Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

For	the	Fiscal	Year	Ended	December	31,	2018

o TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

fullmilogo.jpg

# MARRIOTT	INTERNATIONAL,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	other	jurisdiction	of incorporation	or	organization)

10400	Fernwood	Road,	Bethesda,	Maryland (Address	of	Principal	Executive	Offices)

Registrant's	Telephone	Number,	Including	Area	Code	(301)	380-3000

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

# Title	of	Each	Class

Class	A	Common	Stock,	$0.01	par	value

# Name	of	Each	Exchange	on	Which	Registered

Nasdaq	Global	Select	Market

Chicago	Stock	Exchange

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	NONE

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	rule	405	of	the	Securities	Act.				Yes		ý				No		o

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.				Yes		o				No		ý

Indicate	by	check	mark	whether	the	registrant:	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the	preceding	12 months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days.				Yes		ý				No		o

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	every	Interactive	Data	File	required	to	be	submitted	pursuant	to	Rule	405	of	Regulation	S-T	during	the preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	such	files).				Yes		ý				No		o

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	the	registrant's knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.		o

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	smaller	reporting	company,	or	an	emerging	growth	company.	See the	definitions	of	"large	accelerated	filer,"	"accelerated	filer,"	"smaller	reporting	company,"	and	"emerging	growth	company"	in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer

ý Non-accelerated	filer o

Accelerated	filer

Smaller	reporting	company o

Emerging	growth	company o

If	an	emerging	growth	company,	indicate	by	check	mark	if	the	registrant	has	elected	not	to	use	the	extended	transition	period	for	complying	with	any	new	or	revised	financial accounting	standards	provided	pursuant	to	Section	13(a)	of	the	Exchange	Act.	o

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Exchange	Act).				Yes		o				No		ý

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	Proxy	Statement	prepared	for	the	2019	Annual	Meeting	of	Shareholders	are	incorporated	by	reference	into	Part	III	of	this	report.

# FORM	10-K	TABLE	OF	CONTENTS

# FISCAL	YEAR	ENDED	DECEMBER	31,	2018

# Page	No.

# Part	I.

# Part	II.

# Part	III.

Throughout	this	report,	we	refer	to	Marriott	International,	Inc.,	together	with	its	consolidated	subsidiaries,	as	"we,"	"us,"	"Marriott,"	or	"the	Company."	In	order to	make	this	report	easier	to	read,	we	also	refer	throughout	to	(i)	our	Consolidated	Financial	Statements	as	our	"Financial	Statements,"	(ii)	our	Consolidated	Statements of	Income	as	our	"Income	Statements,"	(iii)	our	Consolidated	Balance	Sheets	as	our	"Balance	Sheets,"	(iv)	our	Condensed	Consolidated	Statements	of	Cash	Flows	as our	"Statements	of	Cash	Flows,"	(v)	our	properties,	brands,	or	markets	in	the	United	States	("U.S.")	and	Canada	as	"North	America"	or	"North	American,"	and	(vi)	our properties,	brands,	or	markets	in	our	Caribbean	and	Latin	America,	Europe,	and	Middle	East	and	Africa	regions	as	"Other	International,"	and	together	with	those	in	our Asia	Pacific	segment,	as	"International."	In	addition,	references	throughout	to	numbered	"Footnotes"	refer	to	the	numbered	Notes	to	our	Financial	Statements	that	we include	in	the	Financial	Statements	section	of	this	report.

# Corporate	Structure	and	Business

We	are	a	worldwide	operator,	franchisor,	and	licensor	of	hotel,	residential,	and	timeshare	properties	under	numerous	brand	names	at	different	price	and	service points.	Consistent	with	our	focus	on	management,	franchising,	and	licensing,	we	own	very	few	of	our	lodging	properties.	We	were	organized	as	a	corporation	in Delaware	in	1997	and	became	a	public	company	in	1998	when	we	were	"spun	off"	as	a	separate	entity	by	the	company	formerly	named	"Marriott	International,	Inc."

We	believe	that	our	portfolio	of	brands,	shown	in	the	following	table,	is	the	largest	and	most	compelling	range	of	brands	and	properties	of	any	lodging	company	in the	world.

# bp130logolockupk2100.jpg

We	discuss	our	operations	in	the	following	reportable	business	segments:	North	American	Full-Service,	North	American	Limited-Service,	and	Asia	Pacific.	Our Europe,	Middle	East	and	Africa,	and	Caribbean	and	Latin	America	operating	segments	do	not	individually	meet	the	criteria	for	separate	disclosure	as	reportable segments.

# Acquisition	of	Starwood	Hotels	&	Resorts	Worldwide

On	September	23,	2016	(the	"Merger	Date"),	we	completed	the	acquisition	of	Starwood	Hotels	&	Resorts	Worldwide,	LLC,	formerly	known	as	Starwood	Hotels	& Resorts	Worldwide,	Inc.	("Starwood"),	through	a	series	of	transactions	(the	"Starwood	Combination"),	after	which	Starwood	became	an	indirect	wholly-owned subsidiary	of	Marriott.	Our	Financial	Statements	and	related	discussions	in	this	report	include	Starwood's	results	of	operations	only	from	the	Merger	Date	through	year- end	2018	and	reflect	the	financial	position	of	our	combined	company	at	December	31,	2018	and	2017	except	where	we	specifically	state	otherwise,	such	as	certain statistics	described	under	the	caption	"Performance	Measures"	in	Part	II,	Item	7.	We	refer	to	our	business	associated	with	brands	that	were	in	our	portfolio	before	the Starwood	Combination	as	"Legacy-Marriott"	and	to	the	Starwood	business	and	brands	that	we	acquired	as	"Legacy-Starwood."	See	Footnote	3.	Dispositions	and Acquisitions	for	more	information.

# Starwood	Reservations	Database	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	have	completed	the	planned	phase	out	of	the	operation	of	the	Starwood	reservations	database,	effective	as	of	the	end	of	2018.	For	further	information about	the	Data	Security	Incident,	see	Part	II,	Item	7	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations"	and	"Data	Security Incident"	in	Footnote	7.	Commitments	and	Contingencies	in	Part	II,	Item	8.

# Company-Operated	Properties

At	year-end	2018,	we	had	2,020	company-operated	properties	(566,759	rooms),	which	included	properties	under	long-term	management	or	lease	agreements	with property	owners	(management	and	lease	agreements	together,	the	"Operating	Agreements"),	properties	that	we	own,	and	home	and	condominium	communities	for	which we	manage	the	related	owners'	associations.

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.	Our	management	agreements	also	typically	include	reimbursement	of costs	of	operations	(both	direct	and	indirect).	Such	agreements	are	generally	for	initial	periods	of	20	to	30	years,	with	options	for	us	to	renew	for	up	to	50	or	more additional	years.	Our	lease	agreements	also	vary,	but	may	include	fixed	annual	rentals	plus	additional	rentals	based	on	a	specified	percentage	of	annual	revenues	that exceed	a	fixed	amount.	Many	of	our	Operating	Agreements	are	subordinated	to	mortgages	or	other	liens	securing	indebtedness	of	the	owners.	Many	of	our	Operating Agreements	also	permit	the	owners	to	terminate	the	agreement	if	we	do	not	meet	certain	performance	metrics	and	financial	returns	fail	to	meet	defined	levels	for	a	period of	time	and	we	have	not	cured	those	deficiencies.	In	certain	circumstances,	some	of	our	management	agreements	allow	owners	to	convert	company-operated	properties to	franchised	properties	under	our	brands.

For	the	lodging	facilities	we	operate,	we	generally	are	responsible	for	hiring,	training,	and	supervising	the	managers	and	employees	needed	to	operate	the	facilities and	for	purchasing	supplies,	and	owners	are	required	to	reimburse	us	for	those	costs.	We	provide	centralized	reservation	services	and	advertising,	marketing,	and promotional	services,	as	well	as	various	accounting	and	data	processing	services,	and	owners	are	also	required	to	reimburse	us	for	those	costs.

# Franchised,	Licensed,	and	Unconsolidated	Joint	Venture	Properties

We	have	franchising,	licensing,	and	joint	venture	programs	that	permit	hotel	owners	and	operators	and	Marriott	Vacations	Worldwide	Corporation	("MVW"),	our former	timeshare	subsidiary	that	we	spun	off	in	2011,	to	use	many	of	our	lodging	brand	names	and	systems.	Under	our	hotel	franchising	programs,	we	generally	receive an	initial	application	fee	and	continuing	royalty	fees,	which	typically	range	from	four	to	six	percent	of	room	revenues	for	all	brands,	plus	two	to	three	percent	of	food	and beverage	revenues	for	certain	full-service	hotels.	We	are	a	partner	in	unconsolidated	joint	ventures	that	manage	and,	in	some	cases,	own	hotels.	Some	of	these	joint ventures	also	provide	services	to	franchised	hotels.	We	recognize	our	share	of	these	joint	ventures'	net	income	or	loss	in	the	"Equity	in	earnings"	caption	of	our	Income Statements.	Franchisees	and	certain	joint	ventures	contribute	to	our	marketing	and	advertising	programs	and	pay	fees	for	use	of	our	centralized	reservation	systems.

We	also	receive	royalty	fees	under	license	agreements	with	MVW	and	its	affiliates	for	certain	brands,	including	Marriott	Vacation	Club,	Grand	Residences	by Marriott,	The	Ritz-Carlton	Destination	Club,	Westin,	Sheraton,	and	for	certain	existing	properties,	St.	Regis	and	The	Luxury	Collection.	We	receive	license	fees	from MVW	consisting	of	a	fixed	annual	fee,	adjusted	for	inflation,	plus	certain	variable	fees	based	on	sales	volumes.

# Residential

We	use	or	license	our	trademarks	for	the	sale	of	residential	real	estate,	often	in	conjunction	with	hotel	development,	and	receive	branding	fees	for	sales	of	such branded	residential	real	estate	by	others.	Third-party	owners	typically	construct	and	sell	residences	with	limited	amounts,	if	any,	of	our	capital	at	risk.	We	have	used	or licensed	our	JW	Marriott,	The	Ritz-Carlton,	Ritz-Carlton	Reserve,	W,	The	Luxury	Collection,	St.	Regis,	EDITION,	Bulgari,	Marriott,	Sheraton,	Westin,	Four	Points, Delta	and	Autograph	Collection	brand	names	and	trademarks	for	residential	real	estate	sales.	While	the	worldwide	residential	market	is	very	large,	we	believe	the luxurious	nature	of	our	residential	properties,	the	quality	and	exclusivity	associated	with	our	brands,	and	the	hospitality	services	that	we	provide,	all	serve	to	make residential	properties	bearing	our	trademarks	distinctive.

# Seasonality

In	general,	business	at	company-operated	and	franchised	properties	fluctuates	only	moderately	with	the	seasons	and	is	relatively	stable.	Business	at	some	resort properties	may	be	seasonal	depending	on	location.

# Relationship	with	Major	Customer

We	operate	or	franchise	properties	that	are	owned	or	leased	by	Host	Hotels	&	Resorts,	Inc.	("Host").	In	addition,	Host	is	a	partner	in	several	partnerships	that	own properties	that	we	operate	under	long-term	management	agreements.	See	Footnote	19.	Relationship	with	Major	Customer	for	more	information.

# Intellectual	Property

We	operate	in	a	highly	competitive	industry	and	our	brand	names,	trademarks,	service	marks,	trade	names,	and	logos	are	very	important	to	the	sales	and	marketing of	our	properties	and	services.	We	believe	that	our	brand	names	and	other	intellectual	property	have	come	to	represent	the	highest	standards	of	quality,	care,	service,	and value	to	our	customers,	guests,	and	the	traveling	public.	Accordingly,	we	register	and	protect	our	intellectual	property	where	we	deem	appropriate	and	otherwise	protect against	its	unauthorized	use.

# Brand	Portfolio

We	believe	that	our	brand	portfolio	offers	the	largest	and	most	compelling	range	of	brands	and	properties	in	hospitality,	with	two	overall	styles	of	hotels	--	Classic, offering	time-honored	hospitality	for	the	modern	traveler,	and	Distinctive,	offering	memorable	experiences	with	a	unique	perspective	--	each	of	which	we	group	into three	quality	tiers:	Luxury,	Premium,	and	Select.

Luxury	offers	bespoke	and	superb	amenities	and	services.	Our	Classic	Luxury	hotel	brands	include	JW	Marriott,	The	Ritz-Carlton,	and	St.	Regis.	Our	Distinctive Luxury	hotel	brands	include	W	Hotels,	The	Luxury	Collection,	EDITION,	and	Bulgari.

Premium	offers	sophisticated	and	thoughtful	amenities	and	services.	Our	Classic	Premium	hotel	brands	include	Marriott	Hotels,	Sheraton,	Delta	Hotels,	Marriott Executive	Apartments,	and	Marriott	Vacation	Club.	Our	Distinctive	Premium	hotel	brands	include	Westin,	Renaissance,	Le	Méridien,	Autograph	Collection,	Gaylord Hotels,	Tribute	Portfolio,	and	Design	Hotels.

Select	offers	smart	and	easy	amenities	and	services	with	our	longer	stay	brands	offering	amenities	that	mirror	the	comforts	of	home.	Our	Classic	Select	hotel brands	include	Courtyard,	Residence	Inn,	Fairfield	by	Marriott,	SpringHill	Suites,	Four	Points,	TownePlace	Suites,	and	Protea	Hotels.	Our	Distinctive	Select	hotel brands	include	Aloft,	AC	Hotels	by	Marriott,	Element,	and	Moxy.

The	following	table	shows	the	geographic	distribution	of	our	brands	at	year-end	2018:

|  | North	America | Europe | Middle	East	&amp;<br>Africa | Asia	Pacific | Caribbean	&amp;	Latin<br>America | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Properties | 28 | 6 | 4 | 33 | 13 | 84 |
| Rooms | 15,681 | 2,075 | 2,708 | 13,122 | 3,597 | 37,183 |
| Properties | 39 | 13 | 13 | 30 | 6 | 101 |
| Rooms | 11,398 | 3,079 | 3,867 | 7,520 | 1,786 | 27,650 |
| Properties | 25 | 6 | 3 | 15 | 6 | 55 |
| Rooms | 7,474 | 1,253 | 1,221 | 4,021 | 1,074 | 15,043 |
| Properties | 17 | 44 | 7 | 30 | 12 | 110 |
| Rooms | 5,084 | 6,566 | 1,962 | 7,286 | 1,058 | 21,956 |
| Properties | 10 | 6 | 4 | 18 | 3 | 41 |
| Rooms | 1,977 | 834 | 1,168 | 4,612 | 448 | 9,039 |
| Properties | 2 | 3 | 1 | 2 | — | 8 |
| Rooms | 567 | 375 | 255 | 671 | — | 1,868 |
| Properties | — | 2 | 1 | 3 | — | 6 |
| Rooms | — | 143 | 120 | 260 | — | 523 |
| Properties | 341 | 94 | 24 | 80 | 28 | 567 |
| Rooms | 134,834 | 23,969 | 8,061 | 26,962 | 7,540 | 201,366 |
| Properties | 190 | 61 | 31 | 123 | 36 | 441 |
| Rooms | 72,674 | 16,580 | 10,408 | 46,073 | 9,882 | 155,617 |
| Properties | 129 | 19 | 7 | 56 | 12 | 223 |
| Rooms | 52,955 | 6,125 | 1,839 | 17,595 | 3,639 | 82,153 |
| Properties | 88 | 36 | 4 | 39 | 8 | 175 |
| Rooms | 29,104 | 8,564 | 1,233 | 13,633 | 2,565 | 55,099 |
| Properties | 19 | 15 | 24 | 47 | 2 | 107 |
| Rooms | 3,987 | 5,010 | 6,612 | 12,154 | 271 | 28,034 |
| Properties | 95 | 46 | 8 | 8 | 9 | 166 |
| Rooms | 20,218 | 6,466 | 1,738 | 2,167 | 4,313 | 34,902 |
| Properties | 61 | 1 | — | 1 | — | 63 |
| Rooms | 14,905 | 223 | — | 339 | — | 15,467 |
| Properties | 6 | — | — | — | — | 6 |
| Rooms | 9,918 | — | — | — | — | 9,918 |
| Properties | — | 4 | 7 | 17 | 2 | 30 |
| Rooms | — | 361 | 823 | 3,016 | 240 | 4,440 |
| Properties | 18 | 6 | — | 5 | 2 | 31 |
| Rooms | 4,285 | 697 | — | 882 | 57 | 5,921 |
| Properties | 1,027 | 63 | 7 | 63 | 39 | 1,199 |
| Rooms | 143,389 | 11,828 | 1,487 | 15,306 | 6,428 | 178,438 |
| Properties | 789 | 9 | 3 | — | 2 | 803 |
| Rooms | 97,335 | 1,196 | 301 | — | 249 | 99,081 |
| Properties | 940 | — | — | 26 | 13 | 979 |
| Rooms | 88,052 | — | — | 4,403 | 1,833 | 94,288 |
| Properties | 414 | — | — | — | — | 414 |
| Rooms | 48,959 | — | — | — | — | 48,959 |
| Properties | 152 | 20 | 12 | 67 | 20 | 271 |
| Rooms | 23,015 | 3,042 | 3,451 | 16,951 | 2,685 | 49,144 |
| Properties | 388 | — | — | — | — | 388 |
| Rooms | 39,231 | — | — | — | — | 39,231 |

|  | North	America | Europe | Middle	East	&amp;<br>Africa | Asia	Pacific | Caribbean	&amp;	Latin<br>America | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Properties | 108 | 7 | 8 | 27 | 9 | 159 |
| Rooms | 16,296 | 1,310 | 2,012 | 6,240 | 1,494 | 27,352 |
| Properties | 49 | 85 | 1 | — | 10 | 145 |
| Rooms | 8,447 | 10,589 | 188 | — | 1,553 | 20,777 |
| Properties | — | — | 80 | — | — | 80 |
| Rooms | — | — | 8,265 | — | — | 8,265 |
| Properties | 31 | 2 | 1 | 5 | — | 39 |
| Rooms | 4,388 | 293 | 168 | 1,085 | — | 5,934 |
| Properties | 11 | 23 | — | 3 | — | 37 |
| Rooms | 2,235 | 4,873 | — | 469 | — | 7,577 |
| Properties | 59 | 6 | 2 | 14 | 8 | 89 |
| Rooms | 6,959 | 256 | 197 | 2,144 | 401 | 9,957 |
| Properties | 70 | 5 | — | 5 | 9 | 89 |
| Rooms | 18,313 | 919 | — | 471 | 2,483 | 22,186 |
| Total\tProperties\t1 | 5,106 | 582 | 252 | 717 | 249 | 6,906 |
| Total\tRooms\t1 | 881,680 | 116,626 | 58,084 | 207,382 | 53,596 | 1,317,368 |

(1) Excludes	Design	Hotels TM 	properties,	which	participate	as	partner	hotels	in	our	 Loyalty	Program	and	are	available	for	booking	through	our	reservation	channels.

# Other	Activities

Loyalty	Program,	Sales	and	Marketing,	and	Reservation	Systems.	On	August	18,	2018,	Marriott	launched	one	loyalty	program	with	unified	benefits	under	its	three legacy	loyalty	brands	—	Marriott	Rewards,	The	Ritz-Carlton	Rewards,	and	Starwood	Preferred	Guest	("SPG").	On	February	13,	2019,	the	combined	program completed	its	integration	under	one	name,	Marriott	BonvoyTM.	Members	have	access	to	Marriott	Bonvoy's	diverse	brand	portfolio,	rich	benefits,	and	travel	experiences. We	refer	to	Marriott	Bonvoy	throughout	this	report	as	our	"Loyalty	Program."

Our	Loyalty	Program	is	a	low	cost	and	high	impact	vehicle	for	our	revenue	generation	efforts.	It	rewards	members	with	points	toward	free	hotel	stays,	experiences and	other	benefits,	or	miles	with	participating	airline	programs.	We	believe	that	our	Loyalty	Program	generates	substantial	repeat	business	that	might	otherwise	go	to competing	hotels.	In	2018,	Loyalty	Program	members	purchased	approximately	50	percent	of	our	room	nights.	We	continually	enhance	our	Loyalty	Program	offerings and	strategically	market	to	this	large	and	growing	guest	base	to	generate	revenue.	See	the	"Loyalty	Program"	caption	in	Footnote	2.	Summary	of	Significant	Accounting Policies	for	more	information.

Marriott.com,	our	international	website,	and	our	mobile	apps	continued	to	grow	significantly	in	2018.	Our	web	and	mobile	platforms	allow	for	a	seamless	booking experience	and	easy	enrollment	in	our	Loyalty	Program	to	book	our	exclusive	Member	Rates.	Our	Look	No	Further®	Best	Rate	Guarantee	ensures	best	rate	integrity, strengthening	consumer	confidence	in	our	brand,	and	gives	guests	greater	access	to	the	same	rates	when	they	book	hotel	rooms	through	our	various	direct	channels.	We also	continue	to	grow	engagement	levels	with	millions	of	guests	through	our	mobile	guest	services	-	check-in,	check-out,	service	requests,	mobile	key,	and	more	-	across our	hotel	portfolio.	In	2018,	we	significantly	expanded	the	number	of	hotels	across	our	portfolio	that	offer	mobile	key,	enabling	guests	to	use	their	mobile	devices	as	a keycard	for	room	entry	and	amenity	access.	We	also	expanded	our	mobile	food	ordering	at	selected	properties,	enabling	guests	to	order	food	and	beverages	on-demand from	hotel	outlets.	Our	digital	strategy	continues	to	focus	on	creating	a	simple	and	efficient	digital	booking	experience,	while	elevating	the	service	experience	through mobile	guest	services	and	generating	superior	guest	satisfaction	and	more	memorable	stays	at	our	properties.

At	year-end	2018,	we	operated	22	hotel	reservation	centers,	eight	in	the	U.S.	and	14	in	other	countries	and	territories,	which	handle	reservation	requests	for	our lodging	brands	worldwide,	including	franchised	properties.	We	own	two	of	the	U.S.	facilities	and	either	lease	the	others	or	share	space	with	a	company-operated property.	While	pricing	is	set	by	our	hotels,	our	reservation	system	manages	inventory	and	allows	us	to	utilize	third	party	agents	where	cost	effective.	Economies	of scale	enable	us	to	minimize	costs	per	occupied	room,	drive	profits	for	our	owners	and	franchisees,	and	enhance	our	fee	revenue.

We	believe	our	global	sales	and	revenue	management	organizations	are	a	key	competitive	advantage	due	to	our	unrelenting	focus	on	optimizing	our	investment	in people,	processes,	and	systems.	Our	above-property	sales	deployment	strategy	aligns	our	sales	efforts	around	how	the	customer	wants	to	buy,	reducing	duplication	of efforts	by	individual	hotels	and	allowing	us	to	cover	a	larger	number	of	accounts.	We	also	utilize	innovative	and	sophisticated	revenue	management	systems,	many	of which	are	proprietary,	which	we	believe	provide	a	competitive	advantage	in	pricing	decisions,	increasing	efficiency	and	producing	higher	property-level	revenue	for hotels	in	our	portfolio.	Most	of	the	hotels	in	our	portfolio	utilize	web-based	programs	to	effectively	manage	the	rate	set-up	and	modification	processes	which	provides for	greater	pricing	flexibility,	reduces	time	spent	on	rate	program	creation	and	maintenance,	and	increases	the	speed	to	market	of	new	products	and	services.

As	we	further	discuss	in	Part	I,	Item	1A	"Risk	Factors"	later	in	this	report,	we	utilize	sophisticated	technology	and	systems	in	our	reservation,	revenue management,	and	property	management	systems,	in	our	Loyalty	Program,	and	in	other	aspects	of	our	business.	We	also	make	certain	technologies	available	to	our guests.	Keeping	pace	with	developments	in	technology	is	important	for	our	operations	and	our	competitive	position.	Furthermore,	the	integrity	and	protection	of customer,	guest,	employee,	and	company	data	is	critical	to	us	as	we	use	such	data	for	business	decisions	and	to	maintain	operational	efficiency.

Credit	Card	Programs.	We	have	multi-year	agreements	with	JP	Morgan	Chase	and	American	Express	for	our	U.S.-issued,	co-brand	credit	cards	associated	with	our Loyalty	Program.	We	also	license	credit	card	programs	in	Canada,	the	United	Kingdom,	United	Arab	Emirates,	and	Japan.	We	earn	license	fees	based	on	card	usage,	and we	believe	that	our	co-brand	credit	cards	contribute	to	the	success	of	our	Loyalty	Program	and	reflect	the	quality	and	value	of	our	portfolio	of	brands.

Sustainability	and	Social	Impact.	Guided	by	our	2025	Sustainability	and	Social	Impact	Goals,	as	well	as	the	United	Nations	Sustainable	Development	Goals,	we believe	we	have	an	opportunity	to	create	a	positive	and	sustainable	impact	wherever	we	do	business.	Our	Sustainability	and	Social	Impact	Platform,	Serve	360:	Doing Good	In	Every	Direction,	is	built	around	four	focus	areas:	Nurture	Our	World;	Sustain	Responsible	Operations;	Empower	Through	Opportunity;	and	Welcome	All	and Advance	Human	Rights.	Within	each	of	these	areas,	we	have	identified	a	series	of	2025	goals	that	we	believe	will	help	us	to	address	the	expectations	of	our	stakeholders, increase	our	operational	efficiency	and	excellence,	and	enhance	our	reputation	while	supporting	the	continued	growth	and	resiliency	of	our	business.	Examples	of	these goals	include	commitments	to	volunteerism,	building	sustainably	and	striving	to	source	responsibly	while	reducing	carbon,	water,	and	waste	footprints,	investing	in	our communities,	and	advancing	human	rights.

Global	Design	Division.	Our	Global	Design	division	provides	design,	development,	refurbishment,	and	procurement	services	to	owners	and	franchisees	of	lodging properties	on	a	voluntary	basis	outside	the	scope	of	and	separate	from	our	management	or	franchise	contracts.	Like	third-party	contractors,	Global	Design	provides	these services	on	a	fee	basis	to	owners	and	franchisees	of	our	branded	properties.

# Competition

We	encounter	strong	competition	both	as	a	lodging	operator	and	as	a	franchisor.	According	to	lodging	industry	data,	there	are	over	1,400	lodging	management companies	in	the	U.S.,	including	approximately	21	that	operate	more	than	100	properties.	These	operators	are	primarily	private	management	firms,	but	also	include several	large	national	and	international	chains	that	own	and	operate	their	own	hotels,	operate	hotels	on	behalf	of	third-party	owners,	and	also	franchise	their	brands. Management	contracts	are	typically	long-term	in	nature,	but	most	allow	the	hotel	owner	to	replace	the	management	firm	if	it	does	not	meet	certain	financial	or performance	criteria.

We	also	compete	for	guests	with	large	companies	that	offer	online	travel	services	as	part	of	their	business	model,	search	engines	such	as	Google	and	Bing,	and online	services	including	Airbnb	and	HomeAway	that	allow	travelers	to	book	short-term	rentals	of	homes	and	apartments	as	an	alternative	to	hotel	rooms.	We	compete against	lodging	operators	and	other	competitors	for	guests	in	many	areas,	including	brand	recognition	and	reputation,	location,	guest	satisfaction,	room	rates,	quality	of service,	amenities,	quality	of	accommodations,	security,	and	the	ability	to	earn	and	redeem	Loyalty	Program	points.

During	the	last	recession,	demand	for	hotel	rooms	declined	significantly,	particularly	in	2009,	and	we	took	steps	to	reduce	operating	costs	and	improve	efficiency. Due	to	the	competitive	nature	of	our	industry,	we	focused	these	efforts	on	areas	that	had	limited	or	no	impact	on	the	guest	experience.	While	demand	trends	globally have	improved	since	2009,	cost	reductions	could	again	become	necessary	if	demand	trends	reverse.	We	would	expect	to	implement	any	such	efforts	in	a	manner designed	to	maintain	guest	loyalty,	owner	preference,	and	associate	satisfaction,	to	help	maintain	or	increase	our	market	share.

Affiliation	with	a	national	or	regional	brand	is	common	in	the	U.S.	lodging	industry,	and	we	believe	that	our	brand	recognition	assists	us	in	attracting	and	retaining guests,	owners,	and	franchisees.	In	2018,	approximately	71	percent	of	U.S.	hotel	rooms	were	brand-affiliated.	Most	of	the	branded	properties	are	franchises,	under	which the	owner	pays	the	franchisor	a	fee	for	use	of	its	hotel	name	and	reservation	system.	In	the	franchising	business,	we	face	many	competitors	that	have	strong

brands	and	guest	appeal,	including	Hilton,	Intercontinental	Hotels	Group,	Hyatt,	Wyndham,	Accor,	Choice,	Radisson,	Best	Western,	and	others.

Outside	the	U.S.,	branding	is	much	less	prevalent	and	most	markets	are	served	primarily	by	independent	operators,	although	branding	is	more	common	for	new hotel	development.	We	believe	that	chain	affiliation	will	increase	in	many	overseas	markets	as	local	economies	grow,	trade	barriers	decline,	international	travel accelerates,	and	hotel	owners	seek	the	economies	of	centralized	reservation	systems	and	marketing	programs.

Based	on	lodging	industry	data,	we	have	an	approximately	15	percent	share	of	the	U.S.	hotel	market	(based	on	number	of	rooms)	and	we	estimate	less	than	a	four percent	share	of	the	hotel	market	outside	the	U.S.	We	believe	that	our	hotel	brands	are	attractive	to	hotel	owners	seeking	a	management	company	or	franchise	affiliation because	our	hotels	typically	generate	higher	Revenue	per	Available	Room	("RevPAR")	than	our	direct	competitors	in	most	market	areas.	We	attribute	this	performance premium	to	our	success	in	achieving	and	maintaining	strong	guest	preference.	We	believe	that	the	location	and	quality	of	our	lodging	facilities,	our	marketing	programs, our	reservation	systems,	and	our	emphasis	on	guest	service	and	guest	and	associate	satisfaction	contribute	to	guest	preference	across	all	our	brands.

Properties	that	we	operate,	franchise,	or	license	are	regularly	upgraded	to	maintain	their	competitiveness.	Most	of	our	management	agreements	provide	for	the allocation	of	funds	to	be	set	aside,	generally	a	fixed	percentage	of	revenue,	for	periodic	refurbishment	and	replacement	of	furnishings,	fixtures,	and	equipment.	These ongoing	refurbishment	programs,	along	with	periodic	brand	initiatives,	are	generally	adequate	to	preserve	or	enhance	the	competitive	position	and	earning	power	of	the properties.	Properties	converting	to	one	of	our	brands	typically	complete	renovations	as	needed	in	conjunction	with	the	conversion.

# Employee	Relations

At	year-end	2018,	we	had	approximately	176,000	employees,	approximately	22,000	of	whom	were	represented	by	labor	unions.	These	numbers	do	not	include hotel	personnel	employed	by	our	owners,	franchisees,	and	management	companies	hired	by	our	franchisees.	Although	we	experienced	labor	disruptions	in	certain	U.S. markets	in	2018	in	connection	with	our	contract	negotiations	with	unions	representing	certain	of	our	organized	associates	in	those	markets,	those	contract	negotiations and	labor	disruptions	have	been	resolved	and	we	believe	relations	with	our	employees	are	positive.

# Environmental	Compliance

The	properties	we	operate	or	develop	are	subject	to	national,	regional,	state	or	provincial,	and	local	laws	and	regulations	that	govern	the	discharge	of	materials	into the	environment	or	otherwise	relate	to	protecting	the	environment.	Those	environmental	provisions	include	requirements	that	address	health	and	safety;	the	use, management,	and	disposal	of	hazardous	substances	and	wastes;	and	emission	or	discharge	of	wastes	or	other	materials.	We	believe	that	our	operation	and	development of	properties	complies,	in	all	material	respects,	with	environmental	laws	and	regulations.	Compliance	with	such	provisions	has	not	materially	impacted	our	capital expenditures,	earnings,	or	competitive	position,	and	we	do	not	anticipate	that	it	will	have	a	material	impact	in	the	future.

# Internet	Address	and	Company	SEC	Filings

Our	primary	Internet	address	is	Marriott.com.	On	the	investor	relations	portion	of	our	website,	Marriott.com/investor,	we	provide	a	link	to	our	electronic	filings with	the	U.S.	Securities	and	Exchange	Commission	(the	"SEC"),	including	our	annual	report	on	Form	10-K,	our	quarterly	reports	on	Form	10-Q,	our	current	reports	on Form	8-K,	and	any	amendments	to	these	reports.	We	make	all	such	filings	available	free	of	charge	as	soon	as	reasonably	practicable	after	filing.	The	information	found on	our	website	is	not	part	of	this	or	any	other	report	we	file	with	or	furnish	to	the	SEC.

# Forward-Looking	Statements

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

Any	number	of	risks	and	uncertainties	could	cause	actual	results	to	differ	materially	from	those	we	express	in	our	forward-looking	statements,	including	the	risks and	uncertainties	we	describe	below	and	other	factors	we	describe	from	time	to

time	in	our	periodic	filings	with	the	SEC.	We	therefore	caution	you	not	to	rely	unduly	on	any	forward-looking	statement.	The	forward-looking	statements	in	this	report speak	only	as	of	the	date	of	this	report,	and	we	undertake	no	obligation	to	update	or	revise	any	forward-looking	statement,	whether	due	to	new	information,	future developments,	or	otherwise.

# Risks	and	Uncertainties

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

Our	industry	is	highly	competitive,	which	may	impact	our	ability	to	compete	successfully	with	other	hotel	properties	and	home	and	apartment	sharing	services	for guests.	We	operate	in	markets	that	contain	many	competitors.	Each	of	our	hotel	brands	competes	with	major	hotel	chains	and	home	and	apartment	sharing	services	in national	and	international	venues,	and	with	independent	companies	in	regional	markets.	Our	ability	to	remain	competitive	and	attract	and	retain	business	and	leisure travelers	depends	on	our	success	in	distinguishing	the	quality,	value,	and	efficiency	of	our	lodging	products	and	services,	including	our	Loyalty	Program,	direct	booking channels,	and	consumer-facing	technology	platforms	and	services,	from	those	offered	by	others.	If	we	cannot	compete	successfully	in	these	areas,	our	operating	margins could	contract,	our	market	share	could	decrease,	and	our	earnings	could	decline.	Further,	new	lodging	supply	in	individual	markets	could	have	a	negative	impact	on	the hotel	industry	and	hamper	our	ability	to	increase	room	rates	or	occupancy	in	those	markets.

Economic	downturns	could	impact	our	financial	results	and	growth.	Weak	economic	conditions	in	one	or	more	parts	of	the	world,	changes	in	oil	prices	and currency	values,	disruptions	in	national,	regional,	or	global	economies	generally	and	the	travel	business	in	particular	that	might	result	from	changing	governmental policies	in	areas	such	as	trade,	travel,	immigration,	healthcare,	and	related	issues,	political	instability	in	some	areas,	and	the	uncertainty	over	how	long	any	of	these conditions	could	continue,	could	have	a	negative	impact	on	the	lodging	industry.	Because	of	such	uncertainty,	we	continue	to	experience	weakened	demand	for	our	hotel rooms	in	some	markets.	Our	future	financial	results	and	growth	could	be	further	harmed	or	constrained	if	economic	or	these	other	conditions	worsen.	U.S.	government travel	and	travel	associated	with	U.S.	government	operations	are	also	a	significant	part	of	our	business,	and	this	aspect	of	our	business	has	suffered	and	could	in	the future	suffer	due	to	U.S.	federal	spending	cuts,	or	government	hiring	restrictions	and	any	further	limitations	that	may	result	from	presidential	or	congressional	action	or inaction,	including	for	example,	a	U.S.	federal	government	shutdown,	such	as	the	partial	shutdown	that	occurred	in	December	2018	and	January	2019.

# Risks	Relating	to	Our	Integration	of	Starwood

The	continued	diversion	of	resources	and	management's	attention	to	the	integration	of	Starwood	could	still	adversely	affect	our	day-to-day	business.	While	the integration	of	Starwood	is	largely	complete,	integration	related	matters	still	place	a	significant	burden	on	our	management	and	internal	resources	and	may	continue	to	do so	for	some	time,	which	could	have	adverse	effects	on	our	business	or	financial	results.

Some	of	the	anticipated	benefits	of	combining	Starwood	and	Marriott	may	still	not	be	realized.	We	decided	to	acquire	Starwood	with	the	expectation	that	the Starwood	Combination	would	result	in	various	benefits.	Although	we	have	already	achieved	substantial	benefits,	others	remain	subject	to	several	uncertainties,	including whether	we	can	achieve	certain	revenue	synergies.

Integration	could	also	involve	unexpected	costs.	Disruptions	of	each	legacy	company's	ongoing	businesses,	processes,	and	systems	could	adversely	affect	the combined	company.	We	have	encountered	challenges	in	harmonizing	our	different	reservations	and	other	systems,	our	Loyalty	Program,	and	other	business	practices, and	we	may	encounter	additional	or	increased	challenges	related	to	integration.	Because	of	these	or	other	factors,	we	cannot	assure	you	when	or	that	we	will	be	able	to fully	realize	additional	benefits	from	the	Starwood	Combination	in	the	form	of	enhancing	revenues	or	achieving	other	operating	efficiencies,	cost	savings,	or	benefits,	or that	challenges	encountered	with	our	harmonization	efforts	will	not	have	adverse	effects	on	our	business	or	reputation.

Program	changes	associated	with	our	integration	efforts	could	have	a	negative	effect	on	guest	preference	or	behavior.	Our	integration	efforts	involved	significant changes	to	certain	of	our	guest	programs	and	services,	including	our	Loyalty	Program,	co-branded	credit	card	arrangements,	and	consumer-facing	technology	platforms and	services.	While	we	believe	such	changes	enhance	these	programs	and	services	for	our	guests	and	will	drive	guest	preference	and	satisfaction,	these	changes	remain subject	to	various	uncertainties,	including	whether	the	changes	could	be	negatively	perceived	by	certain	guests	and	consumers,	could	affect	guest	preference	or	could alter	reservation,	spending	or	other	guest	or	consumer	behavior,	all	of	which	could	adversely	affect	our	market	share,	reputation,	business,	financial	condition,	or	results of	operations.

# Risks	Relating	to	Our	Business

# Operational	Risks

Premature	termination	of	our	management	or	franchise	agreements	could	hurt	our	financial	performance.	Our	hotel	management	and	franchise	agreements	may be	subject	to	premature	termination	in	certain	circumstances,	such	as	the	bankruptcy	of	a	hotel	owner	or	franchisee,	or	a	failure	under	some	agreements	to	meet	specified financial	or	performance	criteria	that	are	subject	to	the	risks	described	in	this	section,	which	we	fail	or	elect	not	to	cure.	Some	courts	have	also	applied	agency	law principles	and	related	fiduciary	standards	to	managers	of	third-party	hotel	properties,	including	us	(or	have	interpreted	hotel	management	agreements	to	be	"personal services	contracts").	Property	owners	may	assert	the	right	to	terminate	management	agreements	even	where	the	agreements	provide	otherwise,	and	some	courts	have upheld	such	assertions	about	our	management	agreements	and	may	do	so	in	the	future.	If	terminations	occur	for	these	or	other	reasons,	we	may	need	to	enforce	our	right to	damages	for	breach	of	contract	and	related	claims,	which	may	cause	us	to	incur	significant	legal	fees	and	expenses.	Any	damages	we	ultimately	collect	could	be	less than	the	projected	future	value	of	the	fees	and	other	amounts	we	would	have	otherwise	collected	under	the	management	or	franchise	agreement.	A	significant	loss	of agreements	due	to	premature	terminations	could	hurt	our	financial	performance	or	our	ability	to	grow	our	business.

Our	lodging	operations	are	subject	to	global,	national,	and	regional	conditions.	Because	we	conduct	our	business	on	a	global	platform,	changes	in	global	and regional	economies	and	governmental	policies	impact	our	activities.	In	recent	years,	decreases	in	travel	resulting	from	weak	economic	conditions	and	the	heightened travel	security	measures	resulting	from	the	threat	of	further	terrorism	have	hurt	our	business.	Our	future	performance	could	be	similarly	affected	by	the	economic	and political	environment	in	each	of	our	operating	regions,	the	resulting	unknown	pace	of	both	business	and	leisure	travel,	and	any	future	incidents	or	changes	in	those regions.

The	growing	significance	of	our	operations	outside	of	the	U.S.	makes	us	increasingly	susceptible	to	the	risks	of	doing	business	internationally,	which	could	lower our	revenues,	increase	our	costs,	reduce	our	profits,	disrupt	our	business,	or	damage	our	reputation.	More	than	a	third	of	the	rooms	in	our	system	are	located	outside	of the	U.S.	and	its	territories.	We	expect	that	our	international	operations,	and	resulting	revenues,	will	continue	to	grow.	This	increasingly	exposes	us	to	the	challenges	and risks	of	doing	business	outside	the	U.S.,	many	of	which	are	outside	of	our	control,	and	which	could	reduce	our	revenues	or	profits,	increase	our	costs,	result	in significant	liabilities	or	sanctions,	disrupt	our	business,	or	damage	our	reputation.	These	challenges	include:	(1)	compliance	with	complex	and	changing	laws,

regulations	and	government	policies	that	may	impact	our	operations,	such	as	foreign	ownership	restrictions,	import	and	export	controls,	and	trade	restrictions;

(2)	compliance	with	U.S.	and	foreign	laws	that	affect	the	activities	of	companies	abroad,	such	as	competition	laws,	cybersecurity	and	privacy	laws,	currency	regulations, and	other	laws	affecting	dealings	with	certain	nations;	(3)	the	difficulties	involved	in	managing	an	organization	doing	business	in	many	different	countries;

(4)	uncertainties	as	to	the	enforceability	of	contract	and	intellectual	property	rights	under	local	laws;	(5)	rapid	changes	in	government	policy,	political	or	civil	unrest,	acts of	terrorism,	or	the	threat	of	international	boycotts	or	U.S.	anti-boycott	legislation;	and	(6)	currency	exchange	rate	fluctuations,	which	may	impact	the	results	and	cash flows	of	our	international	operations.

