Business Segments

9 Months Ended

Sep. 09, 2011

Business Segments

13. Business Segments

We are a diversified hospitality company with operations in five business segments:

• North American Full-Service Lodging, which includes the Marriott Hotels & Resorts, Marriott Conference Centers, JW Marriott, Renaissance Hotels, Renaissance ClubSport, and Autograph Collection properties located in the United States and Canada;

• North American Limited-Service Lodging, which includes the Courtyard, Fairfield Inn & Suites, SpringHill Suites, Residence Inn, TownePlace Suites, and Marriott ExecuStay properties located in the United States and Canada;

• International Lodging, which includes the Marriott Hotels & Resorts, JW Marriott, Renaissance Hotels, Autograph, Courtyard, AC Hotels by Marriott, Fairfield Inn & Suites, Residence Inn, and Marriott Executive Apartments properties located outside the United States and Canada;

• Luxury Lodging, which includes The Ritz-Carlton, Bulgari Hotels & Resorts, and EDITION properties worldwide (together with residential properties associated with some Ritz-Carlton hotels); and

• Timeshare, which includes the development, marketing, operation, and sale of Marriott Vacation Club, The Ritz-Carlton Destination Club, The Ritz-Carlton Residences, and Grand Residences by Marriott timeshare, fractional ownership, and residential properties worldwide. See Footnote No. 17, “Planned Spin-off,” later in this report for a discussion of our plans for a spin-off of our timeshare operations and timeshare development business.

In 2011, we changed the management reporting structure for properties located in Hawaii. In conjunction with that change, we now report revenues, financial results, assets, and liabilities for properties located in Hawaii in our North American segments rather than in our International segment. In addition, we now recognize in our Timeshare segment some base management fees we previously recognized in our International segment. For comparability, we have reclassified prior year segment revenues, segment financial results, and segment assets to reflect these changes. These reclassifications only affect our segment reporting, and do not change our total consolidated revenue, operating income, or net income or our total segment revenues or total segment financial results.

We evaluate the performance of our segments based primarily on the results of the segment without allocating corporate expenses, income taxes, or indirect general, administrative, and other expenses. With the exception of our Timeshare segment, we do not allocate interest income or interest expense to our segments. We include interest income and interest expense associated with our Timeshare segment notes in our Timeshare segment results because financing sales and securitization transactions are an integral part of that segment’s business. In addition, we allocate other gains and losses, equity in earnings or losses from our joint ventures, divisional general, administrative, and other expenses, and income or losses attributable to noncontrolling interests to each of our segments. “Other unallocated corporate” represents that portion of our revenues, general, administrative, and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments.

We aggregate the brands presented within our North American Full-Service, North American Limited-Service, International, Luxury, and Timeshare segments considering their similar economic characteristics, types of customers, distribution channels, the regulatory business environment of the brands and operations within each segment and our organizational and management reporting structure.

Revenues

	Twelve Weeks Ended				Thirty-Six Weeks Ended
($ in millions)	September 9, 2011		September 10, 2010		September 9, 2011		September 10, 2010
North American Full-Service Segment	$	1,232	$	1,158	$	3,788	$	3,571
North American Limited-Service Segment	587		533		1,653		1,501
International Segment	293		264		860		796
Luxury Segment	362		323		1,138		1,053
Timeshare Segment	377		352		1,125		1,076
Total segment revenues	2,851		2,630		8,564		7,997
Other unallocated corporate	23		18		60		52
	$	2,874	$	2,648	$	8,624	$	8,049

Net (Loss) Income

	Twelve Weeks Ended						Thirty-Six Weeks Ended
($ in millions)	September 9, 2011			September 10, 2010			September 9, 2011			September 10, 2010
North American Full-Service Segment	$	71		$	55		$	238		$	209
North American Limited-Service Segment	97			82			267			223
International Segment	35			25			116			99
Luxury Segment	8			11			46			53
Timeshare Segment	(302		)	38			(238		)	96
Total segment financial results	(91		)	211			429			680
Other unallocated corporate	(81		)	(58		)	(201		)	(160		)
Interest expense and interest income(1)	(27		)	(25		)	(74		)	(79		)
Income taxes	20			(45		)	(97		)	(156		)
	$	(179	)	$	83		$	57		$	285

⁽¹⁾  Of the $39 million and $117 million of interest expense shown on the Income Statement for the twelve and thirty-six weeks ended September 9, 2011, respectively, we allocated $10 million and $34 million, respectively, to our Timeshare Segment. Of the $41 million and $130 million of interest expense shown on the Income Statement for the twelve and thirty-six weeks ended September 10, 2010, respectively, we allocated $12 million and $40 million, respectively, to our Timeshare segment.

Equity in Losses of Equity Method Investees

	Twelve Weeks Ended						Thirty-Six Weeks Ended
($ in millions)	September 9, 2011			September 10, 2010			September 9, 2011			September 10, 2010
North American Full-Service Segment	$	1		$	—		$	1		$	1
North American Limited-Service Segment	—			—			(1		)	(6		)
International Segment	1			(2		)	—			(4		)
Luxury Segment	(6		)	(2		)	(8		)	(2		)
Timeshare Segment	—			(2		)	—			(10		)
Total segment equity in losses	(4		)	(6		)	(8		)	(21		)
Other unallocated corporate	2			1			2			1
	$	(2	)	$	(5	)	$	(6	)	$	(20	)

Assets

	At Period End
($ in millions)	September 9, 2011		December 31, 2010
North American Full-Service Segment	$	1,230	$	1,221
North American Limited-Service Segment	526		465
International Segment	1,023		822
Luxury Segment	904		871
Timeshare Segment	2,763		3,310
Total segment assets	6,446		6,689
Other unallocated corporate	2,019		2,294
	$	8,465	$	8,983

We estimate that the cash outflow associated with completing all phases of our existing portfolio of owned timeshare properties currently under development will be approximately $187 million. This estimate is based on our current development plans, which remain subject to change, and we expect the phases currently under development will be completed by 2016.