brands or corporate image could affect our market share, reputation, business, financial condition, or results of operations.
Actions by our franchisees and licensees or others could adversely affect our image and reputation.reputation. We franchise and license many of our brand names and trademarks to third parties for lodging, timeshare, and residential properties, and with respect to our credit card programs.programs and other offerings, and enter into marketing and other strategic collaborations with other companies. Under the terms of their agreements with us, these third parties interact directly with guests and others under or in connection with our brand and trade names. If these third parties fail to maintain or act in accordance with applicable brand standards; experience operational problems, including anya data or privacy incident, involving guest information or a
circumstance involving guest or associate health or safety; or project a brand image inconsistent with ours, then our image and reputation could suffer. Although our agreements with these parties generally provide us with recourse and remedies in the event of a breach, including termination of the agreements under certain circumstances, it could be expensive or time consumingtime-consuming for us to pursue such remedies. and even if we are successful in pursuing such remedies, that may not be sufficient to mitigate reputational harm to us. We also cannot assure you that in every instance a court would ultimately enforce our contractual termination rights or that we could collect any awarded damages from the defaulting party.
Collective bargaining activity and strikes could materially disrupt our operations, increase our labor costs, and interfere with the ability of our management to focus on executing our business strategies. A significant number of associates at our managed, leased, and owned hotels are covered by collective bargaining agreements. If relationships with our organized associates or the unions that represent them become adverse, then the properties we operate could experience labor disruptions such as strikes, lockouts, boycotts, and public demonstrations.demonstrations that cause a significant impact. Numerous collective bargaining agreements are typically subject to negotiation each year, and our ability in the past to resolve such negotiations does not mean that we will be able to resolve future negotiations without significant strikes or disruptions, or on terms that we consider reasonable. Labor disputes and disruptions have in the past, and could in the future,sometimes result in adverse publicity or regulatory investigations and adversely affect operations and revenues at affected hotels. In addition, labor disputes and disruptions couldor increased demands from labor unions can sometimes harm our relationship with our associates, result in increased regulatory requirements or inquiries and enforcement by governmental authorities, harm our relationships with our guests and customers, divert management attention, and reduce customer demand for our services, all of which could have ana significant adverse effect on our reputation, business, financial condition, or results of operations.
In addition, labor regulation and the negotiation of new or existing collective bargaining agreements could lead to higher wage and benefit costs, changes in work rules that raise operating expenses and legal costs, and could impose limitations on our ability or the ability of our third-party property owners to take cost saving measures during economic downturns. We do not have the ability to control the negotiations of collective bargaining agreements covering unionized labor employed by the
operators of our franchised properties. Increased unionization of our workforce, new labor legislation, or changes in regulations could disrupt our operations, reduce our profitability, or interfere with the ability of our management to focus on executing our business strategies.
Our business could suffer if we cannot attract and retain associates or as the result of the loss of the services of our senior executives or if we cannot attract and retain talented associates.. We compete with other companies both within and outside of our industry for talented personnel. We have in the past experienced, and could in the future experience, challenges hiring for certain positions due to various factors, such as increasing wage expectations or competition for labor from other industries, and these circumstances could continue or worsen in the future to an extent and for durations that we are not able to predict. If we cannot recruit, train, develop, and retain sufficient numbers of talented associates, we could experience increasedsignificant negative impacts on our operations, associate morale and turnover, decreased guest satisfaction, low morale, inefficiency, or our internal control failures.environment. Insufficient numbers of talented associates could also limit our ability to grow and expand our businesses. A shortage of skilled laborbusiness. Labor shortages have in the past resulted, and could alsoin the future result, in higher wages that would increaseand initial hiring costs, increasing our labor costs and labor costs at our hotels, which could reduce our revenues and profits. In addition, the efforts and abilities of our senior executives are important elements of maintaining our competitive position and driving future growth, and the loss of the services of one or more of our senior executives could result in challenges executing our business strategies or other adverse effects on our business. The impact of
COVID-19 on the hospitality industry,Extreme weather, natural disasters, climate change, and actions that we and otherssustainability-related concerns have impacted our business in the hospitality industry have takenpast and may takecould in the future have a material adverse effect on our business and results of operations. We are subject to the risks associated with respectextreme weather, natural disasters, and climate change, including the impacts of the physical effects of climate change, changes in laws and regulations related to our associatesclimate change and executives in response to COVID-19, may adversely affect our ability to attractsustainability, and retain associates and executives in the future.
Risks relating to natural or man-made disasters, contagious disease, violence, or war have reduced the demand for lodging, which has adversely affected our revenues.changing consumer preferences. We have seen a decline in travel and reduced demand for lodging due to so called “Actsas a result of God,” such as hurricanes, earthquakes, tsunamis, floods, volcanic activity, wildfires, and other natural disasters as well as man-made disasters and the spread of contagious diseasesextreme weather in some locations where we manage, franchise, own manage, or franchiselease properties andor in areas of the world from which we draw a large number of guests, and the prevalence and impact of these circumstances could continueevents may increase or worsen in the future to an extent and for durations that we are not able to predict. Actual or threatened war, terrorist activity, political unrest, civil or geopolitical strife,future. Natural disasters, extreme weather, and other actsphysical impacts of violenceclimate change (including rising sea levels, extreme hot or cold weather, flooding, water shortages, fires, and droughts) have in the past and could have a similar effect. As within the effects we have already experienced from the COVID-19 pandemic, any onefuture result in increases in related insurance, energy or more of these events may reduce the overall demand for lodging,other operating costs, and physical damage to our hotels that might not be covered by insurance and might prevent or limit the operations of the property. Significant costs could be involved in improving the efficiency and climate resiliency of our hotels and otherwise preparing for, responding to, and mitigating the physical effects of climate change or sustainability-related concerns. Compliance with climate-related legislation and regulation, and our efforts to achieve science-based emissions reduction targets or other sustainability initiatives, could also be complex and costly. Growing public recognition of the dangers of climate change and other sustainability-related concerns may affect customers’ travel choices, including their frequency of travel. As a result of the foregoing, we may experience reduced demand, significant increased operating and compliance costs, operating disruptions or limitations, constraints on our room rates that can be charged, and/or increasegrowth, and physical damage to our operating costs,hotels, all of which could adversely affect our profits. If a terrorist event or other incident of violence wereprofits and growth, as we have seen in the past to involve one or more of our branded properties, demand for our properties in particular could suffer disproportionately, which could further hurt our revenues and profits.some extent.
Insurance may not cover damage to, or losses involving, properties that we own, manage, or franchise, or other aspects of our business, and the cost of such insurance could increase.increase. We require comprehensive property and liability insurance policies for our managed, leased, and owned properties with coverage features and insured limits that we believe are customary. We also require our franchisees to maintain similar levels of insurance. Market forces beyond our control may nonetheless limit the scope of the insurance coverage we, our hotel owners, or our franchisees can obtain, or our or their ability to obtain coverage at reasonable rates. Certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, terrorist acts, pandemics, or liabilities that result from incidents involving the security of information systems, may result in high deductibles, low limits, or may be uninsurable, or the cost of obtaining insurance may be unacceptably high. As a result, we, our hotel owners, and our franchisees may not be successful in obtaining insurance without increases in cost or
decreases in coverage levels, or may not be successful in obtaining insurance at all. For example, over the past several years following the severe and widespread damage caused by the 2017 Atlantic hurricane season and other natural disasters, coupled with continued large global losses, the property, liability, and other insurance markets have seen significant cost increases. Also, due to the data security incident involving unauthorized access to the Starwood reservations database, which we initially reported in November 2018 (the “Data Security Incident”), and the state of the cyber insurance market generally, the costs for our cyber insurance increased with both our 2019 and 2020 renewals, and the cost of such insurance could continue to increase for future policy periods. Further, in the event of a substantial loss, the insurance coverage we, our hotel owners, or our franchisees carry may not be sufficient to pay the full market value or replacement cost of any lost investment or in some cases could result in certain losses being totally uninsured. As a result, our revenues and profits could be adversely affected, and for properties we own or lease, we could lose some or all of the capital that we have invested in the property and we could remain obligated for guarantees, debt, or other financial obligations.
If our brands, goodwill, or other intangible assets become impaired, we may be required to record significant non-cash charges to earnings.As of December 31, 2020,2023, we had $18.2$18.1 billion of goodwill and other intangible assets. We review goodwill and indefinite-lived intangible assets for impairment annually or whenever events or circumstances indicate impairment may have occurred. Estimated fair values of our brands or reporting units could change if, for example, there are changes in the business climate, unanticipated changes in the competitive environment, adverse legal or regulatory actions or developments, changes in guests’ perception and the reputation of our brands, or changes in interest rates, operating cash flows, or market capitalization. Because of the significance of our goodwill and other intangible assets, any future impairment of these
assets could require material non-cash charges to our results of operations, which could have a material adverse effect on our reported financial condition and results of operations.
Our Loyalty Program plays a significant role in our business and unfavorable developments affecting the program could adversely affect our business and results of operations. Our Loyalty Program is an important aspect of our business. Our Loyalty Program faces significant competition from the loyalty programs offered by other hospitality companies, as well as from loyalty programs offered by online travel platforms, bank travel programs, and others. There is significant competition among loyalty programs in terms of the value and utility of program currency, rewards ranges and values, and other terms and conditions. If we are not able to maintain a competitive and attractive loyalty program, whether because of changes we make to the program or changes that result from external factors (including changes in law or regulation), our ability to acquire, engage and retain members in our Loyalty Program and our ability to operate other programs (including our co-branded credit card program) may be adversely impacted, which could adversely affect our operating results and financial condition.
Development and Financing Risks
While we are predominantly a manager and franchisor of hotel properties, ourOur hotel owners and franchisees depend on capital to buy, develop, and improve hotels, and they may be unable to access capital when necessary.necessary Both we and current. Current and potential hotel owners and franchisees must periodically spend money to fund new hotel investments, as well as to refurbish and improve existing hotels. The availability of funds for new investments, and improvement of existing hotels by our current and potential hotel owners and franchisees depends in large measure on their ability to access the capital markets, over which we have little control. Obtaining financing on attractive terms has been, and may in the future be further, constrained by the capital markets for hotel and real estate investments. In addition, owners of existing hotels that we franchise or manage may have difficulty meeting required debt service payments or refinancing loans at maturity.
Our ability to grow our management and franchise systems is subject to the range of risks associated with real estate investments.investments. Our ability to sustain continued growth through management or franchise agreements for new hotels and the conversion of existing facilities to managed or franchised Marriott brands is affected, and may potentially be limited, by a variety of factors influencing real estate development generally. These include site availability, financing availability, planning, zoning and other local approvals, and other limitations that may be imposed by market and submarket factors, such as projected room occupancy and rate, changes in growth in demand compared to projected supply, territorial restrictions in our management and franchise agreements, costs of construction, demand for and availability of construction resources, and other disruptive conditions in global, regional, or local markets.
Our renovation activities expose us to project cost, completion, and resale risks. We occasionally acquire and renovate hotel properties, both directly and through partnerships and other business structures with third parties. This presents a number of risks, including that: (1) weakness in the capital markets maylimit our ability, or that of third parties with whom we partner, to raise capital for completion of projects; (2) properties that we renovate could become less attractive due to decreases in demand for hotel properties, market absorption or oversupply, with the result that we may not be able to sell such properties for a profit or at the prices or time we anticipate, or we may be required to record additional impairment charges; and (3) construction delays or cost overruns, including those due to shortages or increased costs of skilled labor and/or materials, lender financial defaults, or so called “Acts of God” such as earthquakes, hurricanes, floods, or fires may increase project costs. We could face similar risks to the extent we undertake development activities again in the future.
Our owned properties and other real estate investments subject us to numerous risks. We have a number of owned and leased properties and investments in joint ventures that own properties, which are each subject to the risks that generally relate to investments in real property. We may seek to sell some of these properties over time; however, equity real estate investments can be difficult to sell quickly and COVID-19 has disrupted the transaction markets for hospitality assets. Wewe may not be able to complete assetassets sales at prices we find acceptable or at all. Moreover, the investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated, if any, by the relatedparticular properties, and the expenses incurred. A variety of other factors also affect income from properties and real estate values, including local market conditions and new supply of hotels and other lodging products, availability and costs of staffing, governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels,
and the availability of financing. Our real estate propertiesinvestments have been, and could in the future be, impacted by any of these factors, resulting in a material adverse impact on our results of operations or financial condition. If our properties continue todo not generate revenue sufficient to meet operating expenses includingand make needed capital expenditures, our income could be further adversely affected, and we could be required to record additionalsignificant non-cash impairment charges to our results of operations.
Risks associated with development and sale of residential properties associated with our lodging properties or brands may reduce our profits.profits. We participate, through licensing agreements, in the development and sale of residential properties associated with our brands, including residences and condominiums under many of our luxury and premium brand names and trademarks.brands. Such projects pose further risks beyond those generally associated with our lodging business, which may reduce our profits or compromise our brand equity, including risks that: (1) weaknesschanges in residential real estate and demand generally may reduce our profits and could make it more difficult to convince future project developers of the value added by our brands; and (2) increases in interest rates, reductions in mortgage availability or the tax benefits of mortgage financing or residential ownership generally, or increases in the costs of residential ownership could prevent potential customers from buying residential products or reduce the prices they are willing to pay; and (3) residential construction may be subject to warranty and liability claims or claims related to purchaser deposits, and the costs of resolving such claims may be significant.pay.
More hotel projects in our development pipeline may be cancelled or delayed in opening, which could adversely affect our growth prospects.prospects. We report a significant number of hotels in our development pipeline, including hotels under construction, hotels subject to signed contracts, and hotels approved for development but not yet under contract. The eventual opening of such pipeline hotels and, in particular, the approved hotels that are not yet under contract, is subject to numerous risks, including the other risks described above in the risk factors entitled “Our ability to grow our management and franchise systems is subject to the range of risks associated with real estate investments” and “COVID-19has had a material detrimental impact on our business and financial results, and such impact could continue and may worsen for an unknown period of time; Risks Related to Growth.”this section. We have seen construction timelines for pipeline hotels lengthen due to competition for skilled construction labor, disruption in the supply chain for materials, and the impact of COVID-19 generally,various factors, including challenges related to financing, and these circumstances could continue or worsen in the future.
Accordingly, we cannot assure you that all of our development pipeline will result in new hotels entering our system, or that those hotels will open when we anticipate.
Losses on loans or loan guarantees that we have made to third parties impact our profits.profits. At times, we make loans for hotel development, acquisition, or renovation expenditures when we enter into or amend management or franchise agreements. From time to time we also provide third-party lenders with financial guarantees for the timely repayment of all or a portion of debt related to hotels that we manage or franchise, generally subject to an obligation that the owner reimburse us for any fundings. We have suffered losses, and could suffer losses in the future, when hotel owners or franchisees default on loans that we provide or fail to reimburse us for loan guarantees that we have funded.
If owners of hotels that we manage or franchise cannot repay or refinance mortgage loans secured by their properties, our revenues and profits could decrease and our business could be harmed. harmed. The owners of many of our managed or franchised properties have pledged their hotels as collateral for mortgage loans that they entered into when those properties were purchased or refinanced. If those owners cannot meet required debt service payments or repay or refinance maturing indebtedness on favorable terms or at all, the lenders could declare a default, accelerate the related debt, and foreclose on the property, or the owners could declare bankruptcy, as we have seen in the past and could see in the future. SuchIn some cases, such foreclosures or bankruptcies have in the past resulted, and could in the future in some cases, result, in the termination of our management or franchise agreements, and eliminateeliminating our anticipated income and cash flows, which could have a significant negative effect on our results of operations.
Changes affecting the availability of the London Interbank Offered Rate (“LIBOR”) may have consequences that we cannot yet reasonably predict.We are a party to various agreements and other instruments where obligations by or to us are calculated based on or otherwise dependent on LIBOR. In July 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit rates for calculation of LIBOR as early as the end of 2021. As a result, LIBOR may perform differently than in the past and may ultimately cease to be utilized or to exist, either during or after 2021. Alternative benchmark rate(s) may replace LIBOR and could affect our agreements that reference LIBOR, not all of which contain alternative rate provisions. Certain of our agreements reference LIBOR, including for example, our Credit Facility and certain other financial agreements like loans, guaranties, and derivatives. At this time, it is difficult for us to predict the effect of any changes to LIBOR, any phase out of LIBOR, or any establishment of alternative benchmark rates to replace LIBOR. There is uncertainty about how we, the financial markets, applicable law and the courts will address the replacement of LIBOR with alternative benchmark rates for contracts that do not include fallback provisions to provide for such alternative benchmark rates. In addition, any changes from LIBOR to an alternative benchmark rate may have an uncertain impact on our cost of funds, our receipts or payments under agreements that reference LIBOR, and the valuation of derivative or other contracts to which we are a party, any of which could impact our results of operations and cash flows.
Technology, Information Protection, and Privacy Risks
Any disruption in the functioning of our reservation, Loyalty Program, or other core operational systems could adversely affect our performance and results.resultsWe. In the operation of our business, we manage globalor use sophisticated technology and systems, including those used for our reservation, customer relationship management, analytics, revenue management, property management, human resources and payroll systems, that communicate reservationsour Loyalty Program, and technologies we make available to our hotels from individuals who book reservations directly with us online, throughguests and for our mobile apps, through our telephone call centers, or through intermediaries like travel agents, Internet travel websites, and other distribution channels.associates. The cost, speed, accuracy, and efficiency of our reservationthese technologies and systems are critical aspects of our business and are important considerations for hotel owners when choosing our brands. Our business may suffer if we or our third-party service providers fail to maintain, upgrade, or prevent disruption to our reservationthese systems. Disruptions in or changes to our reservationthese systems, including during upgrades or replacements, could result in a disruption to our business and the loss of important data.
A failure to keep pace with developments in technology could impair our operations or competitive position.position. The lodging industry continues to demand the use of sophisticated technology and systems, including those used for our reservation, customer relationship management, analytics, revenue management, property management, human resources and payroll systems, our Loyalty Program, and technologies we make available to our guests and for our associates. TheseWe have underway a multi-year initiative to upgrade certain of our core technologies and systems, as these and other technologies and systems described in this risk factor must be refined, updated, and/or replaced with more advanced systems on a regular basis, and ourbasis. Our business could suffer if we cannot do thatrefine, update, and/or replace technologies and systems as quickly or effectively as our competitors, sufficiently in advance of obsolescence or performance failure or degradation, or within budgeted costs and time frames. We also may not achieve the benefits that we anticipate from any new or upgraded technology or system, and a failure to do so could result in higher than anticipated costs or lower guest satisfaction or could impair our operating results. Our business could also suffer if the use of technologies that provide alternatives to in-person meetings and events results in a decrease in demand for our lodging properties.
We are exposed to risks and costs associated with protecting the integrity and security of Company, associate, and guest data.data. In the operation of our business, we collect, store, use, and transmit large volumes of personal data regarding associates, guests, customers, owners, licensees, franchisees, and our own business operations, including credit card numbers, reservation and loyalty data, and other personal information,data, in various information systems that we maintain and in systems maintained by third parties, including those of our owners, franchisees, licensees, service providers, and service providers.other third parties. The integrity and protection of this personal data is critical to our business. Our guests and associates also have a high expectation that we, as well as our owners, franchisees, licensees, and service providers, and other third parties will adequately protect and appropriately use their personal information.data. The information, security, and privacy requirements imposed by global laws and governmental regulation, our contractual obligations, and the requirements of the payment card industry are also becoming morecontinue to become increasingly stringent in many jurisdictions in which we operate. Our systems and the systems maintained or used by our owners, franchisees, licensees, and service providers, and other third parties may not be able to satisfy these changing legal and regulatory requirements and associate and guest expectations, expectations; we and/or these third parties may require significant additional investments or time to do so.so; and security controls that we and/or these third parties may implement sometimes do not operate effectively or as intended. We have incurred and may in the future incur significant additional costs to meet these requirements, obligations, and expectations, and in the event of alleged or actual noncompliance, we may experience increased operating costs, increased exposure to finespayment obligations and litigation, and increased risk of damage to our reputation and brand.
The Data Security Incident, and other information security incidents, could have numerous adverse effects on our business.business. As a result of the Datadata security incident involving unauthorized access to the Starwood reservations database that we disclosed in November 2018 (the “Data Security Incident, we are a party to or have been named as a defendant inIncident”), numerous lawsuits primarily putative class actions, brought by consumers and otherswere filed against us, as described further in the U.S. and Canada, one securities class action lawsuit in the U.S., three shareholder derivative lawsuits in the U.S., and one purported representative action brought by a purported consumer class in the U.K.Note 7. We may be named as a party in additional lawsuits and other claims may be asserted by or on behalf of guests, customers, hotel owners, stockholders, or others seeking monetary damages or other relief related to the Data Security Incident. A number of federal, state, and foreign governmental authoritieshave also made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident, including under various data protection and privacy regulations. Responding to and resolving these lawsuits, claims, and/or investigations has resulted in fines,payments and other expenses, such as the fine£18.4 million payment imposed by the Information Commissioner’s Office in the United Kingdom (the “ICO”) as discussed in Note 8,connection with the ICO’s final decision issued in October 2020, and could result in material additional finespayments or remedial or other expenses. These fines and other expenses may not be covered by insurance. GovernmentalOther governmental authorities investigating or seeking information about the Data Security Incident alsohave imposed and may seek tofurther impose undertakings, injunctive relief, consent decrees, or other civil or criminal penalties, which could, among other things, materially increase our data security costs or otherwise require us to alter how we operate our business. Significant management time and Company resources have been, and will continue to be, devoted to matters related to the Data Security Incident. Future publicity or developments related to the Data Security Incident, including as a result of subsequent reports or regulatory actions or developments, could have a range of other adverse effects on our business or prospects, including causing or contributing to loss of consumer confidence, reduced consumer demand, reduced enrollment and/or participation in our Loyalty Program, loss of development opportunities, and associate retention and recruiting difficulties. Insurance coverage designed to limit our exposure to losses such as those related to the Data Security Incident may be costly and may not be sufficient or available to cover all of our expenses or other losses (including the final finepayment imposed by the ICO and any other payments, fines or penalties) related to the Data Security Incident. In addition, following our March 31, 2020 announcement of an incident involving informationIncident, and certain expenses by their nature (such as, for approximately 5.5 million guests that we believe may have been improperly accessed through an application using the login credentials of two franchise employees at a franchise property (the “Unauthorized Application Access Incident”), various governmental authorities opened investigations or requested information about the incident, and two lawsuits were filed against
usexample, expenses related to the incident. The Unauthorized Application Access Incident or publicity related to it could negatively affectenhancing our business or reputation.cybersecurity program) are not covered by our insurance program.
Additional cybersecurity incidents could have adverse effects on our business. We have implemented enhanced security measures to safeguard our systems and data, and we intend to continue implementing additional measures in the future, but, as we have seen in the past, our measures may not be sufficient to maintain the confidentiality, security, or availability of the data we collect, store, and use to operate our business. Measures takenSecurity measures implemented by our service providers or our owners, franchisees, licensees, other business partnersthird parties or their service providers also may not be sufficient.sufficient, as we have seen in the past. Efforts to hack or circumvent security measures, efforts to gain unauthorized access to, exploit or disrupt the operation or integrity of our data or systems, failures of systems or software to operate as designed or intended, viruses, “ransomware” or other malware, “supply chain” attacks, “phishing” or other types of business communications compromises, operator error, or inadvertent releases of data have impacted, and may in the future impact, our information systems and records or those of our owners, franchisees, licensees, service providers, or other business partners,third parties. Security measures, no matter how well designed or service providers.implemented, may only mitigate and not fully eliminate risks, and security events, when detected by security tools or third parties, may not always be immediately understood or acted upon. Our reliance on computer, Internet-based, and mobile systems and communications, and the frequency and sophistication of efforts by third parties to gain unauthorized access or prevent authorized access to such systems, have greatly increased in recent years. Our increased reliance on cloud-based services and on remote access to information systems in response to COVID-19 increases the Company’s exposure to potential cybersecurity incidents. We have experienced cyberattacks, attempts to disrupt access to our systems and data, and attempts to affect the operation or integrity of our data or systems, and the frequency and sophistication of such efforts could continue to increase. Any additional significant theft of, unauthorized access to, compromise or loss of, loss of access to, or fraudulent use of guest, associate, owner, franchisee, licensee, or Company data could adversely impact our reputation and could result in legal, regulatory and other consequences, including remedial and other expenses, fines, or litigation. Depending on the nature and scope of the event, future compromises in the security of our information systems or those of our owners, franchisees, licensees, other business partners, or service providers, or other third parties, or other future disruptions or compromises of data or systems, could lead to an interruptionfuture interruptions in, or other adverse effects on, the operation of our systems or those of our owners, franchisees, licensees, other business partners, or service providers, resultingor other third parties. This could result in operational inefficienciesinterruptions and/or outages and a loss of profits, and could result inas well as negative publicity and other adverse effects on our business, including lost sales, loss of consumer confidence, boycotts, reduced enrollment and/or participation in our Loyalty Program, litigation, loss of development opportunities, ordiminished associate satisfaction, and/or retention and recruiting difficulties, all of which could materially affect our market share, reputation, business, financial condition, or results of operations.
Because we have experienced cybersecurity incidents in the past, additional incidents or the failure to detect and appropriately respond to additional incidents could magnify the severity of the adverse effects on our business. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage information systems change frequently, can be difficult to detect for long periods of time, and can involve difficult or prolonged assessment or remediation periods even once detected, which could also magnify the severity of these adverse effects. We cannot assure you that all potential causes of past significant incidents have been identified and remediated; additional measures may be needed to prevent significant incidents in the future. The steps we take may not be sufficient to prevent future significant incidents and as a result, such incidents may occur again. Although we carry cyber insurance that is designed to protect us against certain losses related to cyber risks, that
insurance coverage may not be sufficient or available to cover all expenses or other losses (including fines)payments to regulatory authorities) or all types of claims that may arise in connection with cyberattacks, security compromises, and other related incidents. Furthermore, in the future such insurance may not be available on commercially reasonable terms, or at all.
Changes in privacy and data security laws could increase our operating costs and increase our exposure to finespayment obligations and litigation.litigation. We are subject to numerous, complex, and frequently changing laws, regulations, and contractual obligations designed to protect personal information. Non-U.S.Various U.S. federal and state laws, data privacy and data security laws variousoutside of the U.S. federal and state laws,, payment card industry security standards, and other information privacy and security standards are all applicable to us. Significant legislative, judicial, or regulatory changes have been and could be issued in the future. Compliance with changes in applicable data security and privacy laws and regulations and contractual obligations, including respondingthe need to respond to investigations into our compliance, has increased and may in the future increase our costs, and may restrict our business operations, increase our operating costs, increase our exposure to finespayment obligations and litigation in the event of alleged non-compliance,noncompliance, and adversely affect our reputation. Following the Data Security Incident, certain regulators also opened investigations into our privacy and security policies and practices. As a result of these investigations, we could be exposed to significant fines and remediation costs in addition to those imposed as a result of the Data Security Incident, and adverse publicity related to the investigations could adversely affect our reputation.
Changes in laws could adversely affect our ability to market our products effectively. effectively. We rely on a variety of direct marketing techniques, including email marketing, online advertising (including through social media), and postal mailings. Any further legal restrictions in laws such as the CANSPAM Act, andunder various U.S. federal, state, or international laws, or new international, federal, or state laws on marketing and solicitation or international privacy, e-privacy, and anti-spam laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising (including through social media), and postal mailing techniques and could force furtherrequire changes in our marketing strategy. If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of our sales of certain products. We also obtain access to potential guests and customers from travel service providers or other companies with
whom we have substantial relationships, and we market to some individuals on these lists directly or by including our marketing message in the other companies’ marketing materials. If access to these lists were to be prohibited or otherwise restricted, our ability to develop new guests and customers and introduce them to our products could be impaired.
Governance Risk
Delaware law and our governing corporate documents contain, and our Board of Directors could implement, anti-takeover provisions that could deter takeover attempts.Under the Delaware business combination statute, a stockholder holding 15 percent or more of our outstanding voting stock could not acquire us without Board of DirectorsDirectors’ consent for at least three years after the date the stockholder first held 15 percent or more of the voting stock. Our governing corporate documents also, among other things, require supermajority votes for mergers and similar transactions. In addition, our Board of Directors could, without stockholder approval, implement other anti-takeover defenses, such as a stockholder rights plan.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy
We manage risks from cybersecurity threats through our overall enterprise risk management process, which is overseen by our Board. Management has created a global information security program, which encompasses a dedicated global information security team and policies, procedures, and processes for assessing, identifying, and managing risks from cybersecurity threats. Marriott’s policies, procedures, and processes follow recognized frameworks established by the National Institute of Standards and Technology (“NIST”) and the International Organization for Standardization, as well as other relevant standards. Our program is designed to maintain the confidentiality, integrity, security, and availability of the data that is created, collected, stored, and used to operate our business.
We assess, identify, and manage risks from cybersecurity threats through various mechanisms, which from time to time may include tabletop exercises, business unit assessments, control gap analyses, threat modeling, impact analyses, internal audits, external audits, vulnerability scans, penetration tests, and engagement of third parties to conduct analyses of our information security program. We obtain cybersecurity threat intelligence from recognized forums, third parties, and other sources as part of our risk assessment process. We also maintain a risk-based approach for assessing, identifying, and managing risks from cybersecurity threats associated with third party service providers, owners, franchisees, and other companies with whom we do business.
With respect to incident response, we maintain a Global Information Security & Privacy Incident Response Plan (“IRP”), which applies globally to information security incidents involving properties owned, leased, or managed by Marriott, as well as
our above-property business locations. Franchisees are responsible for information security at franchised properties and the systems and business processes related to information security that are under their direction and control. Franchisees are required to comply with brand standards relating to information security, which include an obligation to report information security incidents to us.
Our IRP sets out a coordinated, multi-functional approach for investigating, containing, and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate. In general, our incident response process follows the NIST framework and focuses on four phases: (i) preparation; (ii) detection and analysis; (iii) containment, eradication, and recovery; and (iv) post-incident remediation.
We do not believe that risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect our overall business strategy, results of operations, or financial condition over the long term. See the discussion about the Starwood Data Security Incident under the “Litigation, Claims, and Government Investigations” caption in Note 7 of our financial statements, the discussion of the same in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the discussion of cybersecurity risk in Part I, Item 1A, “Risk Factors.”
Governance
Our Board has established a Technology and Information Security Oversight Committee (“TISOC”) to assist the Board in providing oversight of matters pertaining to technology, information security, and privacy, including risks from cybersecurity threats; management’s efforts to monitor and mitigate those risks; and significant cybersecurity incidents. The TISOC meets at least four times a year and typically receives quarterly reports from our Chief Information Security Officer (“CISO”) and other members of management. Risks from cybersecurity threats are also discussed with the full Board as part of regular legal updates and management presentations, the Board’s oversight of enterprise risk management, and periodic education sessions. The Board’s Audit Committee also receives reports regarding information security and technology-related audits conducted by our internal audit department.
To establish, implement, and evaluate our risk management policies and practices with respect to cybersecurity threats, and to facilitate the communication of such matters to the Board and to the TISOC, we have established a number of management committees, several of which include senior leaders and direct reports of the Company’s President and CEO, that serve as our policymaking and management-level governing bodies with respect to our information security and data privacy programs; oversee the implementation of our information security and data privacy risk management strategy; and identify, consider, and escalate information security and data privacy issues that may arise in our business.
Our global information security team led by our CISO works in coordination with these management committees and other cross-functional teams and is principally responsible for overseeing our information security strategy, working collaboratively with business leaders across the organization to assess, identify, and manage risks from cybersecurity threats, and to address cybersecurity incidents when they arise. Our global information security program is operated on a 24/7 basis to address risks from cybersecurity threats and to respond to cybersecurity incidents globally.
Our CISO and other members of senior management responsible for our information security program have extensive experience assessing and managing risks from cybersecurity threats, including decades of experience in information technology and information security positions; serving in information technology leadership positions at other large public companies; and having other significant experience in the areas of risk management, information technology, and information security. Our CISO has more than 26 years of experience in information technology and/or information security, including more than 12 years in such positions in the hospitality industry.
Item 2. Properties.
We describeUnder our company-operated propertiesasset-light business model, we typically manage or franchise hotels and other lodging offerings, rather than own them. As of December 31, 2023, we owned or leased 13 hotels (4,339 rooms) in Part I, Item 1. “Business” earlierU.S. & Canada and 37 hotels (8,776 rooms) in this report, and under the “Properties and Rooms” caption in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We believe our owned and leased properties are in generally good physical condition with the need for only routine repairs and maintenance and periodic capital improvements. MostInternational. Additionally, most of our regional offices, reservationcustomer engagement centers, and sales offices, as well as our corporate headquarters, are in leased facilities, both domesticallyfacilities. See Part I, Item 1, “Business,” earlier in this report, and internationally.the “Properties and Rooms” caption in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information about our company-operated properties.
