10-KPeriod: FY2018

MARRIOTT INTERNATIONAL INC /MD/ Annual Report, Year Ended Dec 31, 2018

Filed March 1, 2019For Securities:MAR

Summary

Marriott International, Inc. (MAR) reported its 2018 full-year results, reflecting growth driven by an increasing number of properties in its system and generally favorable economic conditions. The company's "asset-light" business model, focused on management and franchising, continued to drive growth with minimal capital investment. A significant event impacting the company was the Starwood Hotels & Resorts Worldwide acquisition, which is largely integrated, though the report notes ongoing integration challenges and the potential for unrealized benefits. A major concern highlighted is the November 2018 data security incident affecting the Starwood reservations database, which involved unauthorized access to a large volume of guest data. While Marriott stated it had not seen a meaningful impact on demand from this incident, it anticipates significant future expenses related to legal proceedings, regulatory investigations, and enhanced IT security. The company also reported a material weakness in its internal control over financial reporting related to its loyalty program, which is being remediated.

Financial Statements
Beta
Revenue$20.76B
Operating Expenses$18.39B
Operating Income$2.37B
Interest Expense$340.00M
Net Income$1.91B
EPS (Basic)$5.45
EPS (Diluted)$5.38
Shares Outstanding (Basic)350.10M
Shares Outstanding (Diluted)354.20M

Key Highlights

  • 1Marriott International reported systemwide comparable RevPAR growth of 2.6% for 2018, indicating a positive trend in room revenues.
  • 2The company added 494 new properties with over 80,000 rooms in 2018, and its development pipeline reached a record 478,000 rooms, highlighting strong future growth potential.
  • 3The integration of Starwood Hotels & Resorts Worldwide is largely complete, contributing to expanded brand portfolio and global reach, although some integration challenges persist.
  • 4A significant data security incident impacting the Starwood reservations database was disclosed, involving unauthorized access to sensitive guest information, leading to ongoing investigations and potential future costs.
  • 5Marriott identified a material weakness in its internal controls related to the accounting for its loyalty program, prompting remediation efforts to enhance its financial reporting processes.
  • 6Fee revenues (base management, franchise, and incentive management fees) increased by 10% in 2018, demonstrating the effectiveness of the company's core management and franchising business model.
  • 7The company continued its share repurchase program, buying back 21.5 million shares in 2018, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

The acquisition of Starwood, completed in September 2016, is largely integrated by 2018. While the report notes that the integration has expanded Marriott's brand portfolio and global reach, it also mentions ongoing challenges in harmonizing systems and processes, and the possibility that some anticipated benefits may not be fully realized. The results for 2018 include the full year's operations of the combined entity.

Marriott had approximately $9.35 billion in long-term debt at the end of 2018. The company has a $4 billion revolving credit facility and believes its credit facility, access to capital markets, and operational cash flow are adequate to meet its liquidity needs, finance growth plans, and service its debt.

Marriott announced a data security incident involving unauthorized access to the Starwood reservations database, affecting approximately 383 million guest records with potential exposure of names, contact information, passport numbers, and payment card details. While the company stated it had not seen a meaningful impact on demand to date, it anticipates significant future expenses related to legal proceedings, regulatory investigations, and enhanced IT security measures. The company is also offering guest protection services and is cooperating with authorities.

Marriott identified a material weakness in its internal control over financial reporting concerning its guest loyalty program. This was due to insufficient resources with the necessary expertise to evaluate and account for the program under new accounting standards, and disruptions from the integration of the Starwood and Marriott loyalty programs. The company is implementing a remediation plan that includes increasing dedicated personnel, improving reporting processes, and enhancing technology to address these control deficiencies.