Marriott International 10-Q 2011
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the quarterly period ended March 25, 2011
For the transition period from to
Commission File No. 1-13881
MARRIOTT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 359,371,731 shares of Class A Common Stock, par value $0.01 per share, outstanding at April 8, 2011.
MARRIOTT INTERNATIONAL, INC.
FORM 10-Q TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in millions, except per share amounts)
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
The abbreviation VIEs above means Variable Interest Entities.
See Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
See Notes to Condensed Consolidated Financial Statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. (Marriott, and together with its subsidiaries we, us, or the Company). In order to make this report easier to read, we refer throughout to (i) our Condensed Consolidated Financial Statements as our Financial Statements, (ii) our Condensed Consolidated Statements of Income as our Income Statements, our Condensed Consolidated Balance Sheets as our Balance Sheets, (iii) our properties, brands, or markets in the United States and Canada as North America or North American, and (iv) our properties, brands, or markets outside of the United States and Canada as international.
These condensed consolidated financial statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP). Although we believe our disclosures are adequate to make the information presented not misleading, you should read the financial statements in this report in conjunction with the consolidated financial statements and notes to those financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, (2010 Form 10-K). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 2010 Form 10-K.
Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Accordingly, ultimate results could differ from those estimates.
Our 2011 first quarter ended on March 25, 2011; our 2010 fourth quarter ended on December 31, 2010; and our 2010 first quarter ended on March 26, 2010. In our opinion, our financial statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of March 25, 2011, and December 31, 2010, the results of our operations for the twelve weeks ended March 25, 2011, and March 26, 2010, and cash flows for the twelve weeks ended March 25, 2011, and March 26, 2010. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations. We have eliminated all material intercompany transactions and balances between entities consolidated in these financial statements. We have also reclassified certain prior year amounts to conform to our 2011 presentation. See Footnote No. 13, Business Segments, for additional information on the reclassification of segment revenues, segment financial results, and segment assets to reflect movement of Hawaii to our North American segments from our International segment.
Restricted cash in our Balance Sheets at the end of the 2011 first quarter and year-end 2010 is recorded as $43 million and $55 million, respectively, in the Other current assets line and $32 million and $30 million, respectively, in the Other long-term assets line. Restricted cash primarily consists of cash held in a reserve account related to Timeshare segment notes receivable securitizations; cash held internationally that we have not repatriated due to statutory, tax and currency risks; and deposits received, primarily associated with timeshare interval, fractional ownership, and residential sales that are held in escrow until the contract has closed.
Accounting Standards Update No. 2010-06 Provisions Effective in the 2011 First Quarter (ASU No. 2010-06)
Certain provisions of ASU No. 2010-06 became effective during our 2011 first quarter. Those provisions, which amended Subtopic 820-10, require us to present as separate line items all purchases,
sales, issuances, and settlements of financial instruments valued using significant unobservable inputs (Level 3) in the reconciliation of fair value measurements, in contrast to the current aggregate presentation as a single line item. The adoption did not have a material impact on our financial statements or disclosures.
We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. We filed an Internal Revenue Service (IRS) refund claim relating to 2000 and 2001 for certain software development costs. The IRS disallowed the claims, and in July 2009, we protested the disallowance. This issue is pending in the IRS Appeals Division. With the exception of the refund claim for 2000 and 2001, the IRS has examined our federal income tax returns, and we have settled all issues for tax years through 2009.
We participated in the IRS Compliance Assurance Program (CAP) for the 2010 tax year, and are participating in CAP for 2011. This program accelerates the examination of key transactions with the goal of resolving any issues before the tax return is filed. Various income tax returns are also under examination by foreign, state and local taxing authorities.
For the first quarter of 2011, we decreased unrecognized tax benefits by $1 million from $39 million at year-end 2010, primarily due to the expiration of the statute of limitations. The unrecognized tax benefits balance of $38 million at the end of the 2011 first quarter included $25 million of tax positions that, if recognized, would impact our effective tax rate.
As a large taxpayer, the IRS and other taxing authorities continually audit us. Although we do not anticipate that a significant impact to our unrecognized tax benefit balance will occur during the next 52 weeks as a result of these audits, it remains possible that the amount of our liability for unrecognized tax benefits could change over that time period.
Under our 2002 Comprehensive Stock and Cash Incentive Plan (the Comprehensive Plan), we award: (1) stock options to purchase our Class A Common Stock (Stock Option Program); (2) stock appreciation rights (SARs) for our Class A Common Stock (SAR Program); (3) restricted stock units (RSUs) of our Class A Common Stock; and (4) deferred stock units. We grant awards at exercise prices or strike prices equal to the market price of our Class A Common Stock on the date of grant.
We recorded share-based compensation expense related to award grants of $21 million and $20 million for the twelve weeks ended March 25, 2011 and March 26, 2010, respectively. Deferred compensation costs related to unvested awards totaled $196 million and $113 million at March 25, 2011 and December 31, 2010, respectively.
We granted 2.5 million RSUs during the first quarter of 2011 to certain officers and key employees, and those units vest generally over four years in equal annual installments commencing one year after the date of grant. RSUs granted in the first quarter of 2011 had a weighted average grant-date fair value of $40.
We granted 0.7 million SARs to officers and key employees during the first quarter of 2011. These SARs expire 10 years after the date of grant and both vest and are exercisable in cumulative installments of one quarter at the end of each of the first four years following the date of grant. These SARs had a weighted average grant-date fair value of $16.
We use a binomial method to estimate the fair value of each SAR granted, under which we calculate the weighted average expected SARs terms as the product of a lattice-based binomial valuation model that uses suboptimal exercise factors. We use historical data to estimate exercise behaviors and terms to retirement for separate groups of retirement eligible and non-retirement eligible employees.
We used the following assumptions to determine the fair value of the Employee SARs granted during the first quarter of 2011.
In making these assumptions, we based risk-free rates on the corresponding U.S. Treasury spot rates for the expected duration at the date of grant, which we converted to a continuously compounded rate. We based expected volatility on the weighted-average historical volatility, with periods with atypical stock movement given a lower weight to reflect stabilized long-term mean volatility.
