What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-04 · 152 added, 91 removed, 177 unchanged (58% of the section changed)

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our capital expenditures and other investment spending expectations;

the timing of future dividends and share repurchases;

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;

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(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.

The RevPAR, ADR, and occupancy comparisons between 2022 or 2021 and 2019, which we discuss under the “Impact of COVID-19” caption below, reflect properties that are defined as comparable as of March 31, 2022 or December 31, 2021, respectively, even if in 2019 they were not open and operating for the full year or did not meet all the other criteria listed above.

The RevPAR, ADR, and occupancy comparisons between 2022 and 2019, which we discuss under the “Impact of COVID-19” caption below, reflect properties that are defined as comparable as of June 30, 2022, even if in 2019 they were not open and operating for the full year or did not meet all the other criteria listed above.

Impact of COVID-19

While COVID-19 continues to have a material impact on our business and industry, global demand surged during the latter part of the 2022 first quarter in every region except Greater China, after the emergence of the COVID-19 Omicron variant dampened demand globally early in the year.

In March 2022, worldwide RevPAR was only 9.4 percent below March 2019, with occupancy reaching 63.6 percent and ADR exceeding 2019 levels by 4.6 percent.

The global recovery continues to be led by robust leisure demand, which we expect to continue throughout 2022, and travelers who continue to embrace multi-purpose trips, mixing remote work and vacation time.

The decline in business transient and group demand from pre-pandemic 2019 levels improved meaningfully during the latter part of the 2022 first quarter when compared to the 2021 fourth quarter, though this demand continues to lag in recovery.

We have been encouraged by the strength of ADR, which was at or above pre-pandemic 2019 levels in certain U.S.

and International markets during the 2022 first quarter, and we are optimistic about sustaining strong ADR throughout 2022.

RevPAR in the 2022 first quarter compared to the 2021 first quarter improved 99.1 percent in our U.S.

While COVID-19 continues to negatively impact our business and industry, we continued to see strong global RevPAR improvement in the 2022 second quarter, with worldwide RevPAR only 2.9 percent below the 2019 second quarter, driven by ADR growth of 7.2 percent compared to the 2019 second quarter and occupancy of 68 percent.

In the 2022 first half, we saw consecutive worldwide RevPAR improvements each month compared to 2019, and in June 2022, monthly worldwide RevPAR surpassed 2019 for the first time since the pandemic began.

The global recovery continued across all customer segments, led by robust leisure demand and significant improvement in group demand during the quarter.

In addition, business transient demand continued to increase, though more moderately, and we also continued to see more trips that appear to combine leisure and business.

RevPAR in the 2022 second quarter compared to the 2021 second quarter improved 66.1 percent in our U.S.

& Canada segment, 87.8 percent in our International segment, and 70.6 percent worldwide.

RevPAR in the 2022 first quarter compared to pre-pandemic 2019 first quarter levels declined 14.5 percent in our U.S.

RevPAR in the 2022 first half compared to the 2021 first half increased 78.6 percent in our U.S.

& Canada segment, 87.1 percent in our International segment, and 80.5 percent worldwide.

Compared to the 2019 first quarter, 2022 first quarter worldwide occupancy was down 13.6 percentage points, while worldwide ADR was higher by 0.8 percent.

& Canada, the COVID-19 Omicron variant dampened demand at the beginning of the quarter, though occupancy quickly improved, resulting in our U.S.

& Canada RevPAR in March 2022 being down only 3.9 percent when compared to March 2019 levels.

Leisure demand continued to be strong during the 2022 first quarter, particularly at our luxury and resort hotels and in tertiary markets.

In urban destinations, where we have a large presence in the U.S.

& Canada, the decline in demand compared to 2019 levels improved by the end of the 2022 first quarter when compared to the decline seen in the 2021 fourth quarter, though these destinations continue to lag in recovery.

