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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________ 
FORM 10-Q
_________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
_________________________________________________ 
MI-rgb.jpg
MARRIOTT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware52-2055918
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
7750 Wisconsin AvenueBethesdaMaryland20814
(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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Class A Common Stock, $0.01 par valueMAR
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: 293,691,348 shares of Class A Common Stock, par value $0.01 per share, outstanding at October 26, 2023.


Table of Contents

MARRIOTT INTERNATIONAL, INC.
FORM 10-Q TABLE OF CONTENTS
 
  Page No.
Part I.
Item 1.
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.


2

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(Unaudited)
Three Months EndedNine Months Ended
 September 30, 2023September 30, 2022September 30, 2023September 30, 2022
REVENUES
Base management fees$306 $275 $917 $757 
Franchise fees748 678 2,126 1,847 
Incentive management fees143 106 537 343 
Gross fee revenues1,197 1,059 3,580 2,947 
Contract investment amortization(23)(22)(66)(65)
Net fee revenues1,174 1,037 3,514 2,882 
Owned, leased, and other revenue363 345 1,109 971 
Cost reimbursement revenue4,391 3,931 12,995 10,997 
5,928 5,313 17,618 14,850 
OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct293 301 861 779 
Depreciation, amortization, and other46 50 138 147 
General, administrative, and other239 216 681 655 
Merger-related charges and other13 2 52 11 
Reimbursed expenses 4,238 3,786 12,740 10,792 
4,829 4,355 14,472 12,384 
OPERATING INCOME1,099 958 3,146 2,466 
Gains and other income, net28 3 33 9 
Interest expense(146)(100)(412)(288)
Interest income7 7 21 18 
Equity in earnings 1 1 9 18 
INCOME BEFORE INCOME TAXES989 869 2,797 2,223 
Provision for income taxes(237)(239)(562)(538)
NET INCOME$752 $630 $2,235 $1,685 
EARNINGS PER SHARE
Earnings per share – basic$2.52 $1.94 $7.36 $5.15 
Earnings per share – diluted$2.51 $1.94 $7.32 $5.13 
See Notes to Condensed Consolidated Financial Statements.
3

Table of Contents

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)

Three Months EndedNine Months Ended
September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Net income$752 $630 $2,235 $1,685 
Other comprehensive income (loss)
Foreign currency translation adjustments(139)(340)(132)(653)
Other adjustments, net of tax6 1 12 5 
Total other comprehensive income (loss), net of tax(133)(339)(120)(648)
Comprehensive income$619 $291 $2,115 $1,037 
See Notes to Condensed Consolidated Financial Statements.

4

Table of Contents

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
September 30, 2023December 31, 2022
ASSETS
Current assets
Cash and equivalents$717 $507 
Accounts and notes receivable, net2,703 2,571 
Prepaid expenses and other262 235 
3,682 3,313 
Property and equipment, net1,572 1,585 
Intangible assets
Brands5,832 5,812 
Contract acquisition costs and other3,161 2,935 
Goodwill8,795 8,872 
17,788 17,619 
Equity method investments311 335 
Notes receivable, net159 152 
Deferred tax assets240 240 
Operating lease assets937 987 
Other noncurrent assets578 584 
$25,267 $24,815 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt$898 $684 
Accounts payable696 746 
Accrued payroll and benefits1,229 1,299 
Liability for guest loyalty program3,367 3,314 
Accrued expenses and other1,487 1,296 
7,677 7,339 
Long-term debt10,870 9,380 
Liability for guest loyalty program3,427 3,280 
Deferred tax liabilities359 313 
Deferred revenue1,007 1,059 
Operating lease liabilities966 1,034 
Other noncurrent liabilities1,622 1,842 
Stockholders’ equity
Class A Common Stock5 5 
Additional paid-in-capital5,996 5,965 
Retained earnings14,142 12,342 
Treasury stock, at cost(19,955)(17,015)
Accumulated other comprehensive loss(849)(729)
(661)568 
$25,267 $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)

