# EDGAR Filing Document

**Accession Number:** 0001048286
**File Stem:** 0001140361-23-014127
**Filing Date:** 2023-3
**Character Count:** 74377
**Document Hash:** d71a772027528aea8588617c71e4626a
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001140361-23-014127.hdr.sgml**: 20230328

**ACCESSION NUMBER**: 0001140361-23-014127

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230328

**DATE AS OF CHANGE**: 20230328

**EFFECTIVENESS DATE**: 20230328

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** MARRIOTT INTERNATIONAL INC /MD/
- **CENTRAL INDEX KEY:** 0001048286
- **STANDARD INDUSTRIAL CLASSIFICATION:** HOTELS & MOTELS [7011]
- **IRS NUMBER:** 522055918
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-13881
- **FILM NUMBER:** 23766368

**BUSINESS ADDRESS:**
- **STREET 1:** 7750 WISCONSIN AVENUE
- **CITY:** BETHESDA
- **STATE:** MD
- **ZIP:** 20814
- **BUSINESS PHONE:** 3013803000

**MAIL ADDRESS:**
- **STREET 1:** 7750 WISCONSIN AVENUE
- **CITY:** BETHESDA
- **STATE:** MD
- **ZIP:** 20814

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** NEW MARRIOTT MI INC
- **DATE OF NAME CHANGE:** 19971023

### Attached PDF Documents

**Attachment 1:** `ny20006599x501_ars.pdf`

![img-0.jpeg](img-0.jpeg)

# 2022 ANNUAL REPORT

# Letter to Stockholders

![img-1.jpeg](img-1.jpeg)

President and Chief Executive Officer

## Dear Stockholder,

The company had a terrific year in 2022 as travel demand continued to recover. Our associates led the way - taking care of our guests and each other, embracing change, and focusing on the details - and what we accomplished is a source of pride. We strengthened our operations, grew our portfolio, expanded our powerful loyalty program, captured growing global demand, and gave back to the communities where we do business. We look forward with great optimism to our next chapter of innovation and growth.

Last year marked a significant milestone in our company's history, as we celebrated Marriott International's 95th anniversary. We also paid tribute to J.W. Marriott, Jr. for his inspiring and transformative 65+ year career as well as his incredible contributions to the company and the industry, as he transitioned from Executive Chairman to Chairman Emeritus in May. David Marriott was elected Chairman of our Board of Directors, and it has been a true honor to partner with David and our Board as we transition out of recovery mode and focus on positioning the company for the future.

## 2022 Financial Highlights

Two years after experiencing the sharpest downturn in our company's history, we reported record financial results in 2022. We achieved full global revenue per available room (RevPAR)1 recovery to pre-pandemic levels in June. Fourth quarter global RevPAR rose 5 percent compared to 2019, with occupancy down just 5 percent-age points, and average daily rate (ADR) up 13 percent.

One of the highlights was our group business, which experienced significant improvement last year. We're excited that our outlook for group in 2023 remains strong. Leisure demand has also remained incredibly robust. Business travel is still lagging 2019 levels, but also improved meaningfully during 2022. Rising cross-border travel and the blending of business and leisure trips have also continued to help spur overall demand.

For the full year 2022, gross fee revenues totaled $4.1 billion, a significant increase of more than 50 percent compared to 2021 which reflects higher RevPAR, rooms additions, and significant growth in our non-RevPAR related franchise fees, primarily driven by

1 All occupancy, ADR and RevPAR statistics are systemwide constant dollar and include hotels that have been temporarily closed due to COVID-19. Occupancy, ADR and RevPAR comparisons between 2022 and 2019 reflect properties that are defined as comparable as of December 31, 2022 or June 30, 2022 (as applicable), even if they were not open and operating for the full year 2019 or they did not meet all the other criteria for comparable in 2019. Unless otherwise stated, all comparisons to 2019 are comparing the same time period in each year.

i

our co-branded credit card fees. Full year incentive management fees rose impressively over the prior year, reaching $529 million. Adjusted EBITDA reached nearly $3.9 billion in 2022, up almost 70 percent year over year. Full year adjusted diluted earnings per share (EPS) more than doubled from 2021, totaling $6.69.2 Our fee-driven, asset-light business model generated significant cash during the year, allowing us to both invest in the growth of our business and return $2.9 billion to stockholders.

At the hotel level, we have continued to work closely with our owners and franchisees to provide superior customer service while containing operating costs. Importantly, our guest surveys indicate that customer satisfaction continues to rise.

Booking trends at the beginning of 2023 were robust. We see additional runway for RevPAR growth in 2023, particularly with the reopening of borders in China and more cross-border travel.

## Global Growth Trends

We grew the system in 2022 with new hotel openings and conversions. We added more than 65,000 rooms on a gross basis, achieving 3.1 percent net rooms growth year over year. We continue to see strong interest in conversions, with those rooms accounting for 27 percent of our room additions in the year. At the end of 2022, we had nearly 8,300 properties - about 1,000 more hotels than were in our portfolio pre-pandemic - and roughly 1.5 million rooms in 138 countries and territories.

Owners and franchisees continue to show preference for our brands and we have a strong development pipeline. Our development team had an excellent 2022, signing

nearly 108,000 rooms globally, almost half of which were in markets outside the U.S. Nearly 40 percent of rooms signed were in high-value luxury and premium brands, and nearly 20 percent of rooms signed were conversions. The company's industry-leading global development pipeline totaled over 3,000 properties representing more than 496,000 hotel rooms at the end of the year.3

The company is continuing to focus on expanding the breadth of travel offerings available to its customers. In October, we were pleased to announce our planned entry into the popular affordable midscale segment with an agreement to acquire the highly regarded City Express brand portfolio, comprised of around 17,000 rooms in Mexico and three additional countries in Latin America. We are expanding our all-inclusive platform to meet rising guest demand, and we have received a great deal of initial interest from owners and developers in Apartments by Marriott Bonvoy, a new serviced apartment brand in the upper-upscale and luxury segments. In 2022, we also celebrated the inaugural sailing of *Evrima*, the first yacht in The Ritz-Carlton Yacht Collection, offering intimate yachting experiences around the world and contributing to the company's growth in areas beyond traditional lodging.

## Marriott Bonvoy

With more than 177 million members at year-end 2022, our powerful Marriott Bonvoy program has been a key driver of demand for our hotels and other lodging offerings, and for adjacent products such as our co-branded credit cards. Our growing portfolio of co-branded credit cards, now in nine countries following our November card launch in Saudi Arabia, had record global card-member acquisitions and card spend last year.

