Hotel Online  Special Report
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Marriott International Reports 3rd Qtr Net Income of $149 million Up from the
$133 million in the Same Qtr a Year Earlier; RevPAR Up 8.8%
at North American Properties
.
WASHINGTON, Oct. 6, 2005 - Marriott International, Inc. (NYSE: MAR) today reported diluted earnings per share (EPS) of $0.65 in the third quarter of 2005 and income from continuing operations of $148 million. Results included a $17 million pre-tax impairment charge ($0.05 per share after-tax) related to an investment in a Delta Air Lines leveraged aircraft lease. EPS excluding this charge was $0.70, up 27 percent from comparable EPS in the 2004 third quarter.

J.W. Marriott, Jr., chairman and chief executive officer of Marriott International, said, "Third quarter results were very strong despite Hurricane Katrina late in the quarter. In the aftermath of the storm, our associates are working hard to help guests, other associates and the community. By the end of this week 12 of the company's 16 New Orleans area hotels will be open and serving guests, many of whom are involved in emergency management and reconstruction efforts. We are proud of our associates' absolute determination to get things up and running as quickly as possible, even in the face of the difficult living and working conditions in New Orleans.
 

  • Diluted earnings per share (EPS) totaled $0.65 in the third quarter of 2005 and income from continuing operations was $148 million. Results included a $17 million non-cash pre-tax impairment charge ($0.05 per share after-tax) related to an investment in a Delta Air Lines leveraged aircraft lease. EPS excluding this charge was $0.70, up 27 percent from comparable EPS in the 2004 third quarter;
  • Worldwide systemwide, comparable revenue per available room (REVPAR) increased 9.2 percent (8.8 percent using constant dollars) over third quarter 2004, driven by an 8.0 percent increase in average daily rate and a nearly 1 percentage point increase in occupancy to 75.8 percent;
  • Incentive management fees grew 43 percent to $30 million, reflecting a 190 basis point increase in worldwide property level house profit margins.
  • The company's pipeline of hotels under construction, awaiting conversion, or approved for development totaled over 60,000 rooms at quarter end, including nearly 5,000 Ritz-Carlton rooms. The company opened over 5,000 rooms in the third quarter with approximately one- quarter converted from other brands;
  • A record 20 million shares of the company's common stock were repurchased year-to-date through the third quarter for $1.3 billion; 8 million shares were bought back for $531 million in the third quarter alone;
  • The company expects North American REVPAR to increase 8 to 10 percent for the fourth quarter of 2005 and expects fourth quarter fully diluted earnings per share to total $0.95 to $0.98 (including $0.12 per share for synthetic fuel operations);
  • In 2006, the company expects North American REVPAR to increase 7 to 9 percent. Company-operated North American hotel margins are expected to improve 150 to 200 basis points. 

"Overall, the third quarter results were impressive, with particularly strong performances in New York City, Washington, D.C., St. Louis, Florida, and Southern California. Travel to Hawaii increased significantly as Japanese travelers continue to return to the Islands. Internationally, we saw robust growth at our hotels in China and the Middle East, as well as strong demand in Mexico.

"Rarely have we seen a more favorable pricing climate for our industry. In the third quarter, North American group meeting attendance exceeded meeting planner expectations and food and beverage revenue accelerated. Transient demand was strong in most markets around the world. Hotel supply growth, on the other hand, remained modest. The escalating cost of building materials and high land costs continue to temper new U.S. hotel supply.

"Marriott's industry-leading distribution and brand quality help us capture more than our fair share of hotel demand, driving our pricing power. And because of owners' and franchisees' preference for our brands, we continue to add more than our fair share of new units, particularly through conversions of higher-profit full-service hotels. In the third quarter, over 40 percent of our full-service hotel openings were conversions from other brands.