Nine Months Ended
 September 30, 2023September 30, 2022
OPERATING ACTIVITIES
Net income$2,235 $1,685 
Adjustments to reconcile to cash provided by operating activities:
Depreciation, amortization, and other204 212 
Stock-based compensation147 144 
Income taxes(107)197 
Liability for guest loyalty program109 (17)
Contract acquisition costs(134)(92)
Merger-related charges and other42 (1)
Working capital changes(141)(225)
Other64 19 
Net cash provided by operating activities2,419 1,922 
INVESTING ACTIVITIES
Capital and technology expenditures(318)(192)
Asset acquisition(102) 
Dispositions61  
Loan advances(77)(10)
Loan collections35 12 
Other38 53 
Net cash used in investing activities(363)(137)
FINANCING ACTIVITIES
Commercial paper/Credit Facility, net100 (1,050)
Issuance of long-term debt1,918 983 
Repayment of long-term debt(332)(578)
Issuance of Class A Common Stock29  
Dividends paid(435)(195)
Purchase of treasury stock(2,988)(1,235)
Stock-based compensation withholding taxes(105)(88)
Other(25)25 
Net cash used in financing activities(1,838)(2,138)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH218 (353)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)
525 1,421 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)
$743 $1,068 
(1)The 2023 amounts include beginning restricted cash of $18 million at December 31, 2022, and ending restricted cash of $26 million at September 30, 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 September 30, 2023 and December 31, 2022, the results of our operations for the three and nine months ended September 30, 2023 and September 30, 2022, and cash flows for the nine months ended September 30, 2023 and September 30, 2022. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.
NOTE 2. EARNINGS PER SHARE
The table below 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 EndedNine Months Ended
(in millions, except per share amounts)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
Computation of Basic Earnings Per Share
Net income$752 $630 $2,235 $1,685 
Shares for basic earnings per share298.6 324.5 303.9 327.0 
Basic earnings per share$2.52 $1.94 $7.36 $5.15 
Computation of Diluted Earnings Per Share
Net income$752 $630 $2,235 $1,685 
Shares for basic earnings per share298.6 324.5 303.9 327.0 
Effect of dilutive securities
Stock-based compensation1.5 1.2 1.4 1.4 
Shares for diluted earnings per share300.1 325.7 305.3 328.4 
Diluted earnings per share$2.51 $1.94 $7.32 $5.13 
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NOTE 3. STOCK-BASED COMPENSATION
We granted 1.0 million restricted stock units (“RSUs”) during the 2023 first three quarters 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 three quarters 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 three quarters had a weighted average grant-date fair value of $167 per unit.
We recorded stock-based compensation expense for RSUs and PSUs of $47 million in the 2023 third quarter compared to $45 million in the 2022 third quarter, and $129 million in the 2023 first three quarters compared to $136 million in the 2022 first three quarters. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $217 million at September 30, 2023 and $179 million at December 31, 2022.
NOTE 4. INCOME TAXES
Our effective tax rate decreased to 23.9 percent for the 2023 third quarter compared to 27.5 percent for the 2022 third quarter, primarily due to the prior year expense from the completion of tax audits and the increase in tax deductions from stock-based compensation, partially offset by the shift in earnings to jurisdictions with higher tax rates.
Our effective tax rate decreased to 20.1 percent for the 2023 first three quarters compared to 24.2 percent for the 2022 first three quarters, primarily due to the current year release of tax reserves and the prior year expense from the completion of tax audits, partially offset by the shift in earnings to jurisdictions with higher tax rates.
Our unrecognized tax benefit balance decreased by $101 million to $154 million at September 30, 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 $143 million at September 30, 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 September 30, 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 $669 million in the 2023 first three quarters and $341 million in the 2022 first three quarters.
