MARRIOTT INTERNATIONAL INC /MD/ (MAR)

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

A discussion regarding our financial condition and results of operations for year-end 2023 compared to year-end 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on February 13, 2024 (“2023 Form 10-K”).

BUSINESS AND OVERVIEW

Overview

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties under more than 30 brand names. We discuss our operations in the following reportable business segments: (1) U.S. & Canada, (2) Europe, Middle East & Africa (“EMEA”), (3) Greater China, and (4) Asia Pacific excluding China (“APEC”). Our Caribbean & Latin America (“CALA”) operating segment does not meet the applicable accounting criteria for separate disclosure as a reportable business segment, and as such, we include its results in “Unallocated corporate and other.”

Under our asset-light business model, we typically manage or franchise hotels and other lodging offerings, rather than own them. Terms of our management agreements vary, but we earn a management fee that is typically composed of a base management fee, which is a percentage of the revenues of the hotel, and an incentive management fee, which is based on the profits of the hotel. In many cases (particularly in our U.S. & Canada, Europe, and CALA regions), incentive management fees are subject to a specified owner return. Under our hotel franchising arrangements, we generally receive an initial application fee and continuing royalty fees, which are typically based on a percentage of room revenues, plus for certain brands, a percentage

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of food and beverage revenues. We also have license and other agreements with third parties for certain offerings, such as for our timeshare properties, MGM Collection with Marriott Bonvoy, Design Hotels, and The Ritz-Carlton Yacht Collection, under which we receive royalty fees and certain other fees. Additionally, we earn fees for other uses of our intellectual property, including primarily co-branded credit card fees, as well as residential branding fees and certain other licensing fees.

Performance Measures

We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing property level room revenue by total rooms available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our fee revenue. We also believe occupancy and average daily rate (“ADR”), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing total rooms sold by total rooms available for the period, measures the utilization of a property’s available capacity. ADR, which we calculate by dividing property level room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels. RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated. Unless otherwise stated, all changes refer to year-over-year changes for the comparable period. Comparisons to prior periods are on a constant U.S. dollar basis, which we calculate by applying exchange rates for the current period to the prior comparable period. We believe constant dollar analysis provides valuable information regarding the performance of hotels in our system as it removes currency fluctuations from the presentation of such results.

We define our comparable properties as hotels in our system that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 2023 for the current period) and have not, in either the current or previous year: (1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption. Our comparable properties also exclude MGM Collection with Marriott Bonvoy, Design Hotels, The Ritz-Carlton Yacht Collection, and timeshare properties. For 2024, we had 5,439 comparable U.S. & Canada properties and 1,741 comparable International properties.

Business Trends

We saw solid global RevPAR growth during 2024 compared to 2023. In 2024, worldwide RevPAR increased 4.3 percent compared to 2023, reflecting ADR growth of 2.8 percent and occupancy improvement of 1.0 percentage point. The increase in RevPAR was driven by strong year-over-year demand growth in nearly all our regions.

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

In EMEA, RevPAR growth of 9.1 percent in 2024 was driven by strong demand in most countries across the region, aided by the 2024 Paris Olympics and other special events. In APEC, RevPAR increased 12.9 percent in 2024, driven by strong demand, including an increase in inbound demand into the region. In CALA, RevPAR increased 8.8 percent in 2024, driven by strong demand throughout the region. In Greater China, RevPAR declined 2.3 percent in 2024 due to lower domestic demand as a result of macro-economic conditions and an increase in outbound travel.

In 2024, we launched a comprehensive initiative to enhance our effectiveness and efficiency across the Company. At this point in the process, we expect this initiative to yield $80 million to $90 million of annual general and administrative cost reductions beginning in 2025. These efforts are also anticipated to deliver cost savings to our hotel owners.

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

Starwood Data Security Incident

On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). We are currently unable to reasonably estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already recorded; however, we do not believe this incident will impact our long-term financial health. See Note 7 for additional information related to legal proceedings and governmental investigations related to the Data Security Incident.

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System Growth and Pipeline

Our system grew from 8,785 properties (1,597,380 rooms) at year-end 2023 to 9,361 properties (1,706,331 rooms) at year-end 2024. The increase compared to year-end 2023 reflected gross additions of 666 properties (123,389 rooms), including the addition of 16 properties (approximately 38,000 rooms) from our exclusive, long-term strategic licensing agreement with MGM Resorts International and 163 properties (approximately 9,000 rooms) from our long-term agreement with Sonder Holdings Inc., and deletions of 90 properties (14,572 rooms). Our 2024 gross room additions included approximately 52,300 rooms located outside U.S. & Canada and roughly 75,300 rooms converted from competitor brands.

At year-end 2024, we had nearly 3,800 properties and over 577,000 rooms in our development pipeline, which includes roughly 29,000 rooms approved for development but not yet under signed contracts. Our development pipeline includes over 229,000 rooms, or 40 percent, that were under construction or in the process of converting to our system at year-end 2024. Fifty-five percent of the rooms in our development pipeline are located outside U.S. & Canada.

In 2024, we signed over 1,200 development deals with hotel owners and other counterparties for nearly 162,000 rooms globally. Approximately 34 percent of rooms signed were the result of conversion opportunities. During 2024, we continued to strengthen our luxury portfolio and grow our midscale brands. In December 2024, we also announced the expansion of our outdoor-focused lodging offerings.

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

Properties and Rooms

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

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

Lodging Statistics

The following table presents RevPAR, occupancy, and ADR statistics for comparable properties for 2024, and 2024 compared to 2023. Systemwide statistics include data from our franchised properties, in addition to our company-operated

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properties.

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

(2)Includes U.S. & Canada and International - All.

CONSOLIDATED RESULTS

The discussion below presents an analysis of our consolidated results of operations for 2024 compared to 2023. Also see the “Business Trends” section above for further discussion.

Fee Revenues

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

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

The increase in incentive management fees primarily reflected higher profits at managed hotels. In 2024, we earned incentive management fees from 69 percent of our managed hotels worldwide, compared to 68 percent in 2023. We earned incentive management fees from 31 percent of our U.S. & Canada managed hotels and 85 percent of our International managed hotels in each of 2024 and 2023. In addition, 67 percent of our total incentive management fees in 2024 came from our International managed hotels, primarily in EMEA and APEC, versus 65 percent in 2023.

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Owned, Leased, and Other

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

Cost Reimbursements

Cost reimbursements, net (cost reimbursement revenue, net of reimbursed expenses) varies due to timing differences between the costs we incur for centralized programs and services and the related reimbursements we receive from hotel owners and certain other counterparties. Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively. See Note 2 for more information about the accounting for cost reimbursements, including our Loyalty Program.

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

Other Operating Expenses

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

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

Non-Operating Income (Expense)

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

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

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Income Taxes

Our tax provision increased in 2024 primarily due to intellectual property restructuring transactions resulting in non-U.S. tax benefits in the prior year ($228 million), the prior year release of a tax valuation allowance as the Company concluded it is more likely than not to recognize non-U.S. tax benefits ($223 million), and the prior year release of tax reserves, which was mostly due to the completion of a prior year tax audit ($103 million). The increase was partially offset by a decrease in pre-tax income ($51 million).

BUSINESS SEGMENTS

The following discussion presents an analysis of the operating results of our reportable business segments for 2024 compared to 2023. Also see the “Business Trends” section above for further discussion.

In 2024, net fee revenues grew in U.S. & Canada, EMEA, and APEC compared to 2023, primarily driven by higher RevPAR and unit growth (see the Lodging Statistics and Properties and Rooms tables above for more information), as well as higher profits at managed hotels. In Greater China, net fee revenues decreased in 2024 primarily due to lower RevPAR.

U.S. & Canada segment profit decreased in 2024 compared to 2023 despite the higher net fee revenues due to $138 million of lower cost reimbursement revenue, net of reimbursed expenses, $59 million of lower owned, leased, and other revenue, net of direct expenses, and $28 million of higher general, administrative, and other expenses. Owned, leased, and other revenue, net of direct expenses decreased primarily due to higher termination fees in the prior year, largely related to one development project. General, administrative, and other expenses increased primarily due to higher guarantee reserves.

