Financial Information
Jump to a Section:
PART II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cost Reimbursements
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.
2018 Compared to 2017
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.
2017 Compared to 2016
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
2018 Compared to 2017
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.
2017 Compared to 2016
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)
2018 Compared to 2017
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.
2017 Compared to 2016
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.