UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________ 

FORM 10-Q

_________________________________________________ 

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

For the quarterly period ended March 31, 2023

or

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

Commission File No. 1-13881

_________________________________________________ 

MARRIOTT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware			52-2055918
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)
7750 Wisconsin Avenue	Bethesda	Maryland	20814
(Address of principal executive offices)			(Zip Code)

(Registrant’s telephone number, including area code) (301) 380-3000

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock, $0.01 par value	MAR	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 303,354,157 shares of Class A Common Stock, par value $0.01 per share, outstanding at April 25, 2023.

MARRIOTT INTERNATIONAL, INC.

FORM 10-Q TABLE OF CONTENTS

		Page No.
Part I.	Financial Information (Unaudited)
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Cautionary Statement	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
Part II.	Other Information
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 6.	Exhibits	23
	Signature	24

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31, 2023		March 31, 2022
REVENUES
Base management fees	$	293	$	213
Franchise fees	639		500
Incentive management fees	201		102
Gross fee revenues	1,133		815
Contract investment amortization	(21)		(24)
Net fee revenues	1,112		791
Owned, leased, and other revenue	356		262
Cost reimbursement revenue	4,147		3,146
	5,615		4,199
OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct	281		197
Depreciation, amortization, and other	44		48
General, administrative, and other	202		208
Merger-related charges and other	1		9
Reimbursed expenses	4,136		3,179
	4,664		3,641
OPERATING INCOME	951		558
Gains and other income, net	3		4
Interest expense	(126)		(93)
Interest income	15		5
Equity in earnings	1		2
INCOME BEFORE INCOME TAXES	844		476
Provision for income taxes	(87)		(99)
NET INCOME	$	757	$	377
EARNINGS PER SHARE
Earnings per share – basic	$	2.44	$	1.15
Earnings per share – diluted	$	2.43	$	1.14

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)

	Three Months Ended
	March 31, 2023		March 31, 2022
Net income	$	757	$	377
Other comprehensive income
Foreign currency translation adjustments	84		14
Other adjustments, net of tax	(2)		—
Total other comprehensive income, net of tax	82		14
Comprehensive income	$	839	$	391

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

	(Unaudited)
	March 31, 2023		December 31, 2022
ASSETS
Current assets
Cash and equivalents	$	554	$	507
Accounts and notes receivable, net	2,462		2,571
Prepaid expenses and other	248		235
	3,264		3,313
Property and equipment, net	1,595		1,585
Intangible assets
Brands	5,836		5,812
Contract acquisition costs and other	2,996		2,935
Goodwill	8,904		8,872
	17,736		17,619
Equity method investments	334		335
Notes receivable, net	126		152
Deferred tax assets	240		240
Operating lease assets	984		987
Other noncurrent assets	584		584
	$	24,863	$	24,815
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	358	$	684
Accounts payable	722		746
Accrued payroll and benefits	1,027		1,299
Liability for guest loyalty program	3,381		3,314
Accrued expenses and other	1,481		1,296
	6,969		7,339
Long-term debt	10,299		9,380
Liability for guest loyalty program	3,350		3,280
Deferred tax liabilities	307		313
Deferred revenue	1,063		1,059
Operating lease liabilities	1,024		1,034
Other noncurrent liabilities	1,711		1,842
Stockholders’ equity
Class A Common Stock	5		5
Additional paid-in-capital	5,906		5,965
Retained earnings	12,975		12,342
Treasury stock, at cost	(18,099)		(17,015)
Accumulated other comprehensive loss	(647)		(729)
	140		568
	$	24,863	$	24,815

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

	Three Months Ended
	March 31, 2023		March 31, 2022
OPERATING ACTIVITIES
Net income	$	757	$	377
Adjustments to reconcile to cash provided by operating activities:
Depreciation, amortization, and other	65		72
Stock-based compensation	37		44
Income taxes	19		61
Liability for guest loyalty program	107		57
Contract acquisition costs	(58)		(26)
Merger-related charges and other	—		7
Working capital changes	(96)		(230)
Other	56		36
Net cash provided by operating activities	887		398
INVESTING ACTIVITIES
Capital and technology expenditures	(95)		(49)
Loan advances	(1)		—
Loan collections	31		7
Other	6		19
Net cash used in investing activities	(59)		(23)
FINANCING ACTIVITIES
Commercial paper/Credit Facility, net	117		(250)
Issuance of long-term debt	783		—
Repayment of long-term debt	(328)		(401)
Dividends paid	(124)		—
Purchase of treasury stock	(1,135)		—
Stock-based compensation withholding taxes	(72)		(78)
Other	(23)		—
Net cash used in financing activities	(782)		(729)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	46		(354)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	525		1,421
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	$	571	$	1,067

