UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________

FORM 10-Q

_________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

~~For the transition period from to~~

Commission File No. 1-13881

_________________________________________________

MARRIOTT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

~~_______________________________________~~

Delaware

52-2055918

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

7750 Wisconsin Avenue

Bethesda

Maryland

20814

(Address of principal executive offices)

(Zip Code)

~~(301) 380-3000~~

(Registrant’s telephone number, including area code)

(301) 380-3000

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

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 ý No ¨

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 ý No ¨

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.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~316,539,613~~298,239,583 shares of Class A Common Stock, par value $0.01 per share, outstanding at ~~October 27, 2022.~~July 25, 2023.

Table of Contents

MARRIOTT INTERNATIONAL, INC.

FORM 10-Q TABLE OF CONTENTS

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

($ in millions, except per share amounts)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
REVENUES	REVENUES									REVENUES
Base management fees	Base management fees	$	275	$	190	$	757	$	452	Base management fees	$	318	$	269	$	611	$	482
Franchise fees	Franchise fees	678		533		1,847		1,270		Franchise fees	739		669		1,378		1,169
Incentive management fees	Incentive management fees	106		53		343		141		Incentive management fees	193		135		394		237
Gross fee revenues	Gross fee revenues	1,059		776		2,947		1,863		Gross fee revenues	1,250		1,073		2,383		1,888
Contract investment amortization	Contract investment amortization	(22)		(21)		(65)		(56)		Contract investment amortization	(22)		(19)		(43)		(43)
Net fee revenues	Net fee revenues	1,037		755		2,882		1,807		Net fee revenues	1,228		1,054		2,340		1,845
Owned, leased, and other revenue	Owned, leased, and other revenue	345		241		971		536		Owned, leased, and other revenue	390		364		746		626
Cost reimbursement revenue	Cost reimbursement revenue	3,931		2,950		10,997		7,068		Cost reimbursement revenue	4,457		3,920		8,604		7,066
		5,313		3,946		14,850		9,411			6,075		5,338		11,690		9,537
OPERATING COSTS AND EXPENSES	OPERATING COSTS AND EXPENSES									OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct	Owned, leased, and other-direct	301		204		779		507		Owned, leased, and other-direct	287		281		568		478
Depreciation, amortization, and other	Depreciation, amortization, and other	50		64		147		166		Depreciation, amortization, and other	48		49		92		97
General, administrative, and other	General, administrative, and other	216		212		655		610		General, administrative, and other	240		231		442		439
Restructuring, merger-related charges, and other		2		4		11		8
Merger-related charges and other										Merger-related charges and other	38		—		39		9
Reimbursed expenses	Reimbursed expenses	3,786		2,917		10,792		7,005		Reimbursed expenses	4,366		3,827		8,502		7,006
		4,355		3,401		12,384		8,296			4,979		4,388		9,643		8,029
OPERATING INCOME	OPERATING INCOME	958		545		2,466		1,115		OPERATING INCOME	1,096		950		2,047		1,508
Gains and other income, net	Gains and other income, net	3		—		9		6		Gains and other income, net	2		2		5		6
Loss on extinguishment of debt		—		(164)		—		(164)

Interest expense	Interest expense	(100)		(107)		(288)		(323)		Interest expense	(140)		(95)		(266)		(188)
Interest income	Interest income	7		8		18		22		Interest income	(1)		6		14		11
Equity in earnings (losses)		1		(4)		18		(24)
Equity in earnings										Equity in earnings	7		15		8		17
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	869		278		2,223		632		INCOME BEFORE INCOME TAXES	964		878		1,808		1,354
Provision for income taxes	Provision for income taxes	(239)		(58)		(538)		(1)		Provision for income taxes	(238)		(200)		(325)		(299)
NET INCOME	NET INCOME	$	630	$	220	$	1,685	$	631	NET INCOME	$	726	$	678	$	1,483	$	1,055
EARNINGS PER SHARE	EARNINGS PER SHARE									EARNINGS PER SHARE
Earnings per share - basic		$	1.94	$	0.67	$	5.15	$	1.93
Earnings per share - diluted		$	1.94	$	0.67	$	5.13	$	1.92
Earnings per share – basic										Earnings per share – basic	$	2.39	$	2.06	$	4.84	$	3.21
Earnings per share – diluted										Earnings per share – diluted	$	2.38	$	2.06	$	4.81	$	3.20

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in millions)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net income	Net income	$	630	$	220	$	1,685	$	631	Net income	$	726	$	678	$	1,483	$	1,055
Other comprehensive income (loss):
Other comprehensive income (loss)										Other comprehensive income (loss)
Foreign currency translation adjustments	Foreign currency translation adjustments	(340)		(138)		(653)		(197)		Foreign currency translation adjustments	(77)		(327)		7		(313)
Other adjustments, net of tax	Other adjustments, net of tax	1		—		5		—		Other adjustments, net of tax	8		4		6		4

Total other comprehensive income (loss), net of tax	Total other comprehensive income (loss), net of tax	(339)		(138)		(648)		(197)		Total other comprehensive income (loss), net of tax	(69)		(323)		13		(309)
Comprehensive income	Comprehensive income	$	291	$	82	$	1,037	$	434	Comprehensive income	$	657	$	355	$	1,496	$	746

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)


		(Unaudited)					(Unaudited)
		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and equivalents	Cash and equivalents	$	1,045	$	1,393	Cash and equivalents	$	563	$	507
Accounts and notes receivable, net	Accounts and notes receivable, net	2,378		1,982		Accounts and notes receivable, net	2,565		2,571
Prepaid expenses and other	Prepaid expenses and other	261		251		Prepaid expenses and other	316		235

		3,684		3,626			3,444		3,313
Property and equipment, net	Property and equipment, net	1,509		1,503		Property and equipment, net	1,560		1,585
Intangible assets	Intangible assets					Intangible assets
Brands	Brands	5,727		5,979		Brands	5,878		5,812
Contract acquisition costs and other	Contract acquisition costs and other	2,880		2,947		Contract acquisition costs and other	3,117		2,935
Goodwill	Goodwill	8,765		9,073		Goodwill	8,850		8,872
		17,372		17,999			17,845		17,619
Equity method investments	Equity method investments	332		387		Equity method investments	311		335
Notes receivable, net	Notes receivable, net	132		144		Notes receivable, net	140		152
Deferred tax assets	Deferred tax assets	228		228		Deferred tax assets	240		240
Operating lease assets	Operating lease assets	947		1,062		Operating lease assets	965		987
Other noncurrent assets	Other noncurrent assets	559		604		Other noncurrent assets	582		584
		$	24,763	$	25,553		$	25,087	$	24,815
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities	Current liabilities					Current liabilities
Current portion of long-term debt	Current portion of long-term debt	$	558	$	805	Current portion of long-term debt	$	894	$	684
Accounts payable	Accounts payable	746		726		Accounts payable	670		746
Accrued payroll and benefits	Accrued payroll and benefits	1,260		1,187		Accrued payroll and benefits	1,092		1,299
Liability for guest loyalty program	Liability for guest loyalty program	3,094		2,522		Liability for guest loyalty program	3,372		3,314
Accrued expenses and other	Accrued expenses and other	1,454		1,167		Accrued expenses and other	1,492		1,296
		7,112		6,407			7,520		7,339
Long-term debt	Long-term debt	8,860		9,333		Long-term debt	10,403		9,380
Liability for guest loyalty program	Liability for guest loyalty program	3,552		3,949		Liability for guest loyalty program	3,413		3,280
Deferred tax liabilities	Deferred tax liabilities	273		169		Deferred tax liabilities	285		313
Deferred revenue	Deferred revenue	1,085		1,181		Deferred revenue	1,039		1,059
Operating lease liabilities	Operating lease liabilities	1,007		1,098		Operating lease liabilities	999		1,034
Other noncurrent liabilities	Other noncurrent liabilities	1,811		2,002		Other noncurrent liabilities	1,652		1,842
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Class A Common Stock	Class A Common Stock	5		5		Class A Common Stock	5		5
Additional paid-in-capital	Additional paid-in-capital	5,919		5,892		Additional paid-in-capital	5,952		5,965
Retained earnings	Retained earnings	11,795		10,305		Retained earnings	13,544		12,342
Treasury stock, at cost	Treasury stock, at cost	(15,666)		(14,446)		Treasury stock, at cost	(19,009)		(17,015)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(990)		(342)		Accumulated other comprehensive loss	(716)		(729)
		1,063		1,414			(224)		568
		$	24,763	$	25,553		$	25,087	$	24,815

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

(Unaudited)


		Nine Months Ended					Six Months Ended
		September 30, 2022		September 30, 2021			June 30, 2023		June 30, 2022
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	1,685	$	631	Net income	$	1,483	$	1,055
Adjustments to reconcile to cash provided by operating activities:	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	212		222		Depreciation, amortization, and other	135		140
Stock-based compensation	Stock-based compensation	144		138		Stock-based compensation	93		96
Income taxes	Income taxes	197		(292)		Income taxes	(80)		174
Liability for guest loyalty program	Liability for guest loyalty program	(17)		54		Liability for guest loyalty program	131		44
Contract acquisition costs	Contract acquisition costs	(92)		(143)		Contract acquisition costs	(105)		(51)
Restructuring, merger-related charges, and other		(1)		(5)
Merger-related charges and other						Merger-related charges and other	32		6
Working capital changes	Working capital changes	(225)		71		Working capital changes	(215)		(379)
Loss on extinguishment of debt		—		164
Deferred revenue changes and other		19		(95)

Other						Other	64		(37)
Net cash provided by operating activities	Net cash provided by operating activities	1,922		745		Net cash provided by operating activities	1,538		1,048
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Capital and technology expenditures						Capital and technology expenditures	(194)		(119)
Asset acquisition						Asset acquisition	(102)		—

Capital and technology expenditures		(192)		(114)
Dispositions		—		8
Loan advances	Loan advances	(10)		(10)		Loan advances	(17)		(3)
Loan collections	Loan collections	12		38		Loan collections	33		9
Other	Other	53		(3)		Other	37		22
Net cash used in investing activities	Net cash used in investing activities	(137)		(81)		Net cash used in investing activities	(243)		(91)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Credit Facility, net		(1,050)		(150)
Commercial paper/Credit Facility, net						Commercial paper/Credit Facility, net	736		(750)
Issuance of long-term debt	Issuance of long-term debt	983		1,787		Issuance of long-term debt	783		—
Repayment of long-term debt	Repayment of long-term debt	(578)		(2,172)		Repayment of long-term debt	(330)		(576)
Issuance of Class A Common Stock		—		2
Debt extinguishment costs		—		(155)

Dividends paid	Dividends paid	(195)		—		Dividends paid	(281)		(98)
Purchase of treasury stock	Purchase of treasury stock	(1,235)		—		Purchase of treasury stock	(2,046)		(300)
Stock-based compensation withholding taxes	Stock-based compensation withholding taxes	(88)		(85)		Stock-based compensation withholding taxes	(79)		(87)
Other	Other	25		12		Other	(24)		—
Net cash used in financing activities	Net cash used in financing activities	(2,138)		(761)		Net cash used in financing activities	(1,241)		(1,811)
DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(353)		(97)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH						INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	54		(854)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	1,421		894		CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	525		1,421
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	$	1,068	$	797	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	$	579	$	567

(1)The ~~2022~~2023 amounts include beginning restricted cash of ~~$28~~$18 million at December 31, ~~2021,~~2022, and ending restricted cash of ~~$23~~$16 million at ~~September~~June 30, ~~2022,~~2023, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The condensed 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 Condensed Consolidated Financial Statements as our “Financial Statements,” (2) our Condensed Consolidated Statements of Income as our “Income Statements,” (3) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (4) our Condensed 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, Europe, Middle East and Africa, Greater China, and Asia Pacific excluding China regions, as “International.” In addition, references throughout to numbered “Notes” refer to these Notes to Condensed Consolidated Financial Statements, unless otherwise stated.

