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Marriott Corporation, 1982 Annual Report
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Marriott International, Inc.. Marriott Corporation, 1982 Annual Report - Image 28. 1982. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. University of Houston Digital Library. Web. October 27, 2020. https://digital.lib.uh.edu/collection/hiltonar/item/1296/show/1271.

Disclaimer: This is a general citation for reference purposes. Please consult the most recent edition of your style manual for the proper formatting of the type of source you are citing. If the date given in the citation does not match the date on the digital item, use the more accurate date below the digital item.

Marriott International, Inc.. (1982). Marriott Corporation, 1982 Annual Report - Image 28. Annual Reports from the Hospitality Industry Archives. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. Retrieved from https://digital.lib.uh.edu/collection/hiltonar/item/1296/show/1271

Disclaimer: This is a general citation for reference purposes. Please consult the most recent edition of your style manual for the proper formatting of the type of source you are citing. If the date given in the citation does not match the date on the digital item, use the more accurate date below the digital item.

Marriott International, Inc., Marriott Corporation, 1982 Annual Report - Image 28, 1982, Annual Reports from the Hospitality Industry Archives, Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, accessed October 27, 2020, https://digital.lib.uh.edu/collection/hiltonar/item/1296/show/1271.

Disclaimer: This is a general citation for reference purposes. Please consult the most recent edition of your style manual for the proper formatting of the type of source you are citing. If the date given in the citation does not match the date on the digital item, use the more accurate date below the digital item.

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Compound Item Description
Title Marriott Corporation, 1982 Annual Report
Creator (LCNAF)
  • Marriott International, Inc.
Publisher Marriott International, Inc.
Date 1982
Description Marriott Corporation Annual Report for calendar year 1982.
Subject.Topical (LCSH)
  • Hospitality industry
  • Hotel management
  • Corporation reports
Subject.Name (LCNAF)
  • Marriott International, Inc.
Genre (AAT)
  • annual reports
  • business records
Language English
Type (DCMI)
  • Text
  • Image
Original Item Location Marriott Hotels Collection
Digital Collection Annual Reports from the Hospitality Industry Archives
Digital Collection URL http://digital.lib.uh.edu/collection/hiltonar
Repository Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston
Repository URL http://www.uh.edu/hilton-college/About/hospitality-industry-archives
Use and Reproduction No Copyright - United States
File Name index.cpd
Item Description
Title Image 28
Format (IMT)
  • image/jpeg
File Name hiltonar_201609_054_028.jpg
Transcript ■0 Hotel Profit Margins 40% 78 79 80 81 I Margins including sales of non-owned hotels I Margins excluding sales of non-owned hotels. Net Interest Coverage* "The ratio of earnings before net interest, taxes and non-cash charges, less required capital replacements, divided by net interest expense. **Estimated range cost of $365 million. A wholly owned Marriott subsidiary will earn substantial long-term management fees and Marriott, as general partner, will enjoy substantial tax benefits from the properties. □ Financings totaling $750 million were negotiated on eight hotels. The properties will be publicly syndicated similar to the PHLP transaction, largely eliminating Marriott's capital commitment to these hotels. Marriott will obtain lucrative management agreements. □ The Host and Gino's acquisitions, totaling $300 million, were successfully completed. □ The Farrell's Ice Cream Parlour Restaurants Division, excess theme park land and Marriott's equity interest in a downtown Denver hotel were sold for a total of $38 million. Capitalization Optimized Marriott's ambitious capital investment and acquisition program is financed by a combination of retained Discretionary Cash Flow, incremental debt on an expanding asset base, and sales of hotels. Disciplined management of Marriott's highly liquid hotel assets and debt structure enables the company to maintain targeted leverage and minimize capital costs. Marriott bases target debt levels on cash flow coverage of four times interest expense. Marriott's coverage objective is what lenders require to provide the company debt financing at prime rates. Despite aggressive expansion, Marriott financing techniques maintained coverage at targeted levels, as shown at left. The Gino's and Host acquisitions plus 1982 inter nally developed expansion totaling $667 million were financed primarily from internal cash flow and hotel dispositions. The 1983 capital program of about $500 million will be financed in a similar manner. The ability to grow aggressively yet maintain planned coverage demonstrates once again that Marriott's high Discretionary Cash Flow ($7.00 per share versus EPS of $3.44), combined with the declining capital intensity of the company's hotel business, allows Marriott to expand hotel rooms 20% annually without commensurate capital requirements. As a result, investment capacity can be released to fund additional corporate growth-such as the Host and Gino's acquisitions. This is the prime reason that the company's compound five-year EPS growth of 27% has exceeded its target by one- third. Marriott's objective is to increase the proportion of fixed-rate debt in its capital structure when the fixed long-interest rates return to economic levels. Long-term debt with floating interest rates averaged 36.8% of capitalization during 1982, because Marriott's policy is to finance construction in progress with floating rate debt and the company judged fixed interest rates too expensive. This judgment proved correct as interest rates fell precipitously during 1982, with floating rates leading the decline. Marriott's floating borrowing rates fell from a high of 16% in February to a low of 9.7% in December. Marriott's 1982 capital costs were minimized by this strategy. Long fixed rates also fell during 1982, in response to the recession and reduced inflation expectations. With inflation at 6%, the chart at right shows that today's real economic returns of 6%—while lower than last year-remain high relative to historical levels. Marriott's investments are in stable, long-term real estate- related assets. It is difficult for these assets to produce sufficient profits to justify such high real returns to debt holders without either applying an unrealistically high inflation rate to projected profits or reducing returns to Marriott shareholders. Interest rates should decline commensurately with the reduction in inflation. There is a reasonable probability that inflation will continue to stabilize in the 1980s, considering present trends and the government's focus on this important economic issue. However, inflation probably will remain high by historical standards. Marriott's profits are inflation-hedged and vary directly with the inflation rate. If inflation declines, Marriott's profit increases should moderate and interest rates should decline. For these reasons, until lenders' return requirements reach much more normal levels, Marriott will not add non- prepayable, fixed-rate, long- term debt that could present an expensive fixed-cost element in the company's capital structure. Meanwhile, to protect against extreme floating rate fluctuations, the company has negotiated rate ceilings of 12% on a significant portion of floating rate debt. 26