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Marriott Corporation, 1984 Annual Report
Image 24
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Marriott International, Inc.. Marriott Corporation, 1984 Annual Report - Image 24. 1984. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. University of Houston Digital Library. Web. November 11, 2019. https://digital.lib.uh.edu/collection/hiltonar/item/439/show/414.

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.. (1984). Marriott Corporation, 1984 Annual Report - Image 24. 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/439/show/414

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, 1984 Annual Report - Image 24, 1984, Annual Reports from the Hospitality Industry Archives, Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, accessed November 11, 2019, https://digital.lib.uh.edu/collection/hiltonar/item/439/show/414.

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, 1984 Annual Report
Creator (LCNAF)
  • Marriott International, Inc.
Publisher Marriott International, Inc.
Date 1984
Description Marriott Corporation Annual Report for calendar year 1984.
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 24
Format (IMT)
  • image/jpeg
File Name hiltonar_201609_056_024.jpg
Transcript Capital Productivity Improves Return on Shareholders'Equity (ROE) increased to 22%, and return on total capital was 14%. Marriott expects to continue performing at these levels through the 1980s by carefully managing the balance sheet, selling low return businesses and continuing to expand hotels— primarily under management agreements. Several major transactions in 1984 boosted this program: □ Chesapeake Hotel Limited Partnership (CHLP) was syndicated to investors. The offering eliminated Marriott's capital investment in nine hotels with a total value of $305 million. A wholly owned Marriott subsidiary will earn substantial long-term management fees from the properties. □ Hotels totaling $291 million were developed and sold to private investors under long-term management agreements. The demand for Marriott hotel real estate remains strong, as manifested by numerous transactions at attractive prices. □ Financings totaling $357 million were negotiated on five hotels presendy under development These properties will be sold to investors upon completion, thereby largely eliminating Marriott's capital commitment to these hotels. Marriott will retain profitable management agreements. □ An international syndication of Marriott hotels in London and Paris was completed successfully. This unique financing will enable Marriott to expand more aggressively in Europe with attractive management agreements and minimal ownership risk. □ The Gurnee theme park was sold for $114.5 million. The Santa Clara theme park land and improvements are in the process of being sold for about $100 million. Thus, Marriott will exit from the low return theme park business at a capital gain. □ The company entered into agreements to sell the Essex House hotel in New York City and its Host specialty restaurants for considerations of nearly $300 million, with closings to take place in 1985. Capitalisation Optimised 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 cashflow coverage of four times interest expense. Marriott's coverage objective is what lenders require to provide the company debt financing at the lowest possible rates. Despite aggressive expansion, Marriott financing techniques maintained coverage at targeted levels. Total capital spending of $704 million in 1984 and $499 million in 1983 was financed primarily from internal cash flow and asset dispositions—principally hotels. The 1985 capital program of about $900 million will be financed in a similar manner. The ability to grow aggressively yet maintain planned interest coverage demonstrates once again that Marriott's high Discretionary Cash Flow, combined with the declining capital intensity of the company's lodging business, has allowed Marriott to expand hotel rooms by nearly 20% annually over the last five years without commensurate capital requirements. As a result, investment capacity can be released to fund additional corporate growth such as the successful 1982 Host and Gino's acquisitions; the Gladieux and Service Systems purchases in early 1985; and aggressive Courtyard expansion. This is the prime reason that the company's five-year compound EPS growth of 24% has exceeded its target of 20%. Marriott's objective is to minimize the cost of capital by optimizing the mix of fixed and floating interest rate debt obligations. Marriott's operating cash flows have a high correlation with inflation and short interest rates. Thus, an optimal debt structure requires a rich mixture of floating rate debt to minimize capital cost and risk. In addition, the company requires that construction in progress be financed in the traditional manner with floating rate debt. Excluding construction financing, long-term debt with floating interest rates averaged 60% of total debt capitalization in 1984, compared to 58% in 1983. Marriott's policy of avoiding new commitments of non-prepayable, fixed-rate, long-term debt since 1980 has served the company well. Rather than speculate on fixed interest rates at relatively high levels, the company has matched capital costs with cash flows, thus minimizing capital cost and risk. The company plans to increase the proportion of fixed-rate debt in its capital structure when appropriate. In fact, Marriott fixed rates on a substantial portion of its long-term debt during early 1985 as interest rates declined. 22