At the end of the 2011 first quarter, 54 million shares were reserved under the Comprehensive Plan, including 27 million shares under the Stock Option Program and the SAR Program.
We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We show the carrying values and the fair values of non-current financial assets and liabilities that qualify as financial instruments, determined in accordance with current guidance for disclosures on the fair value of financial instruments, in the following table.
We estimate the fair value of both our securitized long-term loans to timeshare owners and a portion of our non-securitized long-term loans to timeshare owners using a discounted cash flow model. We believe this is comparable to the model that an independent third party would use in the current market. Our model uses default rates, prepayment rates, coupon rates and loan terms for our securitized note portfolio as key drivers of risk and relative value, that when applied in combination with pricing parameters, determines the fair value of the underlying notes receivable. We value certain non-securitized loans to timeshare owners at their carrying value, rather than using our pricing model. We believe that the carrying value of such loans approximates fair value because the stated interest rates of these loans are consistent with current market rates and the reserve for these loans appropriately accounts for risks in default rates, prepayment rates, and loan terms.
We estimate the fair value of our senior, mezzanine, and other loans by discounting cash flows using risk-adjusted rates. We estimate the fair value of our cost method investments by applying a cap rate to stabilized earnings (a market approach). The carrying value of our restricted cash approximates its fair value.
We estimate the fair value of our non-recourse debt associated with securitized loans to timeshare owners by obtaining indicative bids from investment banks that actively issue and facilitate the secondary market for timeshare securities. As an additional measure, we internally generate cash flow estimates by modeling all bond tranches for our active securitization transactions, with consideration for the collateral specific to each tranche. The key drivers in this analysis include default rates, prepayment rates, bond interest rates and other structural factors, which we use to estimate the projected cash flows. In order to estimate market credit spreads by rating, we reviewed market spreads from timeshare note securitizations and other asset-backed transactions that occurred during the fourth quarter of 2010 and the first quarter of 2011. We then applied those estimated market spreads to swap rates in order to estimate an underlying discount rate for calculating the fair value of the active bonds. We concluded that the fair value of the bonds reflects a marginal premium over the book value resulting from relatively low current swap rates and credit spreads.
We estimate the fair value of our other long-term debt, excluding leases, using expected future payments discounted at risk-adjusted rates, and we determine the fair value of our senior notes using quoted market prices. At the end of the 2011 first quarter the carrying value of our commercial paper approximated its fair value due to the short maturity. Other long-term liabilities represent guarantee costs and reserves and deposit liabilities. The carrying values of our guarantee costs and reserves approximate their fair values. We estimate the fair value of our deposit liabilities primarily by discounting future payments at a risk-adjusted rate.
We are required to carry our marketable securities at fair value. The carrying value of our marketable securities at the end of our 2011 first quarter was $19 million, which included debt securities of the U.S. Government, its sponsored agencies and other U.S. corporations invested for our self-insurance programs. We value these securities using directly observable Level 1 inputs.
We are also required to carry our derivative assets and liabilities at fair value. As of the end of our 2011 first quarter, we had derivative instruments in a long-term liability position of $1 million valued using Level 3 inputs. We value our Level 3 input derivatives using valuations that we calibrate to the initial trade prices, with subsequent valuations based on unobservable inputs to the valuation model, including interest rates and volatilities.
See the Fair Value Measurements caption of Footnote No. 1, Summary of Significant Accounting Policies of our 2010 Form 10-K for additional information.
The table below illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share.
We compute the effect of dilutive securities using the treasury stock method and average market prices during the period. We determine dilution based on earnings.
In accordance with the applicable accounting guidance for calculating earnings per share, we did not include the following stock options and SARs in our calculation of diluted earnings per share because the exercise prices were greater than the average market prices for the applicable periods:
Inventory, totaling $1,459 million as of March 25, 2011 and $1,489 million as of December 31, 2010, consists primarily of Timeshare segment interval, fractional ownership, and residential products totaling $1,442 million as of March 25, 2011 and $1,472 million as of December 31, 2010. Inventory totaling $17 million as of both March 25, 2011 and December 31, 2010, primarily relates to hotel operating supplies for the limited number of properties we own or lease. We primarily record Timeshare segment interval, fractional ownership, and residential products at the lower of cost or fair market value, in accordance with applicable accounting guidance, and we generally value operating supplies at the lower of cost (using the first-in, first-out method) or market. Consistent with recognized industry practice, we classify Timeshare segment interval, fractional ownership, and residential products inventory, which has an operating cycle that exceeds 12 months, as a current asset.
We show the composition of our Timeshare segment inventory balances in the following table:
We show the composition of our property and equipment balances in the following table:
We show the composition of our notes receivable balances (net of reserves and unamortized discounts) in the following table:
We classify notes receivable due within one year as current assets in the caption Accounts and notes receivable in our Balance Sheets. We show the composition of our long-term notes receivable balances (net of reserves and unamortized discounts) in the following table:
The following tables show future principal payments (net of reserves and unamortized discounts) as well as interest rates, reserves and unamortized discounts for our securitized and non-securitized notes receivable.
Notes Receivable Principal Payments (net of reserves and unamortized discounts) and Interest Rates
Notes Receivable Reserves
Notes Receivable Unamortized Discounts (1)
Senior, Mezzanine, and Other Loans
We reflect interest income associated with Senior, mezzanine, and other loans in the Interest income caption in our Income Statements. At the end of the 2011 first quarter, our recorded investment in impaired Senior, mezzanine, and other loans was $90 million. We had a $76 million notes receivable reserve representing an allowance for credit losses, leaving $14 million of our investment in impaired loans, for which we had no related allowance for credit losses. At year-end 2010, our recorded investment in impaired Senior, mezzanine, and other loans was $83 million, and we had a $74 million notes receivable reserve representing an allowance for credit losses, leaving $9 million of our investment in impaired loans, for which we had no related allowance for credit losses. During the 2011 and 2010 first quarters, our average investment in impaired Senior, mezzanine, and other loans totaled $86 million and $139 million, respectively.