As of December 31, 2020, we owned or leased the following hotel properties:
| | | | | | | | | | | | | | | | |
Properties | | | | Location | | Rooms |
U.S. & Canada Owned Hotels | | | | | | |
| | | | | | |
Courtyard Las Vegas Convention Center | | | | Las Vegas, NV | | 149 | |
Las Vegas Marriott | | | | Las Vegas, NV | | 278 | |
Residence Inn Las Vegas Convention Center | | | | Las Vegas, NV | | 192 | |
The Westin Peachtree Plaza, Atlanta | | | | Atlanta, GA | | 1,073 | |
W New York - Union Square | | | | New York, NY | | 270 | |
U.S. & Canada Leased Hotels | | | | | | |
Albuquerque Airport Courtyard | | | | Albuquerque, NM | | 150 | |
Anaheim Marriott | | | | Anaheim, CA | | 1,030 | |
Baltimore BWI Airport Courtyard | | | | Linthicum, MD | | 149 | |
Baton Rouge Acadian Centre/LSU Area Courtyard | | | | Baton Rouge, LA | | 149 | |
Chicago O'Hare Courtyard | | | | Des Plaines, IL | | 180 | |
Des Moines West/Clive Courtyard | | | | Clive, IA | | 108 | |
Fort Worth University Drive Courtyard | | | | Fort Worth, TX | | 130 | |
Greensboro Courtyard | | | | Greensboro, NC | | 149 | |
Indianapolis Airport Courtyard | | | | Indianapolis, IN | | 151 | |
Irvine John Wayne Airport/Orange County Courtyard | | | | Irvine, CA | | 153 | |
| | | | | | |
Louisville East Courtyard | | | | Louisville, KY | | 151 | |
Mt. Laurel Courtyard | | | | Mt Laurel, NJ | | 151 | |
Newark Liberty International Airport Courtyard | | | | Newark, NJ | | 146 | |
Orlando Airport Courtyard | | | | Orlando, FL | | 149 | |
Orlando International Drive/Convention Center Courtyard | | | | Orlando, FL | | 151 | |
Renaissance New York Times Square Hotel | | | | New York, NY | | 317 | |
Sacramento Airport Natomas Courtyard | | | | Sacramento, CA | | 149 | |
San Diego Sorrento Valley Courtyard | | | | San Diego, CA | | 149 | |
Spokane Downtown at the Convention Center Courtyard | | | | Spokane, WA | | 149 | |
St. Louis Downtown West Courtyard | | | | St. Louis, MO | | 151 | |
W New York – Times Square | | | | New York, NY | | 509 | |
| | | | | | |
International Owned Hotels | | | | | | |
| | | | | | |
| | | | | | | | | | | | | | | | |
Properties | | | | Location | | Rooms |
Courtyard by Marriott Aberdeen Airport | | | | Aberdeen, UK | | 194 | |
Courtyard by Marriott Rio de Janeiro Barra da Tijuca | | | | Barra da Tijuca, Brazil | | 264 | |
Courtyard by Marriott Toulouse Airport | | | | Toulouse, France | | 187 | |
Colony Club, Barbados | | | | Barbados | | 96 | |
Crystal Cove, Barbados | | | | Barbados | | 88 | |
Marriott Puerto Vallarta Resort & Spa | | | | Mexico | | 433 | |
Residence Inn Rio de Janeiro Barra da Tijuca | | | | Barra da Tijuca, Brazil | | 140 | |
Sheraton Grand Rio Hotel & Resort | | | | Rio de Janeiro, Brazil | | 538 | |
Sheraton Lima Hotel & Convention Center | | | | Lima, Peru | | 431 | |
Sheraton Mexico City Maria Isabel Hotel | | | | Mexico City, Mexico | | 755 | |
Tamarind, Barbados | | | | Barbados | | 104 | |
The House, Barbados | | | | Barbados | | 34 | |
Treasure Beach, Barbados | | | | Barbados | | 35 | |
Turtle Beach, Barbados | | | | Barbados | | 161 | |
Waves, Barbados | | | | Barbados | | 70 | |
International Leased Hotels | | | | | | |
15 on Orange Hotel, Autograph Collection | | | | Cape Town, South Africa | | 129 | |
African Pride Melrose Arch, Autograph Collection | | | | Johannesburg, South Africa | | 118 | |
Berlin Marriott Hotel | | | | Berlin, Germany | | 379 | |
Cape Town Marriott Hotel Crystal Towers | | | | Cape Town, South Africa | | 180 | |
Courtyard by Marriott Paris Gare de Lyon | | | | Paris, France | | 249 | |
Frankfurt Marriott Hotel | | | | Frankfurt, Germany | | 593 | |
Grosvenor House, A JW Marriott Hotel | | | | London, UK | | 496 | |
Heidelberg Marriott Hotel | | | | Heidelberg, Germany | | 248 | |
Hotel Alfonso XIII, a Luxury Collection Hotel, Seville | | | | Seville, Spain | | 148 | |
Hotel Maria Cristina, San Sebastian | | | | San Sebastian, Spain | | 139 | |
Leipzig Marriott Hotel | | | | Leipzig, Germany | | 231 | |
Protea Hotel by Marriott Cape Town Sea Point | | | | Cape Town, South Africa | | 124 | |
Protea Hotel by Marriott Midrand | | | | Midrand, South Africa | | 177 | |
Protea Hotel by Marriott O.R. Tambo Airport | | | | Johannesburg, South Africa | | 213 | |
| | | | | | |
Protea Hotel by Marriott Roodepoort | | | | Roodepoort, South Africa | | 79 | |
Protea Hotel Fire & Ice! by Marriott Cape Town | | | | Cape Town, South Africa | | 201 | |
Protea Hotel Fire & Ice! by Marriott Johannesburg Melrose Arch | | | | Johannesburg, South Africa | | 197 | |
| | | | | | |
Renaissance Hamburg Hotel | | | | Hamburg, Germany | | 205 | |
Renaissance Santo Domingo Jaragua Hotel & Casino | | | | Santo Domingo, Dominican Republic | | 300 | |
Sheraton Diana Majestic, Milan | | | | Milan, Italy | | 106 | |
The Ritz-Carlton, Berlin | | | | Berlin, Germany | | 303 | |
The Ritz-Carlton, Tokyo | | | | Tokyo, Japan | | 247 | |
The St. Regis Osaka | | | | Osaka, Japan | | 160 | |
W Barcelona | | | | Barcelona, Spain | | 473 | |
W London – Leicester Square | | | | London, UK | | 192 | |
| | | | | | |
Item 3. Legal Proceedings.
See the information under the “Litigation,“Litigation, Claims, and Government Investigations”Investigations” captionin Note 8,7, which we incorporate here by reference. Within this section, we use a threshold of $1 million in disclosing material environmental proceedings involving a governmental authority.
In May 2020, we received a notice from the District Attorneys of the Counties of Placer, Riverside, San Francisco and San Mateo in California asserting that nine properties in California have failed to comply with certain state statutes regulating hazardous and other waste handling and disposal. We are cooperating with the District Attorneys’ requests for information and have entered into a tolling agreement with the District Attorneys. We cannot predict the ultimate outcome of this matter; however, management does not believe that the outcome will have a material adverse effect on the Company.
From time to time, we are also subject to other legal proceedings and claims in the ordinary course of business, including adjustments proposed during governmental examinations of the various tax returns we file. While management presently believes that the ultimate outcome of these other proceedings, individually and in aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are inherently uncertain, and unfavorable rulings could, individually or in aggregate, have a material adverse effect on our business, financial condition, or operating results.
Item 4. Mine Safety Disclosures.
Not applicable.
Information about our Executive Officers
See the information under “Information about our Executive Officers” in Part III, Item 10 of this report for information about our executive officers, which we incorporate here by reference.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Market Information
At February 10, 2021,6, 2024, 324,414,150289,485,338 shares of our Class A Common Stock (our “common stock”) were outstanding and were held by 34,25330,822 stockholders of record. Our common stock trades on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbol MAR.
Fourth Quarter 20202023 Issuer Purchases of Equity Securities
| | | | | | | | | | | | | | | | | | | | | | | |
(in millions, except per share amounts) | | | | | | | |
Period | Total Number
of Shares
Purchased | | Average Price
per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
| | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1)
|
October 1, 2020-October 31, 2020 | — | | | $ | — | | | — | | | 17.4 | |
November 1, 2020-November 30, 2020 | — | | | $ | — | | | — | | | 17.4 | |
December 1, 2020-December 31, 2020 | — | | | $ | — | | | — | | | 17.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | | | | | | | | |
| Period | | Total Number
of Shares
Purchased | | Average Price
per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| October 1, 2023 - October 31, 2023 | | 1.5 | | | $ | 193.70 | | | 1.5 | | | 7.3 | |
| November 1, 2023 - November 30, 2023 | | 1.6 | | | $ | 202.74 | | | 1.6 | | | 30.7 | |
| December 1, 2023 - December 31, 2023 | | 1.6 | | | $ | 215.26 | | | 1.6 | | | 29.1 | |
(1)On February 15, 2019,November 10, 2022, we announced that our Board of Directors increased our common stock repurchase authorization by 25 million shares. In addition, on November 9, 2023, we announced that our Board of Directors further increased our common stock repurchase authorization by 25 million shares. At year-end 2020, 17.42023, 29.1 million shares remained available for repurchase under Board approved authorizations.We may repurchase shares in the open market andor in privately negotiated transactions. We do not anticipate repurchasing additionaltransactions, and we account for these shares until business conditions improve, and are prohibited from doing so for the duration of the Covenant Waiver Period, as discussed in Note 10, under our Credit Facility, with certain exceptions.treasury stock.
Item 6. Selected Financial Data.
The following table presents a summary of our selected historical financial data derived from our last five years of Financial Statements. Because this information is only a summary and does not provide all of the information contained in our Financial Statements, including the related notes, you should read “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Financial Statements for each year for more detailed information. For 2016, we include Legacy-Starwood results from the Merger Date to year-end 2016.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year | | | | | | | | | | |
| ($ in millions, except per share data) | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | | | | | | | | | |
| Income Statement Data: | | | | | | | | | | | | | | | | | | | |
Revenues (2) | $ | 10,571 | | | $ | 20,972 | | | $ | 20,758 | | | $ | 20,452 | | | $ | 15,407 | | | | | | | | | | | |
Operating income (loss) (2) (4) | $ | 84 | | | $ | 1,800 | | | $ | 2,366 | | | $ | 2,504 | | | $ | 1,424 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net (loss) income (2) (4) | $ | (267) | | | $ | 1,273 | | | $ | 1,907 | | | $ | 1,459 | | | $ | 808 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Per Share Data: | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Diluted (losses) earnings per share (2) (4) | $ | (0.82) | | | $ | 3.80 | | | $ | 5.38 | | | $ | 3.84 | | | $ | 2.73 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Cash dividends declared per share | $ | 0.48 | | | $ | 1.85 | | | $ | 1.56 | | | $ | 1.29 | | | $ | 1.15 | | | | | | | | | | | |
| Balance Sheet Data (at year-end): | | | | | | | | | | | | | | | | | | | |
Total assets (2) (3) (4) | $ | 24,701 | | | $ | 25,051 | | | $ | 23,696 | | | $ | 23,846 | | | $ | 24,078 | | | | | | | | | | | |
| Long-term debt | $ | 9,203 | | | $ | 9,963 | | | $ | 8,514 | | | $ | 7,840 | | | $ | 8,197 | | | | | | | | | | | |
Stockholders’ equity (2) (4) | $ | 430 | | | $ | 703 | | | $ | 2,225 | | | $ | 3,582 | | | $ | 6,265 | | | | | | | | | | | |
| Other Data: | | | | | | | | | | | | | | | | | | | |
| Base management fees | $ | 443 | | | $ | 1,180 | | | $ | 1,140 | | | $ | 1,102 | | | $ | 806 | | | | | | | | | | | |
Franchise fees (1) (2) | 1,153 | | | 2,006 | | | 1,849 | | | 1,586 | | | 1,157 | | | | | | | | | | | |
| Incentive management fees | 87 | | | 637 | | | 649 | | | 607 | | | 425 | | | | | | | | | | | |
Total fees (1) (2) | $ | 1,683 | | | $ | 3,823 | | | $ | 3,638 | | | $ | 3,295 | | | $ | 2,388 | | | | | | | | | | | |
| Gross Fee Revenue-Source: | | | | | | | | | | | | | | | | | | | |
U.S. & Canada (1) (2) | $ | 1,345 | | | $ | 2,791 | | | $ | 2,641 | | | $ | 2,388 | | | $ | 1,845 | | | | | | | | | | | |
Total Outside U.S. & Canada (1) (2) | 338 | | | 1,032 | | | 997 | | | 907 | | | 543 | | | | | | | | | | | |
Total fees (1) (2) | $ | 1,683 | | | $ | 3,823 | | | $ | 3,638 | | | $ | 3,295 | | | $ | 2,388 | | | | | | | | | | | |
(1)In 2017, we reclassified branding fees for third-party residential sales and credit card licensing to the “Franchise fees” caption from the “Owned, leased, and other revenue” caption on our Income Statements. We reclassified 2016 amounts to conform to our current presentation.
(2)In 2018, we adopted ASU No. 2014-09, which impacted our recognition of revenues and certain expenses.
(3)In 2019, we adopted ASU No. 2016-02, which brought substantially all leases onto the balance sheet. Years before 2019 have not been adjusted for this new accounting standard.
(4)In 2020, we adopted ASU No. 2016-13, which impacted our provision for credit losses. Years before 2020 have not been adjusted for this new accounting standard.Reserved.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
A discussion regarding our financial condition and results of operations for year-end 20192022 compared to year-end 20182021 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2022, as filed with the SEC on February 27, 2020.14, 2023 (“2022 Form 10-K”).
BUSINESS AND OVERVIEW
Overview
We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and timeshareother lodging properties in 133139 countries and territories under more than 30 brand names. Under our asset-light business model, we typically manage or franchise hotels, rather than own them. We discuss our operations in the following three reportable business segments: (1) U.S. & Canada; Asia Pacific;Canada and Europe, Middle East and Africa (“EMEA”). Our Caribbean and Latin America (“CALA”) operating segment does not meet the applicable accounting criteria for separate disclosure as a reportable business segment, and we include its results in “Unallocated corporate and other.”(2) International. In January 2021,2024, we modified our reportable segment structure as a result of a change in the way
management intends to evaluate results and allocate resources within the Company. Beginning with the 20212024 first quarter, we will report the following twofour operating segments: (1) U.S. & Canada, (2) Europe, Middle East, and International.Africa, (3) Asia Pacific excluding China, and (4) Greater China. Our Caribbean and Latin America operating segment will not meet the applicable criteria for separate disclosure as a reportable business segment, and as such, we will include its results in “Unallocated corporate and other.”
We earnour management agreements vary, but our management fees generally consist of base management fees and under many agreements, incentive management fees. Base management fees from the properties that we manage,are typically calculated as a percentage of property-level revenue. Incentive management fees are typically calculated as a percentage of a hotel profitability measure, and, we earnin many cases (particularly in our U.S. & Canada, Europe, and Caribbean & Latin America regions), are subject to a specified owner return. Under our franchise agreements, franchise fees on the properties that others operate under franchise agreements with us. In most markets, base management and franchise feesare typically consist ofcalculated as a percentage of property-level revenue or certain property-level revenue in the case of franchise fees, while incentive management fees typically consist of a percentage of net house profit after a specified owner return. For our hotels in the Middle East and Africa and in the Asia Pacific region, incentive management fees typically consist of a percentage of gross operating profit without adjustment for a specified owner return. Net house profit is calculated as gross operating profit (also referred to as “house profit”) less non-controllable expenses such as property insurance, real estate taxes, and capital spending reserves.portion thereof. Additionally, we earn franchise fees for the use of our intellectual property, including fees from our co-brandprimarily co-branded credit card fees, as well as timeshare and yacht fees, residential programs.
Starwood Data Security Incident
On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). The Starwood reservations database is no longer used for business operations.
In July 2019, the ICO issued a formal notice of intent under the U.K. Data Protection Act 2018 (the “U.K. DPA”) proposing a fine in the amount of £99 million against the Company in relation to the Data Security Incident. In October 2020, the ICO issued a final decision under the U.K. DPA, which includes a fine of £18.4 million. The Company did not appeal the ICO’s decision, but has made no admission of liability in relation to the decision or the underlying allegations. In 2019, we expensed $65 million for this loss contingency, in the “Restructuringbranding fees, franchise application and merger-related charges” caption of our Income Statements, based on the fine initially proposed by the ICO in July 2019relicensing fees, and the ongoing proceeding. In 2020, we recorded a $39 million reversal of expense, based on the ICO’s issuance of the final decision. We paid a portion of the ICO fine in the 2020 fourth quarter, and the remainder is payable over the next two years. Our accrual for this loss contingency,certain other licensing fees, which we present in the “Accrued expenses and other” and “Other noncurrent liabilities” captions of our Balance Sheets, was $65 million at year-end 2019 and $17 million at year-end 2020. See Note 8 for additional information.
We are currently unablerefer to estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already incurred. However, we do not believe this incident will impact our long-term financial health. Although our insurance program includes coverage designed to limit our exposure to losses such as those“non-RevPAR related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other losses (including fines and penalties) related to the Data Security Incident. As we expected, the cost of such insurance again increased for our current policy period, and the cost of such insurance could continue to increase for future policy periods. We expect to incur significant expenses associated with the Data Security Incident in future periods, primarily related to legal proceedings and regulatory investigations (including possible additional fines and penalties), increased expenses and capital investments for information technology and information security and data privacy, and increased expenses for compliance activities and to meet increased legal and regulatory requirements. See Note 8 for additional information related to expenses incurred in 2020 and 2019, insurance recoveries, and legal proceedings and governmental investigations related to the Data Security Incident.franchise fees.”
Performance Measures
We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing room sales for comparable properties by room nights available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our fee revenue. We also believe occupancy and average daily rate (“ADR”), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing occupied rooms by total rooms available, (including rooms in hotels temporarily closed due to issues related to COVID-19), measures the utilization of a property’s available capacity. ADR, which we calculate by dividing property room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels. RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated.Comparisons to the prior year periodperiods are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.
We define our comparable properties as our properties that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 20192022 for the current period) and have not, in either the current or previous year: (1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption, with the exception of properties closed or otherwise experiencing interruptions related to COVID-19, which we continue to classify as comparable.interruption. For 20202023 compared to 2019,2022, we had 4,6415,375 comparable U.S. & Canada properties and 1,3401,704 comparable International properties.
Business Trends
We saw strong global RevPAR improvement throughout 2023 compared to 2022. In 2023, worldwide RevPAR increased 14.9 percent compared to 2022, reflecting ADR growth of 5.8 percent and occupancy improvement of 5.5 percentage points. The increase in RevPAR was driven by improvement in all customer segments.
In the U.S. & Canada, RevPAR improved 8.9 percent in 2023 compared to 2022, driven by ADR growth of 4.7 percent and occupancy improvement of 2.7 percentage points. As we returned to more normalized year over year RevPAR comparisons during the year, RevPAR growth began to stabilize in the 2023 last three quarters.
In our International segment, RevPAR improved 32.6 percent in 2023 compared to 2022, driven by ADR growth of 9.7 percent and occupancy improvement of 11.7 percentage points. The improvement in RevPAR compared to 2022 was driven by strengthening demand, particularly in Greater China and Asia Pacific excluding China, which were impacted by COVID-19 and government-imposed travel restrictions for much or all of 2022.
Starwood Data Security Incident
On September 23, 2016, we completed the acquisition of Starwood Hotels & Resorts Worldwide, LLC, formerly known as Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), through a series of transactions, after which Starwood became an indirect wholly-owned subsidiary of the Company. On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). We discontinued use of the Starwood reservations database for business operations at the end of 2018.
We are currently unable to reasonably estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already recorded. However, we do not believe this incident will impact our long-term financial health. Although our insurance program includes coverage designed to limit our exposure to losses such as those related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other
Impact of COVID-19
COVID-19 continueslosses (including monetary payments to have a material impact on our business, our Company, and our industry. COVID-19 first impacted our business in Greater China beginning in January 2020, moved quickly into the rest of Asia Pacific and the European markets, and spread globally by March 2020. As the pandemic accelerated around the world, worldwidecomparable systemwide constant dollar RevPAR fell sharply. Global occupancy levels and RevPAR have since improved comparedregulators and/or litigants) related to the extremely low levels reached in April 2020, but the pace of recovery generally slowed in most regions in the 2020 fourth quarter and into January 2021 due to the sharp rise in COVID-19 cases. As a result, our fee revenue and revenue from owned and leased properties declined significantly during 2020, and we expect that there will not be a significant rebound in travel and lodging demand until there is widespread distribution of effective vaccines.
Worldwide comparable systemwide constant dollar RevPAR declined 23 percent in the 2020 first quarter, 84 percent in the 2020 second quarter, 66 percent in the 2020 third quarter, and 64 percent in the 2020 fourth quarter, compared to the same periods in 2019. Worldwide, approximately six percent of our hotels were closedData Security Incident. In addition, certain expenses by their nature (such as, of February 15, 2021, compared to the peak of more than 25 percent closed on April 26, 2020. However, the progress of recovery is uneven. The spread of COVID-19 has constrained and continues to constrain the speed of recovery and will continue to have a dampening impact on demand. Demand is still being primarily driven by leisure travelers, and we have not seen meaningful demand return from business and group travelers.
Of our geographic regions, Greater China experienced the greatest improvement in demand compared to the 2020 second quarter, driven initially by domestic leisure travel with business transient and group business improving through the year, while demand in the rest of Asia Pacific has generally improved at a much slower pace. In our Europe, Middle East, and Africa region, leisure demand drove RevPAR improvements in the 2020 third quarter compared to the 2020 second quarter, though increases in COVID-19 cases in Europe and resulting increases in government restrictions began anew in September 2020, which negatively impacted the recovery in the 2020 fourth quarter. In U.S. & Canada, demand improved during the remainder of 2020 from the lows seen in April 2020, primarily driven by leisure travel and by travelers within driving range of their destinations.
We continue to take substantial measures to mitigate the negative financial and operational impacts for our hotel owners and our own business. Business contingency plans have been implemented around the world, and we continue to adjust these in response to the global situation. At the corporate level, our actions to date have substantially reduced the monthly run rate of corporate general and administrative costs compared to the monthly costs initially budgeted for 2020, excluding our provision for credit losses. We reduced spending on capital expenditures and other investments, and as previously announced, we suspended share repurchases and cash dividends.
We have taken a number of steps to reorganize the Company in response to the decline in lodging demand caused by COVID-19. We implemented temporary furloughs and reduced work week schedules for both above-property and on-property associates, most of which ended in September 2020 for above-property associates. As part of the realignment of our organization, we implemented a voluntary transition program for certain associates, and we eliminated a significant number of positions. While we have substantially completed the programsexample, expenses related to enhancing our above-property organization, wecybersecurity program) are continuing to develop restructuring plans, which could result in additional on-property position eliminations, to achieve cost savings specific to each ofnot covered by our company-operated properties. See Note 3 for more information about our restructuring activities.
At the property level, we continue to work with owners and franchisees to lower their cash outlays. The steps we have taken to date include deferring renovations, certain hotel initiatives and brand standard audits for hotel owners and franchisees; reducing the amount of certain charges for systemwide programs and services; offering a delay in payment terms for certain charges in the 2020 second quarter; supporting owners and franchisees who are working with their lenders to utilize furniture, fixtures, and equipment (FF&E) reserves to meet working capital needs; and waiving required FF&E funding through 2021. We have significantly lowered the reimbursed expenses we incur on behalf of our owners and franchisees to provide centralized programs and services such as the Loyalty Program, reservations, marketing and sales, which we generally collect through cost reimbursement revenue on the basis of hotel revenue or program usage. In 2020, we applied for Employee Retention Tax Credit refunds from the U.S. Treasury under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) totaling $164 million. In the 2020 fourth quarter, we received $119 million, $94 million of which we passed through to the related hotels that we manage on behalf of owners.insurance program. We expect to receiveincur ongoing legal and other expenses associated with the remaining refundData Security Incident in 2021,future periods, and we believe it is reasonably possible that we may incur additional monetary payments to regulators and/or litigants in excess of the majorityamounts already recorded and costs in connection with compliance with any settlements or resolutions of which we expect will inurematters. See Note 7 for additional information related to legal proceedings and governmental investigations related to the benefit of our hotel owners. We continue to evaluate the availability of credits and benefits under the CARES Act and other legislation.
The impact of COVID-19 on the Company remains fluid, as does our corporate and property-level response, and we expect to continue to assess and may implement additional measures to adapt our operations and plans as we continue to evaluate the implications of COVID-19 on our business. The overall operational and financial impact is highly dependent on
the breadth and duration of COVID-19, including the availability and distribution of effective vaccines or treatments, and could be affected by other factors we are not currently able to predict.Data Security Incident.
System Growth and Pipeline
In 2020, ourOur system grew from 7,3498,288 properties (1,380,921(1,525,407 rooms) at year-end 20192022 to 7,6428,785 properties (1,423,044(1,597,380 rooms) at year-end 2020, reflecting2023. The increase compared to year-end 2022 reflected gross additions of 558 properties (81,281 rooms), including 149 properties (17,300 rooms) from the additionCity Express brand acquisition, and deletions of 39963 properties (62,776 rooms) and the exit of 106 properties (20,416(9,430 rooms). Approximately 45 percent of addedOur 2023 gross room additions included approximately 60,500 rooms are located outside U.S. & Canada and 13 percent are conversionsroughly 16,300 rooms converted from competitor brands.
At year-end 2020,2023, we had more than 498,000nearly 3,400 hotels and roughly 573,000 rooms in our development pipeline, which includes hotel rooms under construction, hotel rooms under signed contracts, and roughly 20,000 hotelover 21,000 rooms approved for development but not yet under signed contracts. Over 229,000More than 232,000 rooms in our developmentthe pipeline, or 41 percent, were under construction at year-end 2020.2023, including approximately 37,000 rooms from the exclusive, long-term strategic licensing agreement with MGM Resorts International that we announced in July 2023. Over half of the rooms in our development pipeline are outside U.S. & Canada.
In 2020,2023, we signed a record number of management, franchise and franchiselicense agreements for 1,575 properties (248,660 rooms).approximately 164,000 organic rooms, of which nearly 65,000 rooms are conversions and approximately 91,000 rooms are located in the U.S. and Canada, in each case, including 37,000 rooms under our agreement with MGM Resorts International discussed above. Contracts signed in 2023 reflected the Company’s strength in the luxury tier, with 58 luxury hotel agreements signed. In 2023, we also entered the Midscale segment through the City Express brand acquisition discussed above, and announced our plans for further Midscale expansion with the launch of two new brands, Four Points Express by Sheraton and StudioRes.
In 2021,2024, we expect grossnet rooms growth of approximately5.5 to 6.0 percent, (3.0including an anticipated 2.3 percent increase as a result of the expected addition of rooms to 3.5 percent, netour system under our agreement with MGM Resorts International discussed above. The first of deletions).such MGM properties joined our system in January 2024, and the remaining properties are expected to join by the end of the 2024 first quarter.
Properties and Rooms
At year-end 2020,2023, we operated, franchised, and licensed the following properties and rooms:
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| | Managed | | Franchised/Licensed | | Owned/Leased | | | | Total |
| Properties | | Rooms | | Properties | | Rooms | | Properties | | Rooms | | | | | | Properties | | Rooms |
| U.S. & Canada | 788 | | | 240,487 | | | 4,720 | | | 677,120 | | | 26 | | | 6,483 | | | | | | | 5,534 | | | 924,090 | |
| Asia Pacific | 698 | | | 199,040 | | | 143 | | | 37,597 | | | 2 | | | 407 | | | | | | | 843 | | | 237,044 | |
| EMEA | 485 | | | 108,185 | | | 407 | | | 72,827 | | | 24 | | | 5,561 | | | | | | | 916 | | | 186,573 | |
| CALA | 112 | | | 21,520 | | | 132 | | | 27,613 | | | 14 | | | 3,449 | | | | | | | 258 | | | 52,582 | |
| Timeshare | — | | | — | | | 91 | | | 22,755 | | | — | | | — | | | | | | | 91 | | | 22,755 | |
| Total | 2,083 | | | 569,232 | | | 5,493 | | | 837,912 | | | 66 | | | 15,900 | | | | | | | 7,642 | | | 1,423,044 | |
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| | Managed | | Franchised/Licensed | | Owned/Leased | | Residential | | Total |
| Properties | | Rooms | | Properties | | Rooms | | Properties | | Rooms | | Properties | | Rooms | | Properties | | Rooms |
| U.S. & Canada | 624 | | | 215,246 | | | 5,259 | | | 752,630 | | | 13 | | | 4,339 | | | 69 | | | 7,416 | | | 5,965 | | | 979,631 | |
| International | 1,422 | | | 360,717 | | | 1,210 | | | 218,830 | | | 37 | | | 8,776 | | | 57 | | | 6,532 | | | 2,726 | | | 594,855 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Timeshare | — | | | — | | | 93 | | | 22,745 | | | — | | | — | | | — | | | — | | | 93 | | | 22,745 | |
| Yacht | — | | | — | | | 1 | | | 149 | | | — | | | — | | | — | | | — | | | 1 | | | 149 | |
| Total | 2,046 | | | 575,963 | | | 6,563 | | | 994,354 | | | 50 | | | 13,115 | | | 126 | | | 13,948 | | | 8,785 | | | 1,597,380 | |
Lodging Statistics
The following tables presenttable presents RevPAR, occupancy, and ADR statistics for comparable properties for 20202023, and 20202023 compared to 2019.2022. Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.
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| RevPAR | | Occupancy | | Average Daily Rate |
| 2020 | | vs. 2019 | | 2020 | | vs. 2019 | | | 2020 | | vs. 2019 |
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| Comparable Company-Operated Properties | | | | | | | | | | | | |
| U.S. & Canada | $ | 50.73 | | | (67.3) | % | | 28.6 | % | | (47.2) | % | pts. | | $ | 177.48 | | | (13.4) | % |
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| | | | | | | | | | | | |
| Asia Pacific | $ | 46.32 | | | (53.7) | % | | 39.6 | % | | (31.7) | % | pts. | | $ | 116.90 | | | (16.7) | % |
| CALA | $ | 52.55 | | | (60.0) | % | | 26.7 | % | | (37.8) | % | pts. | | $ | 196.51 | | | (3.6) | % |
| Europe | $ | 34.88 | | | (76.8) | % | | 20.8 | % | | (53.3) | % | pts. | | $ | 167.70 | | | (17.3) | % |
| Middle East & Africa | $ | 48.97 | | | (52.1) | % | | 34.9 | % | | (32.9) | % | pts. | | $ | 140.34 | | | (6.8) | % |
EMEA (1) | $ | 41.11 | | | (68.1) | % | | 27.0 | % | | (44.3) | % | pts. | | $ | 152.08 | | | (15.9) | % |
International - All (2) | $ | 44.77 | | | (60.6) | % | | 33.8 | % | | (37.0) | % | pts. | | $ | 132.56 | | | (17.4) | % |
Worldwide (3) | $ | 47.53 | | | (64.3) | % | | 31.4 | % | | (41.7) | % | pts. | | $ | 151.51 | | | (16.7) | % |
| Comparable Systemwide Properties | | | | | | | | | | | | |
| U.S. & Canada | $ | 48.28 | | | (59.4) | % | | 37.2 | % | | (36.5) | % | pts. | | $ | 129.96 | | | (19.4) | % |
| Asia Pacific | $ | 46.51 | | | (54.2) | % | | 38.8 | % | | (32.4) | % | pts. | | $ | 119.89 | | | (16.0) | % |
| CALA | $ | 38.81 | | | (63.4) | % | | 24.4 | % | | (37.4) | % | pts. | | $ | 159.12 | | | (7.1) | % |
| Europe | $ | 32.53 | | | (75.1) | % | | 21.7 | % | | (51.2) | % | pts. | | $ | 149.58 | | | (16.5) | % |
| Middle East & Africa | $ | 46.27 | | | (52.5) | % | | 34.3 | % | | (33.2) | % | pts. | | $ | 134.87 | | | (6.5) | % |
EMEA (1) | $ | 36.91 | | | (69.2) | % | | 25.8 | % | | (45.4) | % | pts. | | $ | 143.33 | | | (14.9) | % |
International - All (2) | $ | 41.51 | | | (62.2) | % | | 31.5 | % | | (38.5) | % | pts. | | $ | 131.63 | | | (16.1) | % |
Worldwide (3) | $ | 46.28 | | | (60.2) | % | | 35.5 | % | | (37.1) | % | pts. | | $ | 130.40 | | | (18.5) | % |
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| RevPAR | | Occupancy | | Average Daily Rate |
| 2023 | | vs. 2022 | | 2023 | | vs. 2022 | | | 2023 | | vs. 2022 |
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| Comparable Company-Operated Properties | | | | | | | | | | | | |
| U.S. & Canada | $ | 171.81 | | | 10.2 | % | | 68.9 | % | | 3.7 | % | pts. | | $ | 249.25 | | | 4.3 | % |
| Greater China | $ | 88.18 | | | 80.3 | % | | 68.9 | % | | 22.4 | % | pts. | | $ | 128.03 | | | 21.7 | % |
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| Asia Pacific excluding China | $ | 117.33 | | | 41.9 | % | | 69.5 | % | | 11.5 | % | pts. | | $ | 168.86 | | | 18.4 | % |
| Caribbean & Latin America | $ | 168.44 | | | 13.8 | % | | 64.0 | % | | 4.4 | % | pts. | | $ | 263.19 | | | 6.0 | % |
| Europe | $ | 183.67 | | | 21.2 | % | | 70.7 | % | | 7.7 | % | pts. | | $ | 259.65 | | | 8.0 | % |
| Middle East & Africa | $ | 128.99 | | | 12.5 | % | | 67.6 | % | | 3.2 | % | pts. | | $ | 190.71 | | | 7.2 | % |
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International - All (1) | $ | 120.78 | | | 35.6 | % | | 68.8 | % | | 13.1 | % | pts. | | $ | 175.62 | | | 9.7 | % |
Worldwide (2) | $ | 142.69 | | | 21.2 | % | | 68.8 | % | | 9.1 | % | pts. | | $ | 207.27 | | | 5.1 | % |
| Comparable Systemwide Properties | | | | | | | | | | | | |
| U.S. & Canada | $ | 128.25 | | | 8.9 | % | | 69.8 | % | | 2.7 | % | pts. | | $ | 183.83 | | | 4.7 | % |
| Greater China | $ | 82.77 | | | 78.6 | % | | 67.9 | % | | 22.2 | % | pts. | | $ | 121.91 | | | 20.2 | % |
| Asia Pacific excluding China | $ | 117.89 | | | 43.2 | % | | 69.4 | % | | 10.9 | % | pts. | | $ | 169.93 | | | 20.7 | % |
| Caribbean & Latin America | $ | 142.85 | | | 13.9 | % | | 64.7 | % | | 4.2 | % | pts. | | $ | 220.73 | | | 6.5 | % |
| Europe | $ | 142.88 | | | 21.8 | % | | 68.7 | % | | 8.3 | % | pts. | | $ | 207.86 | | | 7.2 | % |
| Middle East & Africa | $ | 120.67 | | | 14.7 | % | | 66.6 | % | | 2.9 | % | pts. | | $ | 181.18 | | | 9.7 | % |
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International - All (1) | $ | 116.81 | | | 32.6 | % | | 67.9 | % | | 11.7 | % | pts. | | $ | 172.05 | | | 9.7 | % |
Worldwide (2) | $ | 124.70 | | | 14.9 | % | | 69.2 | % | | 5.5 | % | pts. | | $ | 180.24 | | | 5.8 | % |
(1)Includes Greater China, Asia Pacific excluding China, Caribbean & Latin America, Europe, and Middle East & Africa.
(2)Includes Asia Pacific, CALA, and EMEA.
(3)Includes U.S. & Canada and International - All.
CONSOLIDATED RESULTS
Our results declined in 2020 compared to 2019, primarily due to the impact of COVID-19. See the “Impact of COVID-19” section above for more information about the impact to our business during 2020, and theThe discussion below for additionalpresents an analysis of our consolidated results of operations for 2020 and 2019.2023 compared to 2022. Also see the“Business Trends” section above for further discussion.