(1)The 2023 amounts include beginning restricted cash of $18 million at December 31, 2022, and ending restricted cash of $17 million at March 31, 2023, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. and subsidiaries (referred to in this report as “we,” “us,” “Marriott,” or the “Company”). In order to make this report easier to read, we also refer throughout to (1) our Condensed Consolidated Financial Statements as our “Financial Statements,” (2) our Condensed Consolidated Statements of Income as our “Income Statements,” (3) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (4) our Condensed Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (5) our properties, brands, or markets in the United States and Canada as “U.S. & Canada,” and (6) our properties, brands, or markets in our Caribbean and Latin America, Europe, Middle East and Africa, Greater China, and Asia Pacific excluding China regions, as “International.” In addition, references throughout to numbered “Notes” refer to these Notes to Condensed Consolidated Financial Statements, unless otherwise stated.

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

Preparation of financial statements that conform with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Accordingly, ultimate results could differ from those estimates.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of March 31, 2023 and December 31, 2022 and the results of our operations and cash flows for the three months ended March 31, 2023 and March 31, 2022. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations, as well as the impact of COVID-19. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.

NOTE 2. EARNINGS PER SHARE

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

	Three Months Ended
(in millions, except per share amounts)	March 31, 2023		March 31, 2022
Computation of Basic Earnings Per Share
Net income	$	757	$	377
Shares for basic earnings per share	309.6		328.3
Basic earnings per share	$	2.44	$	1.15
Computation of Diluted Earnings Per Share
Net income	$	757	$	377
Shares for basic earnings per share	309.6		328.3
Effect of dilutive securities
Stock-based compensation	1.4		1.7
Shares for diluted earnings per share	311.0		330.0
Diluted earnings per share	$	2.43	$	1.14

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NOTE 3. STOCK-BASED COMPENSATION

We granted 1.0 million restricted stock units (“RSUs”) during the 2023 first quarter to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2023 first quarter to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2025 adjusted EBITDA performance and relative total stockholder return over the 2023 to 2025 performance period. RSUs, including PSUs, granted in the 2023 first quarter had a weighted average grant-date fair value of $167 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $33 million in the 2023 first quarter and $42 million in the 2022 first quarter. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $315 million at March 31, 2023 and $179 million at December 31, 2022.

NOTE 4. INCOME TAXES

Our effective tax rate decreased to 10.3 percent for the 2023 first quarter compared to 20.7 percent for the 2022 first quarter, primarily due to the current year release of tax reserves.

Our unrecognized tax benefit balance decreased by $99 million to $156 million at March 31, 2023 from $255 million at December 31, 2022, primarily due to the completion of a prior year tax audit. Our unrecognized tax benefit balance included $145 million at March 31, 2023 and $241 million at December 31, 2022 of tax positions that, if recognized, would impact our effective tax rate. It is reasonably possible that within the next 12 months we will reach resolution of income tax examinations in one or more jurisdictions. The actual amount of any change to our unrecognized tax benefits could vary depending on the timing and nature of the settlement. Therefore, an estimate of the change cannot be provided.

We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The U.S. Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of March 31, 2023, we have settled all issues for tax years through 2019. Our 2020 through 2023 tax year audits are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.

We paid cash for income taxes, net of refunds, of $68 million in the 2023 first quarter and $38 million in the 2022 first quarter.

NOTE 5. COMMITMENTS AND CONTINGENCIES

Guarantees

We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at March 31, 2023 in the following table:

(in millions) Guarantee Type	Maximum Potential Amount of Future Fundings		Recorded Liability for Guarantees
Debt service	$	60	$	6
Operating profit	182		98
Other	18		4
	$	260	$	108

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

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Contingent Purchase Obligation

Sheraton Grand Chicago. In 2017, we granted the owner a one-time right to require us to purchase the leasehold interest in the land and the hotel for $300 million in cash (the “put option”). In the 2021 third quarter, we entered into an amendment with the owner to move the exercise period of the put option from the 2022 first half to the 2024 first half. If the owner exercises the put option, the closing is expected to occur in the 2024 fourth quarter, and we have the option to purchase, at the same time the put transaction closes, the fee simple interest in the underlying land for an additional $200 million in cash. We account for the put option as a guarantee, and our recorded liability was $300 million at March 31, 2023 and December 31, 2022.