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

LIQUIDITY AND CAPITAL RESOURCES

Our Credit Facility

We are party to a $4.5 billion multicurrency revolving credit agreement (as amended, the “Credit Facility”). Available borrowings under the Credit Facility support our commercial paper program and general corporate needs. U.S. dollar borrowings under the Credit Facility bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our

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public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings (which generally have short-term maturities of 45 days or less) as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on December 14, 2027.

The Credit Facility contains certain covenants, including a single financial covenant that limits our maximum leverage (consisting of the ratio of Adjusted Total Debt to EBITDA, each as defined in the Credit Facility) to not more than 4.5 to 1.0. Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios. We currently satisfy the covenants in our Credit Facility and public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs. We believe the Credit Facility, and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our liquidity requirements.

Commercial Paper

We issue commercial paper in the U.S. Because we do not have purchase commitments from buyers for our commercial paper, our ability to issue commercial paper is subject to market demand. We do not expect that fluctuations in the demand for commercial paper will affect our liquidity, given our borrowing capacity under the Credit Facility and access to capital markets.

Cash from Operations

Net cash provided by operating activities decreased by $421 million in 2024 compared to 2023. Net cash provided by operating activities in 2024 reflected a cash outflow of $300 million in the “Restructuring and merger-related charges” caption of our Statements of Cash Flows for the settlement of the guarantee liability associated with the purchase of the Sheraton Grand Chicago (discussed in Note 3). Cash flows for 2023 reflected reduced cash received from U.S. co-branded credit card issuers related to the 2020 prepayment of certain future revenues. Such reductions ended as of year-end 2023.

Our ratio of current assets to current liabilities was 0.4 to 1.0 at both year-end 2024 and year-end 2023. We have significant borrowing capacity under our Credit Facility should we need additional working capital.

Investing Activities Cash Flows

Capital Expenditures and Other Investments. We made capital and technology expenditures of $750 million in 2024 and $452 million in 2023. Capital and technology expenditures in 2024 increased by $298 million compared to 2023, primarily due to approximately $200 million of spending related to the Sheraton Grand Chicago capitalized assets (discussed in Note 3) and higher than typical spending on our worldwide technology systems transformation, the overwhelming portion of which is expected to be reimbursed over time. In 2023, we also had cash outflows of $101 million due to the City Express brand acquisition.

We expect capital expenditures and other investments will total approximately $1.0 billion to $1.1 billion for 2025, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities, but excluding any potential property or brand acquisitions, which we cannot forecast with sufficient accuracy and which may be significant. Our anticipated capital and technology expenditures include higher than typical spending on our worldwide technology systems transformation and renovations of hotels in our owned and leased portfolio.

Dispositions. Property and asset sales generated $16 million of cash proceeds in 2024 and $71 million in 2023.

Over time, we have sold lodging properties, both completed and under development, generally subject to long-term management agreements. Our ability to attract third-party purchasers, and their ability to raise the debt and equity capital necessary to acquire such properties, depends in part on the perceived risks in the lodging industry and other constraints inherent in the capital markets. We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations. We have made, and expect to continue making, selective and opportunistic investments to add units to our lodging business, which may include property acquisitions and renovations, new construction, loans, guarantees, and equity investments. Over time, we seek to minimize capital invested in our business through asset sales subject to long-term management or franchise agreements.

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Financing Activities Cash Flows

Debt. Debt increased by $2,574 million in 2024, to $14,447 million at year-end 2024 from $11,873 million at year-end 2023, primarily due to the issuances of our Series PP Notes and Series QQ Notes ($1,480 million) and Series NN Notes and Series OO Notes ($1,468 million), partially offset by the maturity of our Series CC Notes ($550 million). See Note 9 for additional information on Senior Notes issuances.

Our long-term financial objectives include maintaining diversified financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital. At year-end 2024, our long-term debt had a weighted average interest rate of 4.5 percent and a weighted average maturity of approximately 5.0 years. The ratio of our fixed-rate long-term debt to our total long-term debt was 0.9 to 1.0 at year-end 2024.

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

Share Repurchases and Dividends. We repurchased 15.4 million shares of our common stock for $3.7 billion in 2024. Year-to-date through February 7, 2025, we repurchased 1.2 million shares for $350 million. For additional information, see “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in Part II, Item 5.

Our Board declared the following quarterly cash dividends in 2024: (1) $0.52 per share declared on February 8, 2024 and paid on March 29, 2024 to stockholders of record on February 22, 2024; (2) $0.63 per share declared on May 10, 2024 and paid on June 28, 2024 to stockholders of record on May 24, 2024; (3) $0.63 per share declared on August 2, 2024 and paid on September 30, 2024 to stockholders of record on August 16, 2024; and (4) $0.63 per share declared on November 7, 2024 and paid on December 31, 2024 to stockholders of record on November 21, 2024.

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

Material Cash Requirements

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

•At year-end 2024, we had $14,447 million of debt plus $3,110 million of future interest payments, of which a total of $1,866 million is payable within the next 12 months from year-end 2024. See Note 9 for further information about our long-term debt and Note 8 for further information about our finance leases.

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

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

•The Company had guarantees and letters of credit as of year-end 2024, which are discussed in Note 7. The majority of our remaining guarantee commitments are not expected to be funded within the next 12 months from year-end 2024.

•In the normal course of business, we enter into purchase commitments related to the programs and services that we typically provide to hotel owners, and we incur other obligations to manage the daily operating needs of the hotels that we manage. Since our contracts with hotel owners generally require reimbursement for expenses incurred in providing these programs and services and managing the daily operating needs of the hotels that we manage, these obligations are not expected to have a material impact on our net income and cash flow over the long term.

NEW ACCOUNTING STANDARDS

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting policy and estimate to be critical if: (1) we must make assumptions that were uncertain when the estimate was made; and (2) changes in the estimate, or selection of a different estimate methodology could have a material effect on our consolidated results of operations or financial condition.

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While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate or assumption was made. Actual results may differ significantly. Additionally, changes in our assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.

See Note 2 for further information related to our critical accounting policies and estimates, which are as follows:

Loyalty Program, including how we estimate the breakage of hotel points, credit card points, and free night certificates, the volume of points and free night certificates that will be issued under our co-branded credit card agreements, the amount of consideration to which we will be entitled under our co-branded credit card agreements, and the stand-alone selling prices of goods and services provided under our co-branded credit card agreements. Changes in these estimates could result in material changes to our liability for guest loyalty program and Loyalty Program revenue. Based on the conditions existing at December 31, 2024 and holding other factors constant, a one percent decrease in our estimate of the breakage of points could result in an increase in the liability for guest loyalty program of approximately $50 million. The breakage impact may vary significantly depending on the specific Loyalty Program points for which the anticipated breakage changes.

Goodwill, including how we evaluate the fair value of reporting units and when we record an impairment loss on goodwill. Our reporting units are the same as our operating segments. See Note 14 for more information. During the 2024 fourth quarter, we conducted our annual goodwill impairment test, and no impairment charges were recorded. The estimated fair values of all our reporting units significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.

Intangibles and Long-Lived Assets, including how we evaluate the fair value of intangibles and long-lived assets and when we record impairment losses on intangibles and long-lived assets. During 2024, we evaluated our intangibles and long-lived asset groups for impairment and did not record any material impairment charges. The estimated fair values of all our indefinite-lived intangible assets significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

A discussion regarding our financial condition and results of operations for year-end 2022 compared to year-end 2021 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 14, 2023 (“2022 Form 10-K”).