2 Please see pages 72-73 for further information on the calculation of adjusted EBITDA and adjusted diluted EPS, including a reconciliation of these adjusted financial measures to the corresponding generally accepted accounting principles (GAAP) measures.

3 The company's global development pipeline at the end of 2022 does not include the City Express portfolio.

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Product innovation and engagement with our members remain key focus areas, especially through investments in our Marriott Bonvoy app and other digital offerings. In 2022, our mobile app users were up 32 percent year over year, digital room nights rose 27 percent and digital revenues climbed 41 percent. We have made great gains in contributions from our digital platforms, which are highly profitable channels for our owners, and anticipate many additional enhancements over the next few years.

## Serve Our World

Environmental, Social, and Governance (ESG) is an integral part of our company's culture and strategy, and we are focused on making a positive and sustainable impact wherever we do business.

One of our core values, *Serve Our World*, guides our efforts to support communities and manage our environmental impact. During tragic humanitarian crises, including the war in Ukraine and the aftermath of the devastating earthquakes in Türkiye and Syria, we provided support to impacted associates and their families and assisted with relief efforts in the community - efforts that continue today.

Our climate action efforts include committing to set a near-term science-based emissions reduction target and a long-term science-based target to reach net-zero value chain greenhouse gas emissions by no later than 2050. Our sustainability strategy and initiatives focus on a wide range of issues, including designing resource-efficient hotels, implementing technologies to track and reduce energy and water consumption, as well as waste and food waste, increasing the use of renewable energy, managing climate and water-related risks, supporting

ecosystem restoration initiatives, and focusing on responsible and local sourcing.

Last year, we launched Marriott's Bridging The Gap, a multi-year program designed to meaningfully increase diverse hotel ownership. As part of the program, Marriott allocated an initial commitment of $50 million to offer financial and other incentives to qualified historically underrepresented owners and franchisees who will have a controlling equity interest in select branded projects. In 2022, Marriott's Bridging the Gap program resulted in nine signed deals.

We have taken the lead in the fight against one of the industry's most pressing human rights issues - human trafficking - and in December 2022, we reached a milestone of training one million Marriott associates in human trafficking awareness. We donated our human trafficking awareness training for use in the broader hospitality workforce, and by December, nearly 850,000 hotel workers outside of Marriott had completed the training. In addition, Marriott partnered with the Global Fund to End Modern Slavery to create a hospitality training curriculum for survivors of human trafficking.

All of these efforts are part of our sustainability and social impact platform, Serve 360: Doing Good in Every Direction, which guides our efforts to make a difference in the communities where we operate.

## Leadership Update

Stephanie Linnartz, a long-time Marriott veteran and President of the company since 2021, stepped down in February 2023 to take on a leadership role outside of the hospitality industry. Craig Smith, Group President, International Division, recently retired after 35 years

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with the company. I wish Stephanie and Craig much success and every happiness in the next chapters of their lives. They have both left an indelible mark on Marriott.

These transitions have allowed me and my executive team to make changes to reflect our current environment and position us for future growth. To support the company's international growth, the importance of our loyalty program, contributions of our luxury brands, new business opportunities, and emphasis on driving revenue and leveraging technology, the following leaders have joined my leadership team, now directly reporting to me:

- Satya Anand, President, Europe, Middle East & Africa (EMEA)
- Tina Edmundson, President, Luxury
- Brian King, President, Caribbean & Latin America (CALA)
- Yibing Mao, President, Greater China (GC)
- Raj Menon, President, Asia Pacific Excluding China (APEC)
- Drew Pinto, Executive Vice President and Chief Revenue & Technology Officer
- Peggy Fang Roe, Executive Vice President and Chief Customer Officer

In addition, Leeny Oberg now leads our Global Development organization in her new role as Chief Financial Officer and Executive Vice President, Development. Liam Brown takes on expanded oversight for the Global Operations function in his role as Group President, U.S. & Canada. My executive team also

includes Ty Breland, Executive Vice President and Chief Human Resources Officer, Tricia Primrose, Executive Vice President and Chief Global Communications & Public Affairs Officer, and Rena Reiss, Executive Vice President and General Counsel. With this leadership team in place, I couldn't be more energized about our future.

## Our Commitment

I would like to thank our associates around the world for their hard work and commitment in navigating through the last few challenging years and in helping the company achieve our record 2022 financial results. Our associates continue to show a tremendous amount of resilience and dedication in taking care of the company, our guests and each other, and demonstrating their commitment to service excellence.

With our industry-leading brand portfolio, powerful loyalty program, the largest global rooms distribution, and our incredibly dedicated associates, we believe Marriott is well-positioned for strong growth over the coming years as we fulfill our purpose of connecting people through the power of travel.

Thank you for your support of Marriott International. We look forward to welcoming you at one of our hotels in the near future.

**Anthony Capuano**
*President and Chief Executive Officer*

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM 10-K

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

For the Fiscal Year Ended December 31, 2022

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

![img-2.jpeg](img-2.jpeg)

# MARRIOTT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

52-2055918

(IRS Employer
Identification No.)

7750 Wisconsin Avenue Bethesda Maryland
(Address of Principal Executive Offices)

20814
(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 |

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

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 ☑ 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 ☑ No ☐

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

| Large accelerated filer | ☑ | Accelerated filer | ☐ |
| --- | --- | --- | --- |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
|  |  | Emerging growth company | ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

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

The aggregate market value of shares of common stock held by non-affiliates at June 30, 2022, was $37,283,265,895.

There were 308,121,159 shares of Class A Common Stock, par value $0.01 per share, outstanding at February 7, 2023.

# DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement prepared for the 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.

# **MARRIOTT INTERNATIONAL, INC.**
**FORM 10-K TABLE OF CONTENTS**
**FISCAL YEAR ENDED DECEMBER 31, 2022**

|  | Page No. |
| --- | --- |
| Part I. |  |
| Item 1. Business | 4 |
| Item 1A. Risk Factors | 11 |
| Item 1B. Unresolved Staff Comments | 19 |
| Item 2. Properties | 19 |
| Item 3. Legal Proceedings | 19 |
| Item 4. Mine Safety Disclosures | 19 |
| Part II. |  |
| Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities | 19 |
| Item 6. Reserved | 20 |
| Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations | 20 |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk | 28 |
| Item 8. Financial Statements | 30 |
| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 61 |
| Item 9A. Controls and Procedures | 61 |
| Item 9B. Other Information | 61 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 62 |
| Part III. |  |
| Item 10. Directors, Executive Officers, and Corporate Governance | 62 |
| Item 11. Executive Compensation | 62 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 62 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 62 |
| Item 14. Principal Accountant Fees and Services | 62 |
| Part IV. |  |
| Item 15. Exhibits and Financial Statement Schedules | 65 |
| Item 16. Form 10-K Summary | 69 |
| Signatures | 70 |

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Throughout this report, we refer to Marriott International, Inc., together with its consolidated subsidiaries, as “we,” “us,” “Marriott,” or the “Company.” In order to make this report easier to read, we also refer throughout to (1) our Consolidated Financial Statements as our “Financial Statements,” (2) our Consolidated Statements of Income (Loss) as our “Income Statements,” (3) our Consolidated Balance Sheets as our “Balance Sheets,” (4) our 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 the Notes to our Financial Statements, unless otherwise stated.

