Marriott International Results

Marriott International Reports Fourth Quarter 2016 Results

Marriott

HIGHLIGHTS

  • Fourth quarter reported diluted EPS totaled $0.62, a 19 percent decrease over prior year results.  Fourth quarter adjusted diluted EPS totaled $0.85, a 20 percent increase over fourth quarter 2015 combined results.  Adjusted 2016 fourth quarter results exclude merger-related costs.  Combined 2015 fourth quarter results assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015;
  • North American comparable systemwide constant dollar RevPAR rose 1.1 percent in the 2016 fourth quarter, while worldwide comparable systemwide constant dollar RevPAR rose 0.8 percent;
  • During the twelve months ended December 31, 2016, Marriott and Starwood together added more than 68,000 rooms, including roughly 11,000 rooms converted from competitor brands and approximately 31,000 rooms in international markets;
  • At year-end, Marriott's worldwide development pipeline increased to more than 420,000 rooms, including nearly 34,000 rooms approved, but not yet subject to signed contracts;
  • Fourth quarter reported net income totaled $244 million, a 21 percent increase over prior year results.  Fourth quarter adjusted net income totaled $334 million, a 15 percent increase over prior year combined results;
  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $756 million in the quarter, an 11 percent increase over fourth quarter 2015 combined adjusted EBITDA;
  • For full year 2016, Marriott repurchased 8.0 million shares of the company's common stock for $573 million, including 4.3 million shares for $348 million in the fourth quarter.

Marriott International, Inc. (NASDAQ:  MAR) today reported fourth quarter 2016 results.

On September 23, 2016, Marriott completed its acquisition of Starwood Hotels & Resorts Worldwide (Starwood). The discussion in the first section below reflects reported results for the fourth quarter in accordance with US generally accepted accounting principles (GAAP). To further assist investors, the company is also providing (a) adjusted results that exclude merger-related costs; and (b) combined financials and selected performance information for full year 2016, the 2015 fourth quarter and full year 2015, that assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015, but use the estimated fair value of assets and liabilities as of the actual closing date of the acquisition. Combined results also reflect other adjustments as described below. Throughout this press release, the business associated with brands that were in Marriott's portfolio before the Starwood acquisition are referred to as "Legacy-Marriott", while the Starwood business and brands that the company acquired are referred to as "Legacy-Starwood."

Arne M. Sorenson, president and chief executive officer of Marriott International, said, "The company delivered record high fee revenues in 2016, boosted by significant unit growth, RevPAR improvement, outstanding property-level margin gains and the acquisition of Starwood Hotels & Resorts. We added 11 leading brands to our portfolio as a result of the acquisition and welcomed the 6,000th hotel to our system. Together with owners and franchisees, Marriott and Starwood added more than 68,000 rooms during the year and, despite a tightening credit market, drove our pipeline of hotels under development to more than 420,000 rooms. 

"Looking ahead, we've never been more optimistic about our long-term prospects. Our expected new rooms growth for 2017 remains healthy, customers love our hotels and loyalty programs, and owners and franchisees prefer our portfolio of brands more than ever. Around the globe, Marriott brands represent nearly one in four hotels under construction, and one in three hotels under construction in North America. 

"Our strategy of managing and franchising hotels under solid, long-term agreements is proven. Over the years, we've shown that this business model delivers meaningful growth in the number and variety of choices for our guests globally, while generating strong sustainable cash flow.

"In 2017, we anticipate growing our rooms distribution by 6 percent, net, and expect that our worldwide systemwide comparable constant dollar RevPAR for the combined portfolio will increase 1/2 to 2 1/2 percent. While we do not assume asset sales in our earnings guidance, we believe assets will be sold in 2017. Not including asset sales, we expect to return $1.5 billion to $2.0 billion to shareholders in share repurchases and dividends in 2017."

Marriott International GAAP - Financial Results As Reported

Marriott reported net income totaled $244 million in the fourth quarter, a 21 percent increase over 2015 fourth quarter net income of $202 million. Reported diluted earnings per share (EPS) was $0.62 in the quarter, a 19 percent decrease from diluted EPS of $0.77 in the year-ago quarter. 

Base management and franchise fees totaled $564 million in the 2016 fourth quarter, compared to $373 million in the year-ago quarter. Of the $191 million year-over-year increase in fees, $174 million relates to Legacy-Starwood results in the quarter.

Fourth quarter worldwide incentive management fees increased to $149 million compared to $81 million in the year-ago quarter. The $68 million increase largely reflects Legacy-Starwood fees in the quarter.

Owned, leased, and other revenue, net of direct expenses, totaled $169 million in the 2016 fourth quarter, compared to $76 million in the year-ago quarter. The $93 million year-over-year increase includes $77 million of Legacy-Starwood results in the quarter. 

Depreciation, amortization, and other expenses totaled $71 million in the fourth quarter compared to $32 million in the year-ago quarter. The year-over-year increase largely reflects $39 million of Legacy-Starwood results in the quarter, including the effect of purchase accounting.

Merger-related costs and charges totaled $136 million in the fourth quarter compared to none in the year-ago quarter. Included in the merger-related costs and charges are $55 million of severance and retention costs, $59 million of integration costs and $22 million of transaction costs.

General, administrative, and other expenses for the 2016 fourth quarter totaled $234 million compared to $188 million in the year-ago quarter. 

Interest expense, net totaled $62 million in the fourth quarter compared to $36 million in the year-ago quarter. 

Equity in earnings totaled $2 million in the fourth quarter compared to equity in earnings of $3 million in the year-ago quarter. 

The provision for income taxes totaled $139 million in the fourth quarter, a 36.3 percent effective tax rate, compared to $82 million in the year-ago quarter. 

Full year 2016 reported net income totaled $780 million, a 9 percent decrease from reported 2015 net income of $859 million. 

Fourth Quarter 2016 Financial Results As Adjusted Compared to Fourth Quarter 2015 Combined Financial Results

This information is being presented to allow shareholders to more easily compare the 2016 fourth quarter adjusted results with the combined results for the fourth quarter of 2015. The combined results assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015, but use the estimated fair value of assets and liabilities as of the actual closing date of the acquisition. 

Combined results discussed in this section make the following assumptions: (1) removes merger-related costs and charges; (2) removes a loss on cumulative translation adjustment related to Starwood's disposition of a hotel property in the 2016 second quarter; (3) adjusts income taxes to reflect the Company's combined 2016 effective tax rate of 32.5 percent; (4) adjusts weighted average shares outstanding to include shares issued to Starwood shareholders; and (5) adjusts debt to reflect borrowing on the Credit Facility and issuance of Series Q and R Notes on January 1, 2015. Adjusted results for the 2016 fourth quarter exclude merger-related costs and charges. See page A-3 for the calculation of adjusted results, as well as combined results for the year-ago quarter.

Fourth quarter 2016 adjusted net income totaled $334 million, a 15 percent increase over 2015 fourth quarter combined net income of $291 million. Adjusted net income for the fourth quarter of 2016 excludes $136 million ($90 million after-tax) of merger-related costs. Adjusted diluted EPS in the fourth quarter totaled $0.85, a 20 percent increase from combined diluted EPS of $0.71 in the year-ago quarter.

Base management and franchise fees totaled $564 million in the fourth quarter of 2016, a 5 percent increase over combined base management and franchise fees of $538 million in the year-ago quarter. The year-over-year increase largely reflects higher RevPAR and unit growth, partially offset by $3 million of unfavorable foreign exchange.

Fourth quarter incentive management fees decreased to $149 million, compared to combined fees of $150 million in the 2015 fourth quarter. Despite a 70 basis point decrease in worldwide comparable company-operated actual dollar RevPAR in the quarter, incentive fees were roughly flat due to higher property-level margins.

On November 7, the company estimated total fee revenue for the fourth quarter would be $695 million to $705 million. Actual total fee revenue of $713 million in the quarter was higher than estimated, reflecting RevPAR near the high end of the guidance range, as well as better than expected incentive fees.

Owned, leased, and other revenue, net of direct expenses, totaled $169 million, compared to combined revenue, net of expenses of $165 million in the year-ago quarter. The adjusted year-over-year increase largely reflects better results at owned and leased hotels, higher residential and credit card branding fees, partially offset by lower termination fees and the impact of Legacy-Starwood hotels previously sold.

On November 7, the company estimated owned, leased, and other revenue, net of direct expenses, for the fourth quarter would total $150 million to $155 million. Actual results of $169 million in the quarter were higher than estimated largely due to better than expected results at several owned and leased hotels, as well as higher than expected residential and credit card branding fees.

