What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2023-11-02 · 122 added, 183 removed, 144 unchanged (68% of the section changed)

8 unchanged sentences

our expectations regarding our ability to meet our liquidity requirements;

our capital expenditures and other investment spending expectations;

our capital expenditures and other investment spending and reimbursement expectations;

our expectations regarding future dividends and share repurchases;

6 unchanged sentences

We discuss our operations in the following reportable business segments:

& Canada and (2) International.

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

Our Caribbean & Latin America (“CALA”) operating segment does not meet the applicable criteria for separate disclosure as a reportable business segment, and as such, we 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.

1 unchanged sentence

Incentive management fees are typically calculated as a percentage of a hotel profitability measure, and, in many cases (particularly in our U.S.

& Canada, Europe, and Caribbean & Latin America regions), are subject to a specified owner return.

Under our franchise agreements, franchise fees are typically calculated as a percentage of property-level revenue or a portion thereof.

Additionally, we earn franchise fees for the use of our intellectual property, such as fees from our co-branded credit card, timeshare, and residential programs.

& Canada, Europe, and CALA regions), are subject to a specified owner return.

Under our franchise and license agreements for most properties, franchise fees are calculated as a percentage of property-level revenue or a portion thereof.

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 non-hotel licensing fees, which we refer to as “non-RevPAR related franchise fees.”

Performance Measures

2 unchanged sentences

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, 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.

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

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

RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated.

Unless otherwise stated, all changes refer to year-over-year changes for the comparable period.

Comparisons to prior periods are on a constant U.S.

1 unchanged sentence

We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

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

We define our comparable properties as our properties that were open and operating under one of our hotel brands since the beginning of the last full calendar year (since January 1, 2023 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.

Our comparable properties also exclude MGM Collection with Marriott Bonvoy, Design Hotels, The Ritz-Carlton Yacht Collection, and timeshare properties.

Business Trends

We saw strong global RevPAR improvement during the 2023 third quarter and 2023 first three quarters compared to the same periods in 2022.

For the 2023 third quarter, worldwide RevPAR increased 8.8 percent compared to the 2022 third quarter, reflecting ADR growth of 4.1 percent and occupancy improvement of 3.2 percentage points.

For the 2023 first three quarters, worldwide RevPAR increased 17.5 percent compared to the 2022 first three quarters, reflecting ADR growth of 6.7 percent and occupancy improvement of 6.4 percentage points.

The increases in RevPAR were driven by improvement in all customer segments, including robust leisure demand as well as strengthening group and business transient demand as compared to the same periods in 2022.

& Canada, RevPAR improved 4.3 percent in the 2023 third quarter compared to the 2022 third quarter, driven by ADR growth of 2.7 percent and occupancy improvement of 1.1 percentage points.

In the 2023 first three quarters, U.S.

& Canada RevPAR improved 10.8 percent compared to the 2022 first three quarters, driven

by ADR growth of 5.2 percent and occupancy improvement of 3.5 percentage points.

While demand continued to be strong in the 2023 third quarter, the year-over-year growth in RevPAR continued to stabilize.

Internationally, RevPAR improved 21.8 percent in the 2023 third quarter and 38.7 percent in the 2023 first three quarters compared to the same periods in 2022.

The improvement in RevPAR compared to 2022 was driven by strengthening demand, particularly in Greater China and Asia Pacific excluding China, where various geographic markets were impacted by COVID-19 and government-imposed travel restrictions during the 2022 comparable periods.

Our business is subject to the effects of changes in global and regional economic, geopolitical and other conditions and these conditions can change rapidly.

We continue to monitor these conditions, and although we are not currently seeing signs of a slowdown in lodging demand in most markets, the lodging booking window is short and trends can change quickly.

We saw solid global RevPAR improvement during the 2024 first quarter compared to the same period in 2023.

For the 2024 first quarter, worldwide RevPAR increased 4.2 percent compared to the 2023 first quarter, reflecting

ADR growth of 2.8 percent and occupancy improvement of 0.9 percentage points.