The following table summarizes the activity related to our Senior, mezzanine, and other loans notes receivable reserve for the 2011 first quarter:
At the end of the 2011 first quarter, past due senior, mezzanine, and other loans totaled $6 million.
Loans to Timeshare Owners
We reflect interest income associated with Loans to timeshare owners of $39 million and $45 million for the 2011 and 2010 first quarters, respectively, in our Income Statements in the Timeshare sales and services revenue caption. Of the $39 million of interest income we recognized from these loans in the 2011 first quarter, $32 million was associated with securitized loans and $7 million was associated with non-securitized loans, compared with the $36 million associated with securitized loans and $9 million associated with non-securitized loans recognized in the 2010 first quarter.
The following table summarizes the activity related to our Loans to timeshare owners notes receivable reserve for the 2011 first quarter:
As of March 25, 2011 and year-end 2010, we estimated average remaining default rates of 8.61 percent and 9.25 percent, respectively, for both non-securitized and securitized timeshare notes receivable.
We show our recorded investment in nonaccrual Loans to timeshare owners loans in the following table:
We show the aging of the recorded investment (before reserves) in Loans to timeshare owners in the following table:
We provide detail on our long-term debt balances in the following table:
The non-recourse debt associated with securitized notes receivable was, and to the extent currently outstanding is, secured by the related notes receivable. All of our other long-term debt was, and to the extent currently outstanding is, recourse to us but unsecured. Other debt in the preceding table includes capital leases.
We are party to a multicurrency revolving credit agreement (the Credit Facility) that provides for $2.404 billion of aggregate effective borrowings to support general corporate needs, including working capital, capital expenditures, and letters of credit. The availability of the Credit Facility also supports our commercial paper program. The Credit Facility expires on May 14, 2012. Borrowings under the Credit Facility bear interest at the London Interbank Offered Rate (LIBOR) plus a fixed spread. We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating. While any outstanding commercial paper borrowings and/or borrowings under our Credit Facility generally have short-term maturities, we classify the outstanding borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. See the Cash Requirements and Our Credit Facilities caption later in this report in the Liquidity and Capital Resources section for information on our available borrowing capacity at March 25, 2011.
Each of our securitized notes receivable pools contains various triggers relating to the performance of the underlying notes receivable. If a pool of securitized notes receivable fails to perform within the pools established parameters (default or delinquency thresholds by deal) transaction provisions effectively redirect the monthly excess spread we typically receive from that pool (related to the interests we retained), to accelerate the principal payments to investors based on the subordination of the different
tranches until the performance trigger is cured. During the first quarter of 2011, one pool that reached a performance trigger at year-end 2010 returned to compliance while one other reached a performance trigger. At the end of the first quarter of 2011, this was the only pool that was still out of compliance with applicable triggers. As a result of performance triggers, a total of $2 million in cash of excess spread was used to pay down debt during the 2011 first quarter. At March 25, 2011, we had 13 securitized notes receivable pools outstanding.
We show future principal payments (net of unamortized discounts) and unamortized discounts for our securitized and non-securitized debt in the following tables:
Debt Principal Payments (net of unamortized discounts)
As the contractual terms of the underlying securitized notes receivable determine the maturities of the non-recourse debt associated with them, actual maturities may occur earlier due to prepayments by the notes receivable obligors.
Unamortized Debt Discounts
We paid cash for interest, net of amounts capitalized, of $24 million in the 2011 first quarter and $27 million in the 2010 first quarter.
We detail comprehensive income in the following table:
The following table details changes in shareholders equity.
(in millions, except per share amounts)
We issue guarantees to certain lenders and hotel owners, primarily to obtain long-term management contracts. The guarantees generally have a stated maximum amount of funding and a term of three to ten years. The terms of guarantees to lenders generally require us to fund if cash flows from hotel operations are inadequate to cover annual debt service or to repay the loan at the end of the term. The terms of the guarantees to hotel owners generally require us to fund if the hotels do not attain specified levels of operating profit. Guarantee fundings to lenders and hotel owners are generally recoverable as loans repayable to us out of future hotel cash flows and/or proceeds from the sale of hotels. We also enter into project completion guarantees with certain lenders in conjunction with hotels and Timeshare segment properties that we or our joint venture partners are building.
We show the maximum potential amount of future fundings for guarantees where we are the primary obligor and the carrying amount of the liability for expected future fundings in the following table.
We included our liability for expected future fundings at March 25, 2011, in our Balance Sheet as follows: $4 million in the Other current liabilities and $23 million in the Other long-term liabilities.
Our guarantees listed in the preceding table include $35 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties.
The guarantees in the preceding table do not include the following:
In addition to the guarantees described in the preceding paragraphs, in conjunction with financing obtained for specific projects or properties owned by joint ventures in which we are a party, we may provide industry standard indemnifications to the lender for loss, liability, or damage occurring as a result of the actions of the other joint venture owner or our own actions.
Commitments and Letters of Credit
In addition to the guarantees noted in the preceding paragraphs, as of March 25, 2011, we had the following commitments outstanding:
At March 25, 2011, we had $79 million of letters of credit outstanding ($76 million under our Credit Facility and $3 million outside the Credit Facility), the majority of which related to our self-insurance programs. Surety bonds issued as of March 25, 2011, totaled $212 million, the majority of which federal, state and local governments requested in connection with our lodging operations, Timeshare segment operations, and self-insurance programs.
We are a diversified hospitality company with operations in five business segments:
In 2011, we changed the management reporting structure for properties located in Hawaii. In conjunction with that change, we now report revenues and financial results for properties located in Hawaii in our North American segments rather than in our International segment. In addition, we now recognize in our Timeshare segment some base management fees we previously recognized in our International segment. For comparability, we have reclassified prior year segment revenues, segment financial results, and segment assets to reflect these changes. These reclassifications only affect our segment reporting, and do not change our total consolidated revenue, operating income, or net income or our total segment revenues or total segment financial results.