Depreciation, amortization, and other expenses for the 2016 fourth quarter totaled $71 million compared to combined expenses of $81 million in the year-ago quarter. The $10 million decrease year-over-year was largely due to Legacy-Starwood hotels previously sold, as well as properties moved to assets held for sale in the 2016 third quarter.

General, administrative, and other expenses for the 2016 fourth quarter totaled $234 million compared to combined expenses of $284 million in the year-ago quarter. The decrease in expenses year-over-year was largely due to general administrative cost savings, an $8 million favorable legal settlement and $4 million of net foreign exchange gains. On November 7, Marriott estimated general, administrative, and other expenses for the fourth quarter would total approximately $235 million to $240 million.

Interest expense, net totaled $62 million in the fourth quarter compared to combined net expense of $69 million in the year-ago quarter. The decrease was largely due to the maturity of Series G and H Senior Notes.

Equity in earnings totaled $2 million in the fourth quarter compared to combined equity in earnings of $13 million in the year-ago quarter. The 2015 fourth quarter benefited from the reversal of an $11 million litigation reserve.

The adjusted provision for income taxes totaled $185 million in the fourth quarter, a 35.6 percent effective rate, compared to the combined provision for taxes of $139 million in the 2015 fourth quarter. On November 7, Marriott estimated an effective tax rate of 32.5 percent for the quarter. The tax rate was higher than expected largely due to a tax rate change in France and a higher mix of earnings in higher tax rate jurisdictions.

For the fourth quarter, adjusted EBITDA totaled $756 million, an 11 percent increase over fourth quarter 2015 combined adjusted EBITDA of $682 million. Full year 2016 combined adjusted EBITDA totaled $2,987 million, a 9 percent increase over full year 2015 combined adjusted EBITDA of $2,743 million. See page A-12 for the adjusted EBITDA calculation.

Selected Performance Information

Combined information presented in this section assumes Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015.

The company added 116 new properties (22,043 rooms) to its worldwide lodging portfolio during the 2016 fourth quarter, including W Las Vegas, The Sanya EDITION and the JW Marriott Hotel Singapore South Beach. Ten properties (2,450 rooms) exited the system during the quarter. At year-end, Marriott's lodging system encompassed 6,080 properties and timeshare resorts with nearly 1,191,000 rooms.

At year-end, the company's worldwide development pipeline totaled 2,493 properties with more than 420,000 rooms, including 892 properties with roughly 161,000 rooms under construction and 218 properties with nearly 34,000 rooms approved for development, but not yet subject to signed contracts.

In the 2016 fourth quarter, worldwide comparable systemwide constant dollar RevPAR increased 0.8 percent (a 0.3 percent increase using actual dollars). North American comparable systemwide constant dollar RevPAR increased 1.1 percent (a 1.1 percent increase using actual dollars), and international comparable systemwide constant dollar RevPAR increased 0.2 percent (a 1.4 percent decline using actual dollars) for the same period. These RevPAR growth statistics compare the fourth quarter of 2016 to combined comparable systemwide RevPAR for the fourth quarter of 2015.

For full year 2016, worldwide comparable combined systemwide constant dollar RevPAR increased 1.8 percent (a 1.0 percent increase using actual dollars). North American comparable combined systemwide constant dollar RevPAR increased 2.3 percent (a 2.2 percent increase using actual dollars), and international comparable combined systemwide constant dollar RevPAR increased 0.7 percent (a 2.1 percent decline using actual dollars) for the same period.

Worldwide comparable company-operated house profit margins increased 30 basis points in the fourth quarter due to improved productivity and lower utility costs. House profit margins for comparable company-operated properties outside North America were flat, while North American comparable company-operated house profit margins increased 50 basis points in the fourth quarter. These house profit margin statistics compare the fourth quarter of 2016 to combined comparable company-operated house profit margins for the fourth quarter of 2015.

For the full year 2016, worldwide comparable company-operated combined house profit margins increased 50 basis points due to improved productivity and lower utility costs. Full year combined house profit margins for comparable company-operated properties outside North America increased 20 basis points, while North America comparable company-operated combined house profit margins increased 70 basis points from the prior year. 

Balance Sheet

At year-end, Marriott's total debt was $8,506 million and cash balances totaled $858 million, compared to $4,107 million in debt and $96 million of cash at year-end 2015.

Marriott Common Stock

Weighted average fully diluted shares outstanding used to calculate reported diluted EPS totaled 394.0 million in the 2016 fourth quarter. Weighted average fully diluted shares outstanding used to calculate combined diluted EPS totaled 409.5 million in the year-ago quarter. 

The company repurchased 4.3 million shares of common stock in the fourth quarter at a cost of $348 million at an average price of $80.11. For full year 2016, Marriott repurchased 8.0 million shares of its stock for $573 million at an average price of $71.55. To date in 2017, the company has repurchased 3.0 million shares for $253 million at an average price of $84.24.

OUTLOOK

The following outlook for the first quarter and full year 2017 does not include merger-related costs, which the company cannot accurately forecast, but expects will be significant on a full-year basis.

Beginning in the first quarter of 2017, branding fees from credit cards and residential sales will be reported in the Franchise fees line on the income statement. Those fees were previously reported in Owned, leased and other revenue. In 2016, combined fees from credit cards and residential sales totaled $52 million in the first quarter and $210 million for the full year. Application fees, relicensing fees and timeshare royalties will continue to be included in the Franchise fees line. Comparisons to prior year combined results throughout this Outlook section reflects this change in reporting. The company is issuing further schedules setting forth combined quarterly and full year combined financial information for both 2015 and 2016 that reflect this change in presentation. Those schedules will be included in a Form 8-K being filed today and will be available on Marriott's Investor Relations website at http://www.marriott.com/investor once this release has been posted. 

In the 2017 first quarter, the company plans to adopt Accounting Standard Update 2016-09 ("ASU 2016-09"), which changes the GAAP reporting of excess tax benefits associated with employee stock-based compensation. For modeling purposes, the company estimates there could be a $41 million tax benefit ($0.10 diluted earnings per share) in 2017. The benefit should be recognized in the 2017 first quarter when most shares vest.

For the 2017 first quarter, Marriott expects comparable systemwide RevPAR on a constant dollar basis for the combined company will increase 1 to 3 percent in North America and worldwide. Outside North America, the company expects comparable systemwide RevPAR on a constant dollar basis for the combined company will increase 1 to 2 percent. The company's RevPAR guidance for the first quarter reflects the benefit of the U.S. Presidential inauguration and related events at Washington, D. C. hotels and the favorable shift of Easter into the second quarter. 

The company assumes first quarter total fee revenue will total $740 million to $750 million, flat to up 1 percent compared to combined first quarter 2016 total fee revenue of $740 million. These fee revenue estimates reflect about $6 million of unfavorable foreign exchange and roughly $7 million of negative impact year-over-year of the leap day in 2016 on base management and franchise fees. The company estimates that incentive management fees will decrease roughly 10 percent year-over-year largely due to deferred fees recognized in the prior year, renovations and timing. Combined fee revenues from credit cards, residential sales, timeshare royalties, application fees and relicensing fees totaled approximately $88 million in the 2016 first quarter and should be flat year-over-year.

Marriott expects first quarter 2017 owned, leased, and other revenue, net of direct expenses, could total $60 million to $70 million, a 19 to 30 percent decrease compared to combined first quarter 2016 results of $86 million. The company estimates that Legacy-Starwood hotels previously sold will negatively impact revenue, net of direct expenses by roughly $4 million in the first quarter of 2017. The first quarter estimate also assumes $13 million of lower termination fees. 

The company expects general, administrative, and other expenses will total $225 million to $230 million in the 2017 first quarter, a 7 to 9 percent decline compared to combined 2016 first quarter expenses of $246 million. 

For the full year 2017, Marriott expects comparable systemwide RevPAR on a constant dollar basis for the combined company will be flat to up 2 percent in North America. The company expects comparable systemwide RevPAR on a constant dollar basis for the combined company will increase 1 to 3 percent outside North America and 0.5 to 2.5 percent worldwide.

For the combined company, Marriott anticipates gross room additions of 6 percent, net, for full year 2017. 

The company assumes full year 2017 total fee revenue will total $3,175 million to $3,245 million, growth of 3 to 6 percent over combined 2016 total fee revenue of $3,072 million. These fee revenue estimates reflect $20 million to $25 million of unfavorable foreign exchange and roughly $7 million of negative impact year-over-year of the leap day in 2016 on base management and franchise fees. For the full year, the company expects that incentive management fees will be roughly flat compared to the prior year combined total of $562 million, reflecting RevPAR improvement and unit growth offset by renovations, terminations and about $15 million of unfavorable foreign exchange. Combined fee revenues from credit cards, residential sales, timeshare royalties, application fees and relicensing fees totaled approximately $350 million in 2016 and is expected to increase to approximately $400 million in 2017. 