In other parts of the world, RevPAR continues to vary greatly by geographic market, and demand is heavily impacted by the number of COVID-19 cases, vaccination rates, and the nature and degree of government restrictions.

& Canada, compared to pre-pandemic 2019 levels, RevPAR improved 1.3 percent in the 2022 second quarter and declined 6.1 percent in the 2022 first half.

RevPAR growth in the 2022 second quarter compared to 2019 was driven by strong ADR, which exceeded the 2019 second quarter by 8 percent.

Internationally, compared to pre-pandemic 2019 levels, RevPAR declined 14.1 percent in the 2022 second quarter and declined 22.9 percent in the 2022 first half.

RevPAR in the 2022 second quarter reflected the lifting of travel restrictions in many countries and the resulting increase in cross-border travel, although RevPAR remained constrained in Greater China and Asia Pacific excluding China.

We continue to take measures to mitigate the negative financial and operational impacts of COVID-19 for our hotel owners and our own business.

At the property level, we continue to work with owners and franchisees by adjusting renovation requirements for certain properties and supporting owners and franchisees who are working with their lenders to utilize FF&E reserves to meet working capital needs.

At the property level, we continue to work with owners and franchisees by adjusting renovation requirements for certain properties.

At the corporate level, we remain focused on managing our corporate general and administrative costs and are being disciplined with respect to our capital expenditures and other investment spending.

As a result of our focus on maximizing cash flow, managing expenses, and improving our credit profile, combined with our strong 2022 first quarter results, we are resuming a cash dividend sooner than anticipated.

On May 2, 2022, our Board of Directors declared a $0.30 per share quarterly cash dividend payable during the 2022 second quarter.

Assuming the global demand environment continues to improve and we are within our target leverage ratio range, we also would expect to resume share repurchases in 2022.

As lodging demand recovers from the lows seen in the early months of the pandemic, we have seen and continue to see industry-wide labor shortages causing challenges in hiring or re-hiring for certain positions,

primarily in certain U.S.

markets where demand has come back quickly.

As lodging demand continues to recover from the lows seen in the early months of the pandemic, we have seen and continue to see industry-wide labor shortages causing challenges in hiring or re-hiring for certain positions, primarily in certain U.S.

In response, we have enhanced our recruitment and retention efforts and increased compensation where needed to maintain competitiveness.

The impact of COVID-19 on the Company remains fluid, as does our corporate and property-level response.

We believe COVID-19 will continue to have a material negative impact on our future results for a period of time that we are currently unable to predict.

We believe COVID-19 will continue to have a negative impact on our future results for a period of time that we are currently unable to predict.

The overall operational and financial impact is highly dependent on the risk factors disclosed under the heading “Risks Relating to COVID-19” in Part I, Item 1A, “Risk Factors,” of our 2021 Form 10-K and could be affected by other factors we are not currently able to predict.

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The Starwood reservations database is no longer used for busi ness operations.

We are currently unable to estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already incurred.

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 incurred.

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 fines and penalties) related to the Data Security Incident.

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, primarily related to legal proceedings and regulatory investigations (including possible additional fines and penalties), increased expenses and capital investments for information technology and information security and data privacy, and increased expenses for compliance activities and to meet increased legal and regulatory requirements.

We expect to incur significant expenses associated with the Data Security Incident in future periods, primarily related to legal proceedings and regulatory investigations (including possible additional monetary payments to regulators and/or litigants), increased expenses and capital investments for information technology and information security and data privacy, and increased expenses for compliance activities and to meet increased legal and regulatory requirements.

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 2022 first quarter, our system had 8,048 properties (1,487,681 rooms), compared to 7,989 properties (1,479,179 rooms) at year-end 2021 and 7,662 properties (1,429,171 rooms) at the end of the 2021 first quarter.

At the end of the 2022 second quarter, our system had 8,120 properties (1,500,744 rooms), compared to 7,989 properties (1,479,179 rooms) at year-end 2021 and 7,797 properties (1,451,609 rooms) at the end of the 2021 second quarter.