The increase in RevPAR was primarily driven by strong year-over-year demand growth in our International regions.

& Canada, where demand has normalized, RevPAR increased 1.5 percent in the 2024 first quarter, led by strong group business.

In EMEA, RevPAR growth of 10.1 percent in the 2024 first quarter was driven by strong demand in most countries across the region, reflecting strength across most customer segments.

In Greater China, RevPAR increased 6.0 percent with growth in demand and ADR.

In APEC, RevPAR grew 16.5 percent, driven by growth in leisure and business travel, including an increase in inbound travel into the region compared to the 2023 first quarter.

In CALA, RevPAR grew 11.6 percent, driven by strong leisure demand at resorts in the Caribbean and Mexico.

Starwood Data Security Incident

8 unchanged sentences

System Growth and Pipeline

At the end of the 2023 third quarter, our system had 8,675 properties (1,581,002 rooms), compared to 8,288 properties (1,525,407 rooms) at year-end 2022 and 8,162 properties (1,507,350 rooms) at the end of the 2022 third quarter.

The increase compared to year-end 2022 reflected gross additions of 430 properties (61,304 rooms), including 149 properties (17,300 rooms) from the City Express acquisition, and deletions of 42 properties (5,840 rooms).

Our 2023 first three quarters gross room additions included approximately 47,300 rooms located outside U.S.

& Canada and approximately 10,500 rooms converted from competitor brands.

At the end of the 2023 third quarter, we had nearly 557,000 hotel rooms in our development pipeline, which includes roughly 40,300 hotel rooms approved for development but not yet under signed contracts.

Approximately 238,000 hotel rooms in the pipeline, including approximately 37,000 rooms from the exclusive, long-term strategic licensing agreement with MGM Resorts International that we announced in July 2023, were under construction as of the end of the 2023 third quarter.

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

At the end of the 2024 first quarter, our system had 8,861 properties (1,643,172 rooms), compared to 8,785 properties (1,597,380 rooms) at year-end 2023 and 8,353 properties (1,534,072 rooms) at the end of the 2023 first quarter.

In the 2024 first quarter, we added roughly 46,000 net rooms, including the addition of approximately 37,000 rooms from our exclusive, long-term strategic licensing agreement with MGM Resorts International.

At the end of the 2024 first quarter, we had over 3,400 hotels and nearly 547,000 rooms in our development pipeline, which includes roughly 27,000 rooms approved for development but not yet under signed contracts.

More than 202,000 rooms in the pipeline, or 37 percent, were under construction at the end of the 2024 first quarter.

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

We currently expect full year 2024 net rooms growth of approximately 5.5 to 6.0 percent.

This estimate excludes the anticipated addition of rooms to our system under our agreement with MGM Resorts International discussed above, which we now expect to be added in early 2024.

Properties and Rooms

At September 30, 2023, we operated, franchised, and licensed the following properties and rooms:

Managed Franchised/Licensed Owned/Leased Residential Total

Properties Rooms Properties Rooms Properties Rooms Properties Rooms Properties Rooms

& Canada 629 215,952 5,217 747,617 14 4,656 67 7,166 5,927 975,391

International 1,410 358,039 1,155 210,458 37 8,776 52 5,444 2,654 582,717

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

Yacht — — 1 149 — — — — 1 149

Total 2,039 573,991 6,466 980,969 51 13,432 119 12,610 8,675 1,581,002

The following table shows our properties and rooms by ownership type.

Properties Rooms

March 31, 2024 March 31, 2023 vs.

March 31, 2023 March 31, 2024 March 31, 2023 vs.

March 31, 2023

1,969 1,993 (24) (1) % 566,944 561,197 5,747 1 %

Franchised/Licensed/Other (1)

6,716 6,192 524 8 % 1,049,173 947,119 102,054 11 %

50 52 (2) (4) % 13,111 13,865 (754) (5) %

126 116 10 9 % 13,944 11,891 2,053 17 %

8,861 8,353 508 6 % 1,643,172 1,534,072 109,100 7 %

(1) In addition to franchised, includes timeshare, The Ritz-Carlton Yacht Collection, and certain license and other agreements.

