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Item 7. Management’s Discussion and Analysis

2024-02-13 compared with 2023-02-14 · 106 added, 98 removed, 203 unchanged (50% of the section changed)

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BUSINESS AND 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.

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties in 139 countries and territories under more than 30 brand names.

Under our asset-light business model, we typically manage or franchise hotels, rather than own them.

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& Canada and (2) International.

In January 2024, we modified our segment structure as a result of a change in the way

management intends to evaluate results and allocate resources within the Company.

Beginning with the 2024 first quarter, we will report the following four operating segments:

& Canada, (2) Europe, Middle East, and Africa, (3) Asia Pacific excluding China, and (4) Greater China.

Our Caribbean and Latin America operating segment will not meet the applicable criteria for separate disclosure as a reportable business segment, and as such, we will include its results in “Unallocated corporate and other.”

Terms of our management agreements vary, but our management fees generally consist of base management fees and incentive management fees.

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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.

Additionally, we earn franchise fees for the use of our intellectual property, including primarily co-branded credit card fees, as well as timeshare and yacht fees, residential branding fees, franchise application and relicensing fees, and certain other licensing fees, which we refer to as “non-RevPAR related franchise fees.”

Performance Measures

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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.

Occupancy, which we calculate by dividing occupied rooms by total rooms available, measures the utilization of a property’s available capacity.

ADR, which we calculate by dividing property room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels.

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We define our comparable properties as our properties that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 2022 for the current period) and have not, in either the current or previous year:

(1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption, with the exception of properties closed or otherwise experiencing interruptions related to COVID-19, which we continue to classify as comparable.

For 2023 compared to 2022, we had 5,375 comparable U.S.

& Canada properties and 1,704 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,

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.

& 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.

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.

We saw strong global RevPAR improvement throughout 2023 compared to 2022.

In 2023, worldwide RevPAR increased 14.9 percent compared to 2022, reflecting ADR growth of 5.8 percent and occupancy improvement of 5.5 percentage points.

The increase in RevPAR was driven by improvement in all customer segments.

& Canada, RevPAR improved 8.9 percent in 2023 compared to 2022, driven by ADR growth of 4.7 percent and occupancy improvement of 2.7 percentage points.

As we returned to more normalized year over year RevPAR comparisons during the year, RevPAR growth began to stabilize in the 2023 last three quarters.

In our International segment, RevPAR improved 32.6 percent in 2023 compared to 2022, driven by ADR growth of 9.7 percent and occupancy improvement of 11.7 percentage points.

The improvement in RevPAR compared to 2022 was driven by strengthening demand, particularly in Greater China and Asia Pacific excluding China, which were impacted by COVID-19 and government-imposed travel restrictions for much or all of 2022.

Starwood Data Security Incident

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.

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 busi ness operations.

We discontinued use of t he Starwood reservations database for business operations at the end of 2018 .

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

However, we do not believe this incident will impact our long-term financial health.

Although our insurance program includes coverage designed to limit our exposure to losses such as those related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other losses (including monetary payments to regulators and/or litigants) related to the Data Security Incident.

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).

We expect to incur ongoing legal and other expenses associated with the Data Security Incident in future periods, and we believe it is reasonably possible that we may incur additional monetary payments to regulators and/or litigants in excess of the amounts already recorded and costs in connection with compliance with any settlements or resolutions of matters.

See Note 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.

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.

Our system grew from 8,288 properties (1,525,407 rooms) at year-end 2022 to 8,785 properties (1,597,380 rooms) at year-end 2023.

The increase compared to year-end 2022 reflected gross additions of 558 properties (81,281 rooms), including 149 properties (17,300 rooms) from the City Express brand acquisition, and deletions of 63 properties (9,430 rooms).

Our 2023 gross room additions included approximately 60,500 rooms located outside U.S.

& Canada and roughly 16,300 rooms converted from competitor brands.

At year-end 2023, we had nearly 3,400 hotels and roughly 573,000 rooms in our development pipeline, which includes over 21,000 rooms approved for development but not yet under signed contracts.

More than 232,000 rooms in the pipeline, or 41 percent, were under construction at year-end 2023, including approximately 37,000 rooms from the exclusive, long-term strategic licensing agreement with MGM Resorts International that we announced in July 2023.

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

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.

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.

In 2023, we signed a record number of management, franchise and license agreements for approximately 164,000 organic rooms, of which nearly 65,000 rooms are conversions and approximately 91,000 rooms are located in the U.S.

and Canada, in each case, including 37,000 rooms under our agreement with MGM Resorts International discussed above.

Contracts signed in 2023 reflected the Company’s strength in the luxury tier, with 58 luxury hotel agreements signed.