"Marriott's new and exciting approach to style, design and comfort is also having an impact. Just two weeks ago, we led our industry with a bold new approach to marketing at a four-day event in New York's Times Square. We constructed a facsimile of the new Marriott Hotels & Resorts room featuring our luxurious new bedding, state-of-the-art technology and comfortable style, and built an entertainment stage on top of it. The event generated tremendous attention. We also showcased our new ad campaign featuring the new bedding collection, Revive. Approximately 95 percent of our hotels have already signed up for the Revive bedding installation to roll out during the balance of the year. New room designs will appear as hotels undergo regular renovation cycles and as new properties enter the system," said Mr. Marriott.
In the third fiscal quarter (12 week period from June 18, 2005 to September 9, 2005), REVPAR for the company's 633 comparable company-operated North American properties increased by 8.8 percent (9.9 percent for the calendar quarter July 1 - September 30); occupancy was up nearly 1 percentage point to 75.9 percent. The continuation of strong demand across the company's brands in North America resulted in a 7.9 percent increase in average daily rate.

REVPAR at the comparable company-operated North American full-service hotels (including Marriott Hotels & Resorts, JW Marriott Hotels & Resorts, The Ritz-Carlton, and Renaissance Hotels & Resorts) increased by 9.2 percent during the quarter (10.8 percent for the calendar quarter), driven by a 7.3 percent increase in average daily rate and a 1.3 percentage point occupancy gain to 75.2 percent. North American company-operated REVPAR for comparable select-service and extended-stay brands (including Courtyard, Fairfield Inn, Residence Inn, TownePlace Suites, and SpringHill Suites) increased 8 percent (8.1 percent for the calendar quarter), driven by solid occupancy and an 8.5 percent increase in average daily rate.

International systemwide comparable REVPAR increased 13.7 percent (11.3 percent using constant dollars), including an 11.8 percent increase in rate and a 1.3 percentage point increase in occupancy. Demand for our hotels in Asia, the Caribbean and Mexico has been strong all year. In the third quarter, comparable REVPAR in China was up 10.4 percent and Mexico rose 11.7 percent.

The company added 35 hotels (5,174 rooms) to the worldwide lodging portfolio during the third quarter, while four properties (1,664 rooms) exited the system. At quarter-end, the company's lodging group encompassed 2,707 hotels and timeshare resorts (493,274 rooms).
MARRIOTT REVENUES totaled $2.7 billion in the third quarter of 2005, an 18 percent increase from 2004. Base management fees rose 11 percent to $108 million reflecting strong REVPAR and growth in new managed units, including the addition of 46 formerly franchised hotels in the United Kingdom. Marriott's purchase of 13 formerly managed properties from CTF Holdings depressed the growth of base management fees but increased owned and leased revenue substantially. Franchise fees rose 5 percent during the quarter due to strong REVPAR and unit growth, offset by the sale of the Ramada International franchise business in 2004 and the transfer to managed of the Whitbread hotels in 2005.

With an 8.7 percent increase in room rates at comparable company-operated properties worldwide (using actual exchange rates), company-operated hotels generated house profit margins of 32.8 percent, a 190 basis point improvement over the prior year quarter. House profit margins for comparable North American company-operated properties increased 180 basis points, with full- service hotels leading the way with 220 basis points growth in house profit margins. Property level EBITDA margins for comparable North American company- operated properties, which include deductions for insurance and property taxes, but exclude management fees, increased 250 basis points for full- service hotels.

Strong property level profits drove incentive management fees up 43 percent to $30 million, including $6 million for incentive fees from two hotels that were calculated based on prior period results, but not earned and due until the third quarter of 2005. In the 2005 third quarter, 44 percent of the company's managed properties paid incentive fees, compared to 27 percent in the year ago quarter.
Owned, leased, corporate housing and other revenue increased 54 percent to $236 million, while profits nearly tripled to $39 million. Revenues and profits improved due to Marriott's acquisition of the CTF properties as well as strong property level results at the company's existing owned and leased properties, many of which have recently been renovated.

Property level room revenue booked through Marriott.com totaled $637 million during the third quarter, an increase of 48 percent over the prior year. Marriott.com gross revenues exceeded the $10 million per day milestone 10 times during the quarter. In addition, Marriott.com was ranked as the top travel site in the recently issued Online Customer Respect Study of the largest airline and travel firms. The company continues to make enhancements to its proprietary online booking channel, including new airline ticket and car rental booking capabilities.
Revenue from timeshare interval sales and services increased 31 percent during the third quarter of 2005, largely due to higher financially reportable development revenue. Timeshare contract sales, including sales made by joint venture projects, were flat, reflecting strong sales at resorts in Aruba and Hawaii, offset by lower sales at the Ritz-Carlton Club resorts in St. Thomas, Bachelor Gulch, Colorado and Jupiter, Florida. Ritz-Carlton Club resorts continue to experience strong demand but had limited inventory available in 2005. Contract sales for the Marriott Vacation Club Resorts brand alone rose 10 percent.