We evaluate the performance of our segments based primarily on the results of the segment without allocating corporate expenses, income taxes, or indirect general, administrative, and other expenses. With the exception of our Timeshare segment, we do not allocate interest income or interest expense to our segments. We include interest income and interest expense associated with our Timeshare segment notes in our Timeshare segment results because financing sales and securitization transactions are an integral part of that segments business. In addition, we allocate other gains and losses, equity in earnings or losses from our joint ventures, divisional general, administrative, and other expenses, and income or losses attributable to noncontrolling interests to each of our segments. Other unallocated corporate represents that portion of our revenues, general, administrative, and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments.
We aggregate the brands presented within our North American Full-Service, North American Limited-Service, International, Luxury, and Timeshare segments considering their similar economic characteristics, types of customers, distribution channels, the regulatory business environment of the brands and operations within each segment and our organizational and management reporting structure.
Equity in Losses of Equity Method Investees
We estimate that, for the 20-year period from 2011 through 2030, the cash outflow associated with completing all phases of our existing portfolio of owned timeshare properties will be approximately $2.2 billion. This estimate is based on our current development plans, which remain subject to change.
In the first quarter of 2011, we contributed approximately $51 million (37 million) in cash for the intellectual property and associated 50 percent interests in two new joint ventures formed for the operation, management and development of AC Hotels by Marriott, initially in Europe but eventually in other parts of the world. The hotels will be managed by the joint ventures or franchised at the direction of the joint ventures. As noted in Footnote No. 12, Contingencies, we have a right and, in some circumstances, an obligation to acquire the remaining interest in the joint ventures over the next ten years.
In the first quarter of 2011, we acquired certain assets and a leasehold on a hotel for an initial payment of $34 million (25 million) in cash plus fixed annual rent. See Footnote No. 17, Leases, for additional information. As noted in Footnote No. 12, Contingencies, we also have a right and, in some circumstances, an obligation to acquire the landlords interest in the real estate property and attached assets of this hotel for $62 million (45 million) during the next three years.
In accordance with the applicable accounting guidance for the consolidation of variable interest entities, we analyze our variable interests, including loans, guarantees, and equity investments, to determine if an entity in which we have a variable interest is a variable interest entity. Our analysis includes both quantitative and qualitative reviews. We base our quantitative analysis on the forecasted cash flows of the entity, and our qualitative analysis on our review of the design of the entity, its organizational structure including decision-making ability, and relevant financial agreements. We also use our qualitative analyses to determine if we must consolidate a variable interest entity as its primary beneficiary.
Variable interest entities related to our timeshare note securitizations
We periodically securitize, without recourse, through special purpose entities, notes receivable originated by our Timeshare segment in connection with the sale of timeshare interval and fractional products. These securitizations provide funding for us and transfer the economic risks and substantially all the benefits of the loans to third parties. In a securitization, various classes of debt securities that the special purpose entities issue are generally collateralized by a single tranche of transferred assets, which consist of timeshare notes receivable. We service the notes receivable. With each securitization, we may retain a portion of the securities, subordinated tranches, interest-only strips, subordinated interests in accrued interest and fees on the securitized receivables or, in some cases, overcollateralization and cash reserve accounts.
Under GAAP as it existed prior to 2010, those entities met the definition of QSPEs, and we were not required to evaluate them for consolidation. We began evaluating those entities for consolidation when we implemented the new Transfers of Financial Assets and Consolidation standards in the 2010 first quarter. We created those entities to serve as a mechanism for holding assets and related liabilities, and the entities have no equity investment at risk, making them variable interest entities. We continue to service the notes, transfer all proceeds collected to those special purpose entities, and retain rights to receive potentially significant benefits. Accordingly, we concluded under the new Transfers of Financial Assets and Consolidation standards that we are the entities primary beneficiary and, therefore, consolidate them.
At March 25, 2011, consolidated assets on our Balance Sheet included collateral for the obligations of those variable interest entities with a carrying amount of $1,011 million, comprised of $115 million of current notes receivable and $849 million of long-term notes receivable (each net of reserves), $6 million of interest receivable and $27 million and $14 million, respectively, of current and long-term restricted cash. Further, at March 25, 2011, consolidated liabilities on our Balance Sheet included liabilities for those variable interest entities with a carrying amount of $946 million, comprised of $2 million of interest payable, $125 million of current portion of long-term debt, and $819 million of long-term debt. The noncontrolling interest balance for those entities was zero. The creditors of those entities do not have general recourse to us. As a result of our involvement with these entities, we recognized $32 million of interest income, offset by $12 million of interest expense to investors.
We show our cash flows to and from the timeshare notes securitization variable interest entities in the following table:
Under the terms of our timeshare note securitizations, we have the right at our option to repurchase defaulted mortgage notes at the outstanding principal balance. The transaction documents typically limit such repurchases to 10 to 15 percent of the transactions initial mortgage balance. We made voluntary repurchases of defaulted notes of $12 million during the first quarter of 2011 and $17 million during the first quarter of 2010. Our maximum exposure to loss relating to the entities that own these notes is the overcollateralization amount (the difference between the loan collateral balance and the balance on the outstanding notes), plus cash reserves and any residual interest in future cash flows from collateral.
Other variable interest entities
We have an equity investment in and a loan receivable due from a variable interest entity that develops and markets fractional ownership and residential interests. We concluded that the entity is a variable interest entity because the equity investment at risk is not sufficient to permit the entity to finance its activities without additional support from other parties. We have determined that we are not the primary beneficiary as power to direct the activities that most significantly impact economic performance of the entity is shared among the variable interest holders, and therefore do not consolidate the entity. In 2009, we fully impaired our equity investment and certain loans receivable due from the entity. In 2010, the continued application of equity losses to our outstanding loan receivable balance reduced its carrying value to zero. We may fund up to an additional $16 million and do not expect to recover this amount, which we have accrued and included in current liabilities. We do not have any remaining exposure to loss related to this entity.