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NOTE 5. COMMITMENTS AND CONTINGENCIES
Guarantees
We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at September 30, 2023 in the following table:
(in millions)
Guarantee Type
Maximum Potential Amount of Future FundingsRecorded Liability for Guarantees
Debt service$57 $6 
Operating profit146 79 
Other18 4 
$221 $89 
Our maximum potential guarantees listed in the preceding table include $41 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.
Contingent Purchase Obligation
Sheraton Grand Chicago. In 2017, we granted the owner a one-time right to require us to purchase the leasehold interest in the land and the hotel for $300 million in cash (the “put option”). In the 2021 third quarter, we entered into an amendment with the owner to move the exercise period of the put option from the 2022 first half to the 2024 first half. If the owner exercises the put option, the closing is expected to occur in the 2024 fourth quarter, and we have the option to purchase, at the same time the put transaction closes, the fee simple interest in the underlying land for an additional $200 million in cash. We account for the put option as a guarantee, and our recorded liability was $300 million at September 30, 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. We discontinued use of the Starwood reservations database for business operations at the end of 2018.
Litigation, Claims, and Government Investigations
Following our announcement of the Data Security Incident, approximately 100 lawsuits were filed by consumers and others against us in U.S. federal, U.S. state and Canadian courts related to the incident. The plaintiffs in the cases that remain pending, who generally purport to represent various classes of consumers, generally claim to have been harmed by alleged actions and/or omissions by the Company in connection with the Data Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. The active U.S. cases are consolidated in the U.S. District Court for the District of Maryland (the “District Court”), pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The District Court granted in part and denied in part class certification of various U.S. groups of consumers. In August 2023, the U.S. Court of Appeals for the Fourth Circuit vacated the District Court’s class certification decision because the District Court failed to first consider the effect of a class-action waiver signed by all putative class members. The Fourth Circuit remanded for further proceedings consistent with its opinion. 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.
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In addition, various U.S. federal, U.S. state and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident and related matters. Although some of these matters have been resolved or no longer appear to be active, some remain open. We are in discussions with the Attorney General offices from 49 states and the District of Columbia and the Federal Trade Commission. Based on the ongoing discussions, we believe it is probable that we will incur losses, and as of September 30, 2023, we have an accrual for an estimated loss contingency, which 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 September 30, 2023 and year-end 2022:
(in millions)September 30,
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%)
322 324 
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%)
540 531 
Series EE Notes, interest rate of 5.8%, face amount of $600, maturing May 1, 2025
(effective interest rate of 6.0%)
598 596 
Series FF Notes, interest rate of 4.6%, face amount of $1,000, maturing June 15, 2030
(effective interest rate of 4.8%)
989 988 
Series GG Notes, interest rate of 3.5%, face amount of $1,000, maturing October 15, 2032
(effective interest rate of 3.7%)
988 987 
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%)
986 984 
Series KK Notes, interest rate of 4.9%, face amount of $800, maturing April 15, 2029
(effective interest rate of 5.3%)
785  
Series LL Notes, interest rate of 5.5%, face amount of $450, maturing September 15, 2026
(effective interest rate of 5.9%)
444  
Series MM Notes, interest rate of 5.6%, face amount of $700, maturing October 15, 2028
