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Nov. 5, 2019, 2:35 p.m. EST

10-Q: MARRIOTT INTERNATIONAL INC /MD/

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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements 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 currently available to us. Forward-looking statements include information about our possible or assumed future results of operations, which follow under the headings "Business and Overview," "Liquidity and Capital Resources," and other statements throughout this report preceded by, followed by, or that include the words "believes," "expects," "anticipates," "intends," "plans," "estimates," or similar expressions. Any number of risks and uncertainties could cause actual results to differ materially from those we express in our forward-looking statements, including the risks and uncertainties we describe below and other factors we describe from time to time in our periodic filings with the U.S. Securities and Exchange Commission (the "SEC"). We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether due to new information, future developments, or otherwise. In addition, see the "Item 1A. Risk Factors" caption in the "Part II-OTHER INFORMATION" section of this report. BUSINESS AND OVERVIEW We are a worldwide operator, franchisor, and licensor of hotel, residential, and timeshare properties in 134 countries and territories under 30 brands at the end of the 2019 third quarter. Under our asset-light business model, we typically manage or franchise hotels, rather than own them. We discuss our operations in the following reportable business segments: North American Full-Service, North American Limited-Service, and Asia Pacific. Our Europe, Middle East and Africa, and Caribbean and Latin America operating segments do not individually meet the criteria for separate disclosure as reportable segments. [[Image Removed: chart-e4cfece4402353f38e4a14.jpg]][[Image Removed: chart-6eb6f60e0bd15360b63.jpg]] We earn base management fees and in many cases incentive management fees from the properties that we manage, and we earn franchise fees on the properties that others operate under franchise agreements with us. In most markets, base management and franchise fees typically consist of 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. In our Middle East and Africa and Asia Pacific 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," which we discuss under the "Performance Measures" section below) less non-controllable expenses such as property insurance, real estate taxes, and capital spending reserves.

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Our emphasis on long-term management contracts and franchising tends to provide more stable earnings in periods of economic softness, while adding new hotels to our system generates growth, typically with little or no investment by the Company. This strategy has driven substantial growth while minimizing financial leverage and risk in a cyclical industry. In addition, we believe minimizing our capital investments and adopting a strategy of recycling our investments maximizes and maintains our financial flexibility.

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Acquisition of Starwood Hotels & Resorts Worldwide On September 23, 2016 (the "Merger Date"), we completed the acquisition of Starwood Hotels & Resorts Worldwide, LLC, formerly known as Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"), through a series of transactions (the "Starwood Combination"), after which Starwood became an indirect wholly-owned subsidiary of the Company. Performance Measures

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For our company-operated properties, we continue to focus on enhancing property-level house profit margins and making productivity improvements despite modest RevPAR growth and higher labor costs. In the 2019 first three quarters, compared to the 2018 first three quarters, North American company-operated house profit margins at comparable properties decreased by 30 basis points, primarily due to wage increases, partially offset by modest RevPAR growth and procurement, loyalty, and commission cost savings. International company-operated house profit margins at comparable properties increased by 10 basis points, primarily due to RevPAR improvements in our Asia Pacific segment and Europe region, partially offset by the impact of year-to-date RevPAR declines in our Middle East and Africa region.







                                    Managed                Franchised/Licensed             Owned/Leased                    Total
                             Properties      Rooms       Properties        Rooms      Properties       Rooms      Properties       Rooms
        North American
        Full-Service               413     183,546          731          208,201           9           5,275          1,153       397,022
        North American
        Limited-Service            400      62,951        3,668          427,139          20           3,006          4,088       493,096
        Asia Pacific               638     185,936          115           30,312           2             410            755       216,658
        Other International        597     130,535          491           93,894          32           8,410          1,120       232,839
        Timeshare                    -           -           89           22,297           -               -             89        22,297
        Total                    2,048     562,968        5,094          781,843          63          17,101          7,205     1,361,912
        