### Cautionary Statement

All statements in this report are made as of the date this Form 10-K 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-K is filed with the SEC. Forward-looking statements include information related to Revenue per Available Room (“RevPAR”), average daily rate (“ADR”), occupancy and other future demand and recovery 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; our expectations regarding our acquisition of the City Express brand and the addition of the City Express hotels to our franchise system; and other statements that are preceded by, followed by, or include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “foresees,” or similar expressions; and similar statements concerning anticipated future events and expectations that are not historical facts.

We caution you that these statements are not guarantees of future performance and are subject to numerous evolving risks and uncertainties that we may not be able to accurately predict or assess, including the risks and uncertainties we describe in Part I, Item 1A of this report and other factors we describe from time to time in our periodic filings with the SEC.

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## PART I

### Item 1. Business.

#### *Corporate Structure and Business*

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties under numerous brand names at different price and service points. Consistent with our focus on management, franchising, and licensing, we own or lease very few of our lodging properties (less than one percent of our system).

The following table shows our portfolio of brands at year-end 2022.

![img-3.jpeg](img-3.jpeg)

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. See Note 14 for more information.

#### *Company-Operated Properties*

At year-end 2022, we had 2,053 company-operated properties (576,243 rooms), which included properties under long-term management or lease agreements with property owners (management and lease agreements together, the “Operating Agreements”) and properties that we own.

Terms of our management agreements vary, but we earn a management fee that is typically composed of a base management fee, which is a percentage of the revenues of the hotel, and an incentive management fee, which is based on the profits of the hotel. Our management agreements also typically include reimbursement of costs of operations (both direct and indirect). Such agreements are generally for initial periods of 20 to 30 years, with options for us to renew for up to 10 or more additional years. Our lease agreements also vary, but may include fixed annual rentals plus additional rentals based on a specified percentage of annual revenues that exceed a fixed amount. Many of our Operating Agreements are subordinated to mortgages or other liens securing indebtedness of the owners. Many of our Operating Agreements also permit the owners to terminate the agreement if we do not meet certain performance metrics, financial returns fail to meet defined levels for a period of time, and we have not cured those deficiencies. In certain circumstances, some of our management agreements allow owners to convert company-operated properties to franchised properties under our brands.

For the lodging facilities we operate, we generally are responsible for hiring, training, and supervising the managers and employees needed to operate the facilities and for purchasing supplies, and owners are required to reimburse us for those costs. We provide centralized programs and services, such as our Marriott Bonvoy loyalty program, reservations, and marketing, as well as various accounting and data processing services, and owners are required to reimburse us for those costs as well.

#### *Franchised and Licensed Properties*

We have franchising and licensing arrangements that permit hotel owners and operators to use many of our lodging brand names and systems. Under our hotel franchising arrangements, we generally receive an initial application fee and continuing royalty fees, which typically range from four to seven percent of room revenues for all brands, plus two to three percent of food and beverage revenues for certain full-service brands. Franchisees contribute to our centralized programs and services, such as our Marriott Bonvoy loyalty program, reservations, and marketing.

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We also receive royalty fees under license agreements with Marriott Vacations Worldwide Corporation, our former timeshare subsidiary that we spun off in 2011, and its affiliates (collectively, “MVW”), for certain brands, including Marriott Vacation Club, Grand Residences by Marriott, The Ritz-Carlton Destination Club, Westin, Sheraton, and for certain existing properties, St. Regis and The Luxury Collection. We receive license fees from MVW consisting of a fixed annual fee, adjusted for inflation, plus certain variable fees based on sales volumes.

Finally, we receive royalty fees under agreements for The Ritz-Carlton Yacht Collection®, which first set sail in 2022, combining the luxury lifestyle of The Ritz-Carlton with a yachting experience.

At year-end 2022, we had 6,122 franchised and licensed properties (937,683 rooms and timeshare units).

### *Residential*

We use or license our trademarks for the sale of residential real estate, often in conjunction with hotel development, and receive branding fees for sales of such branded residential real estate by others. Third-party owners typically construct and sell residences with limited amounts, if any, of our capital at risk. We have used or licensed the JW Marriott, The Ritz-Carlton, Ritz-Carlton Reserve, W, The Luxury Collection, St. Regis, EDITION, Bvlgari, Renaissance, Le Méridien, Marriott, Sheraton, Westin, Four Points, Delta Hotels by Marriott, Autograph Collection, and Tribute Portfolio brand names and trademarks for residential real estate sales. At year-end 2022, we had 113 branded residential communities (11,481 residential units), for which we typically manage the related homeowners’ associations.

### *Intellectual Property*

We operate in a highly competitive industry and our brand names, trademarks, service marks, trade names, and logos are very important to the development, sales and marketing of our properties and services. We believe that our brand names and other intellectual property have come to represent outstanding quality, care, service, and value to our customers, guests, and the traveling public. Accordingly, we register and protect our intellectual property where we deem appropriate and otherwise protect against its unauthorized use.

### *Brand Portfolio*

We believe that our brand portfolio offers the most compelling range of brands and hotels in hospitality. Our brands are categorized by style of offering - Classic and Distinctive. Our Classic brands offer time-honored hospitality for the modern traveler, and our Distinctive brands offer memorable experiences with a unique perspective - each of which we group into three quality tiers: Luxury, Premium, and Select.

*Luxury* offers bespoke and superb amenities and services. Our Classic Luxury hotel brands include JW Marriott, The Ritz-Carlton, and St. Regis. Distinctive Luxury hotel brands in our portfolio include W Hotels, The Luxury Collection, EDITION, and Bvlgari.

