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Marriott Corporation, 1981 Annual Report
Image 28
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Marriott International, Inc.. Marriott Corporation, 1981 Annual Report - Image 28. 1981. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. University of Houston Digital Library. Web. August 9, 2020. https://digital.lib.uh.edu/collection/hiltonar/item/1445/show/1428.

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.. (1981). Marriott Corporation, 1981 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/1445/show/1428

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, 1981 Annual Report - Image 28, 1981, Annual Reports from the Hospitality Industry Archives, Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, accessed August 9, 2020, https://digital.lib.uh.edu/collection/hiltonar/item/1445/show/1428.

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, 1981 Annual Report
Creator (LCNAF)
  • Marriott International, Inc.
Publisher Marriott International, Inc.
Date 1981
Description Marriott Corporation Annual Report for calendar year 1981.
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_053_028.jpg
Transcript Hotel Profit Margins 77 78 79 80 81 I Margins including sales of non-owned hotels. I Margins excluding sales of non-owned hotels. Interest Coverage* I •The ratio of earnings before net interest, taxes and non-cash charges, less required capital replacements, divided by net interest expense. ' "Estimated range D Eleven hotels costing $365 million were debt financed through commercial banks and will be syndicated to equity investors this spring, thereby eliminating Marriott's capital investment in these properties. 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. Interest on the 12-year loan facility floats with the banks' cost of funds, but interest above 12.5% (increasing ratably to 15% over five years) is added to principal and amortized only from the partnership's available operating cash flow. D The $159 million package hotel sale to The Equitable Life Assurance Society of the United States, which was negotiated in 1980 and largely financed Marriott's share repurchase program, was completed with the development and timely delivery of the last three hotels (Anaheim, Westchester and Nashville). □ Hotels totaling $476 million were developed and delivered to other institutions under long-term operating agreements, including Salt Lake City and Maui (Metropolitan Life), Denver City Center (Prudential) and Oak Brook, Illinois (Travelers). □ Farrell's Ice Cream Parlour Restaurants Division was sold for $15 million. □ Capital investment (net of hotel sales) was $234 million, of which 78% was allocated to new hotels and additional Roy Rogers units. Capitalization Expands 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 enables the company to maintain targeted leverage. Marriott bases target debt levels on cash flow coverage of interest expense rather than on traditional measures of debt-to- equity. Senior debt and lease obligations are 52% of historical cost capitalization but only 24% of Current Value capitalization, demonstrating that inflation makes the debt-to- equity ratio an unrealistic standard of debt capacity. Marriott's objective is to maintain about four times coverage, which is what lenders require to provide Marriott debt financing at prime rates. Marriott can prudently utilize relatively high levels of debt in its capitalization because financial markets perceive relatively low risk in the company's predictable cash flow stream and strong real estate asset base. As in the case of its 1980 share repurchase, Marriott will finance 1982 capital investments of about $250 million plus the Host and Gino's acquisitions primarily with a combination of internal cash flow and hotel dispositions. Thus coverage is maintained at targeted levels, as shown at left. It demonstrates once again that Marriott's high Discretionary Cash Flow ($5.84 per share versus EPS of $3.20), combined with the declining capital intensity of the company's hotel business, allows Marriott to expand hotel rooms 20% annually without commensurate capital requirements, thereby releasing investment capacity to fund additional corporate growth. This is the prime reason the company's compound five- year EPS growth of 30% has exceeded its target by 50%. 26