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        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.
                                             Comparable Company-Operated Properties
                            Three Months Ended September 30, 2019 and Change vs. Three Months Ended September 30, 2018
                                       RevPAR                        Occupancy                  Average Daily Rate
                                 2019           vs. 2018        2019        vs. 2018            2019          vs. 2018
        North American
        Full-Service (1)   $        173.08          1.5  %       79.1 %     0.7  % pts.   $    218.86             0.6  %
        North American
        Limited-Service
        (2)                $        112.96         (0.5 )%       77.0 %    (0.4 )% pts.   $    146.77             0.1  %
        North American -
        All (3)            $        153.80          1.0  %       78.4 %     0.3  % pts.   $    196.17             0.6  %
        Asia Pacific       $        100.50          1.4  %       74.4 %     2.0  % pts.   $    135.13            (1.3 )%
        Caribbean & Latin
        America            $        110.70          4.9  %       63.5 %     1.3  % pts.   $    174.43             2.7  %
        Europe             $        178.25          2.2  %       80.7 %     1.4  % pts.   $    220.87             0.5  %
        Middle East &
        Africa             $         92.73          1.5  %       66.4 %     2.3  % pts.   $    139.65            (2.1 )%
        International -
        All (4)            $        117.74          1.9  %       73.6 %     1.9  % pts.   $    159.91            (0.6 )%
        Worldwide (5)      $        135.55          1.4  %       76.0 %     1.1  % pts.   $    178.39               -  %
        








                                                Comparable Systemwide Properties
                             Three Months Ended September 30, 2019 and Change vs. Three Months Ended September 30, 2018
                                        RevPAR                         Occupancy                 Average Daily Rate
                                  2019            vs. 2018        2019        vs. 2018           2019          vs. 2018
        North American
        Full-Service (1)   $          149.14          2.4 %        77.0 %     0.7 % pts.   $    193.77             1.5  %
        North American
        Limited-Service
        (2)                $          106.57          0.3 %        77.8 %       - % pts.   $    137.02             0.3  %
        North American -
        All (3)            $          124.55          1.3 %        77.4 %     0.3 % pts.   $    160.85             1.0  %
        Asia Pacific       $          103.41          1.6 %        74.2 %     2.0 % pts.   $    139.35            (1.2 )%
        Caribbean & Latin
        America            $           88.15          3.1 %        61.2 %     0.4 % pts.   $    143.94             2.4  %
        Europe             $          156.31          2.1 %        79.7 %     0.9 % pts.   $    196.06             1.0  %
        Middle East &
        Africa             $           88.50          1.6 %        66.3 %     2.1 % pts.   $    133.55            (1.6 )%
        International -
        All (4)            $          115.68          1.9 %        73.3 %     1.5 % pts.   $    157.83            (0.2 )%
        Worldwide (5)      $          122.03          1.5 %        76.3 %     0.6 % pts.   $    160.02             0.7  %
        


(1) Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Marriott Hotels, Sheraton, Westin, Renaissance, Autograph Collection, Delta Hotels, Gaylord Hotels, and Le Meridien. Systemwide also includes Tribute Portfolio.

(2) Includes Courtyard, Residence Inn, Fairfield by Marriott, SpringHill Suites, TownePlace Suites, Four Points, Aloft, Element, and AC Hotels by Marriott. Systemwide also includes Moxy.

(3) Includes North American Full-Service and North American Limited-Service.

(4) Includes Asia Pacific, Caribbean & Latin America, Europe, and Middle East & Africa.

(5) Includes North American - All and International - All.

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                                             Comparable Company-Operated Properties
                             Nine Months Ended September 30, 2019 and Change vs. Nine Months Ended September 30, 2018
                                       RevPAR                        Occupancy                  Average Daily Rate
                                 2019           vs. 2018        2019        vs. 2018            2019          vs. 2018
        North American
        Full-Service (1)   $        175.64          1.1  %       77.6 %       -  % pts.   $    226.21             1.1  %
        North American
        Limited-Service
        (2)                $        111.73         (0.8 )%       75.1 %    (1.2 )% pts.   $    148.68             0.7  %
        North American -
        All (3)            $        155.14          0.6  %       76.8 %    (0.4 )% pts.   $    201.90             1.1  %
        Asia Pacific       $        100.98          3.0  %       71.9 %     2.1  % pts.   $    140.54               -  %
        Caribbean & Latin
        America            $        132.96          3.0  %       65.3 %     1.0  % pts.   $    203.54             1.4  %
        Europe             $        152.89          2.9  %       74.9 %     0.9  % pts.   $    204.05             1.6  %
        Middle East &
        Africa             $        102.23         (1.1 )%       67.0 %     2.3  % pts.   $    152.64            (4.5 )%
        International -
        All (4)            $        115.44          2.3  %       71.2 %     1.8  % pts.   $    162.10            (0.3 )%
        Worldwide (5)      $        135.08          1.4  %       74.0 %     0.7  % pts.   $    182.54             0.4  %
        