Marriott expects full year 2017 owned, leased, and other revenue, net of direct expenses, could total $345 million to $360 million, a 16 to 19 percent decrease compared to combined 2016 results of $426 million. The company estimates that Legacy-Starwood hotels previously sold and lower termination fees should reduce results by roughly $38 million year-over-year. The tough comparison to the Olympics in the prior year and lower results at hotels in New York should negatively impact revenue, net of direct expenses, by approximately $20 million for the full year.

For 2017, the company anticipates general, administrative, and other expenses will total $895 million to $905 million. With the uncertainty around the timing of the closing of the Starwood acquisition, the combined company had a significant number of open positions in 2016. As a result, the company is using a baseline of $1,080 million (equal to combined 2015 general, administrative, and other expenses increased by 4 percent) for purposes of evaluating general, administrative, and other expense synergies from the Starwood acquisition. Using that comparison, the company estimates $175 million to $185 million of synergies will be realized in 2017, increasing steadily throughout the year as integration progresses. The company continues to believe it will achieve a run-rate of $250 million of annual cost synergies. 

Marriott expects full year 2017 adjusted EBITDA could total $3,075 million to $3,175 million, a 3 to 6 percent increase compared to full year 2016 combined adjusted EBITDA of $2,987 million. See page A-13 for the adjusted EBITDA calculation. Legacy-Starwood hotels previously sold contributed roughly $20 million of combined adjusted EBITDA in 2016.

 

 

First Quarter 2017

Full Year 2017

Total fee revenue1

$740 million to $750 million

$3,175 million to $3,245 million

Owned, leased and other revenue, net of direct expenses1

$60 million to $70 million

$345 million to $360 million

Depreciation, amortization, and other expenses

Approx. $70 million

Approx. $280 million

General, administrative, and other expenses

$225 million to $230 million

$895 million to $905 million

Operating income

$500 million to $525 million

$2,335 million to $2,430 million

Gains and other income 

Approx. $0 million

Approx. $0 million

Net interest expense2

Approx. $65 million

Approx. $260 million

Equity in earnings (losses)

Approx. $10 million

$35 million to $40 million

Earnings per share3

$0.87 to $0.91

$3.79 to $3.97

Tax rate4

23.8 percent

30.8 percent

1Beginning in the first quarter of 2017, the company plans to report credit card and residential branding fees in Franchise fees revenue. Those fees have to date been reported in Owned, leased and other revenue. Combined credit card and residential branding fees totaled $52 million in First Quarter 2016 and $210 million for Full Year 2016. 2Net of interest income 3Guidance for both First Quarter 2017 EPS and Full Year 2017 EPS includes the $0.10 expected favorable impact from the adoption of ASU 2016-09.  4The tax rate guidance for both First Quarter 2017 and Full Year 2017 includes the $41 million expected benefit from the adoption of ASU 2016-09, but does not include the impact of merger-related costs that may be incurred.  Without the expected benefit from adoption of ASU 2016-09, the anticipated tax rate for both First Quarter 2017 and Full Year 2017 would be 32.7 percent.

The company expects investment spending in 2017 will total approximately $500 million to $700 million, including approximately $175 million for maintenance capital. Investment spending also includes other capital expenditures (including property acquisitions), new mezzanine financing and mortgage notes, contract acquisition costs, and equity and other investments. Assuming this level of investment spending and no asset sales, $1.5 billion to $2.0 billion could be returned to shareholders through share repurchases and dividends in 2017.

The company plans to continue to disclose adjusted results and EBITDA that exclude merger-related costs and charges arising from the Starwood acquisition.

Marriott International, Inc. (NASDAQ:  MAR) is the world's largest hotel company based in Bethesda, Maryland, USA, with more than 6,000 properties in 122 countries and territories. Marriott operates and franchises hotels and licenses vacation ownership resorts. The company's 30 leading brands include: Bulgari®, The Ritz-Carlton® and The Ritz-Carlton Reserve®, St. Regis®, W®, EDITION®, JW Marriott®, The Luxury Collection®, Marriott Hotels®, Westin®, Le Méridien®, Renaissance® Hotels, Sheraton®, Delta Hotels by MarriottSM, Marriott Executive Apartments®, Marriott Vacation Club®, Autograph Collection® Hotels, Tribute Portfolio™, Design Hotels™, Gaylord Hotels®, Courtyard®, Four Points® by Sheraton, SpringHill Suites®, Fairfield Inn & Suites®, Residence Inn®, TownePlace Suites®, AC Hotels by Marriott®, Aloft®, Element®, Moxy® Hotels, and Protea Hotels by Marriott®. The company also operates award-winning loyalty programs: Marriott Rewards®, which includes The Ritz-Carlton Rewards®, and Starwood Preferred Guest®.

IRPR#1

Tables follow

 

MARRIOTT INTERNATIONAL, INC.

PRESS RELEASE SCHEDULES

QUARTER 4, 2016

TABLE OF CONTENTS

                               
                               
                               

Consolidated Statements of Income - As Reported

               

A-1

                               

Consolidated Statements of Income - Fourth Quarter Adjusted 2016 Compared to Combined 2015

 

A-3

                               

Consolidated Statements of Income - Combined Full Year 2016 and 2015

     

A-4

                               

Total Lodging Products

                         

A-5

                               

Combined Key Lodging Statistics

                   

A-8

                               

Combined Adjusted EBITDA/ Adjusted EBITDA

                 

A-12

                               

Adjusted EBITDA Forecast - Full Year 2017

                 

A-13

                               

Non-GAAP Financial and Performance Measures

               

A-14

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME - AS REPORTED

FOURTH QUARTER 2016 AND 2015

(in millions except per share amounts, unaudited)

               
               
   

As Reported

 

As Reported

 

Percent

 
   

Three Months Ended

 

Three Months Ended

 

Better/(Worse)

 
   

December 31, 2016

 

December 31, 2015

 

Reported 2016 vs. 2015

 

REVENUES

             

Base management fees

 

$ 268

 

$ 172

 

56

 

Franchise fees 1

 

296

 

201

 

47

 

Incentive management fees

 

149

 

81

 

84

 

Total Fees

 

713

 

454

 

57

 

Owned, leased, and other revenue 2

 

536

 

257

 

109

 

Cost reimbursements 3

 

4,207

 

2,995

 

40

 

Total Revenues

 

5,456

 

3,706

 

47

 
               

OPERATING COSTS AND EXPENSES

             

Owned, leased, and other - direct 4

 

367

 

181

 

(103)

 

Reimbursed costs

 

4,207

 

2,995

 

(40)

 

Depreciation, amortization, and other 5

 

71

 

32

 

(122)

 

Merger-related costs and charges

 

136

 

-

 

 

General, administrative, and other 6

 

234

 

188

 

(24)

 

Total Expenses

 

5,015

 

3,396

 

(48)

 
               

OPERATING INCOME

 

441

 

310

 

42

 
               

Gains and other income, net 7

 

2

 

7

 

(71)

 

Interest expense

 

(75)

 

(46)

 

(63)

 

Interest income 

 

13

 

10

 

30

 

Equity in earnings 8

 

2

 

3

 

(33)

 
               

INCOME BEFORE INCOME TAXES

 

383

 

284

 

35

 
               

Provision for income taxes

 

(139)

 

(82)

 

(70)

 
               

NET INCOME

 

$ 244

 

$ 202

 

21

 
               
               

EARNINGS PER SHARE

             

Earnings per share - basic

 

$ 0.63

 

$ 0.79

 

(20)

 

Earnings per share - diluted

 

$ 0.62

 

$ 0.77

 

(19)

 
               

Basic Shares

 

387.9

 

256.9

     

Diluted Shares

 

394.0

 

262.4

     
               

* Calculated percentage is not meaningful. 

         
               
               

Franchise fees include fees from our franchise agreements. The company currently plans to reclassify branding fees from owned, leased and other revenue beginning in the first quarter of 2017.

2  Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue. The company currently plans to reclassify branding fees to franchise fees beginning in the first quarter of 2017.

3  Cost reimbursements include reimbursements from properties for company-funded operating expenses.

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

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

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

Gains and other income, net includes gains and losses on the sale of real estate, the sale or other-than-temporary impairment of joint ventures and investments, and results from cost method investments.