In 2023, we also entered the Midscale segment through the City Express brand acquisition discussed above, and announced our plans for further Midscale expansion with the launch of two new brands, Four Points Express by Sheraton and StudioRes.

In 2024, we expect net rooms growth of 5.5 to 6.0 percent, including an anticipated 2.3 percent increase as a result of the expected addition of rooms to our system under our agreement with MGM Resorts International discussed above.

The first of such MGM properties joined our system in January 2024, and the remaining properties are expected to join by the end of the 2024 first quarter.

Properties and Rooms

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Properties Rooms Properties Rooms Properties Rooms Properties Rooms Properties Rooms

632 215,331 5,121 735,470 26 6,483 67 7,128 5,846 964,412

& Canada 624 215,246 5,259 752,630 13 4,339 69 7,416 5,965 979,631

International 1,422 360,717 1,210 218,830 37 8,776 57 6,532 2,726 594,855

1,357 345,220 907 179,319 38 9,209 46 4,353 2,348 538,101

Timeshare — — 93 22,745 — — — — 93 22,745

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Lodging Statistics

The following tables present RevPAR, occupancy, and ADR statistics for comparable properties for 2022, and 2022 compared to 2021.

The following table presents RevPAR, occupancy, and ADR statistics for comparable properties for 2023, and 2023 compared to 2022.

Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.

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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.

($ in millions) 2022 2021 Change 2022 vs.

The discussion below presents an analysis of our consolidated results of operations for 2023 compared to 2022.

Also see the “Business Trends” section above for further discussion.

($ in millions)

2023 2022 Change 2023 vs.

Base management fees $ 1,238 $ 1,044 $ 194 19 %

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Net fee revenues $ 4,736 $ 3,989 $ 747 19 %

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).

The increase in base management fees primarily reflected higher RevPAR and unit growth.

The increase in franchise fees primarily reflected higher RevPAR, unit growth ($99 million), and higher non-RevPAR related franchise fees ($50 million).

Non-RevPAR related franchise fees of $832 million in 2023 increased primarily due to higher co-branded credit card fees ($55 million).

The increase in incentive management fees primarily reflected higher profits at many managed hotels.

In 2023, we earned incentive management fees from 68 percent of our managed properties worldwide, compared to 61 percent in 2022.

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Owned, Leased, and Other

($ in millions) 2022 2021 Change 2022 vs.

($ in millions)

2023 2022 Change 2023 vs.

Owned, leased, and other revenue $ 1,564 $ 1,367 $ 197 14 %

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Owned, leased, and other, net $ 399 $ 293 $ 106 36 %

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).

Owned, leased, and other revenue, net of direct expenses, increased primarily due to stronger results at our owned and leased properties, $46 million of higher termination fees, primarily related to one development project in U.S.

& Canada, and an estimated monetary payment of $31 million recorded in 2022 related to a portfolio of 12 leased hotels in the U.S.

& Canada, partially offset by $29 million of subsidies received in 2022 for certain of our leased hotels under German government COVID-19 assistance programs.

Cost Reimbursements

($ in millions) 2022 2021 Change 2022 vs.

($ in millions)

2023 2022 Change 2023 vs.

Cost reimbursement revenue $ 17,413 $ 15,417 $ 1,996 13 %

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Cost reimbursements, net $ (11) $ 276 $ (287) (104) %

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.

The decrease in cost reimbursements, net primarily reflected Loyalty Program activity, primarily due to lower program revenues and higher program expenses, higher expenses related to our insurance program, and higher marketing expenses.

Other Operating Expenses

($ in millions) 2022 2021 Change 2022 vs.

($ in millions)

2023 2022 Change 2023 vs.

Depreciation, amortization, and other $ 189 $ 193 $ (4) (2) %

General, administrative, and other 1,011 891 120 13 %

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.

Merger-related charges and other 60 12 48 400 %

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

Merger-related charges and other expenses increased primarily due to the Data Security Incident discussed in Note 7.

Non-Operating Income (Expense)

($ in millions) 2022 2021 Change 2022 vs.

($ in millions)

2023 2022 Change 2023 vs.

Gains and other income, net $ 40 $ 11 $ 29 264 %

Loss on extinguishment of debt — (164) 164 100 %

Interest expense (565) (403) (162) (40) %

Interest income 30 26 4 15 %

Equity in earnings (losses)

Equity in earnings

9 18 (9) (50) %

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.

($ in millions) 2022 2021 Change 2022 vs.

(Provision) benefit for income taxes

Gains and other income, net increased primarily due to a gain on the sale of a hotel in the Caribbean & Latin America region ($24 million).

Interest expense increased primarily due to higher commercial paper borrowings and interest rates ($71 million), higher debt balances driven by Senior Notes issuances, net of maturities ($70 million), and higher interest rates on floating rate debt, including the effect of interest rate swaps ($19 million).