Lodging Statistics

The following tables present RevPAR, occupancy, and ADR statistics for comparable properties.

The following table presents 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 September 30, 2023 and Change vs.

Three Months Ended September 30, 2022

Three Months Ended March 31, 2024 and Change vs.

Three Months Ended March 31, 2023

RevPAR Occupancy Average Daily Rate

4 unchanged sentences

$ 258.76 2.1 %

Greater China $ 93.41 48.6 % 72.5 % 14.5 % pts.

$ 128.93 18.9 %

Asia Pacific excluding China $ 116.21 35.2 % 70.7 % 9.3 % pts.

$ 164.45 17.5 %

Caribbean & Latin America $ 138.64 2.4 % 61.1 % 2.4 % pts.

$ 226.76 (1.6) %

Europe $ 147.12 5.5 % 61.6 % 1.2 % pts.

2 unchanged sentences

$ 207.97 6.9 %

International - All (1)

$ 121.93 25.8 % 70.5 % 9.0 % pts.

$ 172.91 9.7 %

Worldwide (2)

$ 142.51 13.8 % 70.6 % 5.7 % pts.

$ 201.76 4.6 %

Comparable Systemwide Properties

& Canada $ 133.92 4.3 % 73.1 % 1.1 % pts.

$ 183.28 2.7 %

Greater China $ 82.48 6.0 % 65.2 % 2.3 % pts.

$ 126.42 2.3 %

Asia Pacific excluding China $ 117.73 36.4 % 70.4 % 8.6 % pts.

$ 167.12 19.7 %

Caribbean & Latin America $ 121.87 2.8 % 62.4 % 2.5 % pts.

$ 195.43 (1.4) %

Europe $ 175.50 9.8 % 74.7 % 3.2 % pts.

$ 235.04 5.0 %

Middle East & Africa $ 98.24 20.2 % 65.3 % 3.5 % pts.

$ 150.50 13.8 %

International - All (1)

Asia Pacific excluding China

$ 123.78 16.1 % 72.0 % 5.5 % pts.

$ 171.86 7.2 %

Worldwide (2)

Caribbean & Latin America

$ 221.29 9.6 % 68.0 % 2.0 % pts.

$ 325.25 6.4 %

Nine Months Ended September 30, 2023 and Change vs.

Nine Months Ended September 30, 2022

RevPAR Occupancy Average Daily Rate

2022 2023 vs.

Comparable Company-Operated Properties

& Canada $ 173.39 12.4 % 69.9 % 4.8 % pts.

$ 248.07 4.7 %

Greater China $ 89.14 78.2 % 68.9 % 22.0 % pts.

$ 129.41 21.2 %

Asia Pacific excluding China $ 114.87 58.1 % 68.5 % 14.3 % pts.

$ 167.63 25.2 %

Caribbean & Latin America $ 165.92 17.8 % 63.4 % 4.9 % pts.

$ 261.59 8.7 %

Europe $ 188.49 25.0 % 70.5 % 9.0 % pts.

$ 267.38 9.0 %

Middle East & Africa $ 118.53 17.8 % 66.2 % 4.0 % pts.

$ 178.96 10.7 %

International - All (1)

7 unchanged sentences

$ 182.63 1.9 %

Greater China $ 83.53 77.9 % 67.8 % 22.2 % pts.

Europe $ 105.64 7.6 % 59.0 % 3.5 % pts.

$ 179.02 1.2 %

Asia Pacific excluding China $ 115.15 58.7 % 68.4 % 13.6 % pts.

Middle East & Africa $ 134.09 13.3 % 68.5 % 2.7 % pts.

$ 195.75 8.8 %

Caribbean & Latin America $ 141.96 18.2 % 64.4 % 5.2 % pts.

Greater China $ 76.87 6.0 % 64.4 % 2.3 % pts.