*Premium* offers sophisticated and thoughtful amenities and services. Our Classic Premium hotel brands include Marriott Hotels, Sheraton, Delta Hotels by Marriott, Marriott Executive Apartments, and Marriott Vacation Club. Our Distinctive Premium hotel brands include Westin, Renaissance Hotels, Le Méridien, Autograph Collection Hotels, Gaylord Hotels, Tribute Portfolio, and Design Hotels.

*Select* offers smart and easy amenities and services, with our longer stay brands offering amenities that mirror the comforts of home. Our Classic Select hotel brands include Courtyard, Residence Inn, Fairfield, SpringHill Suites, Four Points, TownePlace Suites, and Protea Hotels. Our Distinctive Select hotel brands include Aloft Hotels, AC Hotels by Marriott, Element Hotels, and Moxy Hotels.

The following table shows the geographic distribution of our brands at year-end 2022:

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*Our owned properties and other real estate investments subject us to numerous risks.* We have a number of owned and leased properties, which are subject to the risks that generally relate to investments in real property. We may seek to sell some of these properties over time; however, equity real estate investments can be difficult to sell quickly. We may not be able to complete asset sales at prices we find acceptable, or at all. Moreover, the investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated, if any, by the particular properties, and the expenses incurred. A variety of other factors also affect income from properties and real estate values, including local market conditions and new supply of hotels and other lodging products, availability and costs of staffing, governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels, and the availability of financing. Our real estate investments have been, and could in the future be, impacted by any of these factors, resulting in a material adverse impact on our results of operations or financial condition. If our properties do not generate revenue sufficient to meet operating expenses and make needed capital expenditures, our income could be adversely affected, and we could be required to record additional significant non-cash impairment charges to our results of operations.

*Risks associated with development and sale of residential properties associated with our lodging properties or brands may reduce our profits.* We participate, through licensing agreements, in the development and sale of residential properties associated with our brands, including residences and condominiums under many of our luxury and premium brand names and trademarks. Such projects pose further risks beyond those generally associated with our lodging business, which may reduce our profits or compromise our brand equity, including risks that: (1) changes in residential real estate demand generally may reduce our profits and could make it more difficult to convince future project developers of the value added by our brands; (2) increases in interest rates, reductions in mortgage availability or the tax benefits of mortgage financing or residential ownership generally, or increases in the costs of residential ownership could prevent potential customers from buying residential products or reduce the prices they are willing to pay; and (3) residential construction may be subject to warranty and liability claims or claims related to purchaser deposits, and the costs of resolving such claims may be significant.

*More hotel projects in our development pipeline may be cancelled or delayed in opening, which could adversely affect our growth prospects.* We report a significant number of hotels in our development pipeline, including hotels under construction, hotels subject to signed contracts, and hotels approved for development but not yet under contract. The eventual opening of such pipeline hotels and, in particular, the approved hotels that are not yet under contract, is subject to numerous risks, including the other risks described in this section. We have seen construction timelines for pipeline hotels lengthen due to various factors, including competition for skilled construction labor, challenges related to financing, and disruption in permitting and the supply chain for materials, and these circumstances could continue or worsen in the future. Accordingly, we cannot assure you that all of our development pipeline will result in new hotels entering our system, or that those hotels will open when we anticipate.

*Losses on loans or loan guarantees that we have made to third parties impact our profits.* At times, we make loans for hotel development, acquisition, or renovation expenditures when we enter into or amend management or franchise agreements. From time to time we also provide third-party lenders with financial guarantees for the timely repayment of all or a portion of debt related to hotels that we manage or franchise, generally subject to an obligation that the owner reimburse us for any fundings. We have suffered losses, and could suffer losses in the future, when hotel owners or franchisees default on loans that we provide or fail to reimburse us for loan guarantees that we have funded.

*If owners of hotels that we manage or franchise cannot repay or refinance mortgage loans secured by their properties, our revenues and profits could decrease and our business could be harmed.* The owners of many of our managed or franchised properties have pledged their hotels as collateral for mortgage loans that they entered into when those properties were purchased or refinanced. If those owners cannot repay or refinance maturing indebtedness on favorable terms or at all, the lenders could declare a default, accelerate the related debt, and foreclose on the property, or the owners could declare bankruptcy, as we have seen in the past and could see in the future. In some cases, such foreclosures or bankruptcies have in the past resulted, and could in the future result, in the termination of our management or franchise agreements, eliminating our anticipated income and cash flows, which could have a significant negative effect on our results of operations.

#### Technology, Information Protection, and Privacy Risks

*Any disruption in the functioning of our reservation, Loyalty Program, or other core operational systems could adversely affect our performance and results.* We manage global reservation and Loyalty Program systems or use third-party service providers' reservation systems that communicate reservation and transactional information to our properties from individuals who book reservations directly with us online, through our mobile apps, through our telephone call centers, or through intermediaries like travel agents, Internet travel websites, and other distribution channels. The cost, speed, accuracy, and efficiency of our reservation, Loyalty Program, and other core operational systems are critical aspects of our business and are important considerations for hotel owners when choosing our brands. Our business may suffer if we fail to maintain,

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upgrade, or prevent disruption to these systems. Disruptions in or changes to these systems could result in a disruption to our business and the loss of important data.

*A failure to keep pace with developments in technology could impair our operations or competitive position.* The lodging industry continues to demand the use of sophisticated technology and systems, including those used for our reservation, revenue management, property management, human resources and payroll systems, our Loyalty Program, and technologies we make available to our guests and for our associates. We are currently undertaking a multi-year initiative to upgrade certain of our core technologies and systems, as these and other technologies and systems described in this risk factor must be refined, updated, and/or replaced with more advanced systems on a regular basis. Our business could suffer if we cannot refine, update, and/or replace technologies and systems as quickly or effectively as our competitors, sufficiently in advance of obsolescence or performance failure or degradation, or within budgeted costs and time frames. We also may not achieve the benefits that we anticipate from any new or upgraded technology or system, and a failure to do so could result in higher than anticipated costs or lower guest satisfaction or could impair our operating results. Our business could also suffer if the use of technologies that provide alternatives to in-person meetings and events results in a decrease in demand for our lodging properties.