These Financial Statements have not been audited. We have condensed or omitted certain information and disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (“~~2021~~2022 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our ~~2021~~2022 Form 10-K.

Preparation of financial statements that conform with 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 pandemic (“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 as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the results of our operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021,~~2022, and cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021.~~2022. Interim results may not be indicative of fiscal year performance because of seasonal and short-term ~~variations, as well as the impact of COVID-19.~~variations. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.

NOTE 2. EARNINGS PER SHARE

The table below ~~presents~~illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per ~~share:~~share, the latter of which uses the treasury stock method to calculate the dilutive effect of the Company’s potential common stock:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in millions, except per share amounts)	(in millions, except per share amounts)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021		(in millions, except per share amounts)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Computation of Basic Earnings Per Share	Computation of Basic Earnings Per Share									Computation of Basic Earnings Per Share
Net income	Net income	$	630	$	220	$	1,685	$	631	Net income	$	726	$	678	$	1,483	$	1,055
Shares for basic earnings per share	Shares for basic earnings per share	324.5		327.3		327.0		327.0		Shares for basic earnings per share	303.6		328.2		306.6		328.3
Basic earnings per share	Basic earnings per share	$	1.94	$	0.67	$	5.15	$	1.93	Basic earnings per share	$	2.39	$	2.06	$	4.84	$	3.21
Computation of Diluted Earnings Per Share	Computation of Diluted Earnings Per Share									Computation of Diluted Earnings Per Share
Net income	Net income	$	630	$	220	$	1,685	$	631	Net income	$	726	$	678	$	1,483	$	1,055
Shares for basic earnings per share	Shares for basic earnings per share	324.5		327.3		327.0		327.0		Shares for basic earnings per share	303.6		328.2		306.6		328.3
Effect of dilutive securities	Effect of dilutive securities									Effect of dilutive securities
Stock-based compensation	Stock-based compensation	1.2		2.0		1.4		2.1		Stock-based compensation	1.4		1.3		1.4		1.5
Shares for diluted earnings per share	Shares for diluted earnings per share	325.7		329.3		328.4		329.1		Shares for diluted earnings per share	305.0		329.5		308.0		329.8
Diluted earnings per share	Diluted earnings per share	$	1.94	$	0.67	$	5.13	$	1.92	Diluted earnings per share	$	2.38	$	2.06	$	4.81	$	3.20

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NOTE 3. STOCK-BASED COMPENSATION

We granted ~~1.1~~1.0 million restricted stock units (“RSUs”) during the ~~2022~~2023 first ~~three quarters~~half to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted 0.1 million performance-based RSUs (“PSUs”) in the ~~2022~~2023 first ~~three quarters~~half to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions ~~generally~~ based on the degree of achievement of pre-established targets for ~~2024~~2025 adjusted EBITDA performance and relative total stockholder return over the ~~2022~~2023 to ~~2024~~2025 performance period. RSUs, including PSUs, granted in the ~~2022~~2023 first ~~three quarters~~half had a weighted average grant-date fair value of ~~$169~~$166 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of ~~$45~~$49 million in the 2023 second quarter, $49 million in the 2022 ~~third~~second quarter, ~~$40~~$82 million in the ~~2021 third quarter, $136~~2023 first half, and $91 million in the 2022 first ~~three quarters, and $130 million in the 2021 first three quarters.~~half. Deferred compensation costs for unvested awards for RSUs and PSUs totaled ~~$223~~$267 million at ~~September~~June 30, ~~2022~~2023 and ~~$189~~$179 million at December 31, ~~2021.~~2022.

NOTE 4. INCOME TAXES

Our effective tax rate ~~was 27.5~~increased to 24.7 percent for the 2023 second quarter compared to 22.8 percent for the 2022 ~~third~~second quarter, ~~compared~~primarily due to ~~21.1~~a shift in earnings to jurisdictions with higher tax rates.

Our effective tax rate decreased to 18.0 percent for the ~~2021 third quarter. The increase in our effective tax rate was~~2023 first half compared to 22.1 percent for the 2022 first half, primarily due to the current year release of tax ~~expense from~~reserves, partially offset by the ~~completion of prior years’~~shift in earnings to jurisdictions with higher tax ~~audits.~~rates.

Our ~~effective~~unrecognized tax ~~rate was 24.2 percent for the~~benefit balance decreased by $98 million to $157 million at June 30, 2023 from $255 million at December 31, 2022, ~~first three quarters compared to 0.2 percent for the 2021 first three quarters. The increase in our effective tax rate was~~ primarily due to the completion of a prior year tax audit. Our unrecognized tax benefit ~~from the release~~balance included $146 million at June 30, 2023 and $241 million at December 31, 2022 of tax ~~reserves due to~~positions that, if recognized, would impact our effective tax rate. It is reasonably possible that within the ~~favorable~~next 12 months we will reach resolution of ~~Legacy-Starwood~~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 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 June 30, 2023, we have settled all issues for tax years through 2019. Our 2020 through 2023 tax year audits ~~as well as~~are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the ~~current year tax expense from the completion of prior years’ tax audits.~~applicable taxing authorities.

We paid cash for income taxes, net of refunds, of ~~$341~~$406 million in the 2023 first half and $125 million in the 2022 first ~~three quarters and $293 million in the 2021 first three quarters.~~half.

NOTE 5. COMMITMENTS AND CONTINGENCIES

Guarantees

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 ~~September~~June 30, ~~2022~~2023 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	$	77	$	11	Debt service	$	57	$	6
Operating profit	Operating profit	174		104		Operating profit	174		91
Other	Other	15		4		Other	18		4
		$	266	$	119		$	249	$	101

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Our maximum potential guarantees listed in the preceding table include ~~$42~~$58 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.

Contingent Purchase Obligation

Sheraton Grand Chicago. In 2017, we granted the owner a one-time right to require us to purchase the leasehold interest in the land and the hotel for $300 million in cash (the “put option”). In the 2021 third quarter, we entered into an amendment with the owner to move the exercise period of the put option from the 2022 first half to the 2024 first half. If the owner exercises the put option, the closing is expected to occur in the 2024 fourth quarter, and 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. We account for the put option as a guarantee, and our recorded liability was $300 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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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 “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. We discontinued use of t~~The~~he Starwood reservations database ~~is no longer used~~ for business operations at the end of 2018.

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. The plaintiffs in the 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. The active U.S. cases are consolidated in the U.S. District Court for the District of Maryland (the “District Court”), pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). ~~On May 3, 2022, the~~The District Court granted in part and denied in part class certification of various U.S. groups of ~~consumers. We appealed the District Court’s~~consumers, and our appeal of this decision ~~and on July 14, 2022,~~is pending in the U.S. Court of Appeals for the Fourth ~~Circuit granted our petition to appeal. On September 8, 2022, the District Court held that~~Circuit. A case brought by the City of Chicago (which ~~brought claims against us that are~~is consolidated in the MDL proceeding) ~~could not pursue injunctive claims but could pursue monetary claims.~~also remains pending. The Canadian cases have effectively been consolidated into a single case in the province of Ontario. We dispute the allegations in these lawsuits and are vigorously defending against such claims.

In addition, various 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 have been resolved or no longer appear to be active, some remain open. We are in discussions with the Attorney General offices from 49 states and the District of Columbia and the Federal Trade Commission. Based on the ongoing discussions, we believe it is probable that we will incur losses, and as of June 30, 2023, we have ~~recorded~~ an accrual ~~in the 2022 third quarter~~ for an estimated loss ~~contingency; the amount of this accrual~~contingency, which is not material to our Financial Statements. ~~We are also in discussion with the regulatory authority in Australia to resolve its investigation and requests.~~

While we believe it is reasonably possible that we may incur 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 such losses or range of loss that might result from adverse judgments, settlements, fines, 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, and the lack of resolution of significant factual and legal 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.

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NOTE 6. LONG-TERM DEBT

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of ~~September~~June 30, ~~2022~~2023 and year-end ~~2021:~~2022:


($ in millions)		September 30, 2022		December 31, 2021
(in millions)						(in millions)	June 30, 2023		December 31, 2022
Senior Notes:	Senior Notes:					Senior Notes:
Series L Notes, interest rate of 3.3%, face amount of $173, redeemed June 15, 2022 (effective interest rate of 3.4%)		$	—	$	173

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%)	348		347		Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%)	$	348	$	348
Series Q Notes, interest rate of 2.3%, face amount of $399, matured January 15, 2022 (effective interest rate of 2.5%)		—		399

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%)	747		746		Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%)	747		747
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 U Notes, interest rate of 3.1%, face amount of $291, matured February 15, 2023 (effective interest rate of 3.1%)						Series U Notes, interest rate of 3.1%, face amount of $291, matured February 15, 2023 (effective interest rate of 3.1%)	—		291
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%)	325		327		Series V Notes, interest rate of 3.8%, face amount of $318, maturing March 15, 2025 (effective interest rate of 2.8%)	323		324
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%)	289		290		Series W Notes, interest rate of 4.5%, face amount of $278, maturing October 1, 2034 (effective interest rate of 4.1%)	289		289
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%)	446		445		Series X Notes, interest rate of 4.0%, face amount of $450, maturing April 15, 2028 (effective interest rate of 4.2%)	446		446
Series Z Notes, interest rate of 4.2%, face amount of $350, maturing December 1, 2023 (effective interest rate of 4.4%)	Series Z Notes, interest rate of 4.2%, face amount of $350, maturing December 1, 2023 (effective interest rate of 4.4%)	349		349		Series Z Notes, interest rate of 4.2%, face amount of $350, maturing December 1, 2023 (effective interest rate of 4.4%)	350		349
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%)	298		297		Series AA Notes, interest rate of 4.7%, face amount of $300, maturing December 1, 2028 (effective interest rate of 4.8%)	298		298
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%)	532		566		Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%)	536		531
Series DD Notes, interest rate of 2.1%, face amount of $224, matured October 3, 2022 (effective interest rate of 1.2%)		224		226

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%)	596		595		Series EE Notes, interest rate of 5.8%, face amount of $600, maturing May 1, 2025 (effective interest rate of 6.0%)	597		596
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%)	988		987		Series FF Notes, interest rate of 4.6%, face amount of $1,000, maturing June 15, 2030 (effective interest rate of 4.8%)	989		988
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%)	986		986		Series GG Notes, interest rate of 3.5%, face amount of $1,000, maturing October 15, 2032 (effective interest rate of 3.7%)	987		987
Series HH Notes, interest rate of 2.9%, face amount of $1,100, maturing April 15, 2031 (effective interest rate of 3.0%)	Series HH Notes, interest rate of 2.9%, face amount of $1,100, maturing April 15, 2031 (effective interest rate of 3.0%)	1,090		1,090		Series HH Notes, interest rate of 2.9%, face amount of $1,100, maturing April 15, 2031 (effective interest rate of 3.0%)	1,091		1,090
Series II Notes, interest rate of 2.8%, face amount of $700, maturing October 15, 2033 (effective interest rate of 2.8%)	Series II Notes, interest rate of 2.8%, face amount of $700, maturing October 15, 2033 (effective interest rate of 2.8%)	694		693		Series II Notes, interest rate of 2.8%, face amount of $700, maturing October 15, 2033 (effective interest rate of 2.8%)	694		694
Series JJ Notes, interest rate of 5.0%, face amount of $1,000, maturing October 15, 2027 (effective interest rate of 5.4%)	Series JJ Notes, interest rate of 5.0%, face amount of $1,000, maturing October 15, 2027 (effective interest rate of 5.4%)	983		—		Series JJ Notes, interest rate of 5.0%, face amount of $1,000, maturing October 15, 2027 (effective interest rate of 5.4%)	986		984

Series KK Notes, interest rate of 4.9%, face amount of $800, maturing April 15, 2029 (effective interest rate of 5.3%)						Series KK Notes, interest rate of 4.9%, face amount of $800, maturing April 15, 2029 (effective interest rate of 5.3%)	784		—
Commercial paper						Commercial paper	1,641		871
Credit Facility	Credit Facility	—		1,050		Credit Facility	—		—
Finance lease obligations	Finance lease obligations	141		146		Finance lease obligations	135		139
Other	Other	91		135		Other	56		92
		$	9,418	$	10,138		$	11,297	$	10,064
Less current portion	Less current portion	(558)		(805)		Less current portion	(894)		(684)
		$	8,860	$	9,333		$	10,403	$	9,380

We paid cash for interest, net of amounts capitalized, of ~~$203~~$196 million in the 2023 first half and $179 million in the 2022 first ~~three quarters and $251 million in the 2021 first three quarters.~~half.