Fee Revenues
| | ($ in millions) | ($ in millions) | 2020 | | 2019 | | | Change 2020 vs. 2019 | |
| ($ in millions) | |
| ($ in millions) | |
| Base management fees | |
| Base management fees | |
| Base management fees | Base management fees | $ | 443 | | | $ | 1,180 | | | | $ | (737) | | | (62) | % | |
| Franchise fees | Franchise fees | 1,153 | | | 2,006 | | | | (853) | | | (43) | % | |
| Franchise fees | |
| Franchise fees | |
| Incentive management fees | |
| Incentive management fees | |
| Incentive management fees | Incentive management fees | 87 | | | 637 | | | | (550) | | | (86) | % | |
| Gross fee revenues | Gross fee revenues | 1,683 | | | 3,823 | | | | (2,140) | | | (56) | % | |
| Gross fee revenues | |
| Gross fee revenues | |
| Contract investment amortization | |
| Contract investment amortization | |
| Contract investment amortization | Contract investment amortization | (132) | | | (62) | | | | 70 | | | 113 | % | |
| Net fee revenues | Net fee revenues | $ | 1,551 | | | $ | 3,761 | | | | $ | (2,210) | | | (59) | % | |
| Net fee revenues | |
| Net fee revenues | |
The decreaseincrease in base management fees primarily reflected higher RevPAR and unit growth.
The increase in franchise fees primarily reflected lowerhigher RevPAR, unit growth ($99 million), and lower co-brandhigher non-RevPAR related franchise fees ($50 million). Non-RevPAR related franchise fees of $832 million in 2023 increased primarily due to higher co-branded credit card fees of $84 million primarily due to COVID-19, as well as lower fees from properties that left the system of $32 million. ($55 million).
The decrease in franchise fees was partially offset by unit growth ($37 million).
The decreaseincrease in incentive management fees was primarily due to COVID-19.reflected higher profits at many managed hotels. In 2020,2023, we earned incentive management fees from 3768 percent of our managed properties worldwide, compared to 7261 percent in 2019.2022. We earned incentive management fees from 331 percent of our U.S. & Canada managed properties and 85 percent of our International managed properties in U.S. & Canada and 56 percent of managed properties outside U.S. & Canada in 2020,2023, compared to 5729 percent in U.S. & Canada and 8176 percent outside U.S. & Canada in 2019.International in 2022. In addition, 9265 percent of our total incentive management fees in 20202023 came from our International managed properties outside U.S. & Canada, primarily in Asia Pacific, versus 6558 percent in 2019.2022.
Contract investment amortization increased primarily due to higher impairments of investments in management and franchise contracts, primarily due to COVID-19.
Owned, Leased, and Other
| | ($ in millions) | ($ in millions) | 2020 | | 2019 | | | Change 2020 vs. 2019 | |
| ($ in millions) | |
| ($ in millions) | |
| Owned, leased, and other revenue | |
| Owned, leased, and other revenue | |
| Owned, leased, and other revenue | Owned, leased, and other revenue | $ | 568 | | | $ | 1,612 | | | | $ | (1,044) | | | (65) | % | |
| Owned, leased, and other - direct expenses | Owned, leased, and other - direct expenses | 677 | | | 1,316 | | | | (639) | | | (49) | % | |
| Owned, leased, and other - direct expenses | |
| Owned, leased, and other - direct expenses | |
| Owned, leased, and other, net | Owned, leased, and other, net | $ | (109) | | | $ | 296 | | | | $ | (405) | | | (137) | % | |
| Owned, leased, and other, net | |
| Owned, leased, and other, net | |
Owned, leased, and other revenue, net of direct expenses, decreasedincreased primarily due to lower demandstronger results at and the temporary closure of certain of our owned and leased hotels dueproperties, $46 million of higher termination fees, primarily related to COVID-19, as well as net lower ownedone development project in U.S. & Canada, and an estimated monetary payment of $31 million recorded in 2022 related to a portfolio of 12 leased profits attributable to hotels sold in the 2019 fourth and 2020 first quarters ($19 million).U.S. & Canada, partially offset by $29 million of subsidies received in 2022 for certain of our leased hotels under German government COVID-19 assistance programs.
Cost Reimbursements
| | ($ in millions) | ($ in millions) | 2020 | | 2019 | | | Change 2020 vs. 2019 | |
| ($ in millions) | |
| ($ in millions) | |
| Cost reimbursement revenue | |
| Cost reimbursement revenue | |
| Cost reimbursement revenue | Cost reimbursement revenue | $ | 8,452 | | | $ | 15,599 | | | | $ | (7,147) | | | (46) | % | |
| Reimbursed expenses | Reimbursed expenses | 8,435 | | | 16,439 | | | | (8,004) | | | (49) | % | |
| Reimbursed expenses | |
| Reimbursed expenses | |
| Cost reimbursements, net | Cost reimbursements, net | $ | 17 | | | $ | (840) | | | | $ | 857 | | | 102 | % | |
| Cost reimbursements, net | |
| Cost reimbursements, net | |
Cost reimbursements, net (cost reimbursement revenue, net of reimbursed expenses) varies due to timing differences between the costs we incur for centralized programs and services and the related reimbursements we receive from hotelproperty owners and franchisees, primarily driven by our Loyalty Program.franchisees. Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively. See Note 2 for more information about the accounting for cost reimbursements, including our Loyalty Program.
The increasedecrease in cost reimbursements, net in 2020 primarily reflects the performance of thereflected Loyalty Program which hadactivity, primarily due to lower program revenues and higher program expenses, higher expenses related to our insurance program, and redemptions.higher marketing expenses.
Other Operating Expenses
| | ($ in millions) | ($ in millions) | 2020 | | 2019 | | | Change 2020 vs. 2019 | |
| ($ in millions) | |
| ($ in millions) | |
| Depreciation, amortization, and other | |
| Depreciation, amortization, and other | |
| Depreciation, amortization, and other | Depreciation, amortization, and other | $ | 346 | | | $ | 341 | | | | $ | 5 | | | 1 | % | |
| General, administrative, and other | General, administrative, and other | 762 | | | 938 | | | | (176) | | | (19) | % | |
| Restructuring and merger-related charges | 267 | | | 138 | | | | 129 | | | 93 | % | |
| General, administrative, and other | |
| General, administrative, and other | |
| Merger-related charges and other | |
| Merger-related charges and other | |
| Merger-related charges and other | |
Depreciation, amortization,General, administrative, and other expenses increased primarily due to higher operating lease impairmentadministrative and compensation costs and higher litigation accruals.
Merger-related charges ($16 million). See Note 9 for more information about the operating lease impairment charges.
General, administrative, and other expenses decreased primarily due to lower administrative costs due to our cost reduction measures and $20 million of lower legal expenses. The decrease was partially offset by a higher provision for credit losses and higher guarantee reserves primarily due to the negative current and expected economic impact of COVID-19 ($105 million).
Restructuring and merger-related charges increased primarily due to the increased put option liabilityData Security Incident discussed in Note 8 ($243 million) and 2020 restructuring charges ($56 million), partially offset by the ICO Fine discussed in Note 8 ($104 million, representing the 2019 accrual and the 2020 reversal), the 2019 impairment charge of a Legacy-Starwood office building ($34 million), and lower integration costs ($19 million).7.
Non-Operating Income (Expense)
| | ($ in millions) | ($ in millions) | 2020 | | 2019 | | | Change 2020 vs. 2019 | |
| ($ in millions) | |
| ($ in millions) | |
| Gains and other income, net | Gains and other income, net | $ | 9 | | | $ | 154 | | | | $ | (145) | | | (94) | % | |
| Gains and other income, net | |
| Gains and other income, net | |
| | Interest expense | |
| | Interest expense | |
| | Interest expense | Interest expense | (445) | | | (394) | | | | 51 | | | 13 | % | |
| Interest income | Interest income | 27 | | | 26 | | | | 1 | | | 4 | % | |
| Equity in (losses) earnings | (141) | | | 13 | | | | (154) | | | (1,185) | % | |
| Interest income | |
| Interest income | |
| Equity in earnings | |
| Equity in earnings | |
| Equity in earnings | |
Gains and other income, net increased primarily due to a gain on the sale of a hotel in the Caribbean & Latin America region ($24 million).
Interest expense increased primarily due to higher commercial paper borrowings and interest rates ($71 million), higher debt balances driven by Senior Notes issuances, net of maturities ($70 million), and higher interest rates on floating rate debt, including the effect of interest rate swaps ($19 million).
Equity in earnings decreased primarily due to gains recorded in the prior year on the sale of properties held by equity method investees ($23 million).
Gains and other income, net decreased primarily due to the 2019 gains on our property sales ($134 million).
Interest expense increased primarily due to higher interest on Senior Note issuances, net of maturities ($93 million), partially offset by lower commercial paper and Credit Facility interest rates and aggregate average borrowings ($24 million) and net lower interest rates on floating rate debt ($22 million).
Equity in (losses) earnings decreased due to losses recorded by the investees and impairment charges ($77 million), primarily as a result of COVID-19.
Income Taxes
| | ($ in millions) | ($ in millions) | 2020 | | 2019 | | | Change 2020 vs. 2019 | |
| Benefit (provision) for income taxes | $ | 199 | | | $ | (326) | | | | $ | (525) | | | (161) | % | |
| ($ in millions) | |
| ($ in millions) | |
| Provision for income taxes | |
| Provision for income taxes | |
| Provision for income taxes | |
Our tax benefitprovision decreased in 2020,2023, compared to our tax provision in 2019,2022, primarily reflected the decreasedue to intellectual property restructuring transactions completed during 2023 resulting in operating incomenon-U.S. tax benefits ($336228 million), the release of a tax benefit fromvaluation allowance as the Company concluded it is more likely than not to recognize non U.S. tax benefits ($223 million), and the current year release of tax reserves ($103 million), which was mostly due to audit closures during 2020 ($100 million), the tax benefit from the Sheraton Grand Chicago put option reserve ($61 million), the year-over-year tax benefit from impairment charges ($39 million), and thecompletion of a prior year tax expense incurred for U.S. tax on Global Intangible Low-Taxed Income ($35 million).audit. The decrease was partially offset by a shiftthe increase in earnings to jurisdictions with higher tax ratesoperating income ($3661 million).
BUSINESS SEGMENTS
Our segment results declined in 2020 compared to 2019 primarily due to the impact of COVID-19. See the “Impact of COVID-19” section above for more information about the impact to our business during 2020 and theThe following discussion below for additionalpresents an analysis of the operating results of our reportable business segments. Segment revenues and profitsAlso see the“Business Trends” section above for EMEA, a new reportable segment in 2020, did not change significantly in 2019 compared to 2018.further discussion.
| | ($ in millions) | ($ in millions) | 2020 | | 2019 | | | Change 2020 vs. 2019 | |
| ($ in millions) | |
| ($ in millions) | |
| U.S. & Canada | |
| U.S. & Canada | |
| U.S. & Canada | U.S. & Canada | | | | | | | |
| Segment revenues | Segment revenues | $ | 7,905 | | | $ | 16,833 | | | | $ | (8,928) | | | (53) | % | |
| Segment profits | 198 | | | 2,000 | | | | (1,802) | | | (90) | % | |
| Asia Pacific | | | | |
| Segment revenues | Segment revenues | 612 | | | 1,189 | | | | (577) | | | (49) | % | |
| Segment profits | 1 | | | 369 | | | | (368) | | | (100) | % | |
| EMEA | | | | |
| Segment revenues | Segment revenues | 758 | | | 1,932 | | | | (1,174) | | | (61) | % | |
| Segment (loss) profits | (200) | | | 318 | | | | (518) | | | (163) | % | |
| Segment profit | |
| Segment profit | |
| Segment profit | |
| International | |
| International | |
| International | |
| Segment revenues | |
| Segment revenues | |
| Segment revenues | |
| Segment profit | |
| Segment profit | |
| Segment profit | |
|
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| Properties | | Rooms |
| December 31, 2020 | | December 31, 2019 | | vs. December 31, 2019 | | December 31, 2020 | | December 31, 2019 | | vs. December 31, 2019 |
| U.S. & Canada | 5,534 | | | 5,324 | | | 210 | | | 4 | % | | 924,090 | | | 899,805 | | | 24,285 | | | 3 | % |
| Asia Pacific | 843 | | | 782 | | | 61 | | | 8 | % | | 237,044 | | | 221,772 | | | 15,272 | | | 7 | % |
| EMEA | 916 | | | 893 | | | 23 | | | 3 | % | | 186,573 | | | 184,091 | | | 2,482 | | | 1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Properties | | Rooms |
| December 31, 2023 | | December 31, 2022 | | vs. December 31, 2022 | | December 31, 2023 | | December 31, 2022 | | vs. December 31, 2022 |
| U.S. & Canada | 5,965 | | | 5,846 | | | 119 | | | 2 | % | | 979,631 | | | 964,412 | | | 15,219 | | | 2 | % |
| International | 2,726 | | | 2,348 | | | 378 | | | 16 | % | | 594,855 | | | 538,101 | | | 56,754 | | | 11 | % |
U.S. & Canada
U.S. & Canada segment profits decreasedprofit increased primarily due to the following:
•$1,351313 million of lowerhigher gross fee revenues, (primarilyprimarily reflecting lower comparable systemwidehigher RevPAR and net house profits driven by decreasesincreases in both occupancyADR and ADR due to lower demand resulting from COVID-19, partially offset byoccupancy, unit growth, of $32 million);and higher profits at certain managed hotels; and
•$6073 million of higher contract investment amortization costs (primarily reflecting higher contract impairment charges);
•$158 million of lower owned, leased, and other revenue, net of direct expenses, (including $19primarily reflecting $57 million from hotels soldof higher termination fees, primarily related to one development project, and a $31 million estimated monetary payment recorded in the 2019 fourth and 2020 first quarters);2022 related to a portfolio of 12 leased hotels;
partially offset by:
•$22 million of higher general, administrative, and other expenses (primarily reflecting $75 million of higher provision for credit losses and reserves for guarantee funding, partially offset by $4877 million of lower administrative costs due to our cost reduction measures);reimbursement revenue, net of reimbursed expenses.
•$141 million of lower gains and other income, net (primarily reflecting a $134 million gain on the sale of two properties in 2019);
•$101 million of lower equity in (losses) earnings due to impairment charges ($60 million) and losses recorded by investees, primarily as a result of COVID-19; and
•$27 million of higher restructuring and merger-related charges;
partially offset by:
•$49 million of higher cost reimbursement revenue, net of reimbursed expenses.
Asia PacificInternational
Asia PacificInternational segment profits decreasedprofit increased primarily due to the following:
•$294373 million of lowerhigher gross fee revenues, (primarilyprimarily reflecting lower comparable systemwidehigher profits at certain managed hotels, higher RevPAR and net house profits driven by decreasesincreases in both occupancy and ADR due to lower demand resulting from COVID-19);in all regions, and unit growth, partially offset by net unfavorable foreign exchange rates;
•$3924 million of lowerhigher gains and other income, net, primarily reflecting a gain on the sale of a hotel in the Caribbean & Latin America region ($24 million); and
•$3 million of higher owned, leased, and other revenue, net of direct expenses;expenses, primarily reflecting stronger results at our owned and leased properties ($43 million), partially offset by subsidies received in 2022 for certain of our leased hotels under German government COVID-19 assistance programs ($29 million);
partially offset by:
•$932 million of lower cost reimbursement revenue, net of reimbursed expenses; and
•$2555 million of lower equity in (losses) earnings;
partially offset by:
•$13 million of lowerhigher general, administrative, and other expenses, (primarilyprimarily reflecting lower expenses due to COVID-19).higher litigation accruals and higher compensation costs.
EMEA
EMEA segment loss, compared to prior year profits, primarily reflects the following:
•$308 million of lower gross fee revenues (primarily reflecting lower comparable systemwide RevPAR and net house profits driven by decreases in both occupancy and ADR due to lower demand resulting from COVID-19);
•$171 million of lower owned, leased, and other revenue, net of direct expenses;
•$25 million of lower cost reimbursement revenue, net of reimbursed expenses; and
•$11 million of lower equity in (losses) earnings;
partially offset by:
•$13 million of lower general, administrative, and other expenses (primarily reflecting lower expenses due to COVID-19, partially offset by a $24 million higher provision for credit losses).
STOCK-BASED COMPENSATION
See Note 6 for more information.
NEW ACCOUNTING STANDARDS
See Note 2 for information on our adoption of new accounting standards.
LIQUIDITY AND CAPITAL RESOURCES
Our long-term financial objectives include diversifying our financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital. At year-end 2020, our long-term debt hadCredit Facility
We are party to a weighted average interest rate of 3.7 percent and a weighted average maturity of approximately 6.0 years. Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.8 to 1.0 at year-end 2020.
In response to the negative impact COVID-19 had on our cash from operations in 2020, which we expect to continue to be negatively impacted as discussed above, we have taken numerous actions to preserve our financial flexibility and manage our debt maturities, which include:
•Substantially reducing our corporate general and administrative costs, reimbursed expenses we incur on behalf of our owners and franchisees, and our capital expenditures and other investment spending, and implementing restructuring plans, as we discuss under the “Impact of COVID-19” section above;
•Suspending share repurchases and dividends until conditions improve and until permitted under our Credit Facility;
•Drawing$4.5 billion multicurrency revolving credit agreement (the “Credit Facility”). Available borrowings under the Credit Facility as we discuss under the “Sources of Liquidity-Our Credit Facility” section below;
•Amending the Credit Facility to, among other things, waive the quarterly-tested leverage covenant in the Credit Facility through and including the fourth quarter of 2021, as we discuss under the “Sources of Liquidity-Our Credit Facility” section below;
•Issuing $3.6 billion aggregate principal amount of senior notes, and repurchasing and retiring approximately $853 million aggregate principal amount of the Company’s outstanding senior notes maturing in 2022, which we discuss under the “Sources of Liquidity - Senior Notes Issuances and Repurchases” section below; and
•Raising $920 million of cash by entering into amendments to the existing agreements for our U.S.-issued co-brand credit cards, which we discuss under the “Co-brand Credit Card Agreements” section below.
We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs. We currently believe the Credit Facility, our cash on hand, and our access to capital markets remain adequate to meet our liquidity requirements.
Sources of Liquidity
Our Credit Facility
Our Credit Facility provides for up to $4.5 billion of aggregate borrowings for general corporate needs, including to support our commercial paper program if and when we resume issuing commercial paper.general corporate needs. Borrowings under the Credit Facility generally bear interest at LIBORSOFR (the London Interbank OfferedSecured Overnight Financing Rate) plus a spread based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings (which generally have short-term maturities of 45 days or less) as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on June 28, 2024. In 2020, we made borrowings of $4.5 billion and repayments of $3.6 billion, resulting in total outstanding borrowings under the Credit Facility of $0.9 billion as of December 31, 2020.14, 2027.
The Credit Facility contains certain covenants, including a single financial covenant that limits our maximum Leverage Ratio (as defined in the Credit Facility, and generally consistingleverage (consisting of the ratio of Adjusted Total Debt to EBITDA, each as defined in the Credit Facility, and subjectFacility) to additional adjustments as described therein). On April 13, 2020, we entered into an amendmentnot more than 4.5 to the Credit Facility (the “First Credit Facility Amendment”) under which the covenant governing the permitted Leverage Ratio is waived through and including the first quarter of 2021 (the “Covenant Waiver Period”), which waiver period may end sooner at our election, and the required leverage levels for such covenant are adjusted once re-imposed at the end of the Covenant Waiver Period (starting at 5.50 to 1.00 when the leverage test is first re-imposed and gradually stepping down to 4.00 to 1.00 over the succeeding seven fiscal quarters, as further described in the Credit Facility). The First Credit Facility Amendment also imposes a monthly-tested minimum liquidity covenant for the duration of the Covenant Waiver Period and makes certain other amendments to the terms of the Credit Facility, including increasing the interest and fees payable on the Credit Facility for the duration of the Covenant Waiver Period, tightening certain existing covenants and imposing additional covenants for the duration of the Covenant Waiver Period, including restricting dividends and share repurchases.
On January 26, 2021, we entered into two more amendments to the Credit Facility (the “New Credit Facility Amendments,” and together with the First Credit Facility Amendment, the “Credit Facility Amendments”), which extend the
Covenant Waiver Period through and including the fourth quarter of 2021 (which waiver period may end sooner at our election), revise the required leverage levels for such covenant when it is re-imposed at the end of the Covenant Waiver Period (starting at 5.50 to 1.00 when the leverage test is first re-imposed and gradually stepping down to 4.00 to 1.00 over the succeeding five fiscal quarters, as further described in the Credit Facility), and increase the minimum liquidity amount under the liquidity covenant that is tested monthly for the duration of the Covenant Waiver Period. The New Credit Facility Amendments also make certain other amendments to the terms of the Credit Facility, including reducing the rate floor for the LIBOR Daily Floating Rate and the Eurocurrency Rate.
1.0. Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios. We currently satisfy the covenants in our Credit Facility and public debt instruments, including the liquidityleverage covenant under the Credit Facility.
Senior Notes Issuances and Repurchases
On April 16, 2020, we issued $1.6 billion aggregate principal amount of 5.750 percent Series EE Notes due May 1, 2025 (the “Series EE Notes”). We pay interest on the Series EE Notes in May and November of each year, commencing in November 2020. We received net proceeds of approximately $1.581 billion from the offering of the Series EE Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes.
On June 1, 2020, we issued $1.0 billion aggregate principal amount of 4.625 percent Series FF Notes due June 15, 2030 (the “Series FF Notes”). We pay interest on the Series FF Notes in June and December of each year, commencing in December 2020. We received net proceeds of approximately $985 million from the offering of the Series FF Notes, after deducting the underwriting discount and estimated expenses. We used the majority of these proceeds to repurchase Senior Notes with near term maturities, as discussed below and in Note 10.
In June 2020, we completed a tender offer (the “Tender Offer”) and retired $853 million aggregate principal amount of our Senior Notes consisting of:
•$351 million of our 2.3% Series Q Notes maturing January 15, 2022;
•$176 million of our 3.3% Series L Notes maturing September 15, 2022; and
•$326 million of our 2.1% Series DD Notes maturing October 3, 2022.
We used proceeds from our Series FF Notes offering to complete the repurchase of such notes, including the payment of accrued interest and other costs incurred.
On August 14, 2020, we issued $1.0 billion aggregate principal amount of 3.500 percent Series GG Notes due October 15, 2032 (the “Series GG Notes”). We will pay interest on the Series GG Notes in April and October of each year, commencing in April 2021. We received net proceeds of approximately $984 million from the offering of the Series GG Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including the repayment of a portion of our outstanding borrowings under the Credit Facility.
Commercial Paper
Due to changes to our credit ratings as a result of the impact of COVID-19 on our business, we currently are not issuing commercial paper. As a result, we have had to rely more on borrowings under the Credit Facility, and issuancedo not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.
We monitor the status of senior notes, which carry higher interest costs thanthe capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs. We believe the Credit Facility, and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our liquidity requirements.
Commercial Paper
We issue commercial paper in the U.S. Because we do not have purchase commitments from buyers for our commercial paper.paper, our ability to issue commercial paper is subject to market demand. We do not expect that fluctuations in the demand for commercial paper will affect our liquidity, given our borrowing capacity under the Credit Facility and access to capital markets.
Co-brand Credit Card AgreementsCash from Operations
In May 2020, we signed amendmentsNet cash provided by operating activities increased by $807 million in 2023 compared to the existing agreements2022, primarily due to higher net income (adjusted for our U.S.-issued co-brand credit cards associated withnon-cash items), working capital changes driven by accounts receivable timing, and higher cash generated by our Loyalty Program. These amendments provided the Company withProgram, partially offset by higher cash paid for income taxes. Cash inflow from our Loyalty Program in 2020 included $920 million of cash received from the prepayment of certain future revenues under the early payment of a previously committed signing bonus, and the pre-purchase of Marriott Bonvoy points and other consideration. We recorded2020 amendments to our existing U.S.-issued co-branded credit card agreements, which reduced the amount of cash we received primarilyfrom these card issuers in the deferred revenue caption, and the remainder in the liability for guest loyalty program captions, on our Balance Sheet.
Usessubsequent years, until such reductions ended as of Cash
Cash, cash equivalents, and restricted cash totaled $894 million at December 31, 2020, an increase of $641 million from year-end 2019, primarily reflecting Senior Notes issuances, net of repayments ($1,797 million), Credit Facility borrowings, net of repayments ($900 million), net cash provided by operating activities ($1,639 million), and dispositions ($260 million). The following cash outflows partially offset these cash inflows: commercial paper repayments, net of borrowings ($3,190 million),
dividend payments ($156 million), purchase of treasury stock ($150 million), capital and technology expenditures ($135 million), other debt repayments, net of borrowings ($123 million), and financing outflows for employee stock-based compensation withholding taxes ($103 million).
Cash from Operations2023.
Net cash provided by operating activities decreased by $46 million in 2020 compared to 2019, primarily due to the net loss that we recorded in 2020 (adjusted for non-cash items) due to COVID-19, partially offset by net cash inflows from our Loyalty Program, including the one-time cash payments as a result of the amendments to our co-brand credit card agreements discussed in Note 2, a cash benefit from working capital changes, and lower cash paid for income taxes. Working capital changes primarily reflect lower accounts receivable due to lower fee and cost reimbursement revenues and a higher allowance for credit losses, lower accounts payable due to lower purchasing activity, and lower bonus accruals.
Our ratio of current assets to current liabilities was0.4 to 1.0 at year-end 2023 and 0.5 to 1.0 at both year-end 2020 and year-end 2019.2022. We have significant borrowing capacity under our Credit Facility should we need additional working capital.
Investing Activities Cash Flows
Capital Expenditures and Other Investments. We made capital and technology expenditures including expenditures on technology, of $135452 million in 20202023 and $653$332 million in 2019.2022. Capital and technology expenditures in 2020 decreased2023 increased by $518$120 million compared to 2019,2022, primarily reflecting the net lowerdue to higher spending on owned and leased properties and our worldwide technology systems andtransformation, the 2019 acquisitionsoverwhelming portion of a U.S. & Canada property and Elegant Hotels Group plc (“Elegant”).which is expected to be reimbursed over time. We also had cash outflows of $101 million in 2023 due to the City Express brand acquisition, which we discuss in Note 3.
We expect spending on capital expenditures and other investments will total approximately $575 million$1.0 billion to $650 million$1.2 billion for 2021,2024, including capital and technology expenditures, loan advances, contract acquisition costs, equity and other investments, loan advances, and various capital expendituresinvesting activities (including approximately $220$250 million for maintenance capital spending). Our anticipated capital and technology expenditures include $200 million of spending related to our option to purchase the land underlying the Sheraton Grand Chicago, which we discuss in Note 7.
Dispositions. Property and our new headquarters).asset sales generated $71 million of cash proceeds in 2023 and $1 million in 2022.
Over time, we have sold lodging properties, both completed and under development, generally subject to long-term management agreements. The ability of third-party purchasers to raise the debt and equity capital necessary to acquire such properties depends in part on the perceived risks in the lodging industry and other constraints inherent in the capital markets. We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations. In the Starwood Combination, we acquired various hotels and equity interests in various hotels, many of which we have sold or are seeking to sell. We have made, and expect to continue making, selective and opportunistic investments to add units to our lodging business, which may include property acquisitions and renovations, (such as our 2019 acquisitions of the W New York - Union Square and Elegant), new construction, loans, guarantees, and noncontrolling equity investments. Over time, we seek to minimize capital invested in our business through asset sales subject to long-term management or franchise agreements.
Dispositions. Property and asset sales generated $260 million cash proceeds in 2020 and $395 million in 2019. See Note 4 for more information on dispositions.
Loan Activity. From time to time, we make loans to owners of hotels that we operate or franchise. Loan advances, net of loan collections, amounted to $33$16 million in 2020,2023, compared to net collections of $21$3 million in 2019.2022. At year-end 2020,2023, we had $163$169 million of senior, mezzanine, and other loans outstanding, compared to $126$162 million outstanding at year-end 2019.2022.
Financing Activities Cash Flows
Debt. Debt decreasedincreased by $564$1,809 million in 2020,2023, to $10,376$11,873 million at year-end 20202023 from $10,940$10,064 million at year-end 2019.2022,primarily due to the issuance of our Series LL Notes and Series MM Notes ($1,135 million) and Series KK Notes ($783 million), and higher outstanding commercial paper borrowings ($546 million), partially offset by the maturity of our Series Z Notes and Series U Notes ($350 million and $291 million, respectively). See “Note 9 for additional information on Senior Notes issuances.Sources
Our long-term financial objectives include maintaining diversified financing sources, optimizing the mix and maturity of Liquidity,”our long-term debt, and reducing our working capital. At year-end 2023, our long-term debt had a weighted average interest rate of 4.5 percent and a weighted average maturity of approximately 5.0 years. Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.8 to 1.0 at year-end 2023.
See the “Our Credit Facility” caption in this “Liquidity and Capital Resources” section and Note 10 for additionalmore information on the Senior Note andour Credit Facility transactions in 2020.Facility.
Share Repurchases.Repurchases and Dividends. We purchasedrepurchased 1.021.5 million shares of our common stock for $3.9 billion in 2020 (in the 2020 first quarter) at an average price of $145.42 per share and 17.32023.Year-to-date through February 9, 2024, we repurchased 1.3 million shares in 2019 at an average price of $130.79 per share. At year-end 2020, 17.4 million shares remained available for repurchase under Board approved authorizations. We do not anticipate repurchasing additional shares until business conditions improve, and are prohibited from doing so for the duration of the Covenant Waiver Period under our Credit Facility, with certain exceptions.$300 million. For additional information, see “Fourth Quarter 2020“Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities”Securities” in Part II, Item 5.
Dividends. On February 14, 2020, ourOur Board of Directors declared athe following quarterly cash dividend of $0.48dividends in 2023: (1) $0.40 per share payabledeclared on February 10, 2023 and paid on March 31, 2023 to stockholders of record on February 28, 2020, which we24, 2023; (2) $0.52 per share declared on May 12, 2023 and paid on June 30, 2023 to stockholders of record on May 26, 2023; (3) $0.52 per share declared on August 3, 2023 and paid on September 29, 2023 to stockholders of record on August 17, 2023; and (4) $0.52 per share declared on November 9, 2023 and paid on December 29, 2023 to stockholders of record on November 22, 2023. Our Board declared a cash dividend of $0.52 per share on February 8, 2024, payable on March 31, 2020. We do not anticipate declaring further cash dividends until business conditions improve and are prohibited from doing so for the duration29, 2024 to stockholders of the Covenant Waiver Period under our Credit Facility.record on February 22, 2024.
Contractual ObligationsWe expect to continue to return cash to stockholders through a combination of share repurchases and Off-Balance Sheet Arrangementscash dividends.
Contractual ObligationsMaterial Cash Requirements
TheOur material cash requirements include the following table summarizes our contractual obligations atand off-balance sheet arrangements.
•At year-end 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Payments Due by Period |
| ($ in millions) | Total | | Less Than
1 Year | | 1-3 Years | | 3-5 Years | | After
5 Years |
Debt (1) | $ | 12,453 | | | $ | 1,542 | | | $ | 2,143 | | | $ | 4,281 | | | $ | 4,487 | |
Finance lease obligations (1) | 206 | | | 13 | | | 27 | | | 28 | | | 138 | |
| Operating leases where we are the primary obligor | 1,890 | | | 184 | | | 349 | | | 284 | | | 1,073 | |
| Purchase obligations | 437 | | | 186 | | | 185 | | | 66 | | | — | |
| Other noncurrent liabilities | 178 | | | — | | | 97 | | | 28 | | | 53 | |
| Total contractual obligations | $ | 15,164 | | | $ | 1,925 | | | $ | 2,801 | | | $ | 4,687 | | | $ | 5,751 | |
(1)Includes2023, we had $13,937 million of debt, including principal as well as interest.and future interest payments, of which $972 million is payable within the next 12 months from year-end 2023. See Note 9 for further information about our long-term debt.
The preceding table does not reflect•We enter into operating and finance leases primarily for hotels, offices, and equipment, which are discussed in Note 8.
•At December 31, 2023, projected Deemed Repatriation Transition Tax payments totaling $395 million at year-end 2020 as a result ofunder the U.S. tax legislation enacted on December 22, 2017, commonly referred to as the 2017 Tax Cuts and Jobs Act.In addition,Act, totaled $243 million, of which $108 million is payable within the table does not reflect unrecognized tax benefits, including interest and penalties, atnext 12 months from year-end 2020 of $508 million.2023.
•The Company also had guarantees, a contingent purchase obligation, commitments, and letters of credit as of year-end 2023, which are discussed in Note 7. With the exception of the Sheraton Grand Chicago put option discussed in Note 7, the majority of our remaining guarantee commitments are not expected to be funded within the next 12 months from year-end 2023. In addition to the purchase obligations noteddiscussed in the preceding table,Note 7, in the normal course of business, we enter into purchase commitments and incur other obligations to manage the daily operating needs of the hotels that we manage. Since weour contracts with owners require reimbursement for these amounts, these obligations are reimbursed from the cash flows of the hotels or by working capital callsexpected to the hotel owners, these obligations have minimal impact on our net income and cash flow.
Other Commitments
The following table summarizes our guarantee, investment,NEW ACCOUNTING STANDARDS
We do not expect that accounting standard updates issued to date and loan commitments at year-end 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ($ in millions) | Total
Amounts
Committed | | Less Than
1 Year | | 1-3 Years | | 3-5 Years | | After
5 Years |
| Guarantee commitments (expiration by period) | $ | 279 | | | $ | 35 | | | $ | 81 | | | $ | 40 | | | $ | 123 | |
| Investment and loan commitments (expected funding by period) | 22 | | | 12 | | | 7 | | | 3 | | | — | |
| Total other commitments | $ | 301 | | | $ | 47 | | | $ | 88 | | | $ | 43 | | | $ | 123 | |
In conjunction with financing obtained for specific projects or properties owned by entities in which we have an equity investment, we may provide industry standard indemnifications to the lender for loss, liability, or damage occurring as a result of our actions or the actions of the entity.
Additionally, in 2017, we granted a hotel owner a one-time right, exercisable in 2022, to require us to purchase the leasehold interest in the land and hotel for $300 million in cash (the “put option”). If the owner exercises the put option, we have the option to purchase, at the same time the put transaction closes, the fee simple interest in the underlying land for an additional $200 million in cash (the “call option”). We also have the right to defer the closing on the put and call options, if exercised, to December 2024. We account for the put option as a guarantee and as ofthat are effective after December 31, 2020, believe it is probable the hotel owner2023 will exercise the put option and we will exercise the call option.have a material effect on our Financial Statements.
For further information, including the nature of the commitments and their expirations, see the “Commitments” caption in Note 8.
Letters of Credit
At year-end 2020, we had $156 million of letters of credit outstanding (all outside the Credit Facility, as defined in Note 10), most of which were for our self-insurance programs. Surety bonds issued as of year-end 2020 totaled $163 million, most of which state governments requested in connection with our self-insurance programs.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting policy and estimate to be critical if: (1) we must make assumptions that were uncertain when the estimate was made; and (2) changes in the estimate, or selection of a different estimate methodology could have a material effect on our consolidated results of operations or financial condition. Management has discussed the development and selection of its critical accounting policies and estimates with the Audit Committee of our Board of Directors.