Any	failure	by	our	international	operations	to	comply	with	anti-corruption	laws	or	trade	sanctions	could	increase	our	costs,	reduce	our	profits,	limit	our	growth, harm	our	reputation,	or	subject	us	to	broader	liability.	We	are	subject	to	restrictions	imposed	by	the	U.S.	Foreign	Corrupt	Practices	Act	(the	"FCPA")	and	anti- corruption	laws	and	regulations	of	other	countries	applicable	to	our	operations,	such	as	the	UK	Bribery	Act.	Anti-corruption	laws	and	regulations	generally	prohibit companies	and	their	intermediaries	from	making	improper	payments	to	government	officials	or	other	persons	to	receive	or	retain	business.	These	laws	also	require	us	to maintain	adequate	internal	controls	and	accurate	books	and	records.	We	have	properties	in	many	parts	of	the	world	where	corruption	is	common,	and	our	compliance with	anti-corruption	laws	may	potentially	conflict	with	local	customs	and	practices.	The	compliance	programs,	internal	controls	and	policies	we	maintain	and	enforce	to promote	compliance	with	applicable	anti-bribery	and	anti-corruption	laws	may	not	prevent	our	associates,	contractors	or	agents	from	acting	in	ways	prohibited	by	these laws	and	regulations.	We	are	also	subject	to	trade	sanctions	administered	by	the	Office	of	Foreign	Assets	Control	and	the	U.S.	Department	of	Commerce.	Our compliance	programs	and	internal	controls	also	may	not	prevent	conduct	that	is	prohibited	under	these	rules.	The	U.S.	may	impose	additional	sanctions	at	any	time against	any	country	in	which	or	with	whom	we	do	business.	Depending	on	the	nature	of	the	sanctions	imposed,	our	operations	in	the	relevant	country	could	be	restricted or	otherwise	adversely	affected.	Any	violations	of	anti-corruption	laws	and	regulations	or	trade	sanctions	could	result	in	significant	civil	and	criminal	penalties,	reduce our	profits,	disrupt	or	have	a	material	adverse	effect	on	our	business,	damage	our	reputation,	or	result	in	lawsuits	being	brought	against	the	Company	or	its	officers	or directors.	In	addition,	the	operation	of	these	laws	or	an	imposition	of	further	restrictions	in	these	areas	could	increase	our	cost	of	operations,	reduce	our	profits	or	cause us	to	forgo	development	opportunities,	or	cease	operations	in	certain	countries,	that	would	otherwise	support	growth.

Exchange	rate	fluctuations	and	foreign	exchange	hedging	arrangements	could	result	in	significant	foreign	currency	gains	and	losses	and	affect	our	business results.	We	earn	revenues	and	incur	expenses	in	foreign	currencies	as	part	of	our	operations	outside	of	the	U.S.	Accordingly,	fluctuations	in	currency	exchange	rates	may significantly	increase	the	amount	of	U.S.	dollars	required	for	foreign	currency	expenses	or	significantly	decrease	the	U.S.	dollars	we	receive	from	foreign	currency revenues.	We	are	also	exposed	to	currency	translation	risk	because	the	results	of	our	non-U.S.	business	are	generally	reported	in	local	currency,	which	we	then	translate to	U.S.	dollars	for	inclusion	in	our	Financial	Statements.	As	a	result,	changes	between	the	foreign	exchange	rates	and	the	U.S.	dollar	affect	the	amounts	we	record	for our	foreign	assets,	liabilities,	revenues	and	expenses,	and	could	have	a	negative	effect	on	our	financial	results.	We	expect	that	our	exposure	to	foreign	currency	exchange rate	fluctuations	will	grow	as	the	relative	contribution	of	our	non-U.S.	operations	increases.	We	enter	into	foreign	exchange	hedging	agreements	with	financial institutions	to	reduce	exposures	to	some	of	the	principal	currencies	in	which	we	receive	management	and	franchise	fees,	but	these	efforts	may	not	be	successful.	These hedging	agreements	also	do	not	cover	all	currencies	in	which	we	do	business,	do	not	eliminate	foreign	currency	risk	entirely	for	the	currencies	that	they	do	cover,	and involve	costs	and	risks	of	their	own	in	the	form	of	transaction	costs,	credit	requirements	and	counterparty	risk.

Some	of	our	management	agreements	and	related	contracts	require	us	to	make	payments	to	owners	if	the	hotels	do	not	achieve	specified	levels	of	operating	profit. Some	of	our	contracts	with	hotel	owners	require	that	we	fund	shortfalls	if	the	hotels	do	not	attain	specified	levels	of	operating	profit.	We	may	not	be	able	to	recover	any fundings	of	such	performance	guarantees,	which	could	lower	our	profits	and	reduce	our	cash	flows.

Our	new	programs	and	new	branded	products	may	not	be	successful.	We	cannot	assure	you	that	new	or	newly	acquired	brands,	such	as	those	we	acquired	as	a result	of	the	Starwood	Combination,	our	investments	in	PlacePass	and	the	joint	venture	with	Alibaba,	our	pilot	of	a	homesharing	offering	in	certain	European	cities,	or any	other	new	programs	or	products	we	may	launch	in	the	future,	will	be	accepted	by	hotel	owners,	potential	franchisees,	or	the	traveling	public	or	other	guests.	We	also cannot	be	certain	that	we	will	recover	the	costs	we	incurred	in	developing	or	acquiring	the	brands	or	any	new	programs	or	products,	or	that	those	brands,	programs,	or products	will	be	successful.	In	addition,	some	of	our	new	or	newly	acquired	brands	involve	or	may	involve	cooperation	and/or	consultation	with	one	or	more	third parties,	including	some	shared	control	over	product	design	and	development,	sales	and	marketing,	and	brand	standards.	Disagreements	with	these	third	parties	could slow	the	development	of	these	brands	and/or	impair	our	ability	to	take	actions	we	believe	to	be	advisable	for	the	success	and	profitability	of	such	brands.

Risks	relating	to	natural	or	man-made	disasters,	contagious	disease,	terrorist	activity,	and	war	could	reduce	the	demand	for	lodging,	which	may	adversely	affect our	revenues.	So	called	"Acts	of	God,"	such	as	hurricanes,	earthquakes,	tsunamis,	floods,	volcanic	activity,	wildfires,	and	other	natural	disasters,	as	well	as	man-made disasters	and	the	potential	spread	of	contagious	diseases	in	locations	where	we	own,	manage,	or	franchise	significant	properties	and	areas	of	the	world	from	which	we draw	a	large	number	of	guests,	have	in	the	past	caused	and	could	in	the	future	cause	a	decline	in	business	or	leisure	travel	and	reduce	demand	for	lodging	to	an	extent and	for	durations	that	we	are	not	able	to	predict.	Actual	or	threatened	war,	terrorist	activity,	political	unrest,	or	civil	strife,	and	other	geopolitical	uncertainty	could	have	a similar	effect.	Any	one	or	more	of	these	events	may	reduce	the	overall	demand	for	hotel	rooms	and	corporate	apartments	or	limit	the	prices	that	we	can	obtain	for	them, both	of	which	could	adversely	affect	our	profits.	If	a	terrorist	event	were	to	involve	one	or	more	of	our	branded	properties,	demand	for	our	hotels	in	particular	could suffer,	which	could	further	hurt	our	revenues	and	profits.

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

Our	business	depends	on	the	quality	and	reputation	of	our	company	and	our	brands,	and	any	deterioration	could	adversely	impact	our	market	share,	reputation, business,	financial	condition,	or	results	of	operations.	Certain	events,	including	those	that	may	be	beyond	our	control,	could	affect	the	reputation	of	one	or	more	of	our properties	or	more	generally	impact	the	reputation	of	our	brands.	Many	other	factors	also	can	influence	our	reputation	and	the	value	of	our	brands,	including	service, food	quality	and	safety,	availability	and	management	of	scarce	natural	resources,	supply	chain	management,	diversity,	human	rights,	and	support	for	local	communities. Reputational	value	is	also	based	on	perceptions,	and	broad	access	to	social	media	makes	it	easy	for	anyone	to	provide	public	feedback	that	can	influence	perceptions	of us,	our	brands	and	our	hotels,	and	it	may

be	difficult	to	control	or	effectively	manage	negative	publicity,	regardless	of	whether	it	is	accurate.	While	reputations	may	take	decades	to	build,	negative	incidents	can quickly	erode	trust	and	confidence,	particularly	if	they	result	in	adverse	mainstream	and	social	media	publicity,	governmental	investigations	or	penalties,	or	litigation. Negative	incidents	could	lead	to	tangible	adverse	effects	on	our	business,	including	lost	sales,	boycotts,	reduced	enrollment	and/or	participation	in	our	Loyalty	Program, disruption	of	access	to	our	websites	and	reservation	systems,	loss	of	development	opportunities,	or	associate	retention	and	recruiting	difficulties.	Any	decline	in	the reputation	or	perceived	quality	of	our	brands	or	corporate	image	could	affect	our	market	share,	reputation,	business,	financial	condition,	or	results	of	operations.	The Data	Security	Incident	could	have	a	negative	impact	on	our	reputation,	our	corporate	image	and	our	relationship	with	our	guests.

If	our	brands,	goodwill	or	other	intangible	assets	become	impaired,	we	may	be	required	to	record	significant	non-cash	charges	to	earnings.	As	of	December	31, 2018,	we	had	$17.4	billion	of	goodwill	and	other	intangible	assets.	We	review	goodwill	and	indefinite-lived	intangible	assets	for	impairment	annually	or	whenever events	or	circumstances	indicate	impairment	may	have	occurred.	Estimated	fair	values	of	our	brands	or	reporting	units	could	change	if,	for	example,	there	are	changes	in the	business	climate,	unanticipated	changes	in	the	competitive	environment,	adverse	legal	or	regulatory	actions	or	developments,	changes	in	guests'	perception	and	the reputation	of	our	brands,	or	changes	in	interest	rates,	operating	cash	flows,	or	market	capitalization.	Because	of	the	significance	of	our	goodwill	and	other	intangible assets,	any	future	impairment	of	these	assets	could	require	material	non-cash	charges	to	our	results	of	operations,	which	could	have	a	material	adverse	effect	on	our financial	condition	and	results	of	operations.

Actions	by	our	franchisees	and	licensees	could	adversely	affect	our	image	and	reputation.	We	franchise	and	license	many	of	our	brand	names	and	trademarks	to third	parties	for	lodging,	timeshare,	residential,	and	our	credit	card	programs.	Under	the	terms	of	their	agreements	with	us,	our	franchisees	and	licensees	interact	directly with	guests	and	other	third	parties	under	our	brand	and	trade	names.	If	these	franchisees	or	licensees	fail	to	maintain	or	act	in	accordance	with	applicable	brand standards;	experience	operational	problems,	including	any	data	breach	involving	guest	information;	or	project	a	brand	image	inconsistent	with	ours,	our	image	and reputation	could	suffer.	Although	our	franchise	and	license	agreements	provide	us	with	recourse	and	remedies	in	the	event	of	a	breach	by	the	franchisee	or	licensee, including	termination	of	the	agreements	under	certain	circumstances,	it	could	be	expensive	or	time	consuming	for	us	to	pursue	such	remedies.	We	also	cannot	assure	you that	in	every	instance	a	court	would	ultimately	enforce	our	contractual	termination	rights	or	that	we	could	collect	any	awarded	damages	from	the	defaulting	franchisee	or licensee.

Collective	bargaining	activity	and	strikes	could	disrupt	our	operations,	increase	our	labor	costs,	and	interfere	with	the	ability	of	our	management	to	focus	on executing	our	business	strategies.	A	significant	number	of	associates	at	our	managed,	leased,	and	owned	hotels	are	covered	by	collective	bargaining	agreements.	If relationships	with	our	organized	associates	or	the	unions	that	represent	them	become	adverse,	the	properties	we	operate	could	experience	labor	disruptions	such	as strikes,	lockouts,	boycotts,	and	public	demonstrations,	as	we	saw	in	the	fourth	quarter	of	2018.	Although	we	recently	completed	contract	negotiations	for	43	unionized hotels	following	multi-week	strikes	by	our	associates	at	29	of	those	hotels,	a	number	of	collective	bargaining	agreements	are	expected	to	be	negotiated	in	2019.	Labor disputes	and	disruptions	have	in	the	past,	and	could	in	the	future,	result	in	adverse	publicity	and	adversely	affect	operations	and	revenues	at	affected	hotels.	In	addition, labor	disputes	and	disruptions	could	harm	our	relationship	with	our	associates,	result	in	increased	regulatory	inquiries	and	enforcement	by	governmental	authorities, harm	our	relationships	with	our	guests	and	customers,	divert	management	attention,	and	reduce	customer	demand	for	our	services,	all	of	which	could	have	an	adverse effect	on	our	reputation,	business,	financial	condition,	or	results	of	operations.

Labor	regulation	and	the	negotiation	of	new	or	existing	collective	bargaining	agreements	could	lead	to	higher	wage	and	benefit	costs,	changes	in	work	rules	that raise	operating	expenses,	legal	costs,	and	limitations	on	our	ability	or	the	ability	of	our	third-party	property	owners	to	take	cost	saving	measures	during	economic downturns.	We	do	not	have	the	ability	to	control	the	negotiations	of	collective	bargaining	agreements	covering	unionized	labor	employed	by	our	third-party	property owners	and	franchisees.	Increased	unionization	of	our	workforce,	new	labor	legislation	or	changes	in	regulations	could	disrupt	our	operations,	reduce	our	profitability	or interfere	with	the	ability	of	our	management	to	focus	on	executing	our	business	strategies.

If	we	cannot	attract	and	retain	talented	associates,	our	business	could	suffer.	We	compete	with	other	companies	both	within	and	outside	of	our	industry	for talented	personnel.	If	we	cannot	recruit,	train,	develop,	and	retain	sufficient	numbers	of	talented	associates,	we	could	experience	increased	associate	turnover,	decreased guest	satisfaction,	low	morale,	inefficiency,	or	internal	control	failures.	Insufficient	numbers	of	talented	associates	could	also	limit	our	ability	to	grow	and	expand	our businesses.	A	shortage	of	skilled	labor	could	also	result	in	higher	wages	that	would	increase	our	labor	costs,	which	could	reduce	our	profits.

Damage	to,	or	losses	involving,	properties	that	we	own,	manage,	or	franchise	may	not	be	covered	by	insurance,	or	the	cost	of	such	insurance	could	increase.

Marriott	requires	comprehensive	property	and	liability	insurance	policies	for	our

managed,	leased,	and	owned	properties	with	coverage	features	and	insured	limits	that	we	believe	are	customary.	We	require	managed	hotel	owners	to	procure	such coverage	or	we	procure	such	coverage	on	their	behalf.	We	also	require	our	franchisees	to	maintain	similar	levels	of	insurance.	Market	forces	beyond	our	control	may nonetheless	limit	the	scope	of	the	insurance	coverage	we	or	our	franchisees	can	obtain,	or	our	or	their	ability	to	obtain	coverage	at	reasonable	rates.	Certain	types	of losses,	generally	of	a	catastrophic	nature,	such	as	earthquakes,	hurricanes	and	floods,	terrorist	acts,	or	liabilities	that	result	from	breaches	in	the	security	of	our information	systems,	may	result	in	high	deductibles,	low	limits,	or	may	be	uninsurable	or	the	cost	of	obtaining	insurance	may	be	unacceptably	high.	As	a	result,	we	and our	franchisees	may	not	be	successful	in	obtaining	insurance	without	increases	in	cost	or	decreases	in	coverage	levels,	or	may	not	be	successful	in	obtaining	insurance	at all.	For	example,	in	2018	substantial	increases	in	property	insurance	costs	occurred	due	to	the	severe	and	widespread	damage	caused	by	the	2017	Atlantic	hurricane season	and	other	natural	disasters.	In	addition,	in	the	event	of	a	substantial	loss,	the	insurance	coverage	we	or	our	franchisees	carry	may	not	be	sufficient	to	pay	the	full market	value	or	replacement	cost	of	any	lost	investment	or	in	some	cases	could	result	in	certain	losses	being	totally	uninsured.	As	a	result,	we	could	lose	some	or	all	of any	capital	that	we	have	invested	in	a	property,	as	well	as	the	anticipated	future	revenue	from	the	property,	and	we	could	remain	obligated	for	guarantees,	debt,	or	other financial	obligations	for	the	property.

# Development	and	Financing	Risks

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

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

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

Our	development	and	renovation	activities	expose	us	to	project	cost,	completion,	and	resale	risks.	We	occasionally	develop,	or	acquire	and	renovate,	hotel	and residential	properties,	both	directly	and	through	partnerships,	joint	ventures,	and	other	business	structures	with	third	parties.	As	demonstrated	by	the	impairment	charges that	we	recorded	in	2014	and	2015	in	connection	with	our	development	and	construction	of	three	EDITION	hotels	and	residences,	our	ongoing	involvement	in	the development	of	properties	presents	a	number	of	risks,	including	that:	(1)	any	future	weakness	in	the	capital	markets	may	limit	our	ability,	or	that	of	third	parties	with whom	we	do	business,	to	raise	capital	for	completion	of	projects	that	have	commenced	or	for	development	of	future	properties;	(2)	properties	that	we	develop	or renovate	could	become	less	attractive	due	to	decreases	in	demand	for	hotel	and	residential	properties,	market	absorption	or	oversupply,	with	the	result	that	we	may	not	be able	to	sell	such	properties	for	a	profit	or	at	the	prices	or	selling	pace	we	anticipate,	potentially	requiring	additional	changes	in	our	pricing	strategy	that	could	result	in further	charges;	(3)	construction	delays	or	cost	overruns,	including	those	due	to	a	shortage	of	skilled	labor,	lender	financial	defaults,	or	so	called	"Acts	of	God"	such	as earthquakes,	hurricanes,	floods,	or	fires	may	increase	overall	project	costs	or	result	in	project	cancellations;	and	(4)	we	may	be	unable	to	recover	development	costs	we incur	for	any	projects	that	we	do	not	pursue	to	completion.

Our	owned	properties	and	other	real	estate	investments	subject	us	to	numerous	risks.	Although	we	had	relatively	few	owned	and	leased	properties	at	the	end	of 2018,	such	properties	are	subject	to	the	risks	that	generally	relate	to	investments	in	real	property.	Although	we	have	sold	many	properties	in	recent	years	and	we	are actively	pursuing	additional	sales,	equity	real	estate	investments	can	be	difficult	to	sell	quickly,	and	we	may	not	be	able	to	do	so	at	prices	we	find	acceptable	or	at	all. Moreover,	the	investment	returns	available	from	equity	investments	in	real	estate	depend	in	large	part	on	the	amount	of	income

earned	and	capital	appreciation	generated	by	the	related	properties,	and	the	expenses	incurred.	A	variety	of	other	factors	also	affect	income	from	properties	and	real estate	values,	including	governmental	regulations,	insurance,	zoning,	tax	and	eminent	domain	laws,	interest	rate	levels,	and	the	availability	of	financing.	For	example, new	or	existing	real	estate	zoning	or	tax	laws	can	make	it	more	expensive	and/or	time-consuming	to	develop	real	property	or	expand,	modify,	or	renovate	hotels.	When interest	rates	increase,	the	cost	of	acquiring,	developing,	expanding,	or	renovating	real	property	increases	and	real	property	values	may	decrease	as	the	number	of potential	buyers	decreases.	Similarly,	as	financing	becomes	less	available,	it	becomes	more	difficult	both	to	acquire	and	to	sell	real	property.	Finally,	under	eminent domain	laws,	governments	can	take	real	property,	sometimes	for	less	compensation	than	the	owner	believes	the	property	is	worth.	Despite	our	asset-light	strategy,	our real	estate	properties	could	be	impacted	by	any	of	these	factors,	resulting	in	a	material	adverse	impact	on	our	results	of	operations	or	financial	condition.	If	our properties	do	not	generate	revenue	sufficient	to	meet	operating	expenses,	including	needed	capital	expenditures,	our	income	could	be	adversely	affected.

Development	and	other	investing	activities	that	involve	our	co-investment	with	third	parties	may	result	in	disputes	and	may	decrease	our	ability	to	manage	risk. We	have	from	time	to	time	invested,	and	may	continue	to	invest,	in	partnerships,	joint	ventures,	and	other	business	structures	involving	our	co-investment	with	third parties.	These	investments	generally	include	some	form	of	shared	control	over	the	development	of	the	asset	or	operations	of	the	business	and	create	added	risks, including	the	possibility	that	other	investors	in	such	ventures	could	become	bankrupt	or	otherwise	lack	the	financial	resources	to	meet	their	obligations,	could	have	or develop	business	interests,	policies,	or	objectives	that	are	inconsistent	with	ours,	could	take	action	without	our	approval	(or,	conversely,	prevent	us	from	taking	action without	our	partner's	approval),	or	could	make	requests	contrary	to	our	policies	or	objectives.	Should	a	venture	partner	become	bankrupt	we	could	become	liable	for	our partner's	share	of	the	venture's	liabilities.	Actions	by	a	co-venturer	might	subject	the	assets	owned	by	the	venture	or	partnership	to	additional	risk,	such	as	increased project	costs,	project	delays,	or	operational	difficulties	following	project	completion.	These	risks	may	be	more	likely	to	occur	in	difficult	business	environments.	We cannot	assure	you	that	our	investments	through	partnerships	or	joint	ventures	will	be	successful	despite	these	risks.

Risks	associated	with	development	and	sale	of	residential	properties	associated	with	our	lodging	properties	or	brands	may	reduce	our	profits.	We	participate, through	licensing	agreements	or	directly	or	through	noncontrolling	interests,	in	the	development	and	sale	of	residential	properties	associated	with	our	brands,	including residences	and	condominiums	under	many	of	our	luxury	and	premium	brand	names	and	trademarks.	Such	projects	pose	further	risks	beyond	those	generally	associated with	our	lodging	business,	which	may	reduce	our	profits	or	compromise	our	brand	equity,	including	risks	that	(1)	weakness	in	residential	real	estate	and	demand generally	may	reduce	our	profits	and	could	make	it	more	difficult	to	convince	future	development	partners	of	the	value	added	by	our	brands;	(2)	increases	in	interest rates,	reductions	in	mortgage	availability	or	the	tax	benefits	of	mortgage	financing	or	residential	ownership	generally,	or	increases	in	the	costs	of	residential	ownership could	prevent	potential	customers	from	buying	residential	products	or	reduce	the	prices	they	are	willing	to	pay;	and	(3)	residential	construction	may	be	subject	to warranty	and	liability	claims	or	claims	related	to	purchaser	deposits,	and	the	costs	of	resolving	such	claims	may	be	significant.

Some	hotel	openings	in	our	development	pipeline	and	approved	projects	may	be	delayed	or	not	result	in	new	hotels,	which	could	adversely	affect	our	growth prospects.	We	report	a	significant	number	of	hotels	in	our	development	pipeline,	including	hotels	under	construction	and	under	signed	contracts,	as	well	as	hotels approved	for	development	but	not	yet	under	contract.	The	eventual	opening	of	such	pipeline	hotels	and,	in	particular	the	approved	hotels	that	are	not	yet	under	contract, is	subject	to	numerous	risks,	including	in	some	cases	the	owner's	or	developer's	ability	to	obtain	adequate	financing	or	governmental	or	regulatory	approvals.

Competition	for	skilled	construction	labor	and	disruption	in	the	supply	chain	for	materials	could	cause	construction	timelines	for	pipeline	hotels	to	lengthen.	Accordingly, we	cannot	assure	you	that	all	of	our	development	pipeline	will	result	in	new	hotels	entering	our	system,	or	that	those	hotels	will	open	when	we	anticipate.

If	we	incur	losses	on	loans	or	loan	guarantees	that	we	have	made	to	third	parties,	our	profits	could	decline.	At	times,	we	make	loans	for	hotel	development	or renovation	expenditures	when	we	enter	into	or	amend	management	or	franchise	agreements.	From	time	to	time	we	also	provide	third-party	lenders	with	financial guarantees	for	the	timely	repayment	of	all	or	a	portion	of	debt	related	to	hotels	that	we	manage	or	franchise,	generally	subject	to	an	obligation	that	the	owner	reimburse us	for	any	fundings.	We	could	suffer	losses	if	hotel	owners	or	franchisees	default	on	loans	that	we	provide	or	fail	to	reimburse	us	for	loan	guarantees	that	we	have funded.

If	owners	of	hotels	that	we	manage	or	franchise	cannot	repay	or	refinance	mortgage	loans	secured	by	their	properties,	our	revenues	and	profits	could	decrease and	our	business	could	be	harmed.	The	owners	of	many	of	our	managed	or	franchised	properties	have	pledged	their	hotels	as	collateral	for	mortgage	loans	that	they entered	into	when	those	properties	were	purchased	or	refinanced.	If	those	owners	cannot	repay	or	refinance	maturing	indebtedness	on	favorable	terms	or	at	all,	the lenders	could	declare	a	default,	accelerate	the	related	debt,	and	repossess	the	property.	Such	sales	or	repossessions	could,	in	some	cases,	result	in	the	termination	of	our management	or	franchise	agreements	and	eliminate	our	anticipated	income	and	cash	flows,	which	could	negatively	affect	our	results	of	operations.

# Technology,	Information	Protection,	and	Privacy	Risks

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

An	increase	in	the	use	of	third-party	Internet	services	to	book	online	hotel	reservations	could	adversely	impact	our	business.	Some	of	our	hotel	rooms	are	booked through	Internet	travel	intermediaries	such	as	Expedia.com®,	Priceline.com®,	Booking.com™,	Travelocity.com®,	and	Orbitz.com®,	as	well	as	lesser-known	online	travel service	providers.	These	intermediaries	initially	focused	on	leisure	travel,	but	now	also	provide	offerings	for	corporate	travel	and	group	meetings.	Although	our	Best Rate	Guarantee	and	Member	Rate	programs	have	helped	limit	guest	preference	shift	to	intermediaries	and	greatly	reduced	the	ability	of	intermediaries	to	undercut	the published	rates	at	our	hotels,	intermediaries	continue	to	use	a	variety	of	aggressive	online	marketing	methods	to	attract	guests,	including	the	purchase,	by	certain companies,	of	trademarked	online	keywords	such	as	"Marriott"	from	Internet	search	engines	such	as	Google®,	Bing®,	Yahoo®,	and	Baidu®	to	steer	guests	toward	their websites	(a	practice	that	has	been	challenged	by	various	trademark	owners	in	federal	court).	Although	we	have	successfully	limited	these	practices	through	contracts with	key	online	intermediaries,	the	number	of	intermediaries	and	related	companies	that	drive	traffic	to	intermediaries'	websites	is	too	large	to	permit	us	to	eliminate	this risk	entirely.	Our	business	and	profitability	could	be	harmed	if	online	intermediaries	succeed	in	significantly	shifting	loyalties	from	our	lodging	brands	to	their	travel services,	diverting	bookings	away	from	our	direct	online	channels,	or	through	their	fees,	increase	the	overall	cost	of	Internet	bookings	for	our	hotels.	In	addition,	if	we are	not	able	to	negotiate	new	agreements	on	satisfactory	terms	when	our	existing	contracts	with	intermediaries	(which	generally	have	2-	to	3-	year	terms)	come	up	for renewal,	our	business	and	prospects	could	be	negatively	impacted	in	a	number	of	ways.	For	example,	if	newly	negotiated	agreements	are	on	terms	less	favorable	to	our hotels	than	the	expiring	agreements,	or	if	we	are	not	able	to	negotiate	new	agreements	and	our	hotels	no	longer	appear	on	intermediary	websites,	our	bookings	could decline,	our	profits	(and	the	operating	profits	of	hotels	in	our	system)	could	decline,	and	customers	and	owners	may	be	less	attracted	to	our	brands.	We	may	not	be	able to	recapture	or	offset	any	such	loss	of	business	through	actions	we	take	to	enhance	our	direct	marketing	and	reservation	channels	or	to	rely	on	other	channels	or	other intermediary	websites.

We	are	exposed	to	risks	and	costs	associated	with	protecting	the	integrity	and	security	of	company,	associate,	and	guest	data.	In	the	operation	of	our	business,	we collect,	store,	use,	and	transmit	large	volumes	of	data	regarding	associates,	guests,	customers,	owners,	licensees,	franchisees,	and	our	own	business	operations,	including credit	card	numbers,	reservation	and	loyalty	data,	and	other	personal	information,	in	various	information	systems	that	we	maintain	and	in	systems	maintained	by	third parties,	including	our	owners,	franchisees,	licensees,	and	service	providers.	The	integrity	and	protection	of	this	data	is	critical	to	our	business.	If	this	data	is	inaccurate	or incomplete,	we	could	make	faulty	decisions.

Our	guests	and	associates	also	have	a	high	expectation	that	we,	as	well	as	our	owners,	franchisees,	licensees,	and	service	providers,	will	adequately	protect	and appropriately	use	their	personal	information.	The	information,	security,	and	privacy	requirements	imposed	by	laws	and	governmental	regulation,	our	contractual obligations,	and	the	requirements	of	the	payment	card	industry	are	also	increasingly	demanding	in	the	U.S.,	the	European	Union,	Asia,	and	other	jurisdictions	where	we operate.	Our	systems	and	the	systems	maintained	or	used	by	our	owners,	franchisees,	licensees,	and	service	providers	may	not	be	able	to	satisfy	these	changing	legal	and regulatory	requirements	and	associate	and	guest	expectations,	or	may	require	significant	additional	investments	or	time	to	do	so.	We	may	incur	significant	additional costs	to	meet	these	requirements,	obligations,	and	expectations,	and	in	the	event	of	alleged	or	actual	noncompliance	we	may	experience	increased	operating	costs, increased	exposure	to	fines	and	litigation,	and	increased	risk	of	damage	to	our	reputation	and	brand.

The	Data	Security	Incident	could	have	numerous	adverse	effects	on	our	business.	As	a	result	of	the	Data	Security	Incident,	we	are	a	party	to	numerous	class	action lawsuits	brought	by	consumers	and	others	in	the	U.S.	and	Canada,	one	securities	class	action	lawsuit	in	the	U.S.,	and	one	shareholder	derivative	lawsuit	in	the	U.S.	We may	be	named	as	a	party	in	additional	lawsuits	and	other	claims	may	be	asserted	by	or	on	behalf	of	guests,	customers,	hotel	owners,	shareholders	or	others	seeking monetary	damages	or	other	relief.	A	number	of	federal,	state	and	foreign	governmental	authorities	have	also	made	inquiries	or	opened	investigations	related	to	the	Data Security	Incident,	including	under	various	data	protection	and	privacy	regulations,	such	as	the	European	Union's	General	Data	Protection	Regulation.	In	addition,	the major	payment	card	networks	require	the	completion	of	a	forensic	investigation	by	a	certified	investigative	firm,	which	is	underway. Responding	to	and	resolving	these lawsuits,	claims	and	investigations	may	result	in	material	remedial	and	other	expenses	which	may	not	be	covered	by	insurance,	including	fines.	Governmental authorities	investigating	the	Data	Security	Incident	also	may	seek	to

impose	undertakings,	injunctive	relief,	consent	decrees,	or	other	civil	or	criminal	penalties,	which	could,	among	other	things,	materially	increase	our	data	security	costs or	otherwise	require	us	to	alter	how	we	operate	our	business.	Card	issuers	or	payment	card	networks	may	seek	to	attribute	losses	or	other	expenses	to	the	Data	Security Incident,	and	we	cannot	currently	determine	to	what	extent	those	losses	and	expenses	may	be	our	legal	responsibility.	Significant	management	time	and	Company resources	have	been,	and	may	continue	to	be,	devoted	to	the	Data	Security	Incident.	The	Data	Security	Incident	and	publicity	related	to	it	could	have	a	range	of	other adverse	effects	on	our	business	or	prospects,	including	causing	or	contributing	to	loss	of	consumer	confidence,	reduced	consumer	demand,	reduced	enrollment	and/or participation	in	our	Loyalty	Program,	loss	of	development	opportunities,	and	associate	retention	and	recruiting	difficulties.	These	expenses	and	other	adverse	effects could	have	a	material	effect	on	our	market	share,	reputation,	business,	financial	condition,	or	results	of	operations.	Although	we	maintain	insurance	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)	related	to	the	Data	Security	Incident.	Further,	as	a	result	of	the	Data	Security	Incident	and	market	forces	beyond	our	control,	relevant	insurance coverage	may	not	be	available	in	the	future	on	commercially	reasonable	terms	or	at	all.

Our	remediation	efforts	related	to	the	Data	Security	Incident	will	be	costly	and	may	not	be	effective.	Following	the	Data	Security	Incident,	we	implemented additional	technical	measures	on	our	network	designed	to	contain	and	remove	the	threats	identified	during	our	investigation,	secure	the	Starwood	reservations	database, and	monitor	for	any	further	unauthorized	activity.	We	also	accelerated	ongoing	security	enhancements	to	our	network.	We	have	incurred	costs	in	connection	with	these remediation	efforts	to	date,	and	we	could	incur	additional	significant	costs	as	we	take	further	steps	designed	to	prevent	unauthorized	access	to	our	network.	The	technical measures	we	have	taken	are	based	on	our	investigation	of	the	causes	of	the	Data	Security	Incident,	but	additional	measures	may	be	needed	to	prevent	a	similar	incident in	the	future	and	such	measures	may	not	be	sufficient	to	prevent	other	types	of	incidents.	We	cannot	assure	you	that	all	potential	causes	of	the	incident	have	been identified	and	remediated	and	will	not	occur	again.

Additional	cyber-security	incidents	could	have	adverse	effects	on	our	business.	The	Data	Security	Incident	was	significant,	went	undetected	for	a	long	period	of time	and	could	have	numerous	adverse	effects	on	our	business,	as	discussed	above.	If	we	experience	additional	cyber	security	incidents	or	fail	to	detect	and appropriately	respond	to	additional	cyber	security	incidents,	the	severity	of	the	adverse	effects	on	our	business	could	be	magnified.	We	have	implemented	security measures	to	safeguard	our	systems	and	data,	and	we	intend	to	continue	implementing	additional	measures	in	the	future,	but,	as	with	the	Data	Security	Incident,	our measures	may	not	be	sufficient	to	maintain	the	confidentiality,	security,	or	availability	of	the	data	we	collect,	store,	and	use	to	operate	our	business.	Measures	taken	by our	service	providers	or	our	owners,	franchisees,	licensees,	and	their	service	providers	also	may	not	be	sufficient.	Efforts	to	hack	or	circumvent	security	measures, efforts	to	gain	unauthorized	access	to	data,	failures	of	systems	or	software	to	operate	as	designed	or	intended,	viruses,	"ransomware"	or	other	malware,	"phishing"	or other	types	of	business	email	compromises,	operator	error,	or	inadvertent	releases	of	data	have	impacted,	and	may	in	the	future	impact,	our	information	systems	and records	or	those	of	our	owners,	franchisees,	licensees,	or	service	providers.	Our	reliance	on	computer,	Internet-based,	and	mobile	systems	and	communications,	and	the frequency	and	sophistication	of	efforts	by	third	parties	to	gain	unauthorized	access	or	prevent	authorized	access	to	such	systems,	have	greatly	increased	in	recent	years. We	have	experienced	cyber-attacks,	attempts	to	disrupt	access	to	our	systems	and	data,	and	attempts	to	affect	the	integrity	of	our	data,	and	the	frequency	and sophistication	of	such	efforts	could	continue	to	increase.	In	addition	to	the	consequences	of	the	Data	Security	Incident	discussed	above,	any	significant	theft	of, unauthorized	access	to,	loss	of,	loss	of	access	to,	or	fraudulent	use	of	guest,	associate,	owner,	franchisee,	licensee,	or	company	data	could	adversely	impact	our reputation	and	could	result	in	legal,	regulatory	and	other	consequences,	including	remedial	and	other	expenses,	fines,	or	litigation.	Depending	on	the	nature	and	scope	of the	event,	compromises	in	the	security	of	our	information	systems	or	those	of	our	owners,	franchisees,	licensees,	or	service	providers	or	other	disruptions	in	data	services could	lead	to	an	interruption	in	the	operation	of	our	systems,	resulting	in	operational	inefficiencies	and	a	loss	of	profits,	negative	publicity,	and	other	adverse	effects	on our	business,	including	lost	sales,	boycotts,	reduced	enrollment	and/or	participation	in	our	Loyalty	Program,	litigation,	loss	of	development	opportunities,	or	associate retention	and	recruiting	difficulties,	all	of	which	could	affect	our	market	share,	reputation,	business,	financial	condition,	or	results	of	operations.	The	techniques	used	to obtain	unauthorized	access,	disable	or	degrade	service,	or	sabotage	information	systems	change	frequently,	can	be	difficult	to	detect	for	long	periods	of	time,	and	can involve	difficult	or	prolonged	assessment	or	remediation	periods	even	once	detected,	which	could	magnify	the	severity	of	these	adverse	effects.	In	addition,	although	we carry	cyber/privacy	liability	insurance	that	is	designed	to	protect	us	against	certain	losses	related	to	cyber	risks,	that	insurance	coverage	may	not	be	sufficient	to	cover	all expenses	or	other	losses	(including	fines)	or	all	types	of	claims	that	may	arise	in	connection	with	cyber-attacks,	security	compromises,	and	other	related	incidents,	and until	we	renew	our	current	policy	and	a	new	policy	period	begins,	our	policy	coverage	limits	will	be	reduced	by	the	amount	of	claims	paid	related	to	the	Data	Security Incident.	Furthermore,	in	the	future	such	insurance	may	not	be	available	on	commercially	reasonable	terms,	or	at	all.

Changes	in	privacy	and	data	security	laws	could	increase	our	operating	costs,	increase	our	exposure	to	fines	and	litigation,	and	adversely	affect	our	ability	to market	our	products	effectively.	We	are	subject	to	numerous,	complex,	and

frequently	changing	laws,	regulations,	and	contractual	obligations	designed	to	protect	personal	information,	including	in	the	U.S.,	the	European	Union,	Asia,	and	other jurisdictions.	Non-U.S.	data	privacy	and	data	security	laws,	various	U.S.	federal	and	state	laws,	payment	card	industry	security	standards,	and	other	information	privacy and	security	standards	are	all	applicable	to	us.	Significant	legislative	or	regulatory	changes	could	be	adopted	in	the	future,	including	in	reaction	to	the	Data	Security Incident	or	data	breaches	experienced	by	other	companies.	Compliance	with	changes	in	applicable	data	privacy	laws	and	regulations	and	contractual	obligations, including	responding	to	investigations	into	our	compliance,	may	restrict	our	business	operations,	increase	our	operating	costs,	increase	our	exposure	to	fines	and litigation	in	the	event	of	alleged	non-compliance,	and	adversely	affect	our	reputation.	Following	the	Data	Security	Incident,	the	Information	Commissioner's	Office	in the	United	Kingdom	("ICO")	notified	us	that	it	had	opened	an	investigation	into	our	online	privacy	policy	and	related	practices.	This	investigation	is	separate	from	the ICO's	investigation	specifically	related	to	the	Data	Security	Incident.	As	a	result	of	this	investigation,	we	could	be	exposed	to	significant	fines	and	remediation	costs	in addition	to	any	imposed	as	a	result	of	the	Data	Security	Incident,	and	adverse	publicity	related	to	the	investigation	could	adversely	affect	our	reputation.

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

Any	disruption	in	the	functioning	of	our	reservation	systems	could	adversely	affect	our	performance	and	results.	We	manage	global	reservation	systems	that communicate	reservations	to	our	branded	hotels	that	individuals	make	directly	with	us	online,	through	our	mobile	apps,	through	our	telephone	call	centers,	or	through intermediaries	like	travel	agents,	Internet	travel	websites,	and	other	distribution	channels.	The	cost,	speed,	accuracy	and	efficiency	of	our	reservation	systems	are	critical aspects	of	our	business	and	are	important	considerations	for	hotel	owners	when	choosing	our	brands.	Our	business	may	suffer	if	we	fail	to	maintain,	upgrade,	or	prevent disruption	to	our	reservation	systems.	In	addition,	the	risk	of	disruption	in	the	functioning	of	our	global	reservation	systems	could	increase	with	the	ongoing	systems integration	that	is	part	of	our	integration	of	Starwood.	Disruptions	in	or	changes	to	our	reservation	systems	could	result	in	a	disruption	to	our	business	and	the	loss	of important	data.