In ~~September 2022,~~March 2023, we issued ~~$1.0 billion~~$800 million aggregate principal amount of ~~5.000~~4.9 percent Series JJKK Notes due ~~October~~April 15, ~~2027~~2029 (the “Series JJKK Notes”). We will pay interest on the Series JJKK Notes in April and October of each year, commencing in ~~April~~October 2023. We received net proceeds of approximately ~~$983~~$783 million from the offering of the Series JJKK Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

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~~In June 2022, we redeemed all $173 million aggregate principal amount of our outstanding Series L Notes due in September 2022.~~

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~~. Available borrowings ~~for general corporate needs, including working capital, capital expenditures, letters of credit, acquisitions, and to~~under 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 ~~LIBOR~~SOFR (the ~~London Interbank Offered~~Secured 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)~~ 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.~~

We entered into amendments to the Credit Facility in April 2020 and January 2021 (the “Credit Facility Amendments”). The debt leverage covenant in the Credit Facility, which is tested each quarter and was waived pursuant to the Credit Facility Amendments through and including the fourth quarter of 2021, resumed beginning with the quarter that ended March 31, 2022. The Credit Facility Amendments adjusted the required leverage levels for this covenant starting at 5.50 to 1.00 for the test period that ended on March 31, 2022 and gradually stepping down to 4.00 to 1.00 over the succeeding five fiscal quarters, as further described in the Credit Facility. The Credit Facility Amendments also amended certain other terms of the Credit Facility, including reducing the rate floor for the LIBOR Daily Floating Rate and the Eurocurrency Rate.December 14, 2027.

NOTE 7. ACQUISITION

InOn May 1, 2023, we completed the ~~2022 fourth quarter, we announced that we reached an agreement with~~acquisition of the City Express brand portfolio from Hoteles City Express, S.A.B. de C.V. ~~to acquire the City Express brand portfolio~~ for $100 million. As a result of ~~October 19, 2022,~~ the ~~portfolio included 152 mid-scale hotels (17,356 rooms)~~transaction, we added 149 properties located in Mexico, Costa Rica, Colombia, and ~~Chile. Upon closing~~Chile to our franchise portfolio. We accounted for the transaction as an asset acquisition and allocated the cost of the acquisition, including direct and incremental transaction ~~which is subject~~costs, to ~~regulatory approval~~an indefinite-lived brand asset of approximately $85 million and ~~other customary closing conditions, City Express will become our 31~~st ~~brand and the City Express hotels will become part~~franchise contract assets, with a weighted-average term of ~~our franchise system. We expect the transaction could close between the end of 2022 and the first half of 2023.~~20 years, totaling $21 million.

NOTE 8. 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 ~~values~~amounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
($ in millions)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
(in millions)										(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior, mezzanine, and other loans	Senior, mezzanine, and other loans	$	132	$	122	$	144	$	131	Senior, mezzanine, and other loans	$	140	$	131	$	152	$	142
Total noncurrent financial assets	Total noncurrent financial assets	$	132	$	122	$	144	$	131	Total noncurrent financial assets	$	140	$	131	$	152	$	142

Senior Notes	Senior Notes	$	(8,671)	$	(7,808)	$	(8,009)	$	(8,480)	Senior Notes	$	(8,579)	$	(7,991)	$	(8,322)	$	(7,627)
Credit Facility		—		—		(1,050)		(1,050)
Commercial paper										Commercial paper	(1,641)		(1,641)		(871)		(871)

Other long-term debt	Other long-term debt	(56)		(49)		(135)		(140)		Other long-term debt	(56)		(49)		(56)		(49)
Other noncurrent liabilities	Other noncurrent liabilities	(393)		(393)		(414)		(414)		Other noncurrent liabilities	(381)		(381)		(394)		(394)
Total noncurrent financial liabilities	Total noncurrent financial liabilities	$	(9,120)	$	(8,250)	$	(9,608)	$	(10,084)	Total noncurrent financial liabilities	$	(10,657)	$	(10,062)	$	(9,643)	$	(8,941)

See Note 12. Fair Value of Financial Instruments and the “Fair Value Measurements” caption of Note 2. Summary of Significant Accounting Policies of our ~~2021~~2022 Form 10-K for more information on the input levels we use in determining fair value.

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NOTE 9. ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ EQUITY

The following tables detail the accumulated other comprehensive loss activity for the 2023 first half and 2022 first ~~three quarters and 2021 first three quarters:~~half:

($ in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss
Balance at year-end 2021 $ (351) $ 9 $ (342)
Other comprehensive (loss) income before reclassifications (1)
(653) 9 (644)
Reclassification adjustments — (4) (4)
Net other comprehensive (loss) income (653) 5 (648)
Balance at September 30, 2022 $ (1,004) $ 14 $ (990)


(in millions)	Foreign Currency Translation Adjustments		Other Adjustments		Accumulated Other Comprehensive Loss
Balance at year-end 2022	$	(740)	$	11	$	(729)
Other comprehensive income before reclassifications (1)	7		4		11
Reclassification adjustments	—		2		2
Net other comprehensive income	7		6		13
Balance at June 30, 2023	$	(733)	$	17	$	(716)

($ in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss
Balance at year-end 2020 $ (139) $ 4 $ (135)
Other comprehensive loss before reclassifications (1)
(197) — (197)
Reclassification adjustments — — —
Net other comprehensive loss (197) — (197)
Balance at September 30, 2021 $ (336) $ 4 $ (332)


(in millions)	Foreign Currency Translation Adjustments		Other Adjustments		Accumulated Other Comprehensive Loss
Balance at year-end 2021	$	(351)	$	9	$	(342)
Other comprehensive (loss) income before reclassifications (1)	(313)		5		(308)
Reclassification adjustments	—		(1)		(1)
Net other comprehensive (loss) income	(313)		4		(309)
Balance at June 30, 2022	$	(664)	$	13	$	(651)

(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 of $14 million for the 2023 first half and gains of ~~$76~~$44 million for the 2022 first ~~three quarters and $30 million for the 2021 first three quarters.~~half.

The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2023 first half and 2022 first ~~three quarters and 2021 first three quarters:~~half:


(in millions, except per share amounts)	(in millions, except per share amounts)														(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
326.3		Balance at year-end 2021	$	1,414	$	5	$	5,892	$	10,305	$	(14,446)	$	(342)
310.6															310.6	Balance at year-end 2022	$	568	$	5	$	5,965	$	12,342	$	(17,015)	$	(729)

—	—	Net income	377		—		—		377		—		—		—	Net income	757		—		—		757		—		—
—	—	Other comprehensive income	14		—		—		—		—		14		—	Other comprehensive income	82		—		—		—		—		82

1.0		Stock-based compensation plans	(33)		—		(61)		—		28		—

327.3		Balance at March 31, 2022	$	1,772	$	5	$	5,831	$	10,682	$	(14,418)	$	(328)
—	—	Net income	678		—		—		678		—		—		—	Dividends ($0.40 per share)	(124)		—		—		(124)		—		—
—		Other comprehensive loss	(323)		—		—		—		—		(323)
—		Dividends ($0.30 per share)	(98)		—		—		(98)		—		—
—		Stock-based compensation plans	43		—		41		—		2		—
(1.9)		Purchase of treasury stock	(300)		—		—		—		(300)		—
325.4		Balance at June 30, 2022	$	1,772	$	5	$	5,872	$	11,262	$	(14,716)	$	(651)
0.9															0.9	Stock-based compensation plans	(34)		—		(59)		—		25		—
(6.8)															(6.8)	Purchase of treasury stock	(1,109)		—		—		—		(1,109)		—
304.7															304.7	Balance at March 31, 2023	$	140	$	5	$	5,906	$	12,975	$	(18,099)	$	(647)
—	—	Net income	630		—		—		630		—		—		—	Net income	726		—		—		726		—		—
—	—	Other comprehensive loss	(339)		—		—		—		—		(339)		—	Other comprehensive loss	(69)		—		—		—		—		(69)
—	—	Dividends ($0.30 per share)	(97)		—		—		(97)		—		—		—	Dividends ($0.52 per share)	(157)		—		—		(157)		—		—
0.1	0.1	Stock-based compensation plans	47		—		47		—		—		—		0.1	Stock-based compensation plans	48		—		46		—		2		—
(6.2)		Purchase of treasury stock	(950)		—		—		—		(950)		—
319.3		Balance at September 30, 2022	$	1,063	$	5	$	5,919	$	11,795	$	(15,666)	$	(990)
(5.2)															(5.2)	Purchase of treasury stock	(912)		—		—		—		(912)		—
299.6															299.6	Balance at June 30, 2023	$	(224)	$	5	$	5,952	$	13,544	$	(19,009)	$	(716)

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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
324.4		Balance at year-end 2020	$	430	$	5	$	5,851	$	9,206	$	(14,497)	$	(135)
326.3															326.3	Balance at year-end 2021	$	1,414	$	5	$	5,892	$	10,305	$	(14,446)	$	(342)

—	—	Net loss	(11)		—		—		(11)		—		—		—	Net income	377		—		—		377		—		—
—	—	Other comprehensive loss	(155)		—		—		—		—		(155)		—	Other comprehensive income	14		—		—		—		—		14

1.2		Stock-based compensation plans	(30)		—		(64)		—		34		—
1.0															1.0	Stock-based compensation plans	(33)		—		(61)		—		28		—

325.6		Balance at March 31, 2021	$	234	$	5	$	5,787	$	9,195	$	(14,463)	$	(290)
327.3															327.3	Balance at March 31, 2022	$	1,772	$	5	$	5,831	$	10,682	$	(14,418)	$	(328)
—	—	Net income	422		—		—		422		—		—		—	Net income	678		—		—		678		—		—
—	—	Other comprehensive income	96		—		—		—		—		96		—	Other comprehensive loss	(323)		—		—		—		—		(323)

—		Stock-based compensation plans	44		—		43		1		—		—

325.6		Balance at June 30, 2021	$	796	$	5	$	5,830	$	9,618	$	(14,463)	$	(194)
—	—	Net income	220		—		—		220		—		—		—	Dividends ($0.30 per share)	(98)		—		—		(98)		—		—
—	—	Other comprehensive loss	(138)		—		—		—		—		(138)		—	Stock-based compensation plans	43		—		41		—		2		—
0.1		Stock-based compensation plans	40		—		39		—		1		—
325.7		Balance at September 30, 2021	$	918	$	5	$	5,869	$	9,838	$	(14,462)	$	(332)
(1.9)															(1.9)	Purchase of treasury stock	(300)		—		—		—		(300)		—
325.4															325.4	Balance at June 30, 2022	$	1,772	$	5	$	5,872	$	11,262	$	(14,716)	$	(651)

NOTE 10. CONTRACTS WITH CUSTOMERS

Our current and noncurrent liability for guest loyalty program increased by ~~$175~~$191 million, to ~~$6,646~~$6,785 million at ~~September~~June 30, ~~2022,~~2023, from ~~$6,471~~$6,594 million at December 31, ~~2021,~~2022, primarily reflecting an increase in points earned by members. This includes a ~~$191~~$61 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-brand~~co-branded credit cards, which were prepaid by the financial institutions in 2020. The increase was partially offset by ~~$2,025~~$1,572 million of revenue recognized in the ~~2022~~2023 first ~~three quarters,~~half, that was deferred as of December 31, ~~2021. The current portion of our liability for guest loyalty program increased compared to December 31, 2021, due to higher estimated redemptions in the short-term.~~2022.