BUSINESS AND OVERVIEW

Overview

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties in 139 countries and territories under more than 30 brand names. Under our asset-light business model, we typically manage or franchise hotels, rather than own them. We discuss our operations in the following reportable business segments: (1) U.S. & Canada and (2) International. In January 2024, we modified our segment structure as a result of a change in the way

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management intends to evaluate results and allocate resources within the Company. Beginning with the 2024 first quarter, we will report the following four operating segments: (1) U.S. & Canada, (2) Europe, Middle East, and Africa, (3) Asia Pacific excluding China, and (4) Greater China. Our Caribbean and Latin America operating segment will not meet the applicable criteria for separate disclosure as a reportable business segment, and as such, we will include its results in “Unallocated corporate and other.”

Terms of our management agreements vary, but our management fees generally consist of base management fees and incentive management fees. Base management fees are typically calculated as a percentage of property-level revenue. Incentive management fees are typically calculated as a percentage of a hotel profitability measure, and, in many cases (particularly in our U.S. & Canada, Europe, and Caribbean & Latin America regions), are subject to a specified owner return. Under our franchise agreements, franchise fees are typically calculated as a percentage of property-level revenue or a portion thereof. Additionally, we earn franchise fees for the use of our intellectual property, including primarily co-branded credit card fees, as well as timeshare and yacht fees, residential branding fees, franchise application and relicensing fees, and certain other licensing fees, which we refer to as “non-RevPAR related franchise fees.”

Performance Measures

We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing room sales for comparable properties by room nights available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our fee revenue. We also believe occupancy and average daily rate (“ADR”), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing occupied rooms by total rooms available, measures the utilization of a property’s available capacity. ADR, which we calculate by dividing property room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels. RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated. Comparisons to prior periods are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

We define our comparable properties as our properties that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 2022 for the current period) and have not, in either the current or previous year: (1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption. For 2023 compared to 2022, we had 5,375 comparable U.S. & Canada properties and 1,704 comparable International properties.

Business Trends

We saw strong global RevPAR improvement throughout 2023 compared to 2022. In 2023, worldwide RevPAR increased 14.9 percent compared to 2022, reflecting ADR growth of 5.8 percent and occupancy improvement of 5.5 percentage points. The increase in RevPAR was driven by improvement in all customer segments.

In the U.S. & Canada, RevPAR improved 8.9 percent in 2023 compared to 2022, driven by ADR growth of 4.7 percent and occupancy improvement of 2.7 percentage points. As we returned to more normalized year over year RevPAR comparisons during the year, RevPAR growth began to stabilize in the 2023 last three quarters.

In our International segment, RevPAR improved 32.6 percent in 2023 compared to 2022, driven by ADR growth of 9.7 percent and occupancy improvement of 11.7 percentage points. The improvement in RevPAR compared to 2022 was driven by strengthening demand, particularly in Greater China and Asia Pacific excluding China, which were impacted by COVID-19 and government-imposed travel restrictions for much or all of 2022.

Starwood Data Security Incident

On September 23, 2016, we completed the acquisition of Starwood Hotels & Resorts Worldwide, LLC, formerly known as Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), through a series of transactions, after which Starwood became an indirect wholly-owned subsidiary of the Company. On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). We discontinued use of the Starwood reservations database for business operations at the end of 2018.

We are currently unable to reasonably estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already recorded. However, we do not believe this incident will impact our long-term financial health. Although our insurance program includes coverage designed to limit our exposure to losses such as those related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other

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losses (including monetary payments to regulators and/or litigants) related to the Data Security Incident. In addition, certain expenses by their nature (such as, for example, expenses related to enhancing our cybersecurity program) are not covered by our insurance program. We expect to incur ongoing legal and other expenses associated with the Data Security Incident in future periods, and we believe it is reasonably possible that we may incur additional monetary payments to regulators and/or litigants in excess of the amounts already recorded and costs in connection with compliance with any settlements or resolutions of matters. See Note 7 for additional information related to legal proceedings and governmental investigations related to the Data Security Incident.

System Growth and Pipeline

Our system grew from 8,288 properties (1,525,407 rooms) at year-end 2022 to 8,785 properties (1,597,380 rooms) at year-end 2023. The increase compared to year-end 2022 reflected gross additions of 558 properties (81,281 rooms), including 149 properties (17,300 rooms) from the City Express brand acquisition, and deletions of 63 properties (9,430 rooms). Our 2023 gross room additions included approximately 60,500 rooms located outside U.S. & Canada and roughly 16,300 rooms converted from competitor brands.

At year-end 2023, we had nearly 3,400 hotels and roughly 573,000 rooms in our development pipeline, which includes over 21,000 rooms approved for development but not yet under signed contracts. More than 232,000 rooms in the pipeline, or 41 percent, were under construction at year-end 2023, including approximately 37,000 rooms from the exclusive, long-term strategic licensing agreement with MGM Resorts International that we announced in July 2023. Over half of the rooms in our development pipeline are outside U.S. & Canada.

In 2023, we signed a record number of management, franchise and license agreements for approximately 164,000 organic rooms, of which nearly 65,000 rooms are conversions and approximately 91,000 rooms are located in the U.S. and Canada, in each case, including 37,000 rooms under our agreement with MGM Resorts International discussed above. Contracts signed in 2023 reflected the Company’s strength in the luxury tier, with 58 luxury hotel agreements signed. In 2023, we also entered the Midscale segment through the City Express brand acquisition discussed above, and announced our plans for further Midscale expansion with the launch of two new brands, Four Points Express by Sheraton and StudioRes.

In 2024, we expect net rooms growth of 5.5 to 6.0 percent, including an anticipated 2.3 percent increase as a result of the expected addition of rooms to our system under our agreement with MGM Resorts International discussed above. The first of such MGM properties joined our system in January 2024, and the remaining properties are expected to join by the end of the 2024 first quarter.

Properties and Rooms

At year-end 2023, we operated, franchised, and licensed the following properties and rooms:

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Lodging Statistics

The following table presents RevPAR, occupancy, and ADR statistics for comparable properties for 2023, and 2023 compared to 2022. Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.

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

(2)Includes U.S. & Canada and International - All.

CONSOLIDATED RESULTS

The discussion below presents an analysis of our consolidated results of operations for 2023 compared to 2022. Also see the “Business Trends” section above for further discussion.

Fee Revenues

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

The increase in franchise fees primarily reflected higher RevPAR, unit growth ($99 million), and higher non-RevPAR related franchise fees ($50 million). Non-RevPAR related franchise fees of $832 million in 2023 increased primarily due to higher co-branded credit card fees ($55 million).

The increase in incentive management fees primarily reflected higher profits at many managed hotels. In 2023, we earned incentive management fees from 68 percent of our managed properties worldwide, compared to 61 percent in 2022. We earned incentive management fees from 31 percent of our U.S. & Canada managed properties and 85 percent of our International managed properties in 2023, compared to 29 percent in U.S. & Canada and 76 percent in International in 2022. In addition, 65 percent of our total incentive management fees in 2023 came from our International managed properties versus 58 percent in 2022.

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Owned, Leased, and Other

Owned, leased, and other revenue, net of direct expenses, increased primarily due to stronger results at our owned and leased properties, $46 million of higher termination fees, primarily related to one development project in U.S. & Canada, and an estimated monetary payment of $31 million recorded in 2022 related to a portfolio of 12 leased hotels in the U.S. & Canada, partially offset by $29 million of subsidies received in 2022 for certain of our leased hotels under German government COVID-19 assistance programs.

Cost Reimbursements

Cost reimbursements, net (cost reimbursement revenue, net of reimbursed expenses) varies due to timing differences between the costs we incur for centralized programs and services and the related reimbursements we receive from property owners and franchisees. Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively. See Note 2 for more information about the accounting for cost reimbursements, including our Loyalty Program.

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

Other Operating Expenses

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

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

Non-Operating Income (Expense)

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

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

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

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Income Taxes

Our tax provision decreased in 2023, compared to our tax provision in 2022, primarily due to intellectual property restructuring transactions completed during 2023 resulting in non-U.S. tax benefits ($228 million), the release of a tax valuation allowance as the Company concluded it is more likely than not to recognize non U.S. tax benefits ($223 million), and the current year release of tax reserves ($103 million), which was mostly due to the completion of a prior year tax audit. The decrease was partially offset by the increase in operating income ($61 million).