LODGING OPERATING INCOME soared 30 percent in the third quarter as a result of higher base and franchise fees, growth in incentive fees and strong timeshare profits. General and administrative expenses increased $23 million to $149 million and included a $6 million charge associated with the settlement of a litigation matter from 1998, $1 million for bedding program incentives, $1 million in company contributions for hurricane Katrina relief efforts, and $2 million in systems initiatives.

SYNTHETIC FUEL. Net income generated from the synthetic fuel joint ventures totaled $30 million in the third quarter. The ventures contributed earnings per share of $0.13 in both the 2005 and 2004 third quarters.

GAINS AND OTHER INCOME of $39 million in the third quarter ($18 million excluding synthetic fuel compared to $24 million in 2004) included $7 million of gains on the sale of real estate, $3 million of gains from the sale or refinancing of real estate loans, a $3 million gain on the sale of our interest in a joint venture and $5 million of preferred returns from two joint venture investments. The third quarter of 2004 included a $13 million gain on the disposition of Marriott's interest in the Two Flags joint venture.

INTEREST EXPENSE increased $1 million to $24 million. The company retired its $275 million Series D senior notes at maturity in April 2005 and issued $350 million in new Series F senior notes in June 2005.

INTEREST INCOME declined to $13 million in the third quarter of 2005 as the company continued to reduce its notes receivable balances. The provision for loan losses reflects a $17 million non-cash pre-tax charge associated with the impairment of a leveraged lease receivable from Delta Air Lines for an aircraft Marriott acquired and leased to Delta in 1994. In September, Delta filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code and informed the company of its desire to restructure the lease.

EQUITY IN EARNINGS/(LOSSES) reflects Marriott's share of income or losses from joint venture investments. In the third quarter of 2005, several of the hotels in which Marriott had an equity interest were sold. As a result, the company recognized $15 million from its share of the gains on those transactions. The company also benefited from higher results from the Courtyard joint venture and the newly formed joint venture with Whitbread.

Adjusted earnings before interest expense, taxes, depreciation and amortization (Adjusted EBITDA) rose 12 percent to $268 million in the third quarter. Total debt at the end of the third quarter of 2005 was $1,817 million and the cash balance totaled $161 million, compared to $1,325 million of debt and $770 million of cash at the end of 2004.

The company repurchased 8 million shares of common stock in the third quarter of 2005 at a cost of $531 million and has repurchased a total of 22.6 million shares year-to-date through October 5, 2005, at a cost of $1,457 million. The current remaining share repurchase authorization totals approximately 21 million shares.

FOURTH QUARTER 2005 OUTLOOK

The company expects lodging demand to remain strong and estimates 2005 fourth quarter systemwide North American REVPAR growth of 8 to 10 percent, with an approximately 150 basis point improvement in house profit margins. Under these assumptions the company expects fee revenue for the fourth quarter of 2005 to total approximately $320 million, an increase of 17 percent over 2004.

Timeshare interval sales and services revenue, net of direct expenses, should increase to a range of $60 million to $65 million in the fourth quarter 2005. The company also expects to complete a timeshare mortgage note sale transaction in the fourth quarter.
The company expects general, administrative and other expenses to total approximately $185 million in the fourth quarter, a decline of 17 percent compared to 2004. The comparison reflects the impact of the $13 million write-off of the investment in a management contract for the Courtyard joint venture in the fourth quarter of 2004.

Earnings per share from synthetic fuel are expected to total approximately $0.12 in the fourth quarter 2005, $0.02 lower than the 2004 fourth quarter results.

The company expects to open approximately 25,000 rooms (gross) during the full year 2005.

