2017 Annual Report

Financial Information

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PART II

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

Asia Pacific

Financial Table

2017 Compared to 2016

In 2017, across our Asia Pacific segment we added 77 properties (18,035 rooms) and 10 properties (3,961 rooms) left our system.

Asia Pacific segment profits increased by $169 million, primarily due to the following changes:

  • $109 million of higher base management and franchise fees, primarily due to $89 million of higher Legacy-Starwood fees, $9 million of higher Legacy-Marriott branding fees, $6 million from Legacy-Marriott unit growth, and $5 million from stronger RevPAR at Legacy-Marriott hotels;
     
  • $92 million of higher incentive management fees, primarily due to $80 million of higher Legacy-Starwood fees, $8 million from higher net house profits at Legacy-Marriott managed hotels, and $4 million from Legacy-Marriott unit growth;
     
  • $19 million of higher owned, leased, and other revenue, net of direct expenses, primarily due to $22 million of higher Legacy-Starwood owned and leased profits;
     
  • $24 million of higher depreciation, amortization, and other expenses, primarily reflecting higher depreciation and amortization on Legacy-Starwood assets;
     
  • $34 million of higher general, administrative, and other expenses, primarily due to the Starwood Combination; and
     
  • $8 million of higher equity in earnings, primarily due to higher earnings by Legacy-Starwood investees.

Cost reimbursements revenue and expenses for our Asia Pacific segment properties totaled $695 million in 2017, compared to $404 million in 2016.

2016 Compared to 2015

In 2016, across our Asia Pacific segment we added 377 properties (115,995 rooms), including 335 properties (103,611 rooms) from the Starwood Combination on the Merger Date, and 4 properties (1,342 rooms) left our system.

Asia Pacific segment profits increased by $78 million, reflecting $61 million from the Starwood Combination and $17 million of higher Legacy-Marriott profits, primarily due to the following:

  • $7 million of higher Legacy-Marriott base management and franchise fees, primarily due to $9 million of stronger RevPAR and unit growth and $2 million of higher branding fees, partially offset by the impact of $2 million in unfavorable foreign exchange rates;
     
  • $8 million of higher Legacy-Marriott incentive management fees, primarily driven by $10 million in higher net house profits and unit growth, partially offset by the impact of $2 million in unfavorable foreign exchange rates;
     
  • $3 million of higher Legacy-Marriott owned, leased, and other revenue, net of direct expenses, primarily reflecting stronger performance at a property following renovations and the impact of $2 million in favorable foreign exchange rates;
     
  • $4 million of higher Legacy-Marriott general, administrative, and other expenses, primarily due to an increase in administrative costs to grow our brands globally; and
     
  • $4 million of higher Legacy-Marriott equity in earnings, primarily reflecting a 2015 impairment charge on an Asia Pacific joint venture ($6 million).

Cost reimbursements revenue and expenses for our Legacy-Marriott Asia Pacific segment properties totaled $320 million in 2016, compared to $274 million in 2015.

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