The increase compared to year-end 2021 reflects gross additions of 172 properties (28,716 rooms) and deletions of 41 properties (7,155 rooms).

Approximately 22 percent of our 2022 first quarter gross room additions were conversions from competitor brands.

We expect full-year 2022 total gross rooms growth to approach 5.0 percent and net rooms growth of 3.5 to 4.0 percent.

At the end of the 2022 first quarter, we had more than 489,000 rooms in our development pipeline, which includes approximately 201,400 hotel rooms under construction and roughly 20,800 hotel rooms approved for development but not yet under signed contracts.

Approximately 24 percent of our 2022 first half gross room additions were conversions from competitor brands.

We currently expect full-year 2022 total gross rooms growth to approach 5.0 percent and net rooms growth of 3.0 to 3.5 percent, which includes the impact of the Company’s decision to suspend its operations in Russia.

At the end of the 2022 second quarter, we had more than 495,000 hotel rooms in our development pipeline, which includes approximately 203,300 hotel rooms under construction and roughly 27,400 hotel rooms approved for development but not yet subject to signed contracts.

Over half of the rooms in our development pipeline are outside U.S.

Properties and Rooms

At March 31, 2022, we operated, franchised, and licensed the following properties and rooms:

At June 30, 2022, we operated, franchised, and licensed the following properties and rooms:

Managed Franchised/Licensed Owned/Leased Residential Total

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Lodging Statistics

The following table presents RevPAR, occupancy, and ADR statistics for comparable properties.

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 March 31, 2022 and Change vs.

Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 and Change vs.

Three Months Ended June 30, 2021

RevPAR Occupancy Average Daily Rate

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$ 175.99 28.6 %

Six Months Ended June 30, 2022 and Change vs.

Six Months Ended June 30, 2021

RevPAR Occupancy Average Daily Rate

2021 2022 vs.

Comparable Company-Operated Properties

& Canada $ 154.77 124.5 % 63.1 % 26.0 % pts.

$ 245.11 32.1 %

Greater China $ 48.79 (29.4) % 42.6 % (13.8) % pts.

$ 114.47 (6.6) %

Asia Pacific excluding China $ 68.62 109.4 % 51.8 % 20.4 % pts.

$ 132.45 26.9 %

Caribbean & Latin America $ 128.74 109.3 % 59.2 % 23.7 % pts.

$ 217.38 25.6 %

Europe $ 123.50 370.5 % 56.3 % 38.4 % pts.

$ 219.54 49.1 %

Middle East & Africa $ 117.34 78.9 % 63.2 % 19.0 % pts.

$ 185.75 25.1 %

International - All (1)

$ 84.82 68.1 % 52.2 % 13.0 % pts.

$ 162.48 26.2 %

Worldwide (2)

$ 116.23 97.8 % 57.1 % 18.8 % pts.

$ 203.50 32.5 %

Comparable Systemwide Properties

& Canada $ 114.31 78.6 % 65.2 % 16.7 % pts.

$ 175.20 33.0 %

Greater China $ 46.57 (28.4) % 41.7 % (13.3) % pts.

$ 111.73 (5.5) %

Asia Pacific excluding China $ 68.61 104.3 % 52.1 % 20.2 % pts.

$ 131.79 24.9 %

Caribbean & Latin America $ 104.65 119.2 % 56.4 % 22.7 % pts.

$ 185.63 30.8 %

Europe $ 99.99 368.1 % 53.4 % 37.0 % pts.

$ 187.41 43.8 %

Middle East & Africa $ 109.21 81.4 % 62.3 % 19.3 % pts.

$ 175.32 25.3 %

International - All (1)

$ 80.95 87.1 % 51.8 % 16.6 % pts.

$ 156.40 27.2 %

Worldwide (2)

$ 104.33 80.5 % 61.2 % 16.6 % pts.