(effective interest rate of 5.9%)
691  
Commercial paper973 871 
Credit Facility  
Finance lease obligations133 139 
Other56 92 
$11,768 $10,064 
Less current portion(898)(684)
$10,870 $9,380 
We paid cash for interest, net of amounts capitalized, of $266 million in the 2023 first three quarters and $203 million in the 2022 first three quarters.
In September 2023, we issued $450 million aggregate principal amount of 5.45 percent Series LL Notes due September 15, 2026 (the “Series LL Notes”) and $700 million aggregate principal amount of 5.55 percent Series MM Notes due October 15, 2028 (the “Series MM Notes”). We will pay interest on the Series LL Notes in March and September of each year, commencing in March 2024, and we will pay interest on the Series MM Notes in April and October of each year, commencing in April 2024. We received net proceeds of approximately $1.135 billion from the offering of the Series LL Notes and Series MM Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.
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In March 2023, we issued $800 million aggregate principal amount of 4.90 percent Series KK Notes due April 15, 2029 (the “Series KK Notes”). We pay interest on the Series KK Notes in April and October of each year, 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 expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.
We are party to a $4.5 billion multicurrency revolving credit agreement (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 149 properties located in Mexico, Costa Rica, Colombia, and Chile to our franchise portfolio. We accounted for the transaction as an asset acquisition and allocated the cost of the acquisition, including direct and incremental transaction costs, to an indefinite-lived brand asset of approximately $85 million and franchise contract assets, with a weighted-average term of 20 years, totaling $21 million.
NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We present the carrying amounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:
 September 30, 2023December 31, 2022
(in millions)Carrying AmountFair ValueCarrying AmountFair Value
Senior, mezzanine, and other loans$159 $147 $152 $142 
Total noncurrent financial assets$159 $147 $152 $142 
Senior Notes$(9,716)$(8,920)$(8,322)$(7,627)
Commercial paper(973)(973)(871)(871)
Other long-term debt(56)(50)(56)(49)
Other noncurrent liabilities(371)(371)(394)(394)
Total noncurrent financial liabilities$(11,116)$(10,314)$(9,643)$(8,941)
See Note 12. Fair Value of Financial Instruments and the “Fair Value Measurements” caption of Note 2. Summary of Significant Accounting Policies of our 2022 Form 10-K for more information on the input levels we use in determining fair value.
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NOTE 9. ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ EQUITY
The following tables detail the accumulated other comprehensive loss activity for the 2023 first three quarters and 2022 first three quarters:
(in millions)Foreign Currency Translation AdjustmentsOther AdjustmentsAccumulated Other Comprehensive Loss
Balance at year-end 2022$(740)$11 $(729)
Other comprehensive (loss) income before reclassifications (1)
(129)11 (118)
Reclassification adjustments(3)1 (2)
Net other comprehensive (loss) income
(132)12 (120)
Balance at September 30, 2023$(872)$23 $(849)
(in millions)Foreign Currency Translation AdjustmentsOther AdjustmentsAccumulated Other Comprehensive Loss
Balance at year-end 2021$(351)$9 $(342)
Other comprehensive (loss) income before reclassifications (1)
(653)9 (644)
Reclassification adjustments (4)(4)
Net other comprehensive (loss) income(653)5 (648)
Balance at September 30, 2022$(1,004)$14 $(990)
(1)Other comprehensive loss 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 $1 million for the 2023 first three quarters and gains of $76 million for the 2022 first three quarters.
The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2023 first three quarters and 2022 first three quarters:
(in millions, except per share amounts) 
Common
Shares
Outstanding
 TotalClass A Common StockAdditional Paid-in-CapitalRetained EarningsTreasury Stock, at CostAccumulated Other Comprehensive Loss
310.6 Balance at year-end 2022$568 $5 $5,965 $12,342 $(17,015)$(729)
— Net income757 — — 757 — — 