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

 

A-1

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME - AS REPORTED

FULL YEAR 2016 AND 2015

(in millions except per share amounts, unaudited)

               
               
   

As Reported

 

As Reported

 

Percent

 
   

Twelve Months Ended

 

Twelve Months Ended

 

Better/(Worse)

 
   

December 31, 2016

 

December 31, 2015

 

Reported 2016 vs. 2015

 

REVENUES

             

Base management fees

 

$ 806

 

$ 698

 

15

 

Franchise fees 1

 

988

 

853

 

16

 

Incentive management fees

 

425

 

319

 

33

 

Total Fees

 

2,219

 

1,870

 

19

 

Owned, leased, and other revenue 2

 

1,307

 

986

 

33

 

Cost reimbursements3

 

13,546

 

11,630

 

16

 

Total Revenues

 

17,072

 

14,486

 

18

 
               

OPERATING COSTS AND EXPENSES

             

Owned, leased, and other - direct 4

 

900

 

733

 

(23)

 

Reimbursed costs

 

13,546

 

11,630

 

(16)

 

Depreciation, amortization, and other 5

 

168

 

139

 

(21)

 

Merger-related costs and charges

 

386

 

-

 

 

General, administrative, and other 6

 

704

 

634

 

(11)

 

Total Expenses

 

15,704

 

13,136

 

(20)

 
               

OPERATING INCOME

 

1,368

 

1,350

 

1

 
               

Gains and other income, net 7

 

5

 

27

 

(81)

 

Interest expense

 

(234)

 

(167)

 

(40)

 

Interest income 

 

35

 

29

 

21

 

Equity in earnings 8

 

10

 

16

 

(38)

 
               

INCOME BEFORE INCOME TAXES

 

1,184

 

1,255

 

(6)

 
               

Provision for income taxes

 

(404)

 

(396)

 

(2)

 
               

NET INCOME

 

$ 780

 

$ 859

 

(9)

 
               
               

EARNINGS PER SHARE

             

Earnings per share - basic

 

$ 2.68

 

$ 3.22

 

(17)

 

Earnings per share - diluted

 

$ 2.64

 

$ 3.15

 

(16)

 
               

Basic Shares

 

290.9

 

267.3

     

Diluted Shares

 

295.7

 

272.8

     
               
               

* Calculated percentage is not meaningful. 

         
               
               

Franchise fees include fees from our franchise agreements. The company currently plans to reclassify branding fees from owned, leased and other revenue beginning in the first quarter of 2017.

2  Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue. The company currently plans to reclassify branding fees to franchise fees beginning in the first quarter of 2017.

3  Cost reimbursements include reimbursements from properties for company-funded operating expenses.

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

5  Depreciation, amortization, and other expenses include depreciation for fixed assets, amortization of capitalized costs incurred to acquire management, 

franchise, and license agreements, and any related impairments, accelerations, or write-offs.

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

Gains and other income, net includes gains and losses on the sale of real estate, the sale or other-than-temporary impairment of joint ventures and 

investments, and results from cost method investments.

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

 

A-2

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOURTH QUARTER ADJUSTED 2016 COMPARED TO COMBINED 2015

(in millions except per share amounts, unaudited)

                     
                   

Percent

   

As Reported

 

Less:

 

As Adjusted **

 

Combined 10

 

Better/(Worse)

   

Three Months Ended

 

Merger-Related 

 

Three Months Ended

 

Three Months Ended

 

Adjusted 2016 vs.

   

December 31, 2016

 

Costs 9

 

December 31, 2016

 

December 31, 2015

 

Combined 2015

REVENUES

                   

Base management fees

 

$ 268

 

$ -

 

$ 268

 

$ 265

 

1

Franchise fees 1

 

296

 

-

 

296

 

273

 

8

Incentive management fees

 

149

 

-

 

149

 

150

 

(1)

Total Fees

 

713

 

-

 

713

 

688

 

4

Owned, leased, and other revenue 2

 

536

 

-

 

536

 

565

 

(5)

Cost reimbursements 3

 

4,207

 

-

 

4,207

 

4,321

 

(3)

Total Revenues

 

5,456

 

-

 

5,456

 

5,574

 

(2)

                     

OPERATING COSTS AND EXPENSES

                   

Owned, leased, and other - direct 4

 

367

 

-

 

367

 

400

 

8

Reimbursed costs

 

4,207

 

-

 

4,207

 

4,321

 

3

Depreciation, amortization, and other 5

 

71

 

-

 

71

 

81

 

12

Merger-related costs and charges

 

136

 

136

 

-

 

-

 

-

General, administrative, and other 6

 

234

 

-

 

234

 

284

 

18

Total Expenses

 

5,015

 

136

 

4,879

 

5,086

 

4

                     

OPERATING INCOME / (LOSS)

 

441

 

(136)

 

577

 

488

 

18

                     

Gains (losses) and other income, net 7

 

2

 

-

 

2

 

(2)

 

200

Interest expense

 

(75)

 

-

 

(75)

 

(81)

 

7

Interest income 

 

13

 

-

 

13

 

12

 

8

Equity in earnings 8

 

2

 

-

 

2

 

13

 

(85)

                     

INCOME / (LOSS) BEFORE INCOME TAXES

 

383

 

(136)

 

519

 

430

 

21

                     

(Provision) benefit for income taxes

 

(139)

 

46

 

(185)

 

(139)

 

(33)

                     

NET INCOME / (LOSS)

 

$ 244

 

$ (90)

 

$ 334

 

$ 291

 

15

                     
                     

EARNINGS PER SHARE

                   

Earnings per share - basic

 

$ 0.63

     

$ 0.86

 

$ 0.72

 

19

Earnings per share - diluted

 

$ 0.62

     

$ 0.85

 

$ 0.71

 

20

                     

Basic Shares

 

387.9

     

387.9

 

403.0

   

Diluted Shares

 

394.0

     

394.0

 

409.5

   
                     
                     

** Denotes non-GAAP financial measures. See pages A-14 and A-15 for more information about these non-GAAP measures.

                     
                     

Franchise fees include fees from our franchise agreements. The company currently plans to reclassify branding fees from owned, leased and other revenue beginning in the first quarter of 2017.

2  Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue. The company currently plans to reclassify branding fees to franchise fees beginning in the first quarter of 2017.

3  Cost reimbursements include reimbursements from properties for company-funded operating expenses.

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

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

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

7Gains (losses) and other income, net includes gains and losses on the sale of real estate, the sale or other-than-temporary impairment of joint ventures and investments, and results from cost method investments.

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

9 The adjusted consolidated statements of income are presented before the impact of merger-related costs.

10 See pages A-14 and A-15 for basis of presentation of combined financial information.

 

A-3

 

MARRIOTT INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME - COMBINED

FULL YEAR 2016 AND 2015

(in millions except per share amounts, unaudited)

             
             
             
   

Combined 9

 

Combined 9

 

Percent

   

Twelve Months Ended

 

Twelve Months Ended

 

Better/(Worse)

   

December 31, 2016

 

December 31, 2015

 

Combined 2016 vs. 2015

REVENUES

           

Base management fees

 

$ 1,072

 

$ 1,064

 

1

Franchise fees 1 

 

1,228

 

1,146

 

7

Incentive management fees

 

562

 

529

 

6

Total Fees

 

2,862

 

2,739

 

4

Owned, leased, and other revenue 2

 

2,141

 

2,251

 

(5)

Cost reimbursements 3

 

17,480

 

16,936

 

3

Total Revenues

 

22,483

 

21,926

 

3

             

OPERATING COSTS AND EXPENSES

           

Owned, leased, and other - direct 4

 

1,505

 

1,663

 

10

Reimbursed costs

 

17,480

 

16,936

 

(3)

Depreciation, amortization, and other 5

 

313

 

347

 

10

General, administrative, and other 6

 

964

 

1,039

 

7

Total Expenses

 

20,262

 

19,985

 

(1)

             

OPERATING INCOME

 

2,221

 

1,941

 

14

             

Losses and other income, net 7

 

(22)

 

(3)

 

(633)

Interest expense

 

(312)

 

(314)

 

1

Interest income 

 

41

 

34

 

21

Equity in earnings 8

 

25

 

64

 

(61)

             

INCOME BEFORE INCOME TAXES

 

1,953

 

1,722

 

13

             

Provision for income taxes

 

(652)

 

(558)

 

(17)

             

NET INCOME

 

$ 1,301

 

$ 1,164

 

12

             
             

EARNINGS PER SHARE

           

Earnings per share - basic

 

$ 3.35

 

$ 2.89

 

16

Earnings per share - diluted

 

$ 3.30

 

$ 2.84

 

16

             

Basic Shares

 

388.7

 

402.9

   

Diluted Shares

 

394.4

 

409.4

   
             
             
             

Franchise fees include fees from our franchise agreements. The company currently plans to reclassify branding fees from owned, leased and other revenue beginning in the first quarter of 2017.