$ 170.45 31.5 %

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

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CONSOLIDATED RESULTS

Our results in the 2022 first quarter continued to be impacted by COVID-19.

See the “Impact of COVID-19” section above for more information about the impact to our business during the 2022 first quarter, and the discussion below for additional analysis of our consolidated results of operations for the 2022 first quarter compared to the 2021 first quarter.

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021 Change

Our results in the 2022 second quarter and 2022 first half continued to be impacted by COVID-19.

See the “Impact of COVID-19” section above for more information about the impact to our business during the 2022 second quarter and 2022 first half, and the discussion below for additional analysis of our consolidated results of operations for the 2022 second quarter compared to the 2021 second quarter and for the 2022 first half compared to the 2021 first half.

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 Change

2021 June 30, 2022 June 30, 2021 Change

Base management fees $ 269 $ 156 $ 113 72 % $ 482 $ 262 $ 220 84 %

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Net fee revenues $ 1,054 $ 624 $ 430 69 % $ 1,845 $ 1,052 $ 793 75 %

The increase in base management fees in the 2022 first quarter primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19.

The increase in franchise fees in the 2022 first quarter primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19, higher co-brand credit card fees ($36 million), and unit growth ($25 million).

The increase in incentive management fees in the 2022 first quarter primarily reflected higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19.

The increases in base management fees in the 2022 second quarter and 2022 first half primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19.

The increases in franchise fees in the 2022 second quarter and 2022 first half primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19, higher co-brand credit card fees ($40 million and $76 million, respectively), and unit growth ($30 million and $55 million, respectively).

The increases in incentive management fees in the 2022 second quarter and 2022 first half primarily reflected higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19.

Owned, Leased, and Other

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021 Change

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 Change

2021 June 30, 2022 June 30, 2021 Change

Owned, leased, and other revenue $ 364 $ 187 $ 177 95 % $ 626 $ 295 $ 331 112 %

Owned, leased, and other - direct expenses 281 168 113 67 % 478 303 175 58 %

Owned, leased, and other, net $ 65 $ (27) $ 92 nm*

* Percentage change is not meaningful.

Owned, leased, and other revenue, net of direct expenses increased in the 2022 first quarter primarily due to net stronger results at our owned and leased properties driven by the ongoing recovery in lodging demand from the impacts of COVID-19 and $29 million of subsidies under German government COVID-19 assistance programs for certain of our leased hotels.

Owned, leased, and other, net $ 83 $ 19 $ 64 337 % $ 148 $ (8) $ 156 1,950 %

Owned, leased, and other revenue, net of direct expenses increased in the 2022 second quarter primarily due to stronger results at our owned and leased properties driven by the ongoing recovery in lodging demand from the impacts of COVID-19, partially offset by $18 million of subsidies under German government COVID-19 assistance programs for certain of our leased hotels received in the 2021 second quarter.

Owned, leased, and other revenue, net of direct expenses increased in the 2022 first half primarily due to stronger results at our owned and leased properties driven by the ongoing recovery in lodging demand from the impacts of COVID-19, partially offset by lower termination fees ($16 million).

Cost Reimbursements

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021 Change

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 Change

2021 June 30, 2022 June 30, 2021 Change

Cost reimbursement revenue $ 3,920 $ 2,338 $ 1,582 68 % $ 7,066 $ 4,118 $ 2,948 72 %

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Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively.

The increase in cost reimbursements, net in the 2022 first quarter primarily reflects higher revenue for our centralized programs and services and lower insurance expense, partially offset by Loyalty Program activity, primarily due to higher program expenses.

The increase in cost reimbursements, net in the 2022 second quarter primarily reflects higher revenues, net of expenses, related to our insurance program and for our centralized programs and services, partially offset by Loyalty Program activity, primarily due to higher program expenses.