~~Current~~Our current and noncurrent deferred revenue decreased by ~~$162~~$48 million, to ~~$1,365~~$1,283 million at ~~September~~June 30, ~~2022,~~2023, from ~~$1,527~~$1,331 million at December 31, ~~2021,~~2022, primarily as a result of ~~$256~~$148 million of revenue recognized in the ~~2022~~2023 first ~~three quarters~~half that was deferred as of December 31, ~~2021,~~2022, as well as the reclassification from deferred revenue to the liability for guest loyalty program, which we discuss above. The decrease was partially offset by revenue deferred ~~revenue~~in the 2023 first half related to our ~~co-brand~~co-branded credit cards, gift cards, certain centralized programs and services fees, and franchise application and relicensing fees.

Our allowance for credit losses ~~increased~~decreased to ~~$195~~$187 million at ~~September~~June 30, ~~2022~~2023 from ~~$187~~$191 million at December 31, 2021, primarily reflecting our provision for credit losses, partially offset by write-offs of amounts deemed uncollectible. In the 2022 third quarter, we recorded a $6 million net reversal of our provision for credit losses. In the 2022 first three quarters, we recorded a $27 million provision for credit losses.2022.

NOTE 11. BUSINESS SEGMENTS

We discuss our operations in the following two operating segments, both of which meet the applicable accounting criteria for separate disclosure as a reportable business segment: (1) U.S. & Canada and (2) International.

We evaluate the performance of our operating segments using “segment ~~profit/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 most 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 and ~~fees from~~ vacation ownership licensing agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, ~~restructuring,~~ merger-related

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charges and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our 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.

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Segment Revenues

The following tables present our revenues disaggregated by segment and major revenue stream for the ~~2022 third quarter, 2021 third~~2023 second quarter, 2022 second quarter, 2023 first ~~three quarters,~~half, and ~~2021~~2022 first ~~three quarters:~~half:


		Three Months Ended September 30, 2022				Three Months Ended September 30, 2021						Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
($ in millions)		U.S. & Canada		International		Total		U.S. & Canada		International			Total
(in millions)															(in millions)	U.S. & Canada		International		Total		U.S. & Canada		International		Total
Gross fee revenues	Gross fee revenues	$	649	$	241	$	890	$	478	$	156		$	634	Gross fee revenues	$	751	$	314	$	1,065	$	683	$	212	$	895
Contract investment amortization	Contract investment amortization	(16)		(6)		(22)		(15)		(6)			(21)		Contract investment amortization	(17)		(5)		(22)		(15)		(4)		(19)
Net fee revenues	Net fee revenues	633		235		868		463		150			613		Net fee revenues	734		309		1,043		668		208		876
Owned, leased, and other revenue	Owned, leased, and other revenue	114		205		319		93		134			227		Owned, leased, and other revenue	116		242		358		124		217		341
Cost reimbursement revenue	Cost reimbursement revenue	3,253		468		3,721		2,450		337			2,787		Cost reimbursement revenue	3,652		573		4,225		3,325		450		3,775
Total reportable segment revenue	Total reportable segment revenue	$	4,000	$	908	$	4,908	$	3,006	$	621		$	3,627	Total reportable segment revenue	$	4,502	$	1,124	$	5,626	$	4,117	$	875	$	4,992
Unallocated corporate and other	Unallocated corporate and other					405							319		Unallocated corporate and other					449						346
Total revenue	Total revenue					$	5,313						$	3,946	Total revenue					$	6,075					$	5,338


		Nine Months Ended September 30, 2022				Nine Months Ended September 30, 2021						Six Months Ended June 30, 2023								Six Months Ended June 30, 2022
($ in millions)		U.S. & Canada		International		Total		U.S. & Canada		International			Total
(in millions)															(in millions)	U.S. & Canada		International			Total		U.S. & Canada		International		Total
Gross fee revenues	Gross fee revenues	$	1,821	$	630	$	2,451	$	1,101	$	375		$	1,476	Gross fee revenues	$	1,423	$	605		$	2,028	$	1,172	$	389	$	1,561
Contract investment amortization	Contract investment amortization	(45)		(20)		(65)		(41)		(15)			(56)		Contract investment amortization	(33)		(10)			(43)		(29)		(14)		(43)
Net fee revenues	Net fee revenues	1,776		610		2,386		1,060		360			1,420		Net fee revenues	1,390		595			1,985		1,143		375		1,518
Owned, leased, and other revenue	Owned, leased, and other revenue	330		575		905		185		320			505		Owned, leased, and other revenue	233		456			689		216		370		586
Cost reimbursement revenue	Cost reimbursement revenue	9,282		1,273		10,555		5,810		854			6,664		Cost reimbursement revenue	7,157		1,081			8,238		6,029		805		6,834
Total reportable segment revenue	Total reportable segment revenue	$	11,388	$	2,458	$	13,846	$	7,055	$	1,534		$	8,589	Total reportable segment revenue	$	8,780	$	2,132		$	10,912	$	7,388	$	1,550	$	8,938
Unallocated corporate and other	Unallocated corporate and other					1,004							822		Unallocated corporate and other						778						599
Total revenue	Total revenue					$	14,850						$	9,411	Total revenue						$	11,690					$	9,537

Segment ~~Profit~~Profits


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
($ in millions)		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
(in millions)										(in millions)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
U.S. & Canada	U.S. & Canada	$	652	$	485	$	1,833	$	972	U.S. & Canada	$	756	$	727	$	1,413	$	1,181
International	International	227		86		568		142		International	295		210		547		341

Unallocated corporate and other	Unallocated corporate and other	83		(194)		92		(181)		Unallocated corporate and other	54		30		100		9
Interest expense, net of interest income	Interest expense, net of interest income	(93)		(99)		(270)		(301)		Interest expense, net of interest income	(141)		(89)		(252)		(177)
Provision for income taxes	Provision for income taxes	(239)		(58)		(538)		(1)		Provision for income taxes	(238)		(200)		(325)		(299)
Net income	Net income	$	630	$	220	$	1,685	$	631	Net income	$	726	$	678	$	1,483	$	1,055

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement

All statements in this report are made as of the date this Form 10-Q 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-Q is filed with the SEC. Forward-looking statements include information related to ~~the future effects on our business of the coronavirus pandemic (“COVID-19”); Revenue per Available Room (“RevPAR”), average daily rate (“ADR”), occupancy and other~~ future demand ~~and recovery~~ trends and expectations; our expectations

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regarding rooms growth; our expectations regarding our ability to meet our liquidity requirements; our capital expenditures and other investment spending expectations; our expectations regarding future dividends and share repurchases; ~~our expectations regarding our acquisition of the City Express brand and the addition of the City Express hotels to our franchise system;~~ and other statements 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

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uncertainties we describe in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (“~~2021~~2022 Form 10-K”), Part II, Item 1A of this report, and other factors we describe from time to time in our periodic filings with the SEC.

BUSINESS AND OVERVIEW

Overview

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and ~~timeshare~~other lodging properties under ~~numerous~~31 brand ~~names at different price and service points. Consistent with~~names. Under our ~~focus on management, franchising, and licensing,~~asset-light business model, we typically manage or franchise hotels, rather than own ~~very few of our lodging properties.~~ them. We discuss our operations in the following reportable business segments: (1) U.S. & Canada and (2) International.

~~We earn~~Terms of our 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 earn~~in 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 fees~~are typically ~~consist of~~calculated 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, Asia Pacific excluding China, and Greater China regions, 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 furniture, fixtures, and equipment (“FF&E”) reserves.portion thereof. Additionally, we earn franchise fees for the use of our intellectual property, ~~including~~such as fees from our ~~co-brand~~co-branded credit card, timeshare, and residential programs.

Performance Measures

We believe ~~RevPAR,~~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 ~~ADR,~~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 prior periods 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, ~~2021~~2022 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~~interruption.

Business Trends

We saw strong global RevPAR improvement during the ~~exception of properties closed or otherwise experiencing interruptions related to COVID-19, which we continue to classify as comparable. RevPAR, occupancy,~~2023 second quarter and ADR comparisons between 2022 and 2019, which we discuss under the “Impact of COVID-19” caption below, reflect properties that are defined as comparable as of September 30, 2022, June 30, 2022, or March 31, 2022 (as applicable), even if in 2019 they were not open and operating for the full year or did not meet all the other criteria listed above. Unless otherwise stated, all comparisons to pre-pandemic or 2019 are comparing2023 first half compared to the same ~~time period each year.~~periods in 2022. For the 2023 second quarter, worldwide RevPAR increased 13.5 percent compared to the 2022 second quarter, reflecting ADR growth of 6.0 percent and occupancy improvement of 4.7 percentage points. For the 2023 first half, worldwide RevPAR increased 22.4 percent compared to the 2022 first half, reflecting ADR growth of 8.1 percent and occupancy improvement of 8.0 percentage points. The increases in RevPAR were driven by improvement in all customer segments, including robust leisure demand as well as strengthening group and business transient demand as compared to the same periods in 2022.

In the U.S. & Canada, RevPAR improved 6.0 percent in the 2023 second quarter compared to the 2022 second quarter, driven by ADR growth of 4.1 percent and occupancy improvement of 1.3 percentage points. While demand continued to be strong in the 2023 second quarter, year over year demand began to normalize. In the 2023 first half, U.S. & Canada RevPAR improved 14.3 percent compared to the 2022 first half due to strong demand and an improvement in ADR in many markets.

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~~Impact of COVID-19~~

~~While COVID-19 continues to negatively impact our business and industry, primarily in Greater China and Asia Pacific excluding China, we continued to see strong global~~Internationally, RevPAR ~~improvement~~improved 39.1 percent in the 2022 third quarter. For the first time since the pandemic began, quarterly worldwide RevPAR exceeded 2019 levels, with growth of 1.8 percent compared to the 2019 third quarter, reflecting ADR growth of 10.2 percent compared to pre-pandemic levels and rising occupancy. In the 2022 third quarter, occupancy reached 69.2 percent, a decline of only 5.8 percentage points compared to the same period in 2019, which was an improvement from the 20222023 second quarter ~~decline of 7.1 percentage points~~ and 49.5 percent in the ~~2022~~2023 first ~~quarter decline of 13.7 percentage points~~half compared to the same periods in ~~2019.~~2022. The global recovery continued across all customer segments, led by robust leisure demand and strengthening group demand. Business transient demand also continued to improve during the quarter, although it continues to lag behind 2019 levels.

improvement in RevPAR in the 2022 third quarter compared to the 2021 third quarter improved 28.5 percent in our U.S. & Canada segment, 66.1 percent in our International segment, and 36.3 percent worldwide. RevPAR in the 2022 first three quarters compared to the 2021 first three quarters increased 56.4 percent in our U.S. & Canada segment, 77.2 percent in our International segment, and 60.9 percent worldwide.