2  Owned, leased, and other revenue includes revenue from the properties we own or lease, termination fees, branding fees, and other revenue. The company currently plans to reclassify branding fees to franchise fees beginning in the first quarter of 2017.

3  Cost reimbursements include reimbursements from properties for company-funded operating expenses.

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

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

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

Losses and other income, net includes gains and losses on the sale of real estate, the sale or other-than-temporary impairment of joint ventures and investments, and results from cost method investments.

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

9  See pages A-14 and A-15 for basis of presentation of combined financial information.

 

A-4

 

Marriott International, Inc

Total Lodging Products 

By Ownership Type

As of December 31, 2016

             
 

North America

Total International

Total Worldwide

 

Units

Rooms

Units

Rooms

Units

Rooms

Managed

827

250,363

994

271,189

1,821

521,552

JW Marriott Hotels 

15

9,695

47

18,925

62

28,620

The Ritz-Carlton Hotels 

39

11,410

51

14,474

90

25,884

The Ritz-Carlton Residences

34

4,733

8

416

42

5,149

The Ritz-Carlton Serviced Apartments

   

5

697

5

697

Luxury Collection 

5

2,294

47

8,272

52

10,566

W Hotels

25

7,729

23

5,242

48

12,971

St. Regis 

9

1,725

27

6,049

36

7,774

EDITION Hotels 

2

567

2

699

4

1,266

EDITION Residences

1

25

   

1

25

Bulgari Hotels & Resorts 

   

2

117

2

117

Bulgari Residences

   

1

5

1

5

Marriott Hotels 

131

68,440

154

44,547

285

112,987

Sheraton 

31

23,654

188

64,088

219

87,742

Westin 

48

25,173

68

21,964

116

47,137

Renaissance Hotels 

26

11,625

50

16,171

76

27,796

Le Meridien 

4

720

75

20,952

79

21,672

Autograph Collection Hotels 

3

1,065

4

670

7

1,735

Delta Hotels and Resorts 

25

6,764

   

25

6,764

Gaylord Hotels 

5

8,098

   

5

8,098

Marriott Executive Apartments 

   

28

4,195

28

4,195

Tribute Portfolio 

   

3

515

3

515

Courtyard 

256

40,821

78

16,470

334

57,291

Residence Inn 

114

17,155

5

517

119

17,672

Fairfield Inn & Suites 

6

1,432

10

1,588

16

3,020

SpringHill Suites 

30

4,854

   

30

4,854

Four Points 

1

134

58

14,533

59

14,667

TownePlace Suites 

15

1,740

   

15

1,740

Aloft 

1

330

23

5,694

24

6,024

Protea Hotels 

   

36

4,201

36

4,201

Element 

1

180

1

188

2

368

Franchised

3,592

524,793

414

89,612

4,006

614,405

JW Marriott Hotels 

10

4,469

7

1,742

17

6,211

The Ritz-Carlton Hotels 

1

429

   

1

429

The Ritz-Carlton Residences

1

55

   

1

55

Luxury Collection 

9

1,863

33

6,387

42

8,250

Bulgari Hotels & Resorts 

   

1

85

1

85

Marriott Hotels 

210

65,271

43

12,491

253

77,762

Sheraton 

162

48,025

59

17,519

221

65,544

Westin 

75

24,700

23

7,334

98

32,034

Renaissance Hotels 

57

16,103

26

7,168

83

23,271

Le Meridien 

16

3,753

11

2,873

27

6,626

Autograph Collection Hotels 

61

13,234

38

9,622

99

22,856

Delta Hotels and Resorts 

12

3,020

   

12

3,020

Tribute Portfolio 

12

4,541

6

282

18

4,823

Courtyard 

686

91,559

56

10,745

742

102,304

Residence Inn 

611

71,718

2

200

613

71,918

Fairfield Inn & Suites 

822

75,000

2

386

824

75,386

SpringHill Suites 

329

37,672

   

329

37,672

Four Points 

131

19,996

37

6,010

168

26,006

TownePlace Suites 

286

28,512

   

286

28,512

Aloft 

80

11,766

12

1,925

92

13,691

Protea Hotels 

   

51

3,550

51

3,550

Element 

19

2,813

2

293

21

3,106

Moxy Hotels 

2

294

5

1,000

7

1,294

 

A-5

 

Marriott International, Inc

Total Lodging Products 

By Ownership Type

As of December 31, 2016

             
 

North America

Total International

Total Worldwide

 

Units

Rooms

Units

Rooms

Units

Rooms

Owned/Leased

33

10,805

37

10,034

70

20,839

JW Marriott Hotels 

   

1

496

1

496

The Ritz-Carlton Hotels 

   

2

553

2

553

Luxury Collection 

   

3

468

3

468

W Hotels

1

509

2

665

3

1,174

St. Regis 

1

238

1

160

2

398

Marriott Hotels 

4

2,102

4

1,445

8

3,547

Sheraton 

3

2,671

6

2,867

9

5,538

Westin 

2

1,832

1

246

3

2,078

Renaissance Hotels 

1

310

3

749

4

1,059

Tribute Portfolio 

1

135

   

1

135

Courtyard 

19

2,816

3

644

22

3,460

Residence Inn 

1

192

1

140

2

332

Protea Hotels 

   

10

1,601

10

1,601

Unconsolidated Joint Ventures

11

1,913

89

11,193

100

13,106

Autograph Collection Hotels 

   

5

348

5

348

AC Hotels by Marriott 

11

1,913

84

10,845

95

12,758

Timeshare*

66

17,127

17

3,575

83

20,702

Marriott Vacations Worldwide 

48

10,665

14

2,355

62

13,020

Vistana 

18

6,462

3

1,220

21

7,682

Grand Total

4,529

805,001

1,551

385,603

6,080

1,190,604

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

 

A-6

 

Marriott International, Inc

Total Lodging Products 

By Brand

As of December 31, 2016

             
 

North America

Total International

Total Worldwide

Total Systemwide

Units

Rooms

Units

Rooms

Units

Rooms

Luxury

153

45,741

263

65,452

416

111,193

JW Marriott Hotels 

25

14,164

55

21,163

80

35,327

The Ritz-Carlton Hotels 

40

11,839

53

15,027

93

26,866

The Ritz-Carlton Residences

35

4,788

8

416

43

5,204

The Ritz-Carlton Serviced Apartments

   

5

697

5

697

Luxury Collection 

14

4,157

83

15,127

97

19,284

W Hotels

26

8,238

25

5,907

51

14,145

St. Regis 

10

1,963

28

6,209

38

8,172

EDITION Hotels 

2

567

2

699

4

1,266

EDITION Residences

1

25

   

1

25

Bulgari Hotels & Resorts 

   

3

202

3

202

Bulgari Residences

   

1

5

1

5

Upper Upscale

889

331,236

795

236,046

1,684

567,282

Marriott Hotels 

345

135,813

201

58,483

546

194,296

Sheraton 

196

74,350

253

84,474

449

158,824

Westin 

125

51,705

92

29,544

217

81,249

Renaissance Hotels 

84

28,038

79

24,088

163

52,126

Le Meridien 

20

4,473

86

23,825

106

28,298

Autograph Collection Hotels 

64

14,299

47

10,640

111

24,939

Delta Hotels and Resorts 

37

9,784

   

37

9,784

Gaylord Hotels 

5

8,098

   

5

8,098

Marriott Executive Apartments 

   

28

4,195

28

4,195

Tribute Portfolio 

13

4,676

9

797

22

5,473

Limited-Service

3,421

410,897

476

80,530

3,897

491,427

Courtyard 

961

135,196

137

27,859

1,098

163,055

Residence Inn 

726

89,065

8

857

734

89,922

Fairfield Inn & Suites 

828

76,432

12

1,974

840

78,406

SpringHill Suites 

359

42,526

   

359

42,526

Four Points 

132

20,130

95

20,543

227

40,673

TownePlace Suites 

301

30,252

   

301

30,252

Aloft 

81

12,096

35

7,619

116

19,715

AC Hotels by Marriott 

11

1,913

84

10,845

95

12,758

Protea Hotels 

   

97

9,352

97

9,352

Element 

20

2,993

3

481

23

3,474

Moxy Hotels 

2

294

5

1,000

7

1,294

Timeshare*

66

17,127

17

3,575

83

20,702

Marriott Vacations Worldwide 

48

10,665

14

2,355

62

13,020

Vistana 

18

6,462

3

1,220

21

7,682

Grand Total

4,529

805,001

1,551

385,603

6,080

1,190,604

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

 

A-7

 

MARRIOTT INTERNATIONAL, INC.