The increase in cost reimbursements, net in the 2022 first half primarily reflects higher revenues, net of expenses, for our centralized programs and services and lower expenses related to our insurance program, partially offset by Loyalty Program activity, primarily due to higher program expenses.

Other Operating Expenses

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021 Change

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 Change

2021 June 30, 2022 June 30, 2021 Change

Depreciation, amortization, and other $ 49 $ 50 $ (1) (2) % $ 97 $ 102 $ (5) (5) %

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Restructuring, merger-related charges, and other — 3 (3) (100) % 9 4 5 125 %

General, administrative, and other expenses increased in the 2022 second quarter and 2022 first half primarily due to higher compensation costs and higher administrative costs.

Non-Operating Income (Expense)

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021 Change

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 Change

2021 June 30, 2022 June 30, 2021 Change

Gains and other income, net $ 2 $ 5 $ (3) (60) % $ 6 $ 6 $ — — %

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Equity in earnings (losses) 15 (8) 23 288 % 17 (20) 37 185 %

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021 Change

(Provision) benefit for income taxes $ (99) $ 16 $ (115) nm*

* Percentage change is not meaningful.

Our tax provision changed in the 2022 first quarter, compared to our tax benefit in the 2021 first quarter, primarily due to the increase in operating income ($101 million).

Interest expense decreased in the 2022 first half, primarily due to lower debt balances driven by Senior Notes maturities and repurchases, net of issuances.

Equity in earnings (losses) changed in the 2022 second quarter and 2022 first half primarily due to our share of the gains on the sales of properties held by equity method investees ($13 million and $21 million, respectively) and the ongoing recovery in lodging demand from the impacts of COVID-19.

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 Change

2021 June 30, 2022 June 30, 2021 Change

(Provision) benefit for income taxes $ (200) $ 41 $ (241) (588) % $ (299) $ 57 $ (356) (625) %

Our tax provision changed in the 2022 second quarter and 2022 first half, compared to our tax benefit in the 2021 second quarter and 2021 first half, primarily due to the increase in operating income ($125 million and $226 million, respectively) and the release of tax reserves in the 2021 second quarter due to the favorable resolution of Legacy-Starwood tax audits ($118 million).

BUSINESS SEGMENTS

Our segment results in the 2022 first quarter continued to be impacted by COVID-19.

See the “Impact of COVID-19” section above for more information about the impact to our business during the 2022 first quarter and the discussion below for additional analysis of the operating results of our reportable business segments.

Three Months Ended

($ in millions) March 31, 2022 March 31, 2021 Change

Our segment results in the 2022 second quarter and 2022 first half continued to be impacted by COVID-19.

See the “Impact of COVID-19” section above for more information about the impact to our business during the 2022 second quarter and 2022 first half and the discussion below for additional analysis of the operating results of our reportable business segments.

Three Months Ended Six Months Ended

($ in millions) June 30, 2022 June 30, 2021 Change

2021 June 30, 2022 June 30, 2021 Change

Segment revenues $ 4,117 $ 2,328 $ 1,789 77 % $ 7,388 $ 4,049 $ 3,339 82 %

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Segment revenues 875 522 353 68 % 1,550 913 637 70 %

Segment profit (loss) 131 (23) 154 670 %

Segment profit 210 79 131 166 % 341 56 285 509 %

Properties Rooms

March 31, 2022 March 31, 2021 vs.

March 31, 2021 March 31, 2022 March 31, 2021 vs.

March 31, 2021

June 30, 2022 June 30, 2021 vs.

June 30, 2021 June 30, 2022 June 30, 2021 vs.

June 30, 2021

& Canada 5,790 5,600 190 3 % 958,025 932,172 25,853 3 %

International 2,238 2,105 133 6 % 520,018 496,679 23,339 5 %

& Canada 2022 first quarter segment profit increased primarily due to:

Second Quarter

& Canada quarterly segment profit increased, primarily due to the following:

• $310 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy and higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19, as well as unit growth;

• $53 million of higher cost reimbursement revenue, net of reimbursed expenses;

• $24 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting net stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the impacts of COVID-19.