# Other	Risks

Ineffective	internal	control	over	financial	reporting	could	result	in	errors	in	our	financial	statements,	reduce	investor	confidence,	and	adversely	impact	our	stock price.	As	discussed	in	Part	II,	Item	8	"Management's	Report	on	Internal	Control	Over	Financial	Reporting"	later	in	this	report,	in	the	2018	fourth	quarter, we	identified	a	material	weakness	in	internal	control	related	to	our	accounting	for	our	Loyalty	Program,	which	resulted	in	errors	in	our	previously	issued	financial statements	for	the	2018	first,	second,	and	third	quarters.	Internal	controls	related	to	the	implementation	of	ASU	2014-09	and	the	accounting	for	our	Loyalty	Program	are important	to	accurately	reflect	our	financial	position	and	results	of	operations	in	our	financial	reports.	We	are	in	the	process	of	remediating	the	material	weakness,	but our	efforts	may	not	be	successful.	If	we	are	unable	to	remediate	the	material	weakness	in	an	appropriate	and	timely	manner,	or	if	we	identify	additional	control deficiencies	that	individually	or	together	constitute	significant	deficiencies	or	material	weaknesses,	our	ability	to	accurately	record,	process,	and	report	financial information	and	consequently,	our	ability	to	prepare	financial	statements	within	required	time	periods,	could	be	adversely	affected.	Failure	to	maintain	effective	internal control	over	financial	reporting	could	result	in	violations	of	applicable	securities	laws,	stock	exchange	listing	requirements,	and	the	covenants	under	our	debt agreements,	subject	us	to	litigation	and	investigations,	negatively	affect	investor	confidence	in	our	financial	statements,	and	adversely	impact	our	stock	price	and	ability to	access	capital	markets.

Changes	in	laws	and	regulations	could	reduce	our	profits	or	increase	our	costs.	We	are	subject	to	a	wide	variety	of	laws,	regulations,	and	policies	in	jurisdictions around	the	world,	including	those	for	financial	reporting,	taxes,	healthcare,	cybersecurity,	privacy,	climate	change,	and	the	environment.	Changes	to	such	laws, regulations,	or	policies	could	reduce	our	profits.	We	also	anticipate	that	many	of	the	jurisdictions	where	we	do	business	will	continue	to	review	taxes	and	other	revenue raising	measures,	and	any	resulting	changes	could	impose	new	restrictions,	costs,	or	prohibitions	on	our	current	practices	or	reduce	our	profits.	In	particular,

governments	may	revise	tax	laws,	regulations,	or	official	interpretations	in	ways	that	could	significantly	impact	us,	and	other	modifications	could	reduce	the	profits	that we	can	effectively	realize	from	our	operations	or	could	require	costly	changes	to	those	operations	or	the	way	in	which	they	are	structured.

We	could	be	subject	to	additional	tax	liabilities.	We	are	subject	to	a	variety	of	taxes	in	the	U.S.	(federal	and	state)	and	numerous	foreign	jurisdictions.	We	may recognize	additional	tax	expense	and	be	subject	to	additional	tax	liabilities	due	to	changes	in	laws,	regulations,	administrative	practices,	principles,	and	interpretations related	to	tax,	including	changes	to	the	global	tax	framework,	competition,	and	other	laws	and	accounting	rules	in	various	jurisdictions.	Such	changes	could	come	about as	a	result	of	economic,	political,	and	other	conditions.

Our	tax	expense	and	liabilities	may	also	be	affected	by	other	factors,	such	as	changes	in	our	business	operations,	acquisitions,	investments,	entry	into	new businesses	and	geographies,	intercompany	transactions,	the	relative	amount	of	our	foreign	earnings,	losses	incurred	in	jurisdictions	for	which	we	are	not	able	to	realize related	tax	benefits,	the	applicability	of	special	tax	regimes,	changes	in	foreign	currency	exchange	rates,	changes	in	our	stock	price,	and	changes	in	our	deferred	tax assets	and	liabilities	and	their	valuation.	Significant	judgment	is	required	in	evaluating	and	estimating	our	tax	expense	and	liabilities.	In	the	ordinary	course	of	our business,	there	are	many	transactions	and	calculations	for	which	the	ultimate	tax	determination	is	uncertain.	For	example,	the	legislation	known	as	the	U.S.	Tax	Cuts	and Jobs	Act	of	2017	(the	"2017	Tax	Act")	requires	complex	computations	to	be	performed	that	were	not	previously	required	by	U.S.	tax	law,	significant	judgments	to	be made	in	interpretation	of	the	provisions	of	the	2017	Tax	Act,	significant	estimates	in	calculations,	and	the	preparation	and	analysis	of	information	not	previously	relevant or	regularly	produced.	The	U.S.	Treasury	Department,	the	U.S.	Internal	Revenue	Service,	and	other	standard-setting	bodies	will	continue	to	interpret	or	issue	guidance on	how	provisions	of	the	2017	Tax	Act	will	be	applied	or	otherwise	administered.	As	future	guidance	is	issued,	we	may	make	adjustments	to	amounts	that	we	have previously	recorded	that	may	materially	impact	our	financial	statements	in	the	period	in	which	the	adjustments	are	made.

We	are	also	currently	subject	to	tax	controversies	in	various	jurisdictions,	and	these	jurisdictions	may	assess	additional	tax	liabilities	against	us.	Developments	in an	audit,	investigation,	or	other	tax	controversy	could	have	a	material	effect	on	our	operating	results	or	cash	flows	in	the	period	or	periods	for	which	that	development occurs,	as	well	as	for	prior	and	subsequent	periods.	We	regularly	assess	the	likelihood	of	an	adverse	outcome	resulting	from	these	proceedings	to	determine	the adequacy	of	our	tax	accruals.	Although	we	believe	our	tax	estimates	are	reasonable,	the	final	outcome	of	audits,	investigations,	and	any	other	tax	controversies	could	be materially	different	from	our	historical	tax	accruals.

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

# Item	1B.					Unresolved	Staff	Comments.

None.

# Item	2. Properties.

We	describe	our	company-operated	properties	in	Part	I,	Item	1.	"Business"	earlier	in	this	report,	and	under	the	"Properties	and	Rooms"	caption	in	Part	II,	Item	7. "Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations."	We	believe	our	owned	and	leased	properties	are	in	generally	good	physical condition	with	the	need	for	only	routine	repairs	and	maintenance	and	periodic	capital	improvements.	Most	of	our	regional	offices,	reservation	centers,	and	sales	offices, as	well	as	our	corporate	headquarters,	are	in	leased	facilities,	both	domestically	and	internationally.

As	of	December	31,	2018,	we	owned	or	leased	the	following	hotel	properties:

| Properties | Location | Rooms |
| :--- | :--- | :--- |
| North\tAmerican\tFull-Service |  |  |
| Owned\tHotels |  |  |
| The\tSt.\tRegis\tNew\tYork | New\tYork,\tNY | 238 |
| The\tWestin\tPeachtree\tPlaza,\tAtlanta | \t Atlanta,\tGA | 1,073 |
| Sheraton\tGrand\tPhoenix | Phoenix,\tAZ | 1,000 |
| Sheraton\tGateway\tHotel\tin\tToronto\tInternational\tAirport | \t Mississauga,\tCanada | 474 |
| Las\tVegas\tMarriott | Las\tVegas,\tNV | 278 |
| Leased\tHotels |  |  |
| W\tNew\tYork\t–\tTimes\tSquare | \t New\tYork,\tNY | 509 |
| Renaissance\tNew\tYork\tTimes\tSquare\tHotel | New\tYork,\tNY | 317 |
| Anaheim\tMarriott | Anaheim,\tCA | 1,030 |
| Kaua'i\tMarriott\tResort | Lihue,\tHI | 356 |
| North\tAmerican\tLimited-Service |  |  |
| Owned\tHotels |  |  |
| Courtyard\tLas\tVegas\tConvention\tCenter | Las\tVegas,\tNV | 149 |
| Residence\tInn\tLas\tVegas\tConvention\tCenter | Las\tVegas,\tNV | 192 |
| Leased\tHotels |  |  |
| Albuquerque\tAirport\tCourtyard | Albuquerque,\tNM | 150 |
| Baltimore\tBWI\tAirport\tCourtyard | Linthicum,\tMD | 149 |
| Baton\tRouge\tAcadian\tCentre/LSU\tArea\tCourtyard | Baton\tRouge,\tLA | 149 |
| Chicago\tO'Hare\tCourtyard | Des\tPlaines,\tIL | 180 |
| Des\tMoines\tWest/Clive\tCourtyard | Clive,\tIA | 108 |
| Fort\tWorth\tUniversity\tDrive\tCourtyard | Fort\tWorth,\tTX | 130 |
| Greensboro\tCourtyard | Greensboro,\tNC | 149 |
| Indianapolis\tAirport\tCourtyard | Indianapolis,\tIN | 151 |
| Irvine\tJohn\tWayne\tAirport/Orange\tCounty\tCourtyard | Irvine,\tCA | 153 |
| Louisville\tEast\tCourtyard | Louisville,\tKY | 151 |
| Mt.\tLaurel\tCourtyard | \t Mt\tLaurel,\tNJ | 151 |
| Newark\tLiberty\tInternational\tAirport\tCourtyard | Newark,\tNJ | 146 |
| Orlando\tAirport\tCourtyard | Orlando,\tFL | 149 |
| Orlando\tInternational\tDrive/Convention\tCenter\tCourtyard | Orlando,\tFL | 151 |
| Sacramento\tAirport\tNatomas\tCourtyard | Sacramento,\tCA | 149 |

| Properties | Location | Rooms |
| :--- | :--- | :--- |
| Other\tInternational |  |  |
| Owned\tHotels |  |  |
| Sheraton\tGrand\tRio\tHotel\t&amp;\tResort | \t Rio\tde\tJaneiro,\tBrazil | 538 |
| Sheraton\tLima\tHotel\t&amp;\tConvention\tCenter | \t Lima,\tPeru | 431 |
| Sheraton\tMexico\tCity\tMaria\tIsabel\tHotel | \t Mexico\tCity,\tMexico | 755 |
| Courtyard\tby\tMarriott\tToulouse\tAirport | Toulouse,\tFrance | 187 |
| Courtyard\tby\tMarriott\tAberdeen\tAirport | Aberdeen,\tUK | 194 |
| Courtyard\tby\tMarriott\tRio\tde\tJaneiro\tBarra\tda\tTijuca | Barra\tda\tTijuca,\tBrazil | 264 |
| Residence\tInn\tRio\tde\tJaneiro\tBarra\tda\tTijuca | Barra\tda\tTijuca,\tBrazil | 140 |
| Leased\tHotels |  |  |
| Grosvenor\tHouse,\tA\tJW\tMarriott\tHotel | London,\tUK | 496 |
| The\tRitz-Carlton,\tBerlin | Berlin,\tGermany | 303 |
| W\tBarcelona | Barcelona,\tSpain | 473 |
| W\tLondon\t–\tLeicester\tSquare | London,\tUK | 192 |
| Hotel\tAlfonso\tXIII,\ta\tLuxury\tCollection\tHotel,\tSeville | Seville,\tSpain | 148 |
| Hotel\tMaria\tCristina,\tSan\tSebastian | San\tSebastian,\tSpain | 139 |
| Cape\tTown\tMarriott\tHotel\tCrystal\tTowers | Cape\tTown,\tSouth\tAfrica | 180 |
| Frankfurt\tMarriott\tHotel | Frankfurt,\tGermany | 587 |
| Berlin\tMarriott\tHotel | Berlin,\tGermany | 379 |
| Leipzig\tMarriott\tHotel | Leipzig,\tGermany | 231 |
| Heidelberg\tMarriott\tHotel | Heidelberg,\tGermany | 248 |
| Sheraton\tDiana\tMajestic,\tMilan | \t Milan,\tItaly | 106 |
| Renaissance\tDüsseldorf\tHotel | Düsseldorf,\tGermany | 244 |
| Renaissance\tHamburg\tHotel | Hamburg,\tGermany | 205 |
| Renaissance\tSanto\tDomingo\tJaragua\tHotel\t&amp;\tCasino | Santo\tDomingo,\tDominican\tRepublic | 300 |
| 15\ton\tOrange\tHotel,\tAutograph\tCollection | Cape\tTown,\tSouth\tAfrica | 129 |
| African\tPride\tMelrose\tArch,\tAutograph\tCollection | Johannesburg,\tSouth\tAfrica | 118 |
| Courtyard\tby\tMarriott\tParis\tGare\tde\tLyon | Paris,\tFrance | 249 |
| Protea\tHotel\tby\tMarriott\tCape\tTown\tSea\tPoint | Cape\tTown,\tSouth\tAfrica | 124 |
| Protea\tHotel\tby\tMarriott\tMidrand | \t Midrand,\tSouth\tAfrica | 177 |
| Protea\tHotel\tby\tMarriott\tPretoria\tCenturion | Pretoria,\tSouth\tAfrica | 177 |
| Protea\tHotel\tby\tMarriott\tO\tR\tTambo\tAirport | Johannesburg,\tSouth\tAfrica | 213 |
| Protea\tHotel\tby\tMarriott\tRoodepoort | Roodepoort,\tSouth\tAfrica | 79 |
| Protea\tHotel\tFire\t&amp;\tIce!\tby\tMarriott\tCape\tTown | Cape\tTown,\tSouth\tAfrica | 201 |
| Protea\tHotel\tFire\t&amp;\tIce!\tby\tMarriott\tJohannesburg\tMelrose\tArch | Johannesburg,\tSouth\tAfrica | 197 |

# Item	3. Legal

# Proceedings.

See	the	information	under	the	"Litigation,	Claims,	and	Government	Investigations"	caption	in	Footnote	7.	Commitments	and	Contingencies,	which	we	incorporate here	by	reference.

From	time	to	time,	we	are	also	subject	to	other	legal	proceedings	and	claims	in	the	ordinary	course	of	business,	including	adjustments	proposed	during governmental	examinations	of	the	various	tax	returns	we	file.	While	management	presently	believes	that	the	ultimate	outcome	of	these	other	proceedings,	individually and	in	aggregate,	will	not	materially	harm	our	financial	position,	cash	flows,	or	overall	trends	in	results	of	operations,	legal	proceedings	are	inherently	uncertain,	and unfavorable	rulings	could,	individually	or	in	aggregate,	have	a	material	adverse	effect	on	our	business,	financial	condition,	or	operating	results.

# Item	4. Mine	Safety	Disclosures.

Not	applicable.

# Executive	Officers	of	the	Registrant

See	the	information	under	"Executive	Officers	of	the	Registrant"	in	Part	III,	Item	10	of	this	report	for	information	about	our	executive	officers,	which	we incorporate	here	by	reference.

# Item	5. Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters,	and	Issuer	Purchases	of	Equity Securities.

# Market	Information

At	February	20,	2019,	339,668,839	shares	of	our	Class	A	Common	Stock	(our	"common	stock")	were	outstanding	and	were	held	by	36,417	shareholders	of record.	Our	common	stock	trades	on	the	NASDAQ	Global	Select	Market	("NASDAQ")	and	the	Chicago	Stock	Exchange	under	the	trading	symbol	MAR.

# Fourth	Quarter	2018	Issuer	Purchases	of	Equity	Securities

(in	millions,	except	per	share	amounts)

| Period | Total	Number<br>of	Shares<br>Purchased | Average	Price<br>per	Share | Total	Number	of<br>Shares	Purchased	as	Part	of<br>Publicly	Announced	Plans	or<br>Programs	(1) | Maximum	Number<br>of	Shares	That	May	Yet	Be<br>Purchased	Under	the	Plans	or<br>Programs	(1) |
| :--- | :--- | :--- | :--- | :--- |
| October\t1,\t2018-October\t31,\t2018 | 1.9 | $111.79 | 1.9 | 11.8 |
| November\t1,\t2018-November\t30,\t2018 | 1.1 | $117.64 | 1.1 | 10.7 |
| December\t1,\t2018-December\t31,\t2018 | — | $— | — | 10.7 |

(1) On	November	9,	2017,	we	announced	that	our	Board	of	Directors	increased	our	common	stock	repurchase	authorization	by	30	million	shares.	At	year-end	 2018,	10.7	million	shares	remained available	for	repurchase	under	Board	approved	authorizations.	In	addition,	on	February	15,	2019,	our	Board	of	Directors	further	increased	our	common	stock	repurchase	authorization	by 25	million	shares.	We	repurchase	shares	in	the	open	market	and	in	privately	negotiated	transactions.

# Item	6.					Selected	Financial	Data.

The	following	table	presents	a	summary	of	our	selected	historical	financial	data	derived	from	our	last	10	years	of	Financial	Statements.	Because	this	information is	only	a	summary	and	does	not	provide	all	of	the	information	contained	in	our	Financial	Statements,	including	the	related	notes,	you	should	read	"Management's Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations"	and	our	Financial	Statements	for	each	year	for	more	detailed	information	including,	among other	items,	our	adoption	of	ASU	2014-09	"Revenue	from	Contracts	with	Customers"	in	2018,	restructuring	charges	we	incurred	in	2016	and	2009,	timeshare	strategy- impairment	charges	we	incurred	in	2011	and	2009,	and	our	2011	spin-off	of	our	former	timeshare	operations	and	timeshare	development	business.	For	2016,	we	include Legacy-Starwood	results	from	the	Merger	Date	to	year-end	2016.

|  |  |  |  |  | Fiscal	Year	(1) | Fiscal	Year	(1) |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions,\texcept\tper\tshare\tdata) | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 |
| Income\tStatement\tData: |  |  |  |  |  |  |  |  |  |  |
| Revenues\t(6) | $20,758 | $20,452 | $15,407 | $14,486 | $13,796 | $12,784 | $11,814 | $12,317 | $11,691 | $10,908 |
| Operating\tincome\t(loss)\t(6) | $2,366 | $2,504 | $1,424 | $1,350 | $1,159 | $988 | $940 | $526 | $695 | $(152) |
| Net\tincome\t(loss)\t(6) | $1,907 | $1,459 | $808 | $859 | $753 | $626 | $571 | $198 | $458 | $(346) |
| Per\tShare\tData: |  |  |  |  |  |  |  |  |  |  |
| Diluted\tearnings\t(losses)\tper\tshare\t(6) |  |  |  |  |  |  |  |  |  |  |
|  | $5.38 | $3.84 | $2.73 | $3.15 | $2.54 | $2.00 | $1.72 | $0.55 | $1.21 | $(0.97) |
| Cash\tdividends\tdeclared\tper\tshare |  |  |  |  |  |  |  |  |  |  |
|  | $1.5600 | $1.2900 | $1.1500 | $0.9500 | $0.7700 | $0.6400 | $0.4900 | $0.3875 | $0.2075 | $0.0866 |
| Balance\tSheet\tData\t(at\tyear-end): |  |  |  |  |  |  |  |  |  |  |
| Total\tassets\t(4)\t(6) | $23,696 | $23,846 | $24,078 | $6,082 | $6,833 | $6,794 | $6,342 | $5,910 | $8,983 | $7,933 |
| Long-term\tdebt\t(4) |  |  |  |  |  |  |  |  |  |  |
|  | 8,514 | 7,840 | 8,197 | 3,807 | 3,447 | 3,147 | 2,528 | 1,816 | 2,691 | 2,234 |
| \tShareholders'\tequity\t(deficit)\t(6) | 2,225 | 3,582 | 6,265 | (3,590) | (2,200) | (1,415) | (1,285) | (781) | 1,585 | 1,142 |
| Other\tData: |  |  |  |  |  |  |  |  |  |  |
| Base\tmanagement\tfees |  |  |  |  |  |  |  |  |  |  |
|  | $1,140 | $1,102 | $806 | $698 | $672 | $621 | $581 | $602 | $562 | $530 |
| Franchise\tfees\t(5)\t(6) |  |  |  |  |  |  |  |  |  |  |
|  | 1,849 | 1,586 | 1,157 | 984 | 872 | 697 | 607 | 506 | 441 | 400 |
| Incentive\tmanagement\tfees |  |  |  |  |  |  |  |  |  |  |
|  | 649 | 607 | 425 | 319 | 302 | 256 | 232 | 195 | 182 | 154 |
| Total\tgross\tfees\t(5)\t(6) | $3,638 | $3,295 | $2,388 | $2,001 | $1,846 | $1,574 | $1,420 | $1,303 | $1,185 | $1,084 |
| Fee\tRevenue-Source: |  |  |  |  |  |  |  |  |  |  |
| North\tAmerica\t(2)\t(5)\t(6) | $2,641 | $2,388 | $1,845 | $1,586 | $1,439 | $1,200 | $1,074 | $970 | $878 | $806 |
| Total\tOutside\tNorth\tAmerica\t(3)\t(5) | 997 | 907 | 543 | 415 | 407 | 374 | 346 | 333 | 307 | 278 |
| Total\tgross\tfees\t(5)\t(6) | $3,638 | $3,295 | $2,388 | $2,001 | $1,846 | $1,574 | $1,420 | $1,303 | $1,185 | $1,084 |

(1) In	2013,	we	changed	to	a	calendar	year-end	reporting	cycle.	All	fiscal	years	presented	before	2013	included	52	weeks.

(2) Represents	fee	revenue	from	the	U.S.	(but	not	Hawaii	before	2011)	and	Canada.

(3) Represents	fee	revenue	outside	of	North	America,	as	defined	in	footnote	(2)	above.

(4) In	2015,	we	adopted	ASU	No.	2015-03,	which	changes	the	presentation	of	debt	issuance	costs,	and	ASU	No.	2015-17,	which	changes	the	classification	of	deferred	taxes.	Years	before	2014	have not	been	adjusted	for	these	new	accounting	standards.

(5) In	2017,	we	reclassified	branding	fees	for	third-party	residential	sales	and	credit	card	licensing	to	the	" Franchise	fees"	caption	from	the	"Owned,	leased,	and	other	revenue"	caption	on	our Income	Statements.	We	reclassified	prior	period	amounts	through	2013	to	conform	to	our	current	presentation.	We	did	not	reclassify	amounts	for	years	before	2013.

(6) In	2018,	we	adopted	ASU	2014-09,	which	impacted	our	annual	recognition	of	revenues	and	certain	expenses.	Years	before	2016	have	not	been	adjusted	for	this	new	accounting	standard.

# Item	7. Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of

# Operations.

# BUSINESS	AND	OVERVIEW

# Overview

We	are	a	worldwide	operator,	franchisor,	and	licensor	of	hotel,	residential,	and	timeshare	properties	in	130	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: North	American	Full-Service,	North	American	Limited-Service,	and	Asia	Pacific.	Our	Europe,	Middle	East	and	Africa,	and	Caribbean	and	Latin	America	operating segments	do	not	individually	meet	the	criteria	for	separate	disclosure	as	reportable	segments.

We	earn	base	management	fees	and	in	many	cases	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.	In	our	Middle	East	and	Africa	and	Asia	Pacific	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,"	which	we	discuss	under	the "Performance	Measures"	section	below)	less	non-controllable	expenses	such	as	insurance,	real	estate	taxes,	and	capital	spending	reserves.

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

We	remain	focused	on	doing	the	things	that	we	do	well;	that	is,	selling	rooms,	taking	care	of	our	guests,	and	making	sure	we	control	costs	both	at	company- operated	properties	and	at	the	corporate	level	("above-property").	We	provide	our	guests	new	and	memorable	experiences	through	our	portfolio	of	brands,	innovative technology,	personalized	guest	recognition,	and	access	to	travel	experiences	through	our	Marriott	Bonvoy	Moments	program.	Our	brands	remain	strong	due	to	our skilled	management	teams,	dedicated	associates,	superior	guest	service	with	an	emphasis	on	guest	and	associate	satisfaction,	significant	distribution,	our	Loyalty Program,	multichannel	reservation	systems,	and	desirable	property	amenities.	We	strive	to	effectively	leverage	our	size	and	broad	distribution.

We,	along	with	owners	and	franchisees,	continue	to	invest	in	our	brands	by	means	of	new,	refreshed,	and	reinvented	properties,	new	room	and	public	space designs,	and	enhanced	amenities,	technology	offerings,	and	guest	experiences.	We	address,	through	various	means,	hotels	in	our	system	that	do	not	meet	our	standards. We	continue	to	enhance	the	appeal	of	our	proprietary,	information-rich,	and	easy-to-use	websites,	and	of	our	associated	mobile	smartphone	applications,	through functionality	and	service	improvements.

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

# 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").	Working	with	leading	security	experts,	we	determined	that	there	was	unauthorized	access	to	the	Starwood	network	since	2014	and	that	an	unauthorized	party had	copied	information	from	the	Starwood	reservations	database	and	taken	steps	towards	removing	it.	The	information	copied	from	the	Starwood	reservations	database over	time	included	information	about	guests	who	made	a	reservation	at	a	Starwood	property,	including	names,	mailing	addresses,	phone	numbers,	email	addresses, passport	numbers,	payment	card	numbers	and	expiration	dates,	Starwood	Preferred	Guest	account	information,	dates	of	birth,	gender,	arrival	and	departure	information, reservation	dates,	and	communication	preferences.	The	combination	of	information	varied	by	guest.	Based	on	our	analysis	as	of	the	date	of	this	filing,	we	believe	that the	upper	limit	for	the	total	number	of	guest	records	involved	in	this	incident	is	approximately	383	million	records.	In	many	instances,	there	appear	to	be	multiple records	for	the	same	guest,	so	we	have	concluded	with	a	fair	degree	of	certainty	that	information	for	fewer	than	383	million	unique	guests	was	involved,	although	we	are currently	unable	to	quantify	that	lower	number	because	of	the	nature	of	the	data	in	the	database.	Based	on	our	analysis	as	of	the	date	of	this	filing,	we	believe	that	the information	accessed	by	an	unauthorized	third	party	included	approximately	5.25	million	unencrypted	passport	numbers,	approximately	18.5	million	encrypted	passport numbers	and	approximately	9.1	million	encrypted	payment	card	numbers	(approximately	385,000	of	which	cards	were	unexpired	as	of	September	2018).	Certain	data analytics	work	continues,	including	by	the	investigative	firm	engaged	on	behalf	of	the	payment	card	networks,	and	based	on	the	preliminary	information	we	have	as	of the	date	of	this	filing,	we	believe	that	the	information	accessed	by	an	unauthorized	third	party	could	include	several	thousand	unencrypted	payment	card	numbers.

Upon	receiving	information	that	an	alert	from	an	internal	security	tool	was	related	to	an	attempt	to	access	the	Starwood	reservations	database,	we	quickly	engaged leading	security	experts	to	conduct	a	comprehensive	forensic	review	to	determine	the	scope	of	the	intrusion,	including	the	specific	data	impacted,	and	assist	with containment	measures.	While	that	forensic	review	of	the	incident	is	now	complete,	certain	data	analytics	work	continues.	We	reported	this	incident	to	law	enforcement and	continue	to	support	their	investigation.	We	have	completed	the	planned	phase	out	of	the	operation	of	the	Starwood	reservations	database,	effective	as	of	the	end	of 2018.

Following	the	Data	Security	Incident,	we	began	a	guest	outreach	effort	and	offered	certain	services	to	help	guests	monitor	and	protect	their	information.	Promptly following	our	announcement	of	the	incident,	we	began	sending	emails	on	a	rolling	basis	directly	to	various	Starwood	guests	whose	email	addresses	were	in	the	Starwood reservations	database,	and	we	completed	sending	these	emails	on	December	21,	2018.	We	also	established	a	multi-language	dedicated	website	and	multi-language	call center	to	answer	guests'	questions	about	the	incident.	The	dedicated	website	provides	guests	details	of	the	incident,	the	information	affected,	the	steps	being	taken	to investigate,	FAQs	and	information	about	how	guests	can	monitor	and	protect	their	information.	We	are	offering	free	web	monitoring	solutions	for	affected	guests	in certain	jurisdictions	where	the	monitoring	services	are	available.

To	date,	we	have	not	seen	a	meaningful	impact	on	demand	as	a	result	of	the	Data	Security	Incident.

We	are	currently	unable	to	estimate	the	range	of	total	possible	financial	impact	to	the	Company	from	the	Data	Security	Incident.	However,	we	do	not	believe	this incident	will	impact	our	long-term	financial	health.	We	maintain	insurance	designed	to	limit	our	exposure	to	losses	such	as	those	related	to	the	Data	Security	Incident. We	expect	that	the	cost	of	such	insurance	will	increase	significantly	in	2019	and	future	years.	We	expect	to	incur	significant	expenses	associated	with	the	Data	Security Incident	in	future	periods,	primarily	related	to	legal	proceedings	and	regulatory	investigations,	increased	expenses	and	capital	investments	for	IT	and	information security,	incident	response	and	customer	care,	and	increased	expenses	for	insurance,	compliance	activities,	and	to	meet	increased	legal	and	regulatory	requirements.	See Footnote	7.	Commitments	and	Contingencies	for	information	related	to	expenses	incurred	in	2018,	insurance	recoveries,	and	legal	proceedings	and	governmental investigations	related	to	the	Data	Security	Incident.

# Performance	Measures

We	believe	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.	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.

Our	RevPAR	statistics	for	2018,	2017,	and	2016,	include	Legacy-Starwood	comparable	properties	for	each	of	the	full	years	even	though	Marriott	did	not	own	the Legacy-Starwood	brands	before	the	Merger	Date.	Therefore,	our	RevPAR	statistics

include	Legacy-Starwood	properties	for	periods	during	which	fees	from	the	Legacy-Starwood	properties	are	not	included	in	our	Income	Statements.	We	provide	these RevPAR	statistics	as	an	indicator	of	the	performance	of	our	brands	and	to	allow	for	comparison	to	industry	metrics,	and	they	should	not	be	viewed	as	necessarily correlating	with	our	fee	revenue.	Comparisons	to	the	prior	year	period	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,	including	those	that	we	acquired	through	the	Starwood	Combination,	that	were	open	and	operating	under one	of	our	Legacy-Marriott	or	Legacy-Starwood	brands	since	the	beginning	of	the	last	full	calendar	year	(since	January	1,	2017	for	the	current	period)	and	have	not,	in either	the	current	or	previous	year:	(i)	undergone	significant	room	or	public	space	renovations	or	expansions,	(ii)	been	converted	between	company-operated	and franchised,	or	(iii)	sustained	substantial	property	damage	or	business	interruption.	For	2018	compared	to	2017,	we	had	4,109	comparable	North	American	properties	and 1,173	comparable	International	properties.	For	2017	compared	to	2016,	we	had	3,883	comparable	North	American	properties	and	1,030	comparable	International properties.

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

# Business	Trends

Our	2018	full-year	results	reflected	a	year-over-year	increase	in	the	number	of	properties	in	our	system,	favorable	demand	for	our	brands	in	many	markets	around the	world,	and	generally	favorable	economic	conditions.	Comparable	worldwide	systemwide	RevPAR	for	2018	increased	2.6	percent	to	$117.37,	ADR	increased	2.0 percent	on	a	constant	dollar	basis	to	$160.37,	and	occupancy	increased	0.4	percentage	points	to	73.2	percent,	compared	to	2017.

In	North	America,	RevPAR	increased	in	2018,	driven	by	both	higher	transient	and	group	demand.	RevPAR	growth	was	partially	constrained	by	new	lodging supply	in	certain	markets	and	comparisons	to	2017	natural	disasters.	In	our	Asia	Pacific	segment	in	2018,	RevPAR	grew	in	most	markets,	led	by	China,	Indonesia	and India.	Our	Europe	region	experienced	higher	demand	in	2018,	led	by	strong	transient	business	in	most	countries	and	demand	from	the	World	Cup,	partially	constrained by	lower	RevPAR	in	Spain.	In	our	Middle	East	and	Africa	region,	RevPAR	decreased	due	to	geopolitical	instability	and	supply	growth	in	the	Middle	East,	partially offset	by	strong	growth	in	Africa.	RevPAR	grew	across	our	Caribbean	and	Latin	America	region,	driven	by	higher	ADR,	partially	due	to	lower	supply	following	2017 hurricane	activity	in	the	Caribbean.

For	our	company-operated	properties,	we	continue	to	focus	on	enhancing	property-level	house	profit	margins	and	making	productivity	improvements.	In	2018 compared	to	2017	at	comparable	properties,	worldwide	company-operated	house	profit	margins	increased	by	40	basis	points,	primarily	reflecting	RevPAR	growth, improved	productivity,	procurement	cost	savings,	and	synergy	savings	from	the	Starwood	Combination.	International	company-operated	house	profit	margins	increased by	70	basis	points,	and	North	American	company-operated	house	profit	margins	increased	by	10	basis	points.

# System	Growth	and	Pipeline

In	2018,	we	added	494	properties	with	80,255	rooms	around	the	world	across	our	portfolio	of	brands.	Approximately	45	percent	of	the	added	rooms	are	located outside	North	America,	and	12	percent	are	conversions	from	competitor	brands.	In	2018,	107	properties	(21,176	rooms)	exited	our	system.

At	year-end	2018,	our	development	pipeline	grew	to	a	record	478,000	rooms,	with	more	than	half	located	outside	of	North	America.	The	pipeline	includes	hotel rooms	under	construction	and	under	signed	contracts,	and	nearly	23,000	hotel	rooms	approved	for	development	but	not	yet	under	signed	contracts.	In	2018,	we	signed management	and	franchise	agreements	for	816	properties	(125,000	rooms),	setting	company	records	for	rooms	signings	in	Europe	and	Middle	East	and	Africa	and	hotel signings	in	Asia	Pacific.	Contracts	signed	in	2018	also	reflected	the	Company's	strength	in	the	industry's	highest	tier,	with	29	properties	(6,200	rooms)	signed	across	six luxury	brands.

In	2019,	we	expect	the	number	of	our	open	hotel	rooms	will	increase	approximately	5.5	percent	net,	reflecting	room	exits	of	1.0	to	1.5	percent.

# Properties	and	Rooms

At	year-end	2018,	we	operated,	franchised,	and	licensed	the	following	properties	and	rooms:

|  | Managed<br>Properties | Rooms | Franchised/Licensed<br>Properties | Rooms | Owned/Leased<br>Properties | Rooms | Other	(1)<br>Properties | Rooms | Properties | Total<br>Rooms |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| North\tAmerican\nFull-Service | 413 | 184,541 | 705 | 202,204 | 9 | 5,275 | — | — | 1,127 | 392,020 |
| North\tAmerican\nLimited-Service | 408 | 64,372 | 3,432 | 395,522 | 20 | 3,006 | 49 | 8,447 | 3,909 | 471,347 |
| Asia\tPacific | 612 | 179,243 | 98 | 27,258 | 2 | 410 | — | — | 712 | 206,911 |
| Other\tInternational | 524 | 121,508 | 411 | 82,243 | 32 | 8,404 | 102 | 12,749 | 1,069 | 224,904 |
| Timeshare | — | — | 89 | 22,186 | — | — | — | — | 89 | 22,186 |
| Total | 1,957 | 549,664 | 4,735 | 729,413 | 63 | 17,095 | 151 | 21,196 | 6,906 | 1,317,368 |

(1) Other	represents	unconsolidated	equity	method	investments,	which	we	present	in	the	" Equity	in	earnings"	caption	of	our	Income	Statements.

# Lodging	Statistics

The	following	lodging	statistics	present	RevPAR,	occupancy,	and	ADR	for	comparable	properties	2018,	2018	compared	to	2017,	2017,	and	2017	compared	to 2016,	including	Legacy-Starwood	comparable	properties	for	the	full	years	even	though	Marriott	did	not	own	the	Legacy-Starwood	brands	before	the	Merger	Date. Systemwide	statistics	include	data	from	our	franchised	properties,	in	addition	to	our	company-operated	properties.

(1) Includes	JW	Marriott,	The	Ritz-Carlton,	W	Hotels,	The	Luxury	Collection,	St.	Regis,	and	EDITION.

(2) Includes	Marriott	Hotels,	Sheraton,	Westin,	Renaissance,	Autograph	Collection,	Delta	Hotels,	Gaylord	Hotels,	and	Le	Méridien.	Systemwide	also	includes	 Tribute	Portfolio.

(3) Includes	North	American	Luxury	and	North	American	Upper	Upscale.

(4) Includes	Courtyard,	Residence	Inn,	Fairfield	by	Marriott,	SpringHill	Suites,	TownePlace	Suites,	Four	Points,	Aloft,	Element,

and	AC	Hotels	by	Marriott.	Systemwide	also	includes	 Moxy.

(5) Includes	North	American	Full-Service	and	North	American	Limited-Service.

(6) Includes	Asia	Pacific,	Caribbean	&	Latin	America,	Europe,	and	Middle	East	&	Africa.

(7) Includes	North	American	-	All	and	International	-	All.

# Comparable	Company-Operated	Properties

(2) Includes	Marriott	Hotels,	Sheraton,	Westin,	Renaissance,	Autograph	Collection,	Delta	Hotels,	Gaylord	Hotels,	Le	Méridien,	and	Tribute	Portfolio.

(4) Includes	Courtyard,	Residence	Inn,	Fairfield	by	Marriott,	SpringHill	Suites,	Four	Points,	TownePlace	Suites,	and	AC	Hotels	by	Marriott.	Systemwide	also	includes	 Aloft	and	Element.

# CONSOLIDATED	RESULTS

The	following	discussion	presents	an	analysis	of	our	consolidated	results	of	operations	for	2018,	2017,	and	2016.	In	accordance	with	U.S.	generally	accepted accounting	principles	("GAAP"),	our	Income	Statements	include	Legacy-Starwood's	results	of	operations	from	the	Merger	Date.	All	references	to	the	effect	of	Legacy- Starwood	operations	on	our	2017	results	refer	to	the	incremental	amounts	contributed	by	Legacy-Starwood	operations	in	2017	over	the	effect	of	Legacy-Starwood operations	on	our	results	for	the	period	from	the	Merger	Date	through	December	31,	2016.

The	following	discussion	also	reflects	our	adoption	of	several	new	accounting	standards.	See	the	"New	Accounting	Standards	Adopted"	caption	in	Footnote	2. Summary	of	Significant	Accounting	Policies	for	additional	information.

Our	2017	results	were	favorably	impacted	by	the	non-recurring	gain	on	the	disposition	of	our	ownership	interest	in	Avendra,	discussed	in	Footnote	3.	Dispositions and	Acquisitions.	We	committed	to	the	owners	of	the	hotels	in	our	system	that	the	benefits	derived	from	Avendra,	including	any	dividends	or	sale	proceeds	above	our original	investment,	would	be	used	for	the	benefit	of	the	hotels	in	our	system.	Accordingly,	in	2018	we	used	$115	million	($85	million	after-tax)	of	the	net	proceeds,	and we	intend	to	use	the	remainder	of	the	net	proceeds,	for	the	benefit	of	our	system	of	hotels.	Spending	under	those	plans	is,	and	will	be,	expensed	in	the	"Reimbursed expenses"	caption	of	our	Income	Statements,	causing	a	reduction	in	our	profitability	in	the	periods	it	is	expensed.

# Fee	Revenues

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Base\tmanagement\tfees | $1,140 | $1,102 | $806 | $38 | 3% | $296 | 37% |
| Franchise\tfees | 1,849 | 1,586 | 1,157 | 263 | 17% | 429 | 37% |
| Incentive\tmanagement\tfees | 649 | 607 | 425 | 42 | 7% | 182 | 43% |
| Gross\tfee\trevenues | 3,638 | 3,295 | 2,388 | 343 | 10% | 907 | 38% |
| Contract\tinvestment\tamortization | (58) | (50) | (40) | 8 | 16% | 10 | 25% |
| Net\tfee\trevenues | $3,580 | $3,245 | $2,348 | $335 | 10% | $897 | 38% |

The	$38	million	increase	in	base	management	fees	primarily	reflected	$29	million	from	unit	growth,	$28	million	from	RevPAR	growth,	and	$8	million	from	net favorable	foreign	exchange	rates,	partially	offset	by	lower	fees	of	$17	million	from	properties	that	converted	from	managed	to	franchised	and	$14	million	from properties	that	were	terminated.

The	$263	million	increase	in	franchise	fees	primarily	reflected	$143	million	of	higher	branding	fees,	driven	by	$138	million	of	higher	fees	from	our	co-brand credit	card	agreements,	$82	million	from	unit	growth,	$21	million	from	RevPAR	growth,	$15	million	from	properties	that	converted	from	managed	to	franchised,	and $6	million	of	higher	relicensing	and	application	fees,	partially	offset	by	lower	fees	of	$9	million	from	properties	that	were	terminated.

The	$42	million	increase	in	incentive	management	fees	primarily	reflected	net	higher	profits	at	managed	hotels	and	$14	million	from	unit	growth.

In	2018,	we	earned	incentive	management	fees	from	72	percent	of	our	managed	properties	worldwide	versus	71	percent	in	2017.	We	earned	incentive	management fees	from	59	percent	of	managed	properties	in	North	America	and	82	percent	of	managed	properties	outside	North	America	in	2018,	compared	to	60	percent	in	North America	and	80	percent	outside	North	America	in	2017.	In	addition,	63	percent	of	our	total	incentive	management	fees	in	2018	came	from	our	managed	properties outside	North	America	versus	62	percent	in	2017.

The	$296	million	increase	in	base	management	fees	primarily	reflected	$273	million	of	higher	Legacy-Starwood	fees,	$18	million	from	stronger	sales	at	Legacy- Marriott	comparable	properties	primarily	driven	by	RevPAR	growth,	and	$14	million	from	Legacy-Marriott	unit	growth,	partially	offset	by	$6	million	of	lower	fees from	Legacy-Marriott	properties	that	converted	from	managed	to	franchised	and	$4	million	from	Legacy-Marriott	net	unfavorable	exchange	rates.

The	$429	million	increase	in	franchise	fees	primarily	reflected	$341	million	of	higher	Legacy-Starwood	fees,	$54	million	from	Legacy-Marriott	unit	growth,	$18 million	from	Legacy-Marriott	RevPAR	growth,	$14	million	of	higher	Legacy-Marriott	branding	fees,	and	$7	million	of	higher	fees	from	Legacy-Marriott	properties	that converted	from	managed	to	franchised.

The	$182	million	increase	in	incentive	management	fees	primarily	reflected	$159	million	of	higher	Legacy-Starwood	fees	and	$22	million	from	higher	net	house profits	at	Legacy-Marriott	managed	hotels.

The	$10	million	increase	in	contract	investment	amortization	primarily	reflected	$5	million	of	higher	contract	write-offs	related	to	terminated	contracts	at	Legacy- Marriott	hotels.

# Owned,	Leased,	and	Other

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Owned,\tleased,\tand\tother\trevenue | $1,635 | $1,752 | $1,125 | $(117) | (7)% | $627 | 56% |
| Owned,\tleased,\tand\tother\t-\tdirect\texpenses | 1,306 | 1,411 | 901 | (105) | (7)% | 510 | 57% |
|  | $329 | $341 | $224 | $(12) | (4)% | $117 | 52% |

Owned,	leased,	and	other	revenue,	net	of	direct	expenses	decreased	by	$12	million,	primarily	due	to	$81	million	of	lower	owned	and	leased	profits	attributable	to properties	sold,	partially	offset	by	$51	million	of	higher	termination	fees	and	$17	million	of	net	stronger	results	at	our	remaining	owned	and	leased	properties.

Owned,	leased,	and	other	revenue,	net	of	direct	expenses	increased	by	$117	million,	primarily	due	to	$140	million	of	higher	Legacy-Starwood	owned	and	leased profits,	partially	offset	by	$15	million	of	lower	Global	Design	profits	and	$7	million	of	net	lower	Legacy-Marriott	owned	and	leased	profits,	primarily	driven	by	lower RevPAR	in	Brazil	and	properties	under	renovation.

# Cost	Reimbursements

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Cost\treimbursement\trevenue | $15,543 | $15,455 | $11,934 | $88 | 1\t% | $3,521 | 30% |
| Reimbursed\texpenses | 15,778 | 15,228 | 11,834 | 550 | 4\t% | 3,394 | 29% |
|  | $(235) | $227 | $100 | $(462) | (204)% | $127 | 127% |

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.

Cost	reimbursement	revenue,	net	of	reimbursed	expenses,	decreased	$462	million,	primarily	due	to	lower	Loyalty	Program	revenues	net	of	expenses,	spending funded	by	the	proceeds	from	the	2017	sale	of	our	interest	in	Avendra,	and	higher	expenses	for	reservations	and	marketing.

Cost	reimbursement	revenue,	net	of	reimbursed	expenses,	increased	$127	million,	primarily	due	to	$285	million	of	higher	Legacy-Starwood	activity,	partially offset	by	$158	million	of	lower	Legacy-Marriott	cost	reimbursement	revenue,	net	of	reimbursed	expenses	primarily	driven	by	higher	expenses	for	reservations	and	IT systems	initiatives	and	lower	Marriott	Rewards	revenue	net	of	expenses.

# Other	Operating	Expenses

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Depreciation,\tamortization,\tand\tother | $226 | $229 | $119 | $(3) | (1)% | $110 | 92\t% |
| General,\tadministrative,\tand\tother | 927 | 921 | 743 | 6 | 1\t% | 178 | 24\t% |
| Merger-related\tcosts\tand\tcharges | 155 | 159 | 386 | (4) | (3)% | (227) | (59)% |

General,	administrative,	and	other	expenses	increased	by	$6	million,	primarily	due	to	$51	million	of	company-funded	supplemental	retirement	savings	plan contributions	in	2018	and	$20	million	of	higher	professional	fees,	partially	offset	by

administrative	cost	savings	largely	due	to	synergies	associated	with	the	Starwood	Combination.	Company-funded	supplemental	retirement	savings	plan	contributions represent	an	additional	one-time	contribution	of	up	to	$1,000	per	eligible	associate.

Merger-related	costs	and	charges	decreased	by	$4	million,	primarily	due	to	$17	million	of	2017	transaction	costs	that	did	not	occur	in	2018	and	$6	million	of	lower employee	termination	costs,	partially	offset	by	$19	million	of	higher	integration	costs.

Depreciation,	amortization,	and	other	expenses	increased	by	$110	million,	primarily	reflecting	higher	depreciation	and	amortization	on	Legacy-Starwood	assets.

General,	administrative,	and	other	expenses	increased	by	$178	million,	primarily	due	to	the	Starwood	Combination,	$14	million	of	higher	litigation	expenses,	$10 million	of	higher	compensation	expenses,	and	$10	million	from	net	unfavorable	foreign	exchange	rates.

Merger-related	costs	and	charges	decreased	by	$227	million,	primarily	due	to	lower	employee	termination	and	transaction	costs,	partially	offset	by	$39	million	of higher	integration	costs.

# Non-Operating	Income	(Expense)

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Gains\tand\tother\tincome,\tnet | $194 | $688 | $5 | $(494) | (72)% | $683 | 13,660% |
| Interest\texpense | (340) | (288) | (234) | 52 | 18\t% | 54 | 23% |
| Interest\tincome | 22 | 38 | 35 | (16) | (42)% | 3 | 9% |
| Equity\tin\tearnings | 103 | 40 | 9 | 63 | 158\t% | 31 | 344% |

Gains	and	other	income,	net	decreased	by	$494	million,	primarily	due	to	the	2017	gain	on	the	disposition	of	our	ownership	interest	in	Avendra,	net	of	a	2018	true- up	($653	million)	and	the	2017	gain	on	the	sale	of	the	Charlotte	Marriott	City	Center	($24	million),	partially	offset	by	2018	gains	on	our	property	sales	($132	million), sales	of	our	interest	in	four	equity	method	investments	($46	million),	and	modification	of	a	ground	lease	at	one	of	our	offices	($6	million).

Interest	expense	increased	by	$52	million,	primarily	due	to	higher	commercial	paper	interest	rates	and	average	borrowings	and	higher	interest	on	Senior	Note issuances,	net	of	maturities	($6	million).

Interest	income	decreased	by	$16	million,	primarily	due	to	lower	outstanding	loan	balances.

Equity	in	earnings	increased	by	$63	million,	primarily	due	to	our	share	of	the	gains	on	the	sales	of	two	properties	held	by	equity	method	investees	($65	million), partially	offset	by	our	$6	million	share	of	the	2017	gain	on	an	equity	method	investee's	sale	of	a	property.

Gains	and	other	income,	net	increased	by	$683	million,	primarily	due	to	the	gain	on	the	disposition	of	our	ownership	interest	in	Avendra	and	the	gain	on	the	sale	of the	Charlotte	Marriott	City	Center.	See	the	"Dispositions"	caption	of	Footnote	3.	Dispositions	and	Acquisitions	for	more	information.

Interest	expense	increased	by	$54	million,	primarily	due	to	an	increase	in	debt	as	a	result	of	the	Starwood	Combination	and	higher	commercial	paper	borrowings, partially	offset	by	$18	million	of	lower	interest	due	to	Senior	Note	maturities	and	a	$13	million	favorable	variance	to	the	bridge	term	loan	facility	commitment	costs	that we	incurred	in	2016.

Interest	income	increased	by	$3	million,	primarily	due	to	issuances	of	new	loans,	partially	offset	by	$7	million	of	lower	interest	income	on	a	repaid	loan.

Equity	in	earnings	increased	by	$31	million,	primarily	due	to	higher	earnings	by	Legacy-Starwood	investees.

# Income	Taxes

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Provision\tfor\tincome\ttaxes | $(438) | $(1,523) | $(431) | $(1,085) | (71)% | $1,092 | 253% |

Provision	for	income	taxes	decreased	by	$1,085	million,	primarily	due	to	the	nonrecurring	net	tax	expense	in	2017	related	to	the	2017	Tax	Act	and	the	reduction	of the	U.S.	federal	tax	rate	in	2018	($744	million),	the	prior	year	gain	on	the	sale	of	our	interest	in	Avendra	($257	million),	increased	earnings	in	jurisdictions	with	lower tax	rates	($57	million),	lower	operating	income	($46	million),	reduction	of	our	one-time	net	tax	charge	related	to	the	2017	Tax	Act	transition	tax	and	the	remeasurement of	deferred	income	taxes	($41	million),	the	release	of	tax	reserves	due	to	the	completion	of	certain	examinations	($34	million),	and	the	income	tax	consequences	of	an intercompany	transaction	($18	million).	The	decrease	was	partially	offset	by	the	current	period's	provisional	estimate	of	tax	for	global	intangible	low-taxed	income ("GILTI")	under	the	2017	Tax	Act	($34	million),	tax	expense	incurred	for	uncertain	tax	positions	relating	to	Legacy-Starwood	operations	($30	million),	an	unfavorable comparison	to	a	2017	benefit	due	to	tax	law	changes	adopted	in	non-U.S.	jurisdictions	in	2017	($18	million),	the	2017	reversal	of	tax	reserves	related	to	interest	accrued for	previous	periods	($15	million),	net	tax	expense	on	dispositions	($13	million),	and	the	2017	release	of	a	tax	reserve	due	to	the	favorable	settlement	of	a	tax	position ($12	million).

See	Footnote	6.	Income	Taxes	for	further	information	on	the	2017	Tax	Act.

Provision	for	income	taxes	increased	by	$1,092	million,	primarily	due	to	the	2017	Tax	Act	($586	million),	higher	earnings	due	to	the	inclusion	of	Legacy- Starwood	operations	for	the	full	year	2017	($275	million),	the	gain	on	the	sale	of	our	interest	in	Avendra	($259	million),	lower	merger-related	costs	($86	million),	an unfavorable	comparison	to	the	2016	release	of	a	valuation	allowance	($15	million),	the	gain	on	the	disposition	of	a	North	American	Full-Service	property	($9	million), and	a	change	in	judgment	regarding	the	realizability	of	certain	deferred	tax	assets	in	certain	states	and	foreign	jurisdictions	($7	million).	The	increase	was	partially	offset by	tax	benefits	from	the	adoption	of	ASU	2016-09	($72	million),	change	in	the	jurisdictional	mix	of	earnings	($25	million),	tax	law	changes	in	non-U.S.	jurisdictions ($22	million),	the	reversal	of	tax	reserves	related	to	interest	accrued	for	previous	periods	($15	million),	and	adjustments	resulting	from	finalizing	prior	years'	returns ($10	million).

# BUSINESS	SEGMENTS

The	following	discussion	presents	an	analysis	of	the	results	of	operations	of	our	reportable	business	segments:	North	American	Full-Service,	North	American Limited-Service,	and	Asia	Pacific.	Our	Europe,	Middle	East	and	Africa,	and	Caribbean	and	Latin	America	operating	segments	do	not	individually	meet	the	criteria	for separate	disclosure	as	reportable	segments,	and	accordingly	we	have	not	included	those	operations	in	this	discussion	of	our	Business	Segments.	See	Footnote	17. Business	Segments	to	our	Financial	Statements	for	other	information	about	each	segment,	including	revenues	and	a	reconciliation	of	segment	profits	to	net	income.

Our	2016	results	in	this	section	do	not	include	any	Legacy-Starwood	results	for	the	period	between	the	Merger	Date	and	the	end	of	the	2016	third	quarter,	as	we	did not	allocate	any	Legacy-Starwood	results	to	our	segments	for	the	eight	days	ended	September	30,	2016.

# North	American	Full-Service

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Segment\trevenues | $13,072 | $12,909 | $9,424 | $163 | 1\t% | $3,485 | 37% |
| Segment\tprofits | $1,153 | $1,238 | $801 | $(85) | (7)% | $437 | 55% |

In	2018,	across	our	North	American	Full-Service	segment,	we	added	44	properties	(10,454	rooms)	and	20	properties	(6,923	rooms)	left	our	system.

North	American	Full-Service	segment	profits	decreased	by	$85	million,	primarily	due	to	the	following:

•$119	million	of	lower	cost	reimbursement	revenue,	net	of	reimbursed

expenses;

•$45	million	of	higher	base	management	and	franchise	fees,	primarily	reflecting	$23	million	from	unit	growth,	$18	million	from	RevPAR	growth,	and	$5 million	of	higher	residential	branding	fees,	partially	offset	by	$10	million	of	lower	fees	from	properties	that	were	terminated;

•$8	million	of	higher	incentive	management	fees,	primarily	driven	by	net	higher	profits	at	managed

hotels;

•$24	million	of	lower	owned,	leased,	and	other	revenue,	net	of	direct	expenses,	primarily	reflecting	$60	million	of	lower	owned	and	leased	profits	attributable	to properties	sold,	partially	offset	by	$24	million	of	higher	termination	fees	and	$15	million	of	net	stronger	results	at	our	remaining	owned	and	leased	properties;

•$13	million	of	lower	general,	administrative,	and	other	expenses,	primarily	due	to	administrative	cost	savings	largely	due	to	synergies	associated	with	the Starwood	Combination;

•$1	million	of	lower	gains	and	other	income,	net,	primarily	due	to	the	2017	gain	on	the	sale	of	the	Charlotte	Marriott	City	Center	of	$24	million,	partially	offset by	the	2018	gain	on	the	sale	of	two	properties	of	$22	million;	and

•$1	million	of	higher	equity	in	earnings,	primarily	due	to	our	$10	million	share	of	the	2018	gain	on	an	equity	method	investee's	sale	of	a	property,	partially offset	by	our	$6	million	share	of	the	2017	gain	on	an	equity	method	investee's	sale	of	a	property.

In	2017,	across	our	North	American	Full-Service	segment	we	added	55	properties	(13,056	rooms)	and	12	properties	(2,912	rooms)	left	our	system.

North	American	Full-Service	segment	profits	increased	by	$437	million,	primarily	due	to	the	following:

•$38	million	of	higher	cost	reimbursement	revenue,	net	of	reimbursed

•$301	million	of	higher	base	management	and	franchise	fees,	primarily	reflecting	$292	million	of	higher	Legacy-Starwood	fees,	$14	million	from	Legacy- Marriott	unit	growth,	and	$8	million	of	stronger	RevPAR	at	Legacy-Marriott	hotels,	partially	offset	by	$17	million	of	lower	Legacy-Marriott	residential branding	fees;

•$45	million	of	higher	incentive	management	fees,	primarily	driven	by	$31	million	of	higher	Legacy-Starwood	fees	and	higher	net	house	profits	at	Legacy- Marriott	managed	hotels;

•$60	million	of	higher	owned,	leased,	and	other	revenue,	net	of	direct	expenses,	primarily	reflecting	$67	million	of	higher	Legacy-Starwood	owned	and	leased profits;

•$39	million	of	higher	depreciation,	amortization,	and	other	expenses,	primarily	reflecting	higher	depreciation	and	amortization	on	Legacy-Starwood assets;

•$22	million	of	higher	gains	and	other	income,	net,	primarily	due	to	the	gain	on	the	sale	of	a	North	American	Full-Service	hotel	in	the	2017	second	quarter;

•$16	million	of	higher	equity	in	earnings,	primarily	due	to	higher	earnings	by	Legacy-Starwood

investees.

# North	American	Limited-Service

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Segment\trevenues | $3,217 | $3,219 | $2,894 | $(2) | —\t% | $325 | 11% |
| Segment\tprofits | $786 | $827 | $702 | $(41) | (5)% | $125 | 18% |

In	2018,	across	our	North	American	Limited-Service	segment	we	added	281	properties	(33,418	rooms)	and	38	properties	(3,415	rooms)	left	our	system.

North	American	Limited-Service	segment	profits	decreased	by	$41	million,	primarily	due	to	the	following:

•$100	million	of	lower	cost	reimbursement	revenue,	net	of	direct	expenses;

•$63	million	of	higher	base	management	and	franchise	fees,	primarily	reflecting	$56	million	from	unit	growth,	$7	million	from	RevPAR	growth,	and	$5	million of	higher	relicensing	and	application	fees,	partially	offset	by	$6	million	of	lower	fees	from	properties	that	were	terminated.

In	2017,	across	our	North	American	Limited-Service	segment	we	added	270	properties	(33,128	rooms)	and	26	properties	(2,875	rooms)	left	our	system.

North	American	Limited-Service	segment	profits	increased	by	$125	million,	primarily	due	to	the	following:

•$102	million	of	higher	base	management	and	franchise	fees,	primarily	reflecting	$50	million	of	higher	Legacy-Starwood	fees,	$42	million	from	Legacy- Marriott	unit	growth,	and	$11	million	of	stronger	RevPAR	at	Legacy-Marriott	hotels;	and

•$6	million	of	lower	incentive	management	fees,	primarily	driven	by	softer	performance	and	a	change	in	the	specified	owner	return	at	a	Legacy-Marriott portfolio	of	managed	hotels.

# Asia	Pacific

| ($	in	millions) | 2018 | 2017 | 2016 | Change	2018	vs.	2017 |  | Change	2017	vs.	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Segment\trevenues | $1,118 | $1,054 | $631 | $64 | 6% | $423 | 67% |
| Segment\tprofits | $456 | $361 | $160 | $95 | 26% | $201 | 126% |

Asia	Pacific	segment	profits	increased	by	$95	million,	primarily	due	to	the	following	changes:

•$26	million	of	higher	base	management	and	franchise	fees,	primarily	reflecting	$16	million	from	unit	growth	and	$10	million	from	RevPAR growth;

•$22	million	of	higher	incentive	management	fees,	primarily	driven	by	net	higher	profits	at	managed	hotels	and	$10	million	from	unit growth;

•$1	million	of	higher	owned,	leased,	and	other	revenue,	net	of	direct	expenses,	primarily	due	to	$14	million	of	higher	termination	fees,	partially	offset	by	$13 million	lower	owned	and	leased	profits	attributable	to	properties	sold;

•$1	million	of	higher	general,	administrative,	and	other	expenses,	primarily	due	to	$6	million	of	higher	bad	debt	reserves	partially	offset	by	administrative	cost savings	largely	due	to	synergies	associated	with	the	Starwood	Combination;

•$71	million	of	higher	gains	and	other	income,	net,	primarily	reflecting	a	$57	million	gain	on	the	sale	of	two	properties	and	$13	million	from	gains	on	sales	of our	interest	in	two	equity	method	investments;	and

•$29	million	of	lower	cost	reimbursement	revenue,	net	of	reimbursement

Asia	Pacific	segment	profits	increased	by	$201	million,	primarily	due	to	the	following:

•$45	million	of	higher	cost	reimbursement	revenue,	net	of	reimbursement

•$108	million	of	higher	base	management	and	franchise	fees,	primarily	due	to	$88	million	of	higher	Legacy-Starwood	fees,	$9	million	of	higher	Legacy- Marriott	branding	fees,	$6	million	from	Legacy-Marriott	unit	growth,	and	$5	million	from	stronger	RevPAR	at	Legacy-Marriott	hotels;

•$92	million	of	higher	incentive	management	fees,	primarily	due	to	$80	million	of	higher	Legacy-Starwood	fees,	$8	million	from	higher	net	house	profits	at Legacy-Marriott	managed	hotels,	and	$4	million	from	Legacy-Marriott	unit	growth;

•$4	million	of	higher	owned,	leased,	and	other	revenue,	net	of	direct	expenses,	primarily	due	to	$11	million	of	higher	Legacy-Starwood	owned	and	leased profits,	partially	offset	by	$5	million	of	lower	Legacy-Marriott	Global	Design	profits;

•$31	million	of	higher	general,	administrative,	and	other	expenses,	primarily	due	to	the	Starwood	Combination;

# SHARE-BASED	COMPENSATION

See	Footnote	5.	Share-Based	Compensation	for	more	information.

# NEW	ACCOUNTING	STANDARDS

See	Footnote	2.	Summary	of	Significant	Accounting	Policies	for	information	on	our	anticipated	adoption	of	recently	issued	accounting	standards.

# LIQUIDITY	AND	CAPITAL	RESOURCES

# Cash	Requirements	and	Our	Credit	Facility

We	are	party	to	a	multicurrency	revolving	credit	agreement	(the	"Credit	Facility")	that	provides	for	up	to	$4	billion	of	aggregate	effective	borrowings	to	support our	commercial	paper	program	and	general	corporate	needs,	including	working	capital,	capital	expenditures,	share	repurchases,	letters	of	credit,	and	acquisitions. Borrowings	under	the	Credit	Facility	generally	bear	interest	at	LIBOR	(the	London	Interbank	Offered	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.	While	any	outstanding	commercial	paper	borrowings	and/or	borrowings	under	our	Credit Facility	generally	have	short-term	maturities,	we	classify	the	outstanding	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	June	10,	2021.

The	Credit	Facility	contains	certain	covenants,	including	a	single	financial	covenant	that	limits	our	maximum	leverage	(the	ratio	of	Adjusted	Total	Debt	to EBITDA,	each	as	defined	in	the	Credit	Facility)	to	not	more	than	4	to	1.	The	Credit	Facility	defines	EBITDA	as	net	income	less	cost	reimbursement	revenue,	plus reimbursed	expenses,	plus	the	sum	of	interest	expense,	income	taxes,	depreciation,	amortization,	and	non-recurring	non-cash	charges.

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	guarantee	levels	or	increase	those	levels	should	we	decide	to	do	so	in	the	future.

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	short-term and	long-term	liquidity	requirements,	finance	our	long-term	growth	plans,	meet	debt	service,	and	fulfill	other	cash	requirements.

We	issue	commercial	paper	in	the	U.S.	We	do	not	have	purchase	commitments	from	buyers	for	our	commercial	paper;	therefore,	our	ability	to	issue	commercial paper	is	subject	to	market	demand.	We	reserve	unused	capacity	under	our	Credit	Facility	to	repay	outstanding	commercial	paper	borrowings	if	the	commercial	paper market	is	not	available	to	us	for	any	reason	when	outstanding	borrowings	mature.	We	do	not	expect	that	fluctuations	in	the	demand	for	commercial	paper	will	affect	our liquidity,	given	our	borrowing	capacity	under	the	Credit	Facility.

At	year-end	2018,	our	available	borrowing	capacity	amounted	to	$2,067	million	and	reflected	borrowing	capacity	of	$1,751	million	under	our	Credit	Facility	and our	cash	balance	of	$316	million.	We	calculated	that	borrowing	capacity	by	taking	$4	billion	of	effective	aggregate	bank	commitments	under	our	Credit	Facility	and subtracting	$2,249	million	of	outstanding	commercial	paper	(there	being	no	outstanding	letters	of	credit	under	our	Credit	Facility).

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	execute	our announced	growth	plans	and	fund	our	liquidity	needs.	We	expect	to	continue	meeting	part	of	our	financing	and	liquidity	needs	primarily	through	commercial	paper borrowings,	issuances	of	Senior	Notes,	and	access	to	long-term	committed	credit	facilities.	If	conditions	in	the	lodging	industry	deteriorate,	or	if	disruptions	in	the	capital markets	take	place	as	they	did	in	the	immediate	aftermath	of	both	the	2008	worldwide	financial	crisis	and	the	events	of	September	11,	2001,	we	may	be	unable	to	place some	or	all	of	our	commercial	paper	on	a	temporary	or	extended	basis	and	may	have	to	rely	more	on	borrowings	under	the	Credit	Facility,	which	we	believe	will	be adequate	to	fund	our	liquidity	needs,	including	repayment	of	debt	obligations,	but	which	may	carry	a	higher	cost	than	commercial	paper.	Since	we	continue	to	have ample	flexibility	under	the	Credit	Facility's	covenants,	we	expect	that	undrawn	bank	commitments	under	the	Credit	Facility	will	remain	available	to	us	even	if	business conditions	were	to	deteriorate	markedly.

# Cash	from	Operations

Cash	from	operations	and	non-cash	items	for	the	last	three	fiscal	years	are	as	follows:

| ($	in	millions) | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Cash\tfrom\toperations | $2,357 | $2,227 | $1,619 |
| Non-cash\titems\t (1) | 287 | 1,397 | 514 |

(1) Includes	depreciation,	amortization,	share-based	compensation,	deferred	income	taxes,	and	contract	investment	amortization.

Our	ratio	of	current	assets	to	current	liabilities	was	0.4	to	1.0	at	year-end	2018	and	0.5	to	1.0	at	year-end	2017.	We	minimize	working	capital	through	cash management,	strict	credit-granting	policies,	and	aggressive	collection	efforts.	We	also	have	significant	borrowing	capacity	under	our	Credit	Facility	should	we	need additional	working	capital.

# Investing	Activities	Cash	Flows

Acquisition	of	a	Business,	Net	of	Cash	Acquired.	Cash	outflows	of	$2,392	million	in	2016	were	due	to	the	Starwood	Combination.	See	Footnote	3.	Dispositions and	Acquisitions	for	more	information.

Capital	Expenditures	and	Other	Investments.	We	made	capital	expenditures	of	$556	million	in	2018,	$240	million	in	2017,	and	$199	million	in	2016.	Capital expenditures	in	2018	increased	by	$316	million	compared	to	2017,	primarily	reflecting	the	acquisition	of	the	Sheraton	Grand	Phoenix,	improvements	to	our	worldwide systems,	and	net	higher	spending	on	several	owned	properties.	Capital	expenditures	in	2017	increased	by	$41	million	compared	to	2016,	primarily	due	to	improvements to	our	worldwide	systems	and	improvements	to	hotels	acquired	in	the	Starwood	Combination.

We	expect	spending	on	capital	expenditures	and	other	investments	will	total	approximately	$500	million	to	$700	million	for	2019,	including	acquisitions,	loan advances,	equity	and	other	investments,	contract	acquisition	costs,	and	various	capital	expenditures	(including	approximately	$225	million	for	maintenance	capital spending).

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.	In	the	Starwood	Combination,	we	acquired	various	hotels	and	joint	venture	interests	in	hotels,	most	of	which	we	have	sold	or	are	seeking	to	sell, and	in	2018,	we	acquired	the	Sheraton	Grand	Phoenix,	which	we	expect	to	renovate	and	sell	subject	to	a	long-term	management	agreement.	We	also	expect	to	continue making	selective	and	opportunistic	investments	to	add	units	to	our	lodging	business,	which	may	include	property	acquisitions,	new	construction,	loans,	guarantees,	and noncontrolling	equity	investments.	Over	time,	we	seek	to	minimize	capital	invested	in	our	business	through	asset	sales	subject	to	long	term	operating	or	franchise agreements.

Fluctuations	in	the	values	of	hotel	real	estate	generally	have	little	impact	on	our	overall	business	results	because:	(1)	we	own	less	than	one	percent	of	hotels	that we	operate	or	franchise;	(2)	management	and	franchise	fees	are	generally	based	upon	hotel	revenues	and	profits	rather	than	current	hotel	property	values;	and	(3)	our management	agreements	generally	do	not	terminate	upon	hotel	sale	or	foreclosure.

Dispositions.	Property	and	asset	sales	generated	$479	million	cash	proceeds	in	2018	and	$1,418	million	in	2017.	See	Footnote	3.	Dispositions	and	Acquisitions	for more	information	on	dispositions.

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	$35 million	in	2018,	compared	to	net	collections	of	$94	million	in	2017.	At	year-end	2018,	we	had	$131	million	of	senior,	mezzanine,	and	other	loans	outstanding,	compared to	$149	million	outstanding	at	year-end	2017.

Equity	Method	Investments.	Cash	outflows	of	$72	million	in	2018,	$62	million	in	2017,	and	$13	million	in	2016	for	equity	method	investments	primarily	reflect our	investments	in	several	joint	ventures.

# Financing	Activities	Cash	Flows

Debt.	Debt	increased	by	$1,109	million	in	2018,	to	$9,347	million	at	year-end	2018	from	$8,238	million	at	year-end	2017,	primarily	due	to	the	issuance	of	our Series	X,	Y,	Z,	and	AA	Notes,	partially	offset	by	the	maturity	of	our	Series	S	Notes	($330	million)	and	lower	outstanding	commercial	paper	($126	million).	See Footnote	10.	Long-Term	Debt	for	additional	information	on	the	debt	issuances.

Our	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	2018,	our	long-term	debt	had	a	weighted	average	interest	rate	of	3.3	percent	and	a	weighted	average	maturity	of	approximately	4.8	years.	The	ratio	of	our fixed-rate	long-term	debt	to	our	total	long-term	debt	was	0.7	to	1.0	at	year-end	2018.

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

Share	Repurchases.	We	purchased	21.5	million	shares	of	our	common	stock	in	2018	at	an	average	price	of	$130.67	per	share,	29.2	million	shares	in	2017	at	an average	price	of	$103.66	per	share,	and	8.0	million	shares	in	2016	at	an	average	price	of	$71.55	per	share.	At	year-end	2018,	10.7	million	shares	remained	available	for repurchase	under	Board	approved	authorizations,	and	on	February	15,	2019,	our	Board	of	Directors	further	increased	our	common	stock	repurchase	authorization	by	25 million	shares.	For	additional	information,	see	"Fourth	Quarter	2018	Issuer	Purchases	of	Equity	Securities"	in	Part	II,	Item	5.

# Contractual	Obligations	and	Off-Balance	Sheet	Arrangements

# Contractual	Obligations

The	following	table	summarizes	our	contractual	obligations	at	year-end	2018:

|  |  | Less	Than |  |  | After |
| :--- | :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions) | Total | 1\tYear | 1-3\tYears | 3-5\tYears | 5\tYears |
| Debt\t(1) | $10,483 | $1,074 | $4,392 | $2,054 | $2,963 |
| Capital\tlease\tobligations\t(1) | 230 | 13 | 26 | 26 | 165 |
| Operating\tleases\twhere\twe\tare\tthe\tprimary\tobligor | 2,073 | 171 | 315 | 292 | 1,295 |
| Purchase\tobligations | 286 | 153 | 116 | 17 | — |
| Other\tnoncurrent\tliabilities | 136 | 3 | 28 | 20 | 85 |
| Total\tcontractual\tobligations | $13,208 | $1,414 | $4,877 | $2,409 | $4,508 |

(1) Includes	principal	as	well	as	interest	payments.

The	preceding	table	does	not	reflect	Transition	Tax	payments	totaling	$507	million	as	a	result	of	the	2017	Tax	Act.	In	addition,	the	table	does	not	reflect unrecognized	tax	benefits	at	year-end	2018	of	$559	million.

In	addition	to	the	purchase	obligations	noted	in	the	preceding	table,	in	the	normal	course	of	business	we	enter	into	purchase	commitments	to	manage	the	daily operating	needs	of	the	hotels	that	we	manage.	Since	we	are	reimbursed	from	the	cash	flows	of	the	hotels,	these	obligations	have	minimal	impact	on	our	net	income	and cash	flow.

# Other	Commitments

The	following	table	summarizes	our	guarantee,	investment,	and	loan	commitments	at	year-end	2018:

|  | Total |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | Amounts | Less\tThan |  |  | After |
| ($\tin\tmillions) | Committed | 1\tYear | 1-3\tYears | 3-5\tYears | 5\tYears |
| Guarantee\tcommitments\t(expiration\tby\tperiod) | $346 | $53 | $78 | $123 | $92 |
| Investment\tand\tloan\tcommitments\t(expected\tfunding\tby\tperiod) | 19 | 8 | 9 | 2 | — |
| Total\tother\tcommitments | $365 | $61 | $87 | $125 | $92 |

In	conjunction	with	financing	obtained	for	specific	projects	or	properties	owned	by	joint	ventures	in	which	we	are	a	party,	we	may	provide	industry	standard indemnifications	to	the	lender	for	loss,	liability,	or	damage	occurring	as	a	result	of	our	actions	or	the	actions	of	the	other	joint	venture	owner.

In	addition,	we	granted	a	hotel	owner	a	one-time	right	to	require	us	to	purchase	the	leasehold	interest	in	the	land	and	hotel	for	$300	million	in	cash,	exercisable	in 2022.	See	Footnote	7.	Commitments	and	Contingencies	for	more	information.

For	further	information,	including	the	nature	of	the	commitments	and	their	expirations,	see	the	"Commitments"	caption	in	Footnote	7.	Commitments	and Contingencies.

# Letters	of	Credit

At	year-end	2018,	we	had	$136	million	of	letters	of	credit	outstanding	(all	outside	the	Credit	Facility,	as	defined	in	Footnote	10.	Long-Term	Debt),	most	of	which were	for	our	self-insurance	programs.	Surety	bonds	issued	as	of	year-end	2018	totaled	$152	million,	most	of	which	state	governments	requested	in	connection	with	our self-insurance	programs.

# RELATED	PARTY	TRANSACTIONS

# Equity	Method	Investments

We	have	equity	method	investments	in	entities	that	own	properties	for	which	we	provide	management	services	and	receive	fees.	In	addition,	in	some	cases	we provide	loans,	preferred	equity,	or	guarantees	to	these	entities.

# Other	Related	Parties

We	provide	management	services	for	and	receive	fees	from	properties	owned	by	JWM	Family	Enterprises,	L.P.,	which	is	beneficially	owned	and	controlled	by J.W.	Marriott,	Jr.,	Deborah	Marriott	Harrison,	and	other	members	of	the	Marriott	family.

For	more	information,	including	the	impact	to	our	financial	statements	of	transactions	with	these	related	parties,	see	Footnote	18.	Related	Party	Transactions.

# 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.	Management	has	discussed	the	development	and	selection	of	its	critical	accounting	policies	and	estimates	with	the	Audit	Committee	of	our	Board	of Directors.

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	Footnote	2.	Summary	of	Significant	Accounting	Policies	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-brand	credit	card	agreements,	the	amount	of	consideration	to	which	we	will	be	entitled	under	our	co-brand	credit card	agreements,	and	the	stand-alone	selling	prices	of	goods	and	services	provided	under	our	co-brand	credit	card	agreements;

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

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;

Investments,	including	information	on	how	we	evaluate	the	fair	value	of	investments	and	when	we	record	impairment	losses	on	investments;

Loan	Loss	Reserves,	including	information	on	how	we	measure	impairment	on	senior,	mezzanine,	and	other	loans	of	these	types;

Income	Taxes,	including	information	on	how	we	determine	our	current	year	amounts	payable	or	refundable,	our	estimate	of	deferred	tax	assets	and	liabilities, and	the	impacts	of	the	2017	Tax	Act;	and

Business	Combinations,	including	the	assumptions	that	we	make	to	estimate	the	fair	values	of	assets	acquired	and	liabilities	assumed	related	to	discount	rates, royalty	rates,	and	the	amount	and	timing	of	future	cash	flows.

# Item	7A. Quantitative	and	Qualitative	Disclosures	About	Market	Risk.

We	are	exposed	to	market	risk	from	changes	in	interest	rates,	stock	prices,	currency	exchange	rates,	and	debt	prices.	We	manage	our	exposure	to	these	risks	by monitoring	available	financing	alternatives,	through	development	and	application	of	credit	granting	policies	and	by	entering	into	derivative	arrangements.	We	do	not foresee	any	significant	changes	in	either	our	exposure	to	fluctuations	in	interest	rates	or	currency	rates	or	how	we	manage	such	exposure	in	the	future.

We	are	exposed	to	interest	rate	risk	on	our	floating-rate	notes	receivable	and	floating-rate	debt.	Changes	in	interest	rates	also	impact	the	fair	value	of	our	fixed-rate notes	receivable	and	the	fair	value	of	our	fixed-rate	long-term	debt.

We	are	also	subject	to	risk	from	changes	in	debt	prices	from	our	investments	in	debt	securities	and	fluctuations	in	stock	price	from	our	investment	in	a	publicly traded	company.	Changes	in	the	price	of	the	underlying	stock	can	impact	the	fair	value	of	our	investment.

We	use	derivative	instruments,	including	cash	flow	hedges,	net	investment	in	non-U.S.	operations	hedges,	and	other	derivative	instruments,	as	part	of	our	overall strategy	to	manage	our	exposure	to	market	risks	associated	with	fluctuations	in	interest	rates	and	currency	exchange	rates.	As	a	matter	of	policy,	we	only	enter	into transactions	that	we	believe	will	be	highly	effective	at	offsetting	the	underlying	risk,	and	we	do	not	use	derivatives	for	trading	or	speculative	purposes.	See	Footnote	2. Summary	of	Significant	Accounting	Policies	for	more	information	on	derivative	instruments.

The	following	table	sets	forth	the	scheduled	maturities	and	the	total	fair	value	as	of	year-end	2018	for	our	financial	instruments	that	are	impacted	by	market	risks:

| ($	in	millions) | 2019 | 2020 | 2021 | 2022 | 2023 | There-<br>after | Total<br>Carrying<br>Amount | Total<br>Fair<br>Value |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Fixed-rate\tnotes\treceivable | $2 | $2 | $2 | $2 | $— | $38 | $46 | $46 |
| Average\tinterest\trate |  |  |  |  |  |  | 1.27% |  |
| Floating-rate\tnotes\treceivable | $4 | $60 | $— | $— | $— | $21 | $85 | $76 |
| Average\tinterest\trate |  |  |  |  |  |  | 4.65% |  |
| Fixed-rate\tdebt | $(827) | $(359) | $(857) | $(1,107) | $(687) | $(2,555) | $(6,392) | $(6,254) |
| Average\tinterest\trate |  |  |  |  |  |  | 3.45% |  |
| Floating-rate\tdebt | $— | $(547) | $(2,245) | $— | $— | $— | $(2,792) | $(2,793) |

# Item	8. Financial	Statements	and	Supplementary

# Data.

The	following	financial	information	is	included	on	the	pages	indicated:

|  | Page |
| :--- | :--- |
| Management's\tReport\ton\tInternal\tControl\tOver\tFinancial\tReporting | 42 |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | 43 |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | 45 |
| Consolidated\tStatements\tof\tIncome | 46 |
| Consolidated\tStatements\tof\tComprehensive\tIncome | 47 |
| Consolidated\tBalance\tSheets | 48 |
| Consolidated\tStatements\tof\tCash\tFlows | 49 |
| Consolidated\tStatements\tof\tShareholders'\tEquity | 50 |
| Notes\tto\tConsolidated\tFinancial\tStatements | 51 |
| Basis\tof\tPresentation | 51 |
| Summary\tof\tSignificant\tAccounting\tPolicies | 51 |
| Dispositions\tand\tAcquisitions | 64 |
| Earnings\tPer\tShare | 66 |
| Share-Based\tCompensation | 66 |
| Income\tTaxes | 67 |
| Commitments\tand\tContingencies | 70 |
| Leases | 72 |
| Self-Insurance\tReserve\tfor\tLosses\tand\tLoss\tAdjustment\tExpenses | 73 |
| Long-Term\tDebt | 74 |
| Pension\tand\tOther\tPostretirement\tBenefits | 75 |
| Intangible\tAssets\tand\tGoodwill | 78 |
| Property\tand\tEquipment | 78 |
| Notes\tReceivable | 79 |
| Fair\tValue\tof\tFinancial\tInstruments | 79 |
| Accumulated\tOther\tComprehensive\tLoss | 80 |
| Business\tSegments | 80 |
| Related\tParty\tTransactions | 82 |
| Relationship\twith\tMajor\tCustomer | 84 |

# MANAGEMENT'S	REPORT	ON

# INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

Management	of	Marriott	International,	Inc.	(the	"Company")	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	and for	assessing	the	effectiveness	of	internal	control	over	financial	reporting.	The	Company	has	designed	its	internal	control	over	financial	reporting	to	provide	reasonable assurance	on	the	reliability	of	financial	reporting	and	the	preparation	of	the	consolidated	financial	statements	in	accordance	with	U.S.	generally	accepted	accounting principles.

The	Company's	internal	control	over	financial	reporting	includes	those	policies	and	procedures	that:	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable detail,	accurately	and	fairly	reflect	the	Company's	transactions	and	dispositions	of	the	Company's	assets;	(2)	provide	reasonable	assurance	that	transactions	are	recorded as	necessary	to	permit	preparation	of	the	consolidated	financial	statements	in	accordance	with	U.S.	generally	accepted	accounting	principles,	and	that	receipts	and expenditures	of	the	Company	are	being	made	only	in	accordance	with	authorizations	of	the	Company's	management	and	directors;	and	(3)	provide	reasonable	assurance regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	Company's	assets	that	could	have	a	material	effect	on	the	consolidated financial	statements.

Because	of	inherent	limitations	in	internal	control	over	financial	reporting,	such	controls	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any evaluation	of	the	effectiveness	of	internal	controls	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that the	degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

In	connection	with	the	preparation	of	the	Company's	annual	consolidated	financial	statements,	management	assessed	the	effectiveness	of	the	Company's	internal control	over	financial	reporting	as	of	December	31,	2018,	based	on	criteria	established	in	the	Internal	Control-Integrated	Framework	issued	by	the	Committee	of Sponsoring	Organizations	of	the	Treadway	Commission	(2013	Framework)	(the	"COSO	criteria").

Based	on	this	assessment,	and	the	existence	of	a	material	weakness	related	to	the	accounting	for	our	Loyalty	Program	further	described	in	Part	II,	Item	9A, management	has	concluded	that,	applying	the	COSO	criteria,	as	of	December	31,	2018,	the	Company's	internal	control	over	financial	reporting	was	not	effective	to provide	reasonable	assurance	of	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	U.S.	generally accepted	accounting	principles.

Ernst	&	Young	LLP,	the	independent	registered	public	accounting	firm	that	audited	the	Company's	consolidated	financial	statements	included	in	this	report,	has issued	an	attestation	report	on	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting,	a	copy	of	which	appears	on	the	following	page.

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

To	the	Shareholders	and	Board	of	Directors	of	Marriott	International,	Inc.

# Opinion	on	Internal	Control	over	Financial	Reporting

We	have	audited	Marriott	International,	Inc.'s	internal	control	over	financial	reporting	as	of	December	31,	2018,	based	on	criteria	established	in	Internal	Control- Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(2013	Framework)	(the	COSO	criteria).	In	our	opinion, because	of	the	effect	of	the	material	weakness	described	below	on	the	achievement	of	the	objectives	of	the	control	criteria,	Marriott	International,	Inc.	(the	Company) has	not	maintained	effective	internal	control	over	financial	reporting	as	of	December	31,	2018,	based	on	the	COSO	criteria.