— Other comprehensive income82 — — — — 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)
— Net income726 — — 726 — — 
— Other comprehensive loss(69)— — — — (69)
— 
Dividends ($0.52 per share)
(157)— — (157)— — 
0.1 Stock-based compensation plans48 — 46 — 2 — 
(5.2)Purchase of treasury stock(912)— — — (912)— 
299.6 
Balance at June 30, 2023
$(224)$5 $5,952 $13,544 $(19,009)$(716)
— Net income752 — — 752 — — 
— Other comprehensive loss(133)— — — — (133)
— 
Dividends ($0.52 per share)
(154)— — (154)— — 
0.4 Stock-based compensation plans56 — 44 — 12 — 
(4.8)Purchase of treasury stock(958)— — — (958)— 
295.2 
Balance at September 30, 2023
$(661)$5 $5,996 $14,142 $(19,955)$(849)
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Common
Shares
Outstanding
 TotalClass A Common StockAdditional Paid-in-CapitalRetained EarningsTreasury Stock, at CostAccumulated Other Comprehensive Loss
326.3 Balance at year-end 2021$1,414 $5 $5,892 $10,305 $(14,446)$(342)
— Net income377 — — 377 — — 
— Other comprehensive income14 — — — — 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)
— Net income678 — — 678 — — 
— Other comprehensive loss(323)— — — — (323)
— 
Dividends ($0.30 per share)
(98)— — (98)— — 
— Stock-based compensation plans43 — 41 — 2 — 
(1.9)Purchase of treasury stock(300)— — — (300)— 
325.4 
Balance at June 30, 2022
$1,772 $5 $5,872 $11,262 $(14,716)$(651)
— Net income630 — 630 — — 
— Other comprehensive loss(339)— — — — (339)
— 
Dividends ($0.30 per share)
(97)— — (97)— — 
0.1 Stock-based compensation plans47 — 47 —  — 
(6.2)Purchase of treasury stock(950)— — — (950)— 
319.3 
Balance at September 30, 2022
$1,063 $5 $5,919 $11,795 $(15,666)$(990)
NOTE 10. CONTRACTS WITH CUSTOMERS
Our current and noncurrent liability for guest loyalty program increased by $200 million, to $6,794 million at September 30, 2023, from $6,594 million at December 31, 2022, primarily reflecting an increase in points earned by members. This includes a $91 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 $2,325 million of revenue recognized in the 2023 first three quarters, that was deferred as of December 31, 2022.
Our current and noncurrent deferred revenue decreased by $113 million, to $1,218 million at September 30, 2023, from $1,331 million at December 31, 2022, primarily as a result of $213 million of revenue recognized in the 2023 first three quarters that was deferred as of December 31, 2022, as well as the reclassification from deferred revenue to the liability for guest loyalty program, which we discuss above. The decrease was partially offset by revenue deferred in the 2023 first three quarters related to our co-branded credit cards, gift cards, franchise application and relicensing fees, and certain centralized programs and services fees.
Our allowance for credit losses decreased to $189 million at September 30, 2023 from $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.
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Segment Revenues
The following tables present our revenues disaggregated by segment and major revenue stream for the 2023 third quarter, 2022 third quarter, 2023 first three quarters, and 2022 first three quarters:
Three Months Ended September 30, 2023Three Months Ended September 30, 2022
(in millions)U.S. & CanadaInternationalTotalU.S. & CanadaInternationalTotal
Gross fee revenues$690 $319 $1,009 $649 $241 $890 
Contract investment amortization(16)(6)(22)(16)(6)(22)
Net fee revenues674 313 987 633 235 868 
Owned, leased, and other revenue94 235 329 114 205 319 
Cost reimbursement revenue3,565 577 4,142 3,253 468 3,721 
Total reportable segment revenue$4,333 $1,125 $5,458 $4,000 $908 $4,908 
Unallocated corporate and other
470 405 
Total revenue
$5,928 $5,313 
Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
(in millions)U.S. & CanadaInternationalTotalU.S. & CanadaInternationalTotal
Gross fee revenues$2,113 $924 $3,037 $1,821 $630 $2,451 
Contract investment amortization(49)(16)(65)(45)(20)(65)
Net fee revenues2,064 908 2,972 1,776 610 2,386 
Owned, leased, and other revenue327 691 1,018 330 575 905 
Cost reimbursement revenue10,722 1,658 12,380 9,282 1,273 10,555 
Total reportable segment revenue$13,113 $3,257 $16,370 $11,388 $2,458 $13,846 
Unallocated corporate and other
1,248 1,004 
Total revenue
$17,618 $14,850 

