Item 1. Business
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.
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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U.S. & Canada
Europe Middle East & Africa Asia Pacific Caribbean & Latin America Total
Luxury
JW Marriott ®
Properties 33 7 10 47 16 113
Rooms 18,796 2,387 4,247 17,009 4,296 46,735
The Ritz-Carlton ®
Properties 41 12 15 38 9 115
Rooms 12,508 2,689 3,988 9,192 2,007 30,384
W ® Hotels
Properties 25 8 7 20 7 67
Rooms 7,295 1,734 2,317 5,514 1,752 18,612
The Luxury Collection ® (1)
Properties 18 46 13 32 15 124
Rooms 5,484 6,616 2,493 8,268 1,542 24,403
St. Regis ®
Properties 10 5 11 23 4 53
Rooms 1,977 668 3,049 5,530 569 11,793
EDITION ®
Properties 5 4 3 3 — 15
Rooms 1,379 726 638 852 — 3,595
Bvlgari ®
Properties — 3 1 3 — 7
Rooms — 222 121 260 — 603
Premium
Marriott ® Hotels
Properties 339 75 28 102 31 575
Rooms 132,960 21,454 8,726 33,992 8,311 205,443
Sheraton ®
Properties 172 50 33 146 29 430
Rooms 66,621 14,096 9,516 52,487 8,226 150,946
Westin ®
Properties 132 18 8 63 14 235
Rooms 53,756 5,968 2,030 19,450 3,955 85,159
Renaissance ® Hotels
Properties 89 27 5 44 9 174
Rooms 28,998 6,307 1,476 14,791 2,745 54,317
Le Méridien ®
Properties 25 16 23 49 2 115
Rooms 5,705 5,154 6,848 12,486 271 30,464
Autograph Collection ® Hotels (1)
Properties 146 68 13 19 36 282
Rooms 29,678 8,482 2,344 4,455 12,158 57,117
Delta Hotels by Marriott ® (Delta Hotels ® )
Properties 87 30 5 2 1 125
Rooms 20,893 5,134 1,284 978 117 28,406
Gaylord ® Hotels
Properties 6 — — — — 6
Rooms 10,220 — — — — 10,220
Marriott Executive Apartments ®
Properties — 4 12 18 2 36
Rooms — 361 1,665 2,742 240 5,008
Tribute Portfolio ® (1)
Properties 51 17 2 12 7 89
Rooms 7,952 1,741 344 1,859 640 12,536
Design Hotels ®
Properties 10 26 6 2 6 50
Rooms 1,385 2,123 619 581 146 4,854
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U.S. & Canada Europe Middle East & Africa Asia Pacific Caribbean & Latin America Total
Select
Courtyard by Marriott ® (Courtyard ® )
Properties 1,050 74 10 99 47 1,280
Rooms 145,025 14,003 2,139 22,398 7,612 191,177
Residence Inn by Marriott ® (Residence Inn ® )
Properties 849 21 7 — 8 885
Rooms 104,463 2,408 1,117 — 1,213 109,201
Fairfield by Marriott ® (Fairfield ® )
Properties 1,141 — — 96 16 1,253
Rooms 108,338 — — 14,283 2,222 124,843
SpringHill Suites by Marriott ® (SpringHill Suites ® )
Properties 532 — — — — 532
Rooms 63,014 — — — — 63,014
Four Points by Sheraton ® (Four Points ® )
Properties 159 19 21 89 18 306
Rooms 24,058 3,291 5,113 23,133 2,332 57,927
TownePlace Suites by Marriott ® (TownePlace Suites ® )
Properties 486 — — — — 486
Rooms 49,719 — — — — 49,719
Aloft ® Hotels
Properties 156 10 11 31 14 222
Rooms 22,582 1,676 2,555 6,790 2,313 35,916
AC Hotels by Marriott ®
Properties 107 89 2 7 17 222
Rooms 17,766 11,959 286 1,910 2,696 34,617
Protea Hotels ® by Marriott (Protea Hotels ® )
Properties — 1 64 — — 65
Rooms — 72 6,627 — — 6,699
Element ® Hotels
Properties 82 1 6 8 — 97
Rooms 11,396 160 1,009 1,651 — 14,216
Moxy ® Hotels
Properties 28 81 — 13 — 122
Rooms 5,316 15,321 — 2,471 — 23,108
Residences
Residences Properties 67 9 11 14 12 113
Rooms 7,128 326 1,580 1,864 583 11,481
Subtotal Properties 5,846 721 327 980 320 8,194
Subtotal Rooms 964,412 135,078 72,131 264,946 65,946 1,502,513
Timeshare (2)
Properties 93
Rooms 22,745
Yacht (2)
Properties 1
Rooms 149
Total Properties 8,288
Total Rooms 1,525,407
(1) Includes properties acquired when we purchased Elegant Hotels Group plc in December 2019, which we currently intend to re-brand under the following brands after the completion of planned renovations: The Luxury Collection (one property), Autograph Collection Hotels (four properties), and Tribute Portfolio (two properties).