Starwood Data Security Incident

Description of Event

On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). Working with leading security experts, we determined that there was unauthorized access to the Starwood network since 2014 and that an unauthorized party had copied information from the Starwood reservations database and taken steps towards removing it. The Starwood reservations database is no longer used for business operations.

Litigation, Claims, and Government Investigations

Following our announcement of the Data Security Incident, approximately 100 lawsuits were filed by consumers and others against us in U.S. federal, U.S. state and Canadian courts related to the incident. The plaintiffs in the cases that remain pending, who generally purport to represent various classes of consumers, generally claim to have been harmed by alleged actions and/or omissions by the Company in connection with the Data Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. The active U.S. cases are consolidated in the U.S. District Court for the District of Maryland (the “District Court”), pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The District Court granted in part and denied in part class certification of various U.S. groups of consumers, and our appeal of this decision is pending in the U.S. Court of Appeals for the Fourth Circuit. A case brought by the City of Chicago (which is consolidated in the MDL proceeding) also remains pending. The Canadian cases have effectively been consolidated into a single case in the province of Ontario. We dispute the allegations in these lawsuits and are vigorously defending against such claims.

In addition, various U.S. federal, U.S. state and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident and related matters. Although some of these matters have been resolved or no longer appear to be active, some remain open. We are in discussions with the Attorney General offices from 49 states and the District of Columbia and the Federal Trade Commission. Based on the ongoing discussions, we believe it is probable that we will incur losses, and we recorded an accrual in 2022 for an estimated loss contingency; the amount of this accrual is not material to our Financial Statements.

While we believe it is reasonably possible that we may incur losses in excess of the amounts recorded associated with the above described MDL proceedings and regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of such losses or range of loss that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on: (1) in the case of the above described MDL proceedings, the current stage of these proceedings, the absence of specific allegations as to alleged damages, the uncertainty as to the certification of a class or classes and the size of any certified class, and the lack of resolution of significant factual and legal issues; and (2) in the case of the above described regulatory investigations, the lack of resolution with the Federal Trade Commission and the state Attorneys General.

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NOTE 6. LONG-TERM DEBT

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of March 31, 2023 and year-end 2022:

(in millions)	March 31, 2023		December 31, 2022
Senior Notes:
Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%)	$	348	$	348
Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%)	747		747
Series U Notes, interest rate of 3.1%, face amount of $291, matured February 15, 2023 (effective interest rate of 3.1%)	—		291
Series V Notes, interest rate of 3.8%, face amount of $318, maturing March 15, 2025 (effective interest rate of 2.8%)	324		324
Series W Notes, interest rate of 4.5%, face amount of $278, maturing October 1, 2034 (effective interest rate of 4.1%)	289		289
Series X Notes, interest rate of 4.0%, face amount of $450, maturing April 15, 2028 (effective interest rate of 4.2%)	446		446
Series Z Notes, interest rate of 4.2%, face amount of $350, maturing December 1, 2023 (effective interest rate of 4.4%)	350		349
Series AA Notes, interest rate of 4.7%, face amount of $300, maturing December 1, 2028 (effective interest rate of 4.8%)	298		298
Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%)	535		531
Series EE Notes, interest rate of 5.8%, face amount of $600, maturing May 1, 2025 (effective interest rate of 6.0%)	597		596
Series FF Notes, interest rate of 4.6%, face amount of $1,000, maturing June 15, 2030 (effective interest rate of 4.8%)	988		988
Series GG Notes, interest rate of 3.5%, face amount of $1,000, maturing October 15, 2032 (effective interest rate of 3.7%)	987		987
Series HH Notes, interest rate of 2.9%, face amount of $1,100, maturing April 15, 2031 (effective interest rate of 3.0%)	1,091		1,090
Series II Notes, interest rate of 2.8%, face amount of $700, maturing October 15, 2033 (effective interest rate of 2.8%)	694		694
Series JJ Notes, interest rate of 5.0%, face amount of $1,000, maturing October 15, 2027 (effective interest rate of 5.4%)	985		984
Series KK Notes, interest rate of 4.9%, face amount of $800, maturing April 15, 2029 (effective interest rate of 5.3%)	783		—
Commercial paper	1,002		871
Credit Facility	—		—
Finance lease obligations	137		139
Other	56		92
	$	10,657	$	10,064
Less current portion	(358)		(684)
	$	10,299	$	9,380