In the U.S. & Canada, RevPAR improved 3.5 percent in the 2022 third quarter compared to the same period in 2019, due to ADR growth of 10.4 percent, partially offset by a decline in occupancy of 4.7 percentage points. In the 2022 first three quarters, RevPAR declined 2.8 percent compared to the same period in 2019, due to a decline in occupancy of 6.9 percentage points, partially offset by ADR growth of 7.1 percent. The decline in occupancy as compared to 2019 improved sequentially in each of the 2022 first three quarters, reflecting stronger demand in many markets across the region.

Internationally, RevPAR declined 2.4 percent in the 2022 third quarter compared to the same period in 2019, due to a decline in occupancy of 7.9 percentage points, partially offset by ADR growth of 9.8 percent. In the 2022 first three quarters, RevPAR declined 16.3 percent compared to the same period in 2019, due to a decline in occupancy of 13.3 percentage points, partially offset by ADR growth of 3.8 percent. In the 2022 third quarter, RevPAR remained constrained in Greater China and Asia Pacific excluding China, but exceeded pre-pandemic 2019 levels in the Caribbean & Latin America, Europe, and Middle East & Africa,was driven by strengthening demand and ~~an increase~~meaningful growth in ~~cross-border travel.~~ADR in all regions, as compared to the same periods in 2022, which in various geographic markets were impacted by COVID-19 and government-imposed travel restrictions. The lifting of travel restrictions throughout Asia Pacific, particularly in Greater China, significantly boosted 2023 second quarter and 2023 first half demand in that region.

Our business is subject to the effects of changes in global and regional economic conditions and these conditions can change rapidly. We continue to ~~take measures to mitigate the negative financial~~monitor economic conditions, and operational impacts of COVID-19 for our hotel owners and our own business. At the property level, we continue to work with owners and franchisees by adjusting renovation requirements for certain properties. At the corporate level, we remain focused on managing our corporate general and administrative costs and are being disciplined with respect to our capital expenditures and other investment spending.

As lodging demand continues to recover from the lows seen in the early months of the pandemic, we have seen and continue to see industry-wide labor shortages causing challenges in hiring or re-hiring for certain positions, primarily in certain U.S. markets. In response, we have enhanced our recruitment and retention efforts and increased compensation where needed to maintain competitiveness. As a result of these efforts, we have made good progress staffing our hotels despite the challenging labor market.

The impact of COVID-19 on the Company remains fluid, as does our corporate and property-level response. We believe COVID-19 will continue to have a negative impact on our future results for a period of time that we are currently unable to predict. The overall operational and financial impact is highly dependent on the risk factors disclosed under the heading “Risks Relating to COVID-19” in Part I, Item 1A, “Risk Factors,” of our 2021 Form 10-K and could be affected by other factorsalthough we are not currently ~~able to predict.~~seeing signs of a slowdown in lodging demand in most markets, the lodging booking window is short and trends can change quickly.

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~~ We discontinued use of the Starwood reservations database ~~is no longer used~~ for ~~busi~~business operations at the end of 2018~~ness operations.~~.

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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 losses (including monetary payments to regulators and/or litigants) related to the Data Security Incident. In addition, certain expenses by their nature (such as, for example, expenses related to enhancing our cybersecurity program) are not covered by our insurance program. We expect to incur significant expenses associated with the Data Security Incident in future periods in excess of the amounts already recorded, primarily related to legal proceedings and regulatory investigations (including possible additional monetary payments to regulators and/or litigants as well as costs associated with compliance with any settlements or resolutions of matters), 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 5 for additional information related to legal proceedings and governmental investigations related to the Data Security Incident.

System Growth and Pipeline

At the end of the ~~2022 third~~2023 second quarter, our system had ~~8,162~~8,590 properties ~~(1,507,350~~(1,565,258 rooms), compared to ~~7,989~~8,288 properties ~~(1,479,179~~(1,525,407 rooms) at year-end ~~2021~~2022 and ~~7,892~~8,120 properties ~~(1,463,692~~(1,500,744 rooms) at the end of the ~~2021 third~~2022 second quarter. The increase compared to year-end ~~2021 reflects~~2022 reflected gross additions of ~~249~~333 properties ~~(42,787~~(44,112 rooms), including 149 properties (17,300 rooms) from the City Express acquisition, and deletions of 7631 properties ~~(14,595~~(4,346 rooms). ~~Approximately 25 percent of our 2022~~Our 2023 first ~~three quarters~~half gross room additions ~~were conversions~~included approximately 34,300 rooms located outside U.S. & Canada and approximately 5,600 rooms converted from competitor brands.

At the end of the ~~2022 third~~2023 second quarter, we had ~~more than 502,000~~nearly 547,000 hotel rooms in our development pipeline, which includes ~~approximately 204,800 hotel rooms under construction and~~ roughly ~~33,300~~31,500 hotel rooms approved for development but not yet ~~subject to~~under signed contracts. More than 240,000 hotel rooms in the pipeline, including approximately 37,000 rooms from the exclusive, long-term strategic licensing agreement with MGM Resorts International that we announced in July 2023, were under construction as of the end of the second quarter. Over half of the rooms in our development pipeline are outside U.S. & Canada.

We currently expect full-year ~~2022 total gross rooms growth of approximately 4.5 percent and~~2023 net rooms growth of approximately ~~3.0~~6.4 to 6.7 percent, ~~which includes the impact~~including an anticipated 2.4 percent increase as a result of the ~~Company’s decision to suspend its operations in Russia and does not include the~~expected addition of rooms ~~associated with the City Express brand acquisition discussed in Note 7. The decrease in our expectation for gross rooms growth in 2022, compared~~ to our ~~previous estimate, is primarily due to delayed openings~~system in ~~Greater China where COVID-19 restrictions have resulted in extended construction timelines.~~

~~Properties and Rooms~~

~~At September 30, 2022, we operated, franchised, and licensed~~ the ~~following properties and rooms:~~

Managed Franchised/Licensed Owned/Leased Residential Total
Properties Rooms Properties Rooms Properties Rooms Properties Rooms Properties Rooms
U.S. & Canada 633 215,948 5,093 732,399 26 6,483 66 6,935 5,818 961,765
International 1,326 338,913 844 170,834 38 9,209 44 3,928 2,252 522,884
Timeshare — — 92 22,701 — — — — 92 22,701
Total 1,959 554,861 6,029 925,934 64 15,692 110 10,863 8,162 1,507,350
2023 fourth quarter under our agreement with MGM Resorts International discussed above.

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Properties and Rooms

At June 30, 2023, we operated, franchised, and licensed the following properties and rooms:


	Managed		Franchised/Licensed		Owned/Leased		Residential		Total
	Properties	Rooms	Properties	Rooms	Properties	Rooms	Properties	Rooms	Properties	Rooms
U.S. & Canada	632	216,276	5,192	744,050	14	4,656	68	7,199	5,906	972,181
International	1,384	351,187	1,117	204,600	38	9,209	51	5,187	2,590	570,183
Timeshare	—	—	93	22,745	—	—	—	—	93	22,745
Yacht	—	—	1	149	—	—	—	—	1	149
Total	2,016	567,463	6,403	971,544	52	13,865	119	12,386	8,590	1,565,258

Lodging Statistics

The following tables present RevPAR, occupancy, and ADR statistics for comparable properties. Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.


		Three Months Ended September 30, 2022 and Change vs. Three Months Ended September 30, 2021														Three Months Ended June 30, 2023 and Change vs. Three Months Ended June 30, 2022
		RevPAR				Occupancy					Average Daily Rate					RevPAR				Occupancy					Average Daily Rate
		2022		vs. 2021		2022		vs. 2021			2022		vs. 2021			2023		vs. 2022		2023		vs. 2022			2023		vs. 2022
Comparable Company-Operated Properties	Comparable Company-Operated Properties														Comparable Company-Operated Properties
U.S. & Canada	U.S. & Canada	$	164.32	41.2	%	69.4	%	12.2	%	pts.	$	236.69	16.4	%	U.S. & Canada	$	183.42	5.2	%	72.7	%	1.2	%	pts.	$	252.26	3.4	%
Greater China	Greater China	$	67.48	5.3	%	59.3	%	4.3	%	pts.	$	113.87	(2.3)	%	Greater China	$	90.90	124.5	%	69.5	%	27.9	%	pts.	$	130.86	34.3	%
Asia Pacific excluding China	Asia Pacific excluding China	$	88.15	169.8	%	62.7	%	29.5	%	pts.	$	140.52	42.9	%	Asia Pacific excluding China	$	109.48	45.1	%	67.0	%	9.7	%	pts.	$	163.43	24.1	%

Caribbean & Latin America	Caribbean & Latin America	$	111.98	42.8	%	59.1	%	12.9	%	pts.	$	189.46	11.8	%	Caribbean & Latin America	$	160.93	10.1	%	62.8	%	2.1	%	pts.	$	256.25	6.4	%
Europe	Europe	$	188.55	93.1	%	73.3	%	24.5	%	pts.	$	257.08	28.6	%	Europe	$	205.13	24.2	%	75.0	%	5.8	%	pts.	$	273.43	14.5	%
Middle East & Africa	Middle East & Africa	$	97.67	43.3	%	61.6	%	10.1	%	pts.	$	158.65	19.9	%	Middle East & Africa	$	116.06	20.0	%	63.8	%	4.2	%	pts.	$	182.05	12.2	%
International - All (1)	International - All (1)	$	102.53	61.7	%	63.1	%	16.1	%	pts.	$	162.61	20.4	%	International - All (1)	$	121.50	43.8	%	68.2	%	14.1	%	pts.	$	178.06	14.0	%
Worldwide (2)	Worldwide (2)	$	129.91	49.5	%	65.9	%	14.4	%	pts.	$	197.20	16.9	%	Worldwide (2)	$	148.66	19.9	%	70.2	%	8.5	%	pts.	$	211.77	5.5	%
Comparable Systemwide Properties	Comparable Systemwide Properties														Comparable Systemwide Properties
U.S. & Canada	U.S. & Canada	$	128.94	28.5	%	71.8	%	7.9	%	pts.	$	179.58	14.3	%	U.S. & Canada	$	137.93	6.0	%	73.6	%	1.3	%	pts.	$	187.44	4.1	%
Greater China	Greater China	$	64.78	8.2	%	58.3	%	5.4	%	pts.	$	111.12	(1.8)	%	Greater China	$	84.99	125.2	%	68.5	%	28.5	%	pts.	$	124.03	31.5	%
Asia Pacific excluding China	Asia Pacific excluding China	$	87.91	139.3	%	62.7	%	27.2	%	pts.	$	140.15	35.4	%	Asia Pacific excluding China	$	111.21	47.6	%	67.3	%	9.3	%	pts.	$	165.20	27.1	%

