Financial Information
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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.
2019 Compared to 2018
Cost reimbursement revenue, net of reimbursed expenses, decreased $605 million, primarily due to lower Loyalty Program revenues net of expenses.
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.
Other Operating Expenses
2019 Compared to 2018
Depreciation, amortization, and other expenses increased by $115 million, primarily reflecting the $99 million asset impairment associated with the Renaissance New York Times Square Hotel lease and the $15 million impairment of the Sheraton Phoenix Downtown.
General, administrative, and other expenses increased by $11 million, primarily due to $32 million of higher administrative costs, $18 million net unfavorable impact to our legal expenses associated with litigation resolutions, and $10 million of higher bad debt reserves, partially offset by $51 million due to the company-funded supplemental retirement savings plan contributions in 2018.
Merger-related costs and charges decreased by $17 million, primarily due to $116 million of lower integration costs, partially offset by the $65 million accrual for the loss contingency related to the Proposed ICO Fine discussed in Note 7 and a $34 million impairment charge of a Legacy-Starwood office building accounted for as a finance lease.
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 $23 million of lower transaction and termination costs, partially offset by $19 million of higher integration costs.
Non-Operating Income (Expense)
2019 Compared to 2018
Gains and other income, net decreased by $40 million, primarily due to the 2018 gains on our property sales ($132 million) and the 2018 gains on the sales of our interest in four equity method investments ($46 million), partially offset by the 2019 gains on our property sales ($134 million).
Interest expense increased by $54 million, primarily due to higher interest on Senior Note issuances, net of maturities.
Equity in earnings decreased by $90 million, primarily due to the 2018 gains on the sales of two properties held by equity method investees ($65 million) and lower earnings as a result of both the AC Hotels by Marriott transaction discussed in Note 3, and dispositions of other investments ($19 million).
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) and sales of our interest in four equity method investments ($46 million).
Interest expense increased by $52 million, primarily due to higher commercial paper interest rates and average borrowings.
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).