                                                Comparable Systemwide Properties
                             Nine Months Ended September 30, 2019 and Change vs. Nine Months Ended September 30, 2018
                                       RevPAR                        Occupancy                  Average Daily Rate
                                 2019           vs. 2018        2019        vs. 2018            2019          vs. 2018
        North American
        Full-Service (1)   $        149.04          1.8  %       75.1 %       -  % pts.   $    198.37             1.8  %
        North American
        Limited-Service
        (2)                $        102.06          0.1  %       75.0 %    (0.5 )% pts.   $    136.03             0.8  %
        North American -
        All (3)            $        121.90          1.0  %       75.1 %    (0.3 )% pts.   $    162.38             1.4  %
        Asia Pacific       $        102.83          3.0  %       71.8 %     2.1  % pts.   $    143.23               -  %
        Caribbean & Latin
        America            $        103.69          2.5  %       63.1 %       -  % pts.   $    164.26             2.6  %
        Europe             $        133.89          2.8  %       73.8 %     0.7  % pts.   $    181.41             1.8  %
        Middle East &
        Africa             $         97.25         (0.9 )%       66.5 %     2.1  % pts.   $    146.26            (3.9 )%
        International -
        All (4)            $        111.54          2.4  %       70.7 %     1.4  % pts.   $    157.86             0.3  %
        Worldwide (5)      $        118.97          1.3  %       73.8 %     0.2  % pts.   $    161.15             1.1  %
        


(1) Includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Marriott Hotels, Sheraton, Westin, Renaissance, Autograph Collection, Delta Hotels, Gaylord Hotels, and Le Meridien. Systemwide also includes Tribute Portfolio.

(2) Includes Courtyard, Residence Inn, Fairfield by Marriott, SpringHill Suites, TownePlace Suites, Four Points, Aloft, Element, and AC Hotels by Marriott. Systemwide also includes Moxy.

(3) Includes North American Full-Service and North American Limited-Service.

(4) Includes Asia Pacific, Caribbean & Latin America, Europe, and Middle East & Africa.

(5) Includes North American - All and International - All.

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        CONSOLIDATED RESULTS
        The following discussion presents an analysis of our consolidated results of
        operations for the 2019 third quarter compared to the 2018 third quarter and for
        the 2019 first three quarters compared to the 2018 first three quarters.
        Fee Revenues
                                                       Three Months Ended                                                           Nine Months Ended
        ($ in millions)      September 30, 2019      September 30, 2018       Change 2019 vs. 2018       September 30, 2019      September 30, 2018        Change 2019 vs. 2018
        Base management
        fees                $            291        $            279        $    12            4  %     $             882       $             852       $      30           4  %
        Franchise fees                   530                     502             28            6  %                 1,505                   1,394             111           8  %
        Incentive
        management fees                  134                     151            (17 )        (11 )%                   462                     482             (20 )        (4 )%
        Gross fee revenues               955                     932             23            2  %                 2,849                   2,728             121           4  %
        Contract investment
        amortization                     (16 )                   (13 )            3           23  %                   (45 )                   (44 )             1           2  %
        Net fee revenues    $            939        $            919        $    20            2  %     $           2,804       $           2,684       $     120           4  %
        


Third Quarter







                                                        Three Months Ended                                                            Nine Months Ended
        ($ in millions)       September 30, 2019       September 30, 2018       Change 2019 vs. 2018       September 30, 2019      September 30, 2018       Change 2019 vs. 2018
        . . .
        


Nov 05, 2019

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