(2) We exclude geographical data for Timeshare and Yacht as these offerings are captured within “Unallocated corporate and other.”
Loyalty and Credit Card Programs
Marriott Bonvoy ® is our travel loyalty program and marketplace through which members have access to our diverse brand portfolio, rich benefits, and travel experiences. Members can earn points for stays at our hotels and other lodging offerings, such as Homes & Villas by Marriott Bonvoy TM , a global offering focusing on the premium and luxury tiers of rental homes, as well as through purchases with co-branded credit cards and our travel partners. Members can redeem their points for stays at most of our properties, airline tickets, airline frequent flyer program miles, rental cars, products from Marriott Bonvoy Boutiques ® , and a variety of other awards, including experiences from Marriott Bonvoy Moments TM . We refer to our Marriott Bonvoy loyalty program throughout this report as “Marriott Bonvoy” or our “Loyalty Program.”
We believe that Marriott Bonvoy generates substantial repeat business that might otherwise go to competing hotels. In 2022, over half of our global room nights were booked by Marriott Bonvoy members. We strategically market to this large and growing guest base to generate revenue. See the “Loyalty Program” caption in Note 2 for more information.
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We have co-branded credit cards associated with Marriott Bonvoy in nine countries. In the U.S., we have multi-year agreements with JPMorgan Chase and American Express. We also license credit card programs internationally, including in Japan, Canada, the United Kingdom, United Arab Emirates, Saudi Arabia, South Korea, Mexico, and China. We generally earn fixed amounts that are payable at contract inception and variable amounts that are paid to us monthly over the term of the agreements primarily based on card usage. We believe that our co-branded credit cards contribute to the success of Marriott Bonvoy and reflect the quality and value of our portfolio of brands.
Sales and Marketing and Reservation Systems
Marriott.com, our international websites, and our mobile application allow for a seamless booking experience and easy enrollment in Marriott Bonvoy to book our exclusive Member Rates and participate in program benefits. Our Best Rate Guarantee ensures best rate integrity, strengthening consumer confidence in our brand and giving guests access to the best rates when they book hotel rooms through our direct channels. We remain focused on creating digital experiences that better connect our customers to travel, namely through our mobile application, which offers contactless check-in and check-out, chat, service requests, mobile key, and more. Our digital strategy remains focused on growing customer engagement via these elevated digital experiences to drive bookings to our direct channels, which generally deliver more profitable business to hotels in our system compared to bookings made through intermediary channels. We aim to create frictionless digital experiences for our guests, from inspiration to stay, to generate superior guest satisfaction and grow our loyal customer base. In addition, we are focused on driving digital engagement and direct bookings through improved search engine optimization, merchandising placements, increased destination-based content for leisure travelers, and additional language availability across our digital channels.
At year-end 2022, we operated 20 customer care and reservation centers, seven in the U.S. and 13 in other countries and territories. We own two of the U.S. facilities and either lease the others or share space with a company-operated property.
We believe our global sales and revenue management organizations are a key competitive advantage due to our focus on optimizing our investment in people, processes, and systems. Our above-property sales deployment strategy aligns our sales efforts around how the customer wants to buy, reducing duplication of efforts by individual hotels and allowing us to cover a larger number of accounts. We also utilize innovative and sophisticated revenue management systems, many of which are proprietary, which we believe provide a competitive advantage in pricing decisions, increasing efficiency and optimizing property-level revenue for hotels in our portfolio. Most of the hotels in our portfolio utilize web-based programs to effectively manage the rate set-up and modification processes. The use of these web-based programs provides for greater pricing flexibility, reduces time spent on rate program creation and maintenance, and increases the speed to market of new products and services.
Competition
We encounter strong competition in the short-term lodging market from large national and international chains that operate hotels or franchise their brands, unaffiliated hotels, and online platforms, including Airbnb and Vrbo, that allow travelers to book short-term rentals of homes and apartments as an alternative to hotel rooms. We compete for guests in many areas, including brand recognition and reputation, location, guest satisfaction, room rates, quality of service, amenities, quality of accommodations, safety and security, and the ability to earn and redeem loyalty program points.