COMBINED KEY LODGING STATISTICS

Constant $

 
                     

Comparable Company-Operated International Properties1

                     
   

Three Months Ended December 31, 2016 and December 31, 2015

   

REVPAR

 

Occupancy

 

Average Daily Rate

Region

 

2016

vs. 2015*

 

2016

vs. 2015*

 

2016

vs. 2015*

Greater China

 

$92.39

0.8%

 

70.7%

4.3%

pts.

 

$130.60

-5.4%

Rest of Asia Pacific

 

$117.34

1.1%

 

75.8%

1.4%

pts.

 

$154.83

-0.8%

Asia Pacific

 

$100.78

0.9%

 

72.4%

3.4%

pts.

 

$139.12

-3.8%

                     

Caribbean & Latin America

 

$137.49

-3.1%

 

64.3%

-2.1%

pts.

 

$213.96

0.0%

Europe

 

$115.09

1.3%

 

70.1%

0.7%

pts.

 

$164.15

0.3%

Middle East & Africa

 

$119.24

-1.1%

 

67.8%

0.6%

pts.

 

$175.77

-2.0%

                     

Total International2

 

$110.54

0.2%

 

70.4%

1.8%

pts.

 

$157.04

-2.3%

                     

Worldwide3

 

$125.53

0.4%

 

71.0%

0.7%

pts.

 

$176.75

-0.6%

                     
                     

Comparable Systemwide International Properties1

                     
   

Three Months Ended December 31, 2016 and December 31, 2015

   

REVPAR

 

Occupancy

 

Average Daily Rate

Region

 

2016

vs. 2015*

 

2016

vs. 2015*

 

2016

vs. 2015*

Greater China

 

$92.84

0.5%

 

70.6%

4.1%

pts.

 

$131.59

-5.3%

Rest of Asia Pacific

 

$119.26

0.9%

 

75.2%

0.9%

pts.

 

$158.54

-0.3%

Asia Pacific

 

$103.69

0.7%

 

72.5%

2.8%

pts.

 

$143.08

-3.2%

                     

Caribbean & Latin America

 

$106.02

-2.6%

 

60.8%

-1.0%

pts.

 

$174.34

-1.0%

Europe

 

$110.24

1.7%

 

70.8%

1.2%

pts.

 

$155.77

0.0%

Middle East & Africa

 

$114.01

-1.1%

 

67.3%

0.5%

pts.

 

$169.39

-1.8%

                     

Total International2

 

$107.28

0.2%

 

69.7%

1.5%

pts.

 

$153.99

-1.9%

                     

Worldwide3

 

$107.95

0.8%

 

69.6%

0.4%

pts.

 

$155.14

0.3%

                     

* The 2015 statistics used to calculate change from the 2015 period to the 2016 period assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015.

1 International includes properties located outside the United States and Canada.

2 Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Bulgari Hotels & Resorts, Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, Le Meridien, Courtyard, Residence Inn, Fairfield Inn & Suites, Four Points, Aloft Hotels, and AC Hotels by Marriott. Systemwide also includes Element Hotels and Moxy Hotels.

3 Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Bulgari Hotels & Resorts, Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, Gaylord Hotels, Le Meridien, Tribute Portfolio, Courtyard, Residence Inn, Fairfield Inn & Suites, SpringHill Suites, TownePlace Suites, Four Points, Aloft Hotels, and AC Hotels by Marriott. Systemwide also includes Element Hotels and Moxy Hotels.

 

A-8

 

MARRIOTT INTERNATIONAL, INC.

COMBINED KEY LODGING STATISTICS

Constant $

 
                     

Comparable Company-Operated International Properties1

                     
   

Twelve Months Ended December 31, 2016 and December 31, 2015*

   

REVPAR

 

Occupancy

 

Average Daily Rate

Region

 

2016

vs. 2015

 

2016

vs. 2015

 

2016

vs. 2015

Greater China

 

$89.17

0.4%

 

67.5%

3.7%

pts.

 

$132.16

-5.1%

Rest of Asia Pacific

 

$112.69

3.7%

 

75.2%

3.0%

pts.

 

$149.80

-0.5%

Asia Pacific

 

$97.08

1.6%

 

70.1%

3.4%

pts.

 

$138.52

-3.4%

                     

Caribbean & Latin America

 

$139.69

0.4%

 

65.3%

-0.9%

pts.

 

$213.99

1.8%

Europe

 

$124.87

0.8%

 

71.8%

-0.5%

pts.

 

$173.84

1.5%

Middle East & Africa

 

$106.49

-3.8%

 

64.6%

0.6%

pts.

 

$164.90

-4.8%

                     

Total International2

 

$109.05

0.3%

 

69.2%

1.6%

pts.

 

$157.69

-2.1%

                     

Worldwide3

 

$128.37

1.6%

 

72.5%

1.1%

pts.

 

$177.11

0.1%

                     
                     

Comparable Systemwide International Properties1

                     
   

Twelve Months Ended December 31, 2016 and December 31, 2015*

   

REVPAR

 

Occupancy

 

Average Daily Rate

Region

 

2016

vs. 2015

 

2016

vs. 2015

 

2016

vs. 2015

Greater China

 

$89.33

0.2%

 

67.2%

3.5%

pts.

 

$132.92

-5.1%

Rest of Asia Pacific

 

$114.07

4.0%

 

74.4%

2.4%

pts.

 

$153.35

0.7%

Asia Pacific

 

$99.50

2.0%

 

70.2%

3.1%

pts.

 

$141.82

-2.5%

                     

Caribbean & Latin America

 

$116.98

-0.4%

 

63.5%

0.0%

pts.

 

$184.29

-0.3%

Europe

 

$114.62

1.4%

 

70.6%

0.1%

pts.

 

$162.34

1.3%

Middle East & Africa

 

$102.09

-3.5%

 

64.2%

0.4%

pts.

 

$159.12

-4.1%

                     

Total International2

 

$106.39

0.7%

 

68.5%

1.4%

pts.

 

$155.31

-1.5%

                     

Worldwide3

 

$113.50

1.8%

 

72.5%

0.6%

pts.

 

$156.53

1.0%

                     

* The full year 2016 statistics, as well as the 2015 statistics used to calculate change from the 2015 period to the 2016 period, assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015.

1 International includes properties located outside the United States and Canada.

2 Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Bulgari Hotels & Resorts, Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, Le Meridien, Courtyard, Residence Inn, Fairfield Inn & Suites, Four Points, Aloft Hotels, and AC Hotels by Marriott. Systemwide also includes Element Hotels and Moxy Hotels.

3 Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Bulgari Hotels & Resorts, Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Autograph Collection Hotels, Protea Hotels, Gaylord Hotels, Le Meridien, Tribute Portfolio, Courtyard, Residence Inn, Fairfield Inn & Suites, SpringHill Suites, TownePlace Suites, Four Points, Aloft Hotels, and AC Hotels by Marriott. Systemwide also includes Element Hotels and Moxy Hotels.

 

A-9

 

MARRIOTT INTERNATIONAL, INC.

COMBINED KEY LODGING STATISTICS

Constant $

                     

Comparable Company-Operated North American Properties1

                     
   

Three Months Ended December 31, 2016 and December 31, 2015

   

REVPAR

 

Occupancy

 

Average Daily Rate

Brand

 

2016

vs. 2015*

 

2016

vs. 2015*

 

2016

vs. 2015*

JW Marriott Hotels

 

$179.45

3.2%

 

73.0%

1.5%

pts.

 

$245.66

1.0%

The Ritz-Carlton

 

$241.05

3.2%

 

68.6%

0.7%

pts.

 

$351.28

2.1%

W Hotels

 

$246.64

-1.1%

 

80.2%

0.8%

pts.

 

$307.71

-2.0%

Composite North American Luxury2

 

$238.36

2.3%

 

73.3%

1.1%

pts.

 

$325.13

0.8%

Marriott Hotels

 

$135.69

-0.9%

 

70.5%

-0.4%

pts.

 

$192.47

-0.4%

Sheraton Hotels

 

$144.61

0.2%

 

72.1%

-2.0%

pts.

 

$200.70

3.0%

Westin Hotels

 

$159.66

-1.1%

 

73.3%

-1.6%

pts.

 

$217.97

1.1%

Composite North American Upper Upscale3

$143.03

-0.3%

 

71.9%

-0.7%

pts.

 

$198.87

0.7%

Composite North American Full-Service4 

 

$160.65

0.4%

 

72.2%

-0.4%

pts.