*We are exposed to risks and costs associated with protecting the integrity and security of Company, associate, and guest data.* In the operation of our business, we collect, store, use, and transmit large volumes of personal data regarding associates, guests, customers, owners, licensees, franchisees, and our own business operations, including credit card numbers, reservation and loyalty data, and other personal data, in various information systems that we maintain and in systems maintained by third parties, including those of our owners, franchisees, licensees, and service providers. The integrity and protection of this personal data is critical to our business. Our guests and associates also have a high expectation that we, as well as our owners, franchisees, licensees, and service providers, will adequately protect and appropriately use their personal data. The information, security, and privacy requirements imposed by global laws and governmental regulation, our contractual obligations, and the requirements of the payment card industry continue to become increasingly stringent in many jurisdictions in which we operate. Our systems and the systems maintained or used by our owners, franchisees, licensees, and service providers may not be able to satisfy these changing legal and regulatory requirements and associate and guest expectations, or may require significant additional investments or time to do so. We have incurred and may in the future incur significant additional costs to meet these requirements, obligations, and expectations, and in the event of alleged or actual noncompliance, we may experience increased operating costs, increased exposure to payment obligations and litigation, and increased risk of damage to our reputation and brand.

*The Data Security Incident, and other information security incidents, could have numerous adverse effects on our business.* As a result of the Data Security Incident, numerous lawsuits were filed against us, as described further in Note 7. We may be named as a party in additional lawsuits and other claims may be asserted by or on behalf of guests, customers, hotel owners, stockholders, or others seeking monetary damages or other relief related to the Data Security Incident. A number of federal, state, and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident, including under various data protection and privacy regulations. Responding to and resolving these lawsuits, claims, and/or investigations has resulted in payments and other expenses, such as the £18.4 million payment imposed by the Information Commissioner's Office in the United Kingdom (the 'ICO') in connection with the ICO's final decision issued in October 2020, and could result in material additional payments or remedial or other expenses. Other governmental authorities investigating or seeking information about the Data Security Incident have imposed and may further impose undertakings, injunctive relief, consent decrees, or other civil or criminal penalties, which could, among other things, materially increase our costs or otherwise require us to alter how we operate our business. Significant management time and Company resources have been, and will continue to be, devoted to matters related to the Data Security Incident. Future publicity or developments related to the Data Security Incident, including as a result of subsequent reports or regulatory actions or developments, could have a range of other adverse effects on our business or prospects, including causing or contributing to loss of consumer confidence, reduced consumer demand, reduced enrollment and/or participation in our Loyalty Program, and associate retention and recruiting difficulties. Insurance coverage designed to limit our exposure to losses such as those related to the Data Security Incident may not be sufficient or available to cover all of our expenses or other losses (including the final payment imposed by the ICO and any other payments, fines or penalties) related to the Data Security Incident, and certain expenses by their nature (such as, for example, expenses related to enhancing our cybersecurity program) are not covered by our insurance program.

*Additional cybersecurity incidents could have adverse effects on our business.* We have implemented enhanced security measures to safeguard our systems and data, and we intend to continue implementing additional measures in the future, but, as we have seen in the past, our measures may not be sufficient to maintain the confidentiality, security, or availability of the data we collect, store, and use to operate our business. Measures taken by our service providers or our owners, franchisees, licensees, other business partners or their service providers also may not be sufficient, as we have seen in the past. Efforts to hack or circumvent security measures, efforts to gain unauthorized access to, exploit or disrupt the operation or integrity of our data or systems, failures of systems or software to operate as designed or intended, viruses, 'ransomware' or other malware,

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“supply chain” attacks, “phishing” or other types of business communications compromises, operator error, or inadvertent releases of data have impacted, and may in the future impact, our information systems and records or those of our owners, franchisees, licensees, other business partners, or service providers. Our reliance on computer, Internet-based, and mobile systems and communications, and the frequency and sophistication of efforts by third parties to gain unauthorized access or prevent authorized access to such systems, have greatly increased in recent years. Our increased reliance on cloud-based services and on remote access to information systems increases the Company’s exposure to potential cybersecurity incidents. We have experienced cyberattacks, attempts to disrupt access to our systems and data, and attempts to affect the operation or integrity of our data or systems, and the frequency and sophistication of such efforts could continue to increase. Any additional significant theft of, unauthorized access to, compromise or loss of, loss of access to, or fraudulent use of guest, associate, owner, franchisee, licensee, or Company data could adversely impact our reputation and could result in legal, regulatory and other consequences, including remedial and other expenses, fines, or litigation. Depending on the nature and scope of the event, future compromises in the security of our information systems or those of our owners, franchisees, licensees, other business partners, or service providers or other future disruptions or compromises of data or systems could lead to future interruptions in, or other adverse effects on, the operation of our systems or those of our owners, franchisees, licensees, other business partners, or service providers. This could result in operational interruptions and/or outages and a loss of profits, as well as negative publicity and other adverse effects on our business, including lost sales, loss of consumer confidence, boycotts, reduced enrollment and/or participation in our Loyalty Program, litigation, diminished associate satisfaction, and/or retention and recruiting difficulties, all of which could materially affect our market share, reputation, business, financial condition, or results of operations.

Because we have experienced cybersecurity incidents in the past, additional incidents or the failure to detect and appropriately respond to additional incidents could magnify the severity of the adverse effects on our business. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage information systems change frequently, can be difficult to detect for long periods of time, and can involve difficult or prolonged assessment or remediation periods even once detected, which could also magnify the severity of these adverse effects. We cannot assure you that all potential causes of past significant incidents have been identified and remediated; additional measures may be needed to prevent significant incidents in the future. The steps we take may not be sufficient to prevent future significant incidents and as a result, such incidents may occur again. Although we carry cyber insurance that is designed to protect us against certain losses related to cyber risks, that insurance coverage may not be sufficient or available to cover all expenses or other losses (including payments to regulatory authorities) or all types of claims that may arise in connection with cyberattacks, security compromises, and other related incidents. Furthermore, in the future such insurance may not be available on commercially reasonable terms, or at all.

*Changes in privacy and data security laws could increase our operating costs and increase our exposure to payment obligations and litigation.* We are subject to numerous, complex, and frequently changing laws, regulations, and contractual obligations designed to protect personal information. Various U.S. federal and state laws, data privacy and data security laws outside of the U.S., payment card industry security standards, and other information privacy and security standards are all applicable to us. Significant legislative, judicial, or regulatory changes have been and could be issued in the future. Compliance with changes in applicable data security and privacy laws and regulations and contractual obligations, including the need to respond to investigations into our compliance, has increased and may in the future increase our costs, and may restrict our business operations, increase our exposure to payment obligations and litigation in the event of alleged noncompliance, and adversely affect our reputation.