In conjunction with the transaction with CTF described more fully in Footnote No. 8, Acquisitions and Dispositions, of our Annual Report on Form 10-K for 2007, under the caption 2005 Acquisitions, we manage hotels on behalf of tenant entities 100 percent owned by CTF, which lease the hotels from third-party owners. Due to certain provisions in the management agreements, we account for these contracts as operating leases. At March 25, 2011, we managed ten hotels on behalf of three tenant entities. The entities have minimal equity and minimal assets comprised of hotel working capital and furniture, fixtures, and equipment. In conjunction with the 2005 transaction, CTF had placed money in a trust account to cover cash flow shortfalls and to meet rent payments. In turn, we released CTF from its guarantees fully in connection with seven of these properties and partially in connection with the other three properties. At March 25, 2011, the trust account has been fully depleted. The tenant entities are variable interest entities because the holder of the equity investment at risk, CTF, lacks the ability through voting rights to make key decisions about the entities activities that have a significant effect on the success of the entities. We do not consolidate the entities because we do not bear the majority of the expected losses. We are liable for rent payments for seven of the ten hotels if there are cash flow shortfalls. Future minimum lease payments through the end of the lease term for these hotels totaled approximately $36 million. In addition, we are liable for rent payments of up to an aggregate cap of $15 million for the three other hotels if there are cash flow shortfalls. Our maximum exposure to loss is limited to the rent payments and certain other tenant obligations under the lease, for which we are secondarily liable.
On February 14, 2011, we announced a plan to separate the companys businesses into two separate, publicly traded companies. Under the plan, we expect to spin-off our timeshare operations and timeshare development business as a new independent company through a special tax-free dividend to our shareholders in late 2011. The new company will focus on the timeshare business as the exclusive developer and operator of timeshare, fractional, and related products under the Marriott brand and the exclusive developer of fractional and related products under The Ritz-Carlton brand. In the separation, we will retain the lodging management and franchise businesses. We expect to receive franchise fees totaling approximately two percent of developer contract sales plus $50 million annually for the new timeshare companys use of the Marriott timeshare and Ritz-Carlton fractional brands. The franchise fee is also expected to include a periodic inflation adjustment.
We anticipate that the new timeshare company will file a Form 10 registration statement with the SEC in the second quarter 2011. We expect that the common stock of the new timeshare company will be listed on the New York Stock Exchange. We do not expect that the new timeshare company will pay a quarterly cash dividend or be investment grade in the near term. The transaction is subject to final approval of our Board, the receipt of normal and customary regulatory approvals and third-party consents, the execution of inter-company agreements, receipt of a favorable ruling from the Internal Revenue Service, arrangement of adequate financing facilities, final approval by our board of directors, and other related matters. The transaction will not require shareholder approval and will have no impact on Marriotts contractual obligations to the existing securitizations. While we expect that the spin-off will be completed before year-end 2011, we cannot assure you that it will be completed on the anticipated schedule or that its terms will not change. See Part II, Item 1A Risk Factors for certain risk factors relating to the Planned Spin-off Risks.
Because of the anticipated continuing involvement between the companies, we do not expect the spin-off of the timeshare operations and timeshare development business to qualify under GAAP for discontinued operations presentation in our financial statements.
As noted in Footnote No. 14, Acquisitions and Dispositions, in the 2011 first quarter we acquired a leasehold on a hotel for an initial payment of $34 million (25 million) in cash plus fixed annual rent. We account for this leasehold as a capital lease. See Footnote No. 21, Leases, of our 2010 Form 10-K for information regarding our other leases.
The following table details the aggregate minimum lease payments through the initial lease term, which ends in 2014:
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
We make forward-looking statements in Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations, which follow under the headings Business and Overview, Liquidity and Capital Resources, and other statements throughout this report preceded by, followed by or that include the words believes, expects, anticipates, intends, plans, estimates or similar expressions.
Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those we express in these forward-looking statements, including the risks and uncertainties described below and other factors we describe from time to time in our periodic filings with the U.S. Securities and Exchange Commission (the SEC). We therefore caution you not to rely unduly on any forward-looking statements. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
In addition, see the Item 1A. Risk Factors caption in the Part II-OTHER INFORMATION section of this report.
BUSINESS AND OVERVIEW
Conditions for our lodging business improved in the 2011 first quarter reflecting an improving economic climate in most markets around the world, strong unit growth, and the impact of operating efficiencies across our company. While the recent recession significantly affected lodging demand and hotel pricing, occupancies began to improve late in 2009 and that improvement continued throughout 2010. Room rates began to stabilize and improve in some markets in the 2010 second quarter, and that improvement continued, strengthened and expanded to other markets throughout the rest of 2010. In the 2011 first quarter, worldwide average daily rates increased 3.0 percent on a constant dollar basis to $128.91 for comparable systemwide properties, with RevPAR increasing 6.5 percent to $83.29 and occupancy increasing 2.1 percentage points to 64.6 percent.
While worldwide RevPAR for the 2011 first quarter remains well below 2008 levels, we continued to see strengthening in comparable properties in Asia, Europe, the Caribbean, Latin America, and in our luxury properties around the world. Our properties in Asia are benefitting particularly from strong economic growth in that region. Demand at properties in the Middle East was weak reflecting unrest in that region, and demand in Japan was also weak reflecting the impact of the aftermath of the earthquake and tsunami. For comparable properties in North America, most markets reflect strong demand and modest supply growth. In Washington, D.C., a shorter Congressional calendar and budget negotiations reduced lodging demand. In New York, new supply constrained RevPAR growth somewhat.
We monitor market conditions continuously and carefully price our rooms daily to meet individual hotel demand levels. We modify the mix of our business to increase revenue as demand changes. Demand for higher rated rooms improved in 2010 and that improvement has continued into 2011, which allowed us to reduce discounting and special offers for transient business. This mix improvement benefited average daily rates at many hotels.
Our hotels serve both transient and group customers. Group customers typically book rooms and meeting space with significant lead times. Typically, two-thirds of group business is booked prior to the year of arrival and one-third is booked in the year of arrival. In the 2011 first quarter, fewer near-term group meetings were booked in-the-quarter-for-the-quarter than in the prior year. At the same time, new groups continued to book for later quarters in 2011 and our pace of group bookings for the 2011 full year
improved. While group pricing tends to lag transient pricing due to the significant lead times for group bookings, overall business transient demand is strong and corporate group demand is improving.