Equity in earnings decreased primarily due to gains recorded in the prior year on the sale of properties held by equity method investees ($23 million).

($ in millions)

2023 2022 Change 2023 vs.

Provision for income taxes

$ (295) $ (756) $ 461 61 %

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).

Our tax provision decreased in 2023, compared to our tax provision in 2022, primarily due to intellectual property restructuring transactions completed during 2023 resulting in non-U.S.

tax benefits ($228 million), the release of a tax valuation allowance as the Company concluded it is more likely than not to recognize non U.S.

tax benefits ($223 million), and the current year release of tax reserves ($103 million), which was mostly due to the completion of a prior year tax audit.

The decrease was partially offset by the increase in operating income ($61 million).

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.

The following discussion presents an analysis of the operating results of our reportable business segments.

Also see the “Business Trends” section above for further discussion.

($ in millions)

2023 2022 Change 2023 vs.

Segment revenues $ 17,696 $ 15,753 $ 1,943 12 %

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& 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;

• $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);

• $313 million of higher gross fee revenues, primarily reflecting higher RevPAR driven by increases in both ADR and occupancy, unit growth, and higher profits at certain managed hotels;

• $73 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting $57 million of higher termination fees, primarily related to one development project, and a $31 million estimated monetary payment recorded in 2022 related to a portfolio of 12 leased hotels;

partially offset by:

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

• $77 million of lower cost reimbursement revenue, net of reimbursed expenses.

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);

• $35 million of higher cost reimbursement revenue, net of reimbursed expenses;

• $373 million of higher gross fee revenues, primarily reflecting higher profits at certain managed hotels, higher RevPAR driven by increases in both occupancy and ADR in all regions, and unit growth, partially offset by net unfavorable foreign exchange rates;

• $24 million of higher gains and other income, net, primarily reflecting a gain on the sale of a hotel in the Caribbean & Latin America region ($24 million);

• $3 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at our owned and leased properties ($43 million), partially offset by subsidies received in 2022 for certain of our leased hotels under German government COVID-19 assistance programs ($29 million);

partially offset by:

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

• $32 million of lower cost reimbursement revenue, net of reimbursed expenses;

• $55 million of higher general, administrative, and other expenses, primarily reflecting higher litigation accruals and higher compensation costs.

LIQUIDITY AND CAPITAL RESOURCES

Our Credit Facility

In the 2022 fourth quarter, we amended and restated our $4.5 billion multicurrency revolving credit agreement (the “Credit Facility”).

We are party to a $4.5 billion multicurrency revolving credit agreement (the “Credit Facility”).

Available borrowings under the Credit Facility support our commercial paper program and general corporate needs.

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We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating.

We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis.

We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings (which generally have short-term maturities of 45 days or less) as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis.

The Credit Facility expires on December 14, 2027.

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Cash from Operations

Net cash provided by operating activities increased by $1,186 million in 2022 compared to 2021, primarily due to higher net income (adjusted for non-cash items and the prior year loss on extinguishment of debt), partially offset by higher cash paid for income taxes and working capital changes driven by accounts receivable timing.

Cash inflow from our Loyalty Program in 2020 included $920 million of cash received from the prepayment of certain future revenues under the 2020 amendments to our existing U.S.-issued co-branded credit card agreements, which reduced in both 2021 and 2022, and will in the future reduce, the amount of cash we receive from these card issuers.

We expect such reductions to end by year-end 2023.

Net cash provided by operating activities increased by $807 million in 2023 compared to 2022, primarily due to higher net income (adjusted for non-cash items), working capital changes driven by accounts receivable timing, and higher cash generated by our Loyalty Program, partially offset by higher cash paid for income taxes.

Cash inflow from our Loyalty Program in 2020 included $920 million of cash received from the prepayment of certain future revenues under the 2020 amendments to our existing U.S.-issued co-branded credit card agreements, which reduced the amount of cash we received from these card issuers in subsequent years, until such reductions ended as of year-end 2023.

Our ratio of current assets to current liabilities was 0.4 to 1.0 at year-end 2023 and 0.5 to 1.0 at year-end 2022.

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We made capital and technology expenditures of $452 million in 2023 and $332 million in 2022.

Capital and technology expenditures in 2022 increased by $149 million compared to 2021, primarily reflecting higher spending on improvements to our worldwide technology systems.

We expect capital expenditures and other investments will total approximately $850 million to $1 billion for 2023, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities (including approximately $300 million for maintenance capital spending).

This estimate also includes $100 million of investment spending related to the City Express brand acquisition discussed in Note 3, which we currently expect to close in the first half of 2023, and approximately $160 million of renovation spending on hotels that we expect to sell after renovations are complete.