BUSINESS SEGMENTS

The following discussion presents an analysis of the operating results of our reportable business segments. Also see the “Business Trends” section above for further discussion.

U.S. & Canada

U.S. & Canada segment profit increased primarily due to the following:

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

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

partially offset by:

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

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International

International segment profit increased primarily due to the following:

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

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

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

partially offset by:

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

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

LIQUIDITY AND CAPITAL RESOURCES

Our Credit Facility

We are party to a $4.5 billion multicurrency revolving credit agreement (the “Credit Facility”). Available borrowings under the Credit Facility support our commercial paper program and general corporate needs. Borrowings under the Credit Facility generally bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings (which generally have short-term maturities of 45 days or less) as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on December 14, 2027.

The Credit Facility contains certain covenants, including a single financial covenant that limits our maximum leverage (consisting of the ratio of Adjusted Total Debt to EBITDA, each as defined in the Credit Facility) to not more than 4.5 to 1.0. Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios. We currently satisfy the covenants in our Credit Facility and public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs. We believe the Credit Facility, and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our liquidity requirements.

Commercial Paper

We issue commercial paper in the U.S. Because we do not have purchase commitments from buyers for our commercial paper, our ability to issue commercial paper is subject to market demand. We do not expect that fluctuations in the demand for commercial paper will affect our liquidity, given our borrowing capacity under the Credit Facility and access to capital markets.

Cash from Operations

Net cash provided by operating activities increased by $807 million in 2023 compared to 2022, primarily due to higher net income (adjusted for non-cash items), working capital changes driven by accounts receivable timing, and higher cash generated by our Loyalty Program, partially offset by higher cash paid for income taxes. Cash inflow from our Loyalty Program in 2020 included $920 million of cash received from the prepayment of certain future revenues under the 2020 amendments to our existing U.S.-issued co-branded credit card agreements, which reduced the amount of cash we received from these card issuers in subsequent years, until such reductions ended as of year-end 2023.

Our ratio of current assets to current liabilities was 0.4 to 1.0 at year-end 2023 and 0.5 to 1.0 at year-end 2022. We have significant borrowing capacity under our Credit Facility should we need additional working capital.

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Investing Activities Cash Flows

Capital Expenditures and Other Investments. We made capital and technology expenditures of $452 million in 2023 and $332 million in 2022. Capital and technology expenditures in 2023 increased by $120 million compared to 2022, primarily due to higher spending on our worldwide technology systems transformation, the overwhelming portion of which is expected to be reimbursed over time. We also had cash outflows of $101 million in 2023 due to the City Express brand acquisition, which we discuss in Note 3.

We expect capital expenditures and other investments will total approximately $1.0 billion to $1.2 billion for 2024, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities (including approximately $250 million for maintenance capital spending). Our anticipated capital and technology expenditures include $200 million of spending related to our option to purchase the land underlying the Sheraton Grand Chicago, which we discuss in Note 7.

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

Over time, we have sold lodging properties, both completed and under development, generally subject to long-term management agreements. The ability of third-party purchasers to raise the debt and equity capital necessary to acquire such properties depends in part on the perceived risks in the lodging industry and other constraints inherent in the capital markets. We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations. We have made, and expect to continue making, selective and opportunistic investments to add units to our lodging business, which may include property acquisitions and renovations, new construction, loans, guarantees, and equity investments. Over time, we seek to minimize capital invested in our business through asset sales subject to long-term management or franchise agreements.

Loan Activity. From time to time, we make loans to owners of hotels that we operate or franchise. Loan advances, net of loan collections, amounted to $16 million in 2023, compared to net collections of $3 million in 2022. At year-end 2023, we had $169 million of loans outstanding, compared to $162 million outstanding at year-end 2022.

Financing Activities Cash Flows

Debt. Debt increased by $1,809 million in 2023, to $11,873 million at year-end 2023 from $10,064 million at year-end 2022, primarily due to the issuance of our Series LL Notes and Series MM Notes ($1,135 million) and Series KK Notes ($783 million), and higher outstanding commercial paper borrowings ($546 million), partially offset by the maturity of our Series Z Notes and Series U Notes ($350 million and $291 million, respectively). See Note 9 for additional information on Senior Notes issuances.

Our long-term financial objectives include maintaining diversified financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital. At year-end 2023, our long-term debt had a weighted average interest rate of 4.5 percent and a weighted average maturity of approximately 5.0 years. Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.8 to 1.0 at year-end 2023.

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

Share Repurchases and Dividends. We repurchased 21.5 million shares of our common stock for $3.9 billion in 2023. Year-to-date through February 9, 2024, we repurchased 1.3 million shares for $300 million. For additional information, see “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in Part II, Item 5.

Our Board declared the following quarterly cash dividends in 2023: (1) $0.40 per share declared on February 10, 2023 and paid on March 31, 2023 to stockholders of record on February 24, 2023; (2) $0.52 per share declared on May 12, 2023 and paid on June 30, 2023 to stockholders of record on May 26, 2023; (3) $0.52 per share declared on August 3, 2023 and paid on September 29, 2023 to stockholders of record on August 17, 2023; and (4) $0.52 per share declared on November 9, 2023 and paid on December 29, 2023 to stockholders of record on November 22, 2023. Our Board declared a cash dividend of $0.52 per share on February 8, 2024, payable on March 29, 2024 to stockholders of record on February 22, 2024.

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

Material Cash Requirements

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

•At year-end 2023, we had $13,937 million of debt, including principal and future interest payments, of which $972 million is payable within the next 12 months from year-end 2023. See Note 9 for further information about our long-term debt.

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

•At December 31, 2023, projected Deemed Repatriation Transition Tax payments under the U.S. tax legislation enacted on December 22, 2017, commonly referred to as the 2017 Tax Cuts and Jobs Act, totaled $243 million, of which $108 million is payable within the next 12 months from year-end 2023.

•The Company also had guarantees, a contingent purchase obligation, commitments, and letters of credit as of year-end 2023, which are discussed in Note 7. With the exception of the Sheraton Grand Chicago put option discussed in Note 7, the majority of our remaining guarantee commitments are not expected to be funded within the next 12 months from year-end 2023. In addition to the purchase obligations discussed in Note 7, in the normal course of business, we enter into purchase commitments and incur other obligations to manage the daily operating needs of the hotels that we manage. Since our contracts with owners require reimbursement for these amounts, these obligations are expected to have minimal impact on our net income and cash flow.

NEW ACCOUNTING STANDARDS

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting policy and estimate to be critical if: (1) we must make assumptions that were uncertain when the estimate was made; and (2) changes in the estimate, or selection of a different estimate methodology could have a material effect on our consolidated results of operations or financial condition.

While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate or assumption was made. Actual results may differ significantly. Additionally, changes in our assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.

See Note 2 for further information related to our critical accounting policies and estimates, which are as follows:

Loyalty Program, including how we estimate the breakage of hotel points, credit card points, and free night certificates, the volume of points and free night certificates that will be issued under our co-branded credit card agreements, the amount of consideration to which we will be entitled under our co-branded credit card agreements, and the stand-alone selling prices of goods and services provided under our co-branded credit card agreements. Changes in these estimates could result in material changes to our liability for guest loyalty program and Loyalty Program revenue. Based on the conditions existing at December 31, 2023 and holding other factors constant, a one percent decrease in our estimate of the breakage of points could result in an increase in the liability for guest loyalty program of approximately $50 million. The breakage impact may vary significantly depending on the specific Loyalty Program points for which the anticipated breakage changes.

Goodwill, including how we evaluate the fair value of reporting units and when we record an impairment loss on goodwill. During the 2023 fourth quarter, we conducted our annual goodwill impairment test, and no impairment charges were recorded. The estimated fair values of all our reporting units significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.

Intangibles and Long-Lived Assets, including how we evaluate the fair value of intangibles and long-lived assets and when we record impairment losses on intangibles and long-lived assets. During 2023, we evaluated our intangibles and long-lived asset groups for impairment and did not record any material impairment charges. The estimated fair values

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

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

A discussion regarding our financial condition and results of operations for year-end 2021 compared to year-end 2020 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on February 15, 2022 (“2021 Form 10-K”).

BUSINESS AND OVERVIEW

Overview

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties in 138 countries and territories under 30 brand names. Under our asset-light business model, we typically manage or franchise hotels, rather than own them. We discuss our operations in the following reportable business segments: (1) U.S. & Canada and (2) International.

Terms of our management agreements vary, but our management fees generally consist of base management fees and incentive management fees. Base management fees are typically calculated as a percentage of property-level revenue. Incentive management fees are typically calculated as a percentage of a hotel profitability measure, and, in many cases (particularly in our U.S. & Canada, Europe, and Caribbean & Latin America regions), are subject to a specified owner return. Under our franchise agreements, franchise fees are typically calculated as a percentage of property-level revenue or a portion thereof. Additionally, we earn franchise fees for the use of our intellectual property, such as fees from our co-branded credit card, timeshare, and residential programs.

On September 23, 2016, we completed the acquisition of Starwood Hotels & Resorts Worldwide, LLC, formerly known as Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), through a series of transactions, after which Starwood became an indirect wholly-owned subsidiary of the Company.

Performance Measures

We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing room sales for comparable properties by room nights available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our fee revenue. We also believe occupancy and average daily rate (“ADR”), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing occupied rooms by total rooms available (including rooms in hotels temporarily closed due to issues related to COVID-19), measures the utilization of a property’s available capacity. ADR, which we calculate by dividing property room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels. RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated. Comparisons to prior periods are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

We define our comparable properties as our properties that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 2021 for the current period) and have not, in either the current or previous year: (1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption, with the exception of properties closed or otherwise experiencing interruptions related to COVID-19, which we continue to classify as comparable. For 2022 compared to 2021, we had 5,123 comparable U.S. & Canada properties and 1,548 comparable International properties. RevPAR, occupancy, and ADR comparisons between 2022 and 2019, which we discuss under the “Business Trends” caption below, reflect properties that are defined as comparable as of December 31, 2022, September 30, 2022, June 30, 2022, or March 31, 2022 (as applicable), even if in 2019 they were not open and operating for the full year or did not meet all the other criteria listed above. Unless otherwise stated, all comparisons to pre-pandemic or 2019 are comparing to the same time period each year.

Business Trends

We continued to see strong global RevPAR improvement throughout 2022 despite Greater China continuing to be significantly negatively impacted by COVID-19 through the end of the 2022 fourth quarter. While RevPAR recovery at the beginning of 2022 was dampened due to the emergence of COVID-19 variants, RevPAR quickly improved, resulting in 2022 third quarter worldwide RevPAR exceeding 2019 levels for the first time since the pandemic began. By the 2022 fourth quarter,

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worldwide RevPAR exceeded 2019 levels by 4.6 percent, reflecting ADR growth of 12.8 percent, partially offset by a decline in occupancy of 5.1 percentage points compared to 2019 levels. The global recovery continued across all customer segments, led by robust leisure demand as well as strengthening group demand, which was higher than 2019 levels in certain regions during the 2022 fourth quarter. Business transient demand also continued to improve during 2022, although it continued to lag behind 2019 levels.

RevPAR in 2022 compared to 2021 improved 46.5 percent in our U.S. & Canada segment, 66.2 percent in our International segment, and 51.0 percent worldwide. RevPAR in 2022 compared to pre-pandemic 2019 levels declined 4.0 percent worldwide, with improvement in the decline each succeeding quarter during 2022 for each of our segments and worldwide.

In the U.S. & Canada, RevPAR declined only 0.8 percent in 2022 compared to 2019, due to a decline in occupancy of 6.0 percentage points, partially offset by ADR growth of 8.1 percent. In the 2022 fourth quarter, U.S. & Canada RevPAR improved 5.2 percent compared to the same period in 2019, due to ADR growth of 11.1 percent, partially offset by a decline in occupancy of 3.7 percentage points. The decline in occupancy as compared to 2019 improved sequentially in each quarter of 2022, reflecting strong demand recovery in many markets within the U.S. & Canada.

Internationally, RevPAR declined 11.9 percent in 2022 compared to 2019, due to a decline in occupancy of 12.2 percentage points, partially offset by ADR growth of 7.0 percent. In the 2022 fourth quarter, International RevPAR improved 3.4 percent compared to the same period in 2019, due to ADR growth of 17.3 percent, partially offset by a decline in occupancy of 8.3 percentage points. In the 2022 fourth quarter, RevPAR remained significantly below 2019 levels in Greater China, but exceeded pre-pandemic 2019 levels in the Caribbean & Latin America, Europe, Middle East & Africa, and Asia Pacific excluding China regions, driven by strengthening demand, especially from cross-border guests and meaningful growth in ADR.

Although COVID-19’s negative impact on our business has significantly decreased and we saw strong global RevPAR improvement in 2022, our business is subject to the effects of changes in global and regional conditions and these conditions can change rapidly. We continue to monitor global economic conditions, and although we are not currently seeing signs of a slowdown in lodging demand, the lodging booking window is short and trends can change quickly.

Starwood Data Security Incident

On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). The Starwood reservations database is no longer used for business operations.

We are currently unable to reasonably estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already recorded. However, we do not believe this incident will impact our long-term financial health. Although our insurance program includes coverage designed to limit our exposure to losses such as those related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other losses (including monetary payments to regulators and/or litigants) related to the Data Security Incident. In addition, certain expenses by their nature (such as, for example, expenses related to enhancing our cybersecurity program) are not covered by our insurance program. We expect to incur significant expenses associated with the Data Security Incident in future periods in excess of the amounts already recorded, primarily related to legal proceedings and regulatory investigations (including possible additional monetary payments to regulators and/or litigants as well as costs associated with compliance with any settlements or resolutions of matters). See Note 7 for additional information related to legal proceedings and governmental investigations related to the Data Security Incident.

System Growth and Pipeline

In 2022, our system grew from 7,989 properties (1,479,179 rooms) at year-end 2021 to 8,288 properties (1,525,407 rooms) at year-end 2022, reflecting gross additions of 394 properties (65,376 rooms) and deletions of 94 properties (19,079 rooms), including the impact of the Company’s decision to suspend its operations in Russia. Approximately 61 percent of our 2022 gross room additions were located outside U.S. & Canada, and 27 percent were conversions from competitor brands.

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At year-end 2022, we had more than 496,000 hotel rooms in our development pipeline, which includes approximately 199,000 hotel rooms under construction and roughly 22,300 hotel rooms approved for development but not yet under signed contracts. Over half of the rooms in our development pipeline are outside U.S. & Canada. In 2022, we signed 726 new management and franchise agreements, representing nearly 108,000 rooms, of which approximately half of the rooms are located outside U.S. & Canada. Our Select hotel brands continued to be a key growth driver globally with 523 hotel properties signed during 2022. In particular, our longer stay brands, which include Element Hotels, Residence Inn, and TownePlace Suites, accounted for 30 percent of the Company’s signings in 2022. In addition, contracts signed in 2022 reflected the Company’s strength in the luxury tier, with 42 luxury hotel agreements signed, representing nearly 8,000 rooms. Conversions accounted for nearly 20 percent of rooms signings in 2022.

In 2023, we expect total gross rooms growth of approximately 5.5 percent and net rooms growth of 4.0 to 4.5 percent, including approximately 1.1 percent from the anticipated addition of rooms associated with the City Express brand acquisition discussed in Note 3, which are not reflected in the development pipeline discussed above.

Properties and Rooms

At year-end 2022, we operated, franchised, and licensed the following properties and rooms:

Lodging Statistics

The following tables present RevPAR, occupancy, and ADR statistics for comparable properties for 2022, and 2022 compared to 2021. Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.

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

(2)Includes U.S. & Canada and International - All.