$ 119.33 2.2 %

Europe $ 146.12 25.8 % 68.6 % 9.8 % pts.

Asia Pacific excluding China

$ 123.02 16.5 % 71.3 % 5.1 % pts.

$ 172.51 8.2 %

Middle East & Africa $ 111.67 20.3 % 65.3 % 3.7 % pts.

Caribbean & Latin America

$ 185.36 11.6 % 69.7 % 3.7 % pts.

$ 265.96 5.6 %

5 unchanged sentences

$ 179.99 2.8 %

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

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

(2) Includes U.S.

1 unchanged sentence

CONSOLIDATED RESULTS

Our consolidated results in the 2023 third quarter and 2023 first three quarters improved compared to the 2022 third quarter and 2022 first three quarters 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 the 2023 third quarter compared to the 2022 third quarter and for the 2023 first three quarters compared to the 2022 first three quarters.

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 Change 2023 vs.

2022 September 30, 2023 September 30, 2022 Change 2023 vs.

The discussion below presents an analysis of our consolidated results of operations for the 2024 first quarter compared to the 2023 first quarter.

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

Three Months Ended

($ in millions)

March 31, 2024 March 31, 2023 Change 2024 vs.

Base management fees $ 313 $ 293 $ 20 7 %

4 unchanged sentences

Net fee revenues $ 1,187 $ 1,112 $ 75 7 %

The increases in base management fees in the 2023 third quarter and 2023 first three quarters primarily reflected higher RevPAR.

The increase in the 2023 first three quarters was also due to unit growth ($19 million), partially offset by net unfavorable foreign exchange rates ($18 million).

The increases in franchise fees in the 2023 third quarter and 2023 first three quarters primarily reflected higher RevPAR, unit growth ($29 million and $73 million, respectively), and higher co-branded credit card fees ($15 million and $43 million, respectively).

The increases in incentive management fees in the 2023 third quarter and 2023 first three quarters primarily reflected higher profits at many managed hotels.

The increase in base management fees in the 2024 first quarter primarily reflected higher RevPAR.

The increase in franchise fees in the 2024 first quarter primarily reflected unit growth ($22 million), higher RevPAR, and higher non-RevPAR related franchise fees ($11 million).

Non-RevPAR related franchise fees of $208 million in the 2024 first quarter increased primarily due to higher co-branded credit card fees ($14 million).

The increase in incentive management fees in the 2024 first quarter primarily reflected higher profits at International managed hotels.

Owned, Leased, and Other

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 Change 2023 vs.

2022 September 30, 2023 September 30, 2022 Change 2023 vs.

Three Months Ended

($ in millions)

March 31, 2024 March 31, 2023 Change 2024 vs.

Owned, leased, and other revenue $ 357 $ 356 $ 1 — %

1 unchanged sentence

Owned, leased, and other, net $ 71 $ 75 $ (4) (5) %

Owned, leased, and other revenue, net of direct expenses, increased in the 2023 third quarter primarily due to an estimated monetary payment of $19 million recorded in the 2022 third quarter related to a portfolio of 12 leased hotels in the U.S.

Owned, leased, and other revenue, net of direct expenses, increased in the 2023 first three quarters primarily due to stronger results at our owned and leased properties and an estimated monetary payment of $31 million recorded in the 2022 first three quarters related to a portfolio of 12 leased hotels in the U.S.

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

Cost Reimbursements

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 Change 2023 vs.

2022 September 30, 2023 September 30, 2022 Change 2023 vs.

Three Months Ended

($ in millions)

March 31, 2024 March 31, 2023 Change 2024 vs.

Cost reimbursement revenue $ 4,433 $ 4,147 $ 286 7 %

1 unchanged sentence

Cost reimbursements, net $ (68) $ 11 $ (79) (718) %

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 rei mbursemen ts 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.

The increases in cost reimbursements, net in the 2023 third quarter and 2023 first three quarters primarily reflected Loyalty Program activity, primarily due to higher program revenues, and higher revenues, net of expenses, for our centralized programs and services.