Over time, we have sold lodging properties, both completed and under development, subject to long-term management agreements.

Capital and technology expenditures in 2023 increased by $120 million compared to 2022, primarily due to higher spending on our worldwide technology systems transformation, the overwhelming portion of which is expected to be reimbursed over time.

We also had cash outflows of $101 million in 2023 due to the City Express brand acquisition, which we discuss in Note 3.

We expect capital expenditures and other investments will total approximately $1.0 billion to $1.2 billion for 2024, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities (including approximately $250 million for maintenance capital spending).

Our anticipated capital and technology expenditures include $200 million of spending related to our option to purchase the land underlying the Sheraton Grand Chicago, which we discuss in Note 7.

Dispositions.

Property and asset sales generated $71 million of cash proceeds in 2023 and $1 million in 2022.

Over time, we have sold lodging properties, both completed and under development, generally subject to long-term management agreements.

The ability of third-party purchasers to raise the debt and equity capital necessary to acquire such properties depends in part on the perceived risks in the lodging industry and other constraints inherent in the capital markets.

We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations.

We have made, and expect to continue making, selective and opportunistic investments to add units to our lodging business, which may include property acquisitions and renovations, new construction, loans, guarantees, and equity

Over time, we seek to minimize capital invested in our business through asset sales subject to long-term management or franchise agreements.

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From time to time, we make loans to owners of hotels that we operate or franchise.

Loan collections, net of loan advances, amounted to $3 million in 2022, compared to net collections of $27 million in 2021.

At year-end 2022, we had $162 million of senior, mezzanine, and other loans outstanding, compared to $153 million outstanding at year-end 2021.

Loan advances, net of loan collections, amounted to $16 million in 2023, compared to net collections of $3 million in 2022.

At year-end 2023, we had $169 million of loans outstanding, compared to $162 million outstanding at year-end 2022.

Financing Activities Cash Flows

Debt decreased by $74 million in 2022, to $10,064 million at year-end 2022 from $10,138 million at year-end 2021, primarily due to lower outstanding Credit Facility borrowings ($1,050 million), the maturity of our Series Q Notes ($399 million), the maturity of our Series DD Notes ($224 million), and the redemption of our Series L Notes ($173 million), partially offset by the issuance of our Series JJ Notes ($983 million) and higher outstanding commercial paper borrowings ($868 million).

See Note 9 for additional information on the Senior Notes issuance and redemption.

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.

Debt increased by $1,809 million in 2023, to $11,873 million at year-end 2023 from $10,064 million at year-end 2022, primarily due to the issuance of our Series LL Notes and Series MM Notes ($1,135 million) and Series KK Notes ($783 million), and higher outstanding commercial paper borrowings ($546 million), partially offset by the maturity of our Series Z Notes and Series U Notes ($350 million and $291 million, respectively).

See Note 9 for additional information on Senior Notes issuances.

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

At year-end 2023, our long-term debt had a weighted average interest rate of 4.5 percent and a weighted average maturity of approximately 5.0 years.

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For additional information, see “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in Part II, Item 5.

Our Board of Directors declared the following quarterly cash dividends in 2022:

Our Board declared the following quarterly cash dividends in 2023:

(1) $0.40 per share declared on February 10, 2023 and paid on March 31, 2023 to stockholders of record on February 24, 2023;

(2) $0.52 per share declared on May 12, 2023 and paid on June 30, 2023 to stockholders of record on May 26, 2023;

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and (4) $0.52 per share declared on November 9, 2023 and paid on December 29, 2023 to stockholders of record on November 22, 2023.

Our Board of Directors declared a cash dividend of $0.40 per share on February 10, 2023, payable on March 31, 2023 to stockholders of record on February 24, 2023.

Our Board declared a cash dividend of $0.52 per share on February 8, 2024, payable on March 29, 2024 to stockholders of record on February 22, 2024.

We expect to continue to return cash to stockholders through a combination of share repurchases and cash dividends.

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• The Company also had guarantees, a contingent purchase obligation, commitments, and letters of credit as of year-end 2023, which are discussed in Note 7.

The majority of our guarantee commitments are not expected to be funded within the next 12 months from year-end 2022.

With the exception of the Sheraton Grand Chicago put option discussed in Note 7, the majority of our remaining guarantee commitments are not expected to be funded within the next 12 months from year-end 2023.

In addition to the purchase obligations discussed in Note 7, in the normal course of business, we enter into purchase commitments and incur other obligations to manage the daily operating needs of the hotels that we manage.

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During 2023, we evaluated our intangibles and long-lived asset groups for impairment and did not record any material impairment charges.

The estimated fair values of all our indefinite-lived intangible assets significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.

The estimated fair values

of all our indefinite-lived intangible assets significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis