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Item 7. Management’s Discussion and Analysis

2025-02-11 compared with 2024-02-13 · 134 added, 134 removed, 175 unchanged (60% 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 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.

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

We discuss our operations in the following reportable business segments:

& 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.

Base management fees are typically calculated as a percentage of property-level revenue.

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, 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.”

& 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 accounting criteria for separate disclosure as a reportable business segment, and as such, we include its results in “Unallocated corporate and other.”

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

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.

In many cases (particularly in our U.S.

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

Under our hotel franchising arrangements, we generally receive an initial application fee and continuing royalty fees, which are typically based on a percentage of room revenues, plus for certain brands, a percentage

of food and beverage revenues.

We also have license and other agreements with third parties for certain offerings, such as for our timeshare properties, MGM Collection with Marriott Bonvoy, Design Hotels, and The Ritz-Carlton Yacht Collection, under which we receive royalty fees and certain other fees.

Additionally, we earn fees for other uses of our intellectual property, including primarily co-branded credit card fees, as well as residential branding fees and certain other licensing fees.

Performance Measures

We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing room sales for comparable properties by room nights available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties.

We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing property level room revenue by total rooms available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues.

RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our fee revenue.

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 total rooms sold by total rooms available for the period, measures the utilization of a property’s available capacity.

ADR, which we calculate by dividing property level room revenue 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.

dollar basis.

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:

dollar basis, which we calculate by applying exchange rates for the current period to the prior comparable period.

We believe constant dollar analysis provides valuable information regarding the performance of hotels in our system as it removes currency fluctuations from the presentation of such results.

We define our comparable properties as hotels in our system that were open and operating under one of our 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.

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

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

For 2024, we had 5,439 comparable U.S.

& Canada properties and 1,741 comparable International properties.

Business Trends

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.

We saw solid global RevPAR growth during 2024 compared to 2023.

In 2024, worldwide RevPAR increased 4.3 percent compared to 2023, reflecting ADR growth of 2.8 percent and occupancy improvement of 1.0 percentage point.

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

& Canada, where demand has normalized, RevPAR increased 3.0 percent in 2024, led by strong demand from group as well as strong demand from transient customer segments across our brand tiers.

In EMEA, RevPAR growth of 9.1 percent in 2024 was driven by strong demand in most countries across the region, aided by the 2024 Paris Olympics and other special events.

In APEC, RevPAR increased 12.9 percent in 2024, driven by strong demand, including an increase in inbound demand into the region.

In CALA, RevPAR increased 8.8 percent in 2024, driven by strong demand throughout the region.

In Greater China, RevPAR declined 2.3 percent in 2024 due to lower domestic demand as a result of macro-economic conditions and an increase in outbound travel.

In 2024, we launched a comprehensive initiative to enhance our effectiveness and efficiency across the Company.

At this point in the process, we expect this initiative to yield $80 million to $90 million of annual general and administrative cost reductions beginning in 2025.

These efforts are also anticipated to deliver cost savings to our hotel owners.

As part of these efforts, in the second half of 2024, we implemented a voluntary retirement program for certain above-property associates, and some above-property roles in the organization were eliminated or redefined.

We substantially completed this initiative as of year-end 2024.

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”).

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.

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 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.

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Our system grew from 8,785 properties (1,597,380 rooms) at year-end 2023 to 9,361 properties (1,706,331 rooms) at year-end 2024.

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).

The increase compared to year-end 2023 reflected gross additions of 666 properties (123,389 rooms), including the addition of 16 properties (approximately 38,000 rooms) from our exclusive, long-term strategic licensing agreement with MGM Resorts International and 163 properties (approximately 9,000 rooms) from our long-term agreement with Sonder Holdings Inc., and deletions of 90 properties (14,572 rooms).

Our 2024 gross room additions included approximately 52,300 rooms located outside U.S.

& Canada and roughly 75,300 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 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.

At year-end 2024, we had nearly 3,800 properties and over 577,000 rooms in our development pipeline, which includes roughly 29,000 rooms approved for development but not yet under signed contracts.

Our development pipeline includes over 229,000 rooms, or 40 percent, that were under construction or in the process of converting to our system at year-end 2024.

Fifty-five percent of the rooms in our development pipeline are located outside U.S.

In 2024, we signed over 1,200 development deals with hotel owners and other counterparties for nearly 162,000 rooms globally.

Approximately 34 percent of rooms signed were the result of conversion opportunities.

During 2024, we continued to strengthen our luxury portfolio and grow our midscale brands.

In December 2024, we also announced the expansion of our outdoor-focused lodging offerings.

In 2025, we expect net rooms growth of 4 to 5 percent.

Properties and Rooms

At year-end 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 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

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

Yacht — — 1 149 — — — — 1 149

Total 2,046 575,963 6,563 994,354 50 13,115 126 13,948 8,785 1,597,380

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

Properties Rooms

December 31, 2024 December 31, 2023 vs.

December 31, 2023 December 31, 2024 December 31, 2023 vs.

December 31, 2023

1,981 2,046 (65) (3) % 571,889 575,963 (4,074) (1) %

Franchised/Licensed/Other (1)

7,192 6,563 629 10 % 1,104,446 994,354 110,092 11 %

51 50 1 2 % 14,312 13,115 1,197 9 %

137 126 11 9 % 15,684 13,948 1,736 12 %

9,361 8,785 576 7 % 1,706,331 1,597,380 108,951 7 %

(1) In addition to franchised, includes our timeshare properties, MGM Collection with Marriott Bonvoy, Design Hotels, and The Ritz-Carlton Yacht Collection.

Lodging Statistics

The following table presents RevPAR, occupancy, and ADR statistics for comparable properties for 2024, and 2024 compared to 2023.

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

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

RevPAR Occupancy Average Daily Rate

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$ 255.23 2.6 %

Europe $ 215.26 7.0 % 72.1 % 0.7 % pts.

$ 298.73 6.0 %

Middle East & Africa $ 132.47 11.2 % 68.6 % 2.9 % pts.

$ 193.15 6.5 %

Greater China $ 84.57 (2.5) % 68.7 % 1.2 % pts.

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$ 276.82 5.5 %

Europe $ 183.67 21.2 % 70.7 % 7.7 % pts.

$ 259.65 8.0 %

Middle East & Africa $ 128.99 12.5 % 67.6 % 3.2 % pts.

$ 190.71 7.2 %

International - All (1)

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$ 187.14 2.4 %

Europe $ 154.31 7.6 % 70.3 % 2.7 % pts.

$ 219.39 3.5 %

Middle East & Africa $ 123.62 12.1 % 68.0 % 2.8 % pts.

$ 181.72 7.6 %

Greater China $ 78.91 (2.3) % 67.7 % 1.0 % pts.

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$ 231.13 5.8 %

Europe $ 142.88 21.8 % 68.7 % 8.3 % pts.

$ 207.86 7.2 %

Middle East & Africa $ 120.67 14.7 % 66.6 % 2.9 % pts.

$ 181.18 9.7 %

International - All (1)

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$ 183.58 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.

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Net fee revenues $ 5,067 $ 4,736 $ 331 7 %

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.

The increase in base management fees primarily reflected higher RevPAR and unit growth ($26 million).

The increase in franchise fees primarily reflected higher RevPAR, unit growth ($99 million), higher co-branded credit card fees ($59 million), higher residential branding fees ($36 million), and higher fees from properties that converted from managed to franchised ($31 million).

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

In 2024, we earned incentive management fees from 69 percent of our managed hotels worldwide, compared to 68 percent in 2023.

We earned incentive management fees from 31 percent of our U.S.

& Canada managed properties and 85 percent of our International managed properties in 2023, compared to 29 percent in U.S.

& Canada and 76 percent in International in 2022.

In addition, 65 percent of our total incentive management fees in 2023 came from our International managed properties versus 58 percent in 2022.

& Canada managed hotels and 85 percent of our International managed hotels in each of 2024 and 2023.

In addition, 67 percent of our total incentive management fees in 2024 came from our International managed hotels, primarily in EMEA and APEC, versus 65 percent in 2023.

Owned, Leased, and Other

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Owned, leased, and other, net $ 351 $ 399 $ (48) (12) %

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.

Owned, leased, and other revenue, net of direct expenses, decreased primarily due to $65 million of higher termination fees recorded in the prior year, largely related to one development project in U.S.

Cost Reimbursements

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Cost reimbursements, net $ (317) $ (11) $ (306) (2,782) %

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 property owners and franchisees.

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 certain other counterparties.

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 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.

The decrease in cost reimbursements, net primarily reflected lower revenues, net of expenses, for many of our programs and services, and Loyalty Program activity, which incurred higher program expenses.

Other Operating Expenses

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General, administrative, and other 1,074 1,011 63 6 %

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.

Restructuring and merger-related charges 77 60 17 28 %

General, administrative, and other expenses increased primarily due to higher compensation costs ($53 million) and higher guarantee reserves ($22 million).

Restructuring and merger-related charges increased primarily due to $37 million of restructuring charges for employee termination benefits discussed in Note 16 and a $30 million reserve for a loan commitment related to the Company’s acquisition of Starwood, partially offset by $35 million of lower charges related to the Data Security Incident discussed in Note 7.

Non-Operating Income (Expense)

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8 9 (1) (11) %

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).

Gains and other income, net decreased primarily due to a gain recorded in the prior year on the sale of a hotel in the CALA region ($24 million).

Interest expense increased primarily due to higher debt balances driven by Senior Notes issuances, net of maturities ($125 million).

($ in millions)

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$ (776) $ (295) $ (481) (163) %

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).

Our tax provision increased in 2024 primarily due to intellectual property restructuring transactions resulting in non-U.S.

tax benefits in the prior year ($228 million), the prior year 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 prior year release of tax reserves, which was mostly due to the completion of a prior year tax audit ($103 million).

The increase was partially offset by a decrease in pre-tax income ($51 million).

BUSINESS SEGMENTS

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

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

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

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2024 2023 Change 2024 vs.

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

Segment net fee revenues

$ 2,875 $ 2,734 $ 141 5 %

Segment profit 2,640 2,724 (84) (3) %

International

Segment revenues 4,455 3,486 969 28 %

Segment net fee revenues

575 516 59 11 %

Segment profit 512 441 71 16 %

Greater China

Segment net fee revenues

249 265 (16) (6) %

Segment profit 186 208 (22) (11) %

Segment net fee revenues

340 284 56 20 %

Segment profit 280 243 37 15 %

Properties Rooms

December 31, 2024 December 31, 2023 vs.

December 31, 2022 December 31, 2023 December 31, 2022 vs.

December 31, 2023

December 31, 2024 December 31, 2023 vs.

December 31, 2023

6,235 5,965 270 5 % 1,043,224 979,631 63,593 6 %

International

1,295 1,142 153 13 % 234,167 218,167 16,000 7 %

& Canada segment profit increased primarily due to the following:

• $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:

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

International

International segment profit increased primarily due to the following:

• $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:

• $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.

Greater China

589 525 64 12 % 172,388 159,871 12,517 8 %

629 567 62 11 % 143,177 130,158 13,019 10 %

In 2024, net fee revenues grew in U.S.

& Canada, EMEA, and APEC compared to 2023, primarily driven by higher RevPAR and unit growth (see the Lodging Statistics and Properties and Rooms tables above for more information), as well as higher profits at managed hotels.

In Greater China, net fee revenues decreased in 2024 primarily due to lower RevPAR.

& Canada segment profit decreased in 2024 compared to 2023 despite the higher net fee revenues due to $138 million of lower cost reimbursement revenue, net of reimbursed expenses, $59 million of lower owned, leased, and other revenue, net of direct expenses, and $28 million of higher general, administrative, and other expenses.

Owned, leased, and other revenue, net of direct expenses decreased primarily due to higher termination fees in the prior year, largely related to one development project.

General, administrative, and other expenses increased primarily due to higher guarantee reserves.

EMEA segment profit increased in 2024 compared to 2023 due to higher net fee revenues and $30 million of lower general, administrative, and other expenses, primarily due to lower litigation accruals, partially offset by $26 million of lower cost reimbursement revenue, net of reimbursed expenses.

LIQUIDITY AND CAPITAL RESOURCES

Our Credit Facility

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

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

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

Borrowings under the Credit Facility generally bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our public debt rating.

dollar borrowings under the Credit Facility bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our

public debt rating.

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

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Cash from Operations

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.

Net cash provided by operating activities decreased by $421 million in 2024 compared to 2023.

Net cash provided by operating activities in 2024 reflected a cash outflow of $300 million in the “Restructuring and merger-related charges” caption of our Statements of Cash Flows for the settlement of the guarantee liability associated with the purchase of the Sheraton Grand Chicago (discussed in Note 3).

Cash flows for 2023 reflected reduced cash received from U.S.

co-branded credit card issuers related to the 2020 prepayment of certain future revenues.

Such reductions ended as of year-end 2023.

Our ratio of current assets to current liabilities was 0.4 to 1.0 at both year-end 2024 and year-end 2023.

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

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We made capital and technology expenditures of $750 million in 2024 and $452 million in 2023.

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.

Capital and technology expenditures in 2024 increased by $298 million compared to 2023, primarily due to approximately $200 million of spending related to the Sheraton Grand Chicago capitalized assets (discussed in Note 3) and higher than typical spending on our worldwide technology systems transformation, the overwhelming portion of which is expected to be reimbursed over time.

In 2023, we also had cash outflows of $101 million due to the City Express brand acquisition.

We expect capital expenditures and other investments will total approximately $1.0 billion to $1.1 billion for 2025, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities, but excluding any potential property or brand acquisitions, which we cannot forecast with sufficient accuracy and which may be significant.

Our anticipated capital and technology expenditures include higher than typical spending on our worldwide technology systems transformation and renovations of hotels in our owned and leased portfolio.

Dispositions.

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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.

Our ability to attract third-party purchasers, and their ability 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.

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

Loan Activity.

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

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 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).

Debt increased by $2,574 million in 2024, to $14,447 million at year-end 2024 from $11,873 million at year-end 2023, primarily due to the issuances of our Series PP Notes and Series QQ Notes ($1,480 million) and Series NN Notes and Series OO Notes ($1,468 million), partially offset by the maturity of our Series CC Notes ($550 million).

See Note 9 for additional information on Senior Notes issuances.

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At year-end 2024, our long-term debt had a weighted average interest rate of 4.5 percent and a weighted average maturity of approximately 5.0 years.

Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.8 to 1.0 at year-end 2023.

The ratio of our fixed-rate long-term debt to our total long-term debt was 0.9 to 1.0 at year-end 2024.

See the “Our Credit Facility” caption in this “Liquidity and Capital Resources” section for more information on our Credit Facility.

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and (4) $0.63 per share declared on November 7, 2024 and paid on December 31, 2024 to stockholders of record on November 21, 2024.

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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Our material cash requirements include the following contractual obligations and off-balance sheet arrangements.

• At year-end 2023, we had $13,937 million of debt, including principal and future interest payments, of which $972 million is payable within the next 12 months from year-end 2023.

See Note 9 for further information about our long-term debt.

• We enter into operating and finance leases primarily for hotels, offices, and equipment, which are discussed in Note 8.

• At December 31, 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 year-end 2023.

• 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.

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.

Since our contracts with owners require reimbursement for these amounts, these obligations are expected to have minimal impact on our net income and cash flow.

• At year-end 2024, we had $14,447 million of debt plus $3,110 million of future interest payments, of which a total of $1,866 million is payable within the next 12 months from year-end 2024.

See Note 9 for further information about our long-term debt and Note 8 for further information about our finance leases.

• We enter into operating leases primarily for hotels, offices, and equipment, which are discussed in Note 8.

• At December 31, 2024, projected Deemed Repatriation Transition Tax payments under the 2017 Tax Cuts and Jobs Act totaled $135 million, which is payable within the next 12 months from year-end 2024.

• The Company had guarantees and letters of credit as of year-end 2024, which are 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 2024.

• In the normal course of business, we enter into purchase commitments related to the programs and services that we typically provide to hotel owners, and we incur other obligations to manage the daily operating needs of the hotels that we manage.

Since our contracts with hotel owners generally require reimbursement for expenses incurred in providing these programs and services and managing the daily operating needs of the hotels that we manage, these obligations are not expected to have a material impact on our net income and cash flow over the long term.

NEW ACCOUNTING STANDARDS

We do not expect that accounting standard updates issued to date and that are effective after December 31, 2023 will have a material effect on our Financial Statements.

We do not expect that accounting standards updates issued to date and that are effective after December 31, 2024 will have a material effect on our Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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Goodwill , including how we evaluate the fair value of reporting units and when we record an impairment loss on goodwill.

Our reporting units are the same as our operating segments.

See Note 14 for more information.

During the 2024 fourth quarter, we conducted our annual goodwill impairment test, and no impairment charges were recorded.

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During 2024, 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