COST STRUCTURE

Marriott International Cost Structure

Marriott International Cost Structure

In North America, company-operated Marriott brand RevPAR declined 11.9% in the fourth quarter, but their fiscal calendar needs some adjustment. 2008's calendar encompassed 17 weeks while 2009's fourth quarter had only 16 weeks. If they adjust for a comparable period, fourth quarter Marriott RevPAR performance was about a point better. All the RevPAR figures I'm going to converse about this forenoon will be modified for the shift in the calendar. Higher occupancy rates in the quarter revealed stronger demand trends. For the Marriott brand, in 2009 occupancy rates at domestic company-operated comparable hotels declined about five percentage points for the full year. By the fourth quarter, occupancy was roughly flat and by period 13, occupancy increased roughly one to two percentage points. Focusing on latest business enterprise, this includes rooms traded at premium rates; business rates, and discussed exceptional rates. For most of 2009, they saw a weak corporate room demand, but that is changing. Comparable room nights for corporate rated business in the Marriott brand declined 13% in the full year 2009 or flat in the fourth quarter but rose 10% in period 13. On the other hand, as Arne said, room rates remained weak. For the Marriott emblem room rates at household company-operated comparable hotels declined 12% in 2009, 11% in the fourth quarter, and declined 8% in time span 13. Renegotiation of special corporate rates in 2009, continued special offers, and promotions for leisure guests and aggressive pricing for near-term groups have all contributed to the weak pricing in North America.

In the earnings press release, schedules A-22 through A-26 show the impact of the new rules on their 2009 timeshare results. The bottom line adjusted 2009 pre-tax earnings would have been about $1 million lower if the accounting change occurred at ...