 

$222.57

0.9%

Courtyard

 

$94.56

0.2%

 

68.4%

-0.8%

pts.

 

$138.35

1.4%

Residence Inn

 

$108.67

3.0%

 

75.2%

0.2%

pts.

 

$144.56

2.8%

Composite North American Limited-Service5

$97.36

1.2%

 

70.5%

-0.5%

pts.

 

$138.10

1.8%

Composite - All

 

$140.35

0.5%

 

71.6%

-0.4%

pts.

 

$195.91

1.1%

                     
                     

Comparable Systemwide North American Properties1

                     
   

Three Months Ended December 31, 2016 and December 31, 2015

   

REVPAR

 

Occupancy

 

Average Daily Rate

Brand

 

2016

vs. 2015*

 

2016

vs. 2015*

 

2016

vs. 2015*

JW Marriott Hotels

 

$169.31

1.9%

 

71.9%

0.9%

pts.

 

$235.33

0.6%

The Ritz-Carlton

 

$241.05

3.2%

 

68.6%

0.7%

pts.

 

$351.28

2.1%

W Hotels

 

$246.64

-1.1%

 

80.2%

0.8%

pts.

 

$307.71

-2.0%

Composite North American Luxury2

 

$227.14

2.0%

 

72.8%

0.9%

pts.

 

$311.92

0.7%

Marriott Hotels

 

$113.78

-0.2%

 

67.4%

0.0%

pts.

 

$168.91

-0.2%

Sheraton Hotels

 

$107.68

0.9%

 

68.2%

-0.8%

pts.

 

$157.97

2.0%

Westin Hotels

 

$143.36

-0.1%

 

71.7%

-1.1%

pts.

 

$200.02

1.5%

Composite North American Upper Upscale3

$122.03

0.6%

 

69.3%

-0.2%

pts.

 

$176.13

0.9%

Composite North American Full-Service4 

 

$133.08

0.9%

 

69.7%

-0.1%

pts.

 

$191.06

1.0%

Courtyard

 

$91.89

0.6%

 

67.8%

-0.4%

pts.

 

$135.45

1.2%

Residence Inn

 

$104.05

2.0%

 

74.6%

-0.1%

pts.

 

$139.49

2.1%

Fairfield Inn 

 

$71.11

1.4%

 

65.4%

-0.1%

pts.

 

$108.68

1.5%

Composite North American Limited-Service5

$88.22

1.3%

 

69.5%

-0.2%

pts.

 

$127.01

1.6%

Composite - All

 

$108.23

1.1%

 

69.5%

-0.1%

pts.

 

$155.62

1.3%

                     

* The 2015 statistics used to calculate change from the 2015 period to the 2016 period assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015.

1 Includes properties located in the United States and Canada.

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

3 Includes Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, Le Meridien, and Tribute Portfolio.

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

5 Includes Courtyard, Residence Inn, Fairfield Inn & Suites, SpringHill Suites, and TownePlace Suites. Systemwide also includes Four Points, Aloft Hotels and Element Hotels.

 

A-10

 

MARRIOTT INTERNATIONAL, INC.

COMBINED KEY LODGING STATISTICS

Constant $

                     

Comparable Company-Operated North American Properties1

                     
   

Twelve Months Ended December 31, 2016 and December 31, 2015*

   

REVPAR

 

Occupancy

 

Average Daily Rate

Brand

 

2016

vs. 2015

 

2016

vs. 2015

 

2016

vs. 2015

JW Marriott Hotels

 

$187.02

4.0%

 

76.8%

2.2%

pts.

 

$243.57

1.1%

The Ritz-Carlton

 

$252.40

3.6%

 

71.9%

1.0%

pts.

 

$350.99

2.2%

W Hotels

 

$239.94

-2.2%

 

81.7%

0.2%

pts.

 

$293.82

-2.5%

Composite North American Luxury2

 

$242.10

2.8%

 

76.3%

1.4%

pts.

 

$317.13

0.9%

Marriott Hotels

 

$144.94

2.4%

 

75.4%

0.7%

pts.

 

$192.23

1.4%

Sheraton Hotels

 

$149.49

2.1%

 

76.5%

-0.5%

pts.

 

$195.40

2.7%

Westin Hotels

 

$167.21

0.9%

 

77.4%

-0.6%

pts.

 

$216.07

1.7%

Composite North American Upper Upscale3

 

$149.92

2.3%

 

76.1%

0.3%

pts.

 

$196.98

1.8%

Composite North American Full-Service4

 

$166.97

2.4%

 

76.2%

0.5%

pts.

 

$219.25

1.7%

Courtyard

 

$103.65

2.2%

 

73.1%

0.3%

pts.

 

$141.83

1.7%

Residence Inn

 

$118.14

3.8%

 

79.0%

0.6%

pts.

 

$149.56

3.0%

Composite North American Limited-Service5

$106.20

2.8%

 

75.0%

0.5%

pts.

 

$141.68

2.1%

Composite - All

 

$147.48

2.5%

 

75.8%

0.5%

pts.

 

$194.64

1.8%

                     
                     

Comparable Systemwide North American Properties1

                     
   

Twelve Months Ended December 31, 2016 and December 31, 2015*

   

REVPAR

 

Occupancy

 

Average Daily Rate

Brand

 

2016

vs. 2015

 

2016

vs. 2015

 

2016

vs. 2015

JW Marriott Hotels

 

$178.91

3.5%

 

76.0%

1.3%

pts.

 

$235.47

1.8%

The Ritz-Carlton

 

$252.40

3.6%

 

71.9%

1.0%

pts.

 

$350.99

2.2%

W Hotels

 

$239.94

-2.2%

 

81.7%

0.2%

pts.

 

$293.82

-2.5%

Composite North American Luxury2

 

$231.99

2.8%

 

76.0%

1.2%

pts.

 

$305.36

1.2%

Marriott Hotels

 

$124.39

2.0%

 

72.4%

0.3%

pts.

 

$171.92

1.5%

Sheraton Hotels

 

$115.58

2.4%

 

73.3%

0.3%

pts.

 

$157.73

2.0%

Westin Hotels

 

$152.94

2.4%

 

76.9%

0.1%

pts.

 

$198.98

2.3%

Composite North American Upper Upscale3

 

$130.44

2.5%

 

73.9%

0.4%

pts.

 

$176.52

1.9%

Composite North American Full-Service4

 

$141.11

2.6%

 

74.1%

0.5%

pts.

 

$190.41

1.9%

Courtyard

 

$101.49

1.9%

 

72.9%

0.0%

pts.

 

$139.24

1.9%

Residence Inn

 

$112.78

2.4%

 

79.0%

-0.1%

pts.

 

$142.78

2.6%

Fairfield Inn 

 

$77.96

1.2%

 

70.1%

-0.5%

pts.

 

$111.20

1.9%

Composite North American Limited-Service5

$96.62

2.0%

 

74.2%

0.0%

pts.

 

$130.15

2.0%

Composite - All

 

$116.47

2.3%

 

74.2%

0.2%

pts.

 

$157.00

2.0%

                     

* The full year 2016 statistics, as well as the 2015 statistics used to calculate change from the 2015 period to the 2016 period, assume Marriott's acquisition of Starwood and Starwood's sale of its timeshare business had been completed on January 1, 2015.

 
 

1 Includes properties located in the United States and Canada.

               

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

       

3 Includes Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Autograph Collection Hotels, Gaylord Hotels, Le Meridien, and Tribute Portfolio.

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

         

5 Includes Courtyard, Residence Inn, Fairfield Inn & Suites, SpringHill Suites, and TownePlace Suites. Systemwide also includes Four Points, Aloft Hotels and Element Hotels.