Caribbean & Latin America	Caribbean & Latin America	$	96.11	45.0	%	57.5	%	12.6	%	pts.	$	167.27	13.4	%	Caribbean & Latin America	$	138.71	11.9	%	63.3	%	1.6	%	pts.	$	218.98	9.0	%
Europe	Europe	$	156.10	90.3	%	72.0	%	25.0	%	pts.	$	216.92	24.1	%	Europe	$	161.98	24.5	%	73.8	%	6.9	%	pts.	$	219.59	12.8	%
Middle East & Africa	Middle East & Africa	$	94.78	49.7	%	62.0	%	10.8	%	pts.	$	152.92	23.7	%	Middle East & Africa	$	109.70	22.6	%	63.0	%	3.9	%	pts.	$	174.24	15.0	%
International - All (1)	International - All (1)	$	101.37	66.1	%	63.3	%	17.3	%	pts.	$	160.11	20.7	%	International - All (1)	$	119.21	39.1	%	68.2	%	12.4	%	pts.	$	174.91	13.7	%
Worldwide (2)	Worldwide (2)	$	120.60	36.3	%	69.2	%	10.8	%	pts.	$	174.19	15.1	%	Worldwide (2)	$	132.17	13.5	%	71.9	%	4.7	%	pts.	$	183.79	6.0	%

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		Nine Months Ended September 30, 2022 and Change vs. Nine Months Ended September 30, 2021														Six Months Ended June 30, 2023 and Change vs. Six Months Ended June 30, 2022
		RevPAR				Occupancy					Average Daily Rate					RevPAR				Occupancy					Average Daily Rate
		2022		vs. 2021		2022		vs. 2021			2022		vs. 2021			2023		vs. 2022		2023		vs. 2022			2023		vs. 2022
Comparable Company-Operated Properties	Comparable Company-Operated Properties														Comparable Company-Operated Properties
U.S. & Canada	U.S. & Canada	$	157.56	86.2	%	65.3	%	21.3	%	pts.	$	241.46	25.3	%	U.S. & Canada	$	176.19	16.3	%	69.4	%	6.6	%	pts.	$	253.92	5.3	%
Greater China	Greater China	$	54.38	(18.2)	%	47.9	%	(7.7)	%	pts.	$	113.51	(5.0)	%	Greater China	$	87.42	100.1	%	67.1	%	25.9	%	pts.	$	130.35	22.8	%
Asia Pacific excluding China	Asia Pacific excluding China	$	75.29	129.3	%	55.5	%	23.4	%	pts.	$	135.72	32.4	%	Asia Pacific excluding China	$	113.94	73.2	%	67.5	%	16.9	%	pts.	$	168.81	29.9	%

Caribbean & Latin America	Caribbean & Latin America	$	121.10	84.1	%	59.7	%	20.6	%	pts.	$	202.84	20.7	%	Caribbean & Latin America	$	178.07	25.3	%	64.6	%	6.2	%	pts.	$	275.87	13.1	%

Europe	Europe	$	146.25	187.8	%	62.2	%	33.7	%	pts.	$	235.21	31.7	%	Europe	$	166.09	37.4	%	68.0	%	12.3	%	pts.	$	244.08	12.5	%
Middle East & Africa	Middle East & Africa	$	110.94	66.7	%	62.6	%	16.0	%	pts.	$	177.07	24.1	%	Middle East & Africa	$	128.26	18.3	%	66.9	%	4.0	%	pts.	$	191.80	11.3	%
International - All (1)	International - All (1)	$	90.07	64.4	%	55.7	%	13.7	%	pts.	$	161.76	24.0	%	International - All (1)	$	118.74	51.9	%	67.1	%	16.5	%	pts.	$	176.87	14.5	%
Worldwide (2)	Worldwide (2)	$	120.00	76.4	%	59.9	%	17.1	%	pts.	$	200.26	26.1	%	Worldwide (2)	$	143.96	30.4	%	68.1	%	12.2	%	pts.	$	211.32	7.2	%
Comparable Systemwide Properties	Comparable Systemwide Properties														Comparable Systemwide Properties
U.S. & Canada	U.S. & Canada	$	119.16	56.4	%	67.5	%	13.7	%	pts.	$	176.60	24.6	%	U.S. & Canada	$	128.91	14.3	%	69.8	%	4.7	%	pts.	$	184.64	6.5	%
Greater China	Greater China	$	52.09	(16.6)	%	47.0	%	(7.0)	%	pts.	$	110.95	(4.2)	%	Greater China	$	81.68	100.6	%	66.0	%	26.1	%	pts.	$	123.72	21.3	%
Asia Pacific excluding China	Asia Pacific excluding China	$	75.03	116.9	%	55.6	%	22.6	%	pts.	$	134.93	28.9	%	Asia Pacific excluding China	$	113.64	73.5	%	67.4	%	16.2	%	pts.	$	168.73	31.9	%

Caribbean & Latin America	Caribbean & Latin America	$	100.89	89.2	%	56.9	%	19.6	%	pts.	$	177.18	24.2	%	Caribbean & Latin America	$	152.12	26.0	%	65.4	%	6.6	%	pts.	$	232.60	13.2	%

Europe	Europe	$	119.44	183.6	%	59.8	%	33.0	%	pts.	$	199.71	27.2	%	Europe	$	130.71	39.8	%	65.6	%	13.2	%	pts.	$	199.11	11.7	%
Middle East & Africa	Middle East & Africa	$	104.51	70.4	%	62.2	%	16.4	%	pts.	$	168.02	25.5	%	Middle East & Africa	$	119.67	20.7	%	65.6	%	4.0	%	pts.	$	182.48	13.4	%
International - All (1)	International - All (1)	$	87.29	77.2	%	55.5	%	16.5	%	pts.	$	157.25	24.5	%	International - All (1)	$	114.17	49.5	%	66.1	%	15.4	%	pts.	$	172.71	14.6	%
Worldwide (2)	Worldwide (2)	$	109.53	60.9	%	63.9	%	14.6	%	pts.	$	171.52	24.2	%	Worldwide (2)	$	124.38	22.4	%	68.7	%	8.0	%	pts.	$	181.11	8.1	%

(1)Includes Greater China, Asia Pacific excluding China, Caribbean & Latin America, Europe, and Middle East & Africa.

(2)Includes U.S. & Canada and International - All.

CONSOLIDATED RESULTS

Our consolidated results in the 2023 second quarter and 2023 first half improved significantly compared to the 2022 second quarter and 2022 first half due to the continued recovery in lodging demand from the impacts of COVID-19. The discussion below presents an additional analysis of our consolidated results of operations for the 2023 second quarter compared to the 2022 second quarter and for the 2023 first half compared to the 2022 first half.

Fee Revenues


	Three Months Ended								Six Months Ended
(in millions)	June 30, 2023		June 30, 2022		Change 2023 vs. 2022				June 30, 2023		June 30, 2022		Change 2023 vs. 2022
Base management fees	$	318	$	269	$	49	18	%	$	611	$	482	$	129	27	%
Franchise fees	739		669		70		10	%	1,378		1,169		209		18	%
Incentive management fees	193		135		58		43	%	394		237		157		66	%
Gross fee revenues	1,250		1,073		177		16	%	2,383		1,888		495		26	%
Contract investment amortization	(22)		(19)		(3)		(16)	%	(43)		(43)		—		—	%
Net fee revenues	$	1,228	$	1,054	$	174	17	%	$	2,340	$	1,845	$	495	27	%

The increases in base management fees in the 2023 second quarter and 2023 first half primarily reflected higher RevPAR.

The increases in franchise fees in the 2023 second quarter and 2023 first half primarily reflected higher RevPAR, unit growth ($25 million and $43 million, respectively), and higher co-branded credit card fees ($7 million and $27 million, respectively).

The increases in incentive management fees in the 2023 second quarter and 2023 first half primarily reflected higher profits at many managed hotels.

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~~CONSOLIDATED RESULTS~~

Our results in the 2022 third quarter and 2022 first three quarters continued to be impacted by COVID-19. See the “Impact of COVID-19” section above for more information about the impact to our business during the 2022 third quarter and 2022 first three quarters, and the discussion below for additional analysis of our consolidated results of operations for the 2022 third quarter compared to the 2021 third quarter and for the 2022 first three quarters compared to the 2021 first three quarters.

~~Fee Revenues~~

Three Months Ended Nine Months Ended
($ in millions) September 30, 2022 September 30, 2021 Change
2022 vs. 2021 September 30, 2022 September 30, 2021 Change
2022 vs. 2021
Base management fees $ 275 $ 190 $ 85 45 % $ 757 $ 452 $ 305 67 %
Franchise fees 678 533 145 27 % 1,847 1,270 577 45 %
Incentive management fees 106 53 53 100 % 343 141 202 143 %
Gross fee revenues 1,059 776 283 36 % 2,947 1,863 1,084 58 %
Contract investment amortization (22) (21) (1) (5) % (65) (56) (9) (16) %
Net fee revenues $ 1,037 $ 755 $ 282 37 % $ 2,882 $ 1,807 $ 1,075 59 %

The increases in base management fees in the 2022 third quarter and 2022 first three quarters primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19.

The increases in franchise fees in the 2022 third quarter and 2022 first three quarters primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19, higher co-brand credit card fees ($25 million and $101 million, respectively), and unit growth ($29 million and $84 million, respectively).

The increases in incentive management fees in the 2022 third quarter and 2022 first three quarters primarily reflected higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19.

Owned, Leased, and Other


		Three Months Ended								Nine Months Ended									Three Months Ended								Six Months Ended
($ in millions)		September 30, 2022		September 30, 2021		Change 2022 vs. 2021				September 30, 2022		September 30, 2021		Change 2022 vs. 2021
(in millions)																		(in millions)	June 30, 2023		June 30, 2022		Change 2023 vs. 2022				June 30, 2023		June 30, 2022		Change 2023 vs. 2022
Owned, leased, and other revenue	Owned, leased, and other revenue	$	345	$	241	$	104	43	%	$	971	$	536	$	435	81	%	Owned, leased, and other revenue	$	390	$	364	$	26	7	%	$	746	$	626	$	120	19	%
Owned, leased, and other - direct expenses	Owned, leased, and other - direct expenses	301		204		97		48	%	779		507		272		54	%	Owned, leased, and other - direct expenses	287		281		6		2	%	568		478		90		19	%
Owned, leased, and other, net	Owned, leased, and other, net	$	44	$	37	$	7	19	%	$	192	$	29	$	163	562	%	Owned, leased, and other, net	$	103	$	83	$	20	24	%	$	178	$	148	$	30	20	%

Owned, leased, and other revenue, net of direct expenses, increased in the ~~2022 third~~2023 second quarter primarily due to stronger results at our owned and leased properties.

Owned, leased, and other revenue, net of direct expenses, increased in the ~~2022~~2023 first ~~three quarters~~half primarily due to stronger results at our owned and leased properties, ~~driven by the ongoing recovery in lodging demand from the impacts of COVID-19,~~ partially offset by ~~lower termination fees ($23~~$29 million ~~and $39 million, respectively) and an estimated monetary payment related to a portfolio~~ of 12subsidies received for certain of our leased hotels in the ~~U.S. & Canada ($19 million and $31 million, respectively).~~2022 first half under German government COVID-19 assistance programs.

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Cost Reimbursements


		Three Months Ended								Nine Months Ended									Three Months Ended								Six Months Ended
($ in millions)		September 30, 2022		September 30, 2021		Change 2022 vs. 2021				September 30, 2022		September 30, 2021		Change 2022 vs. 2021
(in millions)																		(in millions)	June 30, 2023		June 30, 2022		Change 2023 vs. 2022				June 30, 2023		June 30, 2022		Change 2023 vs. 2022
Cost reimbursement revenue	Cost reimbursement revenue	$	3,931	$	2,950	$	981	33	%	$	10,997	$	7,068	$	3,929	56	%	Cost reimbursement revenue	$	4,457	$	3,920	$	537	14	%	$	8,604	$	7,066	$	1,538	22	%
Reimbursed expenses	Reimbursed expenses	3,786		2,917		869		30	%	10,792		7,005		3,787		54	%	Reimbursed expenses	4,366		3,827		539		14	%	8,502		7,006		1,496		21	%
Cost reimbursements, net	Cost reimbursements, net	$	145	$	33	$	112	339	%	$	205	$	63	$	142	225	%	Cost reimbursements, net	$	91	$	93	$	(2)	(2)	%	$	102	$	60	$	42	70	%

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 hotel owners and franchisees. Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively.