*Changes in laws could adversely affect our ability to market our products effectively.* We rely on a variety of direct marketing techniques, including email marketing, online advertising (including through social media), and postal mailings. Any further legal restrictions under various U.S. federal, state, or international laws, or new international, federal, or state laws on marketing and solicitation or international privacy, e-privacy, and anti-spam laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising (including through social media), and postal mailing techniques and could require changes in our marketing strategy. If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of our sales of certain products. We also obtain access to potential guests and customers from travel service providers or other companies with whom we have substantial relationships, and we market to some individuals on these lists directly or by including our marketing message in the other companies’ marketing materials. If access to these lists were to be prohibited or otherwise restricted, our ability to develop new guests and customers and introduce them to our products could be impaired.

#### Governance Risk

*Delaware law and our governing corporate documents contain, and our Board of Directors could implement, anti-takeover provisions that could deter takeover attempts.* Under the Delaware business combination statute, a stockholder holding 15 percent or more of our outstanding voting stock could not acquire us without Board of Directors’ consent for at least three years after the date the stockholder first held 15 percent or more of the voting stock. Our governing corporate documents

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also, among other things, require supermajority votes for mergers and similar transactions. In addition, our Board of Directors could, without stockholder approval, implement other anti-takeover defenses, such as a stockholder rights plan.

#### **Item 1B. Unresolved Staff Comments.**

None.

#### **Item 2. Properties.**

Under our asset-light business model, we typically manage or franchise hotels and other lodging offerings, rather than own them. As of December 31, 2022, we owned or leased 26 hotels in U.S. & Canada and 38 hotels in International. Additionally, most of our regional offices, customer care and reservation centers, and sales offices, as well as our corporate headquarters, are in leased facilities. See Part I, Item 1, “Business,” earlier in this report, and the “Properties and Rooms” caption in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information about our company-operated properties.

#### **Item 3. Legal Proceedings.**

See the information under the “Litigation, Claims, and Government Investigations” caption in Note 7, which we incorporate here by reference. Within this section, we use a threshold of $1 million in disclosing material environmental proceedings involving a governmental authority, if any.

From time to time, we are also subject to other legal proceedings and claims in the ordinary course of business, including adjustments proposed during governmental examinations of the various tax returns we file. While management presently believes that the ultimate outcome of these other proceedings, individually and in aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are inherently uncertain, and unfavorable rulings could, individually or in aggregate, have a material adverse effect on our business, financial condition, or operating results.

#### **Item 4. Mine Safety Disclosures.**

Not applicable.

#### **Information about our Executive Officers**

See the information under “Information about our Executive Officers” in Part III, Item 10 of this report for information about our executive officers, which we incorporate here by reference.

### **PART II**

#### **Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.**

#### **Market Information**

At February 7, 2023, 308,121,159 shares of our Class A Common Stock (our “common stock”) were outstanding and were held by 32,128 stockholders of record. Our common stock trades on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbol MAR.

#### **Fourth Quarter 2022 Issuer Purchases of Equity Securities**

*(in millions, except per share amounts)*

| Period | Total Number of Shares Purchased | Average Price per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1) |
| --- | --- | --- | --- | --- |
| October 1, 2022 - October 31, 2022 | 3.0 | $149.16 | 3.0 | 6.3 |
| November 1, 2022 - November 30, 2022 | 2.8 | $159.06 | 2.8 | 28.5 |
| December 1, 2022 - December 31, 2022 | 2.9 | $155.66 | 2.9 | 25.6 |

$^{(1)}$ On February 28, 2019, we announced that our Board of Directors increased our common stock repurchase authorization by 25 million shares. In addition, on November 10, 2022, we announced that our Board of Directors further increased our common stock repurchase authorization by 25 million shares. At year-end 2022, 25.6 million shares remained available for repurchase under Board approved authorizations. We repurchase shares in the open market and in privately negotiated transactions and account for these shares as treasury stock.

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# **Item 6. Reserved.**

# **Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.**

*A discussion regarding our financial condition and results of operations for year-end 2021 compared to year-end 2020 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 15, 2022 (“2021 Form 10-K”).*

# **BUSINESS AND OVERVIEW**

# *Overview*

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties in 138 countries and territories under 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.

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

# *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 (including rooms in hotels temporarily closed due to issues related to COVID-19), measures the utilization of a property’s available capacity. ADR, which we calculate by dividing property room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels. RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated. Comparisons to prior periods are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

We define our comparable properties as our properties that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 2021 for the current period) and have not, in either the current or previous year: (1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption, with the exception of properties closed or otherwise experiencing interruptions related to COVID-19, which we continue to classify as comparable. For 2022 compared to 2021, we had 5,123 comparable U.S. & Canada properties and 1,548 comparable International properties. RevPAR, occupancy, and ADR comparisons between 2022 and 2019, which we discuss under the “Business Trends” caption below, reflect properties that are defined as comparable as of December 31, 2022, September 30, 2022, June 30, 2022, or March 31, 2022 (as applicable), even if in 2019 they were not open and operating for the full year or did not meet all the other criteria listed above. Unless otherwise stated, all comparisons to pre-pandemic or 2019 are comparing to the same time period each year.

# *Business Trends*

We continued to see strong global RevPAR improvement throughout 2022 despite Greater China continuing to be significantly negatively impacted by COVID-19 through the end of the 2022 fourth quarter. While RevPAR recovery at the beginning of 2022 was dampened due to the emergence of COVID-19 variants, RevPAR quickly improved, resulting in 2022 third quarter worldwide RevPAR exceeding 2019 levels for the first time since the pandemic began. By the 2022 fourth quarter,

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worldwide RevPAR exceeded 2019 levels by 4.6 percent, reflecting ADR growth of 12.8 percent, partially offset by a decline in occupancy of 5.1 percentage points compared to 2019 levels. The global recovery continued across all customer segments, led by robust leisure demand as well as strengthening group demand, which was higher than 2019 levels in certain regions during the 2022 fourth quarter. Business transient demand also continued to improve during 2022, although it continued to lag behind 2019 levels.

RevPAR in 2022 compared to 2021 improved 46.5 percent in our U.S. & Canada segment, 66.2 percent in our International segment, and 51.0 percent worldwide. RevPAR in 2022 compared to pre-pandemic 2019 levels declined 4.0 percent worldwide, with improvement in the decline each succeeding quarter during 2022 for each of our segments and worldwide.

In the U.S. & Canada, RevPAR declined only 0.8 percent in 2022 compared to 2019, due to a decline in occupancy of 6.0 percentage points, partially offset by ADR growth of 8.1 percent. In the 2022 fourth quarter, U.S. & Canada RevPAR improved 5.2 percent compared to the same period in 2019, due to ADR growth of 11.1 percent, partially offset by a decline in occupancy of 3.7 percentage points. The decline in occupancy as compared to 2019 improved sequentially in each quarter of 2022, reflecting strong demand recovery in many markets within the U.S. & Canada.