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CONSOLIDATED RESULTS

Our consolidated results in 2022 improved significantly compared to 2021 due to the continued recovery in lodging demand from the impacts of COVID-19. The discussion below presents an additional analysis of our consolidated results of operations for 2022 compared to 2021.

Fee Revenues

The increase in base management fees primarily reflected higher RevPAR and unit growth, partially offset by net unfavorable foreign exchange rates ($25 million).

The increase in franchise fees primarily reflected higher RevPAR, higher co-branded credit card fees ($119 million) and unit growth ($109 million), partially offset by net unfavorable foreign exchange rates ($17 million).

The increase in incentive management fees primarily reflected higher profits at certain managed hotels and unit growth, partially offset by net unfavorable foreign exchange rates ($16 million). In 2022, we earned incentive management fees from 61 percent of our managed properties worldwide, compared to 47 percent in 2021. We earned incentive management fees from 29 percent of our U.S. & Canada managed properties and 76 percent of our International managed properties in 2022, compared to 13 percent in U.S. & Canada and 63 percent in International in 2021. In addition, 58 percent of our total incentive management fees in 2022 came from our International managed properties versus 71 percent in 2021.

Owned, Leased, and Other

Owned, leased, and other revenue, net of direct expenses, increased primarily due to net stronger results at our owned and leased properties, partially offset by an estimated monetary payment related to a portfolio of 12 leased hotels in the U.S. & Canada ($31 million) and lower termination fees ($18 million).

Cost Reimbursements

Cost reimbursements, net (cost reimbursement revenue, net of reimbursed expenses) varies due to timing differences between the costs we incur for centralized programs and services and the related reimbursements we receive from hotel owners and franchisees. Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively. See Note 2 for more information about the accounting for cost reimbursements, including our Loyalty Program.

The increase in cost reimbursements, net primarily reflects higher revenues, net of expenses, for our centralized programs and services as well as our insurance program.

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Other Operating Expenses

Depreciation, amortization, and other expenses decreased primarily due to lower impairment charges.

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

Non-Operating Income (Expense)

The loss on extinguishment of debt in 2021 was due to the September 2021 tender offer in which we purchased and retired $1 billion aggregate principal amount of our 5.750 percent Series EE Notes maturing May 1, 2025.

Interest expense decreased primarily due to lower average debt balances driven by Senior Notes maturities and repurchases.

Equity in earnings (losses) changed, primarily due to our share of the gains on the sales of properties ($23 million) and higher profits related to our equity method investments.

Income Taxes

Our tax provision increased in 2022, compared to our tax provision in 2021, primarily due to the increase in operating income ($422 million), the prior year release of tax reserves due to favorable audit resolutions ($143 million), the prior year tax benefit from the loss on extinguishment of debt ($42 million), and the current year tax expense from the completion of prior years’ tax audits ($27 million).

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BUSINESS SEGMENTS

Our segment results in 2022 improved significantly compared to 2021 due to the continued recovery in lodging demand from the impacts of COVID-19. The following discussion presents an additional analysis of the operating results of our reportable business segments.

U.S. & Canada

U.S. & Canada segment profit increased primarily due to the following:

•$906 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy, higher profits at certain managed hotels, and unit growth;

•$83 million of higher cost reimbursement revenue, net of reimbursed expenses; and

•$62 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger results at owned and leased properties, partially offset by an estimated monetary payment related to a portfolio of 12 leased hotels in U.S. & Canada ($31 million);

partially offset by:

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

International

International segment profit increased primarily due to the following:

•$349 million of higher gross fee revenues, primarily reflecting higher comparable systemwide RevPAR driven by increases in both ADR and occupancy in all regions except Greater China, higher profits at certain managed hotels, and unit growth, partially offset by net unfavorable foreign exchange rates ($56 million);

•$141 million of higher owned, leased, and other revenue, net of direct expenses, primarily reflecting net stronger results at owned and leased properties, partially offset by lower termination fees ($16 million); and

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

partially offset by:

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

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LIQUIDITY AND CAPITAL RESOURCES

Our Credit Facility

In the 2022 fourth quarter, we amended and restated our $4.5 billion multicurrency revolving credit agreement (the “Credit Facility”). Available borrowings under the Credit Facility support our commercial paper program and general corporate needs. Borrowings under the Credit Facility generally bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our public debt rating. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on December 14, 2027.

The Credit Facility contains certain covenants, including a single financial covenant that limits our maximum leverage (consisting of the ratio of Adjusted Total Debt to EBITDA, each as defined in the Credit Facility) to not more than 4.5 to 1.0. Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios.

We currently satisfy the covenants in our Credit Facility and public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs. We believe the Credit Facility, and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our liquidity requirements.

Commercial Paper

We issue commercial paper in the U.S. Because we do not have purchase commitments from buyers for our commercial paper, our ability to issue commercial paper is subject to market demand. We do not expect that fluctuations in the demand for commercial paper will affect our liquidity, given our borrowing capacity under the Credit Facility and access to capital markets.

Cash from Operations

Net cash provided by operating activities increased by $1,186 million in 2022 compared to 2021, primarily due to higher net income (adjusted for non-cash items and the prior year loss on extinguishment of debt), partially offset by higher cash paid for income taxes and working capital changes driven by accounts receivable timing. Cash inflow from our Loyalty Program in 2020 included $920 million of cash received from the prepayment of certain future revenues under the 2020 amendments to our existing U.S.-issued co-branded credit card agreements, which reduced in both 2021 and 2022, and will in the future reduce, the amount of cash we receive from these card issuers. We expect such reductions to end by year-end 2023.

Our ratio of current assets to current liabilities was 0.5 to 1.0 at year-end 2022 and 0.6 to 1.0 at year-end 2021. We have significant borrowing capacity under our Credit Facility should we need additional working capital.

Investing Activities Cash Flows

Capital Expenditures and Other Investments. We made capital and technology expenditures of $332 million in 2022 and $183 million in 2021. Capital and technology expenditures in 2022 increased by $149 million compared to 2021, primarily reflecting higher spending on improvements to our worldwide technology systems.

We expect capital expenditures and other investments will total approximately $850 million to $1 billion for 2023, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities (including approximately $300 million for maintenance capital spending). This estimate also includes $100 million of investment spending related to the City Express brand acquisition discussed in Note 3, which we currently expect to close in the first half of 2023, and approximately $160 million of renovation spending on hotels that we expect to sell after renovations are complete.

Over time, we have sold lodging properties, both completed and under development, subject to long-term management agreements. The ability of third-party purchasers to raise the debt and equity capital necessary to acquire such properties depends in part on the perceived risks in the lodging industry and other constraints inherent in the capital markets. We monitor the status of the capital markets and regularly evaluate the potential impact of changes in capital market conditions on our business operations. We have made, and expect to continue making, selective and opportunistic investments to add units to our lodging business, which may include property acquisitions and renovations, new construction, loans, guarantees, and equity

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

Loan Activity. From time to time, we make loans to owners of hotels that we operate or franchise. Loan collections, net of loan advances, amounted to $3 million in 2022, compared to net collections of $27 million in 2021. At year-end 2022, we had $162 million of senior, mezzanine, and other loans outstanding, compared to $153 million outstanding at year-end 2021.

Financing Activities Cash Flows

Debt. Debt decreased by $74 million in 2022, to $10,064 million at year-end 2022 from $10,138 million at year-end 2021, primarily due to lower outstanding Credit Facility borrowings ($1,050 million), the maturity of our Series Q Notes ($399 million), the maturity of our Series DD Notes ($224 million), and the redemption of our Series L Notes ($173 million), partially offset by the issuance of our Series JJ Notes ($983 million) and higher outstanding commercial paper borrowings ($868 million). See Note 9 for additional information on the Senior Notes issuance and redemption.

Our long-term financial objectives include diversifying our financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital. At year-end 2022, our long-term debt had a weighted average interest rate of 4.1 percent and a weighted average maturity of approximately 5.8 years. Including the effect of interest rate swaps, the ratio of our fixed-rate long-term debt to our total long-term debt was 0.9 to 1.0 at year-end 2022.