We paid cash for interest, net of amounts capitalized, of $15 million in the 2023 first quarter and $29 million in the 2022 first quarter.

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

10

We are party to a $4.5 billion multicurrency revolving credit agreement (the “Credit Facility”). Available borrowings under the Credit Facility support our commercial paper program and general corporate needs. Borrowings under the Credit Facility generally bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on December 14, 2027.

NOTE 7. ACQUISITION

On May 1, 2023, we completed the acquisition of the City Express brand portfolio from Hoteles City Express, S.A.B. de C.V. for $100 million. As a result of the transaction, we added approximately 150 properties located in Mexico, Costa Rica, Colombia, and Chile to our franchise portfolio.

NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS

We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We present the carrying amounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:

	March 31, 2023				December 31, 2022
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior, mezzanine, and other loans	$	126	$	118	$	152	$	142
Total noncurrent financial assets	$	126	$	118	$	152	$	142
Senior Notes	$	(9,112)	$	(8,646)	$	(8,322)	$	(7,627)
Commercial paper	(1,002)		(1,002)		(871)		(871)
Other long-term debt	(56)		(49)		(56)		(49)
Other noncurrent liabilities	(387)		(387)		(394)		(394)
Total noncurrent financial liabilities	$	(10,557)	$	(10,084)	$	(9,643)	$	(8,941)

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

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NOTE 9. ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ EQUITY

The following tables detail the accumulated other comprehensive loss activity for the 2023 first quarter and 2022 first quarter:

(in millions)	Foreign Currency Translation Adjustments		Other Adjustments		Accumulated Other Comprehensive Loss
Balance at year-end 2022	$	(740)	$	11	$	(729)
Other comprehensive income (loss) before reclassifications (1)	84		(3)		81
Reclassification adjustments	—		1		1
Net other comprehensive income (loss)	84		(2)		82
Balance at March 31, 2023	$	(656)	$	9	$	(647)

(in millions)	Foreign Currency Translation Adjustments		Other Adjustments		Accumulated Other Comprehensive Loss
Balance at year-end 2021	$	(351)	$	9	$	(342)
Other comprehensive income before reclassifications (1)	14		—		14
Reclassification adjustments	—		—		—
Net other comprehensive income	14		—		14
Balance at March 31, 2022	$	(337)	$	9	$	(328)

(1)Other comprehensive income before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in losses of $12 million for the 2023 first quarter and gains of $12 million for the 2022 first quarter.

The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2023 first quarter and 2022 first quarter:

(in millions, except per share amounts)
Common Shares Outstanding		Total		Class A Common Stock		Additional Paid-in-Capital		Retained Earnings		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss
310.6	Balance at year-end 2022	$	568	$	5	$	5,965	$	12,342	$	(17,015)	$	(729)
—	Net income	757		—		—		757		—		—
—	Other comprehensive income	82		—		—		—		—		82
—	Dividends ($0.40 per share)	(124)		—		—		(124)		—		—
0.9	Stock-based compensation plans	(34)		—		(59)		—		25		—
(6.8)	Purchase of treasury stock	(1,109)		—		—		—		(1,109)		—
304.7	Balance at March 31, 2023	$	140	$	5	$	5,906	$	12,975	$	(18,099)	$	(647)

Common Shares Outstanding		Total		Class A Common Stock		Additional Paid-in-Capital		Retained Earnings		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss
326.3	Balance at year-end 2021	$	1,414	$	5	$	5,892	$	10,305	$	(14,446)	$	(342)
—	Net income	377		—		—		377		—		—
—	Other comprehensive income	14		—		—		—		—		14
1.0	Stock-based compensation plans	(33)		—		(61)		—		28		—
327.3	Balance at March 31, 2022	$	1,772	$	5	$	5,831	$	10,682	$	(14,418)	$	(328)