Internationally, RevPAR declined 11.9 percent in 2022 compared to 2019, due to a decline in occupancy of 12.2 percentage points, partially offset by ADR growth of 7.0 percent. In the 2022 fourth quarter, International RevPAR improved 3.4 percent compared to the same period in 2019, due to ADR growth of 17.3 percent, partially offset by a decline in occupancy of 8.3 percentage points. In the 2022 fourth quarter, RevPAR remained significantly below 2019 levels in Greater China, but exceeded pre-pandemic 2019 levels in the Caribbean & Latin America, Europe, Middle East & Africa, and Asia Pacific excluding China regions, driven by strengthening demand, especially from cross-border guests and meaningful growth in ADR.

Although COVID-19's negative impact on our business has significantly decreased and we saw strong global RevPAR improvement in 2022, 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 7 for additional information related to legal proceedings and governmental investigations related to the Data Security Incident.

#### *System Growth and Pipeline*

In 2022, our system grew from 7,989 properties (1,479,179 rooms) at year-end 2021 to 8,288 properties (1,525,407 rooms) at year-end 2022, reflecting gross additions of 394 properties (65,376 rooms) and deletions of 94 properties (19,079 rooms), including the impact of the Company's decision to suspend its operations in Russia. Approximately 61 percent of our 2022 gross room additions were located outside U.S. & Canada, and 27 percent were conversions from competitor brands.

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At year-end 2022, we had more than 496,000 hotel rooms in our development pipeline, which includes approximately 199,000 hotel rooms under construction and roughly 22,300 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. In 2022, we signed 726 new management and franchise agreements, representing nearly 108,000 rooms, of which approximately half of the rooms are located outside U.S. & Canada. Our Select hotel brands continued to be a key growth driver globally with 523 hotel properties signed during 2022. In particular, our longer stay brands, which include Element Hotels, Residence Inn, and TownePlace Suites, accounted for 30 percent of the Company's signings in 2022. In addition, contracts signed in 2022 reflected the Company's strength in the luxury tier, with 42 luxury hotel agreements signed, representing nearly 8,000 rooms. Conversions accounted for nearly 20 percent of rooms signings in 2022.

In 2023, we expect total gross rooms growth of approximately 5.5 percent and net rooms growth of 4.0 to 4.5 percent, including approximately 1.1 percent from the anticipated addition of rooms associated with the City Express brand acquisition discussed in Note 3, which are not reflected in the development pipeline discussed above.

## Properties and Rooms

At year-end 2022, we operated, franchised, and licensed the following properties and rooms:

|  | Managed |  | Franchised/Licensed |  | Owned/Leased |  | Residential |  | Total |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Properties | Rooms | Properties | Rooms | Properties | Rooms | Properties | Rooms | Properties | Rooms |
| U.S. & Canada | 632 | 215,331 | 5,121 | 735,470 | 26 | 6,483 | 67 | 7,128 | 5,846 | 964,412 |
| International | 1,357 | 345,220 | 907 | 179,319 | 38 | 9,209 | 46 | 4,353 | 2,348 | 538,101 |
| Timeshare | - | - | 93 | 22,745 | - | - | - | - | 93 | 22,745 |
| Yacht | - | - | 1 | 149 | - | - | - | - | 1 | 149 |
| Total | 1,989 | 560,551 | 6,122 | 937,683 | 64 | 15,692 | 113 | 11,481 | 8,288 | 1,525,407 |

## Lodging Statistics

The following tables present RevPAR, occupancy, and ADR statistics for comparable properties for 2022, and 2022 compared to 2021. Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.

|  | RevPAR |  | Occupancy |  | Average Daily Rate |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | vs. 2021 | 2022 | vs. 2021 | 2022 | vs. 2021 |
| Comparable Company-Operated Properties |  |  |  |  |  |  |
| U.S. & Canada | $159.06 | 67.0% | 65.3% | 17.9 % pts. | $243.73 | 21.3% |
| Greater China | $53.22 | (18.5)% | 47.5% | (8.0)% pts. | $112.14 | (4.8)% |
| Asia Pacific excluding China | $84.41 | 122.5% | 59.2% | 23.1 % pts. | $142.60 | 35.8% |
| Caribbean & Latin America | $126.55 | 67.0% | 60.8% | 17.7 % pts. | $208.17 | 18.4% |
| Europe | $153.51 | 148.3% | 63.5% | 30.3 % pts. | $241.65 | 29.9% |
| Middle East & Africa | $124.63 | 52.8% | 64.7% | 13.1 % pts. | $192.54 | 22.0% |
| International - All (1) | $94.64 | 55.5% | 57.0% | 11.7 % pts. | $166.06 | 23.4% |
| Worldwide (2) | $123.30 | 61.9% | 60.7% | 14.5 % pts. | $203.23 | 23.3% |
| Comparable Systemwide Properties |  |  |  |  |  |  |
| U.S. & Canada | $118.97 | 46.5% | 67.0% | 11.6 % pts. | $177.47 | 21.1% |
| Greater China | $51.38 | (16.6)% | 46.8% | (7.2)% pts. | $109.71 | (3.9)% |
| Asia Pacific excluding China | $83.87 | 111.8% | 59.3% | 22.2 % pts. | $141.47 | 32.5% |
| Caribbean & Latin America | $105.26 | 72.3% | 58.0% | 17.1 % pts. | $181.42 | 21.6% |
| Europe | $121.38 | 146.2% | 61.1% | 29.8 % pts. | $198.67 | 25.9% |
| Middle East & Africa | $116.91 | 55.8% | 64.2% | 13.3 % pts. | $182.07 | 23.5% |
| International - All (1) | $91.30 | 66.2% | 57.0% | 14.6 % pts. | $160.21 | 23.7% |
| Worldwide (2) | $110.64 | 51.0% | 64.0% | 12.5 % pts. | $172.85 | 21.5% |

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

$^{(2)}$ Includes U.S. & Canada and International - All.

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## CONSOLIDATED RESULTS

Our consolidated results in 2022 improved significantly compared to 2021 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 2022 compared to 2021.

