Financial Information

PART II

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

Investing Activities Cash Flows

Capital Expenditures and Other Investments. We made capital expenditures of $653 million in 2019, $556 million in 2018, and $240 million in 2017. Capital expenditures in 2019 increased by $97 million compared to 2018, primarily reflecting the 2019 acquisitions of W New York – Union Square and Elegant and net higher spending on several owned and leased properties, partially offset by the 2018 acquisition of the Sheraton Phoenix Downtown. Capital expenditures in 2018 increased by $316 million compared to 2017, primarily reflecting the 2018 acquisition of the Sheraton Phoenix Downtown, improvements to our worldwide systems, and net higher spending on several owned properties.

We expect spending on capital expenditures and other investments will total approximately $700 million to $800 million for 2020, including contract acquisition costs, equity and other investments, loan advances, and various capital expenditures (including approximately $200 million for maintenance capital spending).

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 various hotels, many of which we have sold or are seeking to sell. We have made, and expect to continue making selective and opportunistic investments to add units to our lodging business, which may include property acquisitions and renovations (such as our 2018 acquisition of the Sheraton Phoenix Downtown and our 2019 acquisitions of the W New York – Union Square and Elegant), 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 management 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 $395 million cash proceeds in 2019 and $479 million in 2018. See Note 3 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 $21 million in 2019, compared to net collections of $35 million in 2018. At year-end 2019, we had $126 million of senior, mezzanine, and other loans outstanding, compared to $131 million outstanding at year-end 2018.

Equity Method Investments. Cash outflows of $23 million in 2019, $72 million in 2018, and $62 million in 2017 for equity method investments primarily reflect our investments in several joint ventures.