09_MARRIOTT_INTERNATIONAL - MARRIOTT INTERNATIONAL, INC.1...

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MARRIOTT INTERNATIONAL, INC. 1  Marriott International, Inc. is a worldwide operator and franchisor of hotels and related lodging facilities. 2 The company develops, operates, and franchises hotels and corporate housing properties under fourteen separate brand names, and develops, operates, and markets timeshare, fractional ownership, and residential properties under four separate brand names. 3 Marriott groups its operations into the following five business segments: Segment % 2010 Total Revenues North American Full-Service Lodging Segment 44% North American Limited-Service Lodging Segment 18% International Lodging Segment 11% Luxury Lodging Segment 13% Timeshare Segment 13% Marriott operates or franchises 3,545 lodging properties worldwide, with 618,104 rooms as of year-end 2010 inclusive of 36 home and condominium products (3,737 units) for which it manages the related owners’ associations. 4 In addition, the company provides 2,043 furnished corporate housing rental units, which are not included in the totals. Company-Operated Lodging Property Arrangements At year-end 2010, Marriott operated properties under a number of arrangements: long-term management agreements with property owners, long-term lease agreements with property owners, and company-owned properties. The following table indicates the number of properties and units operated under each type of arrangement: Arrangement Properties Units or Rooms Long-term management agreements with property owners* 1,104 284,868 Long-term lease agreements with property owners 45 10,957 Company-owned properties 5 986 *Includes residential products for which the company manages the related owners’ associations. 36 3737 The terms of the management agreements vary, but typically, the company earns a management fee that includes a base fee and an incentive fee. The base management fee is a percentage of the revenues of the hotel. The incentive management fee is a function of the profits of the hotel. The management agreements also typically include reimbursement of costs of operations (both direct and indirect). These agreements are generally for initial periods of 20 to 30 years, with options to renew for up to 50 or more additional years. The lease agreements also vary, but may include 1 Prepared by Prof. Clifton Brown, Department of Accountancy, University of Illinois at Urbana-Champaign. All rights reserved, 2011. 2 The source of all information presented in this case is the Marriott International, Inc. annual report (Form 10-K) to the SEC for the fiscal year ended December 31, 2010. 3
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This note was uploaded on 07/30/2011 for the course ACCT 560 taught by Professor Chandler during the Summer '11 term at University of Illinois, Urbana Champaign.

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09_MARRIOTT_INTERNATIONAL - MARRIOTT INTERNATIONAL, INC.1...

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