• $24 million of increased owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the impacts of COVID-19.

& Canada 2022 first half segment profit increased primarily due to:

• $549 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy and higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19, as well as unit growth, partially offset by lower residential branding fees;

• $86 million of higher cost reimbursement revenue, net of reimbursed expenses;

• $48 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the impacts of COVID-19;

• $17 million of higher equity in earnings.

International

International 2022 first quarter segment profit, compared to the 2021 first quarter segment loss, primarily reflected:

• $90 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy and higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19;

• $63 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting net stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the

impacts of COVID-19 and subsidies under German government COVID-19 assistance programs for certain of our leased hotels.

Second Quarter

International quarterly segment profit increased primarily due to:

• $80 million of higher gross fee revenues, due to higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in all regions except Greater China and higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19;

• $32 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the impacts of COVID-19, partially offset by subsidies under German government COVID-19 assistance programs for certain of our leased hotels received in the 2021 second quarter;

• $17 million of higher cost reimbursement revenue, net of reimbursed expenses;

partially offset by:

• $15 million of higher general, administrative, and other expenses, partially reflecting a higher provision for credit losses.

International 2022 first half segment profit increased primarily due to:

• $170 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 and higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19, as well as unit growth, partially offset by net unfavorable foreign exchange rates;

• $95 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at owned and leased properties due to the ongoing recovery in lodging demand from the impacts of COVID-19;

• $29 million of higher cost reimbursement revenue, net of reimbursed expenses;

partially offset by:

• $27 million of higher general, administrative, and other expenses, partially reflecting a higher provision for credit losses.

STOCK-BASED COMPENSATION

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Our long-term financial objectives include diversifying our financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital.

At the end of the 2022 first quarter, our long-term debt had a weighted average interest rate of 3.4 percent and a weighted average maturity of approximately 6.6 years.

Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.8 to 1.0 at the end of the 2022 first quarter.

At the end of the 2022 second quarter, our long-term debt had a weighted average interest rate of 3.7 percent and a weighted average maturity of approximately 6.6 years.

Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.9 to 1.0 at the end of the 2022 second quarter.

We remain focused on preserving our financial flexibility and managing our debt maturities.

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The Credit Facility expires on June 28, 2024.

As of March 31, 2022, we had total outstanding borrowings under the Credit Facility of $0.8 billion and remaining borrowing capacity of $3.7 billion.

In April 2022, we repaid an additional $400 million of outstanding borrowings under the Credit Facility, resulting in a borrowing capacity of $4.1 billion.

As of June 30, 2022, we had total outstanding borrowings under the Credit Facility of $0.3 billion and remaining borrowing capacity of $4.2 billion.

In July 2022, we repaid $275 million of outstanding borrowings under the Credit Facility.

We entered into amendments to the Credit Facility in April 2020 and January 2021 (the “Credit Facility Amendments”).

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Due to changes to our credit ratings as a result of the impact of COVID-19 on our business, we currently are not issuing commercial paper.

As a result, we have had to rely more on borrowings under the Credit Facility and issuance of senior notes, which carry higher interest costs than commercial paper.

Cash, cash equivalents, and restricted cash totaled $1,067 million at March 31, 2022, a decrease of $354 million from year-end 2021, primarily reflecting Senior Notes repayments ($399 million), Credit Facility repayments ($250 million), financing outflows for employee stock-based compensation withholding taxes ($78 million), and capital and technology expenditures ($49 million), partially offset by net cash provided by operating activities ($398 million).

Net cash provided by operating activities increased by $371 million in the 2022 first quarter compared to the 2021 first quarter, primarily due to the net income recorded in the 2022 first quarter (adjusted for non-cash items).