While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate or assumption was made. Actual results may differ significantly. Additionally, changes in our assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.
See Note 2 for further information related to our critical accounting policies and estimates, which are as follows:
Loyalty Program, including how we estimate the breakage of hotel points, credit card points, and free night certificates, the volume of points and free night certificates that will be issued under our co-brandco-branded credit card agreements, the amount of consideration to which we will be entitled under our co-brandco-branded credit card agreements, and the stand-alone selling prices of goods and services provided under our co-brandco-branded credit card agreements;agreements. Changes in these estimates could result in material changes to our liability for guest loyalty program and Loyalty Program revenue. Based on the conditions existing at December 31, 2023 and holding other factors constant, a one percent decrease in our estimate of the breakage of points could result in an increase in the liability for guest loyalty program of approximately$50 million. The breakage impact may vary significantly depending on the specific Loyalty Program points for which the anticipated breakage changes.
Goodwill, including how we evaluate the fair value of reporting units and when we record an impairment loss on goodwill;goodwill. During the 2023 fourth quarter, we conducted our annual goodwill impairment test, and no impairment charges were recorded. The estimated fair values of all our reporting units significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.
Intangibles and Long-Lived Assets, including how we evaluate the fair value of intangibles and long-lived assets and when we record impairment losses on intangibles and long-lived assets;assets. During 2023, we evaluated our intangibles and long-lived asset groups for impairment and did not record any material impairment charges. The estimated fair values
of all our indefinite-lived intangible assets significantly exceeded their carrying amounts at the date of their most recent estimated fair value of investments and when we record impairment losses on investments; and
Business Combinations, including the assumptions that we make to estimate the fair values of assets acquired and liabilities assumed related to discount rates, royalty rates, and the amount and timing of future cash flows.determination.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk primarily from changes in interest rates stock prices,and currency exchange rates, and debt prices.rates. We manage our exposure to these risks by monitoring available financing alternatives, through the development and application of credit granting policies, and by entering into derivative arrangements. We do not foresee any significant changes in either our exposure to fluctuations in interest rates or currency rates or how we manage such exposure in the future.
We are exposed to interest rate risk on our floating-rate notes receivable and floating-rate debt. Changes in interest rates also impact the fair value of our fixed-rate notes receivable and the fair value of our fixed-rate long-term debt.
We are also subject to risk from changes in debt prices from our investments in debt securities and fluctuations in stock price from our investments in publicly traded companies. Changes in the price of the underlying stock can impact the fair value of our investment.
We use derivative instruments, including cash flow hedges, fair value hedges, net investment in non-U.S. operations hedges, and other derivative instruments, as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and currency exchange rates. As a matter of policy, we only enter into transactions that we believe will be highly effective at offsettingWe continue to have exposure to such risks to the underlying risk, and we doextent they are not use derivatives for trading or speculative purposes.hedged. See Note 2 for more information on derivative instruments. We use forward contracts not designated as hedging instruments to manage currency exchange rate risk associated with certain cash and intercompany loan balances. We intend to offset the gains and losses related to these forward contracts with the gains and losses related to the remeasurement of our cash and intercompany loan balances, such that there is a negligible effect on earnings. We do not consider the fair value or earnings impact of these forward contracts to be material to our consolidated financial statements.
interest rate swaps. Changes in interest rates also impact the fair value of our fixed-rate notes receivable and the fair value of our fixed-rate long-term debt. The following table sets forth the scheduled maturities and the total fair value as of year-end 20202023 for our financial instruments that are impacted by market risks:interest rate risk:
| | | | Maturities by Period | |
| ($ in millions) | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | There-
after | | Total
Carrying
Amount | | Total
Fair
Value |
Assets - Maturities represent expected principal receipts, fair values represent assets. | | (in millions) | |
| (in millions) | |
| (in millions) | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | There-
after | | Total
Carrying
Amount | | Total
Fair
Value |
Assets - Maturities represent expected principal receipts. Fair values represent assets. | | Assets - Maturities represent expected principal receipts. Fair values represent assets. |
| Fixed-rate notes receivable | Fixed-rate notes receivable | $ | 2 | | | $ | 2 | | | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | 35 | | | $ | 42 | | | $ | 33 | |
| Average interest rate | Average interest rate | | 0.83 | % | |
| Floating-rate notes receivable | Floating-rate notes receivable | $ | 2 | | | $ | 83 | | | $ | 1 | | | $ | 13 | | | $ | 1 | | | $ | 21 | | | $ | 121 | | | $ | 112 | |
| Floating-rate notes receivable | |
| Floating-rate notes receivable | |
| Average interest rate | Average interest rate | | 3.77 | % | |
Liabilities - Maturities represent expected principal payments, fair values represent liabilities. | Liabilities - Maturities represent expected principal payments. Fair values represent liabilities. | |
Liabilities - Maturities represent expected principal payments. Fair values represent liabilities. | |
Liabilities - Maturities represent expected principal payments. Fair values represent liabilities. | |
| Fixed-rate debt | Fixed-rate debt | $ | (849) | | | $ | (572) | | | $ | (674) | | | $ | — | | | $ | (2,293) | | | $ | (3,804) | | | $ | (8,192) | | | $ | (9,100) | |
| Average interest rate | Average interest rate | | 4.06 | % | |
| Floating-rate debt | Floating-rate debt | $ | (317) | | | $ | (228) | | | $ | — | | | $ | (1,486) | | | $ | — | | | $ | — | | | $ | (2,031) | | | $ | (2,035) | |
| Floating-rate debt | |
| Floating-rate debt | |
| Average interest rate | Average interest rate | | 1.63 | % | |
Item 8. Financial Statements and Supplementary Data.Statements.
The following financial information is included on the pages indicated:
MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Marriott International, Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting. The Company has designed its internal control over financial reporting to provide reasonable assurance on the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of inherent limitations in internal control over financial reporting, such controls may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of the Company’s annual consolidated financial statements, management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020,2023, based on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the “COSO criteria”).
Based on this assessment, management has concluded that, applying the COSO criteria, as of December 31, 2020,2023, the Company’s internal control over financial reporting was effective to provide reasonable assurance of the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Ernst & Young LLP (PCAOB ID: 42), the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this report, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting, a copy of which appears on the following page.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Marriott International, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Marriott International, Inc.’s internal control over financial reporting as of December 31, 2020,2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Marriott International, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20202023 and 2019,2022, and the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders’ (deficit) equity and cash flows for each of the three fiscal years in the period ended December 31, 2020,2023, and the related notes, and our report dated February 18, 202113, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Tysons, Virginia
February 18, 202113, 2024
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Marriott International, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Marriott International, Inc. (the Company) as of December 31, 20202023, and 2019, and2022, the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders’ (deficit) equity and cash flows for each of the three fiscal years in the period ended December 31, 2020,2023, and the related notes (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20202023 and 2019,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020,2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 18, 202113, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| | | | | | | | |
| | Accounting for the Loyalty Program |
| Description of the Matter | | During 20202023 the Company recognized $1,118$2,798 millionof revenues previously deferred as of December 31, 20192022, and had deferred revenue of $6,271$7,006 million as of December 31, 20202023 associated with the Marriott Bonvoy guest loyalty program (the “Loyalty Program”). As discussed in Note 2 to the financial statements, the Company recognizes revenue for performance obligations relating to Loyalty Program points and free night certificates as they are redeemed and the related performance obligations are satisfied. The Company recognizes a portion of revenue for the Licensed IP performance obligation under the sales-based royalty criteria, with the remaining portion recognized on a straight-line basis over the contract term. Revenue is recognized utilizing complex models based upon the estimated standalone selling price per point and per free night certificate, which includes judgment in making the estimates of variable consideration and breakage of points. |
| | |
| | Auditing Loyalty Program results is complex due to: (1) the complexity of models and high volume of data used to monitor and account for Loyalty Program results and (2) the complexity in accounting for the amendments to the Company’s co-brand credit card agreements during May 2020, as well as the judgment in estimating the relative standalone selling price of the related performance obligations, (3) the complexity and judgment of estimating the standalone selling price per Loyalty Program point, including both the estimate of variable consideration under the Company’s co-brandco-branded credit card agreements which has significant estimation uncertainty associated with projecting future cardholder spending and redemption activity, and the estimated breakage of Loyalty Program points which requires the use of specialists and (4) the material weakness in the Company’s internal control over financial reporting that existed for a portion of the year relating to the insufficient complement of resources, including IT and accounting processes and personnel, to perform the ongoing accounting associated with the Loyalty Program.specialists. |
| | |
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of certain controls over the Company’s process of accounting for the Loyalty Program. For example, we tested controls over the accounting methods and model used in reporting results of the Loyalty Program, management’s review of the assumptions and data inputs utilized in estimating the standalone selling price per Loyalty Program point, as well as the development of the estimated breakage. |
| | |
| | To test the recognition of revenues and costs associated with the Loyalty Program, we performed audit procedures that included, among others, testing the clerical accuracy and consistency with US GAAP of the accounting model developed by the Company to recognize revenue and costs associated with the Loyalty Program, and testing significant inputs into the accounting model, including the estimated standalone selling price and recognition of points earned and redeemed during the period. Because of the material weakness that was present for a portion of the year, we expanded our sample sizes selected for substantive testing and performed additional testing over the completeness and accuracy of Loyalty Program data during the portion of the year in which the material weakness was present. We involved our valuation specialists to assist in our testing procedures with respect to the estimate of relative standalone selling price of the performance obligations associated with the amendment to the co-brand credit card agreements in May 2020. We involved our actuarial professionals to assist in our testing procedures with respect to the estimate of the breakage of Loyalty Program points. We evaluated management’s methodology for estimating the breakage of Loyalty Program points, and we tested underlying data and actuarial assumptions used in estimating the breakage. We evaluated the reasonableness of management’s assumptions, including projections of cash flows, used to estimate variable consideration under the Company’s co-brandco-branded credit cards. |
| | |
| | | | | | | | |
| | Accounting for General &and Administrative Expenses and Reimbursed Expenses |
| Description of the Matter | | During 20202023 the Company recognized $762$1,011 million of general and administrative expenses and $8,435$17,424 million of reimbursed expenses. As discussed in Note 2 to the financial statements, the Company incurs certain expenses that are for the benefit of, and reimbursable from, hotel owners and franchisees. Such amounts are recorded in the period in which the expense is incurred and include judgment with respect to the allocation of certain costs between general &and administrative expenses, which are non-reimbursable, and reimbursed expenses. |
| | |
| | Auditing the classification of general and administrative expenses and reimbursed expenses is complex due to: (1) judgment associated with testing management’s conclusions regarding the allocation of costs between reimbursable and non-reimbursable expenses (2) the complexity associated with allocating above-property expenses to hotel owners and franchisees due to the high volume of data used to monitor and account for reimbursed expenses and (3)(2) incentives within management’s compensation structure designed to limitachieve certain financial targets that exclude the growth in general and administrativeimpact of reimbursed expenses. |
| | |
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for reimbursed expenses, general and administrative expenses, and the process for allocating expenses. For example, we tested management’s controls over the review of the allocation of certain costs to determine if they were reasonably classified. |
| | |
| | To test the recognition of reimbursed expenses for appropriate classification, we performed audit procedures that included, among others, (1) testing a sample of transactions that were classified withinmanual journal entries made to reimbursed expenses in order to evaluate the appropriate accounting treatment and financial statement classification pursuant to the terms of the managementgeneral and franchise agreements,administrative expenses and (2) performedperforming analytical procedures over total reimbursed expenses and general and administrative expenses in order to identify any trends or indicators of material errors in the classification of expenses, (3) tested manual journal entries made to reimbursed expenses and general and administrative expenses and (4) evaluated the methodology of cost allocations, including any material changes to allocations during the period.expenses. |
| | |
| | Accounting for Indefinite-lived Brand Intangible Assets |
Description of the Matter | | At December 31, 2020 the Company had $5,995 million of indefinite-lived intangible brand assets. As discussed in Note 1 to the financial statements, the novel coronavirus (“COVID-19”) pandemic created uncertainty and increased subjectivity with respect to the development of estimates of future business performance. Further, as discussed in Note 2 to the financial statements, the Company evaluates the carrying value of its indefinite-lived brand intangible assets for impairment annually, or more frequently when factors indicate that the Company may not be able to recover the carrying value. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived brand intangible assets are less than the carrying amount. However, when potential indicators of impairment exist, such as in consideration of the impact of COVID-19 on operations, the Company performs an analysis to determine the recoverability of the asset by comparing the estimated fair value to the carrying value of the asset. |
| | |
| | Auditing the accounting for indefinite-lived brand intangible assets is complex and judgmental as a result of the subjectivity in estimating the fair value of the indefinite-lived brand intangible assets. In particular, the fair value estimates are developed using the income approach and are subject to significant assumptions such as revenue growth, royalty rates and discount rates. These assumptions may be affected by the impact of the COVID-19 pandemic on future market conditions, including the duration of the recovery period. |
| | |
| | | | | | | | |
How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for indefinite-lived brand intangible assets. For example, we tested management’s controls over the review of the significant assumptions used in estimating the fair value of indefinite-lived intangible assets. |
| | |
| | To test the fair value of the indefinite-lived brand intangible assets our procedures included, among others, assessing the methodologies used in evaluating brand assets for impairment, involving our valuation specialists to assist in evaluating significant assumptions used by management in estimating the fair value of the brand assets, and testing the completeness and accuracy of underlying data used by management in their analyses. We compared the significant assumptions used by management to historical operating results and relevant observable market information including current industry, market and economic trends. Our procedures included evaluating the historical accuracy of management’s forecasts and performing sensitivity analyses to evaluate the impact of changes to significant assumptions. |
We have served as the Company’s auditor since 2002.
Tysons, Virginia
February 18, 202113, 2024
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
Fiscal Years 2020, 2019,2023, 2022, and 20182021
($ in millions, except per share amounts)
| | | | December 31,
2020 | | December 31,
2019 | | December 31,
2018 | | 2023 | | 2022 | | 2021 |
| REVENUES | REVENUES | | | | | |
| Base management fees | |
| Base management fees | |
| Base management fees | Base management fees | $ | 443 | | | $ | 1,180 | | | $ | 1,140 | |
| Franchise fees | Franchise fees | 1,153 | | | 2,006 | | | 1,849 | |
| Incentive management fees | Incentive management fees | 87 | | | 637 | | | 649 | |
| Gross fee revenues | Gross fee revenues | 1,683 | | | 3,823 | | | 3,638 | |
| Contract investment amortization | Contract investment amortization | (132) | | | (62) | | | (58) | |
| Net fee revenues | Net fee revenues | 1,551 | | | 3,761 | | | 3,580 | |
| Owned, leased, and other revenue | Owned, leased, and other revenue | 568 | | | 1,612 | | | 1,635 | |
Cost reimbursement revenue (1) | Cost reimbursement revenue (1) | 8,452 | | | 15,599 | | | 15,543 | |
| 10,571 | | | 20,972 | | | 20,758 | |
| 23,713 | |
| OPERATING COSTS AND EXPENSES | OPERATING COSTS AND EXPENSES | |
| Owned, leased, and other-direct | 677 | | | 1,316 | | | 1,306 | |
| Owned, leased, and other - direct | |
| Owned, leased, and other - direct | |
| Owned, leased, and other - direct | |
| Depreciation, amortization, and other | Depreciation, amortization, and other | 346 | | | 341 | | | 226 | |
| General, administrative, and other | General, administrative, and other | 762 | | | 938 | | | 927 | |
| Restructuring and merger-related charges | 267 | | | 138 | | | 155 | |
| Merger-related charges and other | |
Reimbursed expenses (1) | Reimbursed expenses (1) | 8,435 | | | 16,439 | | | 15,778 | |
| 10,487 | | | 19,172 | | | 18,392 | |
| 19,849 | |
| OPERATING INCOME | OPERATING INCOME | 84 | | | 1,800 | | | 2,366 | |
| Gains and other income, net | Gains and other income, net | 9 | | | 154 | | | 194 | |
| Loss on extinguishment of debt | |
| Interest expense | Interest expense | (445) | | | (394) | | | (340) | |
| Interest income | Interest income | 27 | | | 26 | | | 22 | |
Equity in (losses) earnings (1) | (141) | | | 13 | | | 103 | |
| (LOSS) INCOME BEFORE INCOME TAXES | (466) | | | 1,599 | | | 2,345 | |
| Benefit (provision) for income taxes | 199 | | | (326) | | | (438) | |
| NET (LOSS) INCOME | $ | (267) | | | $ | 1,273 | | | $ | 1,907 | |
| (LOSS) EARNINGS PER SHARE | | | | | |
| (Loss) earnings per share - basic | $ | (0.82) | | | $ | 3.83 | | | $ | 5.45 | |
| (Loss) earnings per share - diluted | $ | (0.82) | | | $ | 3.80 | | | $ | 5.38 | |
Equity in earnings (losses) (1) | |
| INCOME BEFORE INCOME TAXES | |
| Provision for income taxes | |
| NET INCOME | |
| EARNINGS PER SHARE | |
| Earnings per share – basic | |
| Earnings per share – basic | |
| Earnings per share – basic | |
| Earnings per share – diluted | |
(1)See Note 1615 for disclosure of related party amounts.
See Notes to Consolidated Financial Statements.
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
Fiscal Years 2020, 2019,2023, 2022, and 20182021
($ in millions)
| | | | | | | | | | | | | | | | | |
| | December 31,
2020 | | December 31,
2019 | | December 31,
2018 |
| Net (loss) income | $ | (267) | | | $ | 1,273 | | | $ | 1,907 | |
| Other comprehensive (loss) income: | | | | | |
| Foreign currency translation adjustments | 229 | | | 35 | | | (391) | |
| Derivative instrument adjustments and other, net of tax | (3) | | | (5) | | | 21 | |
| | | | | |
| | | | | |
| | | | | |
| Total other comprehensive income (loss), net of tax | 226 | | | 30 | | | (370) | |
| Comprehensive (loss) income | $ | (41) | | | $ | 1,303 | | | $ | 1,537 | |
| | | | | | | | | | | | | | | | | |
| | 2023 | | 2022 | | 2021 |
| Net income | $ | 3,083 | | | $ | 2,358 | | | $ | 1,099 | |
| Other comprehensive income (loss) | | | | | |
| Foreign currency translation adjustments | 86 | | | (389) | | | (212) | |
| Other adjustments, net of tax | (4) | | | 2 | | | 5 | |
| | | | | |
| | | | | |
| | | | | |
| Total other comprehensive income (loss), net of tax | 82 | | | (387) | | | (207) | |
| Comprehensive income | $ | 3,165 | | | $ | 1,971 | | | $ | 892 | |
See Notes to Consolidated Financial Statements.
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
Fiscal Years-Ended 20202023 and 20192022
($ in millions)
| | December 31,
2020 | | December 31,
2019 |
| December 31,
2023 | | | December 31,
2023 | | December 31,
2022 |
| ASSETS | ASSETS | | | |
| Current assets | Current assets | |
| Current assets | |
| Current assets | |
| Cash and equivalents | |
| Cash and equivalents | |
| Cash and equivalents | Cash and equivalents | $ | 877 | | | $ | 225 | |
| Accounts and notes receivable, net | Accounts and notes receivable, net | 1,768 | | | 2,395 | |
| Prepaid expenses and other | Prepaid expenses and other | 172 | | | 252 | |
| Assets held for sale | 8 | | | 255 | |
| | 2,825 | | | 3,127 | |
| 3,311 | |
| 3,311 | |
| 3,311 | |
| Property and equipment, net | Property and equipment, net | 1,514 | | | 1,904 | |
| Intangible assets | Intangible assets | |
| Brands | Brands | 6,059 | | | 5,954 | |
| Brands | |
| Brands | |
| Contract acquisition costs and other | Contract acquisition costs and other | 2,930 | | | 2,687 | |
| Goodwill | Goodwill | 9,175 | | | 9,048 | |
| 18,164 | | | 17,689 | |
| 18,076 | |
| Equity method investments | Equity method investments | 422 | | | 577 | |
| Notes receivable, net | Notes receivable, net | 159 | | | 117 | |
| Deferred tax assets | Deferred tax assets | 249 | | | 154 | |
| Operating lease assets | Operating lease assets | 752 | | | 888 | |
| Other noncurrent assets | Other noncurrent assets | 616 | | | 595 | |
| $ | 24,701 | | | $ | 25,051 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| $ | |
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | |
| Current liabilities | Current liabilities | |
| Current liabilities | |
| Current liabilities | |
| Current portion of long-term debt | |
| Current portion of long-term debt | |
| Current portion of long-term debt | Current portion of long-term debt | $ | 1,173 | | | $ | 977 | |
| Accounts payable | Accounts payable | 527 | | | 720 | |
| Accrued payroll and benefits | Accrued payroll and benefits | 831 | | | 1,339 | |
| Liability for guest loyalty program | Liability for guest loyalty program | 1,769 | | | 2,258 | |
| Accrued expenses and other | Accrued expenses and other | 1,452 | | | 1,383 | |
| 5,752 | | | 6,677 | |
| 7,762 | |
| Long-term debt | Long-term debt | 9,203 | | | 9,963 | |
| Liability for guest loyalty program | Liability for guest loyalty program | 4,502 | | | 3,460 | |
| Deferred tax liabilities | Deferred tax liabilities | 83 | | | 290 | |
| Deferred revenue | Deferred revenue | 1,542 | | | 840 | |
| Operating lease liabilities | Operating lease liabilities | 823 | | | 882 | |
| Other noncurrent liabilities | Other noncurrent liabilities | 2,366 | | | 2,236 | |
| Stockholders’ equity | |
| Stockholders’ (deficit) equity | |
| Class A Common Stock | |
| Class A Common Stock | |
| Class A Common Stock | Class A Common Stock | 5 | | | 5 | |
| Additional paid-in-capital | Additional paid-in-capital | 5,851 | | | 5,800 | |
| Retained earnings | Retained earnings | 9,206 | | | 9,644 | |
| Treasury stock, at cost | Treasury stock, at cost | (14,497) | | | (14,385) | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (135) | | | (361) | |
| 430 | | | 703 | |
| $ | 24,701 | | | $ | 25,051 | |
| (682) | |
| $ | |
See Notes to Consolidated Financial Statements.
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years 2020, 2019,2023, 2022, and 20182021
($ in millions)
| | | | December 31,
2020 | | December 31,
2019 | | December 31,
2018 | | 2023 | | 2022 | | 2021 |
| OPERATING ACTIVITIES | OPERATING ACTIVITIES | | | | | |
| Net (loss) income | $ | (267) | | | $ | 1,273 | | | $ | 1,907 | |
| Net income | |
| Net income | |
| Net income | |
| Adjustments to reconcile to cash provided by operating activities: | Adjustments to reconcile to cash provided by operating activities: | |
| Depreciation, amortization, and other | |
| Depreciation, amortization, and other | |
| Depreciation, amortization, and other | Depreciation, amortization, and other | 478 | | | 403 | | | 284 | |
| Stock-based compensation | Stock-based compensation | 201 | | | 187 | | | 184 | |
| Income taxes | Income taxes | (478) | | | (200) | | | (239) | |
| Liability for guest loyalty program | Liability for guest loyalty program | 535 | | | 257 | | | 520 | |
| Contract acquisition costs | Contract acquisition costs | (142) | | | (195) | | | (152) | |
| Restructuring and merger-related charges | 200 | | | 86 | | | 16 | |
| Merger-related charges and other | |
| Working capital changes | Working capital changes | (28) | | | (273) | | | (76) | |
| Loss (gain) on asset dispositions | 3 | | | (147) | | | (194) | |
| Deferred revenue changes and other | 1,137 | | | 294 | | | 107 | |
| | Loss on extinguishment of debt | |
| Loss on extinguishment of debt | |
| Loss on extinguishment of debt | |
| Other | |
| Net cash provided by operating activities | Net cash provided by operating activities | 1,639 | | | 1,685 | | | 2,357 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | | | | |
| Capital and technology expenditures | Capital and technology expenditures | (135) | | | (653) | | | (556) | |
| Capital and technology expenditures | |
| Capital and technology expenditures | |
| Asset acquisition | |
| Dispositions | Dispositions | 260 | | | 395 | | | 479 | |
| Loan advances | Loan advances | (41) | | | (30) | | | (13) | |
| Loan collections | Loan collections | 8 | | | 51 | | | 48 | |
| Other | Other | (57) | | | (47) | | | (10) | |
| Net cash provided by (used in) investing activities | 35 | | | (284) | | | (52) | |
| Net cash used in investing activities | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | | | | |
| Commercial paper/Credit Facility, net | |
| Commercial paper/Credit Facility, net | |
| Commercial paper/Credit Facility, net | Commercial paper/Credit Facility, net | (2,290) | | | 951 | | | (129) | |
| Issuance of long-term debt | Issuance of long-term debt | 3,561 | | | 1,397 | | | 1,646 | |
| Repayment of long-term debt | Repayment of long-term debt | (1,887) | | | (835) | | | (397) | |
| Issuance of Class A Common Stock | Issuance of Class A Common Stock | — | | | 7 | | | 4 | |
| Debt extinguishment costs | |
| Dividends paid | Dividends paid | (156) | | | (612) | | | (543) | |
| Purchase of treasury stock | Purchase of treasury stock | (150) | | | (2,260) | | | (2,850) | |
| Stock-based compensation withholding taxes | Stock-based compensation withholding taxes | (103) | | | (148) | | | (105) | |
| Other | Other | (8) | | | (8) | | | — | |
| Net cash used in financing activities | Net cash used in financing activities | (1,033) | | | (1,508) | | | (2,374) | |
| INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 641 | | | (107) | | | (69) | |
| (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1) | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1) | 253 | | | 360 | | | 429 | |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1) | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1) | $ | 894 | | | $ | 253 | | | $ | 360 | |
|
(1)The 20202023 amounts include beginning restricted cash of $18 million at December 31, 2022 and ending restricted cash of $28 million at December 31, 2019, and ending restricted cash of $17 million at December 31, 2020,2023, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.
See Notes to Consolidated Financial Statements.
MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
Fiscal Years 2020, 2019,2023, 2022, and 20182021
(in millions, except per share amounts)
| Common
Shares
Outstanding | Common
Shares
Outstanding | | | Total | | Class A
Common
Stock | | Additional
Paid-in-
Capital | | Retained
Earnings | | Treasury
Stock, at
Cost | | Accumulated
Other
Comprehensive Loss | Common
Shares
Outstanding | | | Total | | Class A
Common
Stock | | Additional
Paid-in-
Capital | | Retained
Earnings | | Treasury
Stock, at
Cost | | Accumulated
Other
Comprehensive Loss |
| 359.1 | | | Balance at December 31, 2017 | $ | 3,582 | | | $ | 5 | | | $ | 5,770 | | | $ | 7,242 | | | $ | (9,418) | | | $ | (17) | |
| 324.4 | |
| | — | |
| — | |
| — | |
| — | |
| | 1.9 | |
| 1.9 | |
| 1.9 | |
| | 326.3 | |
| 326.3 | |
| 326.3 | |
| | — | — | | | Adoption of ASU 2016-01 | — | | | — | | | — | | | 4 | | | — | | | (4) | |
| — | — | | | Adoption of ASU 2016-16 | 372 | | | — | | | — | | | 372 | | | — | | | — | |
| — | — | | | Net income | 1,907 | | | — | | | — | | | 1,907 | | | — | | | — | |
| — | — | | | Other comprehensive loss | (370) | | | — | | | — | | | — | | | — | | | (370) | |
| — | — | | | Dividends ($1.56 per share) | (543) | | | — | | | — | | | (543) | | | — | | | — | |
| 1.5 | | | Stock-based compensation plans | 86 | | | — | | | 44 | | | — | | | 42 | | | — | |
| (21.5) | | | Purchase of treasury stock | (2,809) | | | — | | | — | | | — | | | (2,809) | | | — | |
| 339.1 | | | Balance at December 31, 2018 | 2,225 | | | 5 | | | 5,814 | | | 8,982 | | | (12,185) | | | (391) | |
| 1.1 | |
| (16.8) | |
| 310.6 | |
| | — | — | | | Adoption of ASU 2016-02 | 1 | | | — | | | — | | | 1 | | | — | | | — | |
| — | | | Net income | 1,273 | | | — | | | — | | | 1,273 | | | — | | | — | |
| — | | | Other comprehensive income | 30 | | | — | | | — | | | — | | | — | | | 30 | |
| — | | | Dividends ($1.85 per share) | (612) | | | — | | | — | | | (612) | | | — | | | — | |
| 2.2 | | | Stock-based compensation plans | 46 | | | — | | | (14) | | | — | | | 60 | | | — | |
| (17.3) | | | Purchase of treasury stock | (2,260) | | | — | | | — | | | — | | | (2,260) | | | — | |
| 324.0 | | | Balance at December 31, 2019 | 703 | | | 5 | | | 5,800 | | | 9,644 | | | (14,385) | | | (361) | |
| — | — | | | Adoption of ASU 2016-13 | (15) | | | — | | | — | | | (15) | | | — | | | — | |
| — | — | | | Net loss | (267) | | | — | | | — | | | (267) | | | — | | | — | |
| — | — | | | Other comprehensive income | 226 | | | — | | | — | | | — | | | — | | | 226 | |
| — | — | | | Dividends ($0.48 per share) | (156) | | | — | | | — | | | (156) | | | — | | | — | |
| 1.4 | 1.4 | | | Stock-based compensation plans | 89 | | | — | | | 51 | | | — | | | 38 | | | — | |
| (1.0) | | | Purchase of treasury stock | (150) | | | — | | | — | | | — | | | (150) | | | — | |
| 324.4 | | (1) | Balance at December 31, 2020 | $ | 430 | | | $ | 5 | | | $ | 5,851 | | | $ | 9,206 | | | $ | (14,497) | | | $ | (135) | |
| (21.5) | |
| 290.5 | |
(1)Our restated certificate of incorporation authorizes 800 million800,000,000 shares of our common stock, with a par value of $0.01 per share and 10 million10,000,000 shares of preferred stock, without par value. At year-end 2020,2023, we had 324.4 million290,539,975 of these authorized shares of our common stock and no preferred stock outstanding.
See Notes to Consolidated Financial Statements.
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. and subsidiaries (referred to in this report as “we,” “us,” “Marriott,” or the “Company”). In order to make this report easier to read, we also refer throughout to (1) our Consolidated Financial Statements as our “Financial Statements,” (2) our Consolidated Statements of (Loss) Income as our “Income Statements,” (3) our Consolidated Balance Sheets as our “Balance Sheets,” (4) our Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (5) our properties, brands, or markets in the United States and Canada as “U.S. & Canada,” and (6) our properties, brands, or markets in our Caribbean and Latin America, region, Europe, Middle East and Africa, segment,Greater China, and Asia Pacific segmentexcluding China regions, as “International.” In addition, references throughout to numbered “Notes” refer to these Notes to Consolidated Financial Statements, unless otherwise stated.
Preparation of financial statements that conform with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. The uncertainty created by the coronavirus and efforts to contain it (“COVID-19”) has made such estimates more difficult and subjective. Accordingly, ultimate results could differ from those estimates.
The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position at fiscal year-end 20202023 and fiscal year-end 20192022 and the results of our operations and cash flows for fiscal years 2020, 2019,2023, 2022, and 2018.2021. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.
The accompanying Financial Statements also reflect our adoption of Accounting Standards Update (“ASU”) 2016-13. See the “New Accounting Standards Adopted” caption in Note 2 for additional information.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Base Management and Incentive Management Fees: For our managed hotels,properties, we have performance obligations to provide hotel management services and a license to our intellectual property for the use of our brand names. As compensation for such services, we are generally entitled to receive base fees, which are a percentage of the revenues of hotels,properties, and incentivesincentive management fees, which are generally based on a measure of hotel profitability. Both the base and incentive management fees are variable consideration, as the transaction price is based on a percentage of revenue or profit, as defined in each contract. We recognize base management fees on a monthly basis over the term of the agreement as those amounts become payable. We recognize incentive management fees on a monthly basis over the term of the agreement based on each property’s financial results, as long as we do not expect a significant reversal due to projected future hotel performance or cash flows in future periods.
Franchise Fee and Royalty Fee Revenue: For our franchised hotels,properties, we have a performance obligation to provide franchisees and operators a license to our intellectual property for use of certain of our brand names. As compensation for such services, we are typically entitled to initial application fees and ongoing royalty fees. Our ongoing royalty fees represent variable consideration, as the transaction price is based on a percentage of certain revenues of the hotels,properties, as defined in each contract. We recognize royalty fees on a monthly basis over the term of the agreement as those amounts become payable. Initial application and relicensing fees are fixed consideration payable upon submission of a franchise application or renewal and are recognized on a straight-line basis over the initial or renewal term of the franchise agreements.
Owned and Leased Hotel Revenue: At our owned and leased hotels, we have performance obligations to provide accommodations and other ancillary services to hotel guests. As compensation for such goods and services, we are typically entitled to a fixed nightly fee for an agreed upon period and additional fixed fees for any ancillary services purchased. These fees are generally payable at the time the hotel guest checks out of the hotel. We generally satisfy the performance obligations over time, and we recognize the revenue from room sales and from other ancillary guest services on a daily basis, as the rooms are occupied and we have rendered the services.
Cost Reimbursements: Under our management and franchise agreements, we are entitled to be reimbursed for certain costs we incur on behalf of the managed, franchised, and licensed properties, with no added mark-up. These costs primarily consist of payroll and related expenses at managed properties where we are the employer of the employees at the properties and
include certain operational and administrative costs as provided for in our contracts with the owners. We are entitled to reimbursement in the period we incur the related reimbursable costs, which we recognize within the “Cost reimbursement revenue” caption of our Income Statements.
Under our management and franchise agreements, hotel owners and franchisees participate in certain centralized programs and services, such as marketing, sales, reservations, and insurance programs. We operate these programs and services for the benefit of our hotel owners. We do not operate these programs and services to generate a profit over the long term, and accordingly, when we recover the costs that we incur for these programs and services from our hotel owners, we do not seek a mark-up. The amounts we charge for these programs and services are generally a combination of fixed fees and variable fees based on sales or other metrics and are payable on a monthly basis. We generally recognize revenue within the “Cost reimbursement revenue” caption of our Income Statements when the amounts may be billed to hotel owners, and we recognize expenses within the “Reimbursed expenses” caption as they are incurred. This pattern of recognition results in timing differences between the costs incurred for centralized programs and services and the related reimbursement from hotel owners in our operating and net income. Over the long term, these programs and services are not designed to impact our economics, either positively or negatively.In addition, we present in the “Reimbursed expenses”“Reimbursed expenses” caption of our Income Statements spending funded by the proceeds ($664 million, $425 million after-tax) from the 2017 sale of our interest in Avendra LLC, which we committed would be used for the benefit of hotels in our system. Such spending totaled $62$161 million ($46120 million after-tax) in 2020, $1182023, $69 million ($8752 million after-tax) in 2019,2022, and $115$56 million ($8542 million after-tax) in 2018.2021.