The increase in the 2023 first three quarters was partially offset by higher expenses related to our insurance program.

The decrease in cost reimbursements, net in the 2024 first quarter primarily reflected higher Loyalty Program expenses, as well as lower revenues, net of expenses, for our centralized programs and services.

Other Operating Expenses

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 Change 2023 vs.

2022 September 30, 2023 September 30, 2022 Change 2023 vs.

Three Months Ended

($ in millions)

March 31, 2024 March 31, 2023 Change 2024 vs.

Depreciation, amortization, and other $ 45 $ 44 $ 1 2 %

1 unchanged sentence

Merger-related charges and other 8 1 7 700 %

Merger-related charges and other expenses increased in the 2023 first three quarters primarily due to the Data Security Incident discussed in Note 5.

General, administrative, and other expenses increased in the 2024 first quarter primarily due to higher compensation costs.

Non-Operating Income (Expense)

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 Change 2023 vs.

2022 September 30, 2023 September 30, 2022 Change 2023 vs.

Three Months Ended

($ in millions)

March 31, 2024 March 31, 2023 Change 2024 vs.

Gains and other income, net $ 4 $ 3 $ 1 33 %

2 unchanged sentences

Equity in earnings — 1 (1) (100) %

Gains and other income, net increased in the 2023 third quarter and 2023 first three quarters primarily due to a gain on the sale of a hotel in the Caribbean & Latin America region ($24 million).

Interest expense increased in the 2023 third quarter and 2023 first three quarters primarily due to higher commercial paper borrowings and interest rates ($23 million and $57 million, respectively) and higher debt balances driven by Senior Notes issuances, net of maturities ($19 million and $48 million, respectively).

The increase in the 2023 first three quarters was also due to higher interest rates on floating rate debt, including the effect of interest rate swaps ($17 million).

Equity in earnings decreased in the 2023 first three quarters primarily due to gains recorded in the prior year on the sale of properties held by equity method investees ($23 million).

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 Change 2023 vs.

2022 September 30, 2023 September 30, 2022 Change 2023 vs.

Interest expense increased in the 2024 first quarter primarily due to higher debt balances driven by Senior Notes issuances, net of maturities ($30 million).

Three Months Ended

($ in millions)

March 31, 2024 March 31, 2023 Change 2024 vs.

Provision for income taxes $ (163) $ (87) $ (76) (87) %

Provision for income taxes decreased by $2 million in the 2023 third quarter primarily due to the prior year tax expense from the completion of tax audits ($27 million), partially offset by the increase in operating income ($23 million).

Provision for income taxes increased by $24 million in the 2023 first three quarters primarily due to the increase in operating income ($133 million) and a shift in earnings to jurisdictions with higher tax rates ($17 million), partially offset by the current year release of tax reserves ($103 million), which was mostly due to the completion of a prior year tax audit, and the prior year tax expense from the completion of tax audits ($27 million).

Provision for income taxes increased by $76 million in the 2024 first quarter primarily due to the prior year release of tax reserves ($103 million), which was mostly due to completion of a tax audit, partially offset by the decrease in operating income ($28 million).

BUSINESS SEGMENTS

Our segment results in the 2023 third quarter and 2023 first three quarters improved compared to the 2022 third quarter and 2022 first three quarters 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 for the 2023 third quarter compared to the 2022 third quarter and for the 2023 first three quarters compared to the 2022 first three quarters.

Three Months Ended Nine Months Ended

(in millions) September 30, 2023 September 30, 2022 Change 2023 vs.

2022 September 30, 2023 September 30, 2022 Change 2023 vs.

Segment revenues $ 4,333 $ 4,000 $ 333 8 % $ 13,113 $ 11,388 $ 1,725 15 %

The following discussion presents an analysis of the operating results of our reportable business segments for the 2024 first quarter compared to the 2023 first quarter.

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

Three Months Ended

($ in millions)

March 31, 2024 March 31, 2023 Change 2024 vs.

Segment net fee revenues

$ 665 $ 656 $ 9 1 %

Segment profit 625 657 (32) (5) %

International

Segment revenues 1,125 908 217 24 % 3,257 2,458 799 33 %

Segment net fee revenues

115 102 13 13 %

Segment profit 81 78 3 4 %

Greater China

Segment net fee revenues

Segment profit 51 46 5 11 %

Segment net fee revenues

86 66 20 30 %

Segment profit 72 56 16 29 %

Properties Rooms

September 30, 2023 September 30, 2022 vs.

September 30, 2022 September 30, 2023 September 30, 2022 vs.

September 30, 2022

& Canada 5,927 5,818 109 2 % 975,391 961,765 13,626 1 %

International 2,654 2,252 402 18 % 582,717 522,884 59,833 11 %

Third Quarter

& Canada 2023 third quarter segment profit increased primarily due to:

• $41 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy, as well as unit growth;

• $13 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting a $19 million estimated monetary payment recorded in the 2022 third quarter related to a portfolio of 12 leased hotels in the U.S.

First Three Quarters

& Canada 2023 first three quarters segment profit increased primarily due to:

• $292 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy, unit growth, and higher profits at certain managed hotels;

• $38 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting a $31 million estimated monetary payment recorded in the 2022 first three quarters related to a portfolio of 12 leased hotels in the U.S.

partially offset by:

• $26 million of lower cost reimbursement revenue, net of reimbursed expenses.

International

Third Quarter

International 2023 third quarter segment profit increased primarily due to:

• $78 million of higher gross fee revenues, primarily reflecting higher profits at certain managed hotels and higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in nearly all regions;

• $25 million of higher gains and other income, net, primarily reflecting a gain on the sale of a hotel property in the Caribbean & Latin America region ($24 million).

First Three Quarters

International 2023 first three quarters segment profit increased primarily due to:

• $294 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in all regions, higher profits at certain managed hotels, and unit growth, partially offset by net unfavorable foreign exchange rates;

• $22 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);

partially offset by:

• $28 million of lower cost reimbursement revenue, net of reimbursed expenses;

• $2 million of lower owned, leased, and other revenue, net of direct expenses, primarily reflecting subsidies received for certain of our leased hotels in the 2022 first three quarters under German government COVID-19 assistance programs, partially offset by stronger results at our owned and leased properties.

March 31, 2024 March 31, 2023 vs.

March 31, 2023 March 31, 2024 March 31, 2023 vs.

March 31, 2023

6,013 5,880 133 2 % 1,019,920 968,919 51,001 5 %

1,150 1,059 91 9 % 220,113 207,811 12,302 6 %

Greater China

533 480 53 11 % 160,972 148,434 12,538 8 %

578 514 64 12 % 132,480 119,432 13,048 11 %

In the 2024 first quarter, net fee revenue grew across all segments, compared to the same period in 2023, primarily reflecting higher RevPAR and unit growth.

(See the Lodging Statistics and Properties and Rooms tables above for more information.) Segment profits also reflected higher general, administrative, and other expenses, primarily due to higher compensation costs, compared to the 2023 first quarter .

Additionally, U.S.

segment profit reflects $24 million of lower cost reimbursement revenue, net of reimbursed expenses compared to the 2023 first quarter .

LIQUIDITY AND CAPITAL RESOURCES

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 the end of the 2023 third quarter, our long-term debt had a weighted average interest rate of 4.4 percent and a weighted average maturity of approximately 5.2 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 2023 third quarter.

At the end of the 2024 first quarter, our long-term debt had a weighted average interest rate of 4.5 percent and a weighted average maturity of approximately 5.3 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 2024 first quarter.

Sources of Liquidity

4 unchanged sentences

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.

8 unchanged sentences

We do not expect that fluctuations in the demand for commercial paper will affect our liquidity, given our borrowing capacity under the Credit Facility and access to capital markets.

Cash, cash equivalents, and restricted cash totaled $743 million at September 30, 2023, an increase of $218 million from year-end 2022, primarily due to net cash provided by operating activities ($2,419 million), Senior Notes issuances, net of repayments ($1,627 million), net commercial paper borrowings ($100 million), and the sale of a hotel in the Caribbean & Latin America region ($61 million), partially offset by share repurchases ($2,988 million), dividends paid ($435 million), capital and technology expenditures ($318 million), financing outflows for

employee stock-based compensation withholding taxes ($105 million), and the City Express asset acquisition ($102 million).

Net cash provided by operating activities increased by $497 million in the 2023 first three quarters compared to the 2022 first three quarters, 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 in both the 2023 first three quarters and 2022 first three quarters, 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.

Our ratio of current assets to current liabilities was 0.5 to 1.0 at the end of the 2023 third quarter.

Sources and Uses of Cash

Cash, cash equivalents, and restricted cash totaled $448 million at March 31, 2024, an increase of $82 million from year-end 2023, primarily due to Senior Notes issuances ($1,468 million) and net cash provided by operating activities ($779 million), partially offset by share repurchases ($1,144 million), net commercial paper repayments ($685 million), dividends paid ($151 million), financing outflows for employee stock-based compensation withholding taxes ($121 million), and capital and technology expenditures ($109 million).

Net cash provided by operating activities decreased by $108 million in the 2024 first quarter compared to the 2023 first quarter, primarily due to lower net income (adjusted for non-cash items) and working capital changes driven by accounts receivable timing.

Our ratio of current assets to current liabilities was 0.4 to 1.0 at the end of the 2024 first 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 $318 million in the 2023 first three quarters and $192 million in the 2022 first three quarters.

Capital and technology expenditures in the 2023 first three quarters increased by $126 million compared to the 2022 first three quarters, primarily reflecting higher spending on improvements to our worldwide technology systems, the overwhelming portion of which is expected to be reimbursed over time.

We expect capital expenditures and other investments will total approximately $900 million to $950 million for the 2023 full year, including capital and technology expenditures, the completed City Express acquisition, loan advances, contract acquisition costs, and other investing activities (including approximately $200 million for maintenance capital spending).

We made capital and technology expenditures of $109 million in the 2024 first quarter and $95 million in the 2023 first quarter.

We expect capital expenditures and other investments will total approximately $1.0 billion to $1.2 billion for the 2024 full year, 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 5.

Share Repurchases and Dividends

We repurchased 4.8 million shares of our common stock for $950 million in the 2023 third quarter.

Year-to-date through October 31, 2023, we repurchased 18.3 million shares for $3.3 billion.

We repurchased 4.8 million shares of our common stock for $1.2 billion in the 2024 first quarter.

Year-to-date through April 26, 2024, we repurchased 6.2 million shares for $1.5 billion.

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

Our Board of Directors declared the following quarterly cash dividends in 2023 to date:

(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;

and (3) $0.52 per share declared on August 3, 2023 and paid on September 29, 2023 to stockholders of record on August 17, 2023.

On February 8, 2024, our Board of Directors declared a quarterly cash dividend of $0.52 per share, which was paid 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.

Material Cash Requirements

As of the end of the 2023 third quarter, there have been no material changes to our cash requirements as disclosed in our 2022 Form 10-K.

As of the end of the 2024 first quarter, there have been no material changes to our cash requirements as disclosed in our 2023 Form 10-K.

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2023 Form 10-K for more information about our cash requirements.

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

At September 30, 2023, 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 $243 million, of which $108 million is payable within the next 12 months from September 30, 2023.

At March 31, 2024, projected Deemed Repatriation Transition Tax payments under the 2017 Tax Cuts and Jobs Act totaled $243 million, of which $108 million is payable within the next 12 months from March 31, 2024.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

1 unchanged sentence

We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our 2023 Form 10-K.

have made no material changes to our critical accounting policies or the methodologies or assumptions that we apply under them.

We have made no material changes to our critical accounting policies or the methodologies or assumptions that we apply under them.

Quantitative and Qualitative Disclosures About Market Risk

2 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis