Accounting Annual Report

September 26, 2025 Claire B 0 Comments

Please see the pages from 47 to 50 of Marriott International Inc’s Annual Report and answer questions.

Now you are familiar with income statement and other financial reports. The table below is a part of the simplified income statement with hotel operating statistics. Please answer question 1, 2, 3, and 4. Show me the process of calculations.

S E E T H E W O R L D

MARRIOTT INTERNATIONAL, INC. 2012 ANNuAL REpORT

ASIA PACIFIC EUROPE MIDDLE EAST &

AFRICA THE AMERICAS

OUR STRATEgy

NEXT gENERATION TRAVELERS

Understand and attract Gen X, Y and future guests

OWNER PREFERENCE

Generate value for our hotel owners and franchisees

BRAND DISTINCTION

Invest in innovation and differentiation

PORTFOLIO POWER

Build loyalty with the most compelling family of brands

TECHNOLOgy LEADERSHIP

Empower connections for guests and associates

gLOBAL gROWTH

Expand our footprint and profitability

74 Countries 3,801 Properties 660,394 Rooms

gLOBAL gROWTH

Marriott International at a Glance

yEAR ENDINg 2012

Properties Open Rooms 3,339 550,319

HOTELS UNDER DEVELOPMENT

Hotels Rooms 574 75,500

yEAR ENDINg 2012

Properties Open Rooms 137 44,829

HOTELS UNDER DEVELOPMENT

Hotels Rooms 140 37,000

yEAR ENDINg 2012

Properties Open Rooms 284 53,321

HOTELS UNDER DEVELOPMENT

Hotels Rooms 37 6,600

yEAR ENDINg 2012

Properties Open Rooms 41 11,925

HOTELS UNDER DEVELOPMENT

Hotels Rooms 41 10,100

POWERFUL BRANDS

LUXURy

THE RITz-CaRlTOn®

THE RITz-CaRlTOn DEsTInaTIOn ClUB®

BvlGaRI®

JW MaRRIOTT®

LIFESTyLE/ COLLECTIONS

EDITIOn®

aUTOGRaPH COllECTIOn®

REnaIssanCE®

aC HOTEls

SIgNATURE

MaRRIOTT HOTEls & REsORTs®

MODERN ESSENTIALS

COURTYaRD®

sPRInGHIll sUITEs®

FaIRFIElD Inn & sUITEs®

EXTENDED STAy

REsIDEnCE Inn®

TOWnEPlaCE sUITEs®

MaRRIOTT EXECUTIvE aPaRTMEnTs®

DESTINATION ENTERTAINMENT

GaYlORD HOTEls®

MaRRIOTT vaCaTIOn ClUB®

GRanD REsIDEnCEs BY MaRRIOTT®

201220112010

$1 ,1

85 $1 ,3

$1 ,4

TOTAL FEES (Dollars in millions)

201220112010

61 8,

10 4

64 3,

19 6

66 0,

39 4

TOTAL ROOMS

201220112010

14 %

13 %

35 %

RETURN ON INVESTED CAPITAL1

A Message From the Executive Chairman This year’s annual report invites you to “See the World,” featuring iconic landmarks around the globe. We’re working hard to make sure you can do just that by staying in our hotels. When I started as chief executive officer in 1972, we had one hotel outside the U.S., in Acapulco, Mexico. Today, we have more than 600 properties out- side the U.S., and nearly 70 percent of our hotel rooms under construction are beyond North America’s shores. It’s an exciting time to be in the lodging business.

2012 was an outstanding year; my first as the company’s executive chairman. Our strong performance is a tribute to the commitment and hard work of our associates all around the world and the exceptional quality of our properties. As we continue to evolve as a company, we’re staying true to our core values — Putting People First, Pursuing Excellence, Embracing Change, Acting with Integrity and Serving Our World. Our strength lies in these values and helps propel our vision of making Marriott the #1 hospitality company in the world.

“Take care of your associates and they’ll take care of the guests” was the philosophy of our founder, my father — J. Willard Marriott. At Marriott, caring for people and the community is part of who we are. Around the globe, we

offer our associates fair treatment, respect and oppor- tunities for personal and professional growth. We know that when we feel valued and respected, it helps make our guests feel that way too.

Marriott has a longstanding reputation for excellent customer service, which dates back to the start of our company more than 85 years ago. To fulfill our vision, Marriott continually seeks innovative and creative ways to meet the needs of guests. We maintain high stan- dards in every aspect of our business, from human rights to environmental and social sustainability. We’re gratified to regularly earn recognition for our commitment to our customers and associates.

We empower our associates to get involved in community service projects and initiatives all over the world. As we grow globally, Marriott is focused on critical areas of need where we can serve the communities where we operate … shelter and food, the environment, readiness for work, the well-being of children and global diversity and inclusion. Worldwide in 2012, our associates raised $4.3 million for their communities during company-spon- sored events and volunteered nearly 460,000 hours.

Last year, I visited more than 200 hotels across the globe. Wherever I travel, I see the dedication, passion and pride that our associates display every day. This is who we are; our business is to welcome travelers. We don’t manufacture machines or produce consumer goods. We provide outstanding service, fabulous desti- nations and exceptional experiences.

On behalf of all associates, we invite you to join us. And when you do, we’ll be there to welcome you at our more than 3,800 properties across the globe. Wishing you great travels!

J.W. Marriott, Jr. Executive Chairman and Chairman of the Board

1 See page 92 for additional information on this non-GAAP measure, including a reconciliation, our reasons for providing this measure and limitations on its use.

Arne M. Sorenson President and Chief Executive Officer

2 MArrIOTT INTErNATIONAL, INC. 2012

Officially recognized as the world’s tallest hotel at a height of

355 meters, only 26 meters short of the Empire State Building

in New York City, the JW Marriott® Marquis® is Dubai’s world-

class convention and business destination hotel.

To Our Shareholders It’s exciting to be at the helm of such a tremendous company, working with a talented and experienced team to grow the business and increase shareholder value. I appreciate Bill Marriott’s confidence and support.

More of you are traveling internationally than ever — in 2012, the United Nations’ World Tourism Organization reported that more than 1 billion trips were taken by people who traveled outside their borders. We are setting our sights to get to 2 billion! It’s an ambitious goal; that’s why I joined the board of Brand USA, and attended the

World Economic Forum in Davos, Switzerland, where we urged governments around the world to adopt “smart visa” policies to stimulate global travel. Travel creates jobs and spurs economic growth. From Turkey to China; from russia to the United Arab Emirates; and in the U.S., governments are increasingly thinking about interna- tional travel and tourism as trade, and they are working to remove barriers and be more strategic in granting visas and welcoming visitors.

2012 PERFORMANCE HIGHLIGHTS 2012 was an excellent year for our company. Here are some of the highlights:

3 For the full year 2012, diluted earnings per share (EPS) totaled $1.72. Adjusting the prior year for the timeshare spin-off and other charges, EPS increased 31 percent and adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization (EBITDA) rose 16 percent.1 Full year fee revenue totaled $1.4 billion matching peak 2007 levels. Incentive management fees alone rose 19 percent. return on invested capital reached 35 percent in 2012.1

3 revenue Per Available room (revPAr) for the com- pany’s worldwide comparable systemwide properties increased more than 6 percent in 2012 and average daily rates rose nearly 4 percent. We saw revPAr improve around the world despite economic weakness in Europe and political uncertainty in the Middle East. In North America, a strengthening economy and mod- est industry supply growth pushed both room rates and revPAr higher.

3 Marriott rewards,® our award-winning guest loyalty program, and our new The ritz-Carlton rewards® pro- gram, together surpassed 41 million members accounting for more than half of our room nights worldwide.

3 Marriott.com, one of the top consumer retail sites in the world, accounted for more than $8.1 billion in property-level gross revenues in 2012.

3 During 2012, we opened 125 properties with over 27,000 rooms. We acquired the Gaylord brand with valuable long-term management agreements; opened high-profile hotels such as the JW Marriott Essex House in New York City; increased our Autograph Collection distribution now spanning four continents; and expanded our Greater China hotel portfolio to 62 properties. Our hotel development organization had an outstanding year signing a record 57,000 rooms worldwide. Our worldwide pipeline of rooms under construction, approved for development or pending conversion reached nearly 130,000 rooms.

3 Our portfolio of luxury brands — BVLGArI Hotels & resorts, The ritz-Carlton, JW Marriott, and our latest luxury lifestyle brand, EDITION,, together reached over 180 properties and more than 50,000 rooms worldwide.

1 See pages 18 and 92-95 for additional information on these non-GAAP measures, including reconciliations, our reasons for providing these mea- sures and limitations on their use.

MArrIOTT INTErNATIONAL, INC. 2012 3

3 We repurchased 31 million shares in 2012 for approxi- mately $1.2 billion. Including $191 million in dividends, we returned more than $1.3 billion to shareholders during the year.

STRATEGY FOR SUCCESS As we grow globally, we remain committed to the endur- ing core values that set us apart, and the talented people who make this company great. Our vision remains to be the best hospitality company in the world. Our strategy combines our unique culture with an extensive portfolio of global brands, a customer-focused sales organization, tremendous guest loyalty and a broad distribution of hotels at multiple price points. By focusing on manag- ing and franchising hotels, rather than owning them, we drive strong shareholder value and high return on invested capital.

With 18 lodging brands our portfolio power allows us to meet the development strategies of individual owners and franchisees and propel distribution and growth. By emphasizing brand distinction under the Marriott International umbrella, guests can stay with us even as their travel needs and budgets change.

Our flagship brand, Marriott Hotels & resorts, continues to broaden its leadership and distribution around the world while changing to meet new customer expecta- tions. New service initiatives and a marketing campaign will be introduced in 2013. The new lobby concept, already available in more than 200 hotels, should be found everywhere by 2015.

Our luxury brands are thriving with a new ritz-Carlton in Vienna, Austria and the star-studded opening of the JW Marriott Marquis Dubai, the tallest hotel in the world. EDITION, our newest luxury lifestyle brand, combines an energetic atmosphere, attitude and style, showcasing some of the best dining and entertainment options. Sophisticated public spaces, finishes, design and details serve the experience, instead of driving it. The EDITION London is scheduled to open in 2013. Other EDITION hotels are planned for Los Angeles, Calif.; New York, N.Y.; Miami Beach, Fla.; Abu Dhabi in the United Arab Emirates; Sanya, China; Gurgaon, India; and Bangkok, Thailand.

Our acquisition of the Gaylord brand and hotel manage- ment company in 2012 adds fuel to our already leading group and meeting portfolio. These incredible hotels bring a fresh, new focus on entertainment, lots of great opportunities to surprise and delight our guests, and enhance our leadership in the major meeting market. Gaylord should benefit from Marriott’s strong reservation system, sales organization, frequent traveler program, and back-of-the-house systems.

Since the launch of the Autograph Collection three years ago, the brand already has nearly 40 hotels open and another 22 in the development pipeline. From gilded palaces to modernist icons to exotic escapes, every

hotel is a landmark of individuality. As a member of the Autograph Collection, owners of independent hotels can take advantage of Marriott’s powerful distribution and marketing channels while remaining unique.

Demand for our Modern Essentials brands — Courtyard, Fairfield Inn & Suites, residence Inn, SpringHill Suites and TownePlace Suites — is increasing in North America as well as globally. There are significant opportunities for FairfieldSM with unique market-driven designs in India and Brazil, while our SpringHill Suites brand will soon reach a milestone 300th hotel with its first property in New York City. Celebrating its 30th anni versary, Courtyard’s rapid growth around the world should allow this power brand to reach 1,000 hotels by year-end 2014.

In early March,2 we announced our newest brand, MOXY HOTELS,SM a European economy 3-star concept that appeals to the fast emerging millennial traveler, combin- ing contemporary stylish design, approach able service and affordable prices. We expect to add 150 franchised MOXY properties over the next 10 years.

LOOKING AHEAD We are focused on next generation travelers. Nearly half the people on this planet are under the age of 25. They will increasingly be our new customers, and what they want, we will deliver. That includes technol- ogy leadership and mobility, along with style, choices and experiences.

We’re also ramping up mobile booking and other flexible, intuitive technologies, and we’re building and investing in social media to better understand — and deliver — what guests want. In 2012, FORTUNE® named us to its “Social Media Star” list, which recognizes com- panies for their innovative use of social media to improve their businesses.

We are very well positioned to keep driving global growth. Our four continental regions — The Americas, including the Caribbean and Latin America; Asia Pacific; Europe, the Middle East and Africa — all saw major growth in 2012 (see highlights from each region begin- ning on page 4). Our continental structure provides close-to-market leadership — a key driver to our success. Our increasing nimbleness allows us to be efficient and insightful about markets and cultures around the world.

If we get all these things right — and we will — we’ll continue to be rewarded with hotel owner preference, sharing our success with our trusted partners.

On behalf of our hotels and the 325,000 associates at managed and franchised properties around the world, we invite you to “See the World” and stay with us.

2 MOXY launched March 5, 2013 and is not included in the brands listed on the “Marriott International at a Glance” page.

The Americas

The Americas continues to produce dynamic results across our brand portfolio. In North America, we added full-service hotels through conversions, new Autograph Collection hotels, and the addition of the Gaylord brand. New build development for our Modern Essentials

David J. Grissen President,The Americas

and Extended Stay brands is a major catalyst for growth. In the Caribbean and Latin America, we expect to nearly double our footprint by the end of 2017. South America, especially Brazil, is very strong with focus on the Fairfield and Courtyard brands.

Located in the heart of Cusco’s historic district, the JW Marriott Cusco in Peru stands at

11,154 feet above sea level, the company’s highest-altitude hotel. Situated at the gateway

of the Andes mountain sanctuary Machu Picchu, the hotel features a highly customized

design built around a colonial church and ancient Inca artifacts found on the site.

15 Brands 3,339 Open Properties in 27 Countries

574 Hotels Under Development

HOW WE SERvE OUR WORLD

n In the Americas, we provide a World of Oppor tunity to disadvantaged youth and adults through hospitality training and employment. Our partnerships include Back on My Feet, a nonprofit that uses running to help members of the homeless community get back on their feet and into jobs, includ- ing at our Marriott hotels. Through the Bridges From School to Work® program, we are training and employing young

people with disabilities. And our hotels in Brazil and Mexico are providing vulner- able youth with life and employment skills through the Youth Career Initiative (YCI).

n Through the Children’s Miracle Network Hospitals, our associates have raised nearly $90 million over nearly 30 years, including more than $5.4 million in 2012, to support healthcare for children and their families.

n To preserve the environment, we have protected 1.4 million acres of rainforest in the Amazon. Our $2 million contribution to the Amazonas Sustainable Foundation has supported sustainable liveli- hoods, schools, and medical sup- port for the residents.

4 MArrIOTT INTErNATIONAL, INC. 2012

Major Hotel Openings: JW Marriott Hotel Cusco – Peru • JW Marriott Essex House – New York, N.Y. • Gaylord Hotels – Grapevine, Texas; Kissimmee, Fla.; Nashville, Tenn.; National Harbor, Md.

MArrIOTT INTErNATIONAL, INC. 2012 5

Simon F. Cooper President and Managing Director Asia Pacific

Asia Pacific

The Ritz-Carlton, Okinawa in Japan is known locally as “Gusuku,” which means “guest house.”

The Ritz-Carlton expresses in the landscape and architecture the peaceful, caring and friend-

ship spirit – “Keion” – of the Okinawan people. The Shurijo motif is symbolic of Okinawa with

its traditional red clay tile roofs, white walls and holy water pond.

With our focus on development in China and India, our Asia Pacific region is grow- ing dramatically. Our hotel pipeline in China should allow us to open — on aver- age — one new hotel a month for the next

Major Hotel Openings: The Ritz-Carlton, Okinawa – Japan • Guangzhou Marriott Hotel Tianhe – China • The Stones Hotel – Legian Bali, Autograph Collection – Indonesia

five years. In India, we expect to grow from 16 to more than 50 hotels by 2015, including Fairfield by Marriott,SM which was specifically designed for that market.

9 Brands 137 Open Properties in 12 Countries

140 Hotels Under Development

HOW WE SERvE OUR WORLD

In southwestern China’s Sichuan Province, we’re helping protect the source of fresh water for more than 2 billion people by investing $500,000 over two years in part- nership with Conservation International. The initiative promotes sustainable jobs — such as beekeeping and honey production — to lessen the impact on the water supply. Nobility of Nature honey is being sold

in nearly all Marriott hotels throughout China and Hong Kong, with a portion of the proceeds going back to support the program. Worldwide, our ritz-Carlton hotels help youth gain life skills and an introduction to hotel careers through our award-winning Succeed through Service partnership with local schools in disadvan- taged communities.

Amy C. McPherson President and Managing Director Europe

Europe

6 MArrIOTT INTErNATIONAL, INC. 2012

The Renaissance Barcelona Hotel is just a few steps away from Paseo de Gracia and is sur-

rounded by an entire universe of shopping, leisure and cultural attractions. Its sun-drenched

roof-top terrace and bar offers spectacular views of the Barcelona skyline. The Renaissance

Barcelona Hotel is distinguished by its high level of service and contemporary decoration.

We are three years into our five-year growth goal to double our portfolio in Europe by adding 40,000 rooms, opened or signed by year-end 2015. We are almost halfway there, driven by some major new growth platforms. With AC Hotels by Marriott,SM our joint venture Lifestyle/Collections brand, we’ve built brand presence in Southern Europe with 79 hotels in Spain, Italy, Portugal and France. With more

than 60 percent of total hotels in Europe operating independently, the Autograph Collection is a significant pillar for growth and we now have 18 open or signed in the region. With our new Courtyard prototype, we are expanding into Eastern Europe with russia becoming our fourth largest source market in Europe. And with our newest brand, MOXY HOTELS, we aim to capture those looking for “style on a budget.”

13 Brands 284 Open Properties in 25 Countries

37 Hotels Under Development

HOW WE SERvE OUR WORLD

Through World of Opportunity Europe our hotels are helping young people by providing employment skills training and vocational opportunities through a variety of charitable partners, including SOS Children’s Villages in Continental Europe and The Prince’s Trust Fairbridge

program in the United Kingdom. In 2012, our hotels contributed $300,000, volun- teered nearly 4,000 hours of time and sponsored more than 250 young people across Europe in vocational training and employment courses.

Major Hotel Openings: Renaissance Barcelona Hotel – Spain • JW Marriott Hotel Absheron Baku – Azerbaijan • The Ritz-Carlton, Vienna – Austria

Alex Kyriakidis President and Managing Director Middle East & Africa

Middle East & Africa

MArrIOTT INTErNATIONAL, INC. 2012 7

The Courtyard by Marriott Riyadh Diplomatic Quarter is the first of the brand in Saudi

Arabia. It is in the heart of Riyadh’s Diplomatic Quarter at the Al-Hada District and will

provide a new level of functionality and comfort to the Kingdom.

Marriott International opened its first hotel in this region, the riyadh Marriott Hotel in Saudi Arabia, in 1980. In 2012, we opened what will be one of the premier destina- tions in the Middle East, the JW Marriott Marquis Dubai — the world’s tallest hotel

and Dubai’s world-class convention and business hotel. We also celebrated the grand opening of Courtyard by Marriott riyadh Diplomatic Quarter in Saudi Arabia, which is the first Courtyard hotel in the country.

7 Brands 41 Open Properties in 10 Countries

41 Hotels Under Development

HOW WE SERvE OUR WORLD

In 2012, we announced our partnership with The Akilah Institute for Women to train 15 young women from rwanda to work in the hotel industry. After year-long paid internships in our Dubai hotels, they will return to rwanda to open the new

Kigali Marriott in late 2013. Through our partnership with Akilah we will have skilled local talent who can fill employment posi- tions at our hotel in Kigali and worldwide as they grow their careers with Marriott.

Major Hotel Openings: JW Marriott Marquis Dubai – United Arab Emirates • Courtyard by Marriott riyadh Diplomatic Quarter – Saudi Arabia

8 MArrIOTT INTErNATIONAL, INC. 2012

The Manila Marriott Hotel in the Philippines boasts a stunning lobby with a sophisticated

ambiance and a variety of seating configurations that provide inviting and comfortable

spaces to relax, work and socialize.

FISCAL YEAR ENDED DECEMBER 28, 2012

Page No.

Risk Factors Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements Shareholder Return Performance Graph Quarterly Financial Data Selected Historical Financial Data Non-GAAP Financial Measures Reconciliations Management's Reports Reports of Independent Registered Public Accounting Firm

3 9

45 47 89 90 91 92 96 97

[This page intentionally left blank.]

Risk Factors.

Forward-Looking Statements

We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations, which follow under the headings “Business and Overview,” “Liquidity and Capital Resources,” and other statements throughout this report preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” or similar expressions.

Any number of risks and uncertainties could cause actual results to differ materially from those we express in our forward-looking statements, including the risks and uncertainties we describe below and other factors we describe from time to time in our periodic filings with the SEC. We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

Risks and Uncertainties

We are subject to various risks that could have a negative effect on us or on our financial condition. You should understand that these risks could cause results to differ materially from those expressed in forward-looking statements contained in this report or in other Company communications. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following:

Our industry is highly competitive, which may impact our ability to compete successfully with other hotel properties for customers. We generally operate in markets that contain numerous competitors. Each of our hotel brands competes with major hotel chains in national and international venues and with independent companies in regional markets. Our ability to remain competitive and to attract and retain business and leisure travelers depends on our success in distinguishing the quality, value, and efficiency of our lodging products and services, including our loyalty programs and consumer-facing technology platforms and services, from those offered by others. If we cannot compete successfully in these areas, our operating margins could contract, our market share could decrease, and our earnings could decline.

Economic uncertainty could continue to impact our financial results and growth. Weak economic conditions in Europe and other parts of the world, the strength or continuation of recovery in countries that have experienced improved economic conditions, potential disruptions in the U.S. economy as a result of governmental action or inaction on the federal deficit, budget, and related issues, political instability in some areas, and the uncertainty over how long any of these conditions will continue, could continue to have a negative impact on the lodging industry. U.S. government travel is also a significant part of our business, and our business could suffer if budget-related decisions reduce the amount of travel by U.S. government employees and contractors or place restrictions on aspects of travel. As a result of such current economic conditions and uncertainty, we continue to experience weakened demand for our hotel rooms in some markets. Recent improvements in demand trends in other markets may not continue, and our future financial results and growth could be further harmed or constrained if the recovery stalls or conditions worsen.

Operational Risks

Premature termination of our management or franchise agreements could hurt our financial performance. Our hotel management and franchise agreements may be subject to premature termination in certain circumstances, such as the bankruptcy of a hotel owner or franchisee, or a failure under some agreements to meet specified financial or performance criteria that are subject to the risks described in this section, which the Company fails or elects not to cure. A significant loss of agreements due to premature terminations could hurt our financial performance or our ability to grow our business.

Our lodging operations are subject to global, regional, and national conditions. Because we conduct our business on a global platform, our activities are affected by changes in global and regional economies. In recent years, our business has been hurt by decreases in travel resulting from weak economic conditions and the heightened travel security measures that have resulted from the threat of further terrorism. Our future performance could be similarly affected by the economic environment in each of the regions in which we operate, the resulting unknown pace of business travel, and the occurrence of any future incidents in those regions.

The growing significance of our operations outside of the United States also makes us increasingly susceptible to the risks of doing business internationally, which could lower our revenues, increase our costs, reduce our profits, or disrupt our business. We currently operate or franchise hotels and resorts in 74 countries, and our operations outside the United States

[This page intentionally left blank.]

Risk Factors.

Forward-Looking Statements

Risks and Uncertainties

Operational Risks

represented approximately 16 percent of our revenues in 2012. We expect that the international share of our total revenues will increase in future years. As a result, we are increasingly exposed to the challenges and risks of doing business outside the United States, which could reduce our revenues or profits, increase our costs, result in significant liabilities or sanctions, or otherwise disrupt our business. These challenges include: (1) compliance with complex and changing laws, regulations and policies of governments that may impact our operations, such as foreign ownership restrictions, import and export controls, and trade restrictions; (2) compliance with U.S. and foreign laws that affect the activities of companies abroad, such as anti- corruption laws, competition laws, currency regulations, and laws affecting dealings with certain nations; (3) limitations on our ability to repatriate non-U.S. earnings in a tax effective manner; (4) the difficulties involved in managing an organization doing business in many different countries; (5) uncertainties as to the enforceability of contract and intellectual property rights under local laws; (6) rapid changes in government policy, political or civil unrest in the Middle East and elsewhere, acts of terrorism, or the threat of international boycotts or U.S. anti-boycott legislation; and (7) currency exchange rate fluctuations.

Our new programs and new branded products may not be successful. We cannot assure you that our recently launched EDITION, Autograph Collection, and AC Hotels by Marriott brands, our recent acquisition of the Gaylord brand, or any new programs or products we may launch in the future will be accepted by hotel owners, potential franchisees, or the traveling public or other customers. We also cannot be certain that we will recover the costs we incurred in developing or acquiring the brands or any new programs or products, or that the brands or any new programs or products will be successful. In addition, some of our new brands involve or may involve cooperation and/or consultation with one or more third parties, including some shared control over product design and development, sales and marketing, and brand standards. Disagreements with these third parties could slow the development of these new brands and/or impair our ability to take actions we believe to be advisable for the success and profitability of such brands.

Risks relating to natural or man-made disasters, contagious disease, terrorist activity, and war could reduce the demand for lodging, which may adversely affect our revenues. So called “Acts of God,” such as hurricanes, earthquakes, tsunamis, and other natural disasters and man-made disasters in recent years, such as Hurricane Sandy in the Northeastern United States, the earthquake and tsunami in Japan, and the spread of contagious diseases in locations where we own, manage, or franchise significant properties and areas of the world from which we draw a large number of customers, could cause a decline in the level of business and leisure travel and reduce the demand for lodging. Actual or threatened war, terrorist activity, political unrest, or civil strife, such as recent events in Syria, Egypt, Libya, and Bahrain, and other geopolitical uncertainty could have a similar effect. Any one or more of these events may reduce the overall demand for hotel rooms and corporate apartments or limit the prices that we can obtain for them, both of which could adversely affect our profits.

Disagreements with the owners of the hotels that we manage or franchise may result in litigation or may delay implementation of product or service initiatives. Consistent with our focus on management and franchising, we own very few of our lodging properties. The nature of our responsibilities under our management agreements to manage each hotel and enforce the standards required for our brands under both management and franchise agreements may be subject to interpretation and will from time to time give rise to disagreements, which may include disagreements over the need for or payment for new product or service initiatives. Such disagreements may be more likely when hotel returns are weaker. We seek to resolve any disagreements in order to develop and maintain positive relations with current and potential hotel owners and joint venture partners but are not always able to do so. Failure to resolve such disagreements has resulted in litigation, and could do so in the future. If any such litigation results in a significant adverse judgment, settlement, or court order, we could suffer significant losses, our profits could be reduced, or our future ability to operate our business could be constrained.

Our business depends on the quality and reputation of our brands, and any deterioration in the quality or reputation of these brands could have an adverse impact on our market share, reputation, business, financial condition, or results of operations. Events that may be beyond our control could affect the reputation of one or more of our properties or more generally impact the reputation of our brands. If the reputation or perceived quality of our brands declines, our market share, reputation, business, financial condition, or results of operations could be affected.

Actions by our franchisees and licensees could adversely affect our image and reputation. We franchise and license many of our brand names and trademarks to third parties in connection with lodging, timeshare, and residential services. Under the terms of their agreements with us, our franchisees and licensees interact directly with customers and other third parties under our brand and trade names. If these franchisees or licensees fail to maintain or act in accordance with applicable brand standards, experience operational problems, or project a brand image inconsistent with ours, our image and reputation could suffer. Although our franchise and license agreements provide us with recourse and remedies in the event of a breach by the franchisee or licensee, including termination of the agreements under certain circumstances, pursuing any such recourse, remedy, or termination could be expensive and time consuming. In addition, we cannot assure you that a court would ultimately enforce our contractual termination rights in every instance.

Damage to, or losses involving, properties that we own, manage, or franchise may not be covered by insurance. We have comprehensive property and liability insurance policies with coverage features and insured limits that we believe are customary. Market forces beyond our control may nonetheless limit the scope of the insurance coverage we can obtain or our ability to obtain coverage at reasonable rates. Certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, or terrorist acts, or liabilities that result from breaches in the security of our information systems may be uninsurable or too expensive to justify obtaining insurance. As a result, we may not be successful in obtaining insurance without increases in cost or decreases in coverage levels. In addition, in the event of a substantial loss, the insurance coverage we carry may not be sufficient to pay the full market value or replacement cost of our lost investment or that of hotel owners or in some cases could result in certain losses being totally uninsured. As a result, we could lose some or all of the capital we have invested in a property, as well as the anticipated future revenue from the property, and we could remain obligated for guarantees, debt, or other financial obligations for the property.

Development and Financing Risks

While we are predominantly a manager and franchisor of hotel properties, our hotel owners depend on capital to buy, develop, and improve hotels, and our hotel owners may be unable to access capital when necessary. In order to fund new hotel investments, as well as refurbish and improve existing hotels, both the Company and current and potential hotel owners must periodically spend money. The availability of funds for new investments and improvement of existing hotels by our current and potential hotel owners depends in large measure on capital markets and liquidity factors, over which we can exert little control. The difficulty of obtaining financing on attractive terms, or at all, continues to constrain the capital markets for hotel and real estate investments. In addition, owners of existing hotels that we franchise or manage may have difficulty meeting required debt service payments or refinancing loans at maturity.

Our growth strategy depends upon third-party owners/operators, and future arrangements with these third parties may be less favorable. Our growth strategy for development of additional lodging facilities entails entering into and maintaining various arrangements with property owners. The terms of our management agreements, franchise agreements, and leases for each of our lodging facilities are influenced by contract terms offered by our competitors, among other things. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future collaborations, renew agreements, or enter into new agreements in the future on terms that are as favorable to us as those that exist today.

Our ability to grow our management and franchise systems is subject to the range of risks associated with real estate investments. Our ability to sustain continued growth through management or franchise agreements for new hotels and the conversion of existing facilities to managed or franchised Marriott brands is affected, and may potentially be limited, by a variety of factors influencing real estate development generally. These include site availability, financing, planning, zoning and other local approvals, and other limitations that may be imposed by market and submarket factors, such as projected room occupancy, changes in growth in demand compared to projected supply, territorial restrictions in our management and franchise agreements, costs of construction, and anticipated room rate structure.

Our development activities expose us to project cost, completion, and resale risks. We develop new hotel and residential properties, and previously developed timeshare interval and fractional ownership properties, both directly and through partnerships, joint ventures, and other business structures with third parties. As demonstrated by the 2009 and 2011 impairment charges for our former Timeshare business, our ongoing involvement in the development of properties presents a number of risks, including that: (1) continued weakness in the capital markets may limit our ability, or that of third parties with whom we do business, to raise capital for completion of projects that have commenced or for development of future properties; (2) properties that we develop could become less attractive due to further decreases in demand for residential properties, increases in mortgage rates and/or decreases in mortgage availability, market absorption or oversupply, with the result that we may not be able to sell such properties for a profit or at the prices or selling pace we anticipate, potentially requiring additional changes in our pricing strategy that could result in further charges; (3) construction delays, cost overruns, lender financial defaults, or so called “Acts of God” such as earthquakes, hurricanes, floods, or fires may increase overall project costs or result in project cancellations; and (4) we may be unable to recover development costs we incur for any projects that we do not pursue to completion.

Development and Financing Risks

Development activities that involve our co-investment with third parties may result in disputes that could increase project costs, impair project operations, or increase project completion risks. Partnerships, joint ventures, and other business structures involving our co-investment with third parties generally include some form of shared control over the operations of the business and create added risks, including the possibility that other investors in such ventures could become bankrupt or otherwise lack the financial resources to meet their obligations, or could have or develop business interests, policies, or objectives that are inconsistent with ours. Although we actively seek to minimize such risks before investing in partnerships, joint ventures, or similar structures, actions by another investor may present additional risks of project delay, increased project costs, or operational difficulties following project completion. Such disputes may also be more likely in difficult business environments.

Risks associated with development and sale of residential properties associated with our lodging properties or brands may reduce our profits. In certain hotel and timeshare projects we participate, either directly or through noncontrolling interests and/or licensing agreements, in the development and sale of residential properties associated with our brands, including residences and condominiums under our The Ritz-Carlton, EDITION, JW Marriott, Autograph Collection, and Marriott brand names and trademarks. Such projects pose further risks beyond those generally associated with our lodging businesses, which may reduce our profits or compromise our brand equity, including the following: (1) the continued weakness in residential real estate and demand generally may continue to reduce our profits and could make it more difficult to convince future hotel development partners of the value added by our brands; (2) increases in interest rates, reductions in mortgage availability, or increases in the costs of residential ownership could prevent potential customers from buying residential products or reduce the prices they are willing to pay; and (3) residential construction may be subject to warranty and liability claims, and the costs of resolving such claims may be significant.

Technology, Information Protection, and Privacy Risks

A failure to keep pace with developments in technology could impair our operations or competitive position. The lodging industry continues to demand the use of sophisticated technology and systems, including those used for our reservation, revenue management, and property management systems, our Marriott Rewards and The Ritz-Carlton Rewards programs, and technologies we make available to our guests. These technologies and systems must be refined, updated, and/or replaced with more advanced systems on a regular basis, and if we cannot do so as quickly as our competitors or within budgeted costs and time frames, our business could suffer. We also may not achieve the benefits that we anticipate from any new technology or system, and a failure to do so could result in higher than anticipated costs or could impair our operating results.

An increase in the use of third-party Internet services to book online hotel reservations could adversely impact our business. Some of our hotel rooms are booked through Internet travel intermediaries such as Expedia.com®, Travelocity.com®, and Orbitz.com®, as well as lesser-known online travel service providers. These intermediaries initially focused on leisure travel, but now also provide offerings for corporate travel and group meetings. Although Marriott’s Look No Further® Best Rate Guarantee has helped prevent customer preference shift to the intermediaries and greatly reduced the ability of intermediaries to undercut the published rates at our hotels, intermediaries continue to use a variety of aggressive online marketing methods to attract customers, including the purchase, by certain companies, of trademarked online keywords such as “Marriott” from Internet search engines such as Google®, Bing®, Yahoo®, and Baidu® to steer customers toward their websites (a practice that has been challenged by various trademark owners in federal court). Although Marriott has successfully limited these practices through contracts with key online intermediaries, the number of intermediaries and related companies that drive traffic to intermediaries’ websites is too large to permit us to eliminate this risk entirely. In addition, recent class action litigation against several online travel intermediaries and lodging companies, including Marriott, challenges the legality under antitrust law of contract provisions that support programs such as Marriott's Look No Further® Best Rate Guarantee, and we cannot assure you that the courts will ultimately uphold such provisions. Our business and profitability could be harmed if online intermediaries succeed in significantly shifting loyalties from our lodging brands to their travel services, diverting bookings away from Marriott.com, or through their fees increasing the overall cost of Internet bookings for our hotels.

Failure to maintain the integrity of internal or customer data could result in faulty business decisions, operational inefficiencies, damage to our reputation and/or subject us to costs, fines, or lawsuits. Our businesses require collection and retention of large volumes of internal and customer data, including credit card numbers and other personally identifiable information of our customers in various information systems that we maintain and in those maintained by third parties with whom we contract to provide services, including in areas such as human resources outsourcing, website hosting, and various forms of electronic communications. We and third parties who provide services to us also maintain personally identifiable information about our employees. The integrity and protection of that customer, employee, and company data is critical to us. If that data is inaccurate or incomplete, we could make faulty decisions. Our customers and employees also have a high expectation that we and our service providers will adequately protect their personal information. The information, security, and privacy requirements imposed by governmental regulation and the requirements of the payment card industry are also increasingly demanding, in both the United States and other jurisdictions where we operate. Our systems may not be able to

satisfy these changing requirements and employee and customer expectations, or may require significant additional investments or time in order to do so. Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error, or inadvertent releases of data all threaten our and our service provider's information systems and records. Our reliance on computer, Internet-based and mobile systems and communications and the frequency and sophistication of efforts by hackers to gain unauthorized access to such systems have increased significantly in recent years. A significant theft, loss, or fraudulent use of customer, employee, or company data could adversely impact our reputation and could result in remedial and other expenses, fines, or litigation. A breach in the security of our information systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits.

Changes in privacy law could adversely affect our ability to market our products effectively. We rely on a variety of direct marketing techniques, including email marketing, online advertising, and postal mailings. Any further restrictions in laws such as the CANSPAM Act, and various U.S. state laws, or new federal laws on marketing and solicitation or international data protection laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising, and postal mailing techniques and could force further changes in our marketing strategy. If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of our sales of certain products. We also obtain access to potential customers from travel service providers or other companies with whom we have substantial relationships and market to some individuals on these lists directly or by including our marketing message in the other company’s marketing materials. If access to these lists was prohibited or otherwise restricted, our ability to develop new customers and introduce them to our products could be impaired.

Other Risks

Changes in tax and other laws and regulations could reduce our profits or increase our costs. Our businesses are subject to regulation under a wide variety of laws, regulations, and policies in jurisdictions around the world. In response to the economic environment, we anticipate that many of the jurisdictions in which we do business will continue to review tax and other revenue raising laws, regulations, and policies, and any resulting changes could impose new restrictions, costs, or prohibitions on our current practices and reduce our profits. In particular, governments may revise tax laws, regulations, or official interpretations in ways that could have a significant impact on us, including modifications that could reduce the profits that we can effectively realize from our non-U.S. operations, or that could require costly changes to those operations, or the way in which they are structured. For example, most U.S. company effective tax rates reflect the fact that income earned and reinvested outside the United States is generally taxed at local rates, which are often much lower than U.S. tax rates. If changes in tax laws, regulations, or interpretations significantly increase the tax rates on non-U.S. income, our effective tax rate could increase and our profits could be reduced. If such increases resulted from our status as a U.S. company, those changes could place us at a disadvantage to our non-U.S. competitors if those competitors remain subject to lower local tax rates.

The 2011 spin-off of our former Timeshare business could result in significant tax liability to us and our shareholders. As discussed in more detail in Footnote No. 16, "Spin-off" to our Financial Statements, in 2011 we completed the spin-off of our timeshare operations and timeshare development business. Although we received a private letter ruling from the Internal Revenue Service ("IRS") and an opinion from our tax counsel confirming that the distribution of MVW common stock will not result in the recognition, for U.S. federal income tax purposes, of income, gain or loss to us or our shareholders (except to the extent of cash received in lieu of fractional shares of MVW common stock), the private letter ruling and opinion that we received are subject to the continuing validity of any assumptions and representations reflected therein. In addition, an opinion from our tax counsel is not binding on the IRS or a court. Moreover, certain future events that may or may not be within our control, including certain extraordinary purchases of our stock or MVW's stock, could cause the distribution not to qualify as tax-free. Accordingly, the IRS could determine that the distribution of the MVW common stock was a taxable transaction and a court could agree with the IRS. If the distribution of the MVW common stock was determined to be taxable for U.S. federal income tax purposes, we and our shareholders who received shares of MVW common stock in the spin-off could incur significant tax liabilities. Under the tax sharing and indemnification agreement that we entered into with MVW, we are entitled to indemnification from MVW for certain taxes and related losses resulting from the failure of the distribution of MVW common stock to qualify as tax-free as a result of (1) any breach by MVW or its subsidiaries of the covenants on the preservation of the tax-free status of the distribution, (2) certain acquisitions of equity securities or assets of MVW or its subsidiaries, and (3) any breach by MVW or its subsidiaries of certain representations in the documents submitted to the IRS and the separation documents relating to the spin-off. If, however, the distribution failed to qualify as a tax-free transaction for reasons other than those specified in the indemnification provisions of the tax sharing and indemnification agreement, liability for any resulting taxes for the distribution would be apportioned between us and MVW based on our relative fair market values.

The 2011 spin-off also might not produce the cash tax benefits we anticipate. In connection with the spin-off, we completed an internal reorganization, which included transactions that were structured in a manner intended to result, for U.S. federal income tax purposes, in our recognition of built-in losses in properties used in the North American and Luxury

Technology, Information Protection, and Privacy Risks

Other Risks

segments of the Timeshare division. Our recognition of these built-in losses and corresponding tax deductions has generated and we expect will continue to generate significant cash tax benefits for us. Although we received a private letter ruling from the IRS and an opinion from our tax counsel confirming that these built-in losses may be recognized and deducted by us, the private letter ruling and opinion that we received are subject to the continuing validity of any assumptions and representations reflected therein. Accordingly, the IRS could determine that the built-in losses should not have been recognized or deductions for such losses should be disallowed and a court could agree with the IRS. If we were unable to deduct these losses for U.S. federal income tax purposes, and, instead, the tax basis of the properties attributable to the built-in losses were available to MVW and its subsidiaries, MVW has agreed, pursuant to the tax sharing and indemnification agreement, to indemnify us for certain tax benefits that we otherwise have recognized or would have recognized if we were able to deduct such losses. For more information on the cash tax benefits we anticipate, see the "Liquidity and Capital Resources" caption within "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this report.

If we cannot attract and retain talented associates, our business could suffer. We compete with other companies both within and outside of our industry for talented personnel. If we cannot recruit, train, develop, and retain sufficient numbers of talented associates, we could experience increased associate turnover, decreased guest satisfaction, low morale, inefficiency, or internal control failures. Insufficient numbers of talented associates could also limit our ability to grow and expand our businesses.

Delaware law and our governing corporate documents contain, and our Board of Directors could implement, anti- takeover provisions that could deter takeover attempts. Under the Delaware business combination statute, a stockholder holding 15 percent or more of our outstanding voting stock could not acquire us without Board of Director consent for at least three years after the date the stockholder first held 15 percent or more of the voting stock. Our governing corporate documents also, among other things, require supermajority votes for mergers and similar transactions. In addition, our Board of Directors could, without stockholder approval, implement other anti-takeover defenses, such as a stockholder’s rights plan.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

BUSINESS AND OVERVIEW

Lodging Business

We are a worldwide operator, franchisor, and licensor of hotels and timeshare properties in 74 countries and territories under numerous brand names. We also develop, operate, and market residential properties and provide services to home/ condominium owner associations. At year-end 2012, we had 3,801 properties (660,394 rooms) in our system, including 35 home and condominium products (3,927 units) for which we manage the related owners’ associations. At year-end 2012, we grouped our operations into four business segments: North American Full-Service Lodging, North American Limited-Service Lodging, International Lodging, and Luxury Lodging.

We earn base management fees and in some cases incentive management fees from the hotels that we manage, and we earn franchise fees on the hotels that others operate under franchise agreements with us. Base fees typically consist of a percentage of property-level revenue while incentive fees typically consist of a percentage of net house profit adjusted for a specified owner return. Net house profit is calculated as gross operating profit (house profit) less noncontrollable expenses such as insurance, real estate taxes, capital spending reserves, and the like.

We use or license our trademarks for the sale of residential real estate either in conjunction with hotel development or on a stand-alone basis under our The Ritz-Carlton, EDITION, JW Marriott, Autograph Collection, and Marriott brand names. Third-party developers typically build and sell residences with little, if any, of our capital at risk. While the worldwide residential market is very large, the luxurious nature of our residential properties, the quality and exclusivity associated with our brands, and the hospitality services that we provide, all serve to make our residential properties distinctive.

Under our business model, we typically manage or franchise hotels, rather than own them. At year-end 2012, we operated 43 percent of the hotel rooms in our worldwide system under management agreements, our franchisees operated 54 percent under franchise agreements, unconsolidated joint ventures that we have an interest in held management and provided services to franchised properties for 1 percent, and we owned or leased only 2 percent.

Our emphasis on long-term management contracts and franchising tends to provide more stable earnings in periods of economic softness, while adding new hotels to our system generates growth, typically with little or no investment by the company. This strategy has driven substantial growth while minimizing financial leverage and risk in a cyclical industry. In addition, we believe minimizing our capital investments and adopting a strategy of recycling the investments that we do make maximizes and maintains our financial flexibility.

We remain focused on doing the things that we do well; that is, selling rooms, taking care of our guests, and making sure we control costs both at company-operated properties and at the corporate level ("above-property"). Our brands remain strong as a result of skilled management teams, dedicated associates, superior customer service with an emphasis on guest and associate satisfaction, significant distribution, our Marriott Rewards and The Ritz-Carlton Rewards loyalty programs, a multichannel reservations system, and desirable property amenities. We strive to effectively leverage our size and broad distribution. We, along with owners and franchisees, continue to invest in our brands by means of new, refreshed, and reinvented properties, new room and public space designs, and enhanced amenities and technology offerings. We address, through various means, hotels in the system that do not meet standards.

We continue to enhance the appeal of our proprietary, information-rich, and easy-to-use website, Marriott.com, and of our associated mobile smartphone applications that connect to Marriott.com, through functionality and service improvements, and we expect to continue capturing an increasing proportion of property-level reservations via this cost-efficient channel. In 2012, we introduced Marriott.jp, adding Japanese language capability to our online platforms. Together with Spanish, German, French, and Chinese, our guests now have a wider selection of languages with which to discover our properties online.

Our profitability, as well as that of owners and franchisees, has benefited from our approach to property-level and above- property productivity. Properties in our system continue to maintain very tight cost controls. We also control above-property costs, some of which we allocate to hotels, by remaining focused on systems, processing, and support areas.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

BUSINESS AND OVERVIEW

Lodging Business

1010

Lodging Performance Measures

We believe RevPAR, which we calculate by dividing room sales for comparable properties by room nights available to guests for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues. References to RevPAR throughout this report are in constant dollars, unless otherwise noted. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

We also believe company-operated house profit margin, which is the ratio of property-level gross operating profit (also known as house profit) to total property-level revenue, is a meaningful indicator of our performance because this ratio measures our overall ability as the operator to produce property-level profits by generating sales and controlling the operating expenses over which we have the most direct control. House profit includes room, food and beverage, and other revenue and the related expenses including payroll and benefits expenses, as well as repairs and maintenance, utility, general and administrative, and sales and marketing expenses. House profit does not include the impact of management fees, furniture, fixtures and equipment replacement reserves, insurance, taxes, or other fixed expenses.

Lodging Results

Conditions for our lodging business continued to improve in 2012, reflecting generally low supply growth, a favorable economic climate in many markets around the world, the impact of operating efficiencies across our company, and a year-over- year increase in the number of hotels. Demand was strong in most North American markets, constrained somewhat in Washington, D.C. due to weak government demand associated with government spending restrictions and a shorter congressional calendar. The D.C. market also experienced the customarily lower demand levels in 2012 associated with an election year, although leisure and group business were strong in the summer months.

In Europe, many economies continue to struggle although our properties there benefited from strong international arrivals. In addition, our hotels benefited from the Olympic Games in London, the Euro Cup Soccer Championship in Warsaw, and a strong fair calendar in Germany. Demand was weak in European markets more dependent on regional travel and new supply constrained RevPAR growth in a few European markets. Demand was strong in the United Arab Emirates and improved modestly but remained weak in Egypt, Jordan, Kuwait, and Oman. Demand in the Asia Pacific region continued to be strong particularly for properties in Thailand, China, and Indonesia. Demand in China in 2012 moderated somewhat as the year progressed, reflecting declines in government related travel ahead of the country's change in leadership, moderating economic growth, and new supply in several markets. RevPAR in India softened throughout 2012, reflecting the country's more challenging economic environment and increased supply.

Compared to 2011, 2012 worldwide average daily rates increased 3.9 percent on a constant dollar basis to $137.49 for comparable systemwide properties, RevPAR increased 6.1 percent to $97.34, and occupancy increased 1.5 percentage points to 70.8 percent.

We monitor market conditions and carefully price our rooms daily in accordance with individual hotel demand levels, generally increasing room rates as demand increases. We also modify the mix of our business to increase revenue as demand changes. Demand for higher rated rooms improved in most markets in 2012, which allowed us to reduce discounting and special offers for transient business in many markets. This mix improvement benefited average daily rates. Our company- operated properties continuously monitor costs as we focus on enhancing property-level house profit margins and actively pursue productivity improvements.

The hotels in our system serve both transient and group customers. Overall, business transient and leisure transient demand was strong in 2012. Group demand improved in 2012, group customers spent more on their meetings, and group related property-level food and beverage volumes improved. Additionally, we saw an increase in short-term bookings for both large and small groups during 2012, and attendance at meetings frequently exceeded initial projections. Typically, two-thirds of group business is booked before the year of arrival and one-third is booked in the year of arrival. During an economic recovery, group pricing tends to lag transient pricing due to the significant lead times for group bookings. Group business booked in earlier periods at lower rates continues to roll off, and with improving group demand, is replaced with bookings reflecting generally higher rates. Projected group revenue for 2013 for comparable North American Marriott Hotels & Resorts properties is up six percent year-over-year, with more than half of the growth coming from rate.

Negotiated corporate business (“special corporate business”) represented nearly 15 percent of our full-service managed hotel room nights for 2012 in North America. In negotiating pricing for this segment of business, we do not focus strictly on volume, but instead carefully evaluate the relationship with our business customers, including for example, stay patterns (day of week and season), locations of stays, non-room spend, and aggregate spend in order to maximize property-level earnings. For 2013, we expect to complete negotiations with our special corporate business national-accounts clients in the first quarter. With approximately 85 percent of our negotiations complete, on average room rates for comparable customers are approximately five percent higher in 2013 than the prior year.

Lodging Transactions

On October 1, 2012, we acquired the Gaylord brand and hotel management company from Gaylord Entertainment Company (now called Ryman Hospitality Properties, Inc. ("Ryman Hospitality")) for $210 million. Ryman Hospitality continues to own the Gaylord hotels, which we manage under the Gaylord brand under long-term management agreements. This transaction added four hotels and approximately 7,800 rooms to our North American Full-Service segment, and included our entering into management agreements for several attractions at the Gaylord Opryland in Nashville, consisting of a showboat, a golf course, and a saloon. As part of the transaction, on December 1, 2012, we also assumed management of another hotel owned by Ryman Hospitality, the Inn at Opryland, with approximately 300 rooms.

In 2012, we completed the sale of our ExecuStay® corporate housing business. Neither the sales price nor the gain we recognized was material to our results of operations and cash flows. The revenues, results of operations, assets, and liabilities of our ExecuStay business also were not material to our financial position, results of operations or cash flows for any of the periods presented, and accordingly we have not reflected ExecuStay as a discontinued operation.

In 2012, we completed the sale of our equity interest in a North American Limited-Service joint venture (formerly two joint ventures which were merged before the sale) and we amended certain provisions of the management agreements for the underlying hotel portfolio. As a result of this transaction, we received cash proceeds of $96 million, including $30 million of proceeds which is refundable over the term of the management agreements if the hotel portfolio does not meet certain quarterly hotel performance thresholds. To the extent the hotel portfolio meets the quarterly hotel performance thresholds, we will recognize the $30 million of proceeds over the remaining term of the management agreements as base fee revenue. In 2012, we recognized a gain of $41 million, which consisted of: (1) $20 million for the recognition of the gain we deferred in 2005 because we retained the equity interest following the original sale of land to one of the joint ventures and because there were contingencies associated with the 2005 transaction that expired with this sale; and (2) $21 million for the gain on the sale of the equity interest. We also recognized base management fee revenue totaling $7 million in 2012, primarily that we had deferred in earlier periods, but which we earned in conjunction with the sale.

See Footnote No. 7, "Acquisitions and Dispositions" to our Financial Statements for more information on these lodging transactions.

Timeshare Spin-off and Timeshare Strategy-Impairment Charges

On November 21, 2011 ("the spin-off date"), we completed a spin-off of our timeshare operations and timeshare development business through a special tax-free dividend to our shareholders of all of the issued and outstanding common stock of our wholly owned subsidiary MVW. Under license agreements with us, MVW is both the exclusive developer and operator of timeshare, fractional, and related products under the Marriott brand and the exclusive developer of fractional and related products under The Ritz-Carlton brand. We now earn license fees under these agreements that we include in franchise fees. We do not allocate MVW license fees to any of our segments and instead include them in "other unallocated corporate."

Because of our significant continuing involvement in MVW operations after the spin-off (by virtue of the license and other agreements between us and MVW), we continue to include the historical financial results before the spin-off of our former Timeshare segment in our historical financial results as a component of continuing operations.

Before the spin-off, we recorded a pre-tax noncash impairment charge of $324 million ($234 million after-tax) in our 2011 Income Statement under the "Timeshare strategy-impairment charges" caption. Please see Footnote No. 16, “Spin-off,” to our Financial Statements and “Risk Factors; Other Risks” for more information on the spin-off and the impairment charges.

CONSOLIDATED RESULTS As noted in the preceding "Business and Overview" section, we completed the spin-off of our timeshare operations and

timeshare development business in late 2011. Accordingly, we no longer have a Timeshare segment and instead now earn license fees that we do not allocate to any of our segments and include in "other unallocated corporate." The following tables detail the components of our former Timeshare segment revenues and results for 2011, as well as certain items that we did not

1110

Lodging Performance Measures

Lodging Results

Lodging Transactions

See Footnote No. 7, "Acquisitions and Dispositions" to our Financial Statements for more information on these lodging transactions.

Timeshare Spin-off and Timeshare Strategy-Impairment Charges

CONSOLIDATED RESULTS As noted in the preceding "Business and Overview" section, we completed the spin-off of our timeshare operations and

1212

allocate to our Timeshare segment for 2011 and also shows the components of revenue, interest income and interest expense we received from MVW for 2012.

($ in millions) 2012 2011 Change

2012/2011 Former Timeshare segment revenues

Base fee revenue $ — $ 51 Total sales and services revenue — 1,088 Cost reimbursements — 299

Former Timeshare segment revenues — 1,438 $ (1,438)

Other base fee revenue — 5 (5)

Other unallocated corporate revenues from MVW Franchise fee revenue 61 4 Cost reimbursements 128 24

Revenues from MVW 189 28 161

Total revenue impact $ 189 $ 1,471 $ (1,282)

2012 2011 Change

2012/2011 Former Timeshare segment results operating income impact

Base fee revenue $ — $ 51 Timeshare sales and services, net — 159 Timeshare strategy-impairment charges — (324) General, administrative, and other expense — (63) Former Timeshare segment results operating income impact (1) — (177) $ 177

Other base fee revenue — 5 (5) General, administrative, and other expenses

Timeshare spin-off costs — (34) 34 Other miscellaneous expenses — (2) 2

Other Unallocated corporate operating income impact from MVW Franchise fee revenue 61 4 57

Total operating income (loss) impact 61 (204) 265 Gains (losses) and other income (1) — 3 (3) Interest expense (1) (8) (43) 35 Capitalized interest — 6 (6) Interest income 11 2 9 Equity in earnings (losses) — 4 (4)

Income (loss) before income taxes spin-off impact $ 64 $ (232) $ 296

(1) Timeshare segment results for year-end 2011 totaled a segment loss of $217 million and consisted of $177 million of operating losses, $43 million of interest expense, and $3 million of gains and other income.

The following discussion presents an analysis of results of our operations for 2012, 2011, and 2010. The results for 2011 included the results of the former Timeshare segment before the spin-off date while 2010 included the former Timeshare segment for the entire fiscal year. See "BUSINESS SEGMENTS: Timeshare" later in this report for more information.

Revenues

2012 Compared to 2011

Revenues decreased by $503 million (4 percent) to $11,814 million in 2012 from $12,317 million in 2011. As detailed in the preceding table, the spin-off contributed to a net $1,282 million decrease in revenues that was partially offset by a $779 million increase in revenues in our lodging business.

The $779 million increase in revenues for our lodging business was a result of: higher cost reimbursements revenue ($757 million), higher franchise fees ($44 million), higher incentive management fees ($37 million, comprised of an $18 million increase for North America and a $19 million increase outside of North America), and higher base management fees ($35 million), partially offset by lower owned, leased, corporate housing, and other revenue ($94 million, which includes a $70 million reduction from our sold corporate housing business as further discussed later in this section).

The $562 million increase in total cost reimbursements revenue, to $9,405 million in 2012 from $8,843 million in 2011, reflected a $757 million increase (allocated across our lodging business) resulting from higher property-level demand and growth across our system, partially offset by a net $195 million decline in timeshare-related cost reimbursements due to the spin-off.

The $21 million decrease in total base management fees, to $581 million in 2012 from $602 million in 2011, primarily reflected a decline of $56 million in former Timeshare segment ($51 million) and International segment ($5 million) base management fees due to the spin-off, partially offset by a net increase of $35 million across our lodging business. The $35 million net increase in base management fees across our lodging business primarily reflected stronger RevPAR ($24 million) and the impact of unit growth across the system ($9 million), as well as recognition in the 2012 third quarter of $7 million of previously deferred base management fees in conjunction with the sale of our equity interest in a North American-Limited Service joint venture, partially offset by unfavorable foreign exchange rates ($3 million) and the unfavorable impact of $3 million of fee reversals in 2012 for two properties to reflect contract revisions. The $101 million increase in total franchise fees, to $607 million in 2012 from $506 million in 2011, primarily reflected an increase of $57 million in license fees from MVW and an increase of $44 million across our lodging business primarily as a result of stronger RevPAR ($27 million) and the impact of unit growth across the system ($13 million).

The $37 million increase in incentive management fees from $195 million in 2011 to $232 million in 2012 primarily reflected higher net property-level income ($30 million), new unit growth, net of terminations ($6 million), recognition of incentive management fees due to contract revisions for certain International segment properties ($3 million), and recognition of previously deferred fees in conjunction with an International segment property's change in ownership ($3 million), partially offset by unfavorable foreign exchange rates ($4 million). In 2012, 33 percent of our managed properties paid us incentive management fees versus 29 percent in 2011. In addition, in 2012, 65 percent of our incentive fees came from properties outside the United States versus 67 percent in 2011. In North America, 14 North American Full-Service segment properties, seven North American Limited-Service segment properties, and two Luxury segment properties earned a combined $13 million in incentive management fees in 2012, but did not earn any incentive management fees in 2011.

The $94 million decrease in owned, leased, corporate housing, and other revenue, to $989 million in 2012 from $1,083 million in 2011, primarily reflected $70 million of lower corporate housing revenue due to the sale of the ExecuStay corporate housing business in the 2012 second quarter, $29 million of lower owned and leased revenue, and $3 million of lower termination fees, partially offset by $7 million of higher branding fees and $3 million of higher other revenue. The $29 million decrease in owned and leased revenue primarily reflected: (1) $34 million of lower revenue at several owned and leased properties in our International segment, primarily driven by three hotels that left the system ($18 million), weaker demand at three other hotels ($6 million), two hotels that are no longer leased but remain within our system as managed or franchised properties ($5 million), and unfavorable foreign exchange rates ($5 million); and (2) $23 million of lower revenue at a North American Full-Service segment property that converted from leased to managed at year-end 2011; partially offset by (3) $14 million of higher revenue at one leased property in London due to strong demand, in part associated with the 2012 third quarter Olympic Games; and (4) $10 million of higher revenue at one leased property in Japan. The property in Japan benefited from favorable comparisons with 2011 as a result of very weak demand due to the earthquake and tsunami as well as a $2 million business interruption payment received in 2012 from a utility company. Combined branding fees for credit card endorsements and the sale of branded residential real estate by others totaled $106 million in 2012 and $99 million in 2011.

1312

allocate to our Timeshare segment for 2011 and also shows the components of revenue, interest income and interest expense we received from MVW for 2012.

($ in millions) 2012 2011 Change

2012/2011 Former Timeshare segment revenues

Base fee revenue $ — $ 51 Total sales and services revenue — 1,088 Cost reimbursements — 299

Former Timeshare segment revenues — 1,438 $ (1,438)

Other base fee revenue — 5 (5)

Other unallocated corporate revenues from MVW Franchise fee revenue 61 4 Cost reimbursements 128 24

Revenues from MVW 189 28 161

Total revenue impact $ 189 $ 1,471 $ (1,282)

2012 2011 Change

2012/2011 Former Timeshare segment results operating income impact

Other base fee revenue — 5 (5) General, administrative, and other expenses

Timeshare spin-off costs — (34) 34 Other miscellaneous expenses — (2) 2

Other Unallocated corporate operating income impact from MVW Franchise fee revenue 61 4 57

Income (loss) before income taxes spin-off impact $ 64 $ (232) $ 296

Revenues

2012 Compared to 2011

1414

2011 Compared to 2010

Revenues increased by $626 million (5 percent) to $12,317 million in 2011 from $11,691 million in 2010, as a result of higher: cost reimbursements revenue ($604 million); base management and franchise fees ($105 million); owned, leased, corporate housing, and other revenue ($37 million); and incentive management fees ($13 million, all from properties outside of North America). These favorable variances were partially offset by lower Timeshare sales and services revenue ($133 million).

The increases in base management fees, to $602 million in 2011 from $562 million in 2010, and in franchise fees, to $506 million in 2011 from $441 million in 2010, primarily reflected stronger RevPAR and, to a lesser extent, the impact of unit growth across our system and favorable foreign exchange rates. Base management fees in 2011 included $51 million for the timeshare business compared to $55 million in the prior year. Franchise fees in 2011 included $4 million for MVW license fees. The increase in incentive management fees from $182 million in 2010 to $195 million in 2011 primarily reflected higher net property-level income resulting from higher property-level revenue and continued property-level cost controls and, to a lesser extent, new unit growth in international markets and favorable foreign exchange rates.

The increase in owned, leased, corporate housing, and other revenue, to $1,083 million in 2011, from $1,046 million in 2010, reflected $21 million of higher total branding fees, $7 million of higher corporate housing revenue, $4 million of higher hotel agreement termination fees, and $3 million of higher other revenue. Combined branding fees for credit card endorsements and the sale of branded residential real estate by others totaled $99 million in 2011 and $78 million in 2010.

The decrease in Timeshare sales and services revenue, to $1,088 million in 2011 from $1,221 million in 2010, primarily reflected: (1) $49 million of lower development revenue reflecting the spin-off and, to a lesser extent, lower sales volumes, partially offset by favorable reportability primarily for sales reserves recorded in 2010; (2) $45 million of lower financing revenue from lower interest income resulting from the transfer of the mortgage portfolio to MVW in conjunction with the spin- off as well as a lower mortgage portfolio balance before the spin-off date; (3) $32 million of lower other revenue, primarily reflecting the spin-off and lower resales revenue; and (4) $7 million of lower services revenue reflecting the spin-off, partially offset by increased rental occupancies and rates before the spin-off date. See “BUSINESS SEGMENTS: Timeshare” later in this report for more information on our former Timeshare segment.

Cost reimbursements revenue represents reimbursements of costs incurred on behalf of managed and franchised properties and relates, predominantly, to payroll costs at managed properties where we are the employer. As we record cost reimbursements based upon costs incurred with no added markup, this revenue and related expense has no impact on either our operating income or net income. The increase in cost reimbursements revenue, to $8,843 million in 2011 from $8,239 million in 2010, reflected the impact of higher property-level demand and growth across the system.

Operating Income

2012 Compared to 2011

Operating income increased by $414 million to $940 million in 2012 from $526 million in 2011. The $414 million increase in operating income reflected a net $265 million favorable variance due to the spin-off (which included $324 million of Timeshare strategy-impairment charges in 2011), as detailed in the preceding table, and a $149 million increase across our lodging business. This $149 million increase across our lodging business reflected a $44 million increase in franchise fees, a $37 million increase in incentive management fees, a $35 million increase in base management fees, $25 million of higher owned, leased, corporate housing, and other revenue net of direct expenses, and an $8 million decrease in general, administrative and other expenses. We discuss the reasons for the increases in base management fees, franchise fees, and incentive management fees across our lodging business compared to 2011 in the preceding “Revenues” section.

The $25 million (18 percent) increase in owned, leased, corporate housing, and other revenue net of direct expenses was primarily attributable to $19 million of net stronger results, particularly at one leased property in Japan ($9 million) and one leased property in London ($8 million), $7 million of higher branding fees, and $3 million of higher other revenue, partially offset by $3 million of lower termination fees. Our leased property in London benefited from strong demand and higher property-level margins in 2012 in part associated with the 2012 third quarter Olympic Games, while our leased property in Japan experienced strong demand in 2012, benefiting from favorable comparisons with 2011 as a result of very weak demand due to the earthquake and tsunami as well as a $2 million business interruption payment received in 2012 from a utility company.

General, administrative, and other expenses decreased by $107 million (14 percent) to $645 million in 2012 from $752 million in 2011. The $107 million decrease reflected a decline of $99 million due to the spin-off (consisting of $63 million of former Timeshare segment general, administrative, and other expenses and $36 million of other expenses not previously allocated to the former Timeshare segment, including $34 million of Timeshare spin-off costs and $2 million of other

expenses), and a decline of $8 million across our lodging business. The $8 million decrease across our lodging business was primarily a result of: (1) favorable variances from the following 2011 items: (a) a $5 million impairment of deferred contract acquisition costs and a $5 million accounts receivable reserve, both for one Luxury segment property whose owner filed for bankruptcy; (b) a $5 million performance cure payment for a North American Full-Service property; and (c) $8 million for a guarantee accrual for one North American Full-Service property and the write-off of contract acquisition costs for several other properties; and (2) $11 million of guarantee accrual reversals in 2012, primarily associated with four properties for which we either satisfied the related guarantee requirements or were otherwise released; (3) a favorable litigation settlement, partially offset by higher legal expenses, netting to a favorable $3 million; and (4) $2 million in decreased expenses due to favorable foreign exchange rates. These favorable items were partially offset by: (1) the following unfavorable 2012 items: (a) $20 million of increased compensation and other overhead expenses; and (b) the accelerated amortization of $8 million of deferred contract acquisitions costs for a North American Full-Service segment property (for which we earned a termination fee that we recorded in owned, leased, corporate housing, and other revenue); and (2) the unfavorable variance for a $5 million reversal in 2011 of a loan loss provision for one property with increased expected future cash flows. See "BUSINESS SEGMENTS: North American Full-Service Lodging" for more information on the termination fee and the related accelerated amortization of deferred contract acquisition costs recorded in 2012.

The $8 million decrease in total general, administrative, and other expenses across our lodging business consisted of a $21 million decrease allocated to our Luxury segment, partially offset by an $11 million increase that we did not allocate to any of our segments and a $2 million increase allocated to our North American Full-Service segment.

2011 Compared to 2010

Operating income decreased by $169 million to $526 million in 2011 from $695 million in 2010. The decrease reflected $324 million of 2011 Timeshare strategy-impairment charges and $40 million of lower Timeshare sales and services revenue net of direct expenses, partially offset by a $105 million increase in base management and franchise fees, $49 million of higher owned, leased, corporate housing, and other revenue net of direct expenses, a $28 million decrease in general, administrative, and other expenses, and $13 million of higher incentive management fees. We address the reasons for the increases in base management and franchise fees and in incentive management fees in the preceding “Revenues” section.

The $49 million (54 percent) increase in owned, leased, corporate housing, and other revenue net of direct expenses was primarily attributable to $21 million of higher branding fees, $15 million of net stronger results at some owned and leased properties due to higher RevPAR and property-level margins, $6 million of higher hotel agreement termination fees, net of 2010 termination costs, $6 million of higher corporate housing and other revenue, net of expenses, and $5 million of decreased rent expense, partially offset by $4 million of lower results at a leased hotel in Japan that experienced lower demand as a result of the earthquake and tsunami earlier in the year.

General, administrative, and other expenses decreased by $28 million (4 percent) to $752 million in 2011 from $780 million in 2010. The decrease primarily reflected favorable variances from the following 2010 items: an $84 million long-lived asset impairment charge for a capitalized revenue management software asset (which we did not allocate to any of our segments); a $13 million long-lived asset impairment charge (allocated to our former Timeshare segment); and a $14 million long-lived asset impairment charge (allocated to our North American Limited-Service segment). Also contributing to the decrease in expenses, was $9 million of lower former Timeshare segment expenses due to the spin-off and a $5 million reversal in 2011 of a loan loss provision for one property with increased expected future cash flows. These favorable variances were partially offset by the following 2011 items: $34 million of transaction-related expenses for the spin-off of the timeshare business; $17 million of higher compensation costs; $10 million of increased other expenses primarily associated with higher costs in international markets and initiatives to enhance and grow our brands globally, a $5 million impairment of contract acquisition costs and a $5 million accounts receivable reserve, both for one Luxury segment property whose owner filed for bankruptcy; a $5 million performance cure payment for a North American Full-Service property; and $7 million for an increase in the guarantee reserves for one International and one North American Full-Service property, primarily due to cash flow shortfalls at those properties, and a $2 million write-off of contract acquisition costs for two other properties. The favorable variances were further offset by the following 2010 items: a $4 million reversal of excess accruals for net asset tax based on the receipt of final assessments from a taxing authority located outside the United States and a $6 million reversal of guarantee accruals, primarily for a completion guarantee for which we satisfied the related requirements.

The $28 million decrease in total general, administrative, and other expenses consisted of a $34 million decrease that we did not allocate to any of our segments; a $22 million decrease allocated to our former Timeshare segment; and a $12 million decrease allocated to our North American Limited-Service segment; partially offset by a $20 million increase allocated to our Luxury segment; a $15 million increase allocated to our International segment; and a $5 million increase allocated to our North American Full-Service segment.

1514

2011 Compared to 2010

Operating Income

2012 Compared to 2011

2011 Compared to 2010

1616

Timeshare sales and services revenue net of direct expenses totaled $159 million in 2011 and $199 million in 2010. The decrease of $40 million as compared to 2010, primarily reflected $28 million of lower other revenue, net of expenses and $25 million of lower financing revenue, net of expenses, partially offset by $8 million of higher development revenue net of product costs and marketing and selling costs and $5 million of higher services revenue, net of expenses. The $28 million decrease in other revenue, net of expenses primarily reflected a $15 million unfavorable variance from an adjustment to the Marriott Rewards liability in 2010 and, to a lesser extent in 2011 the impact of the spin-off as well as lower resales revenue, net of expenses due to lower closings. The $25 million decrease in financing revenue, net of expenses primarily reflected decreased interest income due to the spin-off as well as lower notes receivable balances before the spin-off date. Higher development revenue net of product costs and marketing and selling costs primarily reflected favorable reportability as well as a favorable variance from a net $12 million reserve in the prior year, partially offset by lower 2011 sales volumes as well as the impact of the spin-off. See “BUSINESS SEGMENTS: Timeshare,” later in this report for more information on our former Timeshare segment before spin-off.

Gains (Losses) and Other Income

We show our gains (losses) and other income for 2012, 2011, and 2010 in the following table:

($ in millions) 2012 2011 2010 Net gain on sale of real estate and other $ 27 $ 11 $ 34 Net gain on sale of joint venture and other investments 21 — 1 Income from cost method joint ventures 2 — — Impairment of cost method joint venture investments and equity securities (8) (18) —

$ 42 $ (7) $ 35

2012 Compared to 2011

In 2012, we recognized a total gain of $41 million on the sale of an equity interest in a North American Limited-Service joint venture (formerly two joint ventures which were merged before the sale) which consisted of: (1) a $21 million gain on the sale of this interest reflected in the "Net gain on sale of joint venture and other investments" caption in the preceding table; and (2) recognition of the $20 million remaining gain we deferred in 2005 due to contingencies in the original transaction documents for the sale of land to one of the joint ventures, reflected in the "Net gain on sale of real estate and other" caption in the preceding table. See Footnote No. 7, "Acquisitions and Dispositions" to the Financial Statements for more information on the sale of this equity interest.

The "Impairment of cost method joint venture investments and equity securities" line in the preceding table reflects the other-than-temporary impairment in 2012 of two cost method joint venture investments and the other-than-temporary impairment in 2011 of marketable equity securities. For more information on the $7 million impairment of one of the cost method joint venture investments in 2012 and the impairment of marketable equity securities in 2011, see Footnote No. 4, “Fair Value of Financial Instruments” to the Financial Statements.

2011 Compared to 2010

The $23 million decrease in net gain on sale of real estate and other primarily reflected an unfavorable variance from an $18 million gain on the sale of one Timeshare segment property in 2010. The $18 million impairment in 2011 shown in the "Impairment of cost method joint venture investments and equity securities" caption in the preceding table reflects an other- than-temporary impairment of marketable securities, as discussed previously under the "2012 Compared to 2011" caption.

Interest Expense

2012 Compared to 2011

Interest expense decreased by $27 million (16 percent) to $137 million in 2012 compared to $164 million in 2011. This decrease reflected a $29 million decrease due to the spin-off, partially offset by a $2 million increase for our lodging business. The $29 million decrease in interest expense due to the spin-off consisted of interest expense in 2011 that was allocated to the former Timeshare segment ($43 million), partially offset by interest expense in 2012 for ongoing obligations for costs that were a component of "Timeshare-direct" expenses before the spin-off ($8 million) and the unfavorable variance to 2011 for capitalized interest expense for construction projects for our former Timeshare segment ($6 million). For the $8 million of interest expense in 2012 for ongoing spin-off obligations, we also recorded $8 million of "Interest income" in 2012 for the

associated notes receivable. The $2 million increase in interest expense for our lodging business was primarily for the Series K Notes and the Series L Notes we issued in 2012 ($23 million) as well as increased interest expense for our Marriott Rewards program and our commercial paper program, reflecting higher average balances and interest rates ($2 million), partially offset by increased capitalized interest expense principally for lodging construction projects ($15 million) and the absence of interest expense for the Series F Senior Notes following our repayment of those notes in 2012 ($9 million). See the “LIQUIDITY AND CAPITAL RESOURCES” caption later in this report for more information on our credit facility.

2011 Compared to 2010

Interest expense decreased by $16 million (9 percent) to $164 million in 2011 compared to $180 million in 2010. This decrease was primarily driven by: (1) a $12 million decrease in interest expense on securitized notes, reflecting the transfer of these notes to MVW on the spin-off date, as well as a lower average outstanding balance and a lower average interest rate on those notes before the spin-off date; (2) a $2 million increase in capitalized interest associated with construction projects; and (3) a $1 million decrease in interest expense for our revolving credit facility and commercial paper program, reflecting lower interest rates.

Interest Income and Income Tax

2012 Compared to 2011

Interest income increased by $3 million (21 percent) to $17 million in 2012 compared to $14 million in 2011, primarily reflecting $9 million of increased interest income for two notes receivable issued to us in conjunction with the spin-off, partially offset by a $6 million decrease primarily from the repayment of certain loans. For $8 million of the $9 million increase in interest income in 2012 for notes receivable issued to us in conjunction with the spin-off, we also recorded $8 million of "Interest expense" in 2012 for ongoing obligations for those notes.

Our tax provision increased by $120 million (76 percent) to $278 million in 2012 from $158 million in 2011. The increase was primarily due to the absence of timeshare pre-tax losses in 2012 due to the spin-off and the effect of higher pre-tax income from our lodging business, as well as a lower percentage of lodging pre-tax income in 2012 from jurisdictions outside the U.S. with lower tax rates. These increases in the provision were partially offset by a favorable variance from $34 million of income tax expense that we recorded in 2011 to write off certain deferred tax assets transferred to MVW in conjunction with the spin-off, as discussed under the following "2011 Compared to 2010" caption.

2011 Compared to 2010

Interest income decreased by $5 million (26 percent) to $14 million in 2011 compared to $19 million in 2010, primarily reflecting a $3 million decrease from the repayment of certain loans.

Our tax provision increased by $65 million (70 percent) to $158 million in 2011 from $93 million in 2010. The increase was primarily due to an unfavorable variance related to a prior year IRS settlement on the treatment of funds received from certain non-U.S. subsidiaries that resulted in an $85 million benefit to our income tax provision in 2010 and $34 million of income tax expense that we recorded in 2011 to write off certain deferred tax assets that we transferred to MVW in conjunction with the spin-off. We impaired these assets because we considered it "more likely than not" that MVW will be unable to realize the value of those deferred tax assets. Please see Footnote No. 16, "Spin-off" to our Financial Statements for more information on the transaction. The increases were partially offset by lower pre-tax income in 2011.

Equity in Losses

2012 Compared to 2011

Equity in losses of $13 million in 2012 was unchanged from equity in losses of $13 million in 2011, and reflected a $4 million decrease in equity in losses across our lodging business, entirely offset by a $4 million unfavorable variance due to the impact of the spin-off. The $4 million decrease in equity in losses across our lodging business primarily reflected $3 million of increased earnings at two International segment joint ventures, $3 million of decreased losses at two other joint ventures, and a $3 million favorable variance from the 2012 sale of an equity interest in a North American Limited-Service joint venture (formerly two joint ventures which were merged before the sale) which had losses in the prior year, partially offset by $3 million of increased losses at a Luxury segment joint venture, and a $2 million loan loss provision for certain notes receivable due from another Luxury segment joint venture. The $3 million of increased losses at a Luxury segment joint venture reflected increased losses of $8 million primarily from the impairment of certain underlying residential properties in 2012, partially offset by $5 million of decreased losses in 2012, after the impairment, as a result of decreased joint venture costs. The $4

1716

Gains (Losses) and Other Income

We show our gains (losses) and other income for 2012, 2011, and 2010 in the following table:

$ 42 $ (7) $ 35

2012 Compared to 2011

2011 Compared to 2010

Interest Expense

2012 Compared to 2011

2011 Compared to 2010

Interest Income and Income Tax

2012 Compared to 2011

2011 Compared to 2010

Interest income decreased by $5 million (26 percent) to $14 million in 2011 compared to $19 million in 2010, primarily reflecting a $3 million decrease from the repayment of certain loans.

Equity in Losses

2012 Compared to 2011

1818

million unfavorable variance due to the impact of the spin-off reflected the $4 million reversal in 2011 of the funding liability associated with Timeshare-strategy impairment charges we originally recorded in 2009. See Footnote No. 18, "Timeshare Strategy-Impairment Charges" of our 2011 Form 10-K for additional information on this reversal.

2011 Compared to 2010

Equity in losses of $13 million in 2011 decreased by $5 million from equity in losses of $18 million in 2010 and primarily reflected $9 million of increased earnings at two North American Limited-Service joint ventures and one International segment joint venture, primarily due to stronger property-level performance; $8 million of lower losses for a residential and fractional project joint venture (our former Timeshare segment stopped recognizing their share of the joint venture’s losses as their investment, including loans due from the joint venture, was reduced to zero in 2010); and a favorable variance from 2010 joint venture impairment charges of $5 million for our North American Limited-Service segment. These favorable impacts were partially offset by $8 million of decreased earnings at two Luxury segment joint ventures. We also reversed $4 million in 2011 and $11 million in 2010 of the $27 million funding liability we initially recorded in the Timeshare strategy-impairment charges (non-operating) caption of our 2009 Income Statement (see Footnote No. 18, "Timeshare Strategy- Impairment Charges" of the Notes to our Financial Statements of the 2011 Form 10-K for more information). We recorded both the $11 million reversal in 2010 and the $4 million reversal in 2011 based on facts and circumstances surrounding a project related to our former Timeshare segment, including continued progress on certain construction-related legal claims and potential funding of certain costs by one of the partners.

Net Income

2012 Compared to 2011

Net income increased by $373 million to $571 million in 2012 from $198 million in 2011, and diluted earnings per share increased by $1.17 per share (213 percent) to $1.72 per share from $0.55 per share in 2011. As discussed in more detail in the preceding sections beginning with “Revenues,” the $373 million increase in net income was due to the impact of the spin-off ($296 million), as well as the following increases across our lodging business: higher gains and other income ($52 million), higher franchise fees ($44 million), higher incentive management fees ($37 million), higher base management fees ($35 million), higher owned, leased, corporate housing, and other revenue, net of direct expenses ($25 million), lower general, administrative, and other expenses ($8 million), and lower equity in losses ($4 million). These increases were partially offset by higher income taxes ($120 million) as well as the following decreases across our lodging business: lower interest income ($6 million) and higher interest expense ($2 million).

2011 Compared to 2010

Net income decreased by $260 million (57 percent) to $198 million in 2011 from $458 million in 2010, and diluted earnings per share decreased by $0.66 per share (55 percent) to $0.55 per share from $1.21 per share in 2010. As discussed in more detail in the preceding sections beginning with “Revenues,” the $260 million decrease in net income was due to Timeshare strategy-impairment charges ($324 million), higher income taxes ($65 million), lower gains and other income ($42 million), lower Timeshare sales and services revenue net of direct expenses ($40 million), and lower interest income ($5 million). Higher base management and franchise fees ($105 million), higher owned, leased, corporate housing, and other revenue net of direct expenses ($49 million), lower general, administrative, and other expenses ($28 million), lower interest expense ($16 million), higher incentive management fees ($13 million), and lower equity in losses ($5 million) partially offset these items.

Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA

EBITDA, a financial measure that is not prescribed or authorized by United States generally accepted accounting principles (“GAAP”), reflects earnings excluding the impact of interest expense, provision for income taxes, depreciation and amortization. We believe that EBITDA is a meaningful indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels, and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These

differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

We also believe that Adjusted EBITDA, another non-GAAP financial measure, is a meaningful indicator of operating performance. Our Adjusted EBITDA reflects:

• Timeshare Spin-off Adjustments for 2011 ("Timeshare Spin-off Adjustments") as if the spin-off occurred on the first day of 2011. The Timeshare Spin-off Adjustments of $260 million reflected in net income for 2011 totaled $300 million pre-tax and are primarily comprised of the following pre-tax items: (1) the addition of $217 million to remove the losses of our former Timeshare segment; (2) the addition of a $60 million payment by MVW to us of estimated license fees; (3) the addition of $34 million to remove unallocated spin-off transaction costs; (4) the addition of $10 million of estimated interest income; (5) the subtraction of $14 million of estimated interest expense; and (6) the subtraction of $7 million of other expenses not previously allocated to our former Timeshare segment; and

• Adjustments for Other Charges for 2011. These adjustments of $17 million to net income for 2011 totaled $28 million pre-tax and consist of the following pre-tax items: (1) an $18 million charge for an other-than-temporary impairment of marketable securities; and (2) a $5 million impairment of deferred contract acquisition costs and a $5 million accounts receivable reserve, both for one Luxury segment property whose owner filed for bankruptcy. We discuss the other-than- temporary impairment of marketable securities in greater detail in the preceding "Gains (Losses) and Other Income" caption.

We believe that Adjusted EBITDA that excludes these items is also a meaningful measure of our operating performance because it permits period-over-period comparisons of our ongoing core operations before material charges. EBITDA and Adjusted EBITDA also facilitate our comparison of results from our ongoing operations before material charges with results from other lodging companies.

EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as substitutes for

performance measures calculated under GAAP. Both of these non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and in particular Adjusted EBITDA differently than we do or may not calculate them at all, limiting EBITDA's and Adjusted EBITDA's usefulness as comparative measures. We provide Adjusted EBITDA for illustrative and informational purposes only and Adjusted EBITDA is not necessarily indicative of, and we do not purport that it represents, what our operating results would have been had the spin-off occurred on the first day of 2011. Adjusted EBITDA also does not reflect certain financial and operating benefits we expect to realize as a result of the 2011 timeshare spin-off.

1918

2011 Compared to 2010

Net Income

2012 Compared to 2011

2011 Compared to 2010

Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA

differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

We also believe that Adjusted EBITDA, another non-GAAP financial measure, is a meaningful indicator of operating performance. Our Adjusted EBITDA reflects:

EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as substitutes for

2020

We show our 2012 and 2011 EBITDA and Adjusted EBITDA calculations and reconcile those measures with Net Income in the following tables:

($ in millions) As Reported

2012 Net Income $ 571 Interest expense 137 Tax provision 278 Depreciation and amortization 145 Less: Depreciation reimbursed by third-party owners (16) Interest expense from unconsolidated joint ventures 11 Depreciation and amortization from unconsolidated joint ventures 20 EBITDA $ 1,146

($ in millions) As Reported

2011

Timeshare Spin-off

Adjustments Other Charges 2011 Adjusted

EBITDA Net Income $ 198 $ 260 $ 17 Interest expense 164 (29) — Tax provision 158 40 11 Depreciation and amortization 168 (28) — Less: Depreciation reimbursed by third-party owners (15) — — Interest expense from unconsolidated joint ventures 18 — — Depreciation and amortization from unconsolidated joint ventures 30 — — EBITDA $ 721 $ 243 $ 28 $ 992

Business Segments

We are a diversified lodging company with operations in four business segments: North American Full-Service Lodging, North American Limited-Service Lodging, International Lodging, and Luxury Lodging. See Footnote No. 15, “Business Segments,” to our Financial Statements for further information on our segments, including how we aggregate our individual brands into each segment and other information about each segment, including revenues, net income (loss), equity in earnings (losses) of equity method investees, assets, and capital expenditures.

In addition to our four current segments, on November 21, 2011 we spun off our former timeshare operations and timeshare development business, which had until that time been our Timeshare segment, as a new independent company, MVW. See Footnote No. 15, “Business Segments,” to our Financial Statements for historical financial results of our former Timeshare segment and Footnote No. 16, "Spin-off" to our Financial Statements for more information on the spin-off. Also, see the "CONSOLIDATED RESULTS" caption earlier in this report for more information, including tables, on the impact of the spin-off.

2120

We show our 2012 and 2011 EBITDA and Adjusted EBITDA calculations and reconcile those measures with Net Income in the following tables:

($ in millions) As Reported

2011

Timeshare Spin-off

Adjustments Other Charges 2011 Adjusted

Business Segments

2222

At year-end 2012, we operated, franchised, and licensed the following properties by segment:

Total Lodging and Timeshare Products Properties Rooms U.S. Non-U.S. Total U.S. Non-U.S. Total North American Full-Service Lodging Segment (1)

Marriott Hotels & Resorts 320 14 334 126,113 5,244 131,357 Marriott Conference Centers 10 — 10 2,915 — 2,915 JW Marriott 22 1 23 12,649 221 12,870 Renaissance Hotels 77 2 79 28,248 790 29,038 Renaissance ClubSport 2 — 2 349 — 349 Gaylord Hotels 5 — 5 8,098 — 8,098 Autograph Collection 24 — 24 6,609 — 6,609

460 17 477 184,981 6,255 191,236 North American Limited-Service Lodging Segment (1)

Courtyard 817 21 838 114,948 3,734 118,682 Fairfield Inn & Suites 678 11 689 61,477 1,234 62,711 SpringHill Suites 297 2 299 34,844 299 35,143 Residence Inn 602 19 621 72,642 2,808 75,450 TownePlace Suites 208 2 210 20,803 278 21,081

2,602 55 2,657 304,714 8,353 313,067 International Lodging Segment (1)

Marriott Hotels & Resorts — 155 155 — 44,852 44,852 JW Marriott — 36 36 — 12,923 12,923 Renaissance Hotels — 74 74 — 23,902 23,902 Autograph Collection — 8 8 — 1,056 1,056 Courtyard — 91 91 — 17,871 17,871 Fairfield Inn & Suites — 2 2 — 334 334 Residence Inn — 4 4 — 421 421 Marriott Executive Apartments — 25 25 — 4,066 4,066

— 395 395 — 105,425 105,425 Luxury Lodging Segment

The Ritz-Carlton 38 42 80 11,357 12,410 23,767 Bulgari Hotels & Resorts — 3 3 — 202 202 EDITION — 1 1 — 78 78 The Ritz-Carlton-Residential(2) 30 5 35 3,598 329 3,927 The Ritz-Carlton Serviced Apartments — 4 4 — 579 579

68 55 123 14,955 13,598 28,553 Unconsolidated Joint Ventures

Autograph Collection — 5 5 — 348 348 AC Hotels by Marriott — 79 79 — 8,736 8,736

— 84 84 — 9,084 9,084

Timeshare (3) 50 15 65 10,706 2,323 13,029

Total 3,180 621 3,801 515,356 145,038 660,394

(1) North American includes properties located in the United States and Canada. International includes properties located outside the United States and

Canada. (2) Represents projects where we manage the related owners’ association. We include residential products once they possess a certificate of occupancy. (3) Timeshare properties licensed by MVW under the Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, and

Grand Residences by Marriott brand names. Includes products that are in active sales as well as those that are sold out.

Lodging (reflects all four of our Lodging segments and our former Timeshare segment, for periods before the spin-off date)

2012 Compared to 2011

We added 122 properties (27,059 rooms) and 42 properties (8,883 rooms) exited our system in 2012. These figures do not include residential or ExecuStay units. During 2012, we also added three residential properties (89 units). No residential properties or units exited the system.

Total segment financial results increased by $408 million to $1,173 million in 2012 from $765 million in 2011, and total segment revenues decreased by $671 million to $11,526 million in 2012, a 6 percent decrease from revenues of $12,197 million in 2011. The $408 million increase in segment results reflected a $212 million favorable variance from the spin-off (which included $324 million of Timeshare strategy-impairment charges in 2011) and a net $196 million increase in segment results across our lodging business. The $671 million decrease in total segment revenues reflected a $1,443 million decrease due to the impact of the spin-off that was partially offset by a net $772 million increase across our lodging business.

The year-over-year net increase in segment revenues across our lodging business of $772 million resulted from a $757 million increase in cost reimbursements revenue, a $44 million increase in franchise fees, a $35 million increase in base management fees, and a $37 million increase in incentive management fees, partially offset by a $101 million decrease in owned, leased, corporate housing, and other revenue. The $196 million year-over-year increase in segment results across our lodging business reflected a $44 million increase in franchise fees, $39 million of higher gains and other income, a $37 million increase in incentive management fees, a $35 million increase in base management fees, a $19 million decrease in general, administrative, and other expenses, an $18 million increase in owned, leased, corporate housing, and other revenue net of direct expenses, and $4 million of lower joint venture equity losses. For more detailed information on the variances, see the preceding sections beginning with “Revenues.”

See “Statistics” below for detailed information on Systemwide RevPAR and Company-operated RevPAR by segment, region, and brand.

Compared to 2011, worldwide comparable company-operated house profit margins in 2012 increased by 120 basis points and worldwide comparable company-operated house profit per available room (“HP-PAR”) increased by 9.0 percent on a constant U.S. dollar basis, reflecting higher occupancy, rate increases, improved productivity, and lower energy costs. These same factors contributed to North American company-operated house profit margins increasing by 140 basis points compared to 2011. HP-PAR at those same properties increased by 9.9 percent. International company-operated house profit margins increased by 90 basis points, and HP-PAR at those properties increased by 7.3 percent reflecting increased demand and higher RevPAR in most locations and improved productivity.

2011 Compared to 2010

We added 206 properties (30,856 rooms) and 30 properties (6,262 rooms) exited our system in 2011. These figures do not include residential or ExecuStay units. During that time, we also added four residential properties (753 units) and no residential properties exited the system. These property additions include 80 hotels (8,371 rooms) which are operated or franchised as part of our unconsolidated joint venture with AC Hoteles, S.A. See Footnote No. 7, “Acquisitions and Dispositions,” for more information about AC Hotels by Marriott.

Total segment financial results decreased by $218 million (22 percent) to $765 million in 2011 from $983 million in 2010, and total segment revenues increased by $586 million to $12,197 million in 2011, a 5 percent increase from revenues of $11,611 million in 2010.

The year-over-year increase in revenues included a $604 million increase in cost reimbursements revenue, which does not impact operating income or net income. Total segment financial results, compared to 2010, primarily reflected $324 million of Timeshare strategy-impairment charges, a $40 million decrease in Timeshare sales and services revenue net of direct expenses, a $24 million decrease in gains and other income, and a $6 million increase in general, administrative, and other expenses. Partially offsetting these unfavorable factors were: a $101 million increase in base management and franchise fees to $1,104 million in 2011 from $1,003 million in 2010, a $37 million increase in owned, leased, corporate housing, and other revenue net of direct expenses, $13 million of higher incentive management fees to $195 million in 2011 from $182 million in 2010, $13 million of lower joint venture equity losses, and a $12 million decrease in interest expense. For more detailed information on the variances, see the preceding sections beginning with “Operating Income.”

2322

At year-end 2012, we operated, franchised, and licensed the following properties by segment:

Total Lodging and Timeshare Products Properties Rooms U.S. Non-U.S. Total U.S. Non-U.S. Total North American Full-Service Lodging Segment (1)

460 17 477 184,981 6,255 191,236 North American Limited-Service Lodging Segment (1)

2,602 55 2,657 304,714 8,353 313,067 International Lodging Segment (1)

— 395 395 — 105,425 105,425 Luxury Lodging Segment

68 55 123 14,955 13,598 28,553 Unconsolidated Joint Ventures

Autograph Collection — 5 5 — 348 348 AC Hotels by Marriott — 79 79 — 8,736 8,736

— 84 84 — 9,084 9,084

Timeshare (3) 50 15 65 10,706 2,323 13,029

Total 3,180 621 3,801 515,356 145,038 660,394

(1) North American includes properties located in the United States and Canada. International includes properties located outside the United States and

Grand Residences by Marriott brand names. Includes products that are in active sales as well as those that are sold out.

Lodging (reflects all four of our Lodging segments and our former Timeshare segment, for periods before the spin-off date)

2012 Compared to 2011

See “Statistics” below for detailed information on Systemwide RevPAR and Company-operated RevPAR by segment, region, and brand.

2011 Compared to 2010

2424

The $101 million increase in base management and franchise fees primarily reflected stronger RevPAR and the impact of unit growth across the system and favorable foreign exchange rates. In 2011, 29 percent of our managed properties paid incentive management fees to us versus 27 percent in 2010. In addition, in 2011, 67 percent of our incentive fees came from properties outside the United States versus 65 percent in 2010.

See “Statistics” below for detailed information on Systemwide RevPAR and Company-operated RevPAR by segment, region, and brand.

Compared to 2010, worldwide comparable company-operated house profit margins in 2011 increased by 60 basis points and worldwide comparable company-operated HP-PAR increased by 7.6 percent on a constant U.S. dollar basis, reflecting higher occupancy, rate increases, and the impact of tight cost controls in 2011 at properties in our system, partially offset by higher property-level compensation. These same factors contributed to North American company-operated house profit margins increasing by 70 basis points compared to 2010 and HP-PAR at those same properties increased by 8.1 percent. International company-operated house profit margins increased by 40 basis points and HP-PAR at those properties increased by 6.7 percent reflecting increased demand and higher RevPAR in most locations and continued tight property-level cost controls, partially offset by higher property-level compensation and the effects of RevPAR declines in the Middle East.

Lodging Development

We added 122 properties, totaling 27,059 rooms, across our brands in 2012 and 42 properties (8,883 rooms) left the system, not including residential products or ExecuStay. We also added three residential properties (89 units) and no residential properties left the system. Highlights of the year included:

• Converting 30 properties (5,553 rooms), or 20 percent of our gross room additions for the year, to our brands, including seven properties joining our Autograph Collection brand. Twenty-one of the properties converted were located in the United States;

• Thirty percent of our gross room additions were from the acquisition of the Gaylord brand and hotel management company. At year-end 2012, as a result of the acquisition, we managed five hotels (8,098 rooms) as well as other attractions including a showboat, golf course, and saloon;

• Adding approximately 30 percent of all the new rooms outside the United States; and • Adding 70 properties (8,470 rooms) to our North American Limited-Service brands.

We currently have nearly 130,000 hotel rooms under construction, awaiting conversion, or approved for development in our hotel development pipeline and we expect to add approximately 30,000 to 35,000 hotel rooms (gross) to our system in 2013.

We believe that we have access to sufficient financial resources to finance our growth, as well as to support our ongoing operations and meet debt service and other cash requirements. Nonetheless, our ability to develop and update our brands and the ability of hotel developers to build or acquire new Marriott-branded properties, both of which are important parts of our growth plan, depend in part on capital access, availability and cost for other hotel developers and third-party owners. These growth plans are subject to numerous risks and uncertainties, many of which are outside of our control. See the “Forward- Looking Statements” and “Risks and Uncertainties” captions earlier in this report and the “Liquidity and Capital Resources” caption later in this report.

Statistics

The following tables show occupancy, average daily rate, and RevPAR for comparable properties, for each of the brands in our North American Full-Service and North American Limited-Service segments, for our International segment by region, and the principal brand in our Luxury segment, The Ritz-Carlton. Systemwide statistics include data from our franchised properties, in addition to our owned, leased, and managed properties. We report financial results for all properties on a period- end basis, but report statistics for properties located outside the United States and Canada on a month-end basis.

Reporting periods and currency. The occupancy, average daily rate, and RevPAR statistics we use throughout this report are for the following 52 week periods: for 2012, December 31, 2011 through December 28, 2012; for 2011, January 1, 2011 through December 30, 2011; and for 2010, January 2, 2010 through December 31, 2010; except in each case, for The Ritz- Carlton and Autograph Collection brand properties and properties located outside of the United States where statistics are for the period from January 1 through December 31 for each year. For the properties located in countries that use currencies other than the U.S. dollar, the comparison to the prior year are on a constant U.S. dollar basis.

2524

See “Statistics” below for detailed information on Systemwide RevPAR and Company-operated RevPAR by segment, region, and brand.

Lodging Development

• Adding approximately 30 percent of all the new rooms outside the United States; and • Adding 70 properties (8,470 rooms) to our North American Limited-Service brands.

Statistics

2626

Comparable Company-Operated

North American Properties (1) Comparable Systemwide

North American Properties (1)

2012 Change vs.

2011 2012 Change vs.

2011 Marriott Hotels & Resorts

Occupancy 72.7% 1.8 % pts. 70.1% 1.8% pts. Average Daily Rate $ 171.48 3.5 % $ 157.17 3.6% RevPAR $ 124.72 6.1 % $ 110.19 6.4%

Renaissance Hotels Occupancy 73.6% 2.1 % pts. 71.2% 1.4% pts. Average Daily Rate $ 167.67 4.5 % $ 150.53 4.7% RevPAR $ 123.38 7.5 % $ 107.18 6.8%

Autograph Collection Hotels Occupancy * * pts. 76.1% 3.6% pts. Average Daily Rate * * $ 176.61 1.6% RevPAR * * $ 134.36 6.6%

Composite North American Full-Service Occupancy 72.9% 1.8 % pts. 70.3% 1.8% pts. Average Daily Rate $ 170.92 3.6 % $ 156.30 3.8% RevPAR $ 124.52 6.3 % $ 109.93 6.4%

The Ritz-Carlton North America Occupancy 69.9% 0.8 % pts. 69.9% 0.8% pts. Average Daily Rate $ 319.57 4.9 % $ 319.57 4.9% RevPAR $ 223.51 6.1 % $ 223.51 6.1%

Composite North American Full-Service and Luxury

Occupancy 72.6% 1.7 % pts. 70.3% 1.7% pts. Average Daily Rate $ 185.57 3.8 % $ 166.02 3.8% RevPAR $ 134.64 6.3 % $ 116.72 6.4%

Residence Inn Occupancy 75.4% 0.3 % pts. 77.2% 0.6% pts. Average Daily Rate $ 123.55 4.3 % $ 120.66 4.2% RevPAR $ 93.14 4.7 % $ 93.10 5.0%

Courtyard Occupancy 67.7% 0.5 % pts. 69.2% 1.2% pts. Average Daily Rate $ 117.11 4.9 % $ 118.68 4.6% RevPAR $ 79.32 5.6 % $ 82.15 6.5%

Fairfield Inn & Suites Occupancy nm nm pts. 67.3% 1.7% pts. Average Daily Rate nm nm $ 94.49 4.8% RevPAR nm nm $ 63.56 7.5%

TownePlace Suites Occupancy 70.8% (0.4)% pts. 72.3% 0.6% pts. Average Daily Rate $ 83.04 5.6 % $ 89.07 5.0% RevPAR $ 58.76 5.1 % $ 64.39 5.9%

SpringHill Suites Occupancy 70.5% 2.8 % pts. 71.0% 2.6% pts. Average Daily Rate $ 103.04 2.7 % $ 103.81 3.8% RevPAR $ 72.63 7.0 % $ 73.74 7.8%

Composite North American Limited-Service Occupancy 70.2% 0.6 % pts. 71.2% 1.3% pts. Average Daily Rate $ 116.43 4.6 % $ 111.12 4.4% RevPAR $ 81.76 5.5 % $ 79.07 6.3%

Composite North American – All Occupancy 71.6% 1.2 % pts. 70.8% 1.4% pts. Average Daily Rate $ 157.05 4.2 % $ 130.97 4.2% RevPAR $ 112.40 6.0 % $ 92.79 6.4%

* There are no company-operated properties. nm means not meaningful as the brand is predominantly franchised.

(1) Statistics include only properties located in the United States.

Comparable Company-Operated

Properties Comparable Systemwide

Properties

2012 Change vs.

2011 2012 Change vs.

2011 Caribbean and Latin America

Occupancy 72.3% 1.2 % pts. 70.2% 1.3 % pts. Average Daily Rate $ 190.75 5.1 % $ 171.32 3.4 % RevPAR $ 137.93 6.9 % $ 120.27 5.3 %

Europe Occupancy 72.7% 0.2 % pts. 71.9% 0.2 % pts. Average Daily Rate $ 170.72 2.8 % $ 166.02 2.6 % RevPAR $ 124.20 3.0 % $ 119.40 2.8 %

Middle East and Africa Occupancy 61.8% 5.3 % pts. 61.8% 5.6 % pts. Average Daily Rate $ 133.14 (1.0)% $ 130.10 (0.6)% RevPAR $ 82.25 8.3 % $ 80.37 9.2 %

Asia Pacific Occupancy 73.0% 3.7 % pts. 72.9% 3.6 % pts. Average Daily Rate $ 133.01 3.0 % $ 141.17 2.2 % RevPAR $ 97.04 8.4 % $ 102.90 7.6 %

Regional Composite (1)

Occupancy 71.9% 2.0 % pts. 71.2% 1.9 % pts. Average Daily Rate $ 156.74 2.7 % $ 156.47 2.2 % RevPAR $ 112.66 5.6 % $ 111.45 5.0 %

International Luxury (2)

Occupancy 63.4% 1.3 % pts. 63.4% 1.3 % pts. Average Daily Rate $ 341.32 3.6 % $ 341.32 3.6 % RevPAR $ 216.34 5.9 % $ 216.34 5.9 %

Total International (3)

Occupancy 70.9% 1.9 % pts. 70.5% 1.8 % pts. Average Daily Rate $ 175.14 2.8 % $ 171.36 2.4 % RevPAR $ 124.22 5.6 % $ 120.85 5.1 %

(1) Regional Composite statistics include properties located outside of the United States and Canada for the Marriott Hotels & Resorts, Renaissance

Hotels, and Courtyard brands. (2) International Luxury includes The Ritz-Carlton properties located outside the United States and Canada and Bulgari Hotels & Resorts properties. (3) Total International includes Regional Composite statistics and International Luxury statistics.

2726