Other Revenue: Includes Global Design fees, which we describe below, termination fees, and other property and brand revenues. We generally recognize termination fees when collection is probable and other revenue as services are rendered. Amounts received in advance are deferred as liabilities.
We provide certain hotel design and construction review quality assurance (“Global Design”) services to our managed and franchised hotel owners, generally during the period prior to a hotel’s opening or during the period a hotel is converting to a Marriott brand (the “pre-opening period”). As compensation for such services, we may be entitled to receive a one-time fixed fee that is payable during the pre-opening period of the hotel. As these services are not a distinct performance obligation, we recognize the fees on a straight-line basis over the initial term of the management or franchise agreement within the “Owned, leased, and other revenue” caption of our Income Statements.
Practical Expedients and Exemptions: We do not disclose the amount of variable consideration that we expect to recognize in future periods in the following circumstances:
(1) if we recognize the revenue based on the amount invoiced or services performed;
(2) for sales-based or usage-based royalty promised in exchange for a license of intellectual property; or
(3) if the consideration is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of the consideration relate specifically to our efforts to transfer, or to a specific outcome from transferring the service.
We are required to collect certain taxes and fees from customers on behalf of governmental agencies and remit these to the applicable governmental agencies on a periodic basis. We do not include these taxes in determining the transaction price.
Loyalty Program: Loyalty Program members earn points based on the money they spend at our hotels;properties; the exchange of timeshare ownership interests; purchases of timeshare interval, fractional ownership, and residential products; and through participation in travel experiences and affiliated partners’ programs, such as those offered by credit card, car rental, airline, and other companies. Members can redeem points which we track on their behalf, for stays at most of our hotels,properties, airline tickets, airline frequent flyer program miles, rental cars, merchandise, and a variety of other awards. Points cannot be redeemed for cash.
Under our Loyalty Program, we have a performance obligation to provide or arrange for the provision of goods or services for free or at a discount to Loyalty Program members in exchange for the redemption of points earned from past activities. We operate our Loyalty Program as a cross-brand marketing program to participating properties. Our management and franchise agreements require that properties reimburse us for a portion of the costs of operating the Loyalty Program, including costs for marketing, promotion, communication with, and performing member services for Loyalty Program members, with no added mark-up.mark-up, including costs related to the following activities, which we expense as incurred in our “Reimbursed expenses” caption of our Income Statements: marketing, promotion, and communications and services provided to Loyalty Program members. We generally receive monthly cash contributions on a monthly basis from managed, franchised, owned, and leased hotelsproperties based on a portion of qualified spend by Loyalty Program members (when the points are issued)earned). We recognize these contributions into revenue as we provide the related service (when the points are redeemed). The amount of revenue we recognize upon point redemption is based on a blend of historical funding rates and is impacted by our estimate of the “breakage” for points that members will never redeem. We estimate breakage based on our historical experience and expectations of future member behavior. We recognize revenue net of the redemption cost within our “Cost reimbursement
revenue” caption on our Income Statements, as our performance obligation is to facilitate the transaction between the Loyalty Program member and the managed or franchised property or program partner. Our redemption cost, which is generally based on redemption rates that can increase in periods in which occupancy at the property exceeds a certain threshold, could be higher or lower than our revenue recognized in any given period. We recognize all other Loyalty Program costs as incurred in our “Reimbursed expenses” caption.
We have multi-year agreements for our co-brandco-branded credit cards associated with our Loyalty Program. Under these agreements, we have performance obligations to provide a license to the intellectual property associated with our brands and marketing lists (“Licensed IP”) to the financial institutions that issue the credit cards, to arrange for the redemption of Loyalty Program points as discussed in the preceding paragraph, and to arrange for the redemption of free night certificates and gift cards provided to cardholders. We receive fees from these agreements, including fixed amounts that are primarily payable at contract inception, and variable amounts that are paid to us monthly over the term of the agreements, generally based on: (1) the number of free night certificates issued andor redeemed; (2) the number of Loyalty Program points purchased; and (3) the volume of cardholder spend.spend; and (4) the number of gift cards issued. We allocate those fees among the performance obligations, including the Licensed IP, our Loyalty Program points, and free night certificates, and gift cards provided to cardholders based on their estimated standalone selling prices. The estimation of the standalone selling prices requires significant judgments based upon generally accepted valuation methodologies regarding the value of our Licensed IP, the amount of funding we will receive, and the number of Loyalty Program points, and free night certificates, weand gift cards cardholders will issue over the term of the agreements.ultimately redeem. We base our estimates of these amounts on our historical experience and expectation of future cardholder behavior. We recognize the portion of the Licensed IP revenue that meets the sales-based royalty criteria as the credit cards are used and the remaining portion of the Licensed IP revenue on a straight-line basis over the contract term. In our Income Statements, we primarily recognize Licensed IP revenue in the “Franchise fees” caption, and we recognize a portion in the “Cost reimbursement revenue” caption. We recognize the revenue related to the Loyalty Program points as discussed in the preceding paragraph. We recognize the revenue related to the free night certificates and gift cards when the related service is provided. We recognize revenue net of the redemption cost, as our performance obligation is to facilitate the transaction between the Loyalty Program member and the managed or franchised property.
Contract Balances: We generally receive payments from customers as we satisfy our performance obligations. We record a receivable when we have an unconditional right to receive payment and only the passage of time is required before payment is due. We record deferred revenue when we receive payment, or have the unconditional right to receive payment, in advance of the satisfaction of our performance obligations related to franchise application and relicensing fees, Global Design fees, credit card branding license fees, and our Loyalty Program.
CurrentOur current and noncurrent deferred revenue increaseddecreased by $907$108 million, to $1,867$1,223 million at December 31, 20202023, from $960$1,331 million at December 31, 2019,2022, primarily as a result of amendments to the existing agreements for our U.S.-issued co-brand credit cards associated with our Loyalty Program, which we signed in May 2020. These amendments provided the Company with $920$274 million of cashrevenue recognized in 2023 that was deferred as of December 31, 2022, as well as the reclassification from the prepayment of certain future revenues, the early payment of a previously committed signing bonus, and the pre-purchase of Marriott Bonvoy points and other consideration. We recorded the amount of cash received primarily in the deferred revenue caption, and the remainder into the liability for guest loyalty program, captions, onwhich we discuss below. The decrease was partially offset by revenue deferred in 2023 related to our Balance Sheet.gift cards, co-branded credit cards, franchise application and relicensing fees, and certain centralized programs and services fees.
Our current and noncurrent Loyalty Program liability for guest loyalty program increased by $553$412 million, to $6,271$7,006 million at December 31, 2020,2023, from $5,718$6,594 million at December 31, 2019,2022, primarily reflecting an increase in points earned by members. This includes a $112 million reclassification from deferred revenue to the liability for guest loyalty program primarily due to points that were earned during the period by members using our U.S.-issued co-branded credit cards, which were prepaid by the financial institutions in 2020. The increase was partially offset by $1,118$2,798 million of revenue recognized in 2020,2023, that was deferred as of December 31, 2019. The current portion of our Loyalty Program liability decreased compared to December 31, 2019, due to lower estimated redemptions in the short-term as a result of COVID-19.2022. At each reporting period, we evaluate the estimates used in the recognition of Loyalty Program revenues, including estimates of the breakage of points that members will never redeem and the amount of funding we expect to receive over the life of the agreements with various third parties. In 2020,2023, the updated estimates resulted in a net decrease in deferred revenue, and a corresponding neincreaset increase in revthe liability for guest loyalty programenue of approximately $47$148 million.
Costs Incurred to Obtain and Fulfill Contracts with Customers
We incur certain costs to obtain and fulfill contracts with customers, which we capitalize and amortize on a straight-line basis over the initial, non-cancellable term of the contract. We classify incremental costs of obtaining a contract with a customer in the “Contract acquisition costs and other” caption of our Balance Sheets, the related amortization in the “Contract investment amortization” caption of our Income Statements, and the cash flow impact in the “Contract acquisition costs” caption of our Statements of Cash Flows. We assess the assets for impairment when events or changes in circumstances indicate that we may not be able to recover the carrying value.amount. We recognize an impairment loss for the amount by which the carrying valueamount exceeds the expected net future cash flows. We classify certain direct costs to fulfill a contract with a customer in the “Other noncurrent assets” and “Prepaid expenses and other” captions of our Balance Sheets, and the related amortization in the “Owned, leased, and other - direct expenses”direct” caption of our Income Statements. We had capitalized costs to fulfill contracts with customers of $366$402 million at December 31, 20202023 and $351$379 million at December 31, 2019.2022. See Note 1110 for information on capitalized costs incurred to obtain contracts with customers.
Real Estate Sales
We recognize a gain or loss on real estate transactions when control of the asset transfers to the buyer, generally at the time the sale closes. In sales transactions where we retain a management contract, the terms and conditions of the management
contract are generally comparable to the terms and conditions of the management contracts obtained directly with third-party owners in competitive processes.
Retirement Savings Plan
We contribute to tax-qualified retirement plans for the benefit of U.S. employees who meet certain eligibility requirements and choose to participate in the plans. Participating employees specify the percentage or amount of salary they wish to contribute from their compensation, and the Company typically makes discretionary and certain other matching or supplemental contributions. We recognized compensation costs from Company contributions of $75$215 million in 2020, $1282023, $137 million in 2019,2022, and $224$80 million in 2018.2021.
Non-U.S. Operations
The U.S. dollar is the functional currency of our consolidated and unconsolidated entities operating in the U.S. The functional currency of our consolidated and unconsolidated entities operating outside of the U.S. is generally the principal currency of the economic environment in which the entity primarily generates and expends cash. We translate the financial statements of consolidated entities whose functional currency is not the U.S. dollar into U.S. dollars, and we do the same, as needed, for unconsolidated entities whose functional currency is not the U.S. dollar. We translate assets and liabilities at the exchange rate in effect as of the financial statement date and translate income statement accounts using the weighted average exchange rate for the period. We include translation adjustments from currency exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature as a separate component of stockholders’ equity. We report gains and losses from currency exchange rate changes for intercompany receivables and payables that are not of a long-term investment nature, as well as for third-party transactions, currently in operating costs and expenses.
Stock-Based Compensation
Our stock-based compensation awards primarily consist of restricted stock units (“RSUs”). We measure compensation costs for our stock-based payment transactions at fair value based on the closingaverage of the high and low stock price on the grant date (discounted for the lack of marketability and dividends), and we recognize those costs in our Financial Statements over the vesting period during which the employee provides service in exchange for the award.
Advertising Costs
We expense costs to produce advertising as they are incurred and to communicate advertising as the communication occurs and record such amounts in reimbursed expensesour “Reimbursed expenses” caption of our Income Statements to the extent undertaken on behalf of our owners and franchisees. We recognized advertising costs of $276$794 million in 2020, $8512023, $635 million in 2019,2022, and $660$470 million in 2018.2021.
Income Taxes
We record the amounts of taxes payable or refundable for the current year, as well as deferred tax liabilities and assets for the future tax consequences of events we have recognized in our Financial Statements or tax returns, using judgment in assessing future profitability and the likely future tax consequences of those events. We base our estimates of deferred tax assets and liabilities on current tax laws, rates and interpretations, and, in certain cases, business plans and other expectations about future outcomes. We develop our estimates of future profitability based on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We account for U.S. tax on Global Intangible Low-Taxed Income in the period incurred.
We generally recognize the effect of the tax law changes in the period of enactment. Changes in existing tax laws and rates, their related interpretations, and the uncertainty generated by the current economic environment may affect the amounts of our deferred tax liabilities or the valuations of our deferred tax assets over time. Our accounting for deferred tax consequences represents management’s best estimate of future events that can be appropriately reflected in the accounting estimates.
For tax positions we have taken or expect to take in a tax return, we apply a more likely than not threshold (that is, a likelihood of more than 50 percent), under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, to continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold. We recognize accrued interest and penalties for our unrecognized tax benefits as a component of tax expense. See Note 76 for further information.
Cash and Equivalents
We consider all highly liquid investments with an initial maturity of three months or less at date of purchase to be cash equivalents.
Accounts Receivable
Our accounts receivable primarily consist of amounts due from hotel owners with whom we have management and franchise agreements and include reimbursements of costs we incurred on behalf of managed and franchised properties. We record an allowance for credit losses measured over the contractual life of the instrument based on an assessment of historical collection activity and current and forecasted future economic conditions by region. Our allowance for credit losses was $197 million at December 31, 2023 and $191 million at December 31, 2022. The increase during 2023 was primarily due to our provision for credit losses, partially offset by write-offs of amounts deemed uncollectible. Our provision for credit losses totaled $29 million in 2023, $27 million in 2022, and $22 million in 2021.
Assets Held for Sale
We consider properties to be assets held for sale when (1) management commits to a plan to sell the property; (2) it is unlikely that the disposal plan will be significantly modified or discontinued; (3) the property is available for immediate sale in its present condition; (4) actions required to complete the sale of the property have been initiated; (5) sale of the property is probable and we expect the completed sale will occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its carrying valueamount or its estimated fair value, less estimated costs to sell, and we cease depreciation.
Goodwill
We test goodwill for potential impairment at least annually in the fourth quarter, or more frequently if an event or other circumstance indicates that we may not be able to recover the carrying amount of the net assets of the reporting unit. In evaluating goodwill for impairment, we may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Factors we consider when making this determination include, but are not limited to, assessing general economic conditions, hospitality industry trends, and overall financial performance of the reporting unit. If we bypass the qualitative assessment, or if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value,amount, then we perform a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.
We calculate the estimated fair value of a reporting unit using a combination of the income and market approaches. For the income approach, we use internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. For the market approach, we use internal analyses based primarily on market comparables. We base these assumptions on our historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections, and our expectations.
We have had no goodwill impairment charges for the last three fiscal years.
Intangibles and Long-Lived Assets
We assess indefinite-lived intangible assets for continued indefinite use and for potential impairment annually, or more frequently if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. Like goodwill, we may first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible is less than its carrying amount. If the carrying valueamount of the asset exceeds the fair value, we recognize an impairment loss in the amount of that excess.
We test definite-lived intangibles and long-lived asset groups for recoverability when changes in circumstances indicate that we may not be able to recover the carrying value;amount; for example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, or significant negative industry or economic trends. We also test recoverability when management has committed to a plan to sell or otherwise dispose of an asset group and we expect to complete the plan within a year. We evaluate recoverability of an asset group by comparing its carrying value,amount, including right-of-use assets, to the future net undiscounted cash flows that we expect the asset group will generate. If the comparison indicates that we will not be able to recover the carrying valueamount of an asset group, we recognize an impairment loss for the amount by which the carrying valueamount exceeds the estimated fair value. When we recognize an
impairment loss for assets to be held and used, we depreciate the adjusted carrying amount of those assets over their remaining useful life.
We calculate the estimated fair value of an intangible asset or asset group using the income approach or the market approach. We utilize the same assumptions and methodology for the income approach that we describe in the “Goodwill” caption.“Goodwill” caption of our Balance Sheets. For the market approach, we use internal analyses based primarily on market comparables and assumptions about market capitalization rates, growth rates, and inflation. See Note 9 and Note 12 for additional information.
Investments
We hold equity interests in ventures established to develop or acquire and own hotel properties or that otherwise support our hospitality operations. We account for these investments as either an equity method investment, a financial asset, or a controlled subsidiary. We apply the equity method of accounting if we have significant influence over the entity, typically when we hold 20 percent or more of the voting common stock (or equivalent) of an investee but do not have a controlling financial interest. In certain circumstances, such as with investments in limited liability companies or limited partnerships, we apply the equity method of accounting when we own as little as three to five percent. We account for financial assets at fair value if it is readily determinable, or using the fair value alternative method, whereby investments are measured at cost less impairment, adjusted for observable price changes. We consolidate entities that we control.
When we acquire an investment that qualifies for the equity method of accounting, we determine the acquisition date fair value of the identifiable assets and liabilities. If our carrying amount exceeds our proportional share in the equity of the investee, we amortize the difference on a straight-line basis over the underlying assets’ estimated useful lives when calculating equity method earnings attributable to us, excluding the difference attributable to land, which we do not amortize.
We evaluate an investment for impairment when circumstances indicate that we may not be able to recover the carrying value.amount. When evaluating our ventures, we consider loan defaults, significant underperformance relative to historical or projected operating performance, or significant negative industry or economic trends. Additionally, a venture’s commitment to a plan to sell some or all of its assets could cause us to evaluate the recoverability of the venture’s individual long-lived assets and possibly the venture itself. We impair investments we account for using the equity method of accounting when we determine that there has been an “other-than-temporary” decline in the venture’s estimated fair value compared to its carrying value.amount. We perform qualitative assessments for investments we account for using the fair value alternative method and we record any associated impairment when the fair value is less than the carrying value.amount.
Under the accounting guidance for the consolidation of variable interest entities, we analyze our variable interests, including equity investments, loans, and guarantees, to determine if an entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews. We base our quantitative analysis on the forecasted cash flows of the entity, and our qualitative analysis on our review of the design of the entity, its organizational structure including decision-making ability, and relevant financial agreements. We also use our qualitative analysis to determine if we must consolidate a variable interest entity as its primary beneficiary.
Fair Value Measurements
We have various financial instruments we must measure at fair value on a recurring basis, including certain marketable securities and derivatives. See Note 1312 for further information. We also apply the provisions of fair value measurement to various nonrecurring measurements for our financial and nonfinancial assets and liabilities.
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e.(e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 includesinputs include unobservable inputs that reflect our assumptions about what factors market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.
Derivative Instruments
We record derivatives at fair value. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we reflect the change in fair value of the derivative instrument in our Financial Statements. A derivative qualifies for hedge accounting if, at inception, we expect the derivative will be highly effective in offsetting the underlying hedged cash flows or fair value and we fulfill the hedge documentation standards at the time we enter into the derivative contract. We designate a hedge as a cash flow hedge, a fair value hedge, or a hedge of the net investment in non-U.S. operations based on the exposure we are hedging. For the effective portion of qualifying cash flow hedges, we record changes in fair value in accumulated other comprehensive income (“AOCI”). We release the derivative’s gain or loss from AOCI to match the timing of the underlying hedged items’ effect on earnings. The change in fair value of qualifying fair value hedges as well as changes in fair value of the underlying hedged items to the hedged risks are recorded concurrently in earnings.
We review the effectiveness of our hedging instruments quarterly and discontinue hedge accounting for any hedge that we no longer consider to be highly effective. We recognize changes in fair value for derivatives not designated as hedges or those not qualifying for hedge accounting in current period earnings. Upon termination of cash flow hedges, we release gains and losses from AOCI based on the timing of the underlying cash flows or revenue recognized, unless the termination results from the failure of the intended transaction to occur in the expected time frame. Such untimely transactions require us to immediately recognize in earnings the gains and/or losses that we previously recorded in AOCI.
Changes in interest rates and currency exchange rates and equity securities expose us to market risk. We manage our exposure to these risks by monitoring available financing alternatives, as well as through development and application of credit granting policies. We also use derivative instruments as part of our overall strategy to manage our exposure to market risks. As a matter of policy, we only enter into transactions that we believe will be highly effective at offsetting the underlying risk, and we do not use derivatives for trading or speculative purposes.
Loan Loss Reserves
We may make senior, mezzanine and other loans to owners of hotels that we operate or franchise, generally to facilitate the development or renovation of a hotel and sometimes to facilitate brand programs or initiatives. We expect the owners to repay the loans in accordance with the loan agreements, or earlier as the performance of the hotels mature and capital markets permit. We use metrics such as loan-to-value ratios and debt service coverage, and other information about collateral and from third-party rating agencies to assess the credit quality of the loan receivable, both upon entering into the loan agreement and on an ongoing basis as applicable.
At inception and throughout the term of the loan agreement, we individually assess loans for impairment. We consider current and forecasted future economic conditions in addition to our historical experience. We use internally generated cash flow projections to determine the likelihood that the loans will be repaid under the terms of the loan agreements. To measure impairment, weWe calculate the present value of expected future cash flows discounted at the loan’s original effective interest rate or the estimated fair value of the collateral. If the present value or the estimated collateral isare less than the carrying value of the loan receivable, we establish a specific impairment reserve for the difference.
Leases
We determine if an arrangement is a lease or contains a lease at the inception of the contract. We evaluate leases for classification as operating or financing upon lease commencement. Our leases generally contain fixed and variable components. The variable components of our leases are primarily based on operating performance of the leased property. Our lease agreements may also include non-lease components, such as common area maintenance, which we combine with the lease component to account for both as a single lease component.
Lease liabilities, which represent our obligation to make lease payments arising from the lease, and corresponding right-of-use assets, which represent our right to use an underlying asset for the lease term, are recognized at the commencement date of the lease based on the present value of fixed future payments over the lease term. We calculate the present value of future payments using the discount rate implicit in the lease, if available, or our incremental borrowing rate.
For operating leases, lease expense relating to fixed payments is recognized on a straight-line basis over the lease term and lease expense relating to variable payments is expensed as incurred. For finance leases, the amortization of the asset is recognized over the shorter of the lease term or useful life of the underlying asset.
Guarantees
We measure and record our liability for the fair value of a guarantee on a nonrecurring basis, that is when we issue or modify a guarantee, using Level 3 internally developed inputs, as described above in this footnote under the caption ““Fair Value
Measurements.” We base our calculation of the estimated fair value of a guarantee on the income approach or the market approach, depending on the type of guarantee. For the income approach, we use internally developed discounted cash flow and Monte Carlo simulation models that include the following assumptions, among others: projections of revenues and expenses and related cash flows based on assumed growth rates and demand trends; historical volatility of projected performance; the guaranteed obligations; and applicable discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. For the market approach, we use internal analyses based primarily on market comparable data and our assumptions about market capitalization rates, credit spreads, growth rates, and inflation.
The offsetting entry for the guarantee liability depends on the circumstances in which the guarantee was issued. Funding under the guarantee reduces the recorded liability. In most cases, when we do not forecast any funding, we amortize the liability into income on a straight-line basis over the remaining term of the guarantee. On a quarterly basis, we evaluate all material estimated liabilities based on the operating results and the terms of the guarantee. If we conclude that it is probable that we will be required to fund a greater amount than previously estimated, we record a loss except to the extent that the applicable contracts provide that the advance can be recovered as a loan.
Self-Insurance Programs
We self-insure for certain levels of liability, workers’ compensation, property insurance, and employee medical coverage. We accrue estimated costs of these self-insurance programs at the present value of projected settlements for known and incurred but not reported claims. We use a discount rate of two4.00 percent, based upon market rates, to determine the present value of the projected settlements, which we consider to be reasonable given our history of settled claims, including payment patterns and the fixed nature of the individual settlements. We classify the current portion of our self-insurance reserve in the “Accrued expenses and other” caption and the noncurrent portion in the “Other noncurrent liabilities” caption of our Balance Sheets. The current portion of our self-insurance reserve was $121$172 million in 2020at December 31, 2023 and $166$130 million in 2019.at December 31, 2022. The noncurrent portion of our self-insurance reserve was $341$387 million in 2020at December 31, 2023 and $323$287 million in 2019.at December 31, 2022.
Legal Contingencies
We are subject to various legal proceedings and claims, the outcomes of which are uncertain. We record an accrual for legal contingencies when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the loss. In making such determinations we evaluate, among other things, the probability of an unfavorable outcome and, when we believe it probable that a liability has been incurred, our ability to make a reasonable estimate of the loss. We review these accruals each reporting period and make revisions based on changes in facts and circumstances.
Business Combinations
We allocate the purchase price of an acquisition to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. We recognize as goodwill the amount by which the purchase price of an acquired entity exceeds the net of the fair values assigned to the assets acquired and liabilities assumed. In determining the fair values of assets acquired and liabilities assumed, we use various recognized valuation methods including the income and market approaches. Further, we make assumptions within certain valuation techniques, including discount rates, royalty rates, and the amount and timing of future cash flows. We record the net assets and results of operations of an acquired entity in our Financial Statements from the acquisition date. We initially perform these valuations based upon preliminary estimates and assumptions by management or independent valuation specialists under our supervision, where appropriate, and make revisions as estimates and assumptions are finalized. We expense acquisition-related costs as we incur them.
Asset Acquisitions
Acquisitions that do not meet the definition of a business are accounted for as asset acquisitions. We allocate the cost of the acquisition, including direct and incremental transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis. Goodwill is not recognized in an asset acquisition. See Note 4 for additional information.
New Accounting Standards Adopted
ASU No. 2016-13 - “Financial Instruments-Credit Losses” (Topic 326). ASU 2016-13 requires the use of an impairment methodology that reflects an estimate of expected credit losses, measured over the contractual life of an instrument, based on information about past events, current conditions, and forecasts of future economic conditions. We adopted ASU 2016-13 in the 2020 first quarter using the modified retrospective transition method. Upon adoption, we increased our allowance for credit losses in the “Accounts and notes receivable, net” caption of our Balance Sheets by $19 million, from $82 million at December 31, 2019 to $101 million at January 1, 2020. We also recorded a $4 million decrease in the “Deferred tax liabilities” caption of our Balance Sheets and a $15 million cumulative-effect adjustment to retained earnings on our Balance Sheets.
Additionally, we recorded a provision for credit losses of $136 million in 2020, primarily due to the negative economic impact caused by COVID-19 and our estimate of future economic conditions. The allowance for credit losses was $207 million at December 31, 2020.
NOTE 3. RESTRUCTURING CHARGESACQUISITION
Beginning inOn May 1, 2023, we completed the 2020 second quarter, we initiated several regional restructuring plans to achieve cost savings in response to the decline in lodging demand caused by COVID-19. In 2020, we recorded $366 million of restructuring charges for above-property, property-level, and owned and leased properties employee termination benefits, of which we present $56 million in the “Restructuring and merger-related charges” caption and $310 million in the “Reimbursed expenses” caption of our Income Statements. Our U.S. & Canada segment recorded $255 millionacquisition of the total restructuring chargesCity Express brand portfolio from Hoteles City Express, S.A.B. de C.V. for $100 million. As a result of the transaction, we added 149 properties located in 2020.
In 2020, we recorded $117 million of global above-property restructuring charges, of which we present $44 million in the “RestructuringMexico, Costa Rica, Colombia, and merger-related charges” caption and $73 million in the “Reimbursed expenses” caption of our Income Statements. We have substantially completed the programs relatingChile to our above-property organizationfranchise portfolio. We accounted for the transaction as an asset acquisition and allocated the cost of year-end 2020.
In 2020, we recorded $249the acquisition, including direct and incremental transaction costs, to an indefinite-lived brand asset of approximately $85 million and franchise contract assets, with a weighted-average term of property-level and owned and leased properties restructuring charges, of which we present $12 million in the “Restructuring and merger-related charges” caption and $237 million in the “Reimbursed expenses” caption of our Income Statements. We anticipate additional property-level and owned and leased properties restructuring charges in future quarters.
The following table presents our restructuring reserve activity during the period:
| | | | | | | | | |
($ in millions) | Employee termination benefits | | | | |
Balance at December 31, 2019 | $ | — | | | | | |
Charges | 366 | | | | | |
Cash payments | (215) | | | | | |
Other | (8) | | | | | |
Balance at December 31, 2020, classified in “Accrued expenses and other” | $ | 143 | | | | | |
NOTE 4. DISPOSITIONS AND ACQUISITIONS
Dispositions
In 2020, we sold one U.S. & Canada property for $26820 years, totaling $21 million. We continue to operate the hotel under a long-term management agreement.
In 2019, we sold two U.S. & Canada properties and recognized total gains of $134 million in the “Gains and other income, net” caption of our Income Statements. We continue to operate the hotels under long-term management agreements.
In 2018, we sold two U.S. & Canada properties, two Asia Pacific properties, and two Caribbean and Latin America properties and recognized total gains of $132 million in the “Gains and other income, net” caption of our Income Statements. We continue to operate all but one of these hotels under long-term management agreements.
In 2018, we sold our interest in three equity method investments, whose assets included a plot of land in Italy, a Caribbean and Latin America property, and an Asia Pacific property, and we recognized total gains of $42 million in the “Gains and other income, net” caption of our Income Statements. Also, in 2018, third-party investees sold a Caribbean and Latin America property and a U.S. & Canada property, and we recorded our share of the gains of $55 million and $10 million, respectively, in the “Equity in (losses) earnings” caption of our Income Statements.
Acquisitions
In 2019, we completed the acquisition of Elegant Hotels Group plc (“Elegant”) for $128 million in cash and assumed Elegant’s net debt outstanding of $63 million, which we subsequently repaid in January 2020. As a result of the transaction, we added seven hotels and a beachfront restaurant on the island of Barbados to our Caribbean and Latin America owned and leased portfolio.
In 2019, we purchased a U.S. & Canada property for $206 million.
In 2019, we accelerated our option to acquire our partner’s remaining interests in two joint ventures. As a result of the transaction, we recognized an indefinite-lived brand asset for AC Hotels by Marriott of $156 million and management and franchise contract assets, with a weighted-average term of 24 years totaling $34 million.
NOTE 5.4. EARNINGS PER SHARE
The table below illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share, the latter of which uses the treasury stock method in order to calculate the dilutive effect of the Company’s potential common stock:
| | | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | 2020 | | 2019 | | 2018 |
| Computation of Basic (Loss) Earnings Per Share | | | | | |
| Net (loss) income | $ | (267) | | | $ | 1,273 | | | $ | 1,907 | |
| Shares for basic (loss) earnings per share | 325.8 | | | 332.7 | | | 350.1 | |
| Basic (loss) earnings per share | $ | (0.82) | | | $ | 3.83 | | | $ | 5.45 | |
| Computation of Diluted (Loss) Earnings Per Share | | | | | |
| Net (loss) income | $ | (267) | | | $ | 1,273 | | | $ | 1,907 | |
| Shares for basic earnings per share | 325.8 | | | 332.7 | | | 350.1 | |
| Effect of dilutive securities | | | | | |
Stock-based compensation(1) | — | | | 2.8 | | | 4.1 | |
| Shares for diluted (loss) earnings per share | 325.8 | | | 335.5 | | | 354.2 | |
| Diluted (loss) earnings per share | $ | (0.82) | | | $ | 3.80 | | | $ | 5.38 | |
(1) For the calculation of diluted loss per share for year-end 2020, we excluded share-based compensation securities of 1.4 million because the effect was anti-dilutive. | | | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | 2023 | | 2022 | | 2021 |
| Computation of Basic Earnings Per Share | | | | | |
| Net income | $ | 3,083 | | | $ | 2,358 | | | $ | 1,099 | |
| Shares for basic earnings per share | 301.5 | | | 324.4 | | | 327.2 | |
| Basic earnings per share | $ | 10.23 | | | $ | 7.27 | | | $ | 3.36 | |
| Computation of Diluted Earnings Per Share | | | | | |
| Net income | $ | 3,083 | | | $ | 2,358 | | | $ | 1,099 | |
| Shares for basic earnings per share | 301.5 | | | 324.4 | | | 327.2 | |
| Effect of dilutive securities | | | | | |
| Stock-based compensation | 1.4 | | | 1.4 | | | 2.1 | |
| Shares for diluted earnings per share | 302.9 | | | 325.8 | | | 329.3 | |
| Diluted earnings per share | $ | 10.18 | | | $ | 7.24 | | | $ | 3.34 | |
NOTE 6.5. STOCK-BASED COMPENSATION
RSUs and PSUs
We granted RSUs in the 2020 first quarter2023 to certain officers and key employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted performance-based RSUs (“PSUs”) in the 2020 first quarter2023 to certain executive officers,executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for gross room openings, active Marriott Bonvoy loyalty member growth,2025 adjusted EBITDA performance and adjusted operating income growthrelative total stockholder return over or at the end of, a three-year2023 to 2025 performance period. Additionally, in the 2020 third quarter, as part of our effort to encourage associate retention in response to the severe impact of COVID-19 on our industry and Company, we accelerated the issuance of RSU awards to certain officers and key employees that ordinarily would have been made in the 2021 first quarter, and those units generally vest over four years and five months, with one quarter of the units vesting one year and five months after the grant date and the remaining units vesting in equal annual installments thereafter. We did not accelerate the issuance of awards for our most senior executives.
We had deferred compensation costs for unvested awards for RSUs, including PSUs, of approximately $301$171 million at year-end 20202023 and $176$179 million at year-end 2019.2022. The weighted average remaining term for RSUs outstanding at year-end 20202023 was 2.52.2 years.
The following table provides additional information on RSUs, including PSUs, for the last three fiscal years:
| | 2020 | | 2019 | | 2018 |
| 2023 | | | 2023 | | 2022 | | 2021 |
| Stock-based compensation expense (in millions) | Stock-based compensation expense (in millions) | $ | 188 | | | $ | 177 | | | $ | 170 | |
| Weighted average grant-date fair value (per RSU) | $ | 101 | | | $ | 117 | | | $ | 132 | |
| Weighted average grant-date fair value (per unit) | |
| Aggregate intrinsic value of distributed RSUs (in millions) | Aggregate intrinsic value of distributed RSUs (in millions) | $ | 234 | | | $ | 276 | | | $ | 294 | |
The following table presents the changes in our outstanding RSUs, including PSUs, during 20202023 and the associated weighted average grant-date fair values:
| | Number of RSUs (in millions) | | Weighted Average Grant-Date Fair Value (per unit) |
| Outstanding at year-end 2019 | 4.1 | | | $ | 106 | |
| Number of RSUs (in millions) | | | Number of RSUs (in millions) | | Weighted Average Grant-Date Fair Value (per unit) |
| Outstanding at year-end 2022 | |
| Granted | Granted | 3.6 | | | 101 | |
| Distributed | Distributed | (1.6) | | | 97 | |
| Forfeited | Forfeited | (0.3) | | | 114 | |
| Outstanding at year-end 2020 | 5.8 | | | $ | 107 | |
| Outstanding at year-end 2023 | |
Other Information
At year-end 2020, we had 27 million remainingNo further shares are authorized for grant under the Marriott International, Inc. Stock and Cash Incentive Plan or the Starwood Hotels & Resorts Worldwide, LLC, formerly known as Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), stock plans. Beginning May 2023, awards are granted under the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (“2023 Plan”). At year-end 2023, we had approximately 12 million remaining shares authorized for grant under the 2023 Plan.
NOTE 7.6. INCOME TAXES
The components of our (losses) earnings before income taxes for the last three fiscal years consisted of:
| | ($ in millions) | 2020 | | 2019 | | 2018 |
| (in millions) | | (in millions) | 2023 | | 2022 | | 2021 |
| U.S. | U.S. | $ | (320) | | | $ | 549 | | | $ | 1,311 | |
| Non-U.S. | Non-U.S. | (146) | | | 1,050 | | | 1,034 | |
| $ | (466) | | | $ | 1,599 | | | $ | 2,345 | |
| $ | |
Our (provision) benefit (provision) for income taxes for the last three fiscal years consisted of:
| | ($ in millions) | 2020 | | 2019 | | 2018 |
| (in millions) | | (in millions) | 2023 | | 2022 | | 2021 |
| Current | Current | -U.S. Federal | $ | 9 | | | $ | (272) | | | $ | (169) | |
| -U.S. State | (41) | | | (57) | | | (94) | |
| -Non-U.S. | (78) | | | (161) | | | (284) | |
| (110) | | | (490) | | | (547) | |
| -U.S. State | |
| -Non-U.S. | |
| | (838) | |
| | Deferred | Deferred | -U.S. Federal | 180 | | | 141 | | | 10 | |
| -U.S. State | 81 | | | 39 | | | (6) | |
| -Non-U.S. | 48 | | | (16) | | | 105 | |
| 309 | | | 164 | | | 109 | |
| $ | 199 | | | $ | (326) | | | $ | (438) | |
| Deferred | |
| Deferred | |
| -U.S. State | |
| -Non-U.S. | |
| | 543 | |
| | $ | |
Unrecognized Tax Benefits
The following table reconciles our unrecognized tax benefit balance for each year from the beginning of 20182021 to the end of 2020:2023:
| | | | | |
($ in millions) | Amount |
Unrecognized tax benefit at beginning of 20182021 | $ | 491464 | |
| |
| Change attributable to tax positions taken in prior years | 37 (134) | |
| Change attributable to tax positions taken during the current period | 148— | |
| Decrease attributable to settlements with taxing authorities | (53)(48) | |
| |
Unrecognized tax benefit at year-end 20182021 | 623282 | |
| Change attributable to tax positions taken in prior years | (13)(15) | |
| Change attributable to tax positions taken during the current period | 133 | |
| Decrease attributable to settlements with taxing authorities | (54)(15) | |
| |
Unrecognized tax benefit at year-end 20192022 | 569255 | |
| Change attributable to tax positions taken in prior years | (66)(90) | |
| Change attributable to tax positions taken during the current period | 416 | |
| Decrease attributable to settlements with taxing authorities | (43)(9) | |
| |
Unrecognized tax benefit at year-end 20202023 | $ | 464172 | |
Our unrecognized tax benefit balancesbalance included $410$161 million at year-end 2020, $4982023, $241 million at year-end 2019,2022, and $497$266 million at year-end 20182021 of tax positions that, if recognized, would impact our effective tax rate. It is reasonably possible that within the next twelve12 months we will reach resolution of income tax examinations in one or more jurisdictions. The actual amount of any change to our unrecognized tax benefits could vary depending on the timing and nature of the settlement. Therefore, an estimate of the change cannot be provided. We recognize accrued interest and penalties for our unrecognized tax benefits as a component of tax expense.expenses. Related interest expense (benefit) expense totaled $(15)$6 million in 2020, $282023, $13 million in 2019,2022, and $3$(21) million in 2018.2021. We accrued interest and penalties related to our unrecognized tax benefits of approximately $85$52 million at year-end 20202023 and $100$49 million at year-end 2019 on our Balance Sheets.2022.
We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The U.S. Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of year-end 2020,2023, we have settled all issues for tax years through 2013 for Marriott and through 2012 for Starwood. Our Marriott 2014 and 2015 tax year audits are substantially complete, and our Marriott 2016 through 2018 tax year audits are currently ongoing. Starwood is currently under
audit by the IRS fortax years 2013 through 2016.2021. Our 2022 and 2023 tax year audits are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.
Deferred Income Taxes
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and tax credit carry-forwards. We state those balances at the enacted tax rates we expect will be in effect when we pay or recover the taxes. Deferred income tax assets represent amounts available to reduce income taxes we will pay on taxable income in future years. We evaluate our ability to realize these future tax deductions and credits by assessing whether we expect to have sufficient future taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies to utilize these future deductions and credits. We establish a valuation allowance when we no longer consider it more likely than not that a deferred tax asset will be realized.
The following table presents the tax effect of each type of temporary difference and carry-forward that gave rise to significant portions of our deferred tax assets and liabilities as of year-end 20202023 and year-end 2019:2022:
| | ($ in millions) | At Year-End 2020 | | At Year-End 2019 |
| (in millions) | | (in millions) | At Year-End 2023 | | At Year-End 2022 |
| Deferred Tax Assets | Deferred Tax Assets | | | |
| Employee benefits | |
| Employee benefits | |
| Employee benefits | Employee benefits | $ | 262 | | | $ | 267 | |
| Net operating loss carry-forwards | Net operating loss carry-forwards | 818 | | | 680 | |
| Accrued expenses and other reserves | Accrued expenses and other reserves | 214 | | | 162 | |
| Receivables, net | 12 | | | 11 | |
| | Tax credits | |
| Tax credits | |
| Tax credits | Tax credits | 49 | | | 41 | |
| Loyalty Program | Loyalty Program | 367 | | | 249 | |
| Deferred income | Deferred income | 69 | | | 70 | |
| Lease liabilities | Lease liabilities | 252 | | | 261 | |
| Interest limitation | |
| Other | Other | 82 | | | 15 | |
| Deferred tax assets | Deferred tax assets | 2,125 | | | 1,756 | |
| Valuation allowance | Valuation allowance | (1,009) | | | (616) | |
| Deferred tax assets after valuation allowance | Deferred tax assets after valuation allowance | 1,116 | | | 1,140 | |
| Deferred Tax Liabilities | Deferred Tax Liabilities | |
| Equity method investments | (29) | | | (55) | |
| | Property and equipment | |
| | Property and equipment | |
| | Property and equipment | Property and equipment | (42) | | | (82) | |
| Intangibles | Intangibles | (663) | | | (895) | |
| Right-of-use assets | Right-of-use assets | (197) | | | (229) | |
| Self-insurance | Self-insurance | (19) | | | (15) | |
| | Other | |
| Deferred tax liabilities | Deferred tax liabilities | (950) | | | (1,276) | |
| Net deferred taxes | Net deferred taxes | $ | 166 | | | $ | (136) | |
Our valuation allowance is primarily attributable to non-U.S. and U.S. state net operating loss carry-forwards. During 2020,2023, our valuation allowance increaseddecreased primarily due to legislative changesthe release of certain non-U.S. tax benefits ($223 million) as the Company concluded that it is more likely than not to recognize those tax benefits. In addition, during 2023, our intangibles deferred tax liability decreased primarily due to intellectual property restructuring transactions, resulting in Switzerland and net operating losses in Luxembourg.non-U.S. tax benefits ($228 million).
At year-end 2020,2023, we had approximately $31$47 million of tax credits that will expire through 20302033 and $17 million of tax credits that do not expire. We recorded $44$25 million of net operating loss benefits in 20202023 and $10$12 million in 2019.2022. At year-end 2020,2023, we had approximately $3,938$4,856 million of primarily state and foreign net operating losses, of which $2,315$3,207 million will expire through 2040.2043.
We made no provision for U.S. income taxes or additional non-U.S. taxes on certain undistributed earnings of non-U.S. subsidiaries. These earnings could become subject to additional taxes if the non-U.S. subsidiaries dividend or loan those earnings to an affiliate or if we sell our interests in the non-U.S. subsidiaries. We cannot practically estimate the amount of additional taxes that might be payable on the undistributed earnings.
Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate
The following table reconciles the U.S. statutory tax rate to our effective income tax rate for the last three fiscal years:
| | | | | | | | | | | | | | | | | |
| 2020 | | 2019 | | 2018 |
| U.S. statutory tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| U.S. state income taxes, net of U.S. federal tax benefit | 3.8 | | | 1.6 | | | 2.5 | |
| Non-U.S. income | 12.5 | | | (3.3) | | | (1.0) | |
| Change in valuation allowance | (20.0) | | | 3.4 | | | 2.6 | |
| Change in uncertain tax positions | 12.2 | | | 1.9 | | | 1.0 | |
| Change in U.S. tax rate | 0.0 | | | 0.0 | | | (1.7) | |
| Permanent items | 9.4 | | | 1.3 | | | 0.0 | |
| Tax on asset dispositions | 0.0 | | | (0.7) | | | (2.9) | |
| | | | | |
| Excess tax benefits related to equity awards | 6.4 | | | (3.2) | | | (1.8) | |
| U.S. tax on foreign earnings | (3.0) | | | 0.1 | | | 0.0 | |
| Other, net | 0.6 | | | (1.7) | | | (1.0) | |
| Effective rate | 42.9 | % | | 20.4 | % | | 18.7 | % |
The non-U.S. income tax benefit presented in the table above includes tax-exempt income in Hong Kong and Singapore, and a deemed interest deduction in Switzerland, which collectively represented 12.9% in 2020, 8.8% in 2019, and 4.0% in 2018. We included the impact of these items in the non-U.S. income line above because we consider them to be equivalent to a reduction of the statutory tax rates in these jurisdictions. Pre-tax income in Switzerland, Singapore, and Hong Kong totaled $314 million in 2020, $709 million in 2019, and $513 million in 2018.
The non-U.S. income tax benefit also includes U.S. income tax expense on non-U.S. operations, which represents 0.8% in 2020, 2.0% in 2019, and 1.4% in 2018. We included the impact of this tax in the non-U.S. income line above because we consider this tax to be an integral part of the foreign taxes. | | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | 2021 |
| U.S. statutory tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| U.S. state income taxes, net of U.S. federal tax benefit | 2.8 | | | 2.8 | | | 2.7 | |
| Non-U.S. income | 0.3 | | | (0.5) | | | (0.5) | |
| Change in valuation allowance | (5.8) | | | 0.4 | | | (0.7) | |
| Change in uncertain tax positions | (2.3) | | | 0.3 | | | (12.0) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Excess tax benefits related to equity awards | (0.8) | | | (0.7) | | | (2.8) | |
| U.S. tax on foreign earnings | 1.1 | | | 0.2 | | | 0.4 | |
| Intellectual property restructuring | (7.9) | | | 0.0 | | | 0.0 | |
| Other, net | 0.3 | | | 0.8 | | | (1.3) | |
| Effective rate | 8.7 | % | | 24.3 | % | | 6.8 | % |
Other Information
We paid cash for income taxes, net of refunds, of $279$907 million in 2020, $5262023, $476 million in 2019,2022, and $678$362 million in 2018.2021.
NOTE 8.7. COMMITMENTS AND CONTINGENCIES
Guarantees
We issue guarantees to certain lenders and hotel owners, chiefly to obtain long-term management and franchise contracts. The guarantees generally have a stated maximum funding amount and a term of three to ten years. The terms of guarantees to lenders generally require us to fund if cash flows from hotel operations are inadequate to cover annual debt service or to repay the loan at maturity. The terms of the guarantees to hotel owners generally require us to fund if the hotels do not attain specified levels of operating profit. Guarantee fundings to lenders and hotel owners are generally recoverable out of future hotel cash flows and/or proceeds from the sale or refinancing of hotels.
We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at year-end 20202023 in the following table:
| ($ in millions) Guarantee Type | Maximum Potential
Amount
of Future Fundings | | Recorded Liability for
Guarantees |
(in millions) Guarantee Type | | (in millions) Guarantee Type | | Maximum Potential
Amount
of Future Fundings | | Recorded Liability for
Guarantees |
| Debt service | Debt service | $ | 53 | | | $ | 6 | |
| Operating profit | Operating profit | 207 | | | 128 | |
| Other | Other | 19 | | | 4 | |
| $ | 279 | | | $ | 138 | |
| | $ | |
Our liability at year-end 20202023 for guarantees for which we are the primary obligor is reflected in our Balance Sheets as $16$29 million of “Accrued expenses and other” and $122$75 million of “Other noncurrent liabilities.”
Our maximum potential guarantees listed in the preceding table include $90$62 million of operating profit guarantees and $7 million of other guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.
In conjunction with financing obtained for specific projects or properties owned by us or entities in which we have an investment, we may provide industry standard indemnifications to the lender for loss, liability, or damage occurring as a result of the actions of the entity or our own actions.
Contingent Purchase Obligation
Sheraton Grand Chicago. In 2017, we granted the owner a one-time right exercisable in 2022, to require us to purchase the leasehold interest in the land and the hotel for $300 million in cash (the “put option”). IfIn the 2021 third quarter, we entered into an amendment with the owner exercisesto move the exercise period of the put option from the 2022 first half to the 2024 first half. In January 2024, the owner exercised the put option, and we have theexercised our option to purchase, at the same time the put transaction closes, the fee
simple interest in the underlying land for an additional $200 million in cash.cash, resulting in an expected total cash payment of approximately $500 million. The closing is expected to occur in the 2024 fourth quarter. We account for the put option as a guarantee. In the 2020 fourth quarter, we estimated that the put option is probable of being exercised under the terms of the agreement,guarantee, and accordingly, we increased our recorded liability from $57 million at year-end 2019 towas $300 million at year-end 2020. We recorded the related expense2023 and 2022. The liability is reflected in the “Restructuringour Balance Sheets as “Accrued expenses and merger-related charges” caption of our Income Statements.other” at year-end 2023 and as “Other noncurrent liabilities” at year-end 2022.
We concluded that the entity that owns the Sheraton Grand Chicago hotel is a variable interest entity. We did not consolidate the entity because we do not have the power to direct the activities that most significantly impact the entity’s economic performance. Our maximum exposure to loss related to the entity is equal to the difference between the purchase price and the fair value of the hotel at the time that the put option is exercised,of closing, plus the maximum funding amount of an operating profit guarantee that we provided for the hotel.
Commitments
At year-end 2020,2023, we had various purchase commitments for goods and services in the normal course of business, primarily for programs and services for which we are reimbursed by third-party owners, totaling $437$735 million. We expect to purchase goods and services subject to these commitments as follows: $186$385 million in 2021, $1372024, $202 million in 2022, $482025, $85 million in 2023,2026, and $66$63 million thereafter.
Letters of Credit
At year-end 2020,2023, we had $156$129 million of letters of credit outstanding (all outside the Credit Facility, as defined in Note 10)9), most of which were for our self-insurance programs. Surety bonds issued as of year-end 20202023 totaled $163$164 million, most of which state governments requested in connection with our self-insurance programs.
Starwood Data Security Incident
Description of Event
On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the(the “Data Security Incident”). Working with leading security experts, we determined that there was unauthorized access to the Starwood network since 2014 and that an unauthorized party had copied information from the Starwood reservations database and taken steps towards removing it. TheWe discontinued use of the Starwood reservations database is no longer used for business operations at the end of 2018.
Expenses and Insurance Recoveries
In 2020, we recorded an $11 million net reversal of expenses and $29 million of accrued insurance recoveries related to the Data Security Incident; in 2019, we recorded $148 million of expenses and $84 million of accrued insurance recoveries related to the Data Security Incident; and in 2018, we recorded $28 million of expenses and $25 million of accrued insurance recoveries related to the Data Security Incident. We received insurance recoveries of $47 million in 2020 and $58 million in 2019. The net reversal of expenses for 2020 is primarily due to the reduction of the accrual for the ICO fine to reflect the amount of the final ICO fine, as further described below. We recognize insurance recoveries when they are probable of receipt and present them in our Income Statements in the same caption as the related expense, up to the amount of total expense incurred in prior and current periods. We present expenses and insurance recoveries related to the Data Security Incident in either the “Reimbursed expenses” or “Restructuring and merger-related charges” captions of our Income Statements.
Litigation, Claims, and Government Investigations
Following our announcement of the Data Security Incident, approximately 100 lawsuits were filed by consumers and others against us in U.S. federal, U.S. state and Canadian courts related to the incident. All but one of the U.S. cases were consolidated and transferred to the U.S. District Court for the District of Maryland, pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The plaintiffs in the U.S. and Canadianthe cases that remain pending, who generally purport to represent various classes of consumers, generally claim to have been harmed by alleged actions and/or omissions by the Company in connection with the Data Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. AmongThe active U.S. cases are consolidated in the U.S. casesDistrict Court for the District of Maryland (the “District Court”), pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The District Court granted in part and denied in part class certification of various U.S. groups of consumers. In August 2023, the U.S. Court of Appeals for the Fourth Circuit (the “Fourth Circuit”) vacated the District Court’s class certification decision because the District Court failed to first consider the effect of a class-action waiver signed by all putative class members. On remand, after briefing, the District Court issued an order reinstating the same classes that had previously been certified. We promptly petitioned the Fourth Circuit, seeking leave to appeal that ruling. On January 18, 2024, the Fourth Circuit granted that petition, and we are preparing to file such appeal. A case brought by the City of Chicago (which is consolidated in the MDL proceeding is a putative class action lawsuit that was filed against us and certain of our current officers and directors on December 1, 2018, alleging violations of the federal securities laws in connection with statements regarding our cybersecurity systems and controls, and seeking certification of a class of affected persons, unspecified monetary damages, costs and attorneys’ fees, and other related relief. The MDL proceedingproceeding) also includes two shareholder derivative complaints that were filed on February 26, 2019 and March 15, 2019, respectively, against the Company, certain of its officers and certain current and former members of our Board of Directors, alleging, among other claims, breach of fiduciary duty, corporate waste, unjust enrichment, mismanagement and violations of the federal securities laws, and seeking unspecified monetary damages and restitution, changes to the Company’s corporate governance and internal procedures, costs and attorneys’ fees, and other related relief. A separate shareholder derivative complaint was filed in the Delaware Court of Chancery on December 3, 2019 against the Company and certain of its officers and certain current and former members of our Board of Directors, alleging claims and seeking relief generally similar to the claims made and relief sought in the other two derivative cases. This case will not be consolidated with the MDL proceeding. We dispute the allegations in the lawsuits described above and are vigorously defending against such claims. We have filed motions to dismiss in each of these cases, some of which have been denied, but the cases generally remain at an early stage.remains pending. The Canadian cases have effectively been consolidated into a single case in the province of Ontario. In April 2019, we received a letter purportedly on behalf of a stockholder of the Company (also one of the named plaintiffs in the putative securities class action described above) demanding that our Board of Directors take action against the Company’s current and certain former officers and directors to recover damages for alleged breaches of fiduciary duties and related claims arising from the Data Security Incident. The Board of Directors has constituted a demand review committee to investigate the claims made in the demand letter, and the committee has retained independent counsel to assist with the investigation. The committee’s investigation is ongoing. In addition, on August 18, 2020, a purported representative action was brought against us in the High Court of Justice for England and Wales on behalf of an alleged claimant class of English and Welsh residents alleging breaches of the General Data Protection Regulation and/or the U.K. Data Protection Act 2018 (the “U.K. DPA”) in connection with the Data Security Incident. We dispute all of the allegations in this purported actionthese lawsuits and willare vigorously defenddefending against any such claims. On November 5, 2020, the court issued an order with the consent of all parties staying this action pending resolution of another case raising similar issues, but not involving the Company, that is pending before the U.K. Supreme Court.
In addition, numerousvarious U.S. federal, U.S. state and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident and related matters. Although some of these matters including Attorneyshave been resolved or no longer appear to be active, some remain open. We are in discussions with the Attorney General offices from all 5049 states and the District of Columbia the Federal Trade Commission, the Securities and Exchange Commission, certain committees of the U.S. Senate and House of Representatives, the Information Commissioner’s Office in the United Kingdom (the “ICO”) as lead supervisory authority in the European Economic Area, and regulatory authorities in various other jurisdictions. With the exception of the ICO proceeding, these matters generally remain open. In July 2019, the ICO issued a formal notice of intent under the U.K. DPA proposing a fine in the amount of £99 million against the Company in relation to the Data Security Incident. We submitted written responses to the ICO vigorously defending our position and engaged with the ICO regarding the Data Security Incident and proposed fine. In October 2020, the ICO issued a final decision under the U.K. DPA, which includes a fine of £18.4 million. The Company did not appeal the ICO’s decision, but has made no admission of liability in relation to the decision or the underlying allegations. In 2019, we expensed $65 million for this loss contingency, in the “Restructuring and merger-related charges” caption of our Income Statements, based on the fine initially proposed by the ICO in July 2019 and the ongoing proceeding. In 2020, we recorded a $39 million reversal of expense, based on the ICO’s issuance of the final decision. We paid a portion of the ICO fine in the 2020 fourth quarter, and the remainder is payable over the next two years. Our accrual for this loss contingency, which we present in the “Accrued expenses and other” and “Other noncurrent liabilities” captions of our Balance Sheets, was $65 million at year-end 2019 and $17 million at year-end 2020. Our production of information and/or documents to the state Attorneys General and the Federal Trade CommissionCommission. Based on the ongoing discussions, we believe it is now complete,probable that we will incur losses, and as of December 31, 2023, we are in the early stages of discussions with those authoritieshave an accrual for an estimated loss contingency, which is not material to resolve their investigations and requests.our Financial Statements.
While we believe it is reasonably possible that we may incur additional losses in excess of the amounts recorded associated with the above described MDL proceedings and regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of losssuch losses or range of loss if any, in excess of the amounts already incurred that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on the current stage of these proceedings and investigations, the
penalties or other resolution of these proceedings and investigations based on: (1) in the case of the above described MDL proceedings, the current stage of these proceedings, the absence of specific allegations as to alleged damages, the uncertainty as to the certification of a class or classes and the size of any certified class, if applicable, and/orand the lack of resolution of significant factual and legal issues.issues; and (2) in the case of the above described regulatory investigations, the lack of resolution with the Federal Trade Commission and the state Attorneys General.
NOTE 9.8. LEASES
We enter into operating and finance leases primarily for hotels, offices, and equipment. Most leases have initial terms of up to 20 years, and contain one or more renewals at our option, generally for five-five- or 10-year periods. We have generally not included these renewal periods in the lease term as it is not reasonably certain that we will exercise the renewal option.
The following table details the composition of lease expense for 20202023, 2022, and 2019:2021:
| | | | | | | | | | | |
| ($ in millions) | | 2020 | 2019 |
| | | |
| | | |
| | | |
Operating lease cost | | $ | 157 | | $ | 185 | |
| Variable lease cost | | 60 | | 113 | |
We recorded impairment charges of $116 million in 2020 and $99 million in 2019 in the “Depreciation, amortization, and other” caption of our Income Statements to reduce the carrying amount of certain U.S. & Canada hotel leases right-of-use assets and property and equipment, including leasehold improvements. The impairment charges recorded in 2020 were due to the impact of COVID-19. We determined that we may not be able to fully recover the carrying amount of these U.S. & Canada hotel leases after evaluating the assets for recovery due to declines in market performance and future cash flow projections. We estimated the fair value using an income approach reflecting internally developed Level 3 discounted cash flows that included, among other things, our expectations of future cash flows based on historical experience and projected growth rates, usage estimates and demand trends. Additionally, during the year ended 2019, we recorded expense of $34 million in the “Restructuring and merger-related charges” caption of our Income Statements due to the impairment of a legacy-Starwood office building accounted for as a finance lease. | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2023 | | 2022 | | 2021 |
| | | | | | |
| | | | | | |
| | | | | | |
Operating lease cost | | $ | 155 | | | $ | 165 | | | $ | 149 | |
| Variable lease cost | | 128 | | | 90 | | | 51 | |
The following table presents our future minimum lease payments at year-end 2020:2023:
| | ($ in millions) | Operating Leases | | Finance Leases |
| 2021 | $ | 184 | | | $ | 13 | |
| 2022 | 176 | | | 13 | |
| 2023 | 124 | | | 14 | |
| (in millions) | | (in millions) | Operating Leases | | Finance Leases |
| 2024 | 2024 | 116 | | | 14 | | 2024 | $ | 151 | | $ | 14 |
| 2025 | 2025 | 106 | | | 14 | | 2025 | 147 | | 14 |
| 2026 | | 2026 | 118 | | 15 |
| 2027 | | 2027 | 81 | | 15 |
| 2028 | | 2028 | 76 | | 15 |
| Thereafter | Thereafter | 529 | | | 138 | | Thereafter | 727 | | 92 |
| Total minimum lease payments | Total minimum lease payments | $ | 1,235 | | | $ | 206 | | Total minimum lease payments | $ | 1,300 | | $ | 165 |
| Less: Amount representing interest | Less: Amount representing interest | 265 | | | 53 | | Less: Amount representing interest | 308 | | 34 |
| Present value of minimum lease payments | Present value of minimum lease payments | $ | 970 | | | $ | 153 | | Present value of minimum lease payments | $ | 992 | | $ | 131 |
|
The following table presents the composition of our current and noncurrent lease liability at year-end 20202023 and 2019:2022:
| | ($ in millions) | December 31, 2020 | | December 31, 2019 |
| Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
| (in millions) | | (in millions) | December 31, 2023 | | December 31, 2022 |
| Operating Leases | | | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
Current (1) | Current (1) | $ | 147 | | | $ | 7 | | | $ | 130 | | | $ | 6 | |
Noncurrent (2) | Noncurrent (2) | 823 | | | 146 | | | 882 | | | 151 | |
| $ | 970 | | | $ | 153 | | | $ | 1,012 | | | $ | 157 | |
| $ | |
(1)Operating leases are recorded in the “Accrued“Accrued expenses and other”other” and finance leases are recorded in the “Current“Current portion of long-term debt”debt” captions of our Balance Sheets.
(2)Operating leases are recorded in the “Operating lease liabilities” and finance leases are recorded in the “Long-term debt”“Long-term debt” captions of our Balance Sheets.
At year-end 2020, we had entered into an agreement that we expect to account for as an operating lease with a 20-year term for our new headquarters office, which is not reflected in our Balance Sheets or in the table above as the lease has not commenced.
The following table presents additional information about our lease obligations at year-end 20202023 and 2019:2022:
| | | 2020 | | 2019 |
| Operating leases | | Finance leases | | Operating leases | | Finance leases |
| | 2023 | | | | 2023 | | 2022 |
| | Operating Leases | | | | Operating Leases | | Finance Leases | | Operating Leases | | Finance Leases |
| | Weighted Average Remaining Lease Term (in years) | Weighted Average Remaining Lease Term (in years) | | 10 | | 13 | | 11 | | 14 |
| Weighted Average Remaining Lease Term (in years) | |
| Weighted Average Remaining Lease Term (in years) | | | 13 | | 10 | | 13 | | 11 |
| Weighted Average Discount Rate | Weighted Average Discount Rate | | 4.6 | % | | 4.4 | % | | 4.8 | % | | 4.4 | % | Weighted Average Discount Rate | | 4.3 | % | | 4.4 | % | | 4.4 | % | | 4.3 | % |
The following table presents supplemental cash flow information for 20202023, 2022, and 2019:2021:
| | ($ in millions) | | 2020 | 2019 |
| (in millions) | |
| (in millions) | |
| (in millions) | | | 2023 | | 2022 | | 2021 |
| Cash paid for amounts included in the measurement of lease liabilities: | Cash paid for amounts included in the measurement of lease liabilities: | | |
| Operating cash outflows for operating leases | Operating cash outflows for operating leases | | $ | 162 | | $ | 176 | |
| Operating cash outflows for finance leases | | 7 | | 7 | |
| Financing cash outflows for finance leases | | 6 | | 6 | |
| Operating cash outflows for operating leases | |
| Operating cash outflows for operating leases | |
| | Lease assets obtained in exchange for lease obligations: | |
| | Lease assets obtained in exchange for lease obligations: | |
| | Lease assets obtained in exchange for lease obligations: | Lease assets obtained in exchange for lease obligations: | | |
| Operating leases | Operating leases | | 35 | | 89 | |
| Operating leases | |
| Operating leases | |
|
NOTE 10.9. LONG-TERM DEBT
We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table at year-end 20202023 and 2019:2022:
| | ($ in millions) | At Year-End 2020 | | At Year-End 2019 |
| (in millions) | | (in millions) | At Year-End 2023 | | At Year-End 2022 |
| Senior Notes: | Senior Notes: | | | |
Series L Notes, interest rate of 3.3%, face amount of $173, maturing September 15, 2022 (effective interest rate of 3.4%) | $ | 173 | | | $ | 349 | |
Series M Notes, interest rate of 3.4%, face amount of $350, matured October 15, 2020 (effective interest rate of 3.6%) | — | | | 349 | |
Series N Notes, interest rate of 3.1%, face amount of $400, maturing October 15, 2021 (effective interest rate of 3.4%) | 399 | | | 398 | |
Series O Notes, interest rate of 2.9%, face amount of $450, maturing March 1, 2021 (effective interest rate of 3.1%) | 450 | | | 449 | |
| Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%) | Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%) | 346 | | | 346 | |
Series Q Notes, interest rate of 2.3%, face amount of $399, maturing January 15, 2022 (effective interest rate of 2.5%) | 398 | | | 747 | |
| Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%) | |
| Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%) | |
| Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%) | Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%) | 745 | | | 744 | |
Series U Notes, interest rate of 3.1%, face amount of $291, maturing February 15, 2023 (effective interest rate of 3.1%) | 291 | | | 291 | |
Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%) | |
Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%) | |
Series U Notes, interest rate of 3.1%, face amount of $291, matured February 15, 2023 (effective interest rate of 3.1%) | |
Series V Notes, interest rate of 3.8%, face amount of $318, maturing March 15, 2025 (effective interest rate of 2.8%) | Series V Notes, interest rate of 3.8%, face amount of $318, maturing March 15, 2025 (effective interest rate of 2.8%) | 330 | | | 332 | |
Series W Notes, interest rate of 4.5%, face amount of $278, maturing October 1, 2034 (effective interest rate of 4.1%) | Series W Notes, interest rate of 4.5%, face amount of $278, maturing October 1, 2034 (effective interest rate of 4.1%) | 290 | | | 291 | |
Series X Notes, interest rate of 4.0%, face amount of $450, maturing April 15, 2028 (effective interest rate of 4.2%) | Series X Notes, interest rate of 4.0%, face amount of $450, maturing April 15, 2028 (effective interest rate of 4.2%) | 445 | | | 444 | |
| Series Y Notes, floating rate, face amount of $550, matured December 1, 2020 | — | | | 549 | |
Series Z Notes, interest rate of 4.2%, face amount of $350, maturing December 1, 2023 (effective interest rate of 4.4%) | 348 | | | 347 | |
Series Z Notes, interest rate of 4.2%, face amount of $350, matured December 1, 2023 (effective interest rate of 4.4%) | |
Series AA Notes, interest rate of 4.7%, face amount of $300, maturing December 1, 2028 (effective interest rate of 4.8%) | Series AA Notes, interest rate of 4.7%, face amount of $300, maturing December 1, 2028 (effective interest rate of 4.8%) | 297 | | | 297 | |
Series BB Notes, floating rate, face amount of $300, maturing March 8, 2021 (effective interest rate of 0.9% at December 31, 2020) | 300 | | | 299 | |
| Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%) | Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%) | 586 | | | 564 | |
Series DD Notes, interest rate of 2.1%, face amount of $224, maturing October 3, 2022 (effective interest rate of 1.2%) | 228 | | | 543 | |
Series EE Notes, interest rate of 5.8%, face amount of $1,600, maturing May 1, 2025 (effective interest rate of 6.0%) | 1,583 | | | — | |
Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%) | |
Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%) | |
| Series EE Notes, interest rate of 5.8%, face amount of $600, maturing May 1, 2025 (effective interest rate of 6.0%) | |
Series EE Notes, interest rate of 5.8%, face amount of $600, maturing May 1, 2025 (effective interest rate of 6.0%) | |
Series EE Notes, interest rate of 5.8%, face amount of $600, maturing May 1, 2025 (effective interest rate of 6.0%) | |
Series FF Notes, interest rate of 4.6%, face amount of $1,000, maturing June 15, 2030 (effective interest rate of 4.8%) | Series FF Notes, interest rate of 4.6%, face amount of $1,000, maturing June 15, 2030 (effective interest rate of 4.8%) | 986 | | | — | |
Series GG Notes, interest rate of 3.5%, face amount of $1,000, maturing October 15, 2032 (effective interest rate of 3.7%) | Series GG Notes, interest rate of 3.5%, face amount of $1,000, maturing October 15, 2032 (effective interest rate of 3.7%) | 985 | | | — | |
| Series HH Notes, interest rate of 2.9%, face amount of $1,100, maturing April 15, 2031 (effective interest rate of 3.0%) | |
Series II Notes, interest rate of 2.8%, face amount of $700, maturing October 15, 2033 (effective interest rate of 2.8%) | |
Series JJ Notes, interest rate of 5.0%, face amount of $1,000, maturing October 15, 2027 (effective interest rate of 5.4%) | |
Series KK Notes, interest rate of 4.9%, face amount of $800, maturing April 15, 2029 (effective interest rate of 5.3%) | |
Series LL Notes, interest rate of 5.5%, face amount of $450, maturing September 15, 2026 (effective interest rate of 5.9%) | |
Series MM Notes, interest rate of 5.6%, face amount of $700, maturing October 15, 2028 (effective interest rate of 5.9%) | |
| Commercial paper | Commercial paper | — | | | 3,197 | |
| Credit Facility | Credit Facility | 900 | | | — | |
| Finance lease obligations | Finance lease obligations | 153 | | | 157 | |
| Other | Other | 143 | | | 247 | |
| $ | 10,376 | | | $ | 10,940 | |
| $ | |
| Less current portion | Less current portion | (1,173) | | | (977) | |
| $ | 9,203 | | | $ | 9,963 | |
| $ | |
All our long-term debt is recourse to us but unsecured, other than debt assumed in our acquisition of Elegant which we paid off in January 2020 and debt associated with one of our owned properties.unsecured. All the Senior Notes shown in the table above are our unsecured and unsubordinated obligations, which rank equally with our other Senior Notes and all other unsecured and unsubordinated indebtedness that we have issued or will issue from time to time, and are governed by the terms of an indenture, dated as of November 16, 1998, between us and The Bank of New York Mellon (formerly The Bank of New York), as trustee. With the exception of the floating rate Series BB Notes, weWe may redeem some or all of each series of the Senior Notes before maturity under the terms provided in the applicable form of Senior Note.
In September 2023, we issued $450 million aggregate principal amount of 5.45 percent Series LL Notes due September 15, 2026 (the “Series LL Notes”) and $700 million aggregate principal amount of 5.55 percent Series MM Notes due October 15, 2028 (the “Series MM Notes”). We will pay interest on the Series LL Notes in March and September of each year, commencing in March 2024, and we will pay interest on the Series MM Notes in April and October of each year, commencing
in April 2024. We received net proceeds of approximately $1.135 billion from the offering of the Series LL Notes and Series MM Notes, after deducting the underwriting discount and expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.
In March 2023, we issued $800 million aggregate principal amount of 4.90 percent Series KK Notes due April 15, 2029 (the “Series KK Notes”). We pay interest on the Series KK Notes in April and October of each year. We received net proceeds of approximately $783 million from the offering of the Series KK Notes, after deducting the underwriting discount and expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.