2006 OUTLOOK

The company expects North American REVPAR to increase 7 to 9 percent in 2006, roughly 75 percent of which should be rate driven. Assuming a 1.5 to 2.0 percentage point improvement in house profit margins, and 25,000 to 30,000 new room openings (gross), the company expects total fee revenue of $1,165 million to $1,185 million for the full year 2006.

Given the recent rise in oil prices, the uncertainty surrounding future oil prices, and the range of production alternatives which the company is evaluating, the company is unable to provide guidance for 2006 earnings from the synthetic fuel business.

Also not included in the company's 2006 earnings guidance at this time is the estimated $45 million pre-tax impact of the Financial Accounting Standards Board's Statement (FASB) No. 123®, requiring the expensing of all share based compensation (including stock options).

New accounting rules for the timeshare industry will take effect in 2006. The new rules will change the timing of our recognition of timeshare revenues, selling and product costs, reacquired timeshare inventory and maintenance fees for unsold timeshare inventory. Our estimate of the one-time impact to 2006 first quarter earnings will be a charge of approximately $150 million to $175 million pre-tax. Since this charge is a one-time item, and will be presented in the financial statements below income from continuing operations, we have also not included it in our 2006 earnings guidance.

Diluted earnings per share from continuing operations for 2006 is estimated to range from $3.00 to $3.10 (excluding the impact of FASB No. 123®, the one-time impact associated with the new timeshare accounting rules and the synthetic fuel business).

Under the above assumptions, the company currently estimates the following results for the fourth quarter, full year 2005 and full year 2006:
 
 

                       Fourth Quarter    Full Year 2005     Full Year 2006
                           2005
    Total fee revenue  Approx. $320     Approx. $1,020     $1,165 million to
                         million           million           $1,185 million

    Owned, leased,    $55 million to    $158 million to     $150 million to
     corporate         $60 million       $163 million         $155 million
     housing and
     other, net

    Timeshare         $60 million to    $263 million to      Approx. $265
     interval sales    $65 million       $268 million          million
     and  services,
     net of direct
     expenses

    General,           Approx. $185      Approx. $648       $600 million to
     administrative &    million           million            $610 million
     other expense(1)

    Lodging operating $250 million to   $793 million to     $970 million to
     income(1)         $260 million      $803 million        $1,005 million

    Gains(2)            Approx. $55       Approx. $130       Approx. $100
     (excluding           million           million             million
     synthetic fuel)

    Net interest        Approx. $25       Approx. $40         Approx. $80
     expense(3)          million            million             million

    Equity in           Approx. $5        Approx. $25         Approx. $25
     earnings/           million            million             million
    (losses)

    Earnings per        Approx. $0.12     Approx. $0.51       No guidance
     share from
     synthetic fuel

    Earnings per       $0.95 to $0.98    $3.09 to $3.12       No guidance
     share(4)

    Earnings per share $0.83 to $0.86    $2.58 to $2.61      $3.00 to $3.10
     excluding
     synfuel(4)

    (1) Full year 2005 excludes the 2005 second quarter $94 million pre-tax
        ($0.26 per share) one-time charge associated with the CTF transaction.

    (2) Includes timeshare mortgage note sale gains.

    (3) Includes interest expense and provision for loan losses, net of
        interest income (full year 2005 excludes the $17 million one-time
        impairment charge related to an investment in a Delta Air Lines
        leveraged aircraft lease).

    (4) From continuing operations.  Full year 2005 excludes $17 million
        ($0.05 per share) one-time impairment charge for the leveraged lease
        and $94 million ($0.26 per share) one-time charge associated with the
        CTF transaction.  2006 excludes charge associated with the new
        timeshare accounting rules and $0.13 per share charge associated with
        the adoption of FAS123R.
 

The company expects investment spending in 2005 to total approximately $1.1 billion, including $40 million for maintenance capital spending, $650 million for capital expenditures and acquisitions (including $368 million for the acquisition of the CTF properties), $100 million in new mezzanine financing and mortgage loans for hotels developed by owners and franchisees, and approximately $300 million in equity and other investments (including $170 million investment in the joint venture with Whitbread).

Investment spending in 2006 is expected to total $750 million, including $200 million for the timeshare business.
 