In 2020, we received $920 million of cash from the prepayment of certain future revenues under the amendments to our existing U.S.-issued co-brand credit card agreements, which reduced in the 2022 first quarter and 2021 first quarter, and will in the future reduce, the amount of cash we receive from these card issuers.

Our ratio of current assets to current liabilities was 0.5 to 1.0 at the end of the 2022 first quarter.

As a result, we have had to rely more on borrowings under the Credit Facility and issuance of senior notes.

Cash, cash equivalents, and restricted cash totaled $567 million at June 30, 2022, a decrease of $854 million from year-end 2021, primarily reflecting Credit Facility repayments ($750 million), Senior Notes repayments ($573 million), share repurchases ($300 million), capital and technology expenditures ($119 million), dividends paid ($98 million), and financing outflows for employee stock-based compensation withholding taxes ($87 million), partially offset by net cash provided by operating activities ($1,048 million).

Net cash provided by operating activities increased by $922 million in the 2022 first half compared to the 2021 first half, primarily due to the net income recorded in the 2022 first half (adjusted for non-cash items) and lower cash paid for income taxes.

In 2020, we received $920 million of cash from the prepayment of certain future revenues under the amendments to our existing U.S.-issued co-brand credit card agreements, which reduced in the 2022 first half and 2021 first half, and will in the future reduce, the amount of cash we receive from these card issuers.

Our ratio of current assets to current liabilities was 0.5 to 1.0 at the end of the 2022 second quarter.

We have significant borrowing capacity under our Credit Facility should we need additional working capital.

Capital Expenditures and Other Investments

We made capital and technology expenditures of $49 million in the 2022 first quarter and $30 million in the 2021 first quarter.

We made capital and technology expenditures of $119 million in the 2022 first half and $70 million in the 2021 first half.

We expect capital expenditures and other investments will total approximately $600 million to $650 million for the 2022 full year, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities (including approximately $200 million for maintenance capital spending and our new headquarters).

Share Repurchases

We did not repurchase any shares of our common stock in the 2022 first quarter.

At March 31, 2022, 17.4 million shares remained available for repurchase under Board approved authorizations.

Assuming the global demand environment continues to improve and we are within our target leverage ratio range, we would expect to resume share repurchases in 2022.

We did not declare any cash dividends in the 2022 first quarter.

However, our Board of Directors declared a quarterly cash dividend of $0.30 per share on May 2, 2022, payable on June 30, 2022 to stockholders of record on May 16, 2022.

Share Repurchases and Dividends

Given the improvements in the global demand environment and the restoration of our leverage ratio to within our target leverage ratio range, we resumed repurchases of our common stock in the 2022 second quarter.

We purchased 1.9 million shares in the 2022 second quarter for $300 million.

Year-to-date through July 29, 2022, we repurchased 2.9 million shares for $448 million.

For additional information, see “Issuer Purchases of Equity Securities” in Part II, Item 2.

On May 2, 2022, our Board of Directors declared a quarterly cash dividend of $0.30 per share, which was paid on June 30, 2022 to stockholders of record on May 16, 2022.

We expect to continue to return cash to stockholders through share repurchases and dividends in the remainder of 2022.

Material Cash Requirements

As of the end of the 2022 first quarter, there have been no material changes to our cash requirements as disclosed in our 2021 Form 10-K.

As of the end of the 2022 second quarter, there have been no material changes to our cash requirements as disclosed in our 2021 Form 10-K.

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2021 Form 10-K for more information about our cash requirements.

Also, see Note 6 for information on our long-term debt.

At June 30, 2022, projected Deemed Repatriation Transition Tax payments under the U.S.

tax legislation enacted on December 22, 2017, commonly referred to as the 2017 Tax Cuts and Jobs Act, totaled $306 million, of which $80 million is payable within the next 12 months from June 30, 2022.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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What changed 10-Q

Item 2. Management’s Discussion and Analysis