A	material	weakness	is	a	deficiency,	or	combination	of	deficiencies,	in	internal	control	over	financial	reporting,	such	that	there	is	a	reasonable	possibility	that	a	material misstatement	of	the	Company's	annual	or	interim	financial	statements	will	not	be	prevented	or	detected	on	a	timely	basis.	The	following	material	weakness	has	been identified	and	included	in	management's	assessment.	Management	has	identified	a	material	weakness	in	controls	whereby	the	Company	did	not	have	a	sufficient complement	of	resources,	including	IT	systems	and	accounting	personnel,	to	fully	evaluate,	value	and	perform	the	analysis	and	ongoing	accounting	associated	with	the guest	loyalty	program.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States)	(PCAOB),	the	consolidated	balance	sheets of	Marriott	International,	Inc.	as	of	December	31,	2018	and	2017,	and	the	related	consolidated	statements	of	income,	comprehensive	income,	shareholders'	equity	and cash	flows	for	each	of	the	three	fiscal	years	in	the	period	ended	December	31,	2018,	and	the	related	notes.	This	material	weakness	was	considered	in	determining	the nature,	timing	and	extent	of	audit	tests	applied	in	our	audit	of	the	2018	consolidated	financial	statements,	and	this	report	does	not	affect	our	report	dated	March	1,	2019, which	expressed	an	unqualified	opinion	thereon.

# Basis	for	Opinion

The	Company's	management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal control	over	financial	reporting	included	in	the	accompanying	Management's	Report	on	Internal	Control	Over	Financial	Reporting.	Our	responsibility	is	to	express	an opinion	on	the	Company's	internal	control	over	financial	reporting	based	on	our	audit.	We	are	a	public	accounting	firm	registered	with	the	PCAOB	and	are	required	to be	independent	with	respect	to	the	Company	in	accordance	with	the	U.S.	federal	securities	laws	and	the	applicable	rules	and	regulations	of	the	Securities	and	Exchange Commission	and	the	PCAOB.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	PCAOB.	Those	standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.

Our	audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	testing	and	evaluating	the design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances. We	believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

# Definition	and	Limitations	of	Internal	Control	Over	Financial	Reporting

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of	effectiveness to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the	policies	or procedures	may	deteriorate.

/s/	Ernst	&	Young	LLP

# Opinion	on	the	Financial	Statements

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Marriott	International,	Inc.	(the	Company)	as	of	December	31,	2018	and	2017,	and	the	related consolidated	statements	of	income,	comprehensive	income,	shareholders'	equity	and	cash	flows	for	each	of	the	three	fiscal	years	in	the	period	ended	December	31,	2018, and	the	related	notes	(collectively	referred	to	as	the	"financial	statements").	In	our	opinion,	the	financial	statements	present	fairly,	in	all	material	respects,	the consolidated	financial	position	of	the	Company	at	December	31,	2018	and	2017,	and	the	consolidated	results	of	its	operations	and	its	cash	flows	for	each	of	the	three years	in	the	period	ended	December	31,	2018,	in	conformity	with	U.S.	generally	accepted	accounting	principles.

We	also	have	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States)	(PCAOB),	the	Company's	internal	control over	financial	reporting	as	of	December	31,	2018,	based	on	criteria	established	in	Internal	Control-Integrated	Framework	issued	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission	(2013	Framework)	and	our	report	dated	March	1,	2019	expressed	an	adverse	opinion	thereon.

# Adoption	of	New	Accounting	Standards

As	discussed	in	Note	2	to	the	financial	statements,	the	Company	has	changed	its	method	of	accounting	for:	(1)	revenue	from	contracts	with	customers	and	(2) intercompany	sales	of	assets	other	than	inventory	in	fiscal	year	2018	due	to	the	adoption	of	the	new	revenue	standard	and	the	new	income	tax	accounting	standard.	The Company	adopted	the	new	revenue	standard	using	the	full	retrospective	approach	and	adopted	the	income	tax	accounting	standard	using	the	modified	retrospective approach.

These	financial	statements	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	these	financial	statements	based	on	our audits.	We	are	a	public	accounting	firm	registered	with	the	PCAOB	and	are	required	to	be	independent	with	respect	to	the	Company	in	accordance	with	the	U.S.	federal securities	laws	and	the	applicable	rules	and	regulations	of	the	Securities	and	Exchange	Commission	and	the	PCAOB.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	PCAOB.	Those	standards	require	that	we	plan	and	perform	the	audit	to	obtain	reasonable	assurance about	whether	the	financial	statements	are	free	of	material	misstatement,	whether	due	to	error	or	fraud.	Our	audits	included	performing	procedures	to	assess	the	risks	of material	misstatement	of	the	financial	statements,	whether	due	to	error	or	fraud,	and	performing	procedures	that	respond	to	those	risks.	Such	procedures	included examining,	on	a	test	basis,	evidence	regarding	the	amounts	and	disclosures	in	the	financial	statements.	Our	audits	also	included	evaluating	the	accounting	principles	used and	significant	estimates	made	by	management,	as	well	as	evaluating	the	overall	presentation	of	the	financial	statements.	We	believe	that	our	audits	provide	a	reasonable basis	for	our	opinion.

We	have	served	as	the	Company's	auditor	since	2002.

Tysons,	Virginia

# CONSOLIDATED	STATEMENTS	OF	INCOME

|  | December	31,<br>2018 | December	31,<br>2017 | December	31,<br>2016 |
| :--- | :--- | :--- | :--- |
| REVENUES |  |  |  |
| Base\tmanagement\tfees\t(1) | $1,140 | $1,102 | $806 |
| Franchise\tfees | 1,849 | 1,586 | 1,157 |
| Incentive\tmanagement\tfees\t(1) | 649 | 607 | 425 |
| Gross\tfee\trevenues | 3,638 | 3,295 | 2,388 |
| Contract\tinvestment\tamortization\t(1) | (58) | (50) | (40) |
| Net\tfee\trevenues | 3,580 | 3,245 | 2,348 |
| Owned,\tleased,\tand\tother\trevenue\t(1) | 1,635 | 1,752 | 1,125 |
| Cost\treimbursement\trevenue\t(1) | 15,543 | 15,455 | 11,934 |
|  | 20,758 | 20,452 | 15,407 |
| OPERATING\tCOSTS\tAND\tEXPENSES |  |  |  |
| Owned,\tleased,\tand\tother-direct | 1,306 | 1,411 | 901 |
| Depreciation,\tamortization,\tand\tother\t(1) | 226 | 229 | 119 |
| General,\tadministrative,\tand\tother\t(1) | 927 | 921 | 743 |
| Merger-related\tcosts\tand\tcharges | 155 | 159 | 386 |
| Reimbursed\texpenses\t(1) | 15,778 | 15,228 | 11,834 |
|  | 18,392 | 17,948 | 13,983 |
| OPERATING\tINCOME | 2,366 | 2,504 | 1,424 |
| Gains\tand\tother\tincome,\tnet\t(1) | 194 | 688 | 5 |
| Interest\texpense | (340) | (288) | (234) |
| Interest\tincome\t(1) | 22 | 38 | 35 |
| Equity\tin\tearnings\t(1) | 103 | 40 | 9 |
| INCOME\tBEFORE\tINCOME\tTAXES | 2,345 | 2,982 | 1,239 |
| Provision\tfor\tincome\ttaxes | (438) | (1,523) | (431) |
| NET\tINCOME | $1,907 | $1,459 | $808 |
| EARNINGS\tPER\tSHARE |  |  |  |
| Earnings\tper\tshare\t-\tbasic | $5.45 | $3.89 | $2.78 |
| Earnings\tper\tshare\t-\tdiluted | $5.38 | $3.84 | $2.73 |

(1) See	Footnote	18.	Related	Party	Transactions	for	disclosure	of	related	party	amounts.

See	Notes	to	Consolidated	Financial	Statements.

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME

# ($	in	millions)

|  | December	31,<br>2018 | December	31,<br>2017 | December	31,<br>2016 |
| :--- | :--- | :--- | :--- |
| Net\tincome | $1,907 | $1,459 | $808 |
| Other\tcomprehensive\t(loss)\tincome: |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | (391) | 478 | (311) |
| Derivative\tinstrument\tadjustments,\tnet\tof\ttax | 12 | (14) | 1 |
| Unrealized\t(loss)\tgain\ton\tavailable-for-sale\tsecurities,\tnet\tof\ttax | — | (2) | 2 |
| Pension\tand\tpostretirement\tadjustments,\tnet\tof\ttax | (8) | 7 | 5 |
| Reclassification\tof\tlosses,\tnet\tof\ttax | 17 | 11 | 2 |
| Total\tother\tcomprehensive\t(loss)\tincome,\tnet\tof\ttax | (370) | 480 | (301) |
| Comprehensive\tincome | $1,537 | $1,939 | $507 |

# CONSOLIDATED	BALANCE	SHEETS

|  | December	31,<br>2018 | December	31,<br>2017 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets |  |  |
| Cash\tand\tequivalents | $316 | $383 |
| Accounts\tand\tnotes\treceivable,\tnet\t(1) | 2,133 | 1,973 |
| Prepaid\texpenses\tand\tother\t(1) | 249 | 235 |
| Assets\theld\tfor\tsale | 8 | 149 |
|  | 2,706 | 2,740 |
| Property\tand\tequipment,\tnet | 1,956 | 1,793 |
| Intangible\tassets |  |  |
| Brands | 5,790 | 5,922 |
| Contract\tacquisition\tcosts\tand\tother\t(1) | 2,590 | 2,622 |
| Goodwill | 9,039 | 9,207 |
|  | 17,419 | 17,751 |
| Equity\tmethod\tinvestments\t(1) | 732 | 734 |
| Notes\treceivable,\tnet | 125 | 142 |
| Deferred\ttax\tassets | 171 | 93 |
| Other\tnoncurrent\tassets\t(1) | 587 | 593 |
|  | $23,696 | $23,846 |
| LIABILITIES\tAND\tSHAREHOLDERS'\tEQUITY |  |  |
| Current\tliabilities |  |  |
| Current\tportion\tof\tlong-term\tdebt | $833 | $398 |
| Accounts\tpayable\t(1) | 767 | 783 |
| Accrued\tpayroll\tand\tbenefits | 1,345 | 1,214 |
| Liability\tfor\tguest\tloyalty\tprogram | 2,529 | 2,121 |
| Accrued\texpenses\tand\tother\t(1) | 963 | 1,291 |
|  | 6,437 | 5,807 |
| Long-term\tdebt | 8,514 | 7,840 |
| Liability\tfor\tguest\tloyalty\tprogram | 2,932 | 2,819 |
| Deferred\ttax\tliabilities\t(1) | 485 | 605 |
| Deferred\trevenue | 731 | 583 |
| Other\tnoncurrent\tliabilities\t(1) | 2,372 | 2,610 |
| Shareholders'\tequity |  |  |
| Class\tA\tCommon\tStock | 5 | 5 |
| Additional\tpaid-in-capital | 5,814 | 5,770 |
| Retained\tearnings | 8,982 | 7,242 |
| Treasury\tstock,\tat\tcost | (12,185) | (9,418) |
| Accumulated\tother\tcomprehensive\tloss | (391) | (17) |
|  | 2,225 | 3,582 |
|  | $23,696 | $23,846 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | December	31,<br>2018 | December	31,<br>2017 | December	31,<br>2016 |
| :--- | :--- | :--- | :--- |
| OPERATING\tACTIVITIES |  |  |  |
| Net\tincome | $1,907 | $1,459 | $808 |
| Adjustments\tto\treconcile\tto\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation,\tamortization,\tand\tother | 284 | 279 | 159 |
| Share-based\tcompensation | 184 | 181 | 212 |
| Income\ttaxes | (239) | 887 | 103 |
| Liability\tfor\tguest\tloyalty\tprogram | 520 | 298 | 221 |
| Contract\tacquisition\tcosts | (152) | (185) | (76) |
| Merger-related\tcharges | 16 | (124) | 209 |
| Working\tcapital\tchanges | (76) | (30) | (106) |
| (Gain)\tloss\ton\tasset\tdispositions | (194) | (687) | 1 |
| Other | 107 | 149 | 88 |
| Net\tcash\tprovided\tby\toperating\tactivities | 2,357 | 2,227 | 1,619 |
| INVESTING\tACTIVITIES |  |  |  |
| Acquisition\tof\ta\tbusiness,\tnet\tof\tcash\tacquired | — | — | (2,392) |
| Capital\texpenditures | (556) | (240) | (199) |
| Dispositions | 479 | 1,418 | 211 |
| Loan\tadvances | (13) | (93) | (32) |
| Loan\tcollections | 48 | 187 | 67 |
| Other | (10) | (61) | (1) |
| Net\tcash\t(used\tin)\tprovided\tby\tinvesting\tactivities | (52) | 1,211 | (2,346) |
| FINANCING\tACTIVITIES |  |  |  |
| Commercial\tpaper/Credit\tFacility,\tnet | (129) | 60 | 1,373 |
| Issuance\tof\tlong-term\tdebt | 1,646 | — | 1,482 |
| Repayment\tof\tlong-term\tdebt | (397) | (310) | (326) |
| Issuance\tof\tClass\tA\tCommon\tStock | 4 | 6 | 34 |
| Dividends\tpaid | (543) | (482) | (374) |
| Purchase\tof\ttreasury\tstock | (2,850) | (3,013) | (568) |
| Share-based\tcompensation\twithholding\ttaxes | (105) | (157) | (100) |
| Other | — | — | (24) |
| Net\tcash\t(used\tin)\tprovided\tby\tfinancing\tactivities | (2,374) | (3,896) | 1,497 |
| DECREASE\tIN\tCASH,\tCASH\tEQUIVALENTS,\tAND\tRESTRICTED\tCASH | (69) | (458) | 770 |
| CASH,\tCASH\tEQUIVALENTS,\tAND\tRESTRICTED\tCASH,\tbeginning\tof\tperiod\t(1) | 429 | 887 | 117 |
| CASH,\tCASH\tEQUIVALENTS,\tAND\tRESTRICTED\tCASH,\tend\tof\tperiod\t(1) | $360 | $429 | $887 |

(1) The	2018	amounts	include	beginning	restricted	cash	of	$46	million	at	December	31,	2017,	and	ending	restricted	cash	of	 $44	million	at	December	31,	2018,	which	we	present	in	the "Prepaid	expenses	and	other"	and	"Other	noncurrent	assets"	captions	of	our	Balance	Sheets.

# CONSOLIDATED	STATEMENTS	OF	SHAREHOLDERS'	EQUITY

|  | Total | Class	A<br>Common<br>Stock | Additional<br>Paid-in-<br>Capital | Retained<br>Earnings | Treasury<br>Stock,	at<br>Cost | Accumulated<br>Other<br>Comprehensive<br>Loss |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tDecember\t31,\t2015 | $(3,590) | $5 | $2,821 | $4,878 | $(11,098) | $(196) |
| Adoption\tof\tASU\t2014-09 | (264) | — | — | (264) | — | — |
| Net\tincome | 808 | — | — | 808 | — | — |
| Other\tcomprehensive\tloss | (301) | — | — | — | — | (301) |
| Dividends | (374) | — | — | (374) | — | — |
| Share-based\tcompensation\tplans | 146 | — | 110 | (21) | 57 | — |
| Purchase\tof\ttreasury\tstock | (573) | — | — | — | (573) | — |
| Starwood\tCombination\t(1) | 9,269 | — | 2,877 | 1,238 | 5,154 | — |
| Balance\tat\tDecember\t31,\t2016 | 5,121 | 5 | 5,808 | 6,265 | (6,460) | (497) |
| Net\tincome | 1,459 | — | — | 1,459 | — | — |
| Other\tcomprehensive\tloss | 480 | — | — | — | — | 480 |
| Dividends | (482) | — | — | (482) | — | — |
| Share-based\tcompensation\tplans | 29 | — | (38) | — | 67 | — |
| Purchase\tof\ttreasury\tstock | (3,025) | — | — | — | (3,025) | — |
| Balance\tat\tDecember\t31,\t2017 | 3,582 | 5 | 5,770 | 7,242 | (9,418) | (17) |
| Adoption\tof\tASU\t2016-01 | — | — | — | 4 | — | (4) |
| Adoption\tof\tASU\t2016-16 | 372 | — | — | 372 | — | — |
| Net\tincome | 1,907 | — | — | 1,907 | — | — |
| Other\tcomprehensive\tincome | (370) | — | — | — | — | (370) |
| Dividends | (543) | — | — | (543) | — | — |
| Share-based\tcompensation\tplans | 86 | — | 44 | — | 42 | — |
| Purchase\tof\ttreasury\tstock | (2,809) | — | — | — | (2,809) | — |
| (2)\t Balance\tat\tDecember\t31,\t2018 | $2,225 | $5 | $5,814 | $8,982 | $(12,185) | $(391) |

(1) Represents	Marriott	common	stock	and	equity-based	awards	issued	in	the	Starwood	Combination,	which	also	resulted	in	the	depletion	of	our	accumulated	historical	losses	on	reissuances	of treasury	stock	in	Retained	Earnings.

(2) Our	restated	certificate	of	incorporation	authorizes	800	million	shares	of	our	common	stock,	with	a	par	value	of	 $.01	per	share	and	10	million	shares	of	preferred	stock,	without	par	value.	At year-end	2018,	we	had	339.1	million	of	these	authorized	shares	of	our	common	stock	and	no	preferred	stock	outstanding.

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1.				BASIS	OF	PRESENTATION

The	consolidated	financial	statements	present	the	results	of	operations,	financial	position,	and	cash	flows	of	Marriott	International,	Inc.	and	subsidiaries	(referred to	in	this	report	as	"we,"	"us,"	"Marriott,"	or	"the	Company.").	In	order	to	make	this	report	easier	to	read,	we	also	refer	throughout	to	(i)	our	Consolidated	Financial Statements	as	our	"Financial	Statements,"	(ii)	our	Consolidated	Statements	of	Income	as	our	"Income	Statements,"	(iii)	our	Consolidated	Balance	Sheets	as	our "Balance	Sheets,"	(iv)	our	Condensed	Consolidated	Statements	of	Cash	Flows	as	our	"Statements	of	Cash	Flows,"	(v)	our	properties,	brands,	or	markets	in	the	United States	("U.S.")	and	Canada	as	"North	America"	or	"North	American,"	and	(vi)	our	properties,	brands,	or	markets	in	our	Caribbean	and	Latin	America,	Europe,	and Middle	East	and	Africa	regions	as	"Other	International,"	and	together	with	those	in	our	Asia	Pacific	segment,	as	"International."	In	addition,	references	throughout	to numbered	"Footnotes"	refer	to	the	numbered	Notes	in	these	Notes	to	Consolidated	Financial	Statements,	unless	otherwise	noted.

Preparation	of	financial	statements	that	conform	with	U.S.	generally	accepted	accounting	principles	("GAAP")	requires	management	to	make	estimates	and assumptions	that	affect	the	reported	amounts	of	assets	and	liabilities	as	of	the	date	of	the	financial	statements,	the	reported	amounts	of	revenues	and	expenses	during	the reporting	periods,	and	the	disclosures	of	contingent	liabilities.	Accordingly,	ultimate	results	could	differ	from	those	estimates.

The	accompanying	Financial	Statements	reflect	all	normal	and	recurring	adjustments	necessary	to	present	fairly	our	financial	position	at	fiscal	year-end	2018	and fiscal	year-end	2017	and	the	results	of	our	operations	and	cash	flows	for	fiscal	years	2018,	2017,	and	2016.	We	have	eliminated	all	material	intercompany	transactions and	balances	between	entities	consolidated	in	these	Financial	Statements.

The	accompanying	Financial	Statements	also	reflect	our	adoption	of	several	new	accounting	standards,	including	ASU	2014-09	"Revenue	from	Contracts	with Customers"	(Topic	606).	See	the	"New	Accounting	Standards	Adopted"	caption	in	Footnote	2.	Summary	of	Significant	Accounting	Policies	for	additional	information.

In	the	2018	fourth	quarter,	we	identified	errors	related	to	our	Loyalty	Program,	which	resulted	in	the	understatement	of	cost	reimbursement	revenue,	net	of reimbursed	expenses	in	our	previously	issued	financial	statements	for	the	2018	first,	second,	and	third	quarters.	Correction	of	the	errors	resulted	in	a	$99	million	increase to	net	income	for	the	2018	first	three	quarters	combined.	We	concluded	that	the	errors	were	and	continue	to	be	immaterial	to	those	financial	statements.	We	adjusted	our 2018	first,	second,	and	third	quarter	information	presented	in	Part	II,	Item	8	"Supplementary	Data"	to	reflect	the	correction	of	the	immaterial	errors	because	recording the	out	of	period	adjustments	would	have	been	material	to	the	2018	fourth	quarter.	See	Part	II,	Item	8	"Supplementary	Data"	for	more	information.

On	September	23,	2016	(the	"Merger	Date"),	we	completed	the	acquisition	of	Starwood	Hotels	&	Resorts	Worldwide,	LLC,	formerly	known	as	Starwood	Hotels &	Resorts	Worldwide,	Inc.	("Starwood"),	through	a	series	of	transactions	(the	"Starwood	Combination"),	after	which	Starwood	became	an	indirect	wholly-owned subsidiary	of	Marriott.	Accordingly,	our	Income	Statements	include	Starwood's	results	of	operations	from	the	Merger	Date.	See	Footnote	3.	Dispositions	and Acquisitions	for	more	information	on	the	Starwood	Combination.

# 2.				SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES

# Revenue	Recognition

Base	Management	and	Incentive	Management	Fees:	For	our	managed	hotels,	we	have	performance	obligations	to	provide	hotel	management	services	and	a	license to	our	hotel	system	intellectual	property	for	the	use	of	our	brand	names.	As	compensation	for	such	services,	we	are	generally	entitled	to	receive	base	fees,	which	are	a percentage	of	the	revenues	of	hotels,	and	incentives	fees,	which	are	generally	based	on	a	measure	of	hotel	profitability.	Both	the	base	and	incentive	management	fees	are variable	consideration,	as	the	transaction	price	is	based	on	a	percentage	of	revenue	or	profit,	as	defined	in	each	contract.	We	recognize	base	management	fees	on	a monthly	basis	over	the	term	of	the	agreement	as	those	amounts	become	payable.	We	recognize	incentive	management	fees	on	a	monthly	basis	over	the	term	of	the agreement	based	on	each	property's	financial	results,	as	long	as	we	do	not	expect	a	significant	reversal	due	to	projected	future	hotel	performance	or	cash	flows	in	future periods.

Franchise	Fee	and	Royalty	Fee	Revenue:	For	our	franchised	hotels,	we	have	a	performance	obligation	to	provide	franchisees	and	operators	a	license	to	our	hotel system	intellectual	property	for	use	of	certain	of	our	brand	names.	As	compensation	for	such	services,	we	are	typically	entitled	to	initial	application	fees	and	ongoing royalty	fees.	Our	ongoing	royalty	fees	represent	variable	consideration,	as	the	transaction	price	is	based	on	a	percentage	of	certain	revenues	of	the	hotels,	as	defined	in each	contract.	We	recognize	royalty	fees	on	a	monthly	basis	over	the	term	of	the	agreement	as	those	amounts	become	payable.	Initial	application	and	relicensing	fees	are fixed	consideration	payable	upon	submission	of	a	franchise	application	or	renewal	and	are	recognized	on	a	straight-line	basis	over	the	initial	or	renewal	term	of	the franchise	agreements.

Owned	and	Leased	Hotel	Revenue:	At	our	owned	and	leased	hotels,	we	have	performance	obligations	to	provide	accommodations	and	other	ancillary	services	to hotel	guests.	As	compensation	for	such	goods	and	services,	we	are	typically	entitled	to	a	fixed	nightly	fee	for	an	agreed	upon	period	and	additional	fixed	fees	for	any ancillary	services	purchased.	These	fees	are	generally	payable	at	the	time	the	hotel	guest	checks	out	of	the	hotel.	We	generally	satisfy	the	performance	obligations	over time,	and	we	recognize	the	revenue	from	room	sales	and	from	other	ancillary	guest	services	on	a	daily	basis,	as	the	rooms	are	occupied	and	we	have	rendered	the services.

Cost	Reimbursements:	Under	our	management	and	franchise	agreements,	we	are	entitled	to	be	reimbursed	for	certain	costs	we	incur	on	behalf	of	the	managed, franchised,	and	licensed	properties,	with	no	added	mark-up.	These	costs	primarily	consist	of	payroll	and	related	expenses	at	managed	properties	where	we	are	the employer	of	the	employees	at	the	properties	and	include	certain	operational	and	administrative	costs	as	provided	for	in	our	contracts	with	the	owners.	We	are	entitled	to reimbursement	in	the	period	we	incur	the	related	reimbursable	costs,	which	we	recognize	within	the	"Cost	reimbursement	revenue"	caption	of	our	Income	Statements.

Under	our	management	and	franchise	agreements,	hotel	owners	and	franchisees	participate	in	certain	centralized	programs	and	services,	such	as	marketing,	sales, reservations,	and	insurance	programs.	We	operate	these	programs	and	services	for	the	benefit	of	our	hotel	owners.	We	do	not	operate	these	programs	and	services	to generate	a	profit	over	the	contract	term,	and	accordingly,	when	we	recover	the	costs	that	we	incur	for	these	programs	and	services	from	our	hotel	owners,	we	do	not	seek a	mark-up.	The	amounts	we	charge	for	these	programs	and	services	are	generally	a	combination	of	fixed	fees	and	variable	fees	based	on	sales	or	other	metrics	and	are payable	on	a	monthly	basis.	We	recognize	revenue	within	the	"Cost	reimbursement	revenue"	caption	of	our	Income	Statements	when	the	amounts	may	be	billed	to	hotel owners,	and	we	recognize	expenses	within	the	"Reimbursed	expenses"	caption	as	they	are	incurred.	This	pattern	of	recognition	results	in	temporary	timing	differences between	the	costs	incurred	for	centralized	programs	and	services	and	the	related	reimbursement	from	hotel	owners	in	our	operating	and	net	income.	Over	the	long	term, these	programs	and	services	are	not	designed	to	impact	our	economics,	either	positively	or	negatively.	In	addition,	proceeds	from	the	sale	of	our	interest	in	Avendra	that we	expend	for	the	benefit	of	our	hotel	owners	are	included	in	"Reimbursed	expenses."

Other	Revenue:	Includes	Global	Design	fees,	which	we	describe	below,	termination	fees,	and	other	property	and	brand	revenues.	We	generally	recognize termination	fees	when	collection	is	probable,	and	other	revenue	as	services	are	rendered.	Amounts	received	in	advance	are	deferred	as	liabilities.

We	provide	hotel	design	and	construction	review	quality	assurance	("Global	Design")	services	to	our	managed	and	franchised	hotel	owners,	generally	during	the period	prior	to	a	hotel's	opening	or	during	the	period	a	hotel	is	converting	to	a	Marriott	brand	(the	"pre-opening	period").	As	compensation	for	such	services,	we	may	be entitled	to	receive	a	one-time	fixed	fee	that	is	payable	during	the	pre-opening	period	of	the	hotel.	As	these	services	are	not	a	distinct	performance	obligation,	we recognize	the	fees	on	a	straight-line	basis	over	the	initial	term	of	the	management	or	franchise	agreement	within	the	"Owned,	leased,	and	other	revenue"	caption	of	our Income	Statements.

Practical	Expedients	and	Exemptions:	We	do	not	disclose	the	amount	of	variable	consideration	that	we	expect	to	recognize	in	future	periods	in	the	following circumstances:

(1)	if	we	recognize	the	revenue	based	on	the	amount	invoiced	or	services	performed;

(2)	for	sales-based	or	usage-based	royalty	promised	in	exchange	for	a	license	of	intellectual	property;	or

(3)	if	the	consideration	is	allocated	entirely	to	a	wholly	unsatisfied	promise	to	transfer	a	distinct	service	that	forms	part	of	a	single	performance	obligation,	and	the terms	of	the	consideration	relate	specifically	to	our	efforts	to	transfer,	or	to	a	specific	outcome	from	transferring	the	service.

We	are	required	to	collect	certain	taxes	and	fees	from	customers	on	behalf	of	governmental	agencies	and	remit	these	to	the	applicable	governmental	agencies	on	a periodic	basis.	We	do	not	include	these	taxes	in	determining	the	transaction	price.

# Loyalty	Program.

Loyalty	Program	members	earn	points	based	on	the	money	they	spend	at	our	hotels;	purchases	of	timeshare	interval,	fractional	ownership,	and	residential products;	and	through	participation	in	travel	experiences	and	affiliated	partners'	programs,	such	as	those	offered	by	credit	card,	car	rental,	and	airline	companies. Members	can	redeem	points,	which	we	track	on	their	behalf,	for	stays	at	most	of	our	hotels,	airline	tickets,	airline	frequent	flyer	program	miles,	rental	cars,	and	a	variety of	other	awards.	Points	cannot	be	redeemed	for	cash.

Under	our	Loyalty	Program,	we	have	a	performance	obligation	to	provide	or	arrange	for	the	provision	of	goods	or	services	for	free	or	at	a	discount	to	Loyalty Program	members	in	exchange	for	the	redemption	of	points	earned	from	past	activities.	We	operate	our	Loyalty	Program	as	a	cross-brand	marketing	program	to participating	properties.	Our	management	and	franchise	agreements	require	that	properties	reimburse	us	for	a	portion	of	the	costs	of	operating	the	Loyalty	Program, including	costs	for	marketing,	promotion,	communication	with,	and	performing	member	services	for	Loyalty	Program	members,	with	no	added	mark-up.	We	receive contributions	on	a	monthly	basis	from	managed,	franchised,	owned,	and	leased	hotels	based	on	a	portion	of	qualified	spend	by	Loyalty	Program	members.	We	recognize these	contributions	into	revenue	as	the	points	are	redeemed	and	we	provide	the	related	service.	The	amount	of	revenue	we	recognize	upon	point	redemption	is	impacted by	our	estimate	of	the	"breakage"	for	points	that	members	will	never	redeem.	We	estimate	breakage	based	on	our	historical	experience	and	expectations	of	future member	behavior.	We	recognize	revenue	net	of	the	redemption	cost	within	our	"Cost	reimbursement	revenue"	caption	on	our	Income	Statements,	as	our	performance obligation	is	to	facilitate	the	transaction	between	the	Loyalty	Program	member	and	the	managed	or	franchised	property	or	program	partner.	We	recognize	all	other Loyalty	Program	costs	as	incurred	in	our	"Reimbursed	expenses"	caption.

We	have	multi-year	agreements	for	our	co-brand	credit	cards	associated	with	our	Loyalty	Program.	Under	these	agreements,	we	have	performance	obligations	to provide	a	license	to	the	intellectual	property	associated	with	our	brands	and	marketing	lists	("Licensed	IP")	to	the	financial	institution	that	issues	the	credit	cards,	to arrange	for	the	redemption	of	Loyalty	Program	points	as	discussed	in	the	preceding	paragraph,	and	to	provide	free	night	certificates	to	cardholders.	We	receive	fees	from these	agreements,	including	fixed	amounts	that	are	primarily	payable	at	contract	inception,	and	variable	amounts	that	are	paid	to	us	monthly	over	the	term	of	the agreements,	based	on:	(1)	the	number	of	free	night	certificates	issued	and	redeemed;	(2)	the	number	of	Loyalty	Program	points	purchased;	and	(3)	the	volume	of cardholder	spend.	We	allocate	those	fees	among	the	performance	obligations,	including	the	Licensed	IP,	our	Loyalty	Program	points,	and	free	night	certificates	provided to	cardholders	based	on	their	estimated	standalone	selling	prices.	The	estimation	of	the	standalone	selling	prices	requires	significant	judgments	based	upon	generally accepted	valuation	methodologies	regarding	the	value	of	our	Licensed	IP,	the	amount	of	funding	we	will	receive,	and	the	number	of	Loyalty	Program	points	and	free night	certificates	we	will	issue	over	the	term	of	the	agreements.	We	base	our	estimates	of	these	amounts	on	our	historical	experience	and	expectation	of	future	cardholder behavior.	We	recognize	the	portion	of	the	Licensed	IP	revenue	that	meets	the	sales-based	royalty	criteria	as	the	credit	cards	are	used	and	the	remaining	portion	of	the Licensed	IP	revenue	on	a	straight-line	basis	over	the	contract	term.	In	our	Income	Statements,	we	primarily	recognize	Licensed	IP	revenue	in	the	"Franchise	fees" caption,	and	we	recognize	a	portion	in	the	"Cost	reimbursement	revenue"	caption.	We	recognize	the	revenue	related	to	the	Loyalty	Program	points	as	discussed	in	the preceding	paragraph.	We	recognize	the	revenue	related	to	the	free	night	certificates	when	the	related	service	is	provided.	If	the	free	night	certificate	redemption	involves a	managed	or	franchised	property,	we	recognize	revenue	net	of	the	redemption	cost,	as	our	performance	obligation	is	to	facilitate	the	transaction	between	the	Loyalty Program	member	and	the	managed	or	franchised	property.

Contract	Balances.	We	generally	receive	payments	from	customers	as	we	satisfy	our	performance	obligations.	We	record	a	receivable	when	we	have	an unconditional	right	to	receive	payment	and	only	the	passage	of	time	is	required	before	payment	is	due.	We	record	deferred	revenue	when	we	receive	payment,	or	have the	unconditional	right	to	receive	payment,	in	advance	of	the	satisfaction	of	our	performance	obligations	related	to	franchise	application	and	relicensing	fees,	Global Design	fees,	credit	card	branding	license	fees,	and	our	Loyalty	Program.

Current	and	noncurrent	deferred	revenue	increased	by	$146	million,	to	$831	million	at	December	31,	2018	from	$685	million	at	December	31,	2017,	primarily	as	a result	of	our	Global	Design,	co-brand	credit	card,	and	application	and	relicensing	activities	described	in	the	"Revenue	Recognition"	caption	above.

Our	current	and	noncurrent	Loyalty	Program	liability	increased	by	$521	million,	to	$5,461	million	at	December	31,	2018	from	$4,940	million	at	December	31, 2017,	primarily	reflecting	an	increase	in	points	earned,	partially	offset	by	deferred	revenue	of	$1,897	million	that	we	recognized	in	2018.

# Costs	Incurred	to	Obtain	and	Fulfill	Contracts	with	Customers

We	incur	certain	costs	to	obtain	and	fulfill	contracts	with	customers,	which	we	capitalize	and	amortize	on	a	straight-line	basis	over	the	initial,	non-cancellable	term of	the	contract.	We	classify	incremental	costs	of	obtaining	a	contract	with	a	customer	in	the	"Contract	acquisition	costs	and	other"	caption	of	our	Balance	Sheets,	the related	amortization	in	the	"Contract	investment	amortization"	caption	of	our	Income	Statements,	and	the	cash	flow	impact	in	the	"Contract	acquisition	costs"	caption	of our	Statements	of	Cash	Flows.	We	classify	certain	direct	costs	to	fulfill	a	contract	with	a	customer	in	the	"Other	noncurrent	assets"	caption	of	our	Balance	Sheets,	and the	related	amortization	in	the	"Owned,	leased,	and	other	-	direct	expenses"	caption	of	our	Income	Statements.	We	had	capitalized	costs	to	fulfill	contracts	with customers	of	$324	million	at	December	31,	2018	and	$295	million	at	December	31,	2017.	See	Footnote	12.	Intangible	Assets	and	Goodwill	for	information	on capitalized	costs	incurred	to	obtain	contracts	with	customers.

# Real	Estate	Sales

We	recognize	a	gain	or	loss	on	real	estate	transactions	when	control	of	the	asset	transfers	to	the	buyer,	generally	at	the	time	the	sale	closes.	In	sales	transactions where	we	retain	a	management	contract,	the	terms	and	conditions	of	the	management	contract	are	generally	comparable	to	the	terms	and	conditions	of	the	management contracts	obtained	directly	with	third-party	owners	in	competitive	processes.

# Profit	Sharing	Plan

We	contribute	to	tax-qualified	retirement	plans	for	the	benefit	of	U.S.	employees	who	meet	certain	eligibility	requirements	and	choose	to	participate	in	the	plans. Participating	employees	specify	the	percentage	or	amount	of	salary	they	wish	to	contribute	from	their	compensation,	and	the	Company	typically	makes	discretionary	and certain	other	matching	or	supplemental	contributions.	We	recognized	compensation	costs	from	Company	contributions	of	$224	million	in	2018,	$119	million	in	2017, and	$91	million	in	2016.

# Non-U.S.	Operations

The	U.S.	dollar	is	the	functional	currency	of	our	consolidated	and	unconsolidated	entities	operating	in	the	U.S.	The	functional	currency	of	our	consolidated	and unconsolidated	entities	operating	outside	of	the	U.S.	is	generally	the	principal	currency	of	the	economic	environment	in	which	the	entity	primarily	generates	and expends	cash.	We	translate	the	financial	statements	of	consolidated	entities	whose	functional	currency	is	not	the	U.S.	dollar	into	U.S.	dollars,	and	we	do	the	same,	as needed,	for	unconsolidated	entities	whose	functional	currency	is	not	the	U.S.	dollar.	We	translate	assets	and	liabilities	at	the	exchange	rate	in	effect	as	of	the	financial statement	date	and	translate	income	statement	accounts	using	the	weighted	average	exchange	rate	for	the	period.	We	include	translation	adjustments	from	currency exchange	and	the	effect	of	exchange	rate	changes	on	intercompany	transactions	of	a	long-term	investment	nature	as	a	separate	component	of	shareholders'	equity.	We report	gains	and	losses	from	currency	exchange	rate	changes	for	intercompany	receivables	and	payables	that	are	not	of	a	long-term	investment	nature,	as	well	as	for third-party	transactions,	currently	in	operating	costs	and	expenses.

Our	share-based	compensation	awards	primarily	consist	of	restricted	stock	units	("RSUs").	We	measure	compensation	costs	for	our	share-based	payment transactions	at	fair	value	on	the	grant	date,	and	we	recognize	those	costs	in	our	Financial	Statements	over	the	vesting	period	during	which	the	employee	provides	service in	exchange	for	the	award.

# Advertising	Costs

We	expense	costs	to	produce	advertising	as	they	are	incurred	and	to	communicate	advertising	as	the	communication	occurs	and	record	such	amounts	in	reimbursed expenses	to	the	extent	undertaken	on	behalf	of	our	owners	and	franchisees.	We	recognized	advertising	costs	of	$660	million	in	2018,	$562	million	in	2017,	and	$409 million	in	2016.

We	record	the	amounts	of	taxes	payable	or	refundable	for	the	current	year,	as	well	as	deferred	tax	liabilities	and	assets	for	the	future	tax	consequences	of	events	we have	recognized	in	our	Financial	Statements	or	tax	returns,	using	judgment	in	assessing	future	profitability	and	the	likely	future	tax	consequences	of	those	events.	We base	our	estimates	of	deferred	tax	assets	and	liabilities	on	current	tax	laws,	rates	and	interpretations,	and,	in	certain	cases,	business	plans	and	other	expectations	about future	outcomes.	We	develop	our	estimates	of	future	profitability	based	on	our	historical	data	and	experience,	industry	projections,	micro	and	macro	general	economic condition	projections,	and	our	expectations.

We	generally	recognize	the	effect	of	the	tax	law	changes	in	the	period	of	enactment.	Changes	in	existing	tax	laws	and	rates,	their	related	interpretations,	and	the uncertainty	generated	by	the	current	economic	environment	may	affect	the	amounts	of	our	deferred	tax	liabilities	or	the	valuations	of	our	deferred	tax	assets	over	time. Our	accounting	for	deferred	tax	consequences	represents	management's	best	estimate	of	future	events	that	can	be	appropriately	reflected	in	the	accounting	estimates.

For	tax	positions	we	have	taken	or	expect	to	take	in	a	tax	return,	we	apply	a	more	likely	than	not	threshold,	under	which	we	must	conclude	a	tax	position	is	more likely	than	not	to	be	sustained,	assuming	that	the	position	will	be	examined	by	the	appropriate	taxing	authority	that	has	full	knowledge	of	all	relevant	information,	to continue	to	recognize	the	benefit.	In	determining	our	provision	for	income	taxes,	we	use	judgment,	reflecting	our	estimates	and	assumptions,	in	applying	the	more	likely than	not	threshold.	We	recognize	accrued	interest	and	penalties	for	our	unrecognized	tax	benefits	as	a	component	of	tax	expense.	See	Footnote	6.	Income	Taxes	for further	information.

# Cash	and	Equivalents

We	consider	all	highly	liquid	investments	with	an	initial	maturity	of	three	months	or	less	at	date	of	purchase	to	be	cash	equivalents.

# Accounts	Receivable

Our	accounts	receivable	primarily	consist	of	amounts	due	from	hotel	owners	with	whom	we	have	management	and	franchise	agreements	and	include reimbursements	of	costs	we	incurred	on	behalf	of	managed	and	franchised	properties.	We	generally	collect	these	receivables	within	30	days.	We	record	an	accounts receivable	reserve	when	losses	are	probable,	based	on	an	assessment	of	historical	collection	activity	and	current	business	conditions.	Our	accounts	receivable	reserve was	$66	million	at	year-end	2018	and	$46	million	at	year-end	2017.

# Assets	Held	for	Sale

We	consider	properties	to	be	assets	held	for	sale	when	(1)	management	commits	to	a	plan	to	sell	the	property;	(2)	it	is	unlikely	that	the	disposal	plan	will	be significantly	modified	or	discontinued;	(3)	the	property	is	available	for	immediate	sale	in	its	present	condition;	(4)	actions	required	to	complete	the	sale	of	the	property have	been	initiated;	(5)	sale	of	the	property	is	probable	and	we	expect	the	completed	sale	will	occur	within	one	year;	and	(6)	the	property	is	actively	being	marketed	for sale	at	a	price	that	is	reasonable	given	our	estimate	of	current	market	value.	Upon	designation	of	a	property	as	an	asset	held	for	sale,	we	record	the	property's	value	at	the lower	of	its	carrying	value	or	its	estimated	fair	value,	less	estimated	costs	to	sell,	and	we	cease	depreciation.

# Goodwill

We	test	goodwill	for	potential	impairment	at	least	annually	in	the	fourth	quarter,	or	more	frequently	if	an	event	or	other	circumstance	indicates	that	we	may	not	be able	to	recover	the	carrying	amount	of	the	net	assets	of	the	reporting	unit.	In	evaluating	goodwill	for	impairment,	we	may	assess	qualitative	factors	to	determine	whether it	is	more	likely	than	not	(that	is,	a	likelihood	of	more	than	50	percent)	that	the	fair	value	of	a	reporting	unit	is	less	than	its	carrying	amount.	If	we	bypass	the	qualitative assessment,	or	if	we	conclude	that	it	is	more	likely	than	not	that	the	fair	value	of	a	reporting	unit	is	less	than	its	carrying	value,	then	we	perform	a	quantitative impairment	test	by	comparing	the	fair	value	of	a	reporting	unit	with	its	carrying	amount.

We	calculate	the	estimated	fair	value	of	a	reporting	unit	using	a	weighting	of	the	income	and	market	approaches.	For	the	income	approach,	we	use	internally developed	discounted	cash	flow	models	that	include	the	following	assumptions,	among	others:	projections	of	revenues,	expenses,	and	related	cash	flows	based	on assumed	long-term	growth	rates	and	demand	trends;	expected	future	investments	to	grow	new	units;	and	estimated	discount	rates.	For	the	market	approach,	we	use internal	analyses	based	primarily	on	market	comparables.	We	base	these	assumptions	on	our	historical	data	and	experience,	third-party	appraisals,	industry	projections, micro	and	macro	general	economic	condition	projections,	and	our	expectations.

We	have	had	no	goodwill	impairment	charges	for	the	last	three	fiscal	years.

# Intangibles	and	Long-Lived	Assets

We	assess	indefinite-lived	intangible	assets	for	potential	impairment	and	continued	indefinite	use	annually,	or	more	frequently	if	an	event	or	other	circumstance indicates	that	we	may	not	be	able	to	recover	the	carrying	amount	of	the	asset.	Like	goodwill,	we	may	first	assess	qualitative	factors	to	determine	whether	it	is	more	likely than	not	that	the	fair	value	of	the	indefinite-lived	intangible	is	less	than	its	carrying	amount.	If	the	carrying	value	of	the	asset	exceeds	the	fair	value,	we	recognize	an impairment	loss	in	the	amount	of	that	excess.

We	test	definite-lived	intangibles	and	long-lived	asset	groups	for	recoverability	when	changes	in	circumstances	indicate	that	we	may	not	be	able	to	recover	the carrying	value;	for	example,	when	there	are	material	adverse	changes	in	projected	revenues	or	expenses,	significant	underperformance	relative	to	historical	or	projected operating	results,	or	significant	negative	industry	or	economic	trends.	We	also	test	recoverability	when	management	has	committed	to	a	plan	to	sell	or	otherwise	dispose of	an	asset	group	and	we	expect	to	complete	the	plan	within	a	year.	We	evaluate	recoverability	of	an	asset	group	by	comparing	its	carrying	value	to	the	future	net undiscounted	cash	flows	that	we	expect	the	asset	group	will	generate.	If	the	comparison	indicates	that	we	will	not	be	able	to	recover	the	carrying	value	of	an	asset	group, we	recognize	an	impairment	loss	for	the	amount	by	which	the	carrying	value	exceeds	the	estimated	fair	value.	When	we	recognize	an	impairment	loss	for	assets	to	be held	and	used,	we	depreciate	the	adjusted	carrying	amount	of	those	assets	over	their	remaining	useful	life.

We	calculate	the	estimated	fair	value	of	an	intangible	asset	or	asset	group	using	the	income	approach	or	the	market	approach.	We	utilize	the	same	assumptions	and methodology	for	the	income	approach	that	we	describe	in	the	"Goodwill"	caption.	For	the	market	approach,	we	use	internal	analyses	based	primarily	on	market comparables	and	assumptions	about	market	capitalization	rates,	growth	rates,	and	inflation.

# Investments

We	hold	equity	interests	in	ventures	established	to	develop	or	acquire	and	own	hotel	properties	or	that	otherwise	support	our	hospitality	operations.	We	account	for these	investments	as	either	an	equity	method	investment,	a	financial	asset,	or	a	controlled	subsidiary.	We	apply	the	equity	method	of	accounting	if	we	have	significant influence	over	the	entity,	typically	when	we	hold	20	percent	of	the	voting	common	stock	(or	equivalent)	of	an	investee	but	do	not	have	a	controlling	financial	interest.	In certain	circumstances,	such	as	with	investments	in	limited	liability	or	limited	partnerships,	we	apply	the	equity	method	of	accounting	when	we	own	as	little	as	three	to five	percent.	We	account	for	financial	assets	at	fair	value	if	it	is	readily	determinable,	or	using	the	fair	value	alternative	method,	whereby	investments	are	measured	at cost	less	impairment,	adjusted	for	observable	price	changes.	We	consolidate	entities	that	we	control.

When	we	acquire	an	investment	that	qualifies	for	the	equity	method	of	accounting,	we	determine	the	acquisition	date	fair	value	of	the	identifiable	assets	and liabilities.	If	our	carrying	amount	exceeds	our	proportional	share	in	the	equity	of	the	investee,	we	amortize	the	difference	on	a	straight-line	basis	over	the	underlying assets'	estimated	useful	lives	when	calculating	equity	method	earnings	attributable	to	us,	excluding	the	difference	attributable	to	land,	which	we	do	not	amortize.

We	evaluate	an	investment	for	impairment	when	circumstances	indicate	that	we	may	not	be	able	to	recover	the	carrying	value.	When	evaluating	our	ventures,	we consider	loan	defaults,	significant	underperformance	relative	to	historical	or	projected	operating	performance,	or	significant	negative	industry	or	economic	trends. Additionally,	a	venture's	commitment	to	a	plan	to	sell	some	or	all	of	its	assets	could	cause	us	to	evaluate	the	recoverability	of	the	venture's	individual	long-lived	assets and	possibly	the	venture	itself.	We	impair	investments	we	account	for	using	the	equity	method	of	accounting	when	we	determine	that	there	has	been	an	"other-than- temporary"	decline	in	the	venture's	estimated	fair	value	compared	to	its	carrying	value.	We	perform	qualitative	assessments	for	investments	we	account	for	using	the	fair value	alternative	method	and	we	record	any	associated	impairment	when	the	fair	value	is	less	than	the	carrying	value.

Under	the	accounting	guidance	for	the	consolidation	of	variable	interest	entities,	we	analyze	our	variable	interests,	including	equity	investments,	loans,	and guarantees,	to	determine	if	an	entity	in	which	we	have	a	variable	interest	is	a	variable	interest	entity.	Our	analysis	includes	both	quantitative	and	qualitative	reviews.	We base	our	quantitative	analysis	on	the	forecasted	cash	flows	of	the	entity,	and	our	qualitative	analysis	on	our	review	of	the	design	of	the	entity,	its	organizational	structure including	decision-making	ability,	and	relevant	financial	agreements.	We	also	use	our	qualitative	analysis	to	determine	if	we	must	consolidate	a	variable	interest	entity as	its	primary	beneficiary.

# Fair	Value	Measurements

We	have	various	financial	instruments	we	must	measure	at	fair	value	on	a	recurring	basis,	including	certain	marketable	securities	and	derivatives.	See	Footnote	15. Fair	Value	of	Financial	Instruments	for	further	information.	We	also	apply	the	provisions	of	fair	value	measurement	to	various	nonrecurring	measurements	for	our financial	and	nonfinancial	assets	and	liabilities.

Accounting	standards	define	fair	value	as	the	price	that	would	be	received	to	sell	an	asset	or	paid	to	transfer	a	liability	in	an	orderly	transaction	between	market participants	at	the	measurement	date	(an	exit	price).	We	measure	our	assets	and	liabilities	using	inputs	from	the	following	three	levels	of	the	fair	value	hierarchy:

Level	1	inputs	are	unadjusted	quoted	prices	in	active	markets	for	identical	assets	or	liabilities	that	we	have	the	ability	to	access	at	the	measurement	date.

Level	2	inputs	include	quoted	prices	for	similar	assets	and	liabilities	in	active	markets,	quoted	prices	for	identical	or	similar	assets	or	liabilities	in	markets	that are	not	active,	inputs	other	than	quoted	prices	that	are	observable	for	the	asset	or	liability	(i.e.,	interest	rates,	yield	curves,	etc.),	and	inputs	that	are	derived principally	from	or	corroborated	by	observable	market	data	by	correlation	or	other	means	(market	corroborated	inputs).

Level	3	includes	unobservable	inputs	that	reflect	our	assumptions	about	what	factors	market	participants	would	use	in	pricing	the	asset	or	liability.	We	develop these	inputs	based	on	the	best	information	available,	including	our	own	data.

# Derivative	Instruments

We	record	derivatives	at	fair	value.	The	designation	of	a	derivative	instrument	as	a	hedge	and	its	ability	to	meet	the	hedge	accounting	criteria	determine	how	we reflect	the	change	in	fair	value	of	the	derivative	instrument	in	our	Financial	Statements.	A	derivative	qualifies	for	hedge	accounting	if,	at	inception,	we	expect	the derivative	will	be	highly	effective	in	offsetting	the	underlying	hedged	cash	flows	or	fair	value	and	we	fulfill	the	hedge	documentation	standards	at	the	time	we	enter	into the	derivative	contract.	We	designate	a	hedge	as	a	cash	flow	hedge,	fair	value	hedge,	or	a	net	investment	in	non-U.S.	operations	hedge	based	on	the	exposure	we	are hedging.	For	the	effective	portion	of	qualifying	cash	flow	hedges,	we	record	changes	in	fair	value	in	other	comprehensive	income	("OCI").	We	release	the	derivative's gain	or	loss	from	OCI	to	match	the	timing	of	the	underlying	hedged	items'	effect	on	earnings.

We	review	the	effectiveness	of	our	hedging	instruments	quarterly,	recognize	current	period	hedge	ineffectiveness	immediately	in	earnings,	and	discontinue	hedge accounting	for	any	hedge	that	we	no	longer	consider	to	be	highly	effective.	We	recognize	changes	in	fair	value	for	derivatives	not	designated	as	hedges	or	those	not qualifying	for	hedge	accounting	in	current	period	earnings.	Upon	termination	of	cash	flow	hedges,	we	release	gains	and	losses	from	OCI	based	on	the	timing	of	the underlying	cash	flows	or	revenue	recognized,	unless	the	termination	results	from	the	failure	of	the	intended	transaction	to	occur	in	the	expected	time	frame.	Such untimely	transactions	require	us	to	immediately	recognize	in	earnings	the	gains	and/or	losses	that	we	previously	recorded	in	OCI.

Changes	in	interest	rates,	currency	exchange	rates,	and	equity	securities	expose	us	to	market	risk.	We	manage	our	exposure	to	these	risks	by	monitoring	available financing	alternatives,	as	well	as	through	development	and	application	of	credit	granting	policies.	We	also	use	derivative	instruments,	including	cash	flow	hedges,	net investment	in	non-U.S.	operations	hedges,	fair	value	hedges,	and	other	derivative	instruments,	as	part	of	our	overall	strategy	to	manage	our	exposure	to	market	risks.	As a	matter	of	policy,	we	only	enter	into	transactions	that	we	believe	will	be	highly	effective	at	offsetting	the	underlying	risk,	and	we	do	not	use	derivatives	for	trading	or speculative	purposes.

# Loan	Loss	Reserves

We	may	make	senior,	mezzanine,	and	other	loans	to	owners	of	hotels	that	we	operate	or	franchise,	generally	to	facilitate	the	development	of	a	hotel	and	sometimes to	facilitate	brand	programs	or	initiatives.	We	expect	the	owners	to	repay	the	loans	in	accordance	with	the	loan	agreements,	or	earlier	as	the	hotels	mature	and	capital markets	permit.	We	use	metrics	such	as	loan-to-value	ratios	and	debt	service	coverage,	and	other	information	about	collateral	and	from	third	party	rating	agencies	to assess	the	credit	quality	of	the	loan	receivable,	both	upon	entering	into	the	loan	agreement	and	on	an	ongoing	basis	as	applicable.

On	a	regular	basis,	we	individually	assess	loans	for	impairment.	We	use	internally	generated	cash	flow	projections	to	determine	if	we	expect	the	loans	will	be repaid	under	the	terms	of	the	loan	agreements.	If	we	conclude	that	it	is	probable	a	borrower	will	not	repay	a	loan	in	accordance	with	its	terms,	we	consider	the	loan impaired	and	begin	recognizing	interest	income	on	a	cash	basis.	To	measure	impairment,	we	calculate	the	present	value	of	expected	future	cash	flows	discounted	at	the loan's	original	effective	interest	rate	or	the	estimated	fair	value	of	the	collateral.	If	the	present	value	or	the	estimated	collateral	is	less	than	the	carrying	value	of	the	loan receivable,	we	establish	a	specific	impairment	reserve	for	the	difference.

If	it	is	likely	that	a	loan	will	not	be	collected	based	on	financial	or	other	business	indicators,	including	our	historical	experience,	our	policy	is	to	charge	off	the loan	in	the	quarter	in	which	we	deem	it	uncollectible.

# Guarantees

We	measure	and	record	our	liability	for	the	fair	value	of	a	guarantee	on	a	nonrecurring	basis,	that	is	when	we	issue	or	modify	a	guarantee,	using	Level	3	internally developed	inputs,	as	described	above	in	this	footnote	under	the	heading	"Fair	Value	Measurements."	We	base	our	calculation	of	the	estimated	fair	value	of	a	guarantee on	the	income	approach	or	the	market	approach,	depending	on	the	type	of	guarantee.	For	the	income	approach,	we	use	internally	developed	discounted	cash	flow	and Monte	Carlo	simulation	models	that	include	the	following	assumptions,	among	others:	projections	of	revenues	and	expenses	and	related	cash	flows	based	on	assumed growth	rates	and	demand	trends;	historical	volatility	of	projected	performance;	the	guaranteed	obligations;	and	applicable	discount	rates.	We	base	these	assumptions	on our	historical	data	and	experience,

industry	projections,	micro	and	macro	general	economic	condition	projections,	and	our	expectations.	For	the	market	approach,	we	use	internal	analyses	based	primarily on	market	comparable	data	and	our	assumptions	about	market	capitalization	rates,	credit	spreads,	growth	rates,	and	inflation.

The	offsetting	entry	for	the	guarantee	liability	depends	on	the	circumstances	in	which	the	guarantee	was	issued.	Funding	under	the	guarantee	reduces	the	recorded liability.	In	most	cases,	when	we	do	not	forecast	any	funding,	we	amortize	the	liability	into	income	on	a	straight-line	basis	over	the	remaining	term	of	the	guarantee.	On	a quarterly	basis,	we	evaluate	all	material	estimated	liabilities	based	on	the	operating	results	and	the	terms	of	the	guarantee.	If	we	conclude	that	it	is	probable	that	we	will be	required	to	fund	a	greater	amount	than	previously	estimated,	we	record	a	loss	except	to	the	extent	that	the	applicable	contracts	provide	that	the	advance	can	be recovered	as	a	loan.

# Self-Insurance	Programs

We	self-insure	for	certain	levels	of	liability,	workers'	compensation,	and	employee	medical	coverage.	We	accrue	estimated	costs	of	these	self-insurance	programs at	the	present	value	of	projected	settlements	for	known	and	incurred	but	not	reported	claims.	We	use	a	discount	rate	of	three	percent	to	determine	the	present	value	of	the projected	settlements,	which	we	consider	to	be	reasonable	given	our	history	of	settled	claims,	including	payment	patterns	and	the	fixed	nature	of	the	individual settlements.

# Legal	Contingencies

We	are	subject	to	various	legal	proceedings	and	claims,	the	outcomes	of	which	are	uncertain.	We	record	an	accrual	for	legal	contingencies	when	we	determine	that it	is	probable	that	we	have	incurred	a	liability	and	we	can	reasonably	estimate	the	amount	of	the	loss.	In	making	such	determinations	we	evaluate,	among	other	things, the	probability	of	an	unfavorable	outcome	and,	when	we	believe	it	probable	that	a	liability	has	been	incurred,	our	ability	to	make	a	reasonable	estimate	of	the	loss.	We review	these	accruals	each	reporting	period	and	make	revisions	based	on	changes	in	facts	and	circumstances.

# Business	Combinations

We	allocate	the	purchase	price	of	an	acquisition	to	the	tangible	and	intangible	assets	acquired	and	liabilities	assumed	based	on	their	estimated	fair	values	at	the acquisition	date.	We	recognize	as	goodwill	the	amount	by	which	the	purchase	price	of	an	acquired	entity	exceeds	the	net	of	the	fair	values	assigned	to	the	assets	acquired and	liabilities	assumed.	In	determining	the	fair	values	of	assets	acquired	and	liabilities	assumed,	we	use	various	recognized	valuation	methods	including	the	income	and market	approaches.	Further,	we	make	assumptions	within	certain	valuation	techniques,	including	discount	rates,	royalty	rates,	and	the	amount	and	timing	of	future	cash flows.	We	record	the	net	assets	and	results	of	operations	of	an	acquired	entity	in	our	Financial	Statements	from	the	acquisition	date.	We	initially	perform	these valuations	based	upon	preliminary	estimates	and	assumptions	by	management	or	independent	valuation	specialists	under	our	supervision,	where	appropriate,	and	make revisions	as	estimates	and	assumptions	are	finalized.	We	expense	acquisition-related	costs	as	we	incur	them.	See	Footnote	3.	Dispositions	and	Acquisitions	for	additional information.

# New	Accounting	Standards	Not	Yet	Adopted

Accounting	Standards	Update	("ASU")	2016-02	"Leases"	(Topic	842).	ASU	2016-02	introduces	a	lessee	model	that	brings	substantially	all	leases	onto	the	balance sheet.	Under	the	new	standard,	a	lessee	will	recognize	on	its	balance	sheet	a	lease	liability	and	a	right-of-use	asset	for	most	leases,	including	operating	leases.	The	new standard	will	also	distinguish	leases	as	either	finance	leases	or	operating	leases.	This	distinction	will	affect	how	leases	are	measured	and	presented	in	the	income statement	and	statement	of	cash	flows.	We	will	adopt	the	standard	using	the	modified	retrospective	transition	method	as	of	January	1,	2019,	and	we	will	not	apply	the standard	to	the	comparative	periods	presented	in	the	year	of	adoption.

We	are	still	assessing	the	potential	impact	that	ASU	2016-02	will	have	on	our	financial	statements	and	disclosures,	but	we	expect	that	we	will	recognize	right-of- use	lease	assets	and	related	lease	liabilities	for	operating	leases	in	the	range	of	$1.0	billion	to	$1.1	billion,	with	no	impact	to	our	Income	Statements	or	Statements	of	Cash Flows.	Our	estimate	represents	the	net	present	value	of	lease	payments	from	operating	leases	that	commenced	on	or	before	December	31,	2018.	We	do	not	expect	any changes	related	to	our	current	capital	lease	portfolio,	which	will	be	titled	"finance	leases"	under	ASU	2016-02.

# New	Accounting	Standards	Adopted

ASU	2016-18	"Restricted	Cash"	(Topic	230).	ASU	2016-18	requires	companies	to	include	restricted	cash	with	cash	and	cash	equivalents	when	reconciling beginning	and	ending	amounts	shown	on	the	statement	of	cash	flows.	We	adopted	ASU	2016-18	in	the	2018	first	quarter	using	the	retrospective	transition	method,	and accordingly,	we	revised	prior	period	amounts,	as	shown	in	the	"Statements	of	Cash	Flows"	table	below.

ASU	2016-16	"Accounting	for	Income	Taxes:	Intra-Entity	Transfers	of	Assets	Other	than	Inventory"	(Topic	740).	ASU	2016-16	requires	companies	to	recognize the	income	tax	effects	of	intercompany	sales	of	assets	other	than	inventory	when	the	transfer	occurs.	We	adopted	ASU	2016-16	in	the	2018	first	quarter	using	the modified	retrospective	transition	method	and	recorded	an	adjustment	of	$372	million	for	the	cumulative	effect	to	retained	earnings	at	January	1,	2018.

ASU	2016-15	"Classification	of	Certain	Cash	Receipts	and	Cash	Payments"	(Topic	230).	ASU	2016-15	specifies	how	certain	cash	receipts	and	payments	are	to be	classified	in	the	statement	of	cash	flows	and	primarily	impacts	our	presentation	of	cash	outflows	for	commercial	paper.	Under	ASU	2016-15,	we	are	required	to attribute	a	portion	of	the	payments	to	accreted	interest	and	classify	that	portion	as	cash	outflows	for	operating	activities.	We	adopted	ASU	2016-15	in	the	2018	first quarter	using	the	retrospective	transition	method,	and	accordingly,	we	revised	prior	period	amounts,	as	shown	in	the	"Statements	of	Cash	Flows"	table	below.

ASU	2016-01	"Recognition	and	Measurement	of	Financial	Assets	and	Financial	Liabilities"	(Topic	825).	ASU	2016-01	eliminates	the	available-for-sale classification	for	equity	investments	and	requires	companies	to	measure	equity	investments	at	fair	value	and	recognize	any	changes	in	the	fair	value	in	net	income.	We adopted	ASU	2016-01	in	the	2018	first	quarter	using	the	modified	retrospective	transition	method	and	recorded	a	cumulative-effect	adjustment	of	$4	million	to	retained earnings	at	January	1,	2018.

ASU	2014-09	"Revenue	from	Contracts	with	Customers"	(Topic	606).	ASU	2014-09	and	several	related	ASUs	(collectively	referred	to	as	"ASU	2014-09") supersede	the	revenue	recognition	requirements	in	Topic	605,	Revenue	Recognition,	as	well	as	most	industry-specific	guidance,	and	provide	a	principles-based, comprehensive	framework	in	Topic	606,	Revenue	from	Contracts	with	Customers.	ASU	2014-09	also	specifies	the	accounting	for	certain	costs	to	obtain	or	fulfill	a contract	with	a	customer	and	provides	enhanced	disclosure	requirements.	We	adopted	ASU	2014-09	in	the	2018	first	quarter	using	the	full	retrospective	transition method.

When	we	adopted	ASU	2014-09,	we	applied	the	following	expedients	and	exemptions,	which	are	allowed	by	the	standard,	to	our	prior	period	Financial	Statements and	disclosures:

•We	used	the	transaction	price	at	the	date	of	contract	completion	for	our	contracts	that	had	variable	consideration	and	were	completed	before	January	1, 2018.

•We	considered	the	aggregate	effect	of	all	contract	modifications	that	occurred	before	January	1,	2016	when:	(1)	identifying	satisfied	and	unsatisfied performance	obligations;	(2)	determining	the	transaction	price;	and	(3)	allocating	the	transaction	price	to	the	satisfied	and	unsatisfied	performance	obligations.

•We	did	not:	(1)	disclose	the	amount	of	the	transaction	price	that	we	allocated	to	remaining	performance	obligations;	or	(2)	include	an	explanation	of	when	we expect	to	recognize	the	revenue	allocated	to	remaining	performance	obligations.

The	following	tables	present	the	effect	of	the	adoption	of	ASUs	2014-09,	2016-15,	and	2016-18	on	our	2017	and	2016	Financial	Statements.	Throughout	this report,	our	2017	and	2016	financial	results	reflect	the	"As	Adjusted"	amounts	shown	in	the	tables	below.	See	the	Consolidated	Statements	of	Shareholders'	Equity	for	the impact	of	the	adoption	of	new	accounting	standards	on	our	shareholders'	equity.

# Income	Statements

|  | Twelve	Months	Ended	December	31,	2017 | Twelve	Months	Ended	December	31,	2017 |  | Twelve	Months	Ended	December	31,	2016 | Twelve	Months	Ended	December	31,	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions,\texcept\tper\tshare\tamounts) | As\tPreviously\nReported | Adoption\tof\tASU\n2014-09 | As\tAdjusted | As\tPreviously\nReported | Adoption\tof\tASU\n2014-09 | As\tAdjusted |
| REVENUES |  |  |  |  |  |  |
| Base\tmanagement\tfees | $1,102 | $— | $1,102 | $806 | $— | $806 |
| Franchise\tfees | 1,618 | (32) | 1,586 | 1,169 | (12) | 1,157 |
| Incentive\tmanagement\tfees | 607 | — | 607 | 425 | — | 425 |
| Gross\tfee\trevenues | 3,327 | (32) | 3,295 | 2,400 | (12) | 2,388 |
| Contract\tinvestment\tamortization | — | (50) | (50) | — | (40) | (40) |
| Net\tfee\trevenues | 3,327 | (82) | 3,245 | 2,400 | (52) | 2,348 |
| Owned,\tleased,\tand\tother\trevenue | 1,802 | (50) | 1,752 | 1,126 | (1) | 1,125 |
| Cost\treimbursement\trevenue | 17,765 | (2,310) | 15,455 | 13,546 | (1,612) | 11,934 |
|  | 22,894 | (2,442) | 20,452 | 17,072 | (1,665) | 15,407 |
| OPERATING\tCOSTS\tAND\tEXPENSES |  |  |  |  |  |  |
| Owned,\tleased,\tand\tother-direct | 1,427 | (16) | 1,411 | 900 | 1 | 901 |
| Depreciation,\tamortization,\tand\tother | 290 | (61) | 229 | 168 | (49) | 119 |
| General,\tadministrative,\tand\tother | 894 | 27 | 921 | 704 | 39 | 743 |
| Merger-related\tcosts\tand\tcharges | 159 | — | 159 | 386 | — | 386 |
| Reimbursed\texpenses | 17,765 | (2,537) | 15,228 | 13,546 | (1,712) | 11,834 |
|  | 20,535 | (2,587) | 17,948 | 15,704 | (1,721) | 13,983 |
| OPERATING\tINCOME | 2,359 | 145 | 2,504 | 1,368 | 56 | 1,424 |
| Gains\tand\tother\tincome,\tnet | 688 | — | 688 | 5 | — | 5 |
| Interest\texpense | (288) | — | (288) | (234) | — | (234) |
| Interest\tincome | 38 | — | 38 | 35 | — | 35 |
| Equity\tin\tearnings | 39 | 1 | 40 | 10 | (1) | 9 |
| INCOME\tBEFORE\tINCOME\tTAXES | 2,836 | 146 | 2,982 | 1,184 | 55 | 1,239 |
| Provision\tfor\tincome\ttaxes | (1,464) | (59) | (1,523) | (404) | (27) | (431) |
| NET\tINCOME | $1,372 | $87 | $1,459 | $780 | $28 | $808 |
| EARNINGS\tPER\tSHARE |  |  |  |  |  |  |
| Earnings\tper\tshare\t-\tbasic | $3.66 | $0.23 | $3.89 | $2.68 | $0.10 | $2.78 |
| Earnings\tper\tshare\t-\tdiluted | $3.61 | $0.23 | $3.84 | $2.64 | $0.09 | $2.73 |

# Statements	of	Comprehensive	Income

|  | Twelve	Months	Ended	December	31,	2017 | Twelve	Months	Ended	December	31,	2017 |  | Twelve	Months	Ended	December	31,	2016 | Twelve	Months	Ended	December	31,	2016 | Twelve	Months	Ended	December	31,	2016 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions) | As\tPreviously\nReported | Adoption\tof\tASU\n2014-09 | As\tAdjusted | As\tPreviously\nReported | Adoption\tof\tASU\n2014-09 | As\tAdjusted |
| Net\tincome | $1,372 | $87 | $1,459 | $780 | $28 | $808 |
| Other\tcomprehensive\tincome\t(loss): |  |  |  |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments | 478 | — | 478 | (311) | — | (311) |
| Derivative\tinstrument\tadjustments,\tnet\tof\ttax | (14) | — | (14) | 1 | — | 1 |
| Unrealized\t(loss)\tgain\ton\tavailable-for-sale\tsecurities,\nnet\tof\ttax | (2) | — | (2) | 2 | — | 2 |
| Pension\tand\tpostretirement\tadjustments,\tnet\tof\ttax | 7 | — | 7 | 5 | — | 5 |
| Reclassification\tof\tlosses,\tnet\tof\ttax | 11 | — | 11 | 2 | — | 2 |
| Total\tother\tcomprehensive\tincome\t(loss),\tnet\tof\ttax | 480 | — | 480 | (301) | — | (301) |
| Comprehensive\tincome | $1,852 | $87 | $1,939 | $479 | $28 | $507 |

# Balance	Sheets

| ($	in	millions) | December	31,	2017<br>(As	Previously<br>Reported)	(1) | Adoption	of	ASU	2014-09 | December	31,	2017<br>(As	Adjusted) |
| :--- | :--- | :--- | :--- |
| ASSETS |  |  |  |
| Current\tassets |  |  |  |
| Cash\tand\tequivalents | $383 | $— | $383 |
| Accounts\tand\tnotes\treceivable,\tnet | 1,999 | (26) | 1,973 |
| Prepaid\texpenses\tand\tother | 216 | 19 | 235 |
| Assets\theld\tfor\tsale | 149 | — | 149 |
|  | 2,747 | (7) | 2,740 |
| Property\tand\tequipment,\tnet | 1,793 | — | 1,793 |
| Intangible\tassets |  |  |  |
| Brands | 5,922 | — | 5,922 |
| Contract\tacquisition\tcosts\tand\tother | 2,884 | (262) | 2,622 |
| Goodwill | 9,207 | — | 9,207 |
|  | 18,013 | (262) | 17,751 |
| Equity\tmethod\tinvestments | 735 | (1) | 734 |
| Notes\treceivable,\tnet | 142 | — | 142 |
| Deferred\ttax\tassets | 93 | — | 93 |
| Other\tnoncurrent\tassets | 426 | 167 | 593 |
|  | $23,949 | $(103) | $23,846 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |  |
| Current\tliabilities |  |  |  |
| Current\tportion\tof\tlong-term\tdebt | $398 | $— | $398 |
| Accounts\tpayable | 783 | — | 783 |
| Accrued\tpayroll\tand\tbenefits | 1,214 | — | 1,214 |
| Liability\tfor\tguest\tloyalty\tprogram | 2,064 | 57 | 2,121 |
| Accrued\texpenses\tand\tother | 1,541 | (250) | 1,291 |
|  | 6,000 | (193) | 5,807 |
| Long-term\tdebt | 7,840 | — | 7,840 |
| Liability\tfor\tguest\tloyalty\tprogram | 2,876 | (57) | 2,819 |
| Deferred\ttax\tliabilities | 604 | 1 | 605 |
| Deferred\trevenue | 145 | 438 | 583 |
| Other\tnoncurrent\tliabilities | 2,753 | (143) | 2,610 |
| Shareholders'\tequity |  |  |  |
| Class\tA\tCommon\tStock | 5 | — | 5 |
| Additional\tpaid-in-capital | 5,770 | — | 5,770 |
| Retained\tearnings | 7,391 | (149) | 7,242 |
| Treasury\tstock,\tat\tcost | (9,418) | — | (9,418) |
| Accumulated\tother\tcomprehensive\tloss | (17) | — | (17) |
|  | 3,731 | (149) | 3,582 |
|  | $23,949 | $(103) | $23,846 |

(1) Includes	reclassifications	among	various	captions,	including	Deferred	revenue	and	Other	noncurrent	liabilities,	to	conform	to	current	period	presentation.

# Statements	of	Cash	Flows

|  | Twelve	Months	Ended	December	31,	2017 | Twelve	Months	Ended	December	31,	2017 | Twelve	Months	Ended	December	31,	2017 | Twelve	Months	Ended	December	31,	2017 | Twelve	Months	Ended	December	31,	2016 | Twelve	Months	Ended	December	31,	2016 | Twelve	Months	Ended	December	31,	2016 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  | ASUs |  |  |  | ASUs |  |
|  |  |  | 2016-18 |  |  |  | 2016-18 |  |
|  | As\tPreviously | ASU | and\t2016- |  | As\tPreviously | ASU | and\t2016- |  |
| ($\tin\tmillions) | Reported | 2014-09 | 15 | As\tAdjusted | Reported | 2014-09 | 15 | As\tAdjusted |
| OPERATING\tACTIVITIES |  |  |  |  |  |  |  |  |
| Net\tincome | $1,372 | $87 | $— | $1,459 | $780 | $28 | $— | $808 |
| Adjustments\tto\treconcile\tto\tcash\tprovided\tby\toperating\tactivities: |  |  |  |  |  |  |  |  |
| Depreciation,\tamortization,\tand\tother | 290 | (11) | — | 279 | 168 | (9) | — | 159 |
| Share-based\tcompensation | 181 | — | — | 181 | 212 | — | — | 212 |
| Income\ttaxes | 828 | 59 | — | 887 | 76 | 27 | — | 103 |
| Liability\tfor\tguest\tloyalty\tprogram | 378 | (80) | — | 298 | 343 | (122) | — | 221 |
| Contract\tacquisition\tcosts | — | (185) | — | (185) | — | (76) | — | (76) |
| Merger-related\tcharges | (124) | — | — | (124) | 113 | 96 | — | 209 |
| Working\tcapital\tchanges | 81 | (128) | 17 | (30) | (77) | (24) | (5) | (106) |
| Gain\ton\tasset\tdispositions | (687) | — | — | (687) | 1 | — | — | 1 |
| Other | 117 | 67 | (35) | 149 | 66 | 30 | (8) | 88 |
| Net\tcash\tprovided\tby\t(used\tin)\toperating\tactivities | 2,436 | (191) | (18) | 2,227 | 1,682 | (50) | (13) | 1,619 |
| INVESTING\tACTIVITIES |  |  |  |  |  |  |  |  |
| Acquisition\tof\ta\tbusiness,\tnet\tof\tcash\tacquired | — | — | — | — | (2,412) | — | 20 | (2,392) |
| Capital\texpenditures | (240) | — | — | (240) | (199) | — | — | (199) |
| Dispositions | 1,418 | — | — | 1,418 | 218 | — | (7) | 211 |
| Loan\tadvances | (93) | — | — | (93) | (32) | — | — | (32) |
| Loan\tcollections | 187 | — | — | 187 | 67 | — | — | 67 |
| Contract\tacquisition\tcosts | (189) | 189 | — | — | (80) | 80 | — | — |
| Other | (63) | 2 | — | (61) | 29 | (30) | — | (1) |
| Net\tcash\tprovided\tby\t(used\tin)\tinvesting\tactivities | 1,020 | 191 | — | 1,211 | (2,409) | 50 | 13 | (2,346) |
| FINANCING\tACTIVITIES |  |  |  |  |  |  |  |  |
| Commercial\tpaper/Credit\tFacility,\tnet | 25 | — | 35 | 60 | 1,365 | — | 8 | 1,373 |
| Issuance\tof\tlong-term\tdebt | — | — | — | — | 1,482 | — | — | 1,482 |
| Repayment\tof\tlong-term\tdebt | (310) | — | — | (310) | (326) | — | — | (326) |
| Issuance\tof\tClass\tA\tCommon\tStock | 6 | — | — | 6 | 34 | — | — | 34 |
| Dividends\tpaid | (482) | — | — | (482) | (374) | — | — | (374) |
| Purchase\tof\ttreasury\tstock | (3,013) | — | — | (3,013) | (568) | — | — | (568) |
| Share-based\tcompensation\twithholding\ttaxes | (157) | — | — | (157) | (100) | — | — | (100) |
| Other | — | — | — | — | (24) | — | — | (24) |
| Net\tcash\tused\tin\t(provided\tby)\tfinancing\tactivities | (3,931) | — | 35 | (3,896) | 1,489 | — | 8 | 1,497 |
| (DECREASE)\tINCREASE\tIN\tCASH,\tCASH\tEQUIVALENTS,\tAND\nRESTRICTED\tCASH | (475) | — | 17 | (458) | 762 | — | 8 | 770 |
| CASH,\tCASH\tEQUIVALENTS,\tAND\tRESTRICTED\tCASH,\tbeginning\tof\tperiod | 858 | — | 29 | 887 | 96 | — | 21 | 117 |
| CASH,\tCASH\tEQUIVALENTS,\tAND\tRESTRICTED\tCASH,\tend\tof\tperiod | $383 | $— | $46 | $429 | $858 | $— | $29 | $887 |

# 3.				DISPOSITIONS	AND	ACQUISITIONS

# Dispositions

In	2018,	we	sold	the	following	properties	and	recognized	total	gains	of	$132	million	in	the	"Gains	and	other	income,	net"	caption	of	our	Income	Statements:

•	The	Tremont	Chicago	Hotel	at	Magnificent	Mile	and	Le	Centre	Sheraton	Montreal	Hotel,	two	North	American	Full-Service properties;

•The	Westin	Denarau	Island	Resort	and	The	Sheraton	Fiji	Resort,	two	Asia	Pacific	properties;

•The	Sheraton	Buenos	Aires	Hotel	&	Convention	Center	and	Park	Tower,	A	Luxury	Collection	Hotel,	Buenos	Aires,	two	Caribbean	and	Latin	America properties.

In	2018,	we	sold	our	interest	in	three	equity	method	investments,	whose	assets	included	a	plot	of	land	in	Italy,	the	W	Hotel	Mexico	City,	and	the	Royal	Orchid Sheraton	Hotel	&	Towers	in	Bangkok,	and	we	recognized	total	gains	of	$42	million	in	the	"Gains	and	other	income,	net"	caption	of	our	Income	Statements.	Also	in 2018,	a	Caribbean	and	Latin	America	investee	sold	the	JW	Marriott	Mexico	City,	and	a	North	American	Full-Service	investee	sold	The	Ritz-Carlton	Toronto,	and	we recorded	our	share	of	the	gains	of	$55	million	and	$10	million,	respectively,	in	the	"Equity	in	earnings"	caption	of	our	Income	Statements.

In	2017,	we	sold	the	following	three	North	American	Full-Service	properties:

•The	Sheraton	Centre	Toronto	Hotel	that	was	owned	on	a	long-term	ground

lease;

•The	Westin	Maui	that	was	owned	on	a	long-term	ground	lease;

•The	Charlotte	Marriott	City	Center	and	recognized	a	$24	million	gain	in	the	"Gains	and	other	income,	net"	caption	of	our	Income Statements.

In	2017,	Aramark	purchased	Avendra	LLC,	in	which	we	had	a	55	percent	ownership	interest.	We	recorded	a	non-recurring	pre-tax	gain	of	$659	million	in	2017 and	$5	million	in	2018,	which	we	reflected	in	the	"Gains	and	other	income,	net"	caption	of	our	Income	Statements.	After	cash	paid	for	income	taxes,	the	gain	totaled $425	million.	We	committed	to	the	owners	of	the	hotels	in	our	system	that	the	benefits	derived	from	Avendra,	including	any	dividends	or	sale	proceeds	above	our original	investment,	would	be	used	for	the	benefit	of	the	hotels	in	our	system.	Spending	funded	by	the	sale	proceeds,	which	we	present	in	the	"Reimbursed	expenses" caption	of	our	Income	Statements,	totaled	$115	million	($85	million	after-tax)	in	2018.	In	conjunction	with	the	sale	of	Avendra	to	Aramark,	we	entered	into	a	new	five- year	procurement	services	agreement	with	Avendra	for	the	benefit	of	our	managed	and	owned	properties	in	North	America.

In	2016,	we	sold	The	St.	Regis	San	Francisco,	a	North	American	Full-Service	property.

# Acquisitions

In	2018,	we	purchased	the	Sheraton	Grand	Phoenix,	a	North	American	Full-Service	property	that	we	manage,	for	$255	million.

# 2016	Starwood	Combination

The	following	table	presents	the	fair	value	of	each	type	of	consideration	that	we	transferred	in	the	Starwood	Combination:

| (in	millions,	except	per	share	amounts) |  |
| :--- | :--- |
| Equivalent\tshares\tof\tMarriott\tcommon\tstock\tissued\tin\texchange\tfor\tStarwood\toutstanding\tshares | 134.4 |
| Marriott\tcommon\tstock\tprice\tas\tof\tMerger\tDate | $68.44 |
| Fair\tvalue\tof\tMarriott\tcommon\tstock\tissued\tin\texchange\tfor\tStarwood\toutstanding\tshares | 9,198 |
| Cash\tconsideration\tto\tStarwood\tshareholders,\tnet\tof\tcash\tacquired\tof\t$1,116 | 2,412 |
| Fair\tvalue\tof\tMarriott\tequity-based\tawards\tissued\tin\texchange\tfor\tvested\tStarwood\tequity-based\tawards | 71 |
| Total\tconsideration\ttransferred,\tnet\tof\tcash\tacquired | $11,681 |

Fair	Values	of	Assets	Acquired	and	Liabilities	Assumed.	The	following	table	presents	our	fair	value	estimates	of	the	assets	that	we	acquired	and	the	liabilities	that we	assumed	on	the	Merger	Date:

(1) Goodwill	primarily	represents	the	value	that	we	expect	to	obtain	from	synergies	and	growth	opportunities	from	our	combined	operations,	and	it	is	not	deductible	for	tax	purposes.