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

Share Repurchases and Dividends. We repurchased 16.8 million shares of our common stock for $2.6 billion in 2022. Year-to-date through February 10, 2023, we repurchased 2.5 million shares for $400 million. For additional information, see “Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in Part II, Item 5.

Our Board of Directors declared the following quarterly cash dividends in 2022: (1) $0.30 per share declared on May 2, 2022 and paid on June 30, 2022 to stockholders of record on May 16, 2022; (2) $0.30 per share declared on August 4, 2022 and paid on September 30, 2022 to stockholders of record on August 18, 2022; and (3) $0.40 per share declared on November 10, 2022 and paid on December 30, 2022 to stockholders of record on November 23, 2022. Our Board of Directors declared a cash dividend of $0.40 per share on February 10, 2023, payable on March 31, 2023 to stockholders of record on February 24, 2023.

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

Material Cash Requirements

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

•At year-end 2022, we had $11,989 million of debt, including principal and future interest payments, of which $1,032 million is payable within the next 12 months from year-end 2022. See Note 9 for further information about our long-term debt.

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

•At December 31, 2022, projected Deemed Repatriation Transition Tax payments under the U.S. tax legislation enacted on December 22, 2017, commonly referred to as the 2017 Tax Cuts and Jobs Act, totaled $336 million, of which $89 million is payable within the next 12 months from year-end 2022.

•The Company also had guarantees, a contingent purchase obligation, commitments, and letters of credit as of year-end 2022, which are discussed in Note 7. The majority of our guarantee commitments are not expected to be funded within the next 12 months from year-end 2022. In addition to the purchase obligations discussed in Note 7, in the normal course of business, we enter into purchase commitments and incur other obligations to manage the daily operating needs of the hotels that we manage. Since our contracts with owners require reimbursement for these amounts, these obligations are expected to have minimal impact on our net income and cash flow.

NEW ACCOUNTING STANDARDS

We do not expect that accounting standard updates issued to date and that are effective after December 31, 2022 will have a material effect on our Financial Statements.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting policy and estimate to be critical if: (1) we must make assumptions that were uncertain when the estimate was made; and (2) changes in the estimate, or selection of a different estimate methodology could have a material effect on our consolidated results of operations or financial condition.

While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate or assumption was made. Actual results may differ significantly. Additionally, changes in our assumptions, estimates or assessments due to unforeseen events or otherwise could have a material impact on our financial position or results of operations.

See Note 2 for further information related to our critical accounting policies and estimates, which are as follows:

Loyalty Program, including how we estimate the breakage of hotel points, credit card points, and free night certificates, the volume of points and free night certificates that will be issued under our co-branded credit card agreements, the amount of consideration to which we will be entitled under our co-branded credit card agreements, and the stand-alone selling prices of goods and services provided under our co-branded credit card agreements. Changes in these estimates could result in material changes to our liability for guest loyalty program and Loyalty Program revenue. Based on the conditions existing at December 31, 2022 and holding other factors constant, a one percent decrease in our estimate of the breakage of points could result in an increase in the liability for guest loyalty program of approximately $50 million. The breakage impact may vary significantly depending on the specific Loyalty Program points for which the anticipated breakage changes.

Goodwill, including how we evaluate the fair value of reporting units and when we record an impairment loss on goodwill. During the 2022 fourth quarter, we conducted our annual goodwill impairment test and no impairment charges were recorded. The estimated fair values of all our reporting units significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.

Intangibles and Long-Lived Assets, including how we evaluate the fair value of intangibles and long-lived assets and when we record impairment losses on intangibles and long-lived assets. During 2022, we evaluated our intangibles and long-lived asset groups for impairment and did not record any material impairment charges. The estimated fair values of all our indefinite-lived intangible assets significantly exceeded their carrying amounts at the date of their most recent estimated fair value determination.

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

A discussion regarding our financial condition and results of operations for year-end 2020 compared to year-end 2019 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020, as filed with the SEC on April 2, 2021 (“2020 Form 10-K”).

BUSINESS AND OVERVIEW

Overview

We are a worldwide operator, franchisor, and licensor of hotel, residential, and timeshare properties in 139 countries and territories under 30 brand names. Under our asset-light business model, we typically manage or franchise hotels, rather than own them. We discuss our operations in the following reportable business segments: U.S. & Canada and International.

We earn base management fees and, under many agreements, incentive management fees from the properties that we manage, and we earn franchise fees on the properties that others operate under franchise agreements with us. In most markets, base management and franchise fees typically consist of a percentage of property-level revenue, or certain property-level revenue in the case of franchise fees, while incentive management fees typically consist of a percentage of net house profit after a specified owner return. For our hotels in the Middle East and Africa, Asia Pacific excluding China, and Greater China regions, incentive management fees typically consist of a percentage of gross operating profit without adjustment for a specified owner return. Net house profit is calculated as gross operating profit (also referred to as “house profit”) less non-controllable expenses such as property insurance, real estate taxes, and furniture, fixtures, and equipment (FF&E) reserves. Additionally, we earn franchise fees for use of our intellectual property, including fees from our co-brand credit card, timeshare, and residential programs.

On September 23, 2016, we completed the acquisition of Starwood Hotels & Resorts Worldwide, LLC, formerly known as Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), through a series of transactions, after which Starwood became an indirect wholly-owned subsidiary of the Company. We refer to the Starwood business and brands that we acquired as “Legacy-Starwood.”

Performance Measures

We believe Revenue per Available Room (“RevPAR”), which we calculate by dividing room sales for comparable properties by room nights available for the period, is a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues, and should not be viewed as necessarily correlating with our fee revenue. We also believe occupancy and average daily rate (“ADR”), which are components of calculating RevPAR, are meaningful indicators of our performance. Occupancy, which we calculate by dividing occupied rooms by total rooms available (including rooms in hotels temporarily closed due to issues related to COVID-19), measures the utilization of a property’s available capacity. ADR, which we calculate by dividing property room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels. Comparisons to prior periods are on a constant U.S. dollar basis. We calculate constant dollar statistics by applying exchange rates for the current period to the prior comparable period.

We define our comparable properties as our properties that were open and operating under one of our brands since the beginning of the last full calendar year (since January 1, 2020 for the current period) and have not, in either the current or previous year: (1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption, with the exception of properties closed or otherwise experiencing interruptions related to COVID-19, which we continue to classify as comparable. For 2021 compared to 2020, we had 4,906 comparable U.S. & Canada properties and 1,510 comparable International properties. The RevPAR, ADR, and occupancy comparisons between 2021 and 2019, which we discuss under the “Impact of COVID-19” caption below, reflect properties that are defined as comparable as of December 31, 2021, even if in 2019 they were not open and operating for the full year or did not meet all the other criteria listed above.

Impact of COVID-19

COVID-19 continues to have a material impact on our business and industry. However, the recovery of both global demand and ADR continued in 2021, led primarily by robust leisure demand, which we expect to continue in 2022, and travelers who continue to embrace multi-purpose trips, mixing remote work and vacation time. The spread of COVID-19 variants, such as Delta and Omicron, constrained the pace of the recovery in the latter half of 2021 and continues to constrain the pace of recovery in the beginning of 2022. Business transient and group demand continued to slowly improve in 2021 when

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compared to 2020, though this demand still remains meaningfully below pre-pandemic 2019 levels. Although we have seen delays in the recovery of business transient and group demand as a result of the emergence of COVID-19 variants, we expect this demand to gradually strengthen from current levels as more workers return to the office and travel again. We have been encouraged by the swift improvement in ADR, which in the 2021 second half returned to pre-pandemic 2019 levels in certain U.S. and International markets and are optimistic about sustaining strong ADR in 2022. However, we believe COVID-19 will continue to have a material negative impact on our future results for a period of time that we are currently unable to predict.