NOTE 10. CONTRACTS WITH CUSTOMERS

Our current and noncurrent liability for guest loyalty program increased by $137 million, to $6,731 million at March 31, 2023, from $6,594 million at December 31, 2022, primarily reflecting an increase in points earned by members. This includes a $30 million reclassification from deferred revenue to the liability for guest loyalty program primarily due to points that were earned during the period by members using our U.S.-issued co-branded credit cards, which were prepaid by the financial institutions in 2020. The increase was partially offset by $745 million of revenue recognized in the 2023 first quarter, that was deferred as of December 31, 2022. The

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current portion of our liability for guest loyalty program increased compared to December 31, 2022, due to higher estimated redemptions in the short-term.

Our allowance for credit losses was $194 million at March 31, 2023 and $191 million at December 31, 2022.

NOTE 11. BUSINESS SEGMENTS

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

We evaluate the performance of our operating segments using “segment profits” which is based largely on the results of the segment without allocating corporate expenses, income taxes, indirect general, administrative, and other expenses, or merger-related costs. We assign gains and losses, equity in earnings or losses, and direct general, administrative, and other expenses to each of our segments. “Unallocated corporate and other” includes a portion of our revenues (such as fees we receive from our credit card programs and vacation ownership licensing agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, merger-related charges and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments.

Our chief operating decision maker monitors assets for the consolidated Company but does not use assets by operating segment when assessing performance or making operating segment resource allocations.

Segment Revenues

The following table presents our revenues disaggregated by segment and major revenue stream for the 2023 first quarter and 2022 first quarter:

	Three Months Ended March 31, 2023						Three Months Ended March 31, 2022
(in millions)	U.S. & Canada		International		Total		U.S. & Canada		International		Total
Gross fee revenues	$	672	$	291	$	963	$	489	$	177	$	666
Contract investment amortization	(16)		(5)		(21)		(14)		(10)		(24)
Net fee revenues	656		286		942		475		167		642
Owned, leased, and other revenue	117		214		331		92		153		245
Cost reimbursement revenue	3,505		508		4,013		2,704		355		3,059
Total reportable segment revenue	$	4,278	$	1,008	$	5,286	$	3,271	$	675	$	3,946
Unallocated corporate and other					329						253
Total revenue					$	5,615					$	4,199

Segment Profits

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022
U.S. & Canada	$	657	$	454
International	252		131
Unallocated corporate and other	46		(21)
Interest expense, net of interest income	(111)		(88)
Provision for income taxes	(87)		(99)
Net income	$	757	$	377

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

Cautionary Statement

All statements in this report are made as of the date this Form 10-Q is filed with the U.S. Securities and Exchange Commission (the “SEC”). We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise. We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this

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report based on the beliefs and assumptions of our management and on information available to us through the date this Form 10-Q is filed with the SEC. Forward-looking statements include information related to future demand trends and expectations; our expectations regarding rooms growth; our expectations regarding our ability to meet our liquidity requirements; our capital expenditures and other investment spending expectations; our expectations regarding future dividends and share repurchases; and other statements that are preceded by, followed by, or include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “foresees,” or similar expressions; and similar statements concerning anticipated future events and expectations that are not historical facts.

We caution you that these statements are not guarantees of future performance and are subject to numerous evolving risks and uncertainties that we may not be able to accurately predict or assess, including the risks and uncertainties we describe in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Form 10-K”), Part II, Item 1A of this report, and other factors we describe from time to time in our periodic filings with the SEC.

BUSINESS AND OVERVIEW

Overview

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties under 31 brand names, including our newly added brand, City Express by Marriott™. 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: (1) U.S. & Canada and (2) International.

Terms of our management agreements vary, but our management fees generally consist of base management fees and incentive management fees. Base management fees are typically calculated as a percentage of property-level revenue. Incentive management fees are typically calculated as a percentage of a hotel profitability measure, and, in many cases (particularly in our U.S. & Canada, Europe, and Caribbean & Latin America regions), are subject to a specified owner return. Under our franchise agreements, franchise fees are typically calculated as a percentage of property-level revenue or a portion thereof. Additionally, we earn franchise fees for the use of our intellectual property, such as fees from our co-branded credit card, timeshare, and residential programs.

Performance Measures

We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing room sales for comparable properties by room nights available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our fee revenue. We also believe occupancy and average daily rate (“ADR”), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing occupied rooms by total rooms available, measures the utilization of a property’s available capacity. ADR, which we calculate by dividing property room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels. RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated. Comparisons to prior periods are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

We define our comparable properties as our properties that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 2022 for the current period) and have not, in either the current or previous year: (1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption.

Business Trends

We saw strong global RevPAR improvement during the 2023 first quarter compared to the same period in 2022. For the 2023 first quarter, worldwide RevPAR increased 34.3 percent compared to the 2022 first quarter, reflecting ADR growth of 11.3 percent and occupancy improvement of 11.2 percentage points. The increase in

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RevPAR was driven by improvement in all customer segments, including robust leisure demand as well as strengthening group and business transient demand as compared to the 2022 first quarter.

In the U.S. & Canada, RevPAR increased 25.6 percent in the 2023 first quarter compared to the 2022 first quarter, due to ADR growth of 10.1 percent and occupancy improvement of 8.2 percentage points. The improvement in RevPAR reflected strong demand in many markets within the U.S. & Canada, as compared to the 2022 first quarter, which was negatively impacted by the COVID-19 Omicron variant.

Internationally, RevPAR improved 63.1 percent in the 2023 first quarter compared to the 2022 first quarter, due to occupancy improvement of 18.3 percentage points and ADR growth of 16.4 percent. The improvement in RevPAR was driven by strengthening demand, especially from cross-border guests, and meaningful growth in ADR in all regions, as compared to the 2022 first quarter, which in various geographic markets was heavily impacted by COVID-19 and government-imposed travel restrictions. The lifting of travel restrictions throughout Asia Pacific, particularly in Greater China, significantly boosted 2023 first quarter demand in that region.

Our business is subject to the effects of changes in global and regional conditions and these conditions can change rapidly. We continue to monitor global economic conditions, and although we are not currently seeing signs of a slowdown in lodging demand, the lodging booking window is short and trends can change quickly.

Starwood Data Security Incident

On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). The Starwood reservations database is no longer used for business operations.

We are currently unable to reasonably estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already recorded. However, we do not believe this incident will impact our long-term financial health. Although our insurance program includes coverage designed to limit our exposure to losses such as those related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other losses (including monetary payments to regulators and/or litigants) related to the Data Security Incident. In addition, certain expenses by their nature (such as, for example, expenses related to enhancing our cybersecurity program) are not covered by our insurance program. We expect to incur significant expenses associated with the Data Security Incident in future periods in excess of the amounts already recorded, primarily related to legal proceedings and regulatory investigations (including possible additional monetary payments to regulators and/or litigants as well as costs associated with compliance with any settlements or resolutions of matters). See Note 5 for additional information related to legal proceedings and governmental investigations related to the Data Security Incident.

System Growth and Pipeline

At the end of the 2023 first quarter, our system had 8,353 properties (1,534,072 rooms), compared to 8,288 properties (1,525,407 rooms) at year-end 2022 and 8,048 properties (1,487,681 rooms) at the end of the 2022 first quarter. The increase compared to year-end 2022 reflected gross additions of 79 properties (11,015 rooms) and deletions of 14 properties (2,351 rooms). Approximately 53 percent of our 2023 first quarter gross room additions were located outside U.S. & Canada, and 25 percent were conversions from competitor brands.

At the end of the 2023 first quarter, we had approximately 502,000 hotel rooms in our development pipeline, which includes roughly 200,000 hotel rooms under construction and more than 21,000 hotel rooms approved for development but not yet under signed contracts. Over half of the rooms in our development pipeline are outside U.S. & Canada.

We currently expect full-year 2023 total gross rooms growth of approximately 5.5 percent and net rooms growth of 4.0 to 4.5 percent.