Our direct digital channels also compete for guests with large companies that offer online travel services as part of their business model, such as Expedia.com, Priceline.com, Booking.com, Travelocity.com, and Orbitz.com and search engines such as Google, Bing, Yahoo, and Baidu.
Affiliation with a brand is common in the U.S. lodging industry, and we believe that our strong brand recognition assists us in attracting and retaining guests, owners, and franchisees. In 2022, approximately 72 percent of U.S. hotel rooms were brand-affiliated. Most of the branded properties in the U.S. are franchises, under which the owner pays the franchisor a fee for use of its brand name and reservation system. In the franchising business, we face many competitors that have strong brands and guest appeal, including Hilton, IHG Hotels & Resorts, Hyatt, Wyndham Hotels & Resorts, Accor, Choice Hotels, Best Western Hotels & Resorts, and others.
Outside the U.S., branding is less prevalent, and many markets are served primarily by independent operators, although branding is more common for new hotel development compared to the past. We believe that chain affiliation will continue to become more attractive in many overseas markets as local economies grow, trade barriers decline, international travel accelerates, and hotel owners seek the benefits of centralized reservation systems, marketing programs, and loyalty programs.
Based on lodging industry data, we have an approximately 16 percent share of the U.S. hotel market and a four percent share of the hotel market outside the U.S. (based on number of rooms). We believe that our hotel brands are attractive to hotel owners seeking a management company or franchise affiliation because our hotels typically generate higher RevPAR than our
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direct competitors in most market areas. We attribute this performance premium to our success in achieving and maintaining strong guest preference. We believe that the location and quality of our lodging facilities, our marketing programs, our reservation systems, Marriott Bonvoy, and our emphasis on guest service and guest and associate satisfaction contribute to guest preference across all our brands.
Seasonality
In general, business at company-operated and franchised properties fluctuates moderately with the seasons. Business at some resort properties may be more seasonal depending on location.
Human Capital Management
Marriott’s long history of service, innovation, and growth is built on a culture of putting people first. We are committed to investing in our associates, with a focus on leadership development, recognition, compensation, career opportunity, and skills training. Over the past several years, we faced a number of staffing challenges, including the continuing impact of the COVID-19 pandemic, evolving work environment, and competitive talent landscape. To address these challenges, we are focused on our talent attraction and retention strategies and reinforcing our culture to position us for future growth.
At year-end 2022, Marriott managed the employment of approximately 377,000 associates. This number includes 140,000 associates employed by Marriott at properties, customer care centers, and above-property operations, as well as 237,000 associates who are employed by our property owners but whose employment is managed by Marriott (which is common outside the U.S.). Approximately 111,000 of the associates employed by Marriott are located in the U.S., of which approximately 18,000 belong to labor unions. Outside the U.S., some of our associates are represented by trade unions, works councils, or employee associations. These numbers do not include hotel personnel employed by our franchisees or management companies hired by our franchisees. Marriott encourages our independent franchisees to develop responsible human capital management practices.
We are focused on maintaining Marriott’s position as an employer of choice both for job seekers and our existing associates. To attract talent, we are targeting new labor pools, optimizing our recruiting practices, and sharing our story of long-term career potential. With the opening of our new global headquarters in Bethesda, Maryland, we adopted a hybrid work model to allow for increased flexibility and choice, to meet the evolving needs of our corporate workforce. For hotel-based associates, we are innovating the way hotel jobs are structured with the goal of increasing associate satisfaction and providing better service for our guests.
We encourage continual feedback discussions with our associates at all levels, and measure associate satisfaction through our Associate Engagement Survey, which gives all associates the opportunity to provide feedback about their work experience, providing us with valuable insights to drive improvements in our culture. Our associate engagement scores exceeded the “Best Employer” external benchmark in 2022, as they have in 10 prior years, and we were recognized as one of the Fortune Best Companies to Work for in 2022 for the 25th consecutive year.
Our human capital strategy is based on three signature elements – Growing Great Leaders, Investing in Associates, and Access to Opportunity.
Growing Great Leaders
We believe that all associates, at every level, can inspire others through great leadership. Our framework is designed to help us grow great leaders and starts with competencies that clearly define what great leadership means at Marriott. These competencies have been integrated into our performance management process and leadership development programs.
Our talent development strategy is designed to provide opportunities for our associates to develop and grow their careers. It includes a variety of skills training, professional development, and other learning opportunities. Our Leadership Performance Acceleration program encourages managers and associates to have regular career and development conversations in order to provide actionable feedback and to help associates set and achieve career goals.
These programs and opportunities provide associates with career development and personal growth options and support our leadership development culture.