The decrease in cost reimbursements, net in the 2023 second quarter primarily reflected higher expenses related to our insurance program and lower revenues, net of expenses, for our centralized programs and services, partially offset by Loyalty Program activity, primarily due to higher program revenues.

The increase in cost reimbursements, net in the ~~2022 third quarter~~2023 first half primarily ~~reflects~~reflected Loyalty Program activity, primarily due to higher program revenues, and higher revenues, net of expenses, for our centralized programs and services, ~~and~~partially offset by higher ~~Loyalty Program revenues, net of expenses.~~

~~The increase in cost reimbursements, net in the 2022 first three quarters primarily reflects higher revenues, net of expenses, for our centralized programs and services and lower~~ expenses related to our insurance ~~program, partially offset by Loyalty Program activity, primarily due to higher program expenses.~~program.

Other Operating Expenses

Three Months Ended Nine Months Ended
($ in millions) September 30, 2022 September 30, 2021 Change
2022 vs. 2021 September 30, 2022 September 30, 2021 Change
2022 vs. 2021
Depreciation, amortization, and other $ 50 $ 64 $ (14) (22) % $ 147 $ 166 $ (19) (11) %
General, administrative, and other 216 212 4 2 % 655 610 45 7 %
Restructuring, merger-related charges, and other 2 4 (2) (50) % 11 8 3 38 %

~~Depreciation, amortization, and other expenses decreased in the 2022 first three quarters, primarily due to lower impairment charges.~~

~~General, administrative, and other expenses increased in the 2022 first three quarters primarily due to higher compensation costs and higher administrative costs.~~

~~Non-Operating Income (Expense)~~

Three Months Ended Nine Months Ended
($ in millions) September 30, 2022 September 30, 2021 Change
2022 vs. 2021 September 30, 2022 September 30, 2021 Change
2022 vs. 2021
Gains and other income, net $ 3 $ — $ 3 nm* $ 9 $ 6 $ 3 50 %
Loss on extinguishment of debt — (164) 164 100 % — (164) 164 100 %
Interest expense (100) (107) 7 7 % (288) (323) 35 11 %
Interest income 7 8 (1) (13) % 18 22 (4) (18) %
Equity in earnings (losses) 1 (4) 5 125 % 18 (24) 42 175 %


	Three Months Ended								Six Months Ended
(in millions)	June 30, 2023		June 30, 2022		Change 2023 vs. 2022				June 30, 2023		June 30, 2022		Change 2023 vs. 2022
Depreciation, amortization, and other	$	48	$	49	$	(1)	(2)	%	$	92	$	97	$	(5)	(5)	%
General, administrative, and other	240		231		9		4	%	442		439		3		1	%
Merger-related charges and other	38		—		38		nm*		39		9		30		333	%

* Percentage change is not meaningful.

~~The loss on extinguishment of debt~~Merger-related charges and other expenses increased in the ~~2021 third~~2023 second quarter ~~was~~and the 2023 first half primarily due to the ~~September 2021 tender offer~~Data Security Incident discussed in ~~which we purchased and retired $1 billion aggregate principal amount of our 5.750 percent Series EE Notes maturing May 1, 2025.~~

~~Interest expense decreased in the 2022 first three quarters, primarily due to lower average debt balances driven by Senior Notes maturities and repurchases.~~Note 5.

2019

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Non-Operating Income (Expense)


	Three Months Ended								Six Months Ended
(in millions)	June 30, 2023		June 30, 2022		Change 2023 vs. 2022				June 30, 2023		June 30, 2022		Change 2023 vs. 2022
Gains and other income, net	$	2	$	2	$	—	—	%	$	5	$	6	$	(1)	(17)	%
Interest expense	(140)		(95)		(45)		(47)	%	(266)		(188)		(78)		(41)	%
Interest income	(1)		6		(7)		(117)	%	14		11		3		27	%
Equity in earnings	7		15		(8)		(53)	%	8		17		(9)		(53)	%

Interest expense increased in the 2023 second quarter and 2023 first half primarily due to higher debt balances driven by Senior Notes issuances, net of maturities ($19 million and $29 million, respectively) and higher average borrowings and interest rates related to our commercial paper and Credit Facility program ($17 million and $29 million, respectively).

Equity in earnings ~~(losses) changed~~decreased in the ~~2022~~2023 second quarter and 2023 first ~~three quarters~~half primarily due to ~~our share of~~gains recorded in the ~~gains~~prior year on the ~~sales~~sale of properties held by equity method investees ($~~23 million)~~13 million and ~~the ongoing recovery in lodging demand from the impacts of COVID-19.~~$21 million, respectively).

Income Taxes


		Three Months Ended								Nine Months Ended								Three Months Ended								Six Months Ended
($ in millions)		September 30, 2022		September 30, 2021		Change 2022 vs. 2021				September 30, 2022		September 30, 2021		Change 2022 vs. 2021
(in millions)																	(in millions)	June 30, 2023		June 30, 2022		Change 2023 vs. 2022				June 30, 2023		June 30, 2022		Change 2023 vs. 2022
Provision for income taxes	Provision for income taxes	$	(239)	$	(58)	$	(181)	(312)	%	$	(538)	$	(1)	$	(537)	nm*	Provision for income taxes	$	(238)	$	(200)	$	(38)	(19)	%	$	(325)	$	(299)	$	(26)	(9)	%

* Percentage change is not meaningful.

~~Our tax provision changed~~Provision for income taxes increased by $38 million in the ~~2022 third quarter, compared to our tax provision in the 2021 third~~2023 second quarter primarily due to the increase in operating income ($~~108~~24 million)~~, the prior year~~ and a shift in earnings to jurisdictions with higher tax ~~benefit from the loss on extinguishment of debt~~rates ($~~42 million), and the current year tax expense from the completion of prior years’ tax audits ($27~~7 million).

~~Our tax provision changed~~Provision for income taxes increased by $26 million in the ~~2022~~2023 first ~~three quarters, compared to our tax provision in the 2021 first three quarters,~~half primarily due to the increase in operating income ($~~335~~110 million) and a shift in earnings to jurisdictions with higher tax rates ($15 million), partially offset by the ~~prior~~current year release of tax reserves ($103 million), which was mostly due to the ~~favorable resolution~~completion of ~~Legacy-Starwood tax audits ($118 million), the~~a prior year tax ~~benefit from the loss on extinguishment of debt ($42 million), and the current year tax expense from the completion of prior years’ tax audits ($27 million).~~audit.

BUSINESS SEGMENTS

Our segment results in the 2023 second quarter and 2023 first half improved significantly compared to the 2022 ~~third~~second quarter and 2022 first ~~three quarters~~half due to the continued ~~to be impacted by~~recovery in lodging demand from the impacts of COVID-19. ~~See the “Impact of COVID-19” section above for more information about the impact to our business during the 2022 third quarter and 2022 first three quarters and the~~The following discussion ~~below for~~presents an additional analysis of the operating results of our reportable business ~~segments.~~segments for the 2023 second quarter compared to the 2022 second quarter and for the 2023 first half compared to the 2022 first half.


	Three Months Ended								Six Months Ended
(in millions)	June 30, 2023		June 30, 2022		Change 2023 vs. 2022				June 30, 2023		June 30, 2022		Change 2023 vs. 2022
U.S. & Canada
Segment revenues	$	4,502	$	4,117	$	385	9	%	$	8,780	$	7,388	$	1,392	19	%
Segment profit	756		727		29		4	%	1,413		1,181		232		20	%
International
Segment revenues	1,124		875		249		28	%	2,132		1,550		$	582	38	%
Segment profit	295		210		85		40	%	547		341		206		60	%

Three Months Ended Nine Months Ended
($ in millions) September 30, 2022 September 30, 2021 Change
2022 vs. 2021 September 30, 2022 September 30, 2021 Change
2022 vs. 2021
U.S. & Canada
Segment revenues $ 4,000 $ 3,006 $ 994 33 % $ 11,388 $ 7,055 $ 4,333 61 %
Segment profit 652 485 167 34 % 1,833 972 861 89 %
International
Segment revenues 908 621 287 46 % 2,458 1,534 924 60 %
Segment profit 227 86 141 164 % 568 142 426 300 %


		Properties					Rooms						Properties					Rooms
		September 30, 2022	September 30, 2021	vs. September 30, 2021			September 30, 2022	September 30, 2021	vs. September 30, 2021				June 30, 2023	June 30, 2022	vs. June 30, 2022			June 30, 2023	June 30, 2022	vs. June 30, 2022
U.S. & Canada	U.S. & Canada	5,818	5,656	162	3	%	961,765	938,103	23,662	3	%	U.S. & Canada	5,906	5,790	116	2	%	972,181	958,025	14,156	1	%
International	International	2,252	2,144	108	5	%	522,884	502,888	19,996	4	%	International	2,590	2,238	352	16	%	570,183	520,018	50,165	10	%

2120

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U.S. & Canada

~~Third~~Second Quarter

U.S. & Canada ~~quarterly~~2023 second quarter segment profit increased primarily due ~~to the following:~~to:

•$~~171~~68 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy, ~~and higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19,~~ as well as unit growth; ~~and~~

•~~$17 million of higher cost reimbursement revenue, net of reimbursed expenses;~~

partially offset by:

•$2740 million of lower ~~owned, leased, and other~~cost reimbursement revenue, net of direct expenses, primarily reflecting lower termination fees and an estimated monetary payment related to a portfolio of 12 leased hotels in the U.S. & Canada ($19 million), partially offset by stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the impacts of COVID-19.reimbursed expenses.

First ~~Three Quarters~~Half

U.S. & Canada ~~2022~~2023 first ~~three quarters~~half segment profit increased primarily due to:

•$~~720~~251 million of higher gross fee revenues, primarily reflectinghigher comparable systemwide RevPAR driven by increases in both ADR and occupancy, ~~and~~ higher profits at certain managed hotels, ~~due to the ongoing recovery in lodging demand from the impacts of COVID-19, as well as~~and unit ~~growth, partially offset by lower residential branding fees;~~

•~~$103 million of higher cost reimbursement revenue, net of reimbursed expenses; and~~

•$21 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the impacts of COVID-19, partially offset by lower termination fees and an estimated monetary payment related to a portfolio of 12 leased hotels in the U.S. & Canada ($31 million).

~~International~~

~~Third Quarter~~

~~International quarterly segment profit increased primarily due to:~~

•$85 million of higher gross fee revenues, due to higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in all regions except Greater China and higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19, partially offset by net unfavorable foreign exchange rates;growth; and

•$25 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at our owned and leased ~~properties due to the ongoing recovery in lodging demand from the impacts~~properties;

partially offset by:

•$36 million of ~~COVID-19.~~lower cost reimbursement revenue, net of reimbursed expenses.

~~First Three Quarters~~International

Second Quarter

International ~~2022 first three quarters~~2023 second quarter segment profit increased primarily due to:

•$~~255~~102 million of higher gross fee revenues, primarily reflecting higher profits at certain managed hotels and higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in all regions;

partially offset by:

•$15 million of lower cost reimbursement revenue, net of reimbursed expenses.