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Properties and Rooms

At March 31, 2023, we operated, franchised, and licensed the following properties and rooms:

	Managed		Franchised/Licensed		Owned/Leased		Residential		Total
	Properties	Rooms	Properties	Rooms	Properties	Rooms	Properties	Rooms	Properties	Rooms
U.S. & Canada	627	214,699	5,172	742,406	14	4,656	67	7,158	5,880	968,919
International	1,366	346,498	926	181,819	38	9,209	49	4,733	2,379	542,259
Timeshare	—	—	93	22,745	—	—	—	—	93	22,745
Yacht	—	—	1	149	—	—	—	—	1	149
Total	1,993	561,197	6,192	947,119	52	13,865	116	11,891	8,353	1,534,072

Lodging Statistics

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

	Three Months Ended March 31, 2023 and Change vs. Three Months Ended March 31, 2022
	RevPAR				Occupancy					Average Daily Rate
	2023		vs. 2022		2023		vs. 2022			2023		vs. 2022
Comparable Company-Operated Properties
U.S. & Canada	$	169.53	31.3	%	66.0	%	12.0	%	pts.	$	256.81	7.5	%
Greater China	$	81.68	77.8	%	64.0	%	23.5	%	pts.	$	127.63	12.6	%
Asia Pacific excluding China	$	116.36	116.2	%	68.0	%	24.2	%	pts.	$	171.21	39.3	%
Caribbean & Latin America	$	195.21	41.4	%	66.1	%	10.5	%	pts.	$	295.22	19.0	%
Europe	$	126.48	67.2	%	60.8	%	18.8	%	pts.	$	208.12	15.4	%
Middle East & Africa	$	140.62	17.0	%	70.0	%	3.8	%	pts.	$	200.79	10.6	%
International - All (1)	$	115.77	61.3	%	65.8	%	18.6	%	pts.	$	175.90	15.6	%
Worldwide (2)	$	139.84	43.5	%	65.9	%	15.6	%	pts.	$	212.19	9.5	%
Comparable Systemwide Properties
U.S. & Canada	$	119.74	25.6	%	65.9	%	8.2	%	pts.	$	181.61	10.1	%
Greater China	$	76.06	78.3	%	62.9	%	23.3	%	pts.	$	120.98	12.2	%
Asia Pacific excluding China	$	114.64	112.8	%	67.4	%	23.1	%	pts.	$	170.20	39.9	%
Caribbean & Latin America	$	165.67	40.9	%	67.4	%	11.7	%	pts.	$	245.80	16.4	%
Europe	$	98.61	75.6	%	57.2	%	19.5	%	pts.	$	172.32	15.8	%
Middle East & Africa	$	129.77	19.1	%	68.2	%	4.0	%	pts.	$	190.18	12.0	%
International - All (1)	$	108.80	63.1	%	63.9	%	18.3	%	pts.	$	170.39	16.4	%
Worldwide (2)	$	116.45	34.3	%	65.3	%	11.2	%	pts.	$	178.31	11.3	%

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

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

CONSOLIDATED RESULTS

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

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Fee Revenues

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022		Change 2023 vs. 2022
Base management fees	$	293	$	213	$	80	38	%
Franchise fees	639		500		139		28	%
Incentive management fees	201		102		99		97	%
Gross fee revenues	1,133		815		318		39	%
Contract investment amortization	(21)		(24)		3		13	%
Net fee revenues	$	1,112	$	791	$	321	41	%

The increase in base management fees in the 2023 first quarter primarily reflected higher RevPAR.

The increase in franchise fees in the 2023 first quarter primarily reflected higher RevPAR, higher co-branded credit card fees ($21 million), and unit growth ($18 million).

The increase in incentive management fees in the 2023 first quarter primarily reflected higher profits at certain managed hotels.

Owned, Leased, and Other

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022		Change 2023 vs. 2022
Owned, leased, and other revenue	$	356	$	262	$	94	36	%
Owned, leased, and other - direct expenses	281		197		84		43	%
Owned, leased, and other, net	$	75	$	65	$	10	15	%

Owned, leased, and other revenue, net of direct expenses, increased in the 2023 first quarter primarily due to stronger results at our owned and leased properties, partially offset by $29 million of subsidies received for certain of our leased hotels in the 2022 first quarter under German government COVID-19 assistance programs.

Cost Reimbursements

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022		Change 2023 vs. 2022
Cost reimbursement revenue	$	4,147	$	3,146	$	1,001	32	%
Reimbursed expenses	4,136		3,179		957		30	%
Cost reimbursements, net	$	11	$	(33)	$	44	133	%

Cost reimbursements, net (cost reimbursement revenue, net of reimbursed expenses) varies due to timing differences between the costs we incur for centralized programs and services and the related reimbursements we receive from hotel owners and franchisees. Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively.