Segment Profits
Three Months EndedNine Months Ended
(in millions)September 30, 2023September 30, 2022September 30, 2023September 30, 2022
U.S. & Canada$707 $652 $2,120 $1,833 
International318 227 865 568 
Unallocated corporate and other
103 83 203 92 
Interest expense, net of interest income(139)(93)(391)(270)
Provision for income taxes(237)(239)(562)(538)
Net income$752 $630 $2,235 $1,685 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement
All statements in this report are made as of the date this Form 10-Q is filed with the U.S. Securities and Exchange Commission (the “SEC”). We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise. We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information available to us through the date this Form 10-Q is filed with the SEC. Forward-looking statements include information related to 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.
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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 more than 30 brand names. Under our asset-light business model, we typically manage or franchise hotels, rather than own them. We discuss our operations in the following 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 third quarter and 2023 first three quarters compared to the same periods in 2022. For the 2023 third quarter, worldwide RevPAR increased 8.8 percent compared to the 2022 third quarter, reflecting ADR growth of 4.1 percent and occupancy improvement of 3.2 percentage points. For the 2023 first three quarters, worldwide RevPAR increased 17.5 percent compared to the 2022 first three quarters, reflecting ADR growth of 6.7 percent and occupancy improvement of 6.4 percentage points. The increases in RevPAR were driven by improvement in all customer segments, including robust leisure demand as well as strengthening group and business transient demand as compared to the same periods in 2022.
In the U.S. & Canada, RevPAR improved 4.3 percent in the 2023 third quarter compared to the 2022 third quarter, driven by ADR growth of 2.7 percent and occupancy improvement of 1.1 percentage points. In the 2023 first three quarters, U.S. & Canada RevPAR improved 10.8 percent compared to the 2022 first three quarters, driven
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by ADR growth of 5.2 percent and occupancy improvement of 3.5 percentage points. While demand continued to be strong in the 2023 third quarter, the year-over-year growth in RevPAR continued to stabilize.
Internationally, RevPAR improved 21.8 percent in the 2023 third quarter and 38.7 percent in the 2023 first three quarters compared to the same periods in 2022. The improvement in RevPAR compared to 2022 was driven by strengthening demand, particularly in Greater China and Asia Pacific excluding China, where various geographic markets were impacted by COVID-19 and government-imposed travel restrictions during the 2022 comparable periods.
Our business is subject to the effects of changes in global and regional economic, geopolitical and other conditions and these conditions can change rapidly. We continue to monitor these conditions, and although we are not currently seeing signs of a slowdown in lodging demand in most markets, the lodging booking window is short and trends can change quickly.
Starwood Data Security Incident
On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). We discontinued use of the Starwood reservations database for business operations at the end of 2018.
We are currently unable to reasonably estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already recorded. However, we do not believe this incident will impact our long-term financial health. Although our insurance program includes coverage designed to limit our exposure to losses such as those related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other 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 ongoing legal and other expenses associated with the Data Security Incident in future periods, and we believe it is reasonably possible that we may incur additional monetary payments to regulators and/or litigants in excess of the amounts already recorded and costs in connection 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 third quarter, our system had 8,675 properties (1,581,002 rooms), compared to 8,288 properties (1,525,407 rooms) at year-end 2022 and 8,162 properties (1,507,350 rooms) at the end of the 2022 third quarter. The increase compared to year-end 2022 reflected gross additions of 430 properties (61,304 rooms), including 149 properties (17,300 rooms) from the City Express acquisition, and deletions of 42 properties (5,840 rooms). Our 2023 first three quarters gross room additions included approximately 47,300 rooms located outside U.S. & Canada and approximately 10,500 rooms converted from competitor brands.
At the end of the 2023 third quarter, we had nearly 557,000 hotel rooms in our development pipeline, which includes roughly 40,300 hotel rooms approved for development but not yet under signed contracts. Approximately 238,000 hotel rooms in the pipeline, including approximately 37,000 rooms from the exclusive, long-term strategic licensing agreement with MGM Resorts International that we announced in July 2023, were under construction as of the end of the 2023 third quarter. Over half of the rooms in our development pipeline are outside U.S. & Canada.