 

 MARRIOTT INTERNATIONAL, INC.
Financial Highlights
(in millions, except per share amounts)


                              12 Weeks Ended         12 Weeks Ended
                             September 9, 2005     September 10, 2004
                            --------------------  --------------------
                                                                       Percent
                                   Synthetic             Synthetic     Better/
                            Lodging  Fuel  Total  Lodging  Fuel  Total (Worse)
                            ------- ------ -----  ------- ------ ----- -------
    REVENUES
    Base management fees       $108    $-   $108      $97    $-    $97     11
    Franchise fees               78     -     78       74     -     74      5
    Incentive management fees    30     -     30       21     -     21     43
    Owned, leased, corporate
     housing and other(1)       236     -    236      153     -    153     54
    Timeshare interval
     sales and services(2)      393     -    393      299     -    299     31
    Cost reimbursements(3)    1,771     -  1,771    1,573     -  1,573     13
    Synthetic fuel                -    98     98        -    87     87     13
                            ------- ------ -----  ------- ------ -----

       Total Revenues         2,616    98  2,714    2,217    87  2,304     18

    OPERATING COSTS AND
     EXPENSES
    Owned, leased and
     corporate housing --
     direct(4)                  197     -    197      139     -    139    (42)
    Timeshare -- direct         330     -    330      249     -    249    (33)
    Reimbursed costs          1,771     -  1,771    1,573     -  1,573    (13)
    General, administrative
     and other(5)               149     -    149      126     -    126    (18)
    Synthetic fuel                -   132    132        -   118    118    (12)
                            ------- ------ -----  ------- ------ -----
       Total Expenses         2,447   132  2,579    2,087   118  2,205    (17)
                            ------- ------ -----  ------- ------ -----

    OPERATING INCOME (LOSS)    $169  $(34)   135     $130  $(31)    99     36
                            ======= ======        ======= ======

    Gains and other
     income(6)                                39                    43     (9)
    Interest expense                         (24)                  (23)    (4)
    Interest income                           13                    33    (61)
    Provision for loan
     losses                                  (17)                    -      *
    Equity in earnings/
     (losses) - Other(7)                      17                    (8)   313
                                           -----                 -----

    INCOME BEFORE INCOME
     TAXES AND MINORITY
     INTEREST                                163                   144     13
    Provision for income
     taxes                                   (33)                  (28)   (18)
                                           -----                 -----

    INCOME BEFORE MINORITY
     INTEREST                                130                   116     12
    Minority interest                         18                    16     13
                                           -----                 -----
    INCOME FROM CONTINUING
     OPERATIONS                              148                   132     12

    DISCONTINUED OPERATIONS                    1                     1      -
                                           -----                 -----

    NET INCOME                              $149                  $133     12
                                           =====                 =====

    EARNINGS PER SHARE
     - Basic
      Earnings from
       continuing operations               $0.69                 $0.59     17
      Earnings from
       discontinued operations                 -                     -      *
                                           -----                 -----
    EARNINGS PER SHARE
     - Basic                               $0.69                 $0.59     17
                                           =====                 =====

    EARNINGS PER SHARE
     - Diluted
      Earnings from
       continuing operations               $0.65                 $0.55     18
      Earnings from
       discontinued operations                 -                  0.01   (100)
                                           -----                 -----
    EARNINGS PER SHARE
     - Diluted                             $0.65                 $0.56     16
                                           =====                 =====

    Basic Shares                           215.3                 225.9
    Diluted Shares                         229.3                 238.9
 

    *  Percent can not be calculated.

    1 -- Owned, leased, corporate housing and other revenue includes revenue
         from the properties we own or lease, revenue from our ExecuStay
         business, land rent income and other revenue.
    2 -- Timeshare interval sales and services includes total timeshare
         revenue except for base fees, cost reimbursements, gains, and joint
         venture earnings (losses).
    3 -- Cost reimbursements include reimbursements from lodging properties
         for Marriott funded operating expenses.
    4 -- Owned, leased and corporate housing -- direct expenses include
         operating expenses related to our owned or leased hotels, including
         lease payments, pre-opening expenses and depreciation, plus expenses
         related to our ExecuStay business.
    5 -- General, administrative and other expenses include the overhead costs
         allocated to our lodging business segments (including ExecuStay and
         Timeshare) and our unallocated corporate overhead costs and general
         expenses.
    6 -- Gains and other income includes gains on the sale of real estate,
         gains from the sale of joint ventures, income related to our cost
         method joint ventures and the earn-out payments we made to the
         previous owner of the synthetic fuel operations and earn-out payments
         we received from our synthetic fuel joint venture partner.
    7 -- Equity in earnings/(losses) -- Other includes our equity in earnings
         (losses) of unconsolidated joint ventures.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                             Financial Highlights
                   (in millions, except per share amounts)