The increase in cost reimbursements, net in the 2023 first quarter primarily reflected Loyalty Program activity, primarily due to higher program revenues, as well as higher revenues, net of expenses, for our centralized programs and services.

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Other Operating Expenses

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022		Change 2023 vs. 2022
Depreciation, amortization, and other	$	44	$	48	$	(4)	(8)	%
General, administrative, and other	202		208		(6)		(3)	%
Merger-related charges and other	1		9		(8)		(89)	%

Non-Operating Income (Expense)

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022		Change 2023 vs. 2022
Gains and other income, net	$	3	$	4	$	(1)	(25)	%
Interest expense	(126)		(93)		(33)		(35)	%
Interest income	15		5		10		200	%
Equity in earnings	1		2		(1)		(50)	%

Interest expense increased in the 2023 first quarter, primarily due to higher average debt balances driven by Senior Notes issuances.

Income Taxes

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022		Change 2023 vs. 2022
Provision for income taxes	$	(87)	$	(99)	$	12	12	%

Provision for income taxes decreased by $12 million in the 2023 first quarter, primarily due to the current year release of tax reserves ($103 million), which was mostly due to the completion of a prior year tax audit, partially offset by the increase in operating income ($86 million).

BUSINESS SEGMENTS

Our segment results in the 2023 first quarter improved significantly compared to the 2022 first quarter due to the continued recovery in lodging demand from the impacts of COVID-19. The following discussion presents an additional analysis of the operating results of our reportable business segments for the 2023 first quarter compared to the 2022 first quarter.

	Three Months Ended
(in millions)	March 31, 2023		March 31, 2022		Change 2023 vs. 2022
U.S. & Canada
Segment revenues	$	4,278	$	3,271	$	1,007	31	%
Segment profit	657		454		203		45	%
International
Segment revenues	1,008		675		333		49	%
Segment profit	252		131		121		92	%

	Properties					Rooms
	March 31, 2023	March 31, 2022	vs. March 31, 2022			March 31, 2023	March 31, 2022	vs. March 31, 2022
U.S. & Canada	5,880	5,752	128	2	%	968,919	951,731	17,188	2	%
International	2,379	2,204	175	8	%	542,259	513,249	29,010	6	%

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U.S. & Canada

U.S. & Canada 2023 first quarter segment profit increased, primarily due to $183 million of higher gross fee revenues. The increase in gross fee revenues primarily reflected higher comparable systemwide RevPAR driven by increases in both ADR and occupancy, higher profits at certain managed hotels, and unit growth.

International

International 2023 first quarter segment profit increased, primarily due to $114 million of higher gross fee revenues, partially offset by $11 million of lower owned, leased, and other revenue, net of direct expenses.

The increase in gross fee revenues primarily reflected higher profits at certain managed hotels and higher comparable systemwide RevPAR driven by increases in both occupancy and ADR in all regions, partially offset by net unfavorable foreign exchange rates.

The decrease in owned, leased, and other revenue, net of direct expenses primarily reflected subsidies received for certain of our leased hotels in the 2022 first quarter under German government COVID-19 assistance programs, partially offset by stronger results at owned and leased properties.

LIQUIDITY AND CAPITAL RESOURCES

Our long-term financial objectives include maintaining diversified financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital. At the end of the 2023 first quarter, our long-term debt had a weighted average interest rate of 4.2 percent and a weighted average maturity of approximately 5.8 years. Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.9 to 1.0 at the end of the 2023 first quarter.

Sources of Liquidity

Our Credit Facility

We are party to a $4.5 billion multicurrency revolving credit agreement (the “Credit Facility”). Available borrowings under the Credit Facility support our commercial paper program and general corporate needs. Borrowings under the Credit Facility generally bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on December 14, 2027.

The Credit Facility contains certain covenants, including a single financial covenant that limits our maximum leverage (consisting of the ratio of Adjusted Total Debt to EBITDA, each as defined in the Credit Facility) to not more than 4.5 to 1.0. Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios.

We currently satisfy the covenants in our Credit Facility and public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs. We believe the Credit Facility, and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our liquidity requirements.

Commercial Paper

We issue commercial paper in the U.S. Because we do not have purchase commitments from buyers for our commercial paper, our ability to issue commercial paper is subject to market demand. We do not expect that

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