We are party to a $4.5 billion multicurrency revolving credit agreement (as amended, the(the “Credit Facility”) that provides for up to $4.5 billion of aggregate effective. Available borrowings for general corporate needs, including working capital, capital expenditures, letters of credit, acquisitions and tounder the Credit Facility support our commercial paper program if and when we resume issuing commercial paper.general corporate needs. Borrowings under the Credit Facility generally bear interest at LIBORSOFR (the London Interbank OfferedSecured Overnight Financing Rate) plus a spread based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings (if any)(which generally have short-term maturities of 45 days or less) as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on June 28, 2024. In 2020, we made borrowings of $4.5 billion and repayments of $3.6 billion, resulting in total outstanding borrowings under the Credit Facility of $0.9 billion as of December 31, 2020.
In April 2020, we entered into an amendment to the Credit Facility (the “First Credit Facility Amendment”). The First Credit Facility Amendment waives the quarterly-tested leverage covenant in the Credit Facility through and including the first quarter of 2021 (the “Covenant Waiver Period”), which waiver period may end sooner at our election, adjusts the required leverage levels for the covenant when it is re-imposed at the end of the Covenant Waiver Period, and imposes a new monthly-tested liquidity covenant for the duration of the Covenant Waiver Period. The First Credit Facility Amendment also makes certain other amendments to the terms of the Credit Facility, including increasing the interest and fees payable on the Credit Facility for the duration of the Covenant Waiver Period, tightening certain existing covenants, and imposing additional covenants for the duration of the Covenant Waiver Period. These covenant changes include tightening the lien covenant and the covenant on dividends, share repurchases and distributions, and imposing new covenants limiting asset sales, investments and discretionary capital expenditures.
In January 2021, we entered into two more amendments to the Credit Facility (the “New Credit Facility Amendments,” and together with the First Credit Facility Amendment, the “Credit Facility Amendments”), which extend the Covenant Waiver Period through and including the fourth quarter of 2021 (which waiver period may end sooner at our election), revise the required leverage levels for such covenant when it is re-imposed at the end of the Covenant Waiver Period (starting at 5.50 to 1.00 when the leverage test is first re-imposed and gradually stepping down to 4.00 to 1.00 over the succeeding five fiscal quarters, as further described in the Credit Facility), and increase the minimum liquidity amount under the liquidity covenant that is tested monthly for the duration of the Covenant Waiver Period. The New Credit Facility Amendments also make certain other amendments to the terms of the Credit Facility, including reducing the rate floor for the LIBOR Daily Floating Rate and the Eurocurrency Rate.
In April 2020, we issued $1.6 billion aggregate principal amount of 5.750 percent Series EE Notes due May 1, 2025 (the “Series EE Notes”). We pay interest on the Series EE Notes in May and November of each year, commencing in November 2020. We received net proceeds of approximately $1.581 billion from the offering of the Series EE Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes.
In June 2020, we issued $1.0 billion aggregate principal amount of 4.625 percent Series FF Notes due June 15, 2030 (the “Series FF Notes”). We pay interest on the Series FF Notes in June and December of each year, commencing in December 2020. We received net proceeds of approximately $985 million from the offering of the Series FF Notes, after deducting the underwriting discount and estimated expenses. We used the majority of these proceeds to repurchase Senior Notes with near term maturities, as further described below.
In June 2020, we completed a tender offer (the “Tender Offer”) and retired $853 million aggregate principal amount of our Senior Notes consisting of:
•$351 million of our 2.3% Series Q Notes maturing January 15, 2022;
•$176 million of our 3.3% Series L Notes maturing September 15, 2022; and
•$326 million of our 2.1% Series DD Notes maturing October 3, 2022.
We used proceeds from our Series FF Notes offering to complete the repurchase of such notes, including the payment of accrued interest and other costs incurred.
In July 2020, we redeemed all $350 million aggregate principal amount of our Series M Notes due in October 2020.
In August 2020, we issued $1.0 billion aggregate principal amount of 3.500 percent Series GG Notes due October 15, 2032 (the “Series GG Notes”). We will pay interest on the Series GG Notes in April and October of each year, commencing in April 2021. We received net proceeds of approximately $984 million from the offering of the Series GG Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including the repayment of a portion of our outstanding borrowings under the Credit Facility.
The following table presents future principal payments, net of discounts, premiums, and debt issuance costs, for our debt at year-end 2020:2023:
| | | | | |
Debt Principal Payments ($ in millions) | Amount |
| 2021 | $ | 1,173 | |
| 2022 | 807 | |
| 2023 | 682 | |
| 2024 | 1,494 | |
| 2025 | 2,302 | |
| Thereafter | 3,918 | |
| Balance at year-end 2020 | $ | 10,376 | |
| | | | | |
Debt Principal Payments (in millions) | Amount |
| 2024 | $ | 553 | |
| 2025 | 1,310 | |
| 2026 | 1,202 | |
| 2027 | 2,419 | |
| 2028 | 1,447 | |
| Thereafter | 4,942 | |
| Balance at year-end 2023 | $ | 11,873 | |
We paid cash for interest, net of amounts capitalized, of $377$476 million in 2020, $3482023, $345 million in 2019,2022, and $290$391 million in 2018.2021.
NOTE 11.10. INTANGIBLE ASSETS AND GOODWILL
The following table details the composition of our intangible assets at year-end 20202023 and 2019:2022:
| | ($ in millions) | At Year-End 2020 | | At Year-End 2019 |
| (in millions) | | (in millions) | At Year-End 2023 | | At Year-End 2022 |
| Definite-lived Intangible Assets | Definite-lived Intangible Assets | | | |
| Costs incurred to obtain contracts with customers | Costs incurred to obtain contracts with customers | $ | 1,674 | | | $ | 1,588 | |
| Costs incurred to obtain contracts with customers | |
| Costs incurred to obtain contracts with customers | |
| Contracts acquired in business combinations and other | Contracts acquired in business combinations and other | 2,257 | | | 1,972 | |
| 3,931 | | | 3,560 | |
| 4,672 | |
| Accumulated amortization | Accumulated amortization | (937) | | | (808) | |
| 2,994 | | | 2,752 | |
| 3,344 | |
| Indefinite-lived Intangible Brand Assets | Indefinite-lived Intangible Brand Assets | 5,995 | | | 5,889 | |
| $ | 8,989 | | | $ | 8,641 | |
| $ | |
We capitalize direct costs that we incur to obtain management, franchise, and license agreements. We amortize these costs on a straight-line basis over the initial term of the agreements, generally ranging from 15 to 30 years. In 2020, we recorded impairment charges totaling $64 million in the “Contract investment amortization” caption of our Income Statements to reduce the carrying amount of certain capitalized costs incurred to obtain contracts with customers, primarily due to the impact of COVID-19, most of which we recorded in our U.S. & Canada business segment.
For contracts acquired definite-livedin business combinations and other intangible assets, we recorded amortization expense of $97$226 million in 2020, $1052023, $197 million in 2019,2022, and $111$165 million in 20182021 (of which $122 million in 2023, $83 million in 2022, and $62 million in 2021 was included in the “Depreciation, amortization, and other”“Reimbursed expenses” caption of our Income Statements.Statements). For these assets, we estimate that our aggregate amortization expense will be $95$206 million for eachin 2024, $178 million in 2025, $148 million in 2026, $126 million in 2027, and $94 million in 2028.
The following table details the carrying amount of our goodwill at year-end 20202023 and 2019:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ($ in millions) | U.S. & Canada | | Asia Pacific | | EMEA | | CALA | | Total
Goodwill |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at year-end 2019 | $ | 5,338 | | | $ | 1,864 | | | $ | 1,522 | | | $ | 324 | | | $ | 9,048 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Foreign currency translation | 9 | | | 71 | | | 57 | | | (10) | | | 127 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at year-end 2020 | $ | 5,347 | | | $ | 1,935 | | | $ | 1,579 | | | $ | 314 | | | $ | 9,175 | |
| | | | | | | | | | | | | | | | | | | | | |
| (in millions) | U.S. & Canada | | International | | | | | | Total Goodwill |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at year-end 2022 | $ | 5,323 | | | $ | 3,549 | | | | | | | $ | 8,872 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Foreign currency translation | 10 | | | 4 | | | | | | | 14 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at year-end 2023 | $ | 5,333 | | | $ | 3,553 | | | | | | | $ | 8,886 | |
NOTE 12.11. PROPERTY AND EQUIPMENT
The following table presents the composition of our property and equipment balances at year-end 20202023 and 2019:2022:
| | ($ in millions) | At Year-End 2020 | | At Year-End 2019 |
| (in millions) | | (in millions) | At Year-End 2023 | | At Year-End 2022 |
| Land | Land | $ | 688 | | | $ | 684 | |
| Buildings and leasehold improvements | Buildings and leasehold improvements | 1,045 | | | 1,100 | |
| Furniture and equipment | Furniture and equipment | 640 | | | 1,225 | |
| Construction in progress | Construction in progress | 29 | | | 196 | |
| 2,402 | | | 3,205 | |
| 2,471 | |
| Accumulated depreciation | Accumulated depreciation | (888) | | | (1,301) | |
| $ | 1,514 | | | $ | 1,904 | |
| $ | |
We record property and equipment at cost, including interest and real estate taxes we incur during development and construction. We capitalize the cost of improvements that extend the useful life of property and equipment when we incur them. These capitalized costs may include structural costs, equipment, fixtures, floor, and wall coverings. We expense all repair and maintenance costs when we incur them. We compute depreciation using the straight-line method over the estimated useful lives of the assets (generally three to 40 years), and we amortize leasehold improvements over the shorter of the asset life or lease term. Our gross depreciation expense totaled $322$122 million in 2020, $3462023, $114 million in 2019,2022, and $256$138 million in 20182021 (of which $109$37 million in 2020, $1212023, $35 million in 2019,2022, and $147$49 million in 20182021 was included in the “Reimbursed expenses” caption of our Income Statements). Fixed assets attributed to operations located outside the U.S. were $679$552 million at year-end 20202023 and $695$592 million at year-end 2019.
We recorded impairment charges for property and equipment, including leasehold improvements, and right-of-use assets on several U.S. & Canada leased hotels in 2020 and 2019 as discussed in Note 9.2022.
NOTE 13.12. FAIR VALUE OF FINANCIAL INSTRUMENTS
We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We present the carrying valuesamounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments determined under current guidance for disclosures on the fair value of financial instruments, in the following table:
| | | | At Year-End 2020 | | At Year-End 2019 | | At Year-End 2023 | | At Year-End 2022 |
| ($ in millions) | Carrying
Amount | | Fair Value | | Carrying
Amount | | Fair Value |
| Senior, mezzanine, and other loans | $ | 159 | | | $ | 142 | | | $ | 117 | | | $ | 112 | |
| (in millions) | | (in millions) | Carrying
Amount | | Fair Value | | Carrying
Amount | | Fair Value |
| Mezzanine and other loans | |
| Total noncurrent financial assets | Total noncurrent financial assets | $ | 159 | | | $ | 142 | | | $ | 117 | | | $ | 112 | |
| | Senior Notes | Senior Notes | $ | (8,031) | | | $ | (8,941) | | | $ | (6,441) | | | $ | (6,712) | |
| Commercial paper/Credit Facility | (900) | | | (900) | | | (3,197) | | | (3,197) | |
| Senior Notes | |
| Senior Notes | |
| Commercial paper | |
| Other long-term debt | Other long-term debt | (126) | | | (128) | | | (174) | | | (179) | |
| Other noncurrent liabilities | Other noncurrent liabilities | (426) | | | (426) | | | (196) | | | (196) | |
| Total noncurrent financial liabilities | Total noncurrent financial liabilities | $ | (9,483) | | | $ | (10,395) | | | $ | (10,008) | | | $ | (10,284) | |
We estimate the fair value of our senior, mezzanine and other loans by discounting cash flows using risk-adjusted rates, both of which are Level 3 inputs.
We estimate the fair value of our other long-term debt, excluding leases, using expected future payments discounted at risk-adjusted rates, which are Level 3 inputs. We determine the fair value of our Senior Notes using quoted market prices, which are directly observable Level 1 inputs. As discussed in Note 10, even thoughThe carrying amount of our commercial paper borrowings generally have short-term maturities of 30 days or less, we classify outstanding commercial paper borrowings (if any) as long-term based on our ability and intent to refinance them on a long-term basis. As we have historically been a frequent issuer of commercial paper, we use pricing from recent transactions as Level 2 inputs in estimating fair value.At year-end 2019, we determined that the carrying value of our commercial paper approximatedapproximate fair value due to thetheir short maturity. At year-end 2020, all of our previously issued commercial paper has maturedmaturity and been repaid. Due to changes to our credit ratings as a result of the impact of COVID-19 on our business, we currently are not issuing commercial paper. The carrying value of our Credit Facility borrowings approximate fair value because they bear interest at a market rate. We estimate the fair value of our other long-term debt, excluding leases, using quoted market prices, which are directly observable Level 1 inputs. Our other noncurrent liabilities largely consist of guarantees. As we note in the “
“Guarantees” caption of Note 2, we measure our liability for guarantees at fair value on a
nonrecurring basis, which is when we issue or modify a guarantee using Level 3 internally developed inputs. At year-end 20202023 and year-end 2019,2022, we determined that the carrying valuesamounts of our guarantee liabilities approximated their fair values based on Level 3 inputs.
See the “Fair“Fair Value Measurements”Measurements” caption of Note 2 for more information on the input levels we use in determining fair value.
NOTE 14.13. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table details the accumulated other comprehensive loss activity for 2020, 2019,2023, 2022, and 2018:2021:
| | ($ in millions) | Foreign Currency Translation Adjustments | | Derivative Instrument and Other Adjustments | | Accumulated Other Comprehensive Loss |
| Balance at year-end 2017 | $ | (23) | | | $ | 6 | | | $ | (17) | |
| (in millions) | | (in millions) | Foreign Currency Translation Adjustments | | Other Adjustments | | Accumulated Other Comprehensive Loss |
| Balance at year-end 2020 | |
Other comprehensive (loss) income before reclassifications (1) | Other comprehensive (loss) income before reclassifications (1) | (391) | | | 4 | | | (387) | |
| Reclassification adjustments | Reclassification adjustments | 11 | | | 6 | | | 17 | |
| Net other comprehensive (loss) income | Net other comprehensive (loss) income | (380) | | | 10 | | | (370) | |
| Adoption of ASU 2016-01 | — | | | (4) | | | (4) | |
| Balance at year-end 2018 | $ | (403) | | | $ | 12 | | | $ | (391) | |
Other comprehensive income before reclassifications (1) | 35 | | | 2 | | | 37 | |
| Balance at year-end 2021 | |
Other comprehensive (loss) income before reclassifications (1) | |
| Reclassification adjustments | |
| Net other comprehensive (loss) income | |
| Balance at year-end 2022 | |
Other comprehensive income (loss) before reclassifications (1) | |
| Reclassification adjustments | Reclassification adjustments | — | | | (7) | | | (7) | |
| Net other comprehensive income (loss) | Net other comprehensive income (loss) | 35 | | | (5) | | | 30 | |
| Balance at year-end 2019 | $ | (368) | | | $ | 7 | | | $ | (361) | |
Other comprehensive income before reclassifications (1) | 229 | | | 7 | | | 236 | |
| Reclassification adjustments | — | | | (10) | | | (10) | |
| Net other comprehensive income (loss) | 229 | | | (3) | | | 226 | |
| Balance at year-end 2020 | $ | (139) | | | $ | 4 | | | $ | (135) | |
| Balance at year-end 2023 | |
(1)Other comprehensive income (loss) income before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in (losses)/gains of $(44)$(28) million for 2020, $62023, $32 million for 2019,2022, and $14$40 million for 2018.2021.
NOTE 15.14. BUSINESS SEGMENTS
We discuss our operations in the following three reportable business segments: United States and Canada (“U.S. & Canada”); Asia Pacific; and Europe, Middle East and Africa (“EMEA”). Our Caribbean and Latin America (“CALA”)two operating segment does notsegments, both of which meet the applicable accounting criteria for separate disclosure as a reportable business segment,segment: (1) U.S. & Canada and we include its results in “Unallocated corporate and other.” In the 2020 fourth quarter, we changed the name of our largest segment from “North America” to “U.S. & Canada.” Other than the name change, we made no other changes to the composition of this segment. (2) International.
In January 2021,2024, we modified our reportable segment structure as a result of a change in the way management intends to evaluate results and allocate resources within the Company. Beginning with the 20212024 first quarter, we will report the following twofour operating segments: (1) U.S. & Canada, (2) Europe, Middle East, and International.Africa, (3) Asia Pacific excluding China, and (4) Greater China. Our Caribbean and Latin America operating segment will not meet the applicable criteria for separate disclosure as a reportable business segment, and as such, we will include its results in “Unallocated corporate and other.”
We evaluate the performance of our operating segments using “segment profits/loss”profits,” which is based largely on the results of the segment without allocating corporate expenses, income taxes, indirect general, administrative, and other expenses, or merger-related costs, or above-property restructuring charges.costs. We assign gains and losses, equity in earnings or losses, and direct general, administrative, and other expenses and other restructuring charges to each of our segments. “Unallocated corporate and other” includes a portion of our revenues including license(such as fees we receive from our credit card programs fees fromand vacation ownership licensing agreements,agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, restructuringmerger-related charges and merger-related charges,other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments as well as results of our CALA operating segment.segments.
Our chief operating decision maker monitors assets for the consolidated Company but does not use assets by operating segment when assessing performance or making operating segment resource allocations.
Segment Revenues
The following tables presenttable presents our revenues disaggregated by segment and major revenue stream for the last three fiscal years:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2020 |
| ($ in millions) | U.S. & Canada | | Asia Pacific | | EMEA | | Total |
| Gross fee revenues | $ | 914 | | | $ | 183 | | | $ | 110 | | | $ | 1,207 | |
| Contract investment amortization | (108) | | | (7) | | | (12) | | | (127) | |
| Net fee revenues | 806 | | | 176 | | | 98 | | | 1,080 | |
| Owned, leased, and other revenue | 198 | | | 89 | | | 153 | | | 440 | |
| Cost reimbursement revenue | 6,901 | | | 347 | | | 507 | | | 7,755 | |
| Total reportable segment revenue | $ | 7,905 | | | $ | 612 | | | $ | 758 | | | $ | 9,275 | |
| Unallocated corporate and other | | | | | | | 1,296 | |
| Total revenue | | | | | | | $ | 10,571 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2019 |
| ($ in millions) | U.S. & Canada | | Asia Pacific | | EMEA | | Total |
| Gross fee revenues | $ | 2,265 | | | $ | 477 | | | $ | 418 | | | $ | 3,160 | |
| Contract investment amortization | (48) | | | (2) | | | (8) | | | (58) | |
| Net fee revenues | 2,217 | | | 475 | | | 410 | | | 3,102 | |
| Owned, leased, and other revenue | 715 | | | 178 | | | 553 | | | 1,446 | |
| Cost reimbursement revenue | 13,901 | | | 536 | | | 969 | | | 15,406 | |
| Total reportable segment revenue | $ | 16,833 | | | $ | 1,189 | | | $ | 1,932 | | | $ | 19,954 | |
| Unallocated corporate and other | | | | | | | 1,018 | |
| Total revenue | | | | | | | $ | 20,972 | |
| | 2018 |
| ($ in millions) | U.S. & Canada | | Asia Pacific | | EMEA | | Total |
| 2023 | |
| 2023 | |
| 2023 | | | 2022 | | 2021 |
| (in millions) | | (in millions) | U.S. & Canada | International | | | Total | | U.S. & Canada | International | Total | | U.S. & Canada | International | Total |
| Gross fee revenues | Gross fee revenues | $ | 2,158 | | | $ | 479 | | | $ | 387 | | | $ | 3,024 | |
| Contract investment amortization | Contract investment amortization | (45) | | | (2) | | | (7) | | | (54) | |
| Net fee revenues | Net fee revenues | 2,113 | | | 477 | | | 380 | | | 2,970 | |
| Owned, leased, and other revenue | Owned, leased, and other revenue | 721 | | | 182 | | | 563 | | | 1,466 | |
| Cost reimbursement revenue | Cost reimbursement revenue | 13,455 | | | 459 | | | 926 | | | 14,840 | |
| Total reportable segment revenue | Total reportable segment revenue | $ | 16,289 | | | $ | 1,118 | | | $ | 1,869 | | | $ | 19,276 | |
| Unallocated corporate and other | Unallocated corporate and other | | 1,482 | |
| Total revenue | Total revenue | | $ | 20,758 | |
Revenues attributed to operations located outside the U.S. were $1,9105,160 million in 2020, $4,4002023, $4,032 million in 2019,2022, and $4,246$2,615 million in 2018,2021, including cost reimbursement revenue outside the U.S. of $1,247$2,806 million in 2020, $2,3942023, $2,231 million in 2019,2022, and $2,244$1,553 million in 2018.2021.
Segment Profits and Losses
| | | | | | | | | | | | | | | | | |
| ($ in millions) | 2020 | | 2019 | | 2018 |
U.S. & Canada (1) | $ | 198 | | | $ | 2,000 | | | $ | 1,939 | |
Asia Pacific (2) | 1 | | | 369 | | | 456 | |
EMEA (3) | (200) | | | 318 | | | 328 | |
| Unallocated corporate and other | (47) | | | (720) | | | (60) | |
| Interest expense, net of interest income | (418) | | | (368) | | | (318) | |
| Benefit (provision) for income taxes | 199 | | | (326) | | | (438) | |
| Net (loss) income | $ | (267) | | | $ | 1,273 | | | $ | 1,907 | |
| | | | | | | | | | | | | | | | | |
| (in millions) | 2023 | | 2022 | | 2021 |
U.S. & Canada (1) | $ | 2,724 | | | $ | 2,446 | | | $ | 1,394 | |
International (2) | 1,121 | | | 794 | | | 258 | |
| Unallocated corporate and other | 68 | | | 251 | | | (80) | |
| Interest expense, net of interest income | (535) | | | (377) | | | (392) | |
| Provision for income taxes | (295) | | | (756) | | | (81) | |
| Net income | $ | 3,083 | | | $ | 2,358 | | | $ | 1,099 | |
(1) Includes cost reimbursements, net of $(80)$57 million in 2020, $(129)2023, $134 million in 2019,2022, and $(121)$51 million in 2018.2021.
(2) Includes cost reimbursements, net of $(18)$17 million in 2020, $(9)2023, $49 million in 2019,2022, and zero in 2018.
(3) Includes cost reimbursements, net of $(33)$14 million in 2020, $(8) million in 2019, and zero in 2018.2021.
Segment (losses) profits attributed to operations located outside the U.S. were $(198)$1,258 million in 2020, $9822023, $898 million in 2019,2022, and $1,155$297 million in 2018,2021, including cost reimbursements, net (cost reimbursement revenue, net of reimbursed expenses) outside the U.S. of $(62)$23 million in 2020, $(18)2023, $67 million in 2019,2022, and $(14)$14 million in 2018.2021.
Depreciation, Amortization, and Other
| | | | | | | | | | | | | | | | | |
| ($ in millions) | 2020 | | 2019 | | 2018 |
| U.S. & Canada | $ | 209 | | | $ | 218 | | | $ | 97 | |
| Asia Pacific | 30 | | | 25 | | | 26 | |
| EMEA | 58 | | | 51 | | | 51 | |
| Unallocated corporate and other | 49 | | | 47 | | | 52 | |
| $ | 346 | | | $ | 341 | | | $ | 226 | |
Capital Expenditures
| | | | | | | | | | | | | | | | | |
| ($ in millions) | 2020 | | 2019 | | 2018 |
| U.S. & Canada | $ | 12 | | | $ | 287 | | | $ | 305 | |
| Asia Pacific | 2 | | | 2 | | | 6 | |
| EMEA | 12 | | | 29 | | | 36 | |
| Unallocated corporate and other | 109 | | | 335 | | | 209 | |
| $ | 135 | | | $ | 653 | | | $ | 556 | |
| | | | | | | | | | | | | | | | | |
| (in millions) | 2023 | | 2022 | | 2021 |
| U.S. & Canada | $ | 84 | | | $ | 81 | | | $ | 92 | |
| International | 77 | | | 85 | | | 106 | |
| | | | | |
| Unallocated corporate and other | 28 | | | 27 | | | 22 | |
| $ | 189 | | | $ | 193 | | | $ | 220 | |
NOTE 16.15. RELATED PARTY TRANSACTIONS
Equity Method Investments
We have equity method investments in entities that own or lease properties for which we provide management services and receive fees. In addition, in some cases we provide loans, preferred equity, or guarantees to these entities.
The following table presents Income Statement data resulting from transactions with these related parties. This table does not include our Financial Statement captions with insignificant related party activity.
| | | | | | | | | | | | | | | | | |
| ($ in millions) | 2020 | | 2019 | | 2018 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Cost reimbursement revenue | $ | 107 | | | $ | 233 | | | $ | 332 | |
| | | | | |
| | | | | |
| Reimbursed expenses | (110) | | | (236) | | | (337) | |
| | | | | |
| | | | | |
| | | | | |
| Equity in (losses) earnings | (141) | | | 13 | | | 103 | |
Summarized Financial Information for Investees
The following tables present summarized financial information for the entities in which we have equity method investments:
| | | | | | | | | | | | | | | | | |
| ($ in millions) | 2020 | | 2019 | | 2018 |
| Sales | $ | 259 | | | $ | 815 | | | $ | 932 | |
| Net (loss) income | (212) | | | 80 | | | 221 | |
| | | | | | | | | | | |
| ($ in millions) | At Year-End 2020 | | At Year-End 2019 |
| Assets (primarily composed of hotel real estate managed by us) | $ | 2,348 | | | $ | 2,555 | |
| Liabilities | 1,623 | | | 1,691 | |
| | | | | | | | | | | | | | | | | |
| (in millions) | 2023 | | 2022 | | 2021 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Cost reimbursement revenue | $ | 122 | | | $ | 104 | | | $ | 104 | |
| | | | | |
| | | | | |
| Reimbursed expenses | (126) | | | (104) | | | (105) | |
| | | | | |
| | | | | |
| | | | | |
| Equity in earnings (losses) | 9 | | | 18 | | | (24) | |
The carrying amount of our equity method investments was $422$308 million at year-end 20202023 and $577$335 million at year-end 2019.2022. This value exceeded our share of the book value of the investees’ net assets by $294$231 million at year-end 20202023 and $311$238 million at year-end 2019,2022, primarily due to the value that we assigned to land, contracts, and buildings owned by the investees.
In 2020, we recorded impairment charges totaling $77 million in the “Equity in (losses) earnings” caption of our Income Statements to reduce the carrying amount of certain investments, primarily due to the impact of COVID-19, most of which we recorded in our U.S. & Canada business segment.
Other Related Parties
We receivedearned management fees of approximately $3 million in 2020, $12 million in 2019, and $13 million in 2018,2023, $11 million in 2022, and $6 million in 2021, plus reimbursement of certain expenses, from our operation of properties owned byin which JWM Family Enterprises, L.P., which is beneficially owned and controlled by J.W. Marriott, Jr., Deborah Marriott Harrison, David S. Marriott, and other members of the Marriott family.
NOTE 17. RELATIONSHIP WITH MAJOR CUSTOMER
Host Hotels & Resorts, Inc., formerly known as Host Marriott Corporation, and its affiliates (“Host”) owned or leased 59 lodging properties at year-end 2020 and 60 at year-end 2019 that we operated or franchised. Over the last three years, we recognizedfamily, indirectly holds varying percentages of ownership. We earned gross fee revenues including cost reimbursement revenue, of $1,037approximately $4 million in 2020, $2,4062023, $4 million in 2019,2022, and $2,542$1 million in 20182021, plus reimbursement of certain expenses, from those lodgingmanaged and franchised properties and included those revenues in our U.S. & Canada and Europe, Middle East and Africa reportable business segments, and our Caribbean and Latin America operating segment.
SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA – UNAUDITED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ($ in millions, except per share data) | 2020 |
| | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Fiscal
Year |
| Revenues | $ | 4,681 | | | $ | 1,464 | | | $ | 2,254 | | | $ | 2,172 | | | $ | 10,571 | |
| Operating income (loss) | $ | 114 | | | $ | (154) | | | $ | 252 | | | $ | (128) | | | $ | 84 | |
| Net income (loss) | $ | 31 | | | $ | (234) | | | $ | 100 | | | $ | (164) | | | $ | (267) | |
Basic earnings (loss) per share (1) | $ | 0.10 | | | $ | (0.72) | | | $ | 0.31 | | | $ | (0.50) | | | $ | (0.82) | |
Diluted earnings (loss) per share (1) | $ | 0.09 | | | $ | (0.72) | | | $ | 0.31 | | | $ | (0.50) | | | $ | (0.82) | |
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| ($ in millions, except per share data) | 2019 |
| | First
Quarter | | Second
Quarter | | Third
Quarter | | Fourth
Quarter | | Fiscal
Year |
| Revenues | $ | 5,012 | | | $ | 5,305 | | | $ | 5,284 | | | $ | 5,371 | | | $ | 20,972 | |
| Operating income | $ | 510 | | | $ | 409 | | | $ | 607 | | | $ | 274 | | | $ | 1,800 | |
| Net income | $ | 375 | | | $ | 232 | | | $ | 387 | | | $ | 279 | | | $ | 1,273 | |
Basic earnings per share (1) | $ | 1.10 | | | $ | 0.70 | | | $ | 1.17 | | | $ | 0.85 | | | $ | 3.83 | |
Diluted earnings per share (1) | $ | 1.09 | | | $ | 0.69 | | | $ | 1.16 | | | $ | 0.85 | | | $ | 3.80 | |
(1)The sumwhich other members of the earnings per share for the four quarters may differ from annual earnings per share due to the required method of computing the weighted average shares in interim periods.Marriott family hold varying interests.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) ofunder the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this annual report under the supervision and with the participation of our management, including our Acting Co-PrincipalChief Executive OfficersOfficer and Chief Financial Officer. Management necessarily applied its judgment in assessing the costs and benefits of those controls and procedures, which by their nature, can provide only reasonable assurance about management’s control objectives. You should note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon this evaluation, our Acting Co-PrincipalChief Executive OfficersOfficer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that we record, process, summarize, and report the information we are required to disclose in the reports that we file or submit under the Exchange Act within the time periods specified in the rules and forms of the SEC, and to provide reasonable assurance that we accumulate and communicate such information to our management, including our Acting Co-PrincipalChief Executive OfficersOfficer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.
Internal Control Over Financial Reporting
We have set forth management’s report on internal control over financial reporting and the attestation report of our independent registered public accounting firm on our internal control over financial reporting in Part II, Item 8 of this Form 10-K, and we incorporate those reports here by reference.
We made no changes in internal control over financial reporting during the 2023 fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.During the 2023 fourth quarter, no director or Section 16 officer adopted or terminated any Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements.
PART IIIItem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Items 10, 11, 12, 13, 14.
As described below, we incorporate by reference in this Annual Report on Form 10-K certain information appearing in the Proxy Statement that we will furnish to our stockholders for our 20212024 Annual Meeting of Stockholders.
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| Item 10. Directors, Executive Officers, and Corporate Governance. | We incorporate this information by reference to “Nominees to our Board of Directors,” “Committees of the Board — Audit Committee,” “Transactions with Related Persons,” “Delinquent Section 16(a) Reports,” and “Selection of Director Nominees” sections of our Proxy Statement. We have included information regarding our executive officers and our Code of Ethics below. |
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| Item 11. Executive Compensation. | We incorporate this information by reference to the “Executive and Director Compensation” and “Compensation Committee Interlocks and Insider Participation” sections of our Proxy Statement. |
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| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. | We incorporate this information by reference to the “Securities Authorized for Issuance Under Equity Compensation Plans” and the “Stock Ownership” sections of our Proxy Statement. |
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| Item 13. Certain Relationships and Related Transactions, and Director Independence. | We incorporate this information by reference to the “Transactions with Related Persons” and “Director Independence” sections of our Proxy Statement. |
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| Item 14. Principal Accountant Fees and Services. | We incorporate this information by reference to the “Independent Registered Public Accounting Firm Fee Disclosure” and the “Pre-Approval of Independent Auditor Fees and Services Policy” sections of our Proxy Statement. |
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
We include below certain information on our executive officers. This information is as of February 16, 2021,1, 2024, except where indicated.
On February 16, 2021, the Company announced that Arne M. Sorenson, President and Chief Executive Officer, unexpectedly passed away on February 15, 2021. On February 2, 2021, the Company announced that Mr. Sorenson would step back from full-time management to facilitate more demanding treatment for pancreatic cancer. At that time, Stephanie Linnartz, Group President, Consumer Operations, Technology and Emerging Businesses, and Anthony G. Capuano, Group President, Global Development, Design and Operations Services, began jointly overseeing the day-to-day operations of the Company’s business units and corporate functions. Ms. Linnartz and Mr. Capuano are expected to continue in this capacity until Marriott’s Board of Directors appoints a new President and Chief Executive Officer.
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| Name and Title | | Age | | Business Experience |
Anthony G. (Tony) Capuano President and Chief Executive Officer | | 58 | | | Tony Capuano was appointed Chief Executive Officer (“CEO”) in February 2021 and was additionally designated President in February 2023. Prior to his appointment as CEO, Mr. Capuano was Group President, Global Development, Design and Operations Services, a role he assumed in January 2020. In that role, he was responsible for leading the Company’s global development and design efforts and overseeing the Company’s Global Operations discipline. Mr. Capuano began his Marriott career in 1995 as part of the Market Planning and Feasibility team. Between 1997 and 2005, he led Marriott’s full-service development efforts in the Western U.S. and Canada. From 2005 to 2008, Mr. Capuano served as Senior Vice President of full-service development for North America. In 2008, his responsibilities expanded to include all of U.S. and Canada and the Caribbean and Latin America, and he became Executive Vice President and Global Chief Development Officer in 2009. Mr. Capuano earned his bachelor’s degree in Hotel Administration from Cornell University. He is a member of the Cornell Hotel Society, The Cornell School of Hotel Administration Dean’s Advisory Board, the Business Roundtable, and the American Hotel and Lodging Association’s IREFAC Council. Additionally, Mr. Capuano serves on the Board of Directors of McDonald’s Corporation and Save Venice, a nonprofit organization dedicated to preserving the artistic heritage of Venice, Italy. |
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Satyajit (Satya) Anand President, Europe, Middle East & Africa | | 59 | | | Satya Anand was appointed President, Europe, Middle East & Africa (EMEA) in October 2020, and is responsible for developing and managing Marriott's portfolio in the region. Mr. Anand began his career with Marriott International in 1988 and prior to assuming his role as President, EMEA, he served as Chief Operations Officer, Luxury & Southern Europe and Global Design EMEA from July 2016. Prior to this, Mr. Anand was Marriott’s Chief Financial Officer for Europe for four years and held Area Vice President roles for Western and Central Europe respectively as well as various Cluster General Manager, operations and finance positions both on and above property. Mr. Anand holds a bachelor’s degree in Accounting from Bangalore’s MES College of Commerce and completed his Diploma in Hotel and Tourism Management from the Institute of Tourism & Hotel Management in Semmering, Austria. |
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Benjamin T. (Ty) Breland
Executive Vice President
and Chief Human Resources Officer | | 48 | | | Ty Breland was appointed Executive Vice President and Chief Human Resources Officer effective October 2021. Prior to that appointment, Mr. Breland served as Global HR Officer for Talent Development & Organizational Capability, a role he assumed in 2016. In that role, Mr. Breland had executive oversight for talent management, including leadership development, organizational capability, and change management. Mr. Breland also oversaw The Ritz-Carlton Leadership Center and served as the senior Human Resources leader for the Company’s Global Development, Design & Operations Services disciplines. Mr. Breland joined Marriott in 2004 as a member of the Company’s Talent Management and Analytics group and held a variety of other senior human resources leadership positions, including Global HR Integration Officer, responsible for the Human Resources integration for Marriott’s merger with Starwood Hotels & Resorts. From 2011 to 2015, Mr. Breland served as Regional Vice President of Human Resources for the Eastern Region of the U.S. Mr. Breland earned his Bachelor of Science in Psychology and Ph.D. in Industrial/Organizational Psychology from Virginia Tech, where he is a board member for the Virginia Tech Hospitality Business School. |
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| Name and Title | | Age | | Business Experience |
J.W. Marriott, Jr.