We	estimated	the	value	of	the	acquired	property	and	equipment	using	a	combination	of	the	income,	cost,	and	market	approaches,	which	are	primarily	based	on significant	Level	2	and	Level	3	assumptions,	such	as	estimates	of	future	income	growth,	capitalization	rates,	discount	rates,	and	capital	expenditure	needs	of	the	hotel properties.	Our	equity	method	investments	consist	primarily	of	partnership	and	joint	venture	interests	in	entities	that	own	hotel	real	estate.	We	estimated	the	value	of	the underlying	real	estate	using	the	same	methods	as	for	property	and	equipment	described	above.	We	primarily	valued	debt	using	quoted	market	prices,	which	are considered	Level	1	inputs	as	they	are	observable	in	the	market.

The	following	table	presents	our	estimates	of	the	fair	values	of	Starwood's	identified	intangible	assets	and	their	related	estimated	useful	lives.

|  | Estimated	Fair	Value<br>(in	millions) | Estimated	Useful	Life<br>(in	years) |
| :--- | :--- | :--- |
| Brands | $5,664 | indefinite |
| Management\tAgreements\tand\tLease\tContract\tIntangibles | 751 | 10\t-\t25 |
| Franchise\tAgreements | 746 | 10\t-\t80 |
| Loyalty\tProgram\tMarketing\tRights | 77 | 30 |

We	estimated	the	value	of	Starwood's	brands	using	the	relief-from-royalty	method,	which	applies	an	estimated	royalty	rate	to	forecasted	future	cash	flows, discounted	to	present	value.	We	estimated	the	value	of	management	and	franchise	agreements	using	the	multi-period	excess	earnings	method,	which	is	a	variation	of	the income	approach.	This	method	estimates	an	intangible	asset's	value	based	on	the	present	value	of	the	incremental	after-tax	cash	flows	attributable	to	the	intangible	asset. We	valued	the	lease	contract	intangibles	using	an	income	approach.	These	valuation	approaches	utilize	Level	3	inputs.

Pro	Forma	Results	of	Operations.	We	prepared	unaudited	pro	forma	information	in	accordance	with	applicable	accounting	standards,	assuming	we	completed	the Starwood	Combination	on	January	1,	2015,	and	using	our	estimates	of	the	fair	values	of	assets	and	liabilities	as	of	the	Merger	Date.	Pro	forma	revenues	totaled	$22,492 million	in	2016.	Pro	forma	net	income	totaled	$1,180	million	in	2016,	and	reflected	$113	million	of	integration	costs.	These	unaudited	pro	forma	results	do	not	reflect any	synergies	from	operating	efficiencies,	and	they	are	not	necessarily	indicative	of	what	the	actual	results	of	operations	of	the	combined	company	would	have	been	if the	Starwood	Combination	had	occurred	on	January	1,	2015,	nor	are	they	indicative	of	future	results	of	operations.

# 4.				EARNINGS	PER	SHARE

The	table	below	illustrates	the	reconciliation	of	the	earnings	and	number	of	shares	used	in	our	calculations	of	basic	and	diluted	earnings	per	share:

| (in	millions,	except	per	share	amounts) | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Computation\tof\tBasic\tEarnings\tPer\tShare |  |  |  |
| Net\tincome | $1,907 | $1,459 | $808 |
| Shares\tfor\tbasic\tearnings\tper\tshare | 350.1 | 375.2 | 290.9 |
| Basic\tearnings\tper\tshare | $5.45 | $3.89 | $2.78 |
| Computation\tof\tDiluted\tEarnings\tPer\tShare |  |  |  |
| Net\tincome | $1,907 | $1,459 | $808 |
| Shares\tfor\tbasic\tearnings\tper\tshare | 350.1 | 375.2 | 290.9 |
| Effect\tof\tdilutive\tsecurities |  |  |  |
| Share-based\tcompensation | 4.1 | 4.7 | 4.8 |
| Shares\tfor\tdiluted\tearnings\tper\tshare | 354.2 | 379.9 | 295.7 |
| Diluted\tearnings\tper\tshare | $5.38 | $3.84 | $2.73 |

# RSUs	and	PSUs

We	granted	RSUs	in	2018	to	certain	officers	and	key	employees,	and	those	units	vest	generally	over	four	years	in	equal	annual	installments	commencing	one	year after	the	grant	date.	Upon	vesting,	RSUs	convert	to	shares	of	our	common	stock	which	we	distribute	from	treasury	shares.	We	also	granted	performance-based	RSUs ("PSUs")	in	2018	to	certain	executive	officers,	which	are	earned,	subject	to	continued	employment	and	the	satisfaction	of	certain	performance	conditions	based	on achievement	of	pre-established	targets	for	RevPAR	Index,	room	openings,	and/or	net	administrative	expense	over,	or	at	the	end	of,	a	three-year	performance	period.

We	had	deferred	compensation	costs	for	RSUs	of	approximately	$167	million	at	year-end	2018	and	$164	million	at	year-end	2017.	The	weighted	average remaining	term	for	RSUs	outstanding	at	year-end	2018	was	two	years.

The	following	table	provides	additional	information	on	RSUs	for	the	last	three	fiscal	years:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Share-based\tcompensation\texpense\t(in\tmillions) | $170 | $172 | $204 |
| Weighted\taverage\tgrant-date\tfair\tvalue\t(per\tRSU) | $132 | $85 | $66 |
| Aggregate\tintrinsic\tvalue\tof\tdistributed\tRSUs\t(in\tmillions) | $294 | $322 | $190 |

The	following	table	presents	the	changes	in	our	outstanding	RSUs,	including	PSUs,	during	2018	and	the	associated	weighted	average	grant-date	fair	values:

|  | Number	of	RSUs<br>(in	millions) | Weighted	Average<br>Grant-Date<br>Fair	Value<br>(per	RSU) |
| :--- | :--- | :--- |
| Outstanding\tat\tyear-end\t2017 | 5.6 | $71 |
| Granted | 1.5 | 132 |
| Distributed | (2.1) | 69 |
| Forfeited | (0.2) | 93 |
| Outstanding\tat\tyear-end\t2018 | 4.8 | $90 |

# Other	Information

At	year-end	2018,	we	had	31	million	remaining	shares	authorized	under	the	Marriott	and	Starwood	stock	plans.

The	components	of	our	earnings	before	income	taxes	for	the	last	three	fiscal	years	consisted	of:

| ($	in	millions) | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| U.S. | $1,311 | $2,153 | $888 |
| Non-U.S. | 1,034 | 829 | 351 |
|  | $2,345 | $2,982 | $1,239 |

Our	provision	for	income	taxes	for	the	last	three	fiscal	years	consists	of:

| ($	in	millions) |  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- | :--- |
| Current | -U.S.\tFederal | $(169) | $(1,253) | $(203) |
|  | -U.S.\tState | (94) | (152) | (41) |
|  | -Non-U.S. | (284) | (178) | (56) |
|  |  | (547) | (1,583) | (300) |
| Deferred | -U.S.\tFederal | 10 | 61 | (80) |
|  | -U.S.\tState | (6) | (33) | (17) |
|  | -Non-U.S. | 105 | 32 | (34) |
|  |  | 109 | 60 | (131) |
|  |  | $(438) | $(1,523) | $(431) |

Our	tax	provision	included	an	excess	tax	benefit	of	$42	million	in	2018	and	$72	million	in	2017	related	to	the	vesting	or	exercise	of	share-based	awards.	Our	tax provision	did	not	reflect	excess	tax	benefits	of	$32	million	in	2016,	as	this	period	occurred	before	our	adoption	of	ASU	2016-09.	In	our	Statements	of	Cash	Flows,	we presented	excess	tax	benefits	as	financing	cash	flows	before	our	adoption	of	ASU	2016-09.

# Unrecognized	Tax	Benefits

The	following	table	reconciles	our	unrecognized	tax	benefit	balance	for	each	year	from	the	beginning	of	2016	to	the	end	of	2018:

Our	unrecognized	tax	benefit	balances	included	$497	million	at	year-end	2018,	$385	million	at	year-end	2017,	and	$288	million	at	year-end	2016	of	tax	positions that,	if	recognized,	would	impact	our	effective	tax	rate.	It	is	reasonably	possible	that	we	will	settle	$243	million	of	unrecognized	tax	benefits	within	the	next	twelve months.	This	includes	$210	million	of	U.S.	federal	issues	that	are	currently	in	appeals	and	$33	million	of	state	and	non-U.S.	audits	we	expect	to	resolve	in	2019.	We

recognize	accrued	interest	and	penalties	for	our	unrecognized	tax	benefits	as	a	component	of	tax	expense.	Related	interest	totaled	$3	million	in	2018,	$24	million	in 2017,	and	$8	million	in	2016.

We	file	income	tax	returns,	including	returns	for	our	subsidiaries,	in	various	jurisdictions	around	the	world.	The	U.S.	Internal	Revenue	Service	("IRS")	has examined	our	federal	income	tax	returns,	and	as	of	year-end	2018,	we	have	settled	all	issues	for	tax	years	through	2013	for	Marriott	and	through	2009	for	Starwood.	Our Marriott	2014	and	2015	tax	year	audits	are	substantially	complete,	and	our	Marriott	2016	through	2018	tax	year	audits	are	currently	ongoing.	Starwood	is	currently under	audit	by	the	IRS	for	years	2010	through	2016.	Various	foreign,	state,	and	local	income	tax	returns	are	also	under	examination	by	the	applicable	taxing	authorities.

# Deferred	Income	Taxes

Deferred	income	tax	balances	reflect	the	effects	of	temporary	differences	between	the	carrying	amounts	of	assets	and	liabilities	and	their	tax	bases,	as	well	as	from net	operating	loss	and	tax	credit	carry-forwards.	We	state	those	balances	at	the	enacted	tax	rates	we	expect	will	be	in	effect	when	we	pay	or	recover	the	taxes.	Deferred income	tax	assets	represent	amounts	available	to	reduce	income	taxes	we	will	pay	on	taxable	income	in	future	years.	We	evaluate	our	ability	to	realize	these	future	tax deductions	and	credits	by	assessing	whether	we	expect	to	have	sufficient	future	taxable	income	from	all	sources,	including	reversal	of	taxable	temporary	differences, forecasted	operating	earnings,	and	available	tax	planning	strategies	to	utilize	these	future	deductions	and	credits.	We	establish	a	valuation	allowance	when	we	no	longer consider	it	more	likely	than	not	that	a	deferred	tax	asset	will	be	realized.

The	following	table	presents	the	tax	effect	of	each	type	of	temporary	difference	and	carry-forward	that	gave	rise	to	significant	portions	of	our	deferred	tax	assets and	liabilities	as	of	year-end	2018	and	year-end	2017:

| ($	in	millions) | At	Year-End	2018 | At	Year-End	2017 |
| :--- | :--- | :--- |
| Deferred\tTax\tAssets |  |  |
| Employee\tbenefits | $261 | $264 |
| Net\toperating\tloss\tcarry-forwards | 494 | 376 |
| Accrued\texpenses\tand\tother\treserves | 160 | 161 |
| Receivables,\tnet | 12 | 21 |
| Tax\tcredits | 24 | 27 |
| Loyalty\tProgram | 133 | 31 |
| Deferred\tincome | 56 | 17 |
| Self-insurance | — | 12 |
| Other | 13 | 2 |
| Deferred\ttax\tassets | 1,153 | 911 |
| Valuation\tallowance | (428) | (309) |
| Deferred\ttax\tassets\tafter\tvaluation\tallowance | 725 | 602 |
| Deferred\tTax\tLiabilities |  |  |
| Joint\tventure\tinterests | (59) | (33) |
| Property\tand\tequipment | (85) | (62) |
| Intangibles | (876) | (1,019) |
| Self-insurance | (19) | — |
| Deferred\ttax\tliabilities | (1,039) | (1,114) |
| Net\tdeferred\ttaxes | $(314) | $(512) |

Our	valuation	allowance	is	attributable	to	non-U.S.	and	U.S.	state	net	operating	loss	carry	forwards.	During	2018,	our	valuation	allowance	increased	primarily	due to	net	operating	losses	in	Luxembourg.

At	year-end	2018,	we	had	approximately	$11	million	of	tax	credits	that	will	expire	through	2025	and	$13	million	of	tax	credits	that	do	not	expire.	We	recorded	$10 million	of	net	operating	loss	benefits	in	2018	and	$6	million	in	2017.	At	year-end	2018,	we	had	approximately	$2,595	million	of	primarily	state	and	foreign	net	operating losses,	of	which	$1,712	million	will	expire	through	2038.

# Reconciliation	of	U.S.	Federal	Statutory	Income	Tax	Rate	to	Actual	Income	Tax	Rate

The	following	table	reconciles	the	U.S.	statutory	tax	rate	to	our	effective	income	tax	rate	for	the	last	three	fiscal	years:

|  | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| U.S.\tstatutory\ttax\trate | 21.0\t% | 35.0\t% | 35.0\t% |
| U.S.\tstate\tincome\ttaxes,\tnet\tof\tU.S.\tfederal\ttax\tbenefit | 2.5 | 3.1 | 3.0 |
| Non-U.S.\tincome | (1.0) | (7.3) | (6.1) |
| Change\tin\tvaluation\tallowance | 2.6 | 2.0 | 0.3 |
| Change\tin\tuncertain\ttax\tpositions | 1.0 | 2.2 | 1.4 |
| Change\tin\tU.S.\ttax\trate | (1.7) | (5.5) | 0.0 |
| Transition\tTax\ton\tforeign\tearnings | 0.1 | 22.8 | 0.0 |
| Tax\ton\tasset\tdispositions | (2.9) | (0.2) | 0.0 |
| Excess\ttax\tbenefits\trelated\tto\tequity\tawards | (1.8) | (2.4) | 0.0 |
| Other,\tnet | (1.1) | 1.4 | 1.2 |
| Effective\trate | 18.7\t% | 51.1\t% | 34.8\t% |

The	non-U.S.	income	tax	benefit	presented	in	the	table	above	includes	tax-exempt	income	in	Hong	Kong,	a	tax	rate	incentive	in	Singapore,	a	deemed	interest deduction	in	Switzerland,	and	tax-exempt	income	earned	from	certain	operations	in	Luxembourg,	which	collectively	represented	3.4%	in	2018,	6.2%	in	2017,	and	7.4% in	2016.	We	included	the	impact	of	these	items	in	the	foreign	tax	rate	differential	line	above	because	we	consider	them	to	be	equivalent	to	a	reduction	of	the	statutory	tax rates	in	these	jurisdictions.	Pre-tax	income	in	Switzerland,	Singapore,	Hong	Kong,	and	Luxembourg	totaled	$432	million	in	2018,	$576	million	in	2017,	and	$271 million	in	2016.

The	non-U.S.	income	tax	benefit	also	includes	1.4%	of	U.S.	income	tax	expense	on	non-U.S.	operations.	We	included	the	impact	of	this	tax	in	the	non-U.S.	income line	above	because	we	consider	this	tax	to	be	an	integral	part	of	the	foreign	taxes.

# Tax	Cuts	and	Jobs	Act	of	2017

The	U.S.	Tax	Cuts	and	Jobs	Act	of	2017	(the	"2017	Tax	Act")	was	enacted	on	December	22,	2017.	The	SEC	had	provided	accounting	and	reporting	guidance	that allowed	us	to	report	provisional	amounts	within	a	measurement	period	up	to	one	year	from	the	enactment	date.	Complexities	inherent	in	adopting	the	changes	included additional	guidance,	interpretations	of	the	law,	and	further	analysis	of	data	and	tax	positions.	In	2018,	we	completed	the	accounting	associated	with	the	2017	Tax	Act	as further	described	below.

Reduction	of	U.S.	federal	corporate	tax	rate.	The	2017	Tax	Act	reduced	the	U.S.	federal	corporate	tax	rate	from	35	percent	to	21	percent,	effective	January	1,	2018. In	2017,	we	recorded	a	provisional	estimated	net	tax	benefit	of	$153	million	for	our	year-end	deferred	tax	assets	and	liabilities.	In	2018,	we	completed	our	analyses	of all	impacts	of	the	2017	Tax	Act,	including,	but	not	limited	to,	our	calculation	of	deemed	repatriation	of	deferred	foreign	income	and	the	state	tax	effect	of	adjustments made	to	federal	temporary	differences,	and	recognized	a	tax	benefit	of	$44	million.

Deemed	Repatriation	Transition	Tax.	The	Deemed	Repatriation	Tax	("Transition	Tax")	is	a	new	one-time	tax	on	previously	untaxed	earnings	and	profits	("E&P") of	certain	of	our	foreign	subsidiaries	accumulated	post-1986	through	year-end	2017.	In	addition	to	U.S.	federal	income	taxes,	the	deemed	repatriation	of	such	E&P	also resulted	in	additional	state	income	taxes	in	some	of	the	U.S.	states	in	which	we	operate.	In	2017,	we	recorded	a	provisional	estimated	federal	and	state	Transition	Tax expense	of	$745	million.	In	2018,	we	finalized	our	preliminary	calculation	and	recorded	a	charge	of	$3	million,	which	includes	a	benefit	of	$5	million	resulting	from changes	to	E&P	as	a	result	of	completing	an	IRS	audit.	Substantially	all	of	our	unremitted	foreign	earnings	that	have	not	been	previously	taxed	have	now	been	subjected to	U.S.	taxation	under	the	Transition	Tax.	In	2018,	we	recorded	a	charge	of	$29	million	for	state	tax	liability	on	unremitted	accumulated	earnings.	We	have	made	no additional	provision	for	U.S.	income	taxes	or	additional	non-U.S.	taxes	on	the	remaining	unremitted	accumulated	earnings	of	our	non-U.S.	subsidiaries.	It	is	not	practical at	this	time	to	determine	the	income	tax	liability	related	to	any	remaining	undistributed	earnings	or	additional	basis	difference	not	subject	to	the	Transition	Tax.

Other	provisions.	The	2017	Tax	Act	also	included	a	new	provision	designed	to	tax	GILTI.	We	adopted	the	period	cost	method	and	recorded	a	current	provision	for GILTI	tax	related	to	current-year	operations	in	our	annual	effective	tax	rate.

# 7.				COMMITMENTS	AND	CONTINGENCIES

We	issue	guarantees	to	certain	lenders	and	hotel	owners,	chiefly	to	obtain	long-term	management	contracts.	The	guarantees	generally	have	a	stated	maximum funding	amount	and	a	term	of	three	to	ten	years.	The	terms	of	guarantees	to	lenders	generally	require	us	to	fund	if	cash	flows	from	hotel	operations	are	inadequate	to cover	annual	debt	service	or	to	repay	the	loan	at	maturity.	The	terms	of	the	guarantees	to	hotel	owners	generally	require	us	to	fund	if	the	hotels	do	not	attain	specified levels	of	operating	profit.	Guarantee	fundings	to	lenders	and	hotel	owners	are	generally	recoverable	out	of	future	hotel	cash	flows	and/or	proceeds	from	the	sale	of hotels.	We	also	enter	into	project	completion	guarantees	with	certain	lenders	in	conjunction	with	hotels	that	we	or	our	joint	venture	partners	are	building.

We	present	the	maximum	potential	amount	of	our	future	guarantee	fundings	and	the	carrying	amount	of	our	liability	for	our	debt	service,	operating	profit,	and other	guarantees	(excluding	contingent	purchase	obligations)	for	which	we	are	the	primary	obligor	at	year-end	2018	in	the	following	table:

|  | Maximum	Potential |  |
| :--- | :--- | :--- |
| ($\tin\tmillions) | Amount | Recorded\tLiability\tfor |
| Guarantee\tType | of\tFuture\tFundings | Guarantees |
| Debt\tservice | $125 | $17 |
| Operating\tprofit | 212 | 100 |
| Other | 9 | 2 |
|  | $346 | $119 |

Our	liability	at	year-end	2018	for	guarantees	for	which	we	are	the	primary	obligor	is	reflected	in	our	Balance	Sheets	as	$23	million	of	"Accrued	expenses	and other"	and	$96	million	of	"Other	noncurrent	liabilities."

Our	guarantees	listed	in	the	preceding	table	include	$3	million	of	debt	service	guarantees,	$32	million	of	operating	profit	guarantees,	and	$2	million	of	other guarantees	that	will	not	be	in	effect	until	the	underlying	properties	open	and	we	begin	to	operate	the	properties	or	certain	other	events	occur.

In	conjunction	with	financing	obtained	for	specific	projects	or	properties	owned	by	us	or	joint	ventures	in	which	we	are	a	party,	we	may	provide	industry	standard indemnifications	to	the	lender	for	loss,	liability,	or	damage	occurring	as	a	result	of	the	actions	of	the	other	joint	venture	owner	or	our	own	actions.

# Contingent	Purchase	Obligation

Sheraton	Grand	Chicago.	We	granted	the	owner	a	one-time	right,	exercisable	in	2022,	to	require	us	to	purchase	the	leasehold	interest	in	the	land	and	the	hotel	for $300	million	in	cash	(the	"put	option").	If	the	owner	exercises	the	put	option,	we	have	the	option	to	purchase,	at	the	same	time	the	put	transaction	closes,	the	underlying fee	simple	interest	in	the	land	for	an	additional	$200	million	in	cash.	We	accounted	for	the	put	option	as	a	guarantee,	and	our	recorded	liability	at	year-end	2018	was	$57 million.

We	concluded	that	the	entity	that	owns	the	Sheraton	Grand	Chicago	hotel	is	a	variable	interest	entity.	We	did	not	consolidate	the	entity	because	we	do	not	have	the power	to	direct	the	activities	that	most	significantly	impact	the	entity's	economic	performance.	Our	maximum	exposure	to	loss	related	to	the	entity	is	equal	to	the difference	between	the	purchase	price	and	the	fair	value	of	the	hotel	at	the	time	that	the	put	option	is	exercised,	plus	the	maximum	funding	amount	of	an	operating	profit guarantee	that	we	provided	for	the	hotel.

# Commitments

At	year-end	2018,	we	had	the	following	commitments	outstanding,	which	are	not	recorded	on	our	Balance	Sheets:

•We	had	a	right	and,	under	certain	circumstances,	an	obligation	to	acquire	our	joint	venture	partner's	remaining	interests	in	two	joint	ventures	at	a	price	based on	the	performance	of	the	ventures.	In	the	2019	first	quarter,	we	accelerated	our	option	to	acquire	our	partner's	interests.	We	expect	to	account	for	the transaction	primarily	as	an	acquisition	of	brand	and	contract	assets.

•Investment	commitments	totaling	up	to	$11	million	of	equity	for	non-controlling	interests	in	real	estate	and	travel	technology-related	entities.	We	expect	to invest	up	to	$3	million	in	2019	and	$6	million	thereafter.	We	do	not	expect	to	fund	the	remaining	commitments.

•Various	loan	commitments	totaling	$14	million,	of	which	we	expect	to	fund	$5	million	in	2019	and	$5	million	thereafter.	We	do	not	expect	to	fund	the remaining	commitments.

•Various	commitments	to	purchase	information	technology	hardware,	software,	accounting,	finance,	and	maintenance	services	in	the	normal	course	of business,	primarily	for	programs	and	services	for	which	we	are	reimbursed	by	third-party	owners,	totaling	$286	million.	We	expect	to	purchase	goods	and services	subject	to	these	commitments	as	follows:	$153	million	in	2019,	$78	million	in	2020,	$38	million	in	2021,	and	$17	million	thereafter.

# •Several	commitments	aggregating	$33	million,	which	we	do	not	expect	to

fund.

# Description	of	Event

On	November	30,	2018,	we	announced	a	data	security	incident	involving	unauthorized	access	to	the	Starwood	reservations	database	(the	"Data	Security Incident").	Working	with	leading	security	experts,	we	determined	that	there	was	unauthorized	access	to	the	Starwood	network	since	2014	and	that	an	unauthorized	party had	copied	information	from	the	Starwood	reservations	database	and	taken	steps	towards	removing	it.	While	our	forensic	review	of	the	incident	is	now	complete,	certain data	analytics	work	continues.	We	have	completed	the	planned	phase	out	of	the	operation	of	the	Starwood	reservations	database,	effective	as	of	the	end	of	2018.

# Expenses	and	Insurance	Recoveries

In	2018,	we	recorded	$28	million	of	expenses	related	to	the	Data	Security	Incident,	partially	offset	by	$25	million	of	accrued	insurance	recoveries,	which	we recorded	in	either	the	"Reimbursed	expenses"	or	"Merger-related	costs	and	charges"	captions	of	our	Income	Statements.	Expenses	primarily	included	costs	to investigate	the	Data	Security	Incident	and	customer	care	costs.	We	recognize	insurance	recoveries	when	they	are	probable	of	receipt	and	present	them	in	our	Income Statements	in	the	same	caption	as	the	related	loss,	up	to	the	amount	of	loss.

# Litigation,	Claims,	and	Government	Investigations

To	date,	approximately	100	putative	class	action	lawsuits	have	been	filed	by	consumers	and	others	against	us	in	U.S.	federal,	U.S.	state	and	Canadian	courts	related to	the	Data	Security	Incident.	The	plaintiffs	in	these	cases,	who	purport	to	represent	various	classes	of	consumers,	generally	claim	to	have	been	harmed	by	alleged actions	and/or	omissions	by	the	Company	in	connection	with	the	Data	Security	Incident	and	assert	a	variety	of	common	law	and	statutory	claims	seeking	monetary damages,	injunctive	relief	and	other	related	relief.	On	February	6,	2019,	the	U.S.	Judicial	Panel	on	Multidistrict	Litigation	(MDL)	issued	an	order	consolidating	the	U.S. cases	filed	to	that	date	and	transferring	them	all	to	the	U.S.	District	Court	for	the	District	of	Maryland.	A	putative	class	action	lawsuit	was	filed	against	us	and	certain	of our	current	officers	and	directors	on	December	1,	2018	in	the	U.S.	District	Court	for	the	Eastern	District	of	New	York	alleging	violations	of	the	federal	securities	laws	in connection	with	statements	regarding	our	cybersecurity	systems	and	controls.	The	complaint	seeks	certification	of	a	class	of	affected	persons	and	unspecified	monetary damages,	costs	and	attorneys'	fees.	This	case	is	also	covered	by	the	MDL	order.	A	shareholder	derivative	complaint	was	also	filed	against	the	Company	and	each	of	the members	of	our	Board	of	Directors	on	February	26,	2019	in	the	U.S.	District	Court	for	the	Southern	District	of	New	York	alleging,	among	other	claims,	breach	of fiduciary	duty,	corporate	waste,	mismanagement	and	violations	of	the	federal	securities	laws.	This	case	has	not	yet	been	consolidated	as	part	of	the	MDL	proceeding.	We dispute	the	allegations	in	the	complaints	described	above	and	intend	to	defend	vigorously	against	such	claims.

In	addition,	numerous	U.S.	federal,	U.S.	state	and	foreign	governmental	authorities	are	investigating,	or	otherwise	seeking	information	and/or	documents	related to,	the	Data	Security	Incident	and	related	matters,	including	Attorneys	General	offices	from	all	50	states	and	the	District	of	Columbia,	the	Federal	Trade	Commission, the	Securities	and	Exchange	Commission,	certain	committees	of	the	U.S.	Senate	and	House	of	Representatives,	the	Information	Commissioner's	Office	in	the	United Kingdom	("ICO")	as	lead	supervisory	authority	in	the	European	Economic	Area,	and	regulatory	authorities	in	other	jurisdictions,	including	Germany.	Following	the Data	Security	Incident,	the	ICO	notified	us	that	it	had	opened	an	investigation	into	the	Company's	online	privacy	policy	and	related	practices.	This	investigation	is separate	from	the	ICO's	investigation	related	to	the	Data	Security	Incident.

While	we	believe	it	is	reasonably	possible	that	we	may	incur	losses	associated	with	the	above	described	proceedings	and	investigations,	it	is	not	possible	to estimate	the	amount	of	loss	or	range	of	loss,	if	any,	that	might	result	from	adverse	judgments,	settlements,	fines,	penalties	or	other	resolution	of	these	proceedings	and investigations	based	on	the	early	stage	of	these	proceedings	and	investigations,	the	absence	of	specific	allegations	as	to	alleged	damages,	the	uncertainty	as	to	the certification	of	a	class	or	classes	and	the	size	of	any	certified	class,	if	applicable,	and	the	lack	of	resolution	of	significant	factual	and	legal	issues.

The	following	table	presents	our	future	minimum	lease	obligations	for	which	we	are	the	primary	obligor	as	of	year-end	2018:

| ($	in	millions) | Operating	Leases | Capital	Leases |
| :--- | :--- | :--- |
| 2019 | $171 | $13 |
| 2020 | 170 | 13 |
| 2021 | 145 | 13 |
| 2022 | 153 | 13 |
| 2023 | 139 | 13 |
| Thereafter | 1,295 | 165 |
| Total\tminimum\tlease\tpayments\twhere\twe\tare\tthe\tprimary\tobligor | $2,073 | $230 |

Most	leases	have	initial	terms	of	up	to	20	years,	contain	one	or	more	renewals	at	our	option,	generally	for	five-	or	10-year	periods,	and	generally	contain	fixed	and variable	components.	The	variable	components	of	leases	of	land	or	building	facilities	are	primarily	based	on	operating	performance	of	the	leased	property.

The	following	table	details	the	composition	of	rent	expense	for	operating	leases	for	the	last	three	years:

| ($	in	millions) | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| Minimum\trentals | $192 | $194 | $150 |
| Additional\trentals | 83 | 85 | 67 |
|  | $275 | $279 | $217 |

# 9.				SELF-INSURANCE	RESERVE	FOR	LOSSES	AND	LOSS	ADJUSTMENT	EXPENSES

The	following	table	summarizes	the	activity	in	our	self-insurance	reserve	for	losses	and	loss	adjustment	expenses	as	of	year-end	2018	and	2017:

| ($	in	millions) | 2018 | 2017 |
| :--- | :--- | :--- |
| Balance\tat\tbeginning\tof\tyear | $487 | $493 |
| Less:\tReinsurance\trecoverable | (3) | (3) |
| Net\tbalance\tat\tbeginning\tof\tyear | 484 | 490 |
| Incurred\trelated\tto: |  |  |
| Current\tyear | 151 | 160 |
| Prior\tyears | (37) | (59) |
| Total\tincurred | 114 | 101 |
| Paid\trelated\tto: |  |  |
| Current\tyear | (32) | (30) |
| Prior\tyears | (96) | (77) |
| Total\tpaid | (128) | (107) |
| Net\tbalance\tat\tend\tof\tyear | 470 | 484 |
| Add:\tReinsurance\trecoverable | 7 | 3 |
| Balance\tat\tend\tof\tyear | $477 | $487 |
| Current\tportion\tclassified\tin\t"Accrued\texpenses\tand\tother" | $126 | $112 |
| Noncurrent\tportion\tclassified\tin\t"Other\tnoncurrent\tliabilities" | 351 | 375 |
|  | $477 | $487 |

We	decreased	our	provision	for	incurred	losses	for	prior	years	by	$37	million	in	2018	and	by	$59	million	in	2017	because	of	changes	in	estimates	from	insured events	from	prior	years	due	to	changes	in	underwriting	experience	and	frequency	and	severity	trends.

We	provide	detail	on	our	long-term	debt	balances,	net	of	discounts,	premiums,	and	debt	issuance	costs,	in	the	following	table	at	year-end	2018	and	2017:

| ($	in	millions) | At	Year-End	2018 | At	Year-End	2017 |
| :--- | :--- | :--- |
| Senior\tNotes: |  |  |
| (effective\tinterest\trate\tof\t4.4%) | $600 | $598 |
| (effective\tinterest\trate\tof\t3.4%) | 349 | 348 |
| (effective\tinterest\trate\tof\t3.6%) | 349 | 348 |
| (effective\tinterest\trate\tof\t3.4%) | 397 | 397 |
| (effective\tinterest\trate\tof\t3.1%) | 448 | 447 |
|  | 345 | 345 |
| (effective\tinterest\trate\tof\t4.0%) |  |  |
| (effective\tinterest\trate\tof\t2.5%) | 745 | 744 |
| (effective\tinterest\trate\tof\t3.3%) | 743 | 743 |
| (effective\tinterest\trate\tof\t1.7%) | — | 330 |
| (effective\tinterest\trate\tof\t2.3%) | 188 | 197 |
| (effective\tinterest\trate\tof\t3.1%) | 291 | 291 |
| (effective\tinterest\trate\tof\t2.8%) | 335 | 337 |
| (effective\tinterest\trate\tof\t4.1%) | 292 | 292 |
| (effective\tinterest\trate\tof\t4.2%) | 443 | — |
| Series\tY\tNotes,\tfloating\trate,\tface\tamount\tof\t$550,\tmaturing\tDecember\t1,\t2020\n(effective\tinterest\trate\tof\t3.2%\tat\tDecember\t31,\t2018) | 547 | — |
| (effective\tinterest\trate\tof\t4.4%) | 347 | — |
| (effective\tinterest\trate\tof\t4.8%) | 297 | — |
| Commercial\tpaper | 2,245 | 2,371 |
| Credit\tFacility | — | — |
| Capital\tlease\tobligations | 163 | 171 |
| Other | 223 | 279 |
|  | $9,347 | $8,238 |
| Less:\tCurrent\tportion\tof\tlong-term\tdebt | (833) | (398) |
|  | $8,514 | $7,840 |

All	our	long-term	debt	is	recourse	to	us	but	unsecured.	All	the	Senior	Notes	shown	in	the	table	above	are	our	unsecured	and	unsubordinated	obligations,	which rank	equally	with	our	other	Senior	Notes	and	all	other	unsecured	and	unsubordinated	indebtedness	that	we	have	issued	or	will	issue	from	time	to	time,	and	are	governed by	the	terms	of	an	indenture,	dated	as	of	November	16,	1998,	between	us	and	The	Bank	of	New	York	Mellon	(formerly	The	Bank	of	New	York),	as	trustee.	With	the exception	of	the	floating	rate	Series	Y	Notes,	we	may	redeem	some	or	all	of	each	series	of	the	Senior	Notes	before	maturity	under	the	terms	provided	in	the	applicable form	of	Senior	Note.

We	are	party	to	a	multicurrency	revolving	credit	agreement	(the	"Credit	Facility")	that	provides	for	up	to	$4	billion	of	aggregate	effective	borrowings	to	support our	commercial	paper	program	and	general	corporate	needs,	including	working	capital,	capital	expenditures,	share	repurchases,	letters	of	credit,	and	acquisitions.

Borrowings	under	the	Credit	Facility

generally	bear	interest	at	LIBOR	(the	London	Interbank	Offered	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.	While	any	outstanding	commercial	paper	borrowings	and/or	borrowings	under	our	Credit	Facility	generally	have	short-term maturities,	we	classify	the	outstanding	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	June	10,	2021.	See	the	"Cash	Requirements	and	Our	Credit	Facility"	caption	earlier	in	this	report	in	the	"Liquidity	and	Capital	Resources"	section	of Item	7	above	for	further	information	on	our	Credit	Facility	and	available	borrowing	capacity	at	December	31,	2018.

In	the	2018	fourth	quarter,	we	issued	$550	million	aggregate	principal	amount	of	three-month	LIBOR	plus	0.600	percent	Series	Y	Notes	due	December	1,	2020 (the	"Series	Y	Notes"),	$350	million	aggregate	principal	amount	of	4.150	percent	Series	Z	Notes	due	December	1,	2023	(the	"Series	Z	Notes"),	and	$300	million aggregate	principal	amount	of	4.650	percent	Series	AA	Notes	due	December	1,	2028	(the	"Series	AA	Notes").	We	will	pay	interest	on	the	Series	Y	Notes	on	March	1, June	1,	September	1,	and	December	1	of	each	year,	commencing	on	March	1,	2019,	and	will	pay	interest	on	the	Series	Z	Notes	and	the	Series	AA	Notes	on	June	1	and December	1	of	each	year,	commencing	on	June	1,	2019.	We	received	net	proceeds	of	approximately	$1,190	million	from	the	offering	of	the	Series	Y	Notes,	the	Series	Z Notes,	and	the	Series	AA	Notes,	after	deducting	the	underwriting	discount	and	estimated	expenses.

In	the	2018	second	quarter,	we	issued	$450	million	aggregate	principal	amount	of	4.000	percent	Series	X	Notes	due	April	15,	2028	(the	"Series	X	Notes").	We	will pay	interest	on	the	Series	X	Notes	on	April	15	and	October	15	of	each	year,	commencing	on	October	15,	2018.	We	received	net	proceeds	of	approximately	$443	million from	the	offering	of	the	Series	X	Notes,	after	deducting	the	underwriting	discount	and	estimated	expenses.

The	proceeds	from	our	2018	senior	note	issuances	were	made	available	for	general	corporate	purposes,	which	may	include	working	capital,	capital	expenditures, acquisitions,	stock	repurchases,	or	repayment	of	outstanding	commercial	paper	or	other	borrowings.

The	following	table	presents	future	principal	payments,	net	of	discounts,	premiums,	and	debt	issuance	costs,	for	our	debt	as	of	year-end	2018:

| Debt	Principal	Payments	($	in	millions) | Amount |
| :--- | :--- |
| 2019 | $833 |
| 2020 | 912 |
| 2021 | 3,108 |
| 2022 | 1,114 |
| 2023 | 695 |
| Thereafter | 2,685 |
| Balance\tat\tyear-end\t2018 | $9,347 |

# 11.	PENSION	AND	OTHER	POSTRETIREMENT	BENEFITS

We	sponsor	numerous	funded	and	unfunded	domestic	and	international	defined	benefit	pension	plans.	All	defined	benefit	plans	covering	U.S.	employees	are frozen,	meaning	that	employees	do	not	accrue	additional	benefits.	Certain	plans	covering	non-U.S.	employees	remain	active.	We	also	sponsor	the	Starwood	Retiree Welfare	Program,	which	provides	health	care	and	life	insurance	benefits	for	certain	eligible	retired	employees.

The	following	tables	show	changes	in	plan	assets	and	accumulated	benefit	obligations	and	the	funded	status	of	our	defined	benefit	pension	and	other postretirement	benefit	plans	at	year-end	2018	and	2017:

|  | Domestic	Pension	Benefits |  | Foreign	Pension	Benefits |  | Other	Postretirement	Benefits |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions) | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Plan\tAssets |  |  |  |  |  |  |
| Beginning\tfair\tvalue\tof\tplan\tassets | $— | $— | $294 | $262 | $— | $— |
| Actual\treturn\ton\tplan\tassets,\tnet\tof\texpenses | — | — | (16) | 29 | — | — |
| Employer\tcontribution | 2 | 2 | — | 2 | 1 | 1 |
| Participant\tcontributions | — | — | — | — | 1 | — |
| Plan\tsettlement\t(1) | — | — | (62) | — | — | — |
| Effect\tof\tforeign\texchange\trates | — | — | (6) | 10 | — | — |
| Benefits\tpaid | (2) | (2) | (8) | (9) | (2) | (1) |
| Ending\tfair\tvalue\tof\tplan\tassets | $— | $— | $202 | $294 | $— | $— |
| Accumulated\tBenefit\tObligations |  |  |  |  |  |  |
| Beginning\tbenefit\tobligations | $21 | $21 | $246 | $229 | $14 | $15 |
| Interest\tcost | 1 | 1 | 8 | 8 | 1 | — |
| Actuarial\t(gain)\tloss | (1) | 1 | 2 | 10 | (2) | — |
| Participant\tcontributions | — | — | — | — | 1 | — |
| Plan\tsettlement\t(1) | — | — | (55) | — | — | — |
| Effect\tof\tforeign\texchange\trates | — | — | (4) | 8 | — | — |
| Benefits\tpaid | (2) | (2) | (9) | (9) | (2) | (1) |
| Ending\taccumulated\tbenefit\tobligations | $19 | $21 | $188 | $246 | $12 | $14 |
| Funded\tStatus |  |  |  |  |  |  |
| Overfunded\t(underfunded)\tat\tyear-end | $(19) | $(21) | $14 | $48 | $(12) | $(14) |

(1) In	2018,	we	transferred	the	benefit	obligations	of	one	of	our	international	pension	plans	located	in	the	U.K.	to	Legal	&	General	Assurance	Society	Limited	("LGAS").	The	transaction	met	the criteria	for	settlement	accounting,	and	accordingly,	we	removed	the	plan	asset	and	liability	from	our	Balance	Sheet	at	year-end	2018.	We	reported	the	loss	of	$20	million	in	the	"Merger-related costs	and	charges"	caption	of	our	Income	Statement	because	we	had	assumed	the	plan	in	"Buy-In"	status	as	a	result	of	the	Starwood	Combination.

The	following	table	shows	the	classification	of	overfunded	and	(underfunded)	amounts	in	our	Balance	Sheets	at	year-end	2018	and	2017:

| ($	in	millions) | At	Year-End	2018 | At	Year-End	2017 |
| :--- | :--- | :--- |
| Other\tnoncurrent\tassets | $21 | $56 |
| Accrued\texpenses\tand\tother | (3) | (3) |
| Other\tnoncurrent\tliabilities | (35) | (40) |
|  | $(17) | $13 |

The	following	table	shows	the	benefit	obligations	for	pension	plans	with	accumulated	benefit	obligations	that	exceed	the	fair	value	of	plan	assets:

|  | Domestic	Pension	Benefits |  | Foreign	Pension	Benefits |  |
| :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions) | 2018 | 2017 | 2018 | 2017 |
| Projected\tbenefit\tobligation | $19 | $21 | $8 | $8 |
| Accumulated\tbenefit\tobligation | 19 | 21 | 7 | 7 |
| Fair\tvalue\tof\tplan\tassets | — | — | — | — |

The	weighted	average	assumptions	used	to	determine	benefit	obligations	at	year-end	2018	and	2017	were	as	follows:

| Domestic	Pension	Benefits |  | Foreign	Pension	Benefits |  | Other	Postretirement	Benefits |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| 4.25% | 3.50% | 3.88% | 3.30% | 4.24% | 3.50% |
| n/a | n/a | 3.02% | 3.02% | n/a | n/a |

(1) Rate	of	compensation	increase	is	not	applicable	to	domestic	pension	benefits	as	all	domestic	plans	are	frozen	and	do	not	accrue	additional	benefits,	or	to	other	postretirement	benefits	as	it	is	not an	input	in	the	benefit	obligation	determination.