Comparable systemwide constant dollar RevPAR in 2021 compared to 2020 improved 67.7 percent in our U.S. & Canada segment, 40.6 percent in our International segment, and 60.4 percent worldwide. Comparable systemwide constant dollar RevPAR in 2021 compared to pre-pandemic 2019 levels declined 32.5 percent in our U.S. & Canada segment, 46.6 percent in our International segment, and 36.5 percent worldwide, with improvement in the decline each succeeding quarter during 2021 for each of our segments and worldwide. Worldwide comparable systemwide occupancy and constant dollar ADR were down only 11.9 percentage points and 2.3 percent, respectively, in the 2021 fourth quarter compared to the 2019 fourth quarter, leading to RevPAR 19.0 percent below pre-pandemic 2019 levels.

In the U.S. & Canada, demand continued to recover in 2021, driven by strong leisure demand particularly at our luxury and resort hotels and in tertiary markets. Occupancy peaked in the 2021 third quarter before decreasing slightly in the 2021 fourth quarter primarily due to seasonality. Urban destinations, where we have a large presence in the U.S. & Canada, experienced meaningful improvement in demand in 2021, though they continue to lag the recovery. In other parts of the world, RevPAR continues to vary greatly by geographic market, and demand is heavily impacted by the number of COVID-19 cases, vaccination rates, and the nature and degree of government restrictions. In the 2021 fourth quarter, the decline of comparable systemwide constant dollar RevPAR when compared to pre-pandemic 2019 levels improved compared to the decline seen in the 2021 third quarter in all our International regions except for Greater China, which remained flat as a result of strict government restrictions in response to COVID-19 outbreaks in several regions.

We continue to take measures to mitigate the negative financial and operational impacts of COVID-19 for our hotel owners and our own business. At the corporate level, we remain focused on managing our corporate general and administrative costs and are being disciplined with respect to our capital expenditures and other investment spending. Share repurchases and cash dividends remain suspended until our leverage ratios further improve, although assuming there is no meaningful setback in the global recovery from COVID-19, we could restart some level of capital returns in the second half of 2022 and more meaningful levels of capital returns in 2023 and beyond. In 2021, we substantially completed restructuring plans to achieve cost savings specific to our company-operated properties. In addition, we continue to work with owners and franchisees by adjusting renovation requirements for certain properties, deferring certain hotel initiatives, and supporting owners and franchisees who are working with their lenders to utilize FF&E reserves to meet working capital needs.

We continue to evaluate the availability of stimulus tax credits under the Coronavirus Aid, Relief, and Economic Security Act, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 enacted as part of the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021 (“ARPA”), and other legislation. As of February 1, 2022, we have received Employee Retention Tax Credit (“ERTC”) refunds from the U.S. Treasury totaling $170 million, including $119 million in 2020 and $51 million in 2021, of which we passed through $94 million and $48 million, respectively, to the related hotels that we manage on behalf of owners. We have received from the U.S. Treasury substantially all expected ERTC refunds based on applications that we have submitted as of February 1, 2022. Additionally, as of December 31, 2021, we have received or expect to receive, through Medicare tax offsets and payments from the U.S. Treasury pursuant to ARPA, a total of $35 million as reimbursement for the cost of health coverage continuation provided to eligible former associates and furloughed or part-time associates (and their eligible enrolled dependents) in accordance with requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 for the period of April 1, 2021 to September 30, 2021. Finally, in 2021, we received subsidies totaling $28 million from German government COVID-19 assistance programs for certain of our leased hotels and equity method investments in Germany.

The impact of COVID-19 on the Company remains fluid, as does our corporate and property-level response. We expect to continue to assess the situation and may implement additional measures to adapt our operations and plans to address the implications of COVID-19 on our business. The overall operational and financial impact is highly dependent on the breadth and duration of COVID-19 and could be affected by other factors we are not currently able to predict.

Starwood Data Security Incident

On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). The Starwood reservations database is no longer used for business operations.

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We are currently unable to estimate the range of total possible financial impact to the Company from the Data Security Incident in excess of the expenses already incurred. However, we do not believe this incident will impact our long-term financial health. Although our insurance program includes coverage designed to limit our exposure to losses such as those related to the Data Security Incident, that insurance may not be sufficient or available to cover all of our expenses or other losses (including fines and penalties) related to the Data Security Incident. In addition, certain expenses by their nature (such as, for example, expenses related to enhancing our cybersecurity program) are not covered by our insurance program. We expect to incur significant expenses associated with the Data Security Incident in future periods, primarily related to legal proceedings and regulatory investigations (including possible additional fines and penalties), increased expenses and capital investments for information technology and information security and data privacy, and increased expenses for compliance activities and to meet increased legal and regulatory requirements. See Note 7 for additional information related to expenses incurred in 2021, insurance recoveries, and legal proceedings and governmental investigations related to the Data Security Incident.

System Growth and Pipeline

In 2021, our system grew from 7,642 properties (1,423,044 rooms) at year-end 2020 to 7,989 properties (1,479,179 rooms) at year-end 2021, reflecting gross additions of 517 properties (86,372 rooms) and deletions of 171 properties (30,236 rooms), including 88 properties from a primarily select-service portfolio which left our system in the 2021 first quarter. Approximately 50 percent of our 2021 gross room additions are located outside U.S. & Canada, and 21 percent were conversions from competitor brands.

At year-end 2021, we had roughly 485,000 rooms in our development pipeline, which includes more than 202,000 hotel rooms under construction and approximately 19,000 hotel rooms approved for development but not yet under signed contracts. Over half of the rooms in our development pipeline are outside U.S. & Canada. In 2021, we signed management and franchise agreements for 599 properties, representing approximately 92,000 rooms, of which more than half of the rooms are located outside U.S. & Canada. Contracts signed in 2021 reflected the Company’s strength in the luxury tier, with 40 properties signed (resulting in a total of nearly 50,000 luxury rooms in our development pipeline at year-end 2021), as well as strong momentum in all-inclusive resort signings, with 22 properties signed in 2021. In addition, in 2021, longer stay brands, which include Element Hotels, Residence Inn, and TownePlace Suites, accounted for 37 percent of the Company's rooms signings in U.S. & Canada. Conversions accounted for 27 percent of rooms signings in 2021.

In 2022, we expect total gross rooms growth to approach 5.0 percent and net rooms growth of 3.5 to 4.0 percent.

Properties and Rooms

At year-end 2021, we operated, franchised, and licensed the following properties and rooms:

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Lodging Statistics

The following tables present RevPAR, occupancy, and ADR statistics for comparable properties for 2021 and 2021 compared to 2020. Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.

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

(2)Includes U.S. & Canada and International - All.

CONSOLIDATED RESULTS

Our results in 2021 continued to be impacted by COVID-19. See the “Impact of COVID-19” section above for more information about the impact to our business during 2021, and the discussion below for additional analysis of our consolidated results of operations for 2021 compared to 2020.

Fee Revenues

The increase in base management fees primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19.

The increase in franchise fees primarily reflected higher RevPAR due to the ongoing recovery in lodging demand from the impacts of COVID-19, higher co-brand credit card fees ($102 million), unit growth ($89 million), and higher residential branding fees ($39 million).

The increase in incentive management fees primarily reflected higher profits at certain managed hotels due to the ongoing recovery in lodging demand from the impacts of COVID-19. In 2021, we earned incentive management fees from 47 percent of our managed properties worldwide, compared to 37 percent in 2020. We earned incentive management fees from 13 percent of our U.S. & Canada managed properties and 63 percent of our International managed properties in 2021, compared to 3 percent in U.S. & Canada and 56 percent in International in 2020. In addition, 71 percent of our total incentive management fees in 2021 came from our International managed properties versus 92 percent in 2020.

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Contract investment amortization changed primarily due to lower impairments of investments in management and franchise contracts.

Owned, Leased, and Other

* Percentage change is not meaningful.

Owned, leased, and other revenue, net of direct expenses increased primarily due to net stronger results at our owned and leased properties driven by the ongoing recovery in lodging demand from the impacts of COVID-19, higher termination fees of $20 million, and $18 million of subsidies under German government COVID-19 assistance programs for certain of our leased hotels.

Cost Reimbursements