We currently expect full-year 2023 net rooms growth of approximately 4.2 to 4.5 percent. This estimate excludes the anticipated addition of rooms to our system under our agreement with MGM Resorts International discussed above, which we now expect to be added in early 2024.
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Properties and Rooms
At September 30, 2023, we operated, franchised, and licensed the following properties and rooms:
 ManagedFranchised/LicensedOwned/LeasedResidentialTotal
PropertiesRoomsPropertiesRoomsPropertiesRoomsPropertiesRoomsPropertiesRooms
U.S. & Canada629 215,952 5,217 747,617 14 4,656 67 7,166 5,927 975,391 
International1,410 358,039 1,155 210,458 37 8,776 52 5,444 2,654 582,717 
Timeshare— — 93 22,745 — — — — 93 22,745 
Yacht— — 149 — — — — 149 
Total2,039 573,991 6,466 980,969 51 13,432 119 12,610 8,675 1,581,002 
Lodging Statistics
The following tables present RevPAR, occupancy, and ADR statistics for comparable properties. Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.
Three Months Ended September 30, 2023 and Change vs. Three Months Ended September 30, 2022
RevPAROccupancyAverage Daily Rate
2023vs. 20222023vs. 20222023vs. 2022
Comparable Company-Operated Properties
U.S. & Canada$169.46 4.4 %70.8 %1.3 %pts.$239.40 2.5 %
Greater China$93.41 48.6 %72.5 %14.5 %pts.$128.93 18.9 %
Asia Pacific excluding China$116.21 35.2 %70.7 %9.3 %pts.$164.45 17.5 %
Caribbean & Latin America$138.64 2.4 %61.1 %2.4 %pts.$226.76 (1.6)%
Europe$226.46 10.6 %75.5 %3.2 %pts.$300.01 6.0 %
Middle East & Africa$101.11 18.1 %65.4 %4.2 %pts.$154.50 10.5 %
International - All (1)
$121.93 25.8 %70.5 %9.0 %pts.$172.91 9.7 %
Worldwide (2)
$142.51 13.8 %70.6 %5.7 %pts.$201.76 4.6 %
Comparable Systemwide Properties
U.S. & Canada$133.92 4.3 %73.1 %1.1 %pts.$183.28 2.7 %
Greater China$87.31 47.4 %71.3 %14.5 %pts.$122.40 17.4 %
Asia Pacific excluding China$117.73 36.4 %70.4 %8.6 %pts.$167.12 19.7 %
Caribbean & Latin America$121.87 2.8 %62.4 %2.5 %pts.$195.43 (1.4)%
Europe$175.50 9.8 %74.7 %3.2 %pts.$235.04 5.0 %
Middle East & Africa$98.24 20.2 %65.3 %3.5 %pts.$150.50 13.8 %
International - All (1)
$120.43 21.8 %70.1 %7.6 %pts.$171.85 8.5 %
Worldwide (2)
$129.73 8.8 %72.1 %3.2 %pts.$179.84 4.1 %
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Nine Months Ended September 30, 2023 and Change vs. Nine Months Ended September 30, 2022
RevPAROccupancyAverage Daily Rate
2023vs. 20222023vs. 20222023vs. 2022
Comparable Company-Operated Properties
U.S. & Canada$173.39 12.4 %69.9 %4.8 %pts.$248.07 4.7 %
Greater China$89.14 78.2 %68.9 %22.0 %pts.$129.41 21.2 %
Asia Pacific excluding China$114.87 58.1 %68.5 %14.3 %pts.$167.63 25.2 %
Caribbean & Latin America$165.92 17.8 %63.4 %4.9 %pts.$261.59 8.7 %
Europe$188.49 25.0 %70.5 %9.0 %pts.$267.38 9.0 %
Middle East & Africa$118.53 17.8 %66.2 %4.0 %pts.$178.96 10.7 %
International - All (1)
$119.30 42.0 %68.2 %14.1 %pts.$174.86 12.7 %
Worldwide (2)
$142.74 24.7 %68.9 %10.1 %pts.$207.02 6.5 %
Comparable Systemwide Properties
U.S. & Canada$130.48 10.8 %70.9 %3.5 %pts.$183.93 5.2 %
Greater China$83.53 77.9 %67.8 %22.2 %pts.$123.11 19.8 %
Asia Pacific excluding China$115.15 58.7 %68.4 %13.6 %pts.$168.42 27.1 %
Caribbean & Latin America$141.96 18.2 %64.4 %5.2 %pts.$220.49 8.6 %
Europe$146.12 25.8 %68.6 %9.8 %pts.$212.87 7.9 %
Middle East & Africa$111.67 20.3 %65.3 %3.7 %pts.$171.06 13.5 %
International - All (1)
$115.90 38.7 %67.4 %12.9 %pts.$171.93 12.3 %
Worldwide (2)
$125.96 17.5 %69.8 %6.4 %pts.$180.34 6.7 %
(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 third quarter and 2023 first three quarters improved compared to the 2022 third quarter and 2022 first three quarters 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 third quarter compared to the 2022 third quarter and for the 2023 first three quarters compared to the 2022 first three quarters.
Fee Revenues
Three Months EndedNine Months Ended
(in millions)September 30, 2023September 30, 2022Change 2023 vs. 2022September 30, 2023September 30, 2022Change 2023 vs. 2022
Base management fees$306 $275 $31 11 %$917 $757 $160 21 %
Franchise fees748 678 70 10 %2,126 1,847 279 15 %
Incentive management fees143 106 37 35 %537 343 194 57 %
Gross fee revenues1,197 1,059 138 13 %3,580 2,947 633 21 %
Contract investment amortization(23)(22)(1)(5)%(66)(65)(1)(2)%
Net fee revenues$1,174 $1,037 $137 13 %$3,514 $2,882 $632 22 %
The increases in base management fees in the 2023 third quarter and 2023 first three quarters primarily reflected higher RevPAR. The increase in the 2023 first three quarters was also due to unit growth ($19 million), partially offset by net unfavorable foreign exchange rates ($18 million).
The increases in franchise fees in the 2023 third quarter and 2023 first three quarters primarily reflected higher RevPAR, unit growth ($29 million and $73 million, respectively), and higher co-branded credit card fees ($15 million and $43 million, respectively).
The increases in incentive management fees in the 2023 third quarter and 2023 first three quarters primarily reflected higher profits at many managed hotels.
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Owned, Leased, and Other