### Fee Revenues

| ($ in millions) | 2022 | 2021 | Change 2022 vs. 2021 |  |
| --- | --- | --- | --- | --- |
| Base management fees | $1,044 | $669 | $375 | 56% |
| Franchise fees | 2,505 | 1,790 | 715 | 40% |
| Incentive management fees | 529 | 235 | 294 | 125% |
| Gross fee revenues | 4,078 | 2,694 | 1,384 | 51% |
| Contract investment amortization | (89) | (75) | (14) | (19)% |
| Net fee revenues | $3,989 | $2,619 | $1,370 | 52% |

The increase in base management fees primarily reflected higher RevPAR and unit growth, partially offset by net unfavorable foreign exchange rates ($25 million).

The increase in franchise fees primarily reflected higher RevPAR, higher co-branded credit card fees ($119 million) and unit growth ($109 million), partially offset by net unfavorable foreign exchange rates ($17 million).

The increase in incentive management fees primarily reflected higher profits at certain managed hotels and unit growth, partially offset by net unfavorable foreign exchange rates ($16 million). In 2022, we earned incentive management fees from 61 percent of our managed properties worldwide, compared to 47 percent in 2021. We earned incentive management fees from 29 percent of our U.S. & Canada managed properties and 76 percent of our International managed properties in 2022, compared to 13 percent in U.S. & Canada and 63 percent in International in 2021. In addition, 58 percent of our total incentive management fees in 2022 came from our International managed properties versus 71 percent in 2021.

### Owned, Leased, and Other

| ($ in millions) | 2022 | 2021 | Change 2022 vs. 2021 |  |
| --- | --- | --- | --- | --- |
| Owned, leased, and other revenue | $1,367 | $796 | $571 | 72% |
| Owned, leased, and other - direct expenses | 1,074 | 734 | 340 | 46% |
| Owned, leased, and other, net | $293 | $62 | $231 | 373% |

Owned, leased, and other revenue, net of direct expenses, increased primarily due to net stronger results at our owned and leased properties, partially offset by an estimated monetary payment related to a portfolio of 12 leased hotels in the U.S. & Canada ($31 million) and lower termination fees ($18 million).

### Cost Reimbursements

| ($ in millions) | 2022 | 2021 | Change 2022 vs. 2021 |  |
| --- | --- | --- | --- | --- |
| Cost reimbursement revenue | $15,417 | $10,442 | $4,975 | 48% |
| Reimbursed expenses | 15,141 | 10,322 | 4,819 | 47% |
| Cost reimbursements, net | $276 | $120 | $156 | 130% |

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. See Note 2 for more information about the accounting for cost reimbursements, including our Loyalty Program.

The increase in cost reimbursements, net primarily reflects higher revenues, net of expenses, for our centralized programs and services as well as our insurance program.

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## Other Operating Expenses

| ($ in millions) | 2022 | 2021 | Change 2022 vs. 2021 |  |
| --- | --- | --- | --- | --- |
| Depreciation, amortization, and other | $193 | $220 | $(27) | (12)% |
| General, administrative, and other | 891 | 823 | 68 | 8% |
| Restructuring, merger-related charges, and other | 12 | 8 | 4 | 50% |

Depreciation, amortization, and other expenses decreased primarily due to lower impairment charges.

General, administrative, and other expenses increased primarily due to higher administrative and compensation costs.

## Non-Operating Income (Expense)

| ($ in millions) | 2022 | 2021 | Change 2022 vs. 2021 |  |
| --- | --- | --- | --- | --- |
| Gains and other income, net | $11 | $10 | $1 | 10% |
| Loss on extinguishment of debt | - | (164) | 164 | 100% |
| Interest expense | (403) | (420) | 17 | 4% |
| Interest income | 26 | 28 | (2) | (7)% |
| Equity in earnings (losses) | 18 | (24) | 42 | 175% |

The loss on extinguishment of debt in 2021 was due to the September 2021 tender offer in which we purchased and retired $1 billion aggregate principal amount of our 5.750 percent Series EE Notes maturing May 1, 2025.

Interest expense decreased primarily due to lower average debt balances driven by Senior Notes maturities and repurchases.

Equity in earnings (losses) changed, primarily due to our share of the gains on the sales of properties ($23 million) and higher profits related to our equity method investments.

## Income Taxes

| ($ in millions) | 2022 | 2021 | Change 2022 vs. 2021 |  |
| --- | --- | --- | --- | --- |
| (Provision) benefit for income taxes | $(756) | $(81) | $(675) | (833)% |

Our tax provision increased in 2022, compared to our tax provision in 2021, primarily due to the increase in operating income ($422 million), the prior year release of tax reserves due to favorable audit resolutions ($143 million), the prior year tax benefit from the loss on extinguishment of debt ($42 million), and the current year tax expense from the completion of prior years' tax audits ($27 million).

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## BUSINESS SEGMENTS

Our segment results in 2022 improved significantly compared to 2021 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.

| ($ in millions) | 2022 | 2021 | Change 2022 vs. 2021 |  |
| --- | --- | --- | --- | --- |
| U.S. & Canada |  |  |  |  |
| Segment revenues | $15,753 | $10,356 | $5,397 | 52% |
| Segment profit | 2,446 | 1,394 | 1,052 | 75% |
| International |  |  |  |  |
| Segment revenues | 3,486 | 2,254 | 1,232 | 55% |
| Segment profit | 794 | 258 | 536 | 208% |

|  | Properties |  |  | Rooms |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | December 31, 2022 | December 31, 2021 | vs. December 31, 2021 | December 31, 2022 | December 31, 2021 | vs. December 31, 2021 |
| U.S. & Canada | 5,846 | 5,712 | 134 2% | 964,412 | 945,987 | 18,425 2% |
| International | 2,348 | 2,185 | 163 7% | 538,101 | 510,491 | 27,610 5% |

### U.S. & Canada

U.S. & Canada segment profit increased primarily due to the following:

- $906 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy, higher profits at certain managed hotels, and unit growth;
- $83 million of higher cost reimbursement revenue, net of reimbursed expenses; and
- $62 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at owned and leased properties, partially offset by an estimated monetary payment related to a portfolio of 12 leased hotels in U.S. & Canada ($31 million);

partially offset by:

- $23 million of higher general, administrative, and other expenses, primarily reflecting a favorable litigation settlement in 2021 ($18 million).

### International

International segment profit increased primarily due to the following:

- $349 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in all regions except Greater China, higher profits at certain managed hotels, and unit growth, partially offset by net unfavorable foreign exchange rates ($56 million);
- $141 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting net stronger results at owned and leased properties, partially offset by lower termination fees ($16 million); and
- $35 million of higher cost reimbursement revenue, net of reimbursed expenses;

partially offset by:

- $28 million of higher general, administrative, and other expenses, primarily reflecting higher compensation costs.

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