Properties in our system continue to maintain very tight cost controls. Where appropriate for market conditions, we have maintained many of our 2009 property-level cost saving initiatives regarding menus and restaurant hours, room amenities, cross-training personnel, and utilizing personnel at multiple properties where feasible. We also control above-property costs, which we allocate to hotels, by remaining focused on systems, processing, and support areas. In addition, we continue to require (where legally permitted) or encourage employees to use their vacation time accrued during the year.
Our lodging business model involves managing and franchising hotels, rather than owning them. At March 25, 2011, we operated 44 percent of the hotel rooms in our system under management agreements, our franchisees operated 53 percent under franchise agreements, we owned or leased two percent, and one percent were operated or franchised through unconsolidated joint ventures. Our emphasis on long-term management contracts and franchising tends to provide more stable earnings in periods of economic softness, while the addition of new hotels to our system generates growth. This strategy has allowed substantial growth while reducing financial leverage and risk in a cyclical industry. In addition, we believe we increase our financial flexibility by reducing our capital investments and adopting a strategy of recycling the investments that we make.
We currently have more than 95,000 rooms in our lodging development pipeline. During the first quarter of 2011 we added 14,203 rooms (gross). Approximately 80 percent of new rooms were located outside the United States, half of the new rooms were associated with the new AC Hotels joint venture, and 14 percent of the room additions were conversions from competitor brands. For the full 2011 fiscal year, we expect to add approximately 35,000 rooms (gross) to our system. The figures in this paragraph do not include residential, timeshare, or ExecuStay units.
We consider RevPAR, which we calculate by dividing room sales for comparable properties by room nights available to guests for the period, to be a meaningful indicator of our performance because it measures the period-over-period change in room revenues for comparable properties. RevPAR may not be comparable to similarly titled measures, such as revenues. References to RevPAR throughout this report are in constant dollars, unless otherwise noted.
Company-operated house profit margin is the ratio of property-level gross operating profit (also known as house profit) to total property-level revenue. We consider house profit margin to be a meaningful indicator of our performance because this ratio measures our overall ability as the operator to produce property-level profits by generating sales and controlling the operating expenses over which we have the most direct control. House profit includes room, food and beverage, and other revenue and the related expenses including payroll and benefits expenses, as well as repairs and maintenance, utility, general and administrative, and sales and marketing expenses. House profit does not include the impact of management fees, furniture, fixtures and equipment replacement reserves, insurance, taxes, or other fixed expenses.
We earn base management fees and incentive management fees on the hotels that we manage, and we earn franchise fees on the hotels operated by others under franchise agreements with us. Base fees are typically a percentage of property-level revenue while incentive fees are typically a percentage of net house profit adjusted for a specified owner return. Net house profit is calculated as gross operating profit (house profit) less non-controllable expenses such as insurance, real estate taxes, capital spending reserves, and the like. As compared to the 2010 first quarter, base management, incentive and franchise fees in the 2011 first quarter have increased reflecting strengthening RevPAR and unit growth.
On February 14, 2011, we announced a plan to split the companys businesses into two separate, publicly traded companies. Under the plan, we expect to spin-off our timeshare operations and timeshare development business as a new independent company through a special tax-free dividend to our
shareholders in late 2011. Please see Footnote No. 16, Planned Spin-off, of the Notes to our Financial Statements and Part II, Item 1A Risk Factors; Planned Spin-off Risks for additional information.
Timeshare segment contract sales, including sales made by our timeshare joint venture projects, represent sales of timeshare interval, fractional ownership, and residential ownership products before the adjustment for percentage-of-completion accounting. Contract sales for our timeshare, fractional, and residential products decreased in the 2011 first quarter, compared to 2010, largely due to difficult comparisons driven by sales promotions in the 2010 first quarter as well as the start-up impact of our shift from the sale of weeks-based to points-based products. By year-end 2010, timeshare pricing had improved because we had largely discontinued or reduced the purchase incentives. In addition, beginning in May of 2010, we began targeting more of our marketing efforts towards our existing owner base as we launched our points-based Marriott Vacation Club Destinations program. Contract sales to existing owners totaled more than 61 percent and 48 percent of contract sales for the 2011 and 2010 first quarters, respectively. While sales to existing customers were strong, with fewer sales to new customers and a lower average contract price, contract sales declined as compared to the year ago quarter. We expect to shift our marketing focus from the existing owner base to new owners in the second half of 2011. Demand for fractional and residential units remains weak.
As with Lodging, our Timeshare properties continue to maintain very tight cost controls, and during 2011 we continue to require (where legally permitted) or encourage employees to use their vacation time accrued during 2011.
Since the sale of timeshare and fractional intervals and condominiums follows the percentage-of-completion accounting method, current demand may not always be reflected in our Timeshare segment results until later accounting periods.
The following discussion presents an analysis of results of our operations for the twelve weeks ended March 25, 2011, compared to the twelve weeks ended March 26, 2010.
Revenues increased by $148 million (6 percent) to $2,778 million in the first quarter of 2011 from $2,630 million in the first quarter of 2010, as a result of higher: cost reimbursements revenue ($139 million); base management and franchise fees ($21 million); and incentive management fees ($2 million (comprised of a $1 million increase for North America and a $1 million increase outside of North America)). These increases were partially offset by lower Timeshare sales and services revenue ($9 million) and lower owned, leased, corporate housing, and other revenue ($5 million).
The increases in base management fees, to $134 million in the 2011 first quarter from $125 million in the 2010 first quarter, and in franchise fees, to $103 million in the 2011 first quarter from $91 million in the 2010 first quarter, primarily reflected stronger RevPAR and, to a lesser extent, the impact of unit growth across the system.
The decrease in Timeshare sales and services revenue to $276 million in the 2011 first quarter, from $285 million in the 2010 first quarter, primarily reflected lower development revenue from lower sales volumes, partially offset by favorable reportability related to reserves on uncollectible notes recorded in the 2010 first quarter, and lower financing revenue from lower interest income. See BUSINESS SEGMENTS: Timeshare later in this report for additional information on our Timeshare segment.