First Half

International 2023 first half segment profit increased primarily due to:

•$216 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in all regions, ~~except Greater China and~~ higher profits at certain managed hotels, ~~due to the ongoing recovery in lodging demand from the impacts of COVID-19, as well as~~and unit growth, partially offset by net unfavorable foreign exchange rates; and

~~Table of Contents~~

•$~~120~~13 million of ~~higher~~lower general, administrative, and other expenses, primarily reflecting a lower provision for credit losses;

partially offset by:

•$20 million of lower cost reimbursement revenue, net of reimbursed expenses; and

•$10 million of lower owned, leased, and other revenue, net of direct expenses, primarily reflecting subsidies received for certain of our leased hotels in the 2022 first half under German government COVID-19 assistance programs, partially offset by stronger results at our owned and leased ~~properties due to the ongoing recovery in lodging demand from the impacts~~properties.

Table of ~~COVID-19, partially offset by lower termination fees; and~~Contents

•~~$38 million of higher cost reimbursement revenue, net of reimbursed expenses.~~

~~STOCK-BASED COMPENSATION~~

~~See Note 3 for more information.~~

LIQUIDITY AND CAPITAL RESOURCES

Our long-term financial objectives include ~~diversifying our~~maintaining diversified financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital. At the end of the ~~2022 third~~2023 second quarter, our long-term debt had a weighted average interest rate of ~~3.9~~4.3 percent and a weighted average maturity of approximately ~~6.0~~5.5 years. Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was ~~0.9~~0.8 to 1.0 at the end of the ~~2022 third~~2023 second quarter.

We remain focused on preserving our financial flexibility and managing our debt maturities. We also remain focused on managing our corporate general and administrative costs and our capital expenditures and other investment spending.

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~~We are party to a $4.5 billion multicurrency revolving credit agreement (the “Credit Facility”). Available borrowings under the Credit Facility ~~provides for up to $4.5 billion of aggregate borrowings for general corporate needs, including working capital, capital expenditures, letters of credit, acquisitions, and 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 ~~LIBOR~~SOFR (the ~~London Interbank Offered~~Secured 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)~~ 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. As of September 30, 2022, we had no outstanding borrowings under the Credit Facility.~~December 14, 2027.

~~We entered into amendments to the~~The Credit Facility ~~in April 2020 and January 2021 (the “Credit Facility Amendments”). The debt~~contains certain covenants, including a single financial covenant that limits our maximum leverage ~~covenant~~(consisting of the ratio of Adjusted Total Debt to EBITDA, each as defined in the Credit ~~Facility, which is tested each quarter and was waived pursuant~~Facility) to the Credit Facility Amendments through and including the fourth quarter of 2021, resumed beginning with the quarter that ended March 31, 2022. The Credit Facility Amendments adjusted the required leverage levels for this covenant starting at 5.50not more than 4.5 to 1.00 for the test period that ended on March 31, 2022 and gradually stepping down to 4.00 to 1.00 over the succeeding five fiscal quarters, as further described in the Credit Facility. The Credit Facility Amendments also amended certain other 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.~~

~~Commercial Paper~~

~~Due to changes to our credit ratings as a result of~~Facility and public debt instruments, including 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~~leverage covenant under the Credit Facility, and ~~issuance~~do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We monitor the status of ~~senior notes.~~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 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.

~~Table of Contents~~Commercial Paper

We issue commercial paper in the U.S. Because we do not have purchase commitments from buyers for our commercial 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.

Uses of Cash

Cash, cash equivalents, and restricted cash totaled ~~$1,068~~$579 million at ~~September~~June 30, ~~2022, a decrease~~2023, an increase of ~~$353~~$54 million from year-end ~~2021,~~2022, primarily due to net cash provided by operating activities ($1,538 million), commercial paper borrowings ($736 million), and Senior Notes issuances, net of repayments ($493 million), partially offset by share repurchases ($~~1,235 million), Credit Facility repayments, net of borrowings ($1,050~~2,046 million), dividends paid ($~~195~~281 million), capital and technology expenditures ($~~192~~194 million), the City Express asset acquisition ($102 million), and financing outflows for employee stock-based compensation withholding taxes ($~~88 million), partially offset by net cash provided by operating activities ($1,922 million) and Senior Notes issuances, net of repayments ($411~~79 million).

Net cash provided by operating activities increased by ~~$1,177~~$490 million in the ~~2022~~2023 first ~~three quarters~~half compared to the ~~2021~~2022 first ~~three quarters,~~half, primarily due to higher net income (adjusted for non-cash ~~items~~items) and ~~the prior year loss on extinguishment of debt).~~working capital changes driven by accounts receivable timing, 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 2020 amendments to our existing U.S.-issued ~~co-brand~~co-branded credit card agreements, which reduced in both the ~~2021~~2023

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first half and 2022 first ~~three quarters,~~half, and will in the future reduce, the amount of cash we receive from these card issuers. We expect such reductions to end by year-end 2023.

Our ratio of current assets to current liabilities was 0.5 to 1.0 at the end of the ~~2022 third~~2023 second quarter. We have significant borrowing capacity under our Credit Facility should we need additional working capital.

Capital Expenditures and Other Investments

We made capital and technology expenditures of ~~$192~~$194 million in the 2023 first half and $119 million in the 2022 first ~~three quarters and $114 million in the 2021 first three quarters.~~half. We expect capital expenditures and other investments will total approximately ~~$500~~$900 million to $1 billion for the ~~2022~~2023 full year, including capital and technology expenditures, the completed City Express acquisition, loan advances, contract acquisition costs, ~~loan advances,~~ and other investing activities (including approximately $200 million for maintenance capital spending). This estimate also includes higher than typical spending ~~and~~on our ~~new headquarters). If the City Express brand acquisition discussed in Note 7 closes in 2022, we will have an additional $100 million of investment spending.~~worldwide technology systems, which is overwhelmingly expected to be reimbursed over time.

Share Repurchases and Dividends

We ~~purchased 6.2~~repurchased 5.2 million shares of our common stock for $903 million in the ~~2022 third quarter for $950 million.~~2023 second quarter. Year-to-date through ~~October 31, 2022,~~July 28, 2023, we repurchased ~~11.1~~13.6 million shares for ~~$1,700 million.~~$2.3 billion. For additional information, see “Issuer Purchases of Equity Securities” in Part II, Item 2.

Our Board of Directors declared the following quarterly cash dividends in ~~2022:~~2023 to date: (1) ~~$0.30~~$0.40 per share declared on February 10, 2023 and paid on March 31, 2023 to stockholders of record on February 24, 2023; and (2) $0.52 per share declared on May ~~2, 2022~~12, 2023 and paid on June 30, ~~2022~~2023 to stockholders of record on May ~~16, 2022; and (2) $0.30 per share declared on August 4, 2022 and paid on September 30, 2022 to stockholders of record on August 18, 2022.~~26, 2023.

We expect to continue to return cash to stockholders through a combination of share repurchases and ~~dividends in the remainder of 2022.~~cash dividends.

Material Cash Requirements

As of the end of the ~~2022 third~~2023 second quarter, there have been no material changes to our cash requirements as disclosed in our ~~2021~~2022 Form 10-K. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our ~~2021~~2022 Form 10-K for more information about our cash requirements. Also, see Note 6 for information on our long-term debt.

At ~~September~~June 30, ~~2022,~~2023, projected Deemed Repatriation Transition Tax payments under the U.S. tax legislation enacted on December 22, 2017, commonly referred to as the 2017 Tax Cuts and Jobs Act, totaled ~~$336~~$245 million, of which ~~$89~~$111 million is payable within the next 12 months from ~~September~~June 30, ~~2022.~~2023.

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. We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our ~~2021~~2022 Form 10-K. We

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have made no material changes to our critical accounting policies or the methodologies or assumptions that we apply under them.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk has not materially changed since December 31, ~~2021.~~2022. See Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our ~~2021~~2022 Form 10-K for more information on our exposure to market risk.

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Item 4. 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) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this quarterly report under the supervision and with the participation of our management, including our Chief Executive Officer 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 Chief Executive Officer 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 Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.

Changes in Internal Control Over Financial Reporting

We made no changes in internal control over financial reporting during the ~~2022 third~~2023 second quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

See the information under the “Litigation, Claims, and Government Investigations” caption in Note 5, 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.~~

As previously disclosed in our 2021 Form 10-K, several counties and cities in California asserted that the Ritz-Carlton hotels in California failed to comply with certain state statutes regulating hazardous and other waste handling and disposal. In July 2022, we executed final settlement documents to fully settle the matter, and in August the settlement was approved by the Superior Court of the State of California, County of Riverside. The settlement involves payments by the Company below the above-referenced $1 million disclosure threshold.authority, if any.

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 1A. Risk Factors

We are subject to various risks that make an investment in our securities risky. You should carefully consider the risk factors disclosed in Part I, Item 1A, “Risk Factors,” of our ~~2021~~2022 Form 10-K. There are no material changes to the risk factors discussed in our ~~2021~~2022 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)Unregistered Sale of Securities

None.

(b)Use of Proceeds

None.

(c)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)
July 1, 2022 - July 31, 2022 1.0 $ 144.77 1.0 14.5
August 1, 2022 - August 31, 2022 2.5 $ 158.22 2.5 12.0
September 1, 2022 - September 30, 2022 2.7 $ 153.48 2.7 9.3


(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)



April 1, 2023 - April 30, 2023	1.5	$	167.80	1.5	17.3
May 1, 2023 - May 31, 2023	1.5	$	172.15	1.5	15.8
June 1, 2023 - June 30, 2023	2.2	$	176.93	2.2	13.6

(1)On ~~February 28, 2019,~~November 10, 2022, we announced that our Board of Directors increased our common stock repurchase authorization by 25 million shares. As of ~~September~~June 30, ~~2022, 9.3~~2023, 13.6 million shares remained available for repurchase under Board approved authorizations. We may repurchase shares in the open market ~~and~~or in privately negotiated transactions, and we account for these shares as treasury stock.

Item 5.Other Information

During the 2023 second quarter, no director or Section 16 officer adopted or terminated any Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements.

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Item 6. Exhibits

We have not filed as exhibits certain instruments defining the rights of holders of the long-term debt of Marriott 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 and its consolidated subsidiaries. The Company agrees to furnish a copy of any such instrument to the Commission upon request.

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)

3.1

Restated Certificate of Incorporation.

Exhibit No. 3.(i) to our Form 8-K filed August 22, 2006 (File No. 001-13881).

3.2

Amended and Restated Bylaws.

Exhibit No. 3.(ii) to our Form 8-K filed February 14, 2022 (File No. 001-13881).

*10.1

2023 Marriott International, Inc. Stock and Cash Incentive Plan.

Exhibit No. 10.1 to our Form 8-K filed May 16, 2023 (File No. 001-13881).

*10.2

Form of Non-Employee Director Deferred Share Award Agreement for the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (June 2023).

Filed with this report.

*10.3

Form of Non-Employee Director Deferred Fee Award Agreement for the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (June 2023).

Filed with this report.

*10.4

Form of Non-Employee Director Stock Appreciation Right Agreement for the 2023 Marriott International, Inc. Stock and Cash Incentive Plan (June 2023).

Filed with this report.

31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).

Filed with this report.

31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).

Filed with this report.

Section 1350 Certifications.

Furnished with this report.

101

The following financial statements from Marriott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL: (i) the Condensed Consolidated Statements of Income; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; and (iv) the Condensed Consolidated Statements of Cash Flows.