Executive Chairman and
Chairman of the Board | | 88 | | | J.W. Marriott, Jr. was elected Executive Chairman effective March 31, 2012, having relinquished his position as Chief Executive Officer. He served as Chief Executive Officer of the Company and its predecessors since 1972. He joined Marriott in 1956, became President and a Director in 1964, Chief Executive Officer in 1972, and Chairman of the Board in 1985. Mr. Marriott serves on the Board of Trustees of The J. Willard & Alice S. Marriott Foundation and the Executive Committee of the World Travel & Tourism Council. Mr. Marriott has served as a Director of the Company and its predecessors since 1964. He holds a Bachelor of Science degree in Banking and Finance from the University of Utah. Mr. Marriott plans to transition to the role of Chairman Emeritus in 2022. |
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LiamWilliam P. (Liam) Brown
Group President, United States and Canada | | 6063 | | | Liam Brown becamewas appointed Group President, United States and CanadaCanada effective January 2021, and is responsible for developing and managing Marriott's portfolio in January 2021.the region. Prior to this role, Mr. Brown served as the President and Managing Director of Europe from 2018 to 2019, followed by Group President of Europe, Middle East & Africa in 2020. Mr. Brown joined Marriott in 1989 and served as President for Franchising, Owner Services and Managed by Marriott Select Brands, North America from 2012 to 2018. Other key positions previously held by Mr. Brown include Chief Operations Officer for the Americas for Select Service & Extended Stay Lodging and Owner & Franchise Services, as well as Senior Vice President and Executive Vice President of Development for Marriott’s Select Service & Extended Stay lodging products. Mr. Brown also serves on the Board of DirectorsExecutive Committee of the American Hotel and Lodging Association. He holds a Hotel Diploma and Business Degree from the Dublin Institute of Technology, Trinity College and earned his Master of Business Administration from the Robert H. Smith School of Management at the University of Maryland. |
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Anthony G. Capuano
Group President, Global Development, Design and Operations Services (Acting Co-Principal Executive Officer) | | 55 | | | Anthony G. Capuano became Group President, Global Development, Design and Operations Services in January 2020. He is responsible for leading the Company’s global development and design efforts and oversees the Company’s Global Operations discipline. In February 2021, Mr. Capuano also began to share responsibility with Ms. Linnartz for overseeing the day-to-day operations of Marriott’s business units and corporate functions, which arrangement is expected to continue until the Company’s Board of Directors appoints a permanent CEO. During this time, Mr. Capuano will be overseeing the Company’s U.S. & Canada segment and Finance. Mr. Capuano began his Marriott career in 1995 as part of the Market Planning and Feasibility team. Between 1997 and 2005, he led Marriott’s full-service development efforts in the Western U.S. & Canada. In early 2008, his responsibilities expanded to include all of U.S. & Canada and the Caribbean and Latin America and he became Executive Vice President and Global Chief Development Officer in 2009. Mr. Capuano began his professional career in Laventhol and Horwath’s Boston-based Leisure Time Advisory Group. He then joined Kenneth Leventhal and Company’s hospitality consulting group in Los Angeles, CA. Mr. Capuano earned his bachelor’s degree in Hotel Administration from Cornell University. He is an active member of the Cornell Hotel Society and a member of The Cornell School of Hotel Administration Dean’s Advisory Board. Mr. Capuano is also a member of the American Hotel and Lodging Association’s Industry Real Estate Financial Advisory Council. |
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Name and Title | | Age | | Business Experience |
Felitia O. Lee
Controller and
Chief Accounting Officer | | 5962 | | | Felitia Lee becamewas appointed Marriott’s Controller and Chief Accounting Officer and principal accounting officer ineffective August 2020, with responsibility for the global accounting operations of the Company including oversight of Financial Reporting & Analysis, Accounting Policy, General Accounting, Governance, Risk Management (Insurance, Claims, Business Continuity, Fire & Life Safety), Global Finance Shared Services,financial reporting and Finance Contract Compliance.analysis, accounting policy, general accounting, finance and accounting governance, finance shared services, and financial contract compliance. Ms. Lee joined Marriott in May 2020, supporting the management of the Company’s accounting operations. Prior to joining Marriott, Ms. Lee was the Senior Vice President and Controller for Kohl’s Corporation a publicly-traded retailer, since 2018, where she was responsible for financial reporting, Sarbanes-Oxley processes, capital management, tax planning and compliance. Priorprior to joining Kohl’s Corporation, Ms. Lee held numerous positions with PepsiCo, Inc., a publicly-traded global food and beverage company, culminating inthe title of Vice President and Controller of the Pepsi Beverage Company after the mergeralong with a number of PepsiCo with two of its largest bottlers in 2010. Earlier in her career, Ms. Lee held a variety of financialother leadership positions with such organizations as Pilkington, plc and Coopers & Lybrand (an accounting firm now part of PricewaterhouseCoopers).PepsiCo, Inc. She earned her Bachelor of Science in Accounting from Santa Clara University. She is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. |
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Stephanie Linnartz
Group Yibing Mao President, Consumer Operations, Technology and Emerging Businesses (Acting Co-Principal Executive Officer)Greater China | | 60 | | | 52 | | Stephanie Linnartz became GroupYibing Mao was appointed President, Consumer Operations, TechnologyGreater China in February 2023, and Emerging Businesses in January 2020. She is responsible for the Company’s brand management, sales, marketing, revenue management, distribution, customer experience and innovation, information technology and digital functions, including Marriott Bonvoy, the Company’s loyalty program. In February 2021, Ms. Linnartz also began to share responsibility with Mr. Capuano for overseeing the day-to-day operations of Marriott’s business units and corporate functions, which arrangement is expected to continue until the Company’s Board of Directors appoints a permanent CEO. During this time, Ms. Linnartz will be overseeing the Company’s International segment, as well as Legal, Human Resources and Communications & Public Affairs. Ms. Linnartz also is responsible for developing incubating, and running new linesmanaging Marriott's portfolio in the region. Ms. Mao joined Marriott in 1996 and held the title of business. Before assuming her current position, Ms. Linnartz, who began her Marriott career in 1997, served as Global Chief Commercial Officer from 2013 to 2019; Global Officer, Sales and Revenue Management from 2009 to 2013; Senior Vice President Global Sales& Chief Counsel, Asia Pacific from 2008May 2016 until she stepped down in 2020. From 2021 to 2009; Senior Vice President, Sales and Marketing Planning and Support from 2005 to 2008; and prior to that, various roles in Marriott’s Finance and Business Development Department.February 2023, she was a member of the Board of Directors of Las Vegas Sands Corporation. She currently serves on the BoardLeadership Council of DirectorsDuke Women’s Impact Network. Ms. Mao received a Bachelor of The Home Depot. She holdsLaws from Jilin University, Master of Law from Peking University, and a bachelor’sJ.D. degree from Duke University School of Law. |
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Rajeev (Raj) Menon President, Asia Pacific Excluding China | | 55 | | | Rajeev Menon was appointed President, Asia Pacific excluding China (APEC) in Political ScienceOctober 2019, and Governmentis responsible for developing and managing Marriott's portfolio in the region. Prior to being appointed President, APEC, Mr. Menon served as the Chief Operating Officer for APEC from March 2015 through September 2019. Mr. Menon joined Marriott International in April 2001 as the CollegeGeneral Manager of Renaissance Mumbai Hotel and Convention Center and Marriott Executive Apartments, Mumbai. He completed his education including Hotel Management in New Delhi and is also a graduate of the Holy Cross, where she sits on the Board of Trustees, and earned her Master ofAdvance Management Program (AMP Class 194) at Harvard Business Administration from the College of William and Mary.School. |
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| Name and Title | | Age | | Business Experience |
Kathleen K. (Leeny) Oberg
Chief Financial Officer and Executive Vice President, Development | | 63 | | | Leeny Oberg was appointed Executive Vice President and
Chief Financial Officer | | 60 | | | Kathleen (“Leeny”) K. Oberg was appointed as Marriott’s Chief Financial Officer effective January 1, 2016.2016 and was additionally designated Executive Vice President, Business Operations in October 2021. In February 2023, Ms. Oberg began leading the Company’s Global Development organization and was appointed Chief Financial Officer and Executive Vice President, Development. Previously, Ms. Oberg was the Chief Financial Officer for The Ritz-Carlton since 2013, where she contributed significantly to the brand’s performance, growth, and organizational effectiveness.2013. Prior to assuming that role, Ms. Oberg served in a range of financial leadership positions with Marriott. From 2008 to 2013, she was the Company’sMarriott, including Senior Vice President, Corporate and Development Finance where she led a team that valued new hotel development projects and merger and acquisition opportunities, prepared the Company’s long-range plans and annual budgets, and made recommendations for the Company’s financial and capital allocation strategy. From 2006 to 2008, Ms. Oberg served in London as Senior Vice President, International Project Finance and Asset Management for Europe and the Middle East and Africa, and as the region’s senior finance executive.Africa. Ms. Oberg first joined Marriott as part of its Investor Relations group in 1999. Before joining Marriott, Ms. Oberg held a varietyis an active member of financial leadership positions with such organizations as Sodexo (previously Sodexo Marriott Services), Sallie Mae, Goldman Sachs,the American Hotel and Chase Manhattan Bank. SheLodging Association’s IREFAC Council, and she currently serves on the Adobe Board of Directors.Directors of Adobe Inc. She earned her Bachelor of Science in Commerce, with concentrations in Finance and Management Information Systems, from the University of Virginia, McIntire School of Commerce and received her Master of Business Administration from Stanford University Graduate School of Business. |
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Drew L. Pinto Executive Vice President and Chief Revenue & Technology Officer | | 52 | | | Drew Pinto was appointed Executive Vice President and Chief Revenue & Technology Officer in February 2023, and is responsible for leading global sales and support channels, revenue management, digital, and information technology strategy for the Company. Since joining the Company in 2004, Mr. Pinto has held various leadership roles, including Global Officer, Global Sales, Distribution, and Revenue Management from January 2021 to February 2023 and Senior Vice President, Distribution & Revenue Strategy from January 2019 to January 2021. Mr. Pinto serves on advisory boards for the American Hotel & Lodging Association and several industry-related ventures. Mr. Pinto earned a Bachelor of Arts degree from Yale University and his Master of Business Administration from The University of Michigan Ross School of Business. |
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Rena Hozore Reiss
Executive Vice President and
General Counsel
| | 6164 | | | Rena Hozore Reiss becamewas appointed Executive Vice President and General Counsel ineffective December 2017. Ms. Reiss previously held the position of Executive Vice President, General Counsel and Corporate Secretary at Hyatt Hotels where she led the global legal team and oversaw Hyatt’s risk management team and corporate transactions group.Hotels. Prior to her position with Hyatt, Ms. Reiss was an attorney in Marriott’s law department from 2000 to 2010 building her career in roles with increasing responsibility, ultimately holding the position of Senior Vice President and Associate General Counsel in which she led Marriott’s managed development efforts in the Americas region. Before joining Marriott, Ms. Reiss was a partner at Counts & Kanne, Chartered, in Washington, D.C. and Associate General Counsel at the Miami Herald Publishing Company. Ms. Reiss also serves on the Board of Directors of the American Hotel and Lodging Association.Association and of Legal Aid DC. She earned her A.B. from Princeton University and her J.D. from Harvard Law School. |
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David A. Rodriguez
Peggy F. Roe Executive Vice President
Global Chief Human ResourcesCustomer Officer | | 52 | | | 62 | | David A. RodriguezPeggy Roe was appointed Executive Vice President and Global Chief Human ResourcesCustomer Officer in 2006. BeforeFebruary 2023, and is responsible for overseeing development and execution of all aspects of Marriott’s global consumer strategy. Since joining Marriott in 1998, he2003, Ms. Roe has held seniorvarious leadership roles focused on growth and innovation. From January 2020 to February 2023, she served as Global Officer, Customer Experience, Loyalty, and New Ventures, and from October 2013 to December 2019, she served as Chief Sales and Marketing Officer, Asia Pacific. She co-founded the Marriott Women in human resources at Citicorp (now Citigroup) from 1989 through 1998. Dr. Rodriguez holds a Bachelor of Arts degreeLeadership initiative in Asia Pacific in 2014 and a doctorate degree in Industrial and Organizational Psychology from New York University. He is a board member of the Board of Directors at American Woodmark. He is an elected fellowHong Kong chapter of the National Academy of Human Resources, chairmanAsian University for Women. She currently leads Marriott’s Women’s Associate Resource Group. Ms. Roe is a graduate of the American Health Policy Institute, vice chairUniversity of the Human Resources Policy Association,Michigan and holds a governor on the board of the Health Transformation Alliance. |
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Craig S. Smith
Group President, International | | 58 | | | Craig S. Smith became Group President, International effective in January 2021. From October 2019 until December 2020, Mr. Smith was Group President and Managing Director of Asia Pacific, and he previously served as President and Managing Director of Asia Pacific since June 2015, assuming the responsibility for the strategic leadership of all operational and development functions spanning the region. Mr. Smith began his career with Marriott in 1988. Before becoming President and Managing Director of Asia Pacific, Mr. Smith served as President of Marriott’s Caribbean and Latin America region from 2013 to 2015. Before moving to the Caribbean and Latin America region in 2013, he was Executive Vice President and Chief Operations Officer for Asia Pacific. As the son of an American diplomat, Mr. Smith has lived in 13 countries, working in North America, the Caribbean, Latin America, Asia Pacific, and Australia. He is fluent in Spanish and conversant in Portuguese. Mr. Smith earned his Master of Business Administration from the Rotman School of Management at the University of Toronto and a Bachelor of Science from Brigham Young University.Harvard Business School. |
Code of Ethics and Business Conduct Guide
The Company has long maintained and enforced a Code of Ethics that applies to all Marriott associates, including our Chairman of the Board, Acting Co-PrincipalChief Executive Officers,Officer, Chief Financial Officer, and Principal Accounting Officer, and to each member of the Board. The Code of Ethics is encompassed in our Business Conduct Guide, which is available in the Investor Relations section of our website (Marriott.com/investor) by clicking on “Governance” and then “Documents & Charters.” We intend to post on that
website any future changes or amendments to our Code of Ethics, and any waiver of our Code of Ethics that applies to our Chairman of the Board, any of our executive officers or a member of our Board within four business days following the date of the amendment or waiver.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS
We include this portion of Item 15 under Part II, Item 8 of this Annual Report on Form 10-K.
(2) FINANCIAL STATEMENT SCHEDULES
We include the financial statement schedule information required by the applicable accounting regulations of the SEC in the notes to our financial statements and incorporate that information in this Item 15 by reference.
(3) EXHIBITS
Any stockholder who wants a copy of the following Exhibits may obtain one from us upon request at a charge that reflects the reproduction cost of such Exhibits. Requests should be made to the Secretary, Marriott International, Inc., 10400 Fernwood Road,7750 Wisconsin Avenue, Department 52/862, Bethesda, MD 20817.20814.
We have not filed as exhibits certain instruments defining the rights of holders of the long-term debt of Marriott or its subsidiary Starwood Hotels & Resorts Worldwide, LLC, pursuant to Item 601(b)(4)(iii) of Regulation S-K promulgated under the Exchange Act, because the amount of debt authorized and outstanding under each such instrument does not exceed 10 percent of the total assets of the Company’s and its consolidated subsidiaries. The Company agrees to furnish a copy of any such instrument to the Commission upon request.
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| Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
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| 3.1 | | Restated Certificate of Incorporation. | | |
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| 3.2 | | Amended and Restated Bylaws. | | |
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| 4.1 | | Form of Common Stock Certificate. | | |
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| 4.2 | | Indenture, dated as of November 16, 1998, between the Company and The Bank of New York Mellon, as successor to JPMorgan Chase Bank, N.A., formerly known as The Chase Manhattan Bank. | | |
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| 4.3 | | Description of Registrant’s SecuritiesSecurities. | | |
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10.1.110.1 | | U.S. $4,500,000 FifthSixth Amended and Restated Credit Agreement dated as of June 28, 2019December 14, 2022 with Bank of America, N.A. as administrative agent and certain banks. | | |
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10.1.2 | | First Amendment, dated as of April 13, 2020, to the Fifth Amended and Restated Credit Agreement with Bank of America, N.A. as administrative agent, and certain banks, dated as of June 28, 2019. | | |
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Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
10.1.3 | | Second Amendment, dated as of January 26, 2021, to the Fifth Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent, and certain banks, dated as of June 28, 2019. | | |
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10.1.4 | | Third Amendment, dated as of January 26, 2021, to the Fifth Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent, and certain banks, dated as of June 28, 2019. | | |
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| 10.2.1 | | License, Services and Development Agreement entered into on November 17, 2011, among the Company, Marriott Worldwide Corporation, Marriott Vacations Worldwide Corporation, and the other signatories thereto. | | |
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| 10.2.2 | | First Amendment to License, Services, and Development Agreement for Marriott Projects, dated February 26, 2018, among the Company, Marriott Worldwide Corporation, Marriott Vacations Worldwide Corporation, and the other signatories thereto. | | |
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| Exhibit No. | | Description | | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
| 10.2.3 | | Letter of Agreement, effective as of September 1, 2018, among Marriott International, Inc.,the Company, Marriott Worldwide Corporation, Marriott Rewards, LLC, Starwood Hotels & Resorts Worldwide, LLC, Marriott Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc., Vistana Signature Experiences, Inc. and ILG, LLC. | | |
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| 10.2.4 | | Letter of Agreement, effective as of January 1, 2022, among the Company, Marriott Worldwide Corporation, Marriott Vacations Worldwide Corporation, Starwood Hotels & Resorts Worldwide, LLC, Marriott Ownership Resorts, Inc., Vistana Signature Experiences, Inc. and ILG, LLC. | | |
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| 10.2.5 | | Letter of Agreement, dated as of March 4, 2022, among the Company, Marriott Worldwide Corporation, Marriott Vacations Worldwide Corporation, Starwood Hotels & Resorts Worldwide, LLC, Vistana Signature Experiences, Inc. and ILG, LLC. | | |
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| 10.2.6 | | Amendment to License, Services, and Development Agreement for Marriott Projects, dated May 19, 2022, among the Company, Marriott Worldwide Corporation, Marriott Vacations Worldwide Corporation, Starwood Hotels & Resorts Worldwide, LLC, Vistana Signature Experiences, Inc. and ILG, LLC. | | |
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| 10.3.1 | | License, Services and Development Agreement entered into on November 17, 2011, among The Ritz-Carlton Hotel Company, L.L.C., Marriott Vacations Worldwide Corporation, and the other signatories thereto. | | |
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| 10.3.2 | | First Amendment to License, Services, and Development Agreement for Ritz-Carlton Projects, dated February 26, 2018, among The Ritz-Carlton Hotel Company, L.L.C., Marriott Vacations Worldwide Corporation, and the other signatories thereto. | | |
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| 10.4.1 | | Marriott RewardsBonvoy Affiliation Agreement entered into on November 17, 2011,10, 2021, among the Company, Marriott Rewards, L.L.C., Marriott Vacations Worldwide Corporation and certain of its subsidiaries, Marriott Ownership Resorts, Inc., and the other signatories thereto. | | |
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10.4.2†10.5 | | First Amendment to the Marriott RewardsAmended and Restated Side Letter Agreement - Program Affiliation, Agreement, dated February 26, 2018, among the Company, Marriott Rewards, LLC, Marriott Vacations Worldwide, Corporation, and Marriott Ownership Resorts, Inc.certain of their subsidiaries. | | |
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10.4.3*10.6.1 | | 2023 Marriott International, Inc. Stock and Cash Incentive Plan. | | Second Amendment to Marriott Rewards Affiliation Agreement, dated November 25, 2019, among the Company, Marriott Rewards, LLC, Marriott Vacations Worldwide Corporation, and Marriott Ownership Resorts, Inc. | |
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| *10.6.2 | | United Kingdom Sub-Plan of the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (December 2023). | | | |
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| *10.7.1 | | *10.5.1Form of Non-Employee Director Deferred Share Award Agreement for the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (June 2023). | | |
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| *10.7.2 | | Form of Non-Employee Director Deferred Fee Award Agreement for the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (June 2023). | | |
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| Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
| *10.8 | | Form of Non-Employee Director Stock Appreciation Right Agreement for the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (June 2023). | | |
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| *10.9.1 | | Marriott International, Inc. Stock and Cash Incentive Plan, as Amended Throughamended through February 13, 2014. | | |
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*10.5.210.9.2 | | Amendment dated August 7, 2014 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.9.3 | | Amendment dated September 23, 2016 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.9.4 | | Amendment dated November 10, 2016 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.9.5 | | Amendment dated May 5, 2017 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.9.6 | | Amendment dated February 15, 2019 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.9.7 | | Amendment dated May 10, 2019 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.9.8 | | Amendment dated May 8, 2020 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.10.1 | | Form of MI Shares Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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| *10.10.2 | | Form of Retention Executive Restricted Stock Unit Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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| *10.10.3 | | Form of Executive Restricted Stock Unit/MI Shares Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2021). | | |
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| *10.10.4 | | Form of MI Shares Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2023). | | |
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| *10.11.1 | | Form of Stock Appreciation Rights Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (pre-February 2018). | | |
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| *10.11.2 | | Form of Stock Appreciation Rights Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2018). | | |
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| *10.11.3 | | Form of Stock Appreciation Rights Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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| *10.11.4 | | Form of Stock Appreciation Rights Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2021). | | |
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| *10.11.5 | | Form of Stock Appreciation Rights Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2023). | | |
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| *10.12.1 | | Form of Non-Employee Director Deferred Fee Award Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| *10.12.2 | | Form of Non-Employee Director Deferred Share Award Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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| Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
| *10.13.1 | | Form of Non-Employee Director Stock Appreciation Right Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (Pre-May 2022). | | |
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| *10.13.2 | | Form of Non-Employee Director Stock Appreciation Right Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (May 2022). | | |
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| *10.14.1 | | Form of Performance Share Unit Award Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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| *10.14.2 | | Form of Performance Share Unit Award Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2021). | | |
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| *10.14.3 | | Form of Performance Share Unit Award Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2023). | | |
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| *10.15.1 | | Marriott International, Inc. Executive Deferred Compensation Plan, amended and restated as of February 11, 2022. | | |
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| *10.15.2 | | First Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective as of October 31, 2022. | | |
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| *10.15.3 | | Second Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective as of January 1, 2024. | | |
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| *10.16.1 | | Starwood 2013 Long-Term Incentive Compensation Plan. | | |
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| *10.16.2 | | Amendment dated June 29, 2016 to the Starwood 2013 Long-Term Incentive Compensation Plan. | | |
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| *10.16.3 | | Amendment dated September 23, 2016 to the Starwood 2013 Long-Term Incentive Compensation Plan. | | |
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| *10.16.4 | | Amendment dated May 5, 2017 to the Starwood 2013 Long-Term Incentive Compensation Plan. | | |
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| *10.17 | | Amended and Restated Aircraft Time Sharing Agreement, effective as of September 14, 2023, between Marriott International Administrative Services, Inc. and Anthony Capuano. | | |
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| 10.18 | | Second Amended and Restated Aircraft Time Sharing Agreement, effective as of September 14, 2023, between Marriott International Administrative Services, Inc. and J. Willard Marriott, Jr. | | |
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| *10.19 | | Aircraft Time Sharing Agreement, effective as of February 9, 2023, between Marriott International Administrative Services, Inc. and David Marriott. | | |
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| 21 | | Subsidiaries of Marriott International, Inc. | | |
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| 23 | | Consent of Ernst & Young LLP. | | |
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| 31.1 | | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a). | | |
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| 31.2 | | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a). | | |
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| 32 | | Section 1350 Certifications. | | |
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| Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
*10.5.397 | | Amendment dated September 23, 2016 to the Marriott International, Inc. Stock and Cash Incentive Plan.Rule 10D-1 Clawback Policy. | | |
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*10.5.4 | | Amendment dated May 5, 2017 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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*10.5.5 | | Amendment dated February 15, 2019 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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*10.5.6 | | Amendment dated May 10, 2019 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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*10.5.7 | | Amendment dated May 8, 2020 to the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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*10.6.1 | | Marriott International, Inc. Executive Deferred Compensation Plan, Amended and Restated as of January 1, 2009. | | |
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*10.6.2 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective January 1, 2010. | | |
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*10.6.3 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective April 1, 2010. | | |
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*10.6.4 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective October 25, 2011. | | |
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*10.6.5 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective November 19, 2011. | | |
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*10.6.6 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective January 1, 2013. | | |
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*10.6.7 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective September 23, 2016 (409A). | | |
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*10.6.8 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective September 23, 2016 (Starwood deferral elections). | | |
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*10.6.9 | | Amendment to the Marriott International, Inc. Executive Deferred Compensation Plan, effective January 1, 2019. | | |
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*10.7.1 | | Form of Employee Non-Qualified Stock Option Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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*10.7.2 | | Form of Senior Executive Supplemental Non-Qualified Stock Option Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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*10.8.1 | | Form of Executive Restricted Stock Unit/MI Shares Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (pre-February 2018). | | |
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Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
*10.8.2 | | Form of Executive Restricted Stock Unit/MI Shares Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2018). | | |
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*10.8.3 | | Form of Retention Executive Restricted Stock Unit Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2018). | | |
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*10.8.4 | | Form of MI Shares Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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*10.8.5 | | Form of Retention Executive Restricted Stock Unit Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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*10.9.1 | | Form of Stock Appreciation Right Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (pre-February 2018). | | |
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*10.9.2 | | Form of Senior Executive Supplemental Stock Appreciation Right Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan. | | |
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*10.9.3 | | Form of Stock Appreciation Right Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (For Non-Employee Directors). | | |
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*10.9.4 | | Form of Stock Appreciation Rights Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2018). | | |
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*10.9.5 | | Form of Stock Appreciation Rights Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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*10.10.1 | | Form of Performance Share Unit Award Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (February 2018). | | |
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*10.10.2 | | Form of Performance Share Unit Award Agreement for the Marriott International, Inc. Stock and Cash Incentive Plan (March 2019). | | |
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*10.11 | | Summary of Marriott International, Inc. Director Compensation. | | |
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*10.12 | | Marriott International, Inc. Executive Officer Annual Cash Incentive Program. | | |
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*10.13.1 | | Starwood 1999 Long-Term Incentive Compensation Plan. | | |
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*10.13.2 | | First Amendment to the Starwood 1999 Long-Term Incentive Compensation Plan, dated as of August 1, 2001. | | |
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*10.13.3 | | Second Amendment to the Starwood 1999 Long-Term Incentive Compensation Plan. | | |
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*10.14.1 | | Starwood 2002 Long-Term Incentive Compensation Plan. | | |
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*10.14.2 | | First Amendment to the Starwood 2002 Long-Term Incentive Compensation Plan. | | |
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Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
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*10.15.1 | | Starwood 2004 Long-Term Incentive Compensation Plan, amended and restated as of December 31, 2008. | | |
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*10.15.2 | | First Amendment to the Starwood 2004 Long-Term Incentive Compensation Plan. | | |
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*10.16.1 | | Starwood 2013 Long-Term Incentive Compensation Plan. | | |
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*10.16.2 | | Amendment dated May 5, 2017 to the Starwood 2013 Long-Term Incentive Compensation Plan. | | |
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*10.17 | | Amendment dated June 29, 2016 to the Starwood 2013 Long-Term Incentive Compensation Plan, the Starwood 2004 Long-Term Incentive Compensation Plan, the Starwood 2002 Long-Term Incentive Compensation Plan, and the Starwood 1999 Long-Term Incentive Compensation Plan. | | |
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*10.18 | | Amendment dated September 23, 2016 to the Starwood 2013 Long-Term Incentive Compensation Plan, the Starwood 2004 Long-Term Incentive Compensation Plan, the Starwood 2002 Long-Term Incentive Compensation Plan, and the Starwood 1999 Long-Term Incentive Compensation Plan. | | |
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*10.19 | | Amendment dated November 10, 2016 to the Marriott International, Inc. Stock and Cash Incentive Plan, the Starwood 2013 Long-Term Incentive Compensation Plan, the Starwood 2004 Long-Term Incentive Compensation Plan, the Starwood 2002 Long-Term Incentive Compensation Plan, and the Starwood 1999 Long-Term Incentive Compensation Plan. | | |
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†10.20 | | Amended and Restated Side Letter Agreement - Program Affiliation, dated February 26, 2018, among the Company, Marriott Vacations Worldwide, and certain of their subsidiaries. | | |
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10.21 | | Aircraft Time Sharing Agreement, effective as of September 20, 2018, between Marriott International Administrative Services, Inc. and J. Willard Marriott Jr. | | |
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21 | | Subsidiaries of Marriott International, Inc. | | |
| | |
| 23 | Consent of Ernst & Young LLP. | | |
| | |
31.1 | | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a). | | |
| | |
31.2 | | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a). | | |
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Exhibit No. | | Description | | Incorporation by Reference (where a report is indicated below, that document has been previously filed with the SEC and the applicable exhibit is incorporated by reference thereto) |
| | |
32 | | Section 1350 Certifications. | | |
| | |
| 101 | | The following financial statements from Marriott International, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020,2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of (Loss) Income for the year ended December 31, 2020,2023, December 31, 2019,2022, and December 31, 2018;2021; (ii) the Consolidated Balance Sheets at December 31, 2020,2023, and December 31, 2019;2022; (iii) the Consolidated Statements of Cash Flows for the year ended December 31, 2020,2023, December 31, 2019,2022, and December 31, 2018;2021; (iv) the Consolidated Statements of Comprehensive (Loss) Income for the year ended December 31, 2020,2023, December 31, 2019,2022, and December 31, 2018;2021; (v) the Consolidated Statements of Stockholders’ (Deficit) Equity for the year ended December 31, 2020,2023, December 31, 2019,2022, and December 31, 2018;2021; and (vi) Notes to Consolidated Financial Statements. | | Submitted electronically with this report. |
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| 101.INS | | XBRL Instance Document. | | Submitted electronically with this report. |
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| 101.SCH | | XBRL Taxonomy Extension Schema Document. | | Submitted electronically with this report. |
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| 101.CAL | | XBRL Taxonomy Calculation Linkbase Document. | | Submitted electronically with this report. |
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| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase. | | Submitted electronically with this report. |
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| 101.LAB | | XBRL Taxonomy Label Linkbase Document. | | Submitted electronically with this report. |
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| 101.PRE | | XBRL Taxonomy Presentation Linkbase Document. | | Submitted electronically with this report. |
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| 104 | | The cover page from Marriott International, Inc.’s Annual Report on Form 10-K/A10-K for the year ended December 31, 2020,2023, formatted in Inline XBRL (included as Exhibit 101). | | Submitted electronically with this report. |
* Denotes management contract or compensatory plan.
† Portions of this exhibit were redacted pursuant to a confidential treatment request filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Exchange Act. The redacted portions of this exhibit have been filed with the Securities and Exchange Commission.
Item 16. Form 10-K Summary.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, we have duly caused this Form 10-K/A10-K to be signed on our behalf by the undersigned, thereunto duly authorized, on this 2nd13th day of April 2021.February 2024.
MARRIOTT INTERNATIONAL, INC.
| | | | | | | | | | | | | | |
| By: | | /s/Anthony G. Capuano | | |
| | Anthony G. Capuano | | |
| | President and Chief Executive Officer | | |
Pursuant to the requirements of the Exchange Act, this Form 10-K/A10-K has been signed by the following persons on our behalf in the capacities indicated and on the date indicated above.
| | | | | | | | |
| PRINCIPAL EXECUTIVE OFFICER: |
| | |
| /s/Anthony G. Capuano | | President, Chief Executive Officer and Director |
| Anthony G. Capuano | |
| | |
| PRINCIPAL FINANCIAL OFFICER: | | |
| | |
| /s/Kathleen K. Oberg | | Chief Financial Officer and Executive Vice President, and Chief Financial OfficerDevelopment |
| Kathleen K. Oberg | |
| | |
| PRINCIPAL ACCOUNTING OFFICER: | | |
| | |
| /s/Felitia O. Lee | | Controller and Chief Accounting Officer |
| Felitia O. Lee | |
| | |
| DIRECTORS: | | |
| | |
| /s/David S. Marriott | | /s/Debra L. Lee |
| David S. Marriott, Chairman of the Board | | Debra L. Lee, Director |
| | |
| /s/Isabella D. Goren | | /s/Aylwin B. Lewis |
| Isabella D. Goren, Director | | Aylwin B. Lewis, Director |
| | |
| /s/Deborah Marriott Harrison | | /s/Debra L. LeeMargaret M. McCarthy |
| Deborah Marriott Harrison, Director | | Debra L. Lee,Margaret M. McCarthy, Director |
| | |
| /s/Frederick A. Henderson | | /s/Aylwin B. LewisGrant F. Reid |
| Frederick A. Henderson, Director | | Aylwin B. Lewis,Grant F. Reid, Director |
| | |
| /s/Eric Hippeau | | /s/Margaret M. McCarthyHoracio D. Rozanski |
| Eric Hippeau, Director | | Margaret M. McCarthy,Horacio D. Rozanski, Director |
| | |
/s/Lawrence W. KellnerLauren R. Hobart | | /s/Susan C. Schwab |
Lawrence W. Kellner,Lauren R. Hobart, Director | | Susan C. Schwab, Director |
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