The decrease in owned, leased, corporate housing, and other revenue, to $224 million in the 2011 first quarter, from $229 million in the 2010 first quarter, reflected $10 million of lower revenue from owned and leased properties, partially offset by $2 million of higher hotel agreement termination fees and $2 million of higher branding fees. The decrease in owned and leased revenue primarily reflected conversions to managed properties. Combined branding fees associated with affinity card endorsements and the sale of branded residential real estate totaled $16 million and $14 million in the 2011 and 2010 first quarters, respectively.
Cost reimbursements revenue represents reimbursements of costs incurred on behalf of managed and franchised properties and relates, predominantly, to payroll costs at managed properties where we are the employer. As we record cost reimbursements based upon costs incurred with no added markup, this revenue and related expense has no impact on either our operating income or net income attributable to us. The increase in cost reimbursements revenue, to $1,999 million in the 2011 first quarter from $1,860 million in the 2010 first quarter, reflected the impact of higher property-level demand and growth across the system, partially offset by lower property-level costs in response to cost controls. Net of hotels exiting the system, we added 5,539 managed rooms and 13,304 franchised rooms to our system since the end of the 2010 first quarter.
Operating income increased by $11 million to $191 million in the 2011 first quarter from $180 million in the 2010 first quarter. The increase reflected a $21 million increase in franchise and base management fees, $8 million of higher owned, leased, corporate housing, and other revenue net of direct expenses, $2 million of higher incentive management fees, and $1 million of higher Timeshare sales and services revenue net of direct expenses, partially offset by a $21 million increase in general, administrative, and other expenses. We note the reasons for the increase of $21 million in franchise and base management fees as compared to the 2010 first quarter in the preceding Revenues section.
The $8 million (67 percent) increase in owned, leased, corporate housing, and other revenue net of direct expenses was primarily attributable to $4 million of net stronger results at some owned and leased properties due to higher RevPAR and property-level margins, $2 million of higher hotel agreement termination fees, $2 million of higher branding fees, and $1 million of higher owned and leased income reflecting conversions to managed properties.
Timeshare sales and services revenue net of direct expenses in the first quarter of 2011 totaled $51 million. The increase of $1 million as compared to the first quarter of 2010, primarily reflected $9 million of higher development revenue net of product costs and marketing and selling costs mostly offset by $7 million of lower financing revenue and $1 million of lower services revenue net of expenses. Higher development revenue net of product costs and marketing and selling costs primarily reflected lower costs due to lower sales volumes and a favorable variance from a net $11 million reserve in the 2010 first quarter, partially offset by lower development revenue for the reasons stated in the preceding Revenues section. The $7 million decrease in financing revenue primarily reflected decreased interest income due to lower notes receivable balances. See BUSINESS SEGMENTS: Timeshare, later in this report for additional information on our Timeshare segment.
General, administrative, and other expenses increased by $21 million (15 percent) to $159 million in the first quarter of 2011 from $138 million in the first quarter of 2010. The increase primarily reflected the following items: $7 million of higher incentive compensation costs, $6 million of increased other expenses primarily associated with higher costs in international markets and initiatives to enhance and grow our brands globally, a $6 million reversal in the 2010 first quarter of guarantee accruals, primarily related to a completion guarantee for which we satisfied the related requirements, and $2 million of collections in the 2010 first quarter on previously written off receivables.
The $21 million increase in total general, administrative, and other expenses consisted of an $11 million increase that we did not allocate to any of our segments; an $8 million increase allocated to our Luxury segment; and a $2 million increase allocated to our North American Full-Service segment.
Gains (Losses) and Other Income
We show our gains (losses) and other income for the twelve weeks ended March 25, 2011, and March 26, 2010 in the following table:
Interest expense decreased by $4 million (9 percent) to $41 million in the first quarter of 2011 compared to $45 million in the first quarter of 2010. This decrease was primarily driven by: (1) a $2 million decrease in interest expense on securitized notes, which reflected a lower outstanding balance and a lower interest rate on those notes; and (2) a $1 million decrease in interest expense associated with our $2.4 billion multicurrency revolving credit facility (our Credit Facility) and commercial paper program, which primarily reflected lower average borrowings.
Interest Income and Income Tax
Interest income was unchanged at $4 million in the first quarter of each of 2011 and 2010.
Our tax provision increased by $5 million (11 percent) to a tax provision of $51 million in the first quarter of 2011 from a tax provision of $46 million in the first quarter of 2010. The increase was primarily due to higher pretax income in 2011. The increase was partially offset by a decrease in the effective tax rate as a result of lower tax expense due to higher pre-tax income in low tax jurisdictions.
Equity in Losses
Equity in losses of $4 million in the first quarter of 2011 decreased by $7 million from $11 million in the first quarter of 2010 and primarily reflected a favorable variance from 2010 first quarter joint venture impairment charges of $3 million ($2 million associated with our North American Limited-Service segment and $1 million associated with our Timeshare segment) and $5 million of lower 2011 first quarter losses for a Timeshare segment residential and fractional project joint venture, primarily related to cancellation allowances recorded in the 2010 first quarter.
Net income increased by $18 million (22 percent) to $101 million in the first quarter of 2011 from $83 million in the first quarter of 2010, and diluted earnings per share increased by $0.04 (18 percent) to $0.26 per share from $0.22 per share in the first quarter of 2010. As discussed in more detail in the preceding sections beginning with Operating Income, the $18 million increase in net income compared to the prior year was due to higher franchise and base management fees ($21 million), higher owned, leased, corporate housing, and other revenue net of direct expenses ($8 million), lower equity in losses ($7 million), lower interest expense ($4 million), higher incentive management fees ($2 million), higher Timeshare sales and services revenue net of direct expenses ($1 million), and higher gains and other income ($1 million). Higher general, administrative, and other expenses ($21 million) and higher income taxes ($5 million) partially offset these items.