                     

A-11

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

COMBINED ADJUSTED EBITDA/ ADJUSTED EBITDA

($ in millions)

                   
 

Fiscal Year 2016

 

Combined 1 First Quarter

 

Combined 1 Second Quarter

 

Combined 1 Third Quarter

 

Adjusted 2 Fourth Quarter

 

Combined Total

Net income 2

$ 290

 

$ 333

 

$ 344

 

$ 334

 

$ 1,301

Interest expense 

77

 

79

 

81

 

75

 

312

Tax provision

140

 

161

 

166

 

185

 

652

Depreciation and amortization

82

 

79

 

81

 

71

 

313

Depreciation classified in reimbursed costs

32

 

33

 

34

 

33

 

132

Interest expense from unconsolidated joint ventures 

4

 

4

 

4

 

4

 

16

Depreciation and amortization from unconsolidated joint ventures

11

 

11

 

13

 

10

 

45

EBITDA **

636

 

700

 

723

 

712

 

2,771

                   

Loss on asset dispositions and impairments, net

-

 

23

 

-

 

-

 

23

Share-based compensation (including share-based compensation reimbursed by third-party owners)

47

 

50

 

52

 

44

 

193

Adjusted EBITDA **

$ 683

 

$ 773

 

$ 775

 

$ 756

 

$ 2,987

                   

Increase over 2015 Combined Adjusted EBITDA **

3%

 

7%

 

14%

 

11%

 

9%

                   
 

Fiscal Year 2015 1

 

Combined First Quarter

 

Combined Second Quarter

 

Combined Third Quarter

 

Combined Fourth Quarter

 

Combined Total

Net income 2

$ 272

 

$ 326

 

$ 275

 

$ 291

 

$ 1,164

Interest expense 

75

 

77

 

81

 

81

 

314

Tax provision

131

 

156

 

132

 

139

 

558

Depreciation and amortization

83

 

91

 

80

 

81

 

335

Depreciation classified in reimbursed costs

30

 

31

 

32

 

32

 

125

Interest expense from unconsolidated joint ventures 

4

 

4

 

5

 

3

 

16

Depreciation and amortization from unconsolidated joint ventures

12

 

8

 

11

 

11

 

42

EBITDA **

607

 

693

 

616

 

638

 

2,554

                   

EDITION impairment charge

12

 

-

 

-

 

-

 

12

Loss (gain) on asset dispositions and impairments, net

-

 

22

 

14

 

(7)

 

29

Gain on redemption of preferred equity ownership interest

-

 

(41)

 

-

 

-

 

(41)

Share-based compensation (including share-based compensation reimbursed by third-party owners)

43

 

48

 

47

 

51

 

189

Adjusted EBITDA **

$ 662

 

$ 722

 

$ 677

 

$ 682

 

$ 2,743

                   

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

       
                   

1See pages A-14 and A-15 for basis of presentation of combined financial information.

       

2 For the 2016 fourth quarter, see page A-3 for a reconciliation of net income to adjusted net income. For other periods presented, see pages A-14 and A-15 for a reconciliation to pro forma net income calculated in accordance with Article 11 of Regulation S-X. 

 

A-12

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA FORECAST

FULL YEAR 2017

($ in millions)

             
 

Range

     
 

Estimated Fiscal Year 2017

 

Combined Fiscal Year 2016 1

 

Net income 2 

$ 1,461

 

$ 1,529

 

$ 1,301

 

Interest expense 

300

 

300

 

312

 

Tax provision

649

 

681

 

652

 

Depreciation and amortization

280

 

280

 

313

 

Depreciation classified in Reimbursed costs

145

 

145

 

132

 

Interest expense from unconsolidated joint ventures 

10

 

10

 

16

 

Depreciation and amortization from unconsolidated joint ventures

40

 

40

 

45

 

EBITDA **

2,885

 

2,985

 

2,771

 
             

Loss (gain) on asset dispositions and impairments, net

-

 

-

 

23

 

Share-based compensation (including share-based compensation reimbursed by third-party owners)

190

 

190

 

193

 

Adjusted EBITDA **

$ 3,075

 

$ 3,175

 

$ 2,987

 
             

Increase over 2016 Combined Adjusted EBITDA **

3%

 

6%

     
             
             
             

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

             

1See pages A-14 and A-15 for basis of presentation of combined financial information and a reconciliation to pro forma net income calculated in accordance with Article 11 of Regulation S-X. 

2Estimated 2017 net income excludes merger-related costs, which the company cannot accurately forecast, but expects will be significant on a full-year basis.

 

A-13

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

 

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

 

Combined Financial Information. The unaudited combined financial information presented on pages A-3, A-4, A-12, and A-13 give effect to Marriott's acquisition of Starwood, and Starwood's sale of its timeshare business, as if these two transactions (the "Transactions") had occurred on January 1, 2015, and are presented to facilitate comparisons with our results following the acquisition of Starwood. The unaudited combined financial information also uses the estimated fair value of assets and liabilities on September 23, 2016, the closing date of the acquisition, and makes the following assumptions: (1) removes merger-related costs and charges; (2) removes a loss on cumulative translation adjustment related to Starwood's disposition of a hotel property in the 2016 second quarter; (3) adjusts income taxes to reflect the Company's combined 2016 effective tax rate of 32.5%; (4) adjusts weighted-average shares outstanding to include shares issued to Starwood shareholders; and (5) adjusts debt to reflect borrowing on the Credit Facility and issuance of Series Q and R Notes on January 1, 2015.

 

The 2016 fourth quarter adjusted net income presented herein represents reported net income adjusted to eliminate merger-related costs, net of tax at the actual effective tax rate.

 

Marriott presents the combined financial information for informational purposes only and the combined financial information is not necessarily indicative of what the combined company's results of operations would actually have been had the Transactions been completed on the date indicated. In addition, the combined financial information does not purport to project the future operating results of the combined company.

 

Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("EBITDA"), Combined EBITDA, Adjusted EBITDA, and Combined Adjusted EBITDA. EBITDA and Combined EBITDA reflect adjusted net income or combined net income, as applicable, excluding the impact of interest expense, depreciation, amortization, and provision for income taxes. Our non-GAAP measures of Adjusted EBITDA and Combined Adjusted EBITDA further adjust EBITDA or Combined EBITDA, respectively, to exclude the following items: (1) gains and losses on asset dispositions and impairments; (2) the pre-tax EDITION impairment charges in the 2015 first quarter; (3) the pre-tax preferred equity investment gain in the 2015 second quarter; and (4) share-based compensation expense for all periods presented.

 

Combined net income on pages A-3, A-4, A-12, and A-13 includes additional adjustments that are not prescribed by Article 11 of Regulation S-X. The following tables present reconciliations of pro forma net income in accordance with Article 11 to combined net income. (For the 2016 fourth quarter, see page A-3 for a reconciliation of GAAP net income to adjusted net income.)

 

           

2016

       
           

First

 

Second

 

Third

       
 

(in millions)

     

Quarter

 

Quarter

 

Quarter

       
 

Pro forma net income under Article 11 

 

$ 291

 

$ 209

 

$ 179

       
 

Merger-related costs and charges 

 

3

 

16

 

220

       
 

Income taxes (1) 

     

(4)

 

17

 

(55)

       
 

Loss on cumulative translation adjustment

-

 

91

 

-

       
 

Combined net income

   

$ 290

 

$ 333

 

$ 344

       
                             
                             
           

2015

   
           

First

 

Second

 

Third

 

Fourth

   
 

(in millions)

     

Quarter

 

Quarter

 

Quarter

 

Quarter

   
 

Pro forma net income under Article 11 

 

$ 264

 

$ 335

 

$ 280

 

$ 306

   
 

Merger-related costs and charges 

 

16

 

8

 

3

 

5

   
 

Income taxes (1) 

     

(8)

 

(17)

 

(8)

 

(20)

   
 

Combined net income

   

$ 272

 

$ 326

 

$ 275

 

$ 291

   
                             
 

(1)Combined net income applies an effective income tax rate of 32.5% for all periods presented. For pro forma net income under Article 11, we applied the historical effective tax rates for Marriott and Starwood.

 
   

A-14

 

MARRIOTT INTERNATIONAL, INC.

NON-GAAP FINANCIAL AND PERFORMANCE MEASURES

 

We believe that Adjusted EBITDA and Combined Adjusted EBITDA are meaningful indicators of our operating performance because they permit period-over-period comparisons of our ongoing core operations before these items and facilitate our comparison of results before these items with results from other lodging companies. We use such measures to evaluate companies because they exclude certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provisions for income taxes can vary considerably among companies. Our Adjusted EBITDA and Combined EBITDA also exclude depreciation and amortization expense which we report under "Depreciation, amortization, and other" as well as depreciation included under "Reimbursed costs" in our Combined Consolidated Statements of Income, because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. We also excluded share-based compensation expense in all periods presented in order to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.

 

RevPAR. In addition to the foregoing non-GAAP financial measures, we present Revenue per Available Room ("RevPAR") as a performance measure. We believe RevPAR is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues. We calculate RevPAR by dividing room sales (recorded in local currency) for comparable properties by room nights available for the period. We present growth in both comparative Legacy-Marriott RevPAR and comparative pro forma combined company RevPAR on a constant dollar basis, which we calculate by applying exchange rates for the current period to each period presented. We believe constant dollar analysis provides valuable information regarding our properties' performance as it removes currency fluctuations from the presentation of such results.



Logos, product and company names mentioned are the property of their respective owners.