Our	investment	objectives	for	plan	assets	are	to	minimize	asset	value	volatility	and	to	ensure	the	assets	are	sufficient	to	pay	plan	benefits.	The	target	asset	allocation is	39%	debt	securities,	39%	equity	securities,	and	22%	other.	We	consider	several	factors	in	assessing	the	expected	return	on	plan	assets,	including	current	and	expected allocation	of	plan	assets,	investment	strategy,	historical	rates	of	return	and	our	expectations,	as	well	as	investment	expert	expectations,	for	investment	performance	over approximately	a	ten-year	period.

The	following	tables	present	our	fair	value	hierarchy	of	plan	assets	at	year-end	2018	and	2017:

|  |  | At	Year-End	2018 | At	Year-End	2018 |  |  | At	Year-End	2017 | At	Year-End	2017 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions) | Level\t1 | Level\t2 | Level\t3 | Total | Level\t1 | Level\t2 | Level\t3 | Total |
| Assets: |  |  |  |  |  |  |  |  |
| Mutual\tfunds | $76 | $— | $— | $76 | $86 | $— | $— | $86 |
| Collective\ttrusts | — | 1 | 36 | 37 | — | 1 | 101 | 102 |
| Equity\tindex\ttrusts | 86 | — | — | 86 | 94 | — | — | 94 |
| Money\tmarkets | — | 2 | — | 2 | 1 | 9 | — | 10 |
| Bond\tindex\tfunds | — | 1 | — | 1 | — | 2 | — | 2 |
|  | $162 | $4 | $36 | $202 | $181 | $12 | $101 | $294 |

The	collective	trust	assets	include	investments	in	insurance	contracts,	which	we	valued	using	significant	unobservable	inputs,	including	plan	specific	data	and	bond interest	rates.	We	value	all	other	assets	using	quoted	market	prices	in	active	markets	or	other	observable	inputs.

The	following	table	shows	our	expected	future	pension	and	other	postretirement	benefit	plan	payments	for	the	next	ten	years:

| ($	in	millions) | Domestic<br>Pension	Benefits | Foreign<br>Pension	Benefits | Other	Postretirement<br>Benefits | Total |
| :--- | :--- | :--- | :--- | :--- |
| 2019 | $2 | $17 | $1 | $20 |
| 2020 | 2 | 9 | 1 | 12 |
| 2021 | 2 | 10 | 1 | 13 |
| 2022 | 2 | 10 | 1 | 13 |
| 2023 | 1 | 11 | 1 | 13 |
| 2024-2028 | 7 | 55 | 5 | 67 |

# 12.				INTANGIBLE	ASSETS	AND	GOODWILL

The	following	table	details	the	composition	of	our	intangible	assets	at	year-end	2018	and	2017:

| ($	in	millions) | At	Year-End	2018 | At	Year-End	2017 |
| :--- | :--- | :--- |
| Definite-lived\tIntangible\tAssets |  |  |
| Costs\tincurred\tto\tobtain\tcontracts\twith\tcustomers | $1,347 | $1,137 |
| Contracts\tacquired\tin\tbusiness\tcombinations\tand\tother | 1,983 | 2,052 |
|  | 3,330 | 3,189 |
| Accumulated\tamortization | (674) | (499) |
|  | 2,656 | 2,690 |
| Indefinite-lived\tIntangible\tBrand\tAssets | 5,724 | 5,854 |
|  | $8,380 | $8,544 |

We	capitalize	direct	costs	that	we	incur	to	obtain	management,	franchise,	and	license	agreements.	We	amortize	these	costs	on	a	straight-line	basis	over	the	initial term	of	the	agreements,	ranging	from	15	to	30	years.

For	acquired	definite-lived	intangible	assets,	we	recorded	amortization	expense	of	$111	million	in	2018,	$116	million	in	2017,	and	$31	million	in	2016	in	the "Depreciation,	amortization,	and	other"	caption	of	our	Income	Statements.	For	these	assets,	we	estimate	that	our	aggregate	amortization	expense	will	be	$111	million for	each	of	the	next	five	fiscal	years.

The	following	table	details	the	carrying	amount	of	our	goodwill	at	year-end	2018	and	2017:

| ($	in	millions) | North	American	Full-<br>Service | North	American<br>Limited-Service | Asia	Pacific | Other	International | Total<br>Goodwill |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tyear-end\t2017 | $3,585 | $1,769 | $1,928 | $1,925 | $9,207 |
| Foreign\tcurrency\ttranslation | (19) | (14) | (66) | (69) | (168) |
| Balance\tat\tyear-end\t2018 | $3,566 | $1,755 | $1,862 | $1,856 | $9,039 |

# 13.				PROPERTY	AND	EQUIPMENT

The	following	table	presents	the	composition	of	our	property	and	equipment	balances	at	year-end	2018	and	2017:

| ($	in	millions) | At	Year-End	2018 | At	Year-End	2017 |
| :--- | :--- | :--- |
| Land | $591 | $601 |
| Buildings\tand\tleasehold\timprovements | 1,275 | 1,052 |
| Furniture\tand\tequipment | 1,439 | 1,121 |
| Construction\tin\tprogress | 168 | 116 |
|  | 3,473 | 2,890 |
| Accumulated\tdepreciation | (1,517) | (1,097) |
|  | $1,956 | $1,793 |

We	record	property	and	equipment	at	cost,	including	interest	and	real	estate	taxes	we	incur	during	development	and	construction.	We	capitalize	the	cost	of improvements	that	extend	the	useful	life	of	property	and	equipment	when	we	incur	them.	These	capitalized	costs	may	include	structural	costs,	equipment,	fixtures,	floor, and	wall	coverings.	We	expense	all	repair	and	maintenance	costs	when	we	incur	them.	We	compute	depreciation	using	the	straight-line	method	over	the	estimated	useful lives	of	the	assets	(generally	three	to	40	years),	and	we	amortize	leasehold	improvements	over	the	shorter	of	the	asset	life	or	lease	term.	Our	gross	depreciation	expense totaled	$256	million	in	2018,	$231	million	in	2017,	and	$157	million	in	2016	(of	which	$147	million	in	2018,	$126	million	in	2017,	and	$76	million	in	2016	was included	in	reimbursed	costs).	Fixed	assets	attributed	to	operations	located	outside	the	U.S.	were	$533	million	in	2018	and	$705	million	in	2017.

# 14.	NOTES	RECEIVABLE

The	following	table	presents	the	expected	future	principal	payments,	net	of	reserves	and	unamortized	discounts,	as	well	as	interest	rates	for	our	notes	receivable	as of	year-end	2018:

| Notes	Receivable	Principal	Payments	 ($	in	millions) | Amount |
| :--- | :--- |
| 2019 | $6 |
| 2020 | 62 |
| 2021 | 2 |
| 2022 | 2 |
| 2023 | — |
| Thereafter | 59 |
| Balance\tat\tyear-end\t2018 | $131 |
| Weighted\taverage\tinterest\trate\tat\tyear-end\t2018 | 5.9% |
| Range\tof\tstated\tinterest\trates\tat\tyear-end\t2018 | 0\t-\t9% |

At	year-end	2018,	our	recorded	investment	in	impaired	senior,	mezzanine,	and	other	loans	was	$45	million,	and	we	had	a	$25	million	allowance	for	credit	losses, leaving	$20	million	of	exposure	to	our	investment	in	impaired	loans.	At	year-end	2017,	our	recorded	investment	in	impaired	senior,	mezzanine,	and	other	loans	was	$95 million,	and	we	had	a	$72	million	allowance	for	credit	losses,	leaving	$23	million	of	exposure	to	our	investment	in	impaired	loans.	Our	average	investment	in	impaired senior,	mezzanine,	and	other	loans	totaled	$70	million	during	2018,	$84	million	during	2017,	and	$73	million	during	2016.

# 15.				FAIR	VALUE	OF	FINANCIAL	INSTRUMENTS

We	believe	that	the	fair	values	of	our	current	assets	and	current	liabilities	approximate	their	reported	carrying	amounts.	We	present	the	carrying	values	and	the	fair values	of	noncurrent	financial	assets	and	liabilities	that	qualify	as	financial	instruments,	determined	under	current	guidance	for	disclosures	on	the	fair	value	of	financial instruments,	in	the	following	table:

|  | At	Year-End	2018 | At	Year-End	2018 | At	Year-End	2017 | At	Year-End	2017 |
| :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions) | Carrying\nAmount | Fair\tValue | Carrying\nAmount | Fair\tValue |
| Senior,\tmezzanine,\tand\tother\tloans | $125 | $116 | $142 | $130 |
| Total\tnoncurrent\tfinancial\tassets | $125 | $116 | $142 | $130 |
| Senior\tNotes | $(5,928) | $(5,794) | $(5,087) | $(5,126) |
| Commercial\tpaper | (2,245) | (2,245) | (2,371) | (2,371) |
| Other\tlong-term\tdebt | (184) | (182) | (217) | (221) |
| Other\tnoncurrent\tliabilities | (153) | (153) | (178) | (178) |
| Total\tnoncurrent\tfinancial\tliabilities | $(8,510) | $(8,374) | $(7,853) | $(7,896) |

We	estimate	the	fair	value	of	our	senior,	mezzanine,	and	other	loans	by	discounting	cash	flows	using	risk-adjusted	rates,	both	of	which	are	Level	3	inputs.

We	estimate	the	fair	value	of	our	other	long-term	debt,	including	the	current	portion	and	excluding	leases,	using	expected	future	payments	discounted	at	risk- adjusted	rates,	which	are	Level	3	inputs.	We	determine	the	fair	value	of	our	Senior	Notes	using	quoted	market	prices,	which	are	directly	observable	Level	1	inputs.	As noted	in	Footnote	10.	Long-Term	Debt,	even	though	our	commercial	paper	borrowings	generally	have	short-term	maturities	of	30	days	or	less,	we	classify	outstanding commercial	paper	borrowings	as	long-term	based	on	our	ability	and	intent	to	refinance	them	on	a	long-term	basis.	As	we	are	a	frequent	issuer	of	commercial	paper,	we use	pricing	from	recent	transactions	as	Level	2	inputs	in	estimating	fair	value.	At	year-end	2018	and	year-end	2017,	we	determined	that	the	carrying	value	of	our commercial	paper	approximated	fair	value	due	to	the	short	maturity.	Our	other	noncurrent	liabilities	largely	consist	of	guarantees.	As	we	note	in	the	"Guarantees" caption	of	Footnote	2.	Summary	of	Significant	Accounting	Policies,	we	measure	our	liability	for	guarantees	at	fair	value	on	a	nonrecurring	basis,	which	is	when	we	issue or	modify	a	guarantee	using	Level	3	internally	developed	inputs.	At	year-end	2018	and	year-end	2017,	we	determined	that	the	carrying	values	of	our	guarantee	liabilities approximated	their	fair	values	based	on	Level	3	inputs.

See	the	"Fair	Value	Measurements"	caption	of	Footnote	2.	Summary	of	Significant	Accounting	Policies	for	more	information	on	the	input	levels	we	use	in determining	fair	value.

# 16.				ACCUMULATED	OTHER	COMPREHENSIVE	LOSS

The	following	table	details	the	accumulated	other	comprehensive	loss	activity	for	2018,	2017,	and	2016:

| ($	in	millions) | Foreign	Currency<br>Translation	Adjustments | Derivative	Instrument<br>Adjustments | Available-For-Sale<br>Securities	Unrealized<br>Adjustments | Pension	and	Postretirement<br>Adjustments | Accumulated	Other<br>Comprehensive	Loss |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tyear-end\t2015 | $(192) | $(8) | $4 | $— | $(196) |
| Other\tcomprehensive\t(loss)\tincome\nbefore\treclassifications\t(1) | (311) | 1 | 2 | 5 | (303) |
| Reclassification\tof\tlosses | — | 2 | — | — | 2 |
| Net\tother\tcomprehensive\t(loss)\tincome | (311) | 3 | 2 | 5 | (301) |
| Balance\tat\tyear-end\t2016 | $(503) | $(5) | $6 | $5 | $(497) |
| Other\tcomprehensive\tincome\t(loss)\nbefore\treclassifications\t(1) | 478 | (14) | (2) | 7 | 469 |
| Reclassification\tof\tlosses | 2 | 9 | — | — | 11 |
| Net\tother\tcomprehensive\tincome\t(loss) | 480 | (5) | (2) | 7 | 480 |
| Balance\tat\tyear-end\t2017 | $(23) | $(10) | $4 | $12 | $(17) |
| Other\tcomprehensive\t(loss)\tincome\nbefore\treclassifications\t(1) | (391) | 12 | — | (8) | (387) |
| Reclassification\tof\tlosses | 11 | 6 | — | — | 17 |
| Net\tother\tcomprehensive\t(loss)\tincome | (380) | 18 | — | (8) | (370) |
| Adoption\tof\tASU\t2016-01 | — | — | (4) | — | (4) |
| Balance\tat\tyear-end\t2018 | $(403) | $8 | $— | $4 | $(391) |

(1) Other	comprehensive	(loss)	income	before	reclassifications	for	foreign	currency	translation	adjustments	includes	gains	(losses)	on	intra-entity	foreign	currency	transactions	that	are	of	a	long-term investment	nature	of	$14	million	for	2018,	$(147)	million	for	2017,	and	$69	million	for	2016.

We	are	a	diversified	global	lodging	company	with	operations	in	the	following	reportable	business	segments:

•North	American	Full-Service,	which	includes	our	Luxury	and	Premium	brands	located	in	the	U.S.	and Canada;

•North	American	Limited-Service,	which	includes	our	Select	brands	located	in	the	U.S.	and	Canada;

•Asia	Pacific,	which	includes	all	brand	tiers	in	our	Asia	Pacific

region.

The	following	operating	segments	do	not	meet	the	applicable	accounting	criteria	for	separate	disclosure	as	reportable	business	segments:	Caribbean	and	Latin America,	Europe,	and	Middle	East	and	Africa.	We	present	these	operating	segments	together	as	"Other	International"	in	the	tables	below.

We	evaluate	the	performance	of	our	operating	segments	using	"segment	profits"	which	is	based	largely	on	the	results	of	the	segment	without	allocating	corporate expenses,	income	taxes,	or	indirect	general,	administrative,	and	other	expenses.	We	assign	gains	and	losses,	equity	in	earnings	or	losses	from	our	joint	ventures,	and direct	general,	administrative,	and	other	expenses	to	each	of	our	segments.	"Unallocated	corporate"	represents	a	portion	of	our	revenues,	including	license	fees	we receive	from	our	credit	card	programs	and	fees	from	vacation	ownership	licensing	agreements,	general,	administrative,	and	other	expenses,	equity	in	earnings	or	losses, and	other	gains	or	losses	that	we	do	not	allocate	to	our	segments.	Beginning	in	the	2018	first	quarter,	"Unallocated	corporate"	also	includes	revenues	and	expenses	for our	Loyalty	Program,	and	we	reflected	this	change	in	the	prior	period	amounts	shown	in	the	tables	below.	Additionally,	in	2016,	"Unallocated	corporate"	also	included the	impact	of	Legacy-Starwood	operations	for	the	eight	days	ended	September	30,	2016,	as	we	did	not	allocate	Legacy-Starwood's	results	to	our	segments	for	the	period between	the	Merger	Date	and	the	end	of	the	2016	third	quarter.

Our	President	and	Chief	Executive	Officer,	who	is	our	"chief	operating	decision	maker"	("CODM"),	monitors	assets	for	the	consolidated	company,	but	does	not use	assets	by	operating	segment	when	assessing	performance	or	making	operating	segment	resource	allocations.

# Segment	Revenues

The	following	tables	present	our	revenues	disaggregated	by	major	revenue	stream	as	of	year-end	2018,	year-end	2017,	and	year-end	2016:

| ($	in	millions) | North	American	Full-<br>Service | North	American<br>Limited-Service | Asia	Pacific | Other	International | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Gross\tfee\trevenues | $1,255 | $903 | $479 | $518 | $3,155 |
| Contract\tinvestment\tamortization | (33) | (12) | (2) | (11) | (58) |
| Net\tfee\trevenues | 1,222 | 891 | 477 | 507 | 3,097 |
| Owned,\tleased,\tand\tother\trevenue | 593 | 128 | 182 | 668 | 1,571 |
| Cost\treimbursement\trevenue | 11,257 | 2,198 | 459 | 1,091 | 15,005 |
| Total\tsegment\trevenue | $13,072 | $3,217 | $1,118 | $2,266 | $19,673 |
| Unallocated\tcorporate |  |  |  |  | 1,085 |
| Total\trevenue |  |  |  |  | $20,758 |

| ($	in	millions) | North	American	Full-<br>Service | North	American<br>Limited-Service | Asia	Pacific | Other	International | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Gross\tfee\trevenues | $1,202 | $842 | $431 | $476 | $2,951 |
| Contract\tinvestment\tamortization | (25) | (11) | (1) | (13) | (50) |
| Net\tfee\trevenues | 1,177 | 831 | 430 | 463 | 2,901 |
| Owned,\tleased,\tand\tother\trevenue | 697 | 132 | 191 | 685 | 1,705 |
| Cost\treimbursement\trevenue | 11,035 | 2,256 | 433 | 1,140 | 14,864 |
| Total\tsegment\trevenue | $12,909 | $3,219 | $1,054 | $2,288 | $19,470 |
| Unallocated\tcorporate |  |  |  |  | 982 |
| Total\trevenue |  |  |  |  | $20,452 |

| ($	in	millions) | North	American	Full-<br>Service | North	American<br>Limited-Service | Asia	Pacific | Other	International | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Gross\tfee\trevenues | $856 | $746 | $231 | $312 | $2,145 |
| Contract\tinvestment\tamortization | (21) | (9) | (1) | (9) | (40) |
| Net\tfee\trevenues | 835 | 737 | 230 | 303 | 2,105 |
| Owned,\tleased,\tand\tother\trevenue | 390 | 119 | 127 | 438 | 1,074 |
| Cost\treimbursement\trevenue | 8,199 | 2,038 | 274 | 922 | 11,433 |
| Total\tsegment\trevenue | $9,424 | $2,894 | $631 | $1,663 | $14,612 |
| Unallocated\tcorporate |  |  |  |  | 795 |
| Total\trevenue |  |  |  |  | $15,407 |

# Segment	Profits

| ($	in	millions) | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| North\tAmerican\tFull-Service | $1,153 | $1,238 | $801 |
| North\tAmerican\tLimited-Service | 786 | 827 | 702 |
| Asia\tPacific | 456 | 361 | 160 |
| Other\tInternational | 570 | 420 | 222 |
| Other\tunallocated\tcorporate | (302) | 386 | (447) |
| Interest\texpense,\tnet\tof\tinterest\tincome | (318) | (250) | (199) |
| Income\ttaxes | (438) | (1,523) | (431) |
| Net\tincome | $1,907 | $1,459 | $808 |

Segment	profits	attributed	to	operations	located	outside	the	U.S.	were	$1,155	million	in	2018,	$837	million	in	2017,	and	$446	million	in	2016.	The	2018	segment profits	consisted	of	segment	profits	of	$456	million	from	Asia	Pacific,	$266	million	from	Europe,	$242	million	from	the	Caribbean	and	Latin	America,	$62	million from	the	Middle	East	and	Africa,	and	$129	million	from	other	locations.

# Depreciation,	Amortization,	and	Other

| ($	in	millions) | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| North\tAmerican\tFull-Service | $82 | $82 | $43 |
| North\tAmerican\tLimited-Service | 15 | 14 | 13 |
| Asia\tPacific | 26 | 32 | 8 |
| Other\tInternational | 70 | 71 | 34 |
| Unallocated\tcorporate | 33 | 30 | 21 |
|  | $226 | $229 | $119 |

# Capital	Expenditures

| ($	in	millions) | 2018 | 2017 | 2016 |
| :--- | :--- | :--- | :--- |
| North\tAmerican\tFull-Service | $290 | $21 | $35 |
| North\tAmerican\tLimited-Service | 15 | 10 | 7 |
| Asia\tPacific | 6 | 12 | 1 |
| Other\tInternational | 40 | 42 | 38 |
| Unallocated\tcorporate | 205 | 155 | 118 |
|  | $556 | $240 | $199 |

# The	following	tables	present	financial	data	resulting	from	transactions	with	these	related	parties:

# Income	Statement	Data

Undistributed	earnings	attributable	to	our	equity	method	investments	represented	approximately	$70	million	of	our	consolidated	retained	earnings	at	year-end

# Summarized	Financial	Information	for	Investees

The	following	tables	present	summarized	financial	information	for	the	entities	in	which	we	have	equity	method	investments:

(1) 2016	sales	and	net	income	for	entities	in	which	we	acquired	an	investment	through	the	Starwood	Combination	are	for	the	period	from	the	Merger	Date	to	year-end	2016.

The	carrying	amount	of	our	equity	method	investments	was	$732	million	at	year-end	2018	and	$734	million	at	year-end	2017.	This	value	exceeded	our	share	of the	book	value	of	the	investees'	net	assets	by	$419	million	at	year-end	2018	and	$441	at	year-end	2017,	primarily	due	to	the	value	that	we	assigned	to	land,	contracts,	and buildings	owned	by	the	investees.

We	received	management	fees	of	approximately	$13	million	in	2018,	$13	million	in	2017,	and	$13	million	in	2016,	plus	reimbursement	of	certain	expenses,	from our	operation	of	properties	owned	by	JWM	Family	Enterprises,	L.P.,	which	is	beneficially	owned	and	controlled	by	J.W.	Marriott,	Jr.,	Deborah	Marriott	Harrison,	and other	members	of	the	Marriott	family.

Host	Hotels	&	Resorts,	Inc.,	formerly	known	as	Host	Marriott	Corporation,	and	its	affiliates	("Host")	owned	or	leased	74	lodging	properties	at	year-end	2018	and 81	at	year-end	2017	that	we	operated	or	franchised.	Over	the	last	three	years,	we	recognized	revenues,	including	cost	reimbursement	revenue,	of	$2,542	million	in	2018, $2,671	million	in	2017,	and	$2,015	million	in	2016	from	those	lodging	properties,	and	included	those	revenues	in	our	North	American	Full-Service	and	North	American Limited-Service	reportable	business	segments,	and	our	Caribbean	and	Latin	America	and	Europe	operating	segments.

Host	is	also	a	partner	in	certain	unconsolidated	partnerships	that	own	lodging	properties	that	we	operate	under	long-term	agreements.	Host	was	affiliated	with	10 such	properties	at	year-end	2018	and	11	such	properties	at	year-end	2017.	We	recognized	revenues,	including	cost	reimbursement	revenue,	of	$123	million	in	2018, $114	million	in	2017,	and	$100	million	in	2016	from	those	lodging	properties,	and	included	those	revenues	in	our	North	American	Full-Service	reportable	business segment	and	our	Europe	operating	segment.

# SUPPLEMENTARY	DATA

# QUARTERLY	FINANCIAL	DATA	–	UNAUDITED

| ($	in	millions,	except	per	share	data) |  |  | 2018 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | First\nQuarter | Second\nQuarter | Third\nQuarter | Fourth\nQuarter | Fiscal\nYear |
| Revenues | $5,009 | $5,409 | $5,051 | $5,289 | $20,758 |
| Operating\tincome | $530 | $818 | $596 | $422 | $2,366 |
| Net\tincome | $420 | $667 | $503 | $317 | $1,907 |
| Basic\tearnings\tper\tshare\t(1) | $1.17 | $1.89 | $1.45 | $0.93 | $5.45 |
| Diluted\tearnings\tper\tshare\t(1) | $1.16 | $1.87 | $1.43 | $0.92 | $5.38 |

| ($	in	millions,	except	per	share	data) |  |  | 2017 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  | First\nQuarter | Second\nQuarter | Third\nQuarter | Fourth\nQuarter | Fiscal\nYear |
| Revenues | $4,912 | $5,211 | $5,078 | $5,251 | $20,452 |
| Operating\tincome | $546 | $744 | $790 | $424 | $2,504 |
| Net\tincome | $371 | $489 | $485 | $114 | $1,459 |
| Basic\tearnings\tper\tshare\t(1) | $0.96 | $1.29 | $1.30 | $0.31 | $3.89 |
| Diluted\tearnings\tper\tshare\t(1) | $0.95 | $1.28 | $1.29 | $0.31 | $3.84 |

(1) The	sum	of	the	earnings	per	share	for	the	four	quarters	may	differ	from	annual	earnings	per	share	due	to	the	required	method	of	computing	the	weighted	average	shares	in	interim	periods.

In	the	2018	fourth	quarter,	we	identified	errors	related	to	our	Loyalty	Program,	which	resulted	in	the	understatement	of	cost	reimbursement	revenue,	net	of reimbursed	expenses	in	our	previously	issued	financial	statements	for	the	2018	first,	second,	and	third	quarters.	Correction	of	the	errors	resulted	in	a	$99	million	increase to	net	income	for	the	2018	first	three	quarters	combined.	We	concluded	that	the	errors	were	and	continue	to	be	immaterial	to	those	financial	statements.	We	revised	each prior	period	presented	in	the	2018	quarterly	financial	data	table	above	to	reflect	the	correction	of	the	immaterial	errors	because	recording	the	out	of	period	adjustments would	have	been	material	to	the	2018	fourth	quarter.	The	table	below	presents	the	effects	of	our	adjustments.

|  |  | First	Quarter |  |  | Second	Quarter |  |  | Third	Quarter |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| ($\tin\tmillions,\texcept\tper\tshare\namounts) | As\nPreviously\nReported | Adjustments | As\tAdjusted | As\nPreviously\nReported | Adjustments | As\tAdjusted | As\tPreviously\nReported | Adjustments | As\tAdjusted |
| REVENUES |  |  |  |  |  |  |  |  |  |
| Base\tmanagement\tfees | $273 | $— | $273 | $300 | $— | $300 | $279 | $— | $279 |
| Franchise\tfees | 417 | — | 417 | 475 | — | 475 | 502 | — | 502 |
| Incentive\tmanagement\tfees | 155 | — | 155 | 176 | — | 176 | 151 | — | 151 |
| Gross\tfee\trevenues | 845 | — | 845 | 951 | — | 951 | 932 | — | 932 |
| Contract\tinvestment\namortization | (18) | — | (18) | (13) | — | (13) | (13) | — | (13) |
| Net\tfee\trevenues | 827 | — | 827 | 938 | — | 938 | 919 | — | 919 |
| Owned,\tleased,\tand\tother\nrevenue | 406 | — | 406 | 423 | — | 423 | 397 | — | 397 |
| Cost\treimbursement\trevenue | 3,773 | 3 | 3,776 | 3,985 | 63 | 4,048 | 3,733 | 2 | 3,735 |
|  | 5,006 | 3 | 5,009 | 5,346 | 63 | 5,409 | 5,049 | 2 | 5,051 |
| OPERATING\tCOSTS\tAND\nEXPENSES |  |  |  |  |  |  |  |  |  |
| Owned,\tleased,\tand\tother-\ndirect | 336 | — | 336 | 334 | — | 334 | 315 | — | 315 |
| Depreciation,\tamortization,\nand\tother | 54 | — | 54 | 58 | — | 58 | 52 | — | 52 |
| General,\tadministrative,\tand\nother | 247 | — | 247 | 217 | — | 217 | 221 | — | 221 |
| Merger-related\tcosts\tand\ncharges | 34 | — | 34 | 18 | — | 18 | 12 | — | 12 |
| Reimbursed\texpenses | 3,835 | (27) | 3,808 | 3,979 | (15) | 3,964 | 3,879 | (24) | 3,855 |
|  | 4,506 | (27) | 4,479 | 4,606 | (15) | 4,591 | 4,479 | (24) | 4,455 |
| OPERATING\tINCOME | 500 | 30 | 530 | 740 | 78 | 818 | 570 | 26 | 596 |
| Gains\tand\tother\tincome,\tnet | 59 | — | 59 | 114 | — | 114 | 18 | — | 18 |
| Interest\texpense | (75) | — | (75) | (85) | — | (85) | (86) | — | (86) |
| Interest\tincome | 5 | — | 5 | 6 | — | 6 | 5 | — | 5 |
| Equity\tin\tearnings | 13 | — | 13 | 21 | — | 21 | 61 | — | 61 |
| INCOME\tBEFORE\tINCOME\nTAXES | 502 | 30 | 532 | 796 | 78 | 874 | 568 | 26 | 594 |
| Provision\tfor\tincome\ttaxes | (104) | (8) | (112) | (186) | (21) | (207) | (85) | (6) | (91) |
| NET\tINCOME | $398 | $22 | $420 | $610 | $57 | $667 | $483 | $20 | $503 |
| EARNINGS\tPER\tSHARE |  |  |  |  |  |  |  |  |  |
| Earnings\tper\tshare\t-\tbasic | $1.11 | $0.06 | $1.17 | $1.73 | $0.16 | $1.89 | $1.39 | $0.06 | $1.45 |
| Earnings\tper\tshare\t-\tdiluted | $1.09 | $0.07 | $1.16 | $1.71 | $0.16 | $1.87 | $1.38 | $0.05 | $1.43 |

# Item	9. Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial

# Disclosure.

# Item	9A. Controls	and	Procedures.

# Disclosure	Controls	and	Procedures

As	of	the	end	of	the	period	covered	by	this	annual	report,	we	evaluated,	under	the	supervision	and	with	the	participation	of	our	management,	including	our	Chief Executive	Officer	and	Chief	Financial	Officer,	the	effectiveness	of	our	disclosure	controls	and	procedures	(as	such	term	is	defined	in	Rules	13a-15(e)	and	15d-15(e)	of the	Securities	Exchange	Act	of	1934	(the	"Exchange	Act")).	Management	necessarily	applied	its	judgment	in	assessing	the	costs	and	benefits	of	those	controls	and procedures,	which	by	their	nature,	can	provide	only	reasonable	assurance	about	management's	control	objectives.	You	should	note	that	the	design	of	any	system	of controls	is	based	in	part	upon	certain	assumptions	about	the	likelihood	of	future	events,	and	we	cannot	assure	you	that	any	design	will	succeed	in	achieving	its	stated goals	under	all	potential	future	conditions,	regardless	of	how	remote.	Based	upon	this	evaluation,	our	Chief	Executive	Officer	and	the	Chief	Financial	Officer	concluded that	our	disclosure	controls	and	procedures	were	not	effective	because	of	the	material	weakness	in	internal	control	over	financial	reporting	described	below.	In	light	of the	material	weakness,	management	performed	additional	procedures	to	validate	the	accuracy	and	completeness	of	the	financial	results	impacted	by	the	control deficiencies.	Such	procedures	included	the	validation	of	data	underlying	key	financial	models,	substantive	logic	inspection,	fluctuation	analyses,	and	detailed	testing.

# Material	Weakness	in	Internal	Control	Over	Financial	Reporting

A	material	weakness	(as	defined	in	Rule	12b-2	under	the	Exchange	Act)	is	a	deficiency,	or	combination	of	deficiencies,	in	internal	control	over	financial	reporting, such	that	there	is	a	reasonable	possibility	that	a	material	misstatement	of	the	company's	annual	or	interim	financial	statements	will	not	be	prevented	or	detected	on	a timely	basis.

In	the	2018	fourth	quarter,	we	identified	the	following	deficiencies	in	the	design	of	internal	control	over	financial	reporting	for	our	Loyalty	Program.

1. There	were	not	sufficient	resources	with	an	understanding	of	both	the	requirements	under	generally	accepted	accounting	principles	of	ASU	2014-09	and Loyalty	Program	operations	involved	in	the	initial	implementation	and	ongoing	monitoring	of	ASU	2014-09	to	allow	the	individuals	responsible	for	the	review of	the	Loyalty	Program	accounting	model	to	prevent	or	detect	material	misstatements	on	a	timely	basis	in	the	normal	course	of	their	review.

2. The	combination	of	the	Starwood	Preferred	Guest	and	Marriott	Rewards	programs	in	August	2018	resulted	in	delayed,	incomplete,	and	inaccurate	reporting	of Loyalty	Program	data	such	that	the	financial	results	of	the	Loyalty	Program	could	not	be	properly	recorded	on	a	timely	basis.

These	control	deficiencies	resulted	in	errors	in	the	calculation	of	cost	reimbursement	revenue	and	reimbursed	expenses	in	our	previously	issued	financial statements	for	the	2018	first,	second,	and	third	quarters.	Although	the	errors	were	not	material	to	those	financial	statements,	we	concluded	that	the	combination	of control	deficiencies	represented	a	material	weakness.	Ernst	&	Young	LLP,	an	independent	registered	public	accounting	firm,	has	independently	assessed	our	internal control	over	financial	reporting	and	its	report	is	included	in	Part	II,	Item	8	of	this	report.

# Remediation	of	Material	Weakness

We	have	developed	a	remediation	plan	that	includes	steps	to	increase	dedicated	personnel,	improve	reporting	processes,	and	enhance	related	supporting technology.	We	are	committed	to	maintaining	a	strong	internal	control	environment	and	implementing	measures	designed	to	help	ensure	that	control	deficiencies contributing	to	the	material	weakness	are	remediated	as	soon	as	possible.

We	have	set	forth	management's	report	on	internal	control	over	financial	reporting	and	the	attestation	report	of	our	independent	registered	public	accounting	firm on	our	internal	control	over	financial	reporting	in	Part	II,	Item	8	of	this	Form	10-K,	and	we	incorporate	those	reports	here	by	reference.

As	outlined	above,	we	are	in	the	process	of	taking	steps	to	remediate	the	material	weakness.	We	made	no	other	changes	in	internal	control	over	financial	reporting during	the	fourth	quarter	of	2018	that	materially	affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

# Item	9B. Other	Information.

As	described	below,	we	incorporate	by	reference	in	this	Annual	Report	on	Form	10-K	certain	information	appearing	in	the	Proxy	Statement	that	we	will	furnish	to our	shareholders	for	our	2019	Annual	Meeting	of	Shareholders.

# Item	10.	Directors,	Executive	Officers,	and	Corporate	Governance.

# Item	11.	Executive	Compensation.

# Item	12.	Security	Ownership	of	Certain	Beneficial	Owners	and	Management and	Related	Stockholder	Matters.

We	incorporate	this	information	by	reference	to	"Our	Board	of	Directors,"	"Section 16(a)	Beneficial	Ownership	Reporting	Compliance,"	"Audit	Committee," "Transactions	with	Related	Persons,"	and	"Selection	of	Director	Nominees" sections	of	our	Proxy	Statement.	We	have	included	information	regarding	our executive	officers	and	our	Code	of	Ethics	below.

We	incorporate	this	information	by	reference	to	the	"Executive	and	Director Compensation"	and	"Compensation	Committee	Interlocks	and	Insider Participation"	sections	of	our	Proxy	Statement.

We	include	below	certain	information	on	our	executive	officers.	This	information	is	as	of	February	1,	2019,	except	where	indicated.

Craig	S.	Smith President	&	Managing	Director Asia	Pacific 56 Craig	S.	Smith	became	President	and	Managing	Director	of	Asia	Pacific	in	June	2015,	assuming	the responsibility	for	the	strategic	leadership	of	all	operational	and	development	functions	spanning	the region.	Mr.	Smith	began	his	career	with	Marriott	in	1988.	Before	his	current	position,	Mr.	Smith	served as	President	of	Marriott's	Caribbean	and	Latin	American	region	from	2011	to	2015.	Before	moving	to the	Caribbean	and	Latin	American	region	in	2011,	he	was	Executive	Vice	President	and	Chief Operations	Officer	for	Asia	Pacific.	As	the	son	of	an	American	diplomat,	Mr.	Smith	has	lived	in	13 countries,	working	in	North	America,	the	Caribbean,	Latin	America,	Asia	Pacific,	and	Australia.	He	is fluent	in	Spanish	and	conversant	in	Portuguese.	Mr.	Smith	earned	his	Master	of	Business Administration	from	the	Rotman	School	of	Management	at	the	University	of	Toronto	and	a	Bachelor	of Science	from	Brigham	Young	University.

# Code	of	Ethics	and	Business	Conduct	Guide

The	Company	has	long	maintained	and	enforced	a	Code	of	Ethics	that	applies	to	all	Marriott	associates,	including	our	Chairman	of	the	Board,	Chief	Executive Officer,	Chief	Financial	Officer,	and	Principal	Accounting	Officer,	and	to	each	member	of	the	Board.	The	Code	of	Ethics	is	encompassed	in	our	Business	Conduct Guide,	which	is	available	in	the	Investor	Relations	section	of	our	website	(www.marriott.com/investor)	by	clicking	on	"Governance"	and	then	"Documents	&	Charters." We	intend	to	post	on	that	website	any	future	changes	or	amendments	to	our	Code	of	Ethics,	and	any	waiver	of	our	Code	of	Ethics	that	applies	to	our	Chairman	of	the Board,	any	of	our	executive	officers,	or	a	member	of	our	Board	within	four	business	days	following	the	date	of	the	amendment	or	waiver.

# PART	IV

# Item	15. Exhibits	and	Financial	Statement

# Schedules.

# LIST	OF	DOCUMENTS	FILED	AS	PART	OF	THIS	REPORT

# (1)	FINANCIAL	STATEMENTS

We	include	this	portion	of	Item	15	under	Part	II,	Item	8	of	this	Report	on	Form	10-K.

# (2)	FINANCIAL	STATEMENT	SCHEDULES

We	include	the	financial	statement	schedule	information	required	by	the	applicable	accounting	regulations	of	the	SEC	in	the	notes	to	our	financial statements	and	incorporate	that	information	in	this	Item	15	by	reference.

# (3)	EXHIBITS

Any	shareholder	who	wants	a	copy	of	the	following	Exhibits	may	obtain	one	from	us	upon	request	at	a	charge	that	reflects	the	reproduction	cost	of	such Exhibits.	Requests	should	be	made	to	the	Secretary,	Marriott	International,	Inc.,	10400	Fernwood	Road,	Department	52/862,	Bethesda,	MD	20817.

We	have	not	filed	as	exhibits	certain	instruments	defining	the	rights	of	holders	of	the	long-term	debt	of	Marriott	or	its	subsidiary	Starwood	Hotels	& Resorts	Worldwide,	LLC,	pursuant	to	Item	601(b)(4)(iii)	of	Regulation	S-K	promulgated	under	the	Exchange	Act,	because	the	amount	of	debt	authorized and	outstanding	under	each	such	instrument	does	not	exceed	10	percent	of	the	total	assets	of	the	Company's	and	its	consolidated	subsidiaries.	The Company	agrees	to	furnish	a	copy	of	any	such	instrument	to	the	Commission	upon	request.

# Incorporation	by	Reference	(where	a	report	is	indicated	below,	that	document

† Portions	of	this	exhibit	were	redacted	pursuant	to	a	confidential	treatment	request	filed	with	the	Securities	and	Exchange	Commission	pursuant	to	Rule	24b-2	under the	Exchange	Act.	The	redacted	portions	of	this	exhibit	have	been	filed	with	the	Securities	and	Exchange	Commission.

We	have	submitted	electronically	the	following	documents	formatted	in	XBRL	(Extensible	Business	Reporting	Language)	as	Exhibit	101	to	this	report:	(i)	the Consolidated	Statements	of	Income	for	the	year-ended	December	31,	2018,	December	31,	2017,	and	December	31,	2016;	(ii)	the	Consolidated	Balance	Sheets	at December	31,	2018,	and	December	31,	2017;	(iii)	the	Consolidated	Statements	of	Cash	Flows	for	the	year-ended	December	31,	2018,	December	31,	2017,	and December	31,	2016;	(iv)	the	Consolidated	Statements	of	Comprehensive	Income	for	the	year-ended	December	31,	2018,	December	31,	2017,	and	December	31,	2016; (v)	the	Consolidated	Statements	of	Shareholders'	Equity	for	the	year-ended	December	31,	2018,	December	31,	2017,	and	December	31,	2016;	and	(vi)	Notes	to Consolidated	Financial	Statements.

# Summary.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Exchange	Act,	we	have	duly	caused	this	Form	10-K	to	be	signed	on	our	behalf	by	the	undersigned, thereunto	duly	authorized,	on	this	1st	day	of	March	2019.

By: /s/Arne	M.	Sorenson

# 	 Arne	M.	Sorenson

# 	 President	and	Chief	Executive	Officer

Pursuant	to	the	requirements	of	the	Exchange	Act,	this	Form	10-K	has	been	signed	by	the	following	persons	on	our	behalf	in	the	capacities	indicated	and	on	the date	indicated	above.

# PRINCIPAL	EXECUTIVE	OFFICER:

# DIRECTORS:

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

/s/Mary	K.	Bush Mary	K.	Bush,	Director

/s/Bruce	W.	Duncan Bruce	W.	Duncan,	Director

/s/Deborah	Marriott	Harrison Deborah	Marriott	Harrison,	Director /s/Frederick	A.	Henderson Frederick	A.	Henderson,	Director

/s/Lawrence	W.	Kellner Lawrence	W.	Kellner,	Director

/s/Debra	L.	Lee Debra	L.	Lee,	Director

/s/Aylwin	B.	Lewis Aylwin	B.	Lewis,	Director

/s/George	Muñoz George	Muñoz,	Director /s/Steven	S	Reinemund Steven	S	Reinemund,	Director


of the total contractual obligations and off-balance sheet arrangements contractual obligations what percentage is due to capital lease obligations?