Earnings Before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)
EBITDA, a financial measure that is not prescribed or authorized by United States generally accepted accounting principles (GAAP), reflects earnings excluding the impact of interest expense, provision for income taxes, depreciation and amortization. We consider EBITDA to be an indicator of operating performance because we use it to measure our ability to service debt, fund capital expenditures, and expand our business. We also use EBITDA, as do analysts, lenders, investors and others, to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a companys capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their
differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.
EBITDA has limitations and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. This non-GAAP measure excludes certain cash expenses that we are obligated to make. We show our EBITDA calculations and reconcile that measure with Net Income in the following table.
We are a diversified hospitality company with operations in five business segments: North American Full-Service Lodging, North American Limited-Service Lodging, International Lodging, Luxury Lodging, and Timeshare. See Footnote No. 13, Business Segments, of the Notes to our Financial Statements for further information on our segments including how we aggregate our individual brands into each segment, the reclassification of certain 2010 segment revenues, segment financial results, and segment assets to reflect our movement of Hawaii to our North American segments from our International segment, and other information about each segment, including revenues, net income, equity in earnings (losses) of equity method investees, and assets.
We added 209 properties (33,733 rooms) and 30 properties (6,405 rooms) exited our system since the end of the 2010 first quarter. These figures do not include residential or ExecuStay units. We also added 4 residential properties (665 units) and 1 residential property (25 units) exited the system during that time. These property additions include 72 hotels (7,421 rooms) which are currently operated or franchised as AC Hotels as part of our unconsolidated joint venture with AC Hoteles, S.A. and will be rebranded AC Hotels by Marriott or Autograph, as applicable, during the next few months once they have been fully integrated with our systems. See Footnote No. 14, Acquisitions and Dispositions, for additional information regarding AC Hotels.
Total segment financial results increased by $30 million (14 percent) to $239 million in the first quarter of 2011 from $209 million in the first quarter of 2010, and total segment revenues increased by $147 million to $2,762 million in the first quarter of 2011, a 6 percent increase from revenues of $2,615 million in the first quarter of 2010.
The quarter-over-quarter increase in revenues included a $139 million increase in cost reimbursements revenue, which does not impact operating income or net income. The results, compared to the year-ago quarter, primarily reflected a $21 million increase in franchise and base management fees to $237 million in the first quarter of 2011 from $216 million in the first quarter of 2010, $7 million of lower joint venture equity losses, an increase of $7 million in owned, leased, corporate housing, and other revenue net of direct expenses, $2 million of higher incentive management fees to $42 million in the first quarter of 2011 from $40 million in the first quarter of 2010, a $2 million decrease in interest expense, and an increase of $1 million in Timeshare sales and services revenue net of direct expenses. A $10 million increase in general, administrative, and other expenses partially offset these favorable variances. For more detailed information regarding the variances see the preceding sections beginning with Operating Income.
The $21 million increase in franchise and base management fees primarily reflected stronger RevPAR and, to a lesser extent, the impact of unit growth across the system. In the first quarter of 2011, 25 percent of our managed properties paid incentive management fees to us versus 23 percent in the first quarter of 2010. In addition, in the first quarter of 2011, 61 percent of our incentive fees came from properties outside the United States versus 60 percent in the 2010 first quarter.
See Statistics below for detailed information on Systemwide RevPAR and Company-operated RevPAR by segment, region, and brand.
Compared to the first quarter of 2010, worldwide comparable company-operated house profit margins in the first quarter of 2011 increased by 30 basis points and worldwide comparable company-operated house profit per available room (HP-PAR) increased by 6.4 percent on a constant U.S. dollar basis, reflecting higher occupancy, rate increases, and the impact of tight cost controls in 2011 at properties in our system, partially offset by higher property-level compensation. North American company-operated house profit margins decreased by 30 basis points compared to the 2010 first quarter reflecting increased state unemployment tax rates, lower attrition fees, and higher property-level compensation offset somewhat by tight cost controls. HP-PAR at those same properties increased by 3.4 percent reflecting higher demand and RevPAR. International company-operated house profit margins increased by 180 basis points and HP-PAR at those properties increased by 14.9 percent reflecting increased demand, higher RevPAR and continued tight property-level cost controls.
Summary of Properties by Brand
Including residential properties, we added 100 lodging properties (14,203 rooms) during the first quarter of 2011, including 72 properties (7,421 rooms) associated with the AC Hotels, while 6 properties (1,479 rooms) exited the system, increasing our total properties to 3,639 (630,826 rooms). These figures include 35 home and condominium products (3,615 units), for which we manage the related owners associations.
Unless otherwise indicated, our references to Marriott Hotels & Resorts throughout this report include JW Marriott and Marriott Conference Centers, references to Renaissance Hotels include Renaissance ClubSport, and references to Fairfield Inn & Suites include Fairfield Inn.
At March 25, 2011, we operated or franchised the following properties by brand (excluding 1,984 corporate housing rental units):
Total Lodging and Timeshare Products by Segment
At March 25, 2011, we operated or franchised the following properties by segment (excluding 1,984 corporate housing rental units associated with our ExecuStay brand):
The following table provides additional detail, by brand, as of March 25, 2011, for our Timeshare properties:
The following tables show occupancy, average daily rate, and RevPAR for comparable properties, for each of the brands in our North American Full-Service and North American Limited-Service segments, for our International segment by region, and the principal brand in our Luxury segment, The Ritz-Carlton. We have not presented statistics for company-operated Fairfield Inn & Suites properties in these tables because the brand is predominantly franchised and we operate very few properties, so such information would not be meaningful (identified as nm in the tables that follow). Systemwide statistics include data from our franchised properties, in addition to our owned, leased, and managed properties.
The occupancy, average daily rate, and RevPAR statistics we use throughout this report for the twelve weeks ended March 25, 2011, include the period from January 1, 2011, through March 25, 2011, and the statistics for the twelve weeks ended March 26, 2010, include the period from January 2, 2010, through March 26, 2010, (except in each case, for The Ritz-Carlton brand properties and properties located outside of the United States, which for those properties includes the period from January 1 through the end of February).