Investing in Associates
We are focused on providing our associates with the tools, resources, and support they need to thrive – both personally and professionally. We have comprehensive compensation and benefits offerings designed to invest in our associates, and we regularly evaluate these programs for competitiveness against the external talent market. In addition, pay equity is foundational
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to our compensation structures and practices. In the U.S., we conduct pay equity audits at least annually and make adjustments as needed.
We provide our eligible U.S. associates and their families with access to health care coverage, work/life support benefits, as well as other benefits, such as a retirement savings plan, employee stock purchase plan, paid time off, paid parental leave, and financial assistance to help with adoption fees. Outside the U.S., we also offer comprehensive compensation and benefit programs that vary based on the geographic market. Our TakeCare program provides associates with tools and resources to support their physical, mental, and financial wellbeing.
Access to Opportunity
Our company-wide diversity, equity, and inclusion (“DEI”) efforts include a range of initiatives and programs to support our goal to make all stakeholders (including associates, guests, owners, and suppliers) feel welcome and valued. The Inclusion and Social Impact Committee of our Board of Directors (the “ISI Committee”), established 20 years ago, helps drive accountability for these efforts across the Company. The ISI Committee assists the Board in providing oversight of the Company’s strategy, efforts, and commitments related to its people-first culture, associate well-being, inclusion, and other environmental, social and governance (“ESG”) matters. As part of our efforts to continue to diversify our senior leadership, we have established a goal to achieve global gender parity at the Vice President level and above by the end of 2023. We also have established an objective to increase the representation of people of color at the Vice President level and above in the U.S. to twenty-five percent by year-end 2025.
To better meet the needs of our diverse and changing workforce, we are continuing to evolve our hospitality jobs through workforce innovation. As part of this effort, we are blending certain hotel jobs to enhance the employment experience for our associates as well as providing scheduling flexibility.
Sustainability and Social Impact
Guided by our 2025 sustainability and social impact goals, as well as the United Nations Sustainable Development Goals, we are focused on creating a positive and sustainable impact wherever we do business. Our sustainability and social impact platform, Serve 360: Doing Good in Every Direction, is built around four focus areas: Nurture Our World; Sustain Responsible Operations; Empower Through Opportunity; and Welcome All and Advance Human Rights – each with targets to drive our efforts through 2025. These targets reflect our goals to (1) support the resiliency and sustainable development of the communities and environments where we do business, (2) work to reduce our environmental impacts, design and operate sustainable hotels, and source responsibly, while mitigating climate-related risk, (3) facilitate workplace readiness and access to opportunity in our business, and (4) create a safe, welcoming world, including by working with organizations to educate and advocate on issues related to human rights throughout and beyond our business. Although the COVID-19 pandemic and certain other factors have impacted our progress in some areas, we remain focused on advancing our sustainability and social impact goals and initiatives.
Our climate action efforts include committing to set a near-term science-based emissions reduction target (“SBT”) and set a long-term science-based target to reach net-zero value chain greenhouse gas (“GHG”) emissions by no later than 2050. We are currently preparing our SBT and net-zero targets for submission and developing longer-term strategies to support those targets.
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, driving third-party certifications at the hotel-level, supporting innovative ecosystem restoration initiatives, and focusing on responsible and local sourcing.
In response to humanitarian crises, like war and natural disasters, our hotels often look to support their local communities in need by donating funds, hotel stays, food, supplies, and volunteer hours. We also deploy our Marriott Disaster Relief Fund to support associates and their families impacted by crises, such as the war in Ukraine, as well as charitable organizations providing relief on the ground. In 2022, to further our human rights efforts, we reached the milestone of training one million associates in human trafficking awareness, a major step toward our goal to train 100 percent of on-property associates by 2025. Additionally, in collaboration with leading anti-trafficking and hospitality organizations, we donated our recently updated training to the lodging industry and made it available to other individuals and organizations outside the industry, such as travelers and non-profit organizations.
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Government Regulations
As a company with global operations, we are subject to a wide variety of laws, regulations, and government policies in the U.S. and in jurisdictions around the world. Some of the regulations that most affect us include those related to employment practices; environment, health, and safety; trade and economic sanctions; competition; anti-bribery and anti-corruption; cybersecurity; data privacy, data localization, and the handling of personally identifiable information; the offer and sale of franchises; and liquor sales.
Internet Address and Company SEC Filings
Our primary Internet address is Marriott.com. On the investor relations portion of our website, Marriott.com/investor, we provide a link to our electronic filings with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to these reports. We make all such filings available free of charge as soon as reasonably practicable after filing. The information found on our website is not part of this or any other report we file with or furnish to the SEC.