                              36 Weeks Ended         36 Weeks Ended
                             September 9, 2005     September 10, 2004
                            --------------------  --------------------
                                                                       Percent
                                   Synthetic             Synthetic     Better/
                            Lodging  Fuel  Total  Lodging  Fuel  Total (Worse)
                            ------- ------ -----  ------- ------ ----- -------
    REVENUES
    Base management fees       $342    $-   $342     $302    $-   $302     13
    Franchise fees              226     -    226      207     -    207      9
    Incentive management
     fees                       132     -    132       90     -     90     47
    Owned, leased,
     corporate housing
     and other(1)               583     -    583      491     -    491     19
    Timeshare interval
     sales and services(2)    1,074     -  1,074      898     -    898     20
    Cost reimbursements(3)    5,248     -  5,248    4,772     -  4,772     10
    Synthetic fuel                -   304    304        -   198    198     54
                            ------- ------ -----  ------- ------ -----
       Total Revenues         7,605   304  7,909    6,760   198  6,958     14

    OPERATING COSTS AND
     EXPENSES
    Owned, leased and
     corporate housing --
     direct(4)                  480     -    480      428     -    428    (12)
    Timeshare -- direct         871     -    871      746     -    746    (17)
    Reimbursed costs          5,248     -  5,248    4,772     -  4,772    (10)
    General, administrative
     and other(5)               557     -    557      385     -    385    (45)
    Synthetic fuel                -   419    419        -   259    259    (62)
                            ------- ------ -----  ------- ------ -----
       Total Expenses         7,156   419  7,575    6,331   259  6,590    (15)
                            ------- ------ -----  ------- ------ -----

    OPERATING INCOME (LOSS)    $449 $(115)   334     $429  $(61)   368     (9)
                            ======= ======        ======= ======
 

    Gains and other
     income(6)                                97                    95      2
    Interest expense                         (69)                  (69)     -
    Interest income                           65                    98    (34)
    Provision for loan
     losses                                  (28)                    -      *
    Equity in earnings/
     (losses) - Synthetic
                fuel(7)                        -                   (28)   100
              - Other(8)                      18                    (9)   300
                                           -----                 -----

    INCOME BEFORE INCOME
     TAXES AND MINORITY
     INTEREST                                417                   455     (8)
    Provision for income
     taxes                                   (18)                  (79)    77
                                           -----                 -----

    INCOME BEFORE MINORITY
     INTEREST                                399                   376      6
    Minority interest                         32                    30      7
                                           -----                 -----
    INCOME FROM CONTINUING
     OPERATIONS                              431                   406      6

    DISCONTINUED OPERATIONS                    1                     1      -
                                           -----                 -----

    NET INCOME                              $432                  $407      6
                                           =====                 =====

    EARNINGS PER SHARE -
     Basic
      Earnings from
       continuing operations               $1.96                 $1.78     10
      Earnings from
       discontinued
       operations                              -                  0.01   (100)
                                           -----                 -----
    EARNINGS PER SHARE -
     Basic                                 $1.96                 $1.79      9
                                           =====                 =====

    EARNINGS PER SHARE -
     Diluted
      Earnings from
       continuing operations               $1.83                 $1.69      8
      Earnings from
       discontinued
       operations                              -                     -      *
                                           -----                 -----
    EARNINGS PER SHARE -
     Diluted                               $1.83                 $1.69      8
                                           =====                 =====

    Basic Shares                           220.4                 227.5
    Diluted Shares                         235.3                 240.9
 

    *  Percent can not be calculated.

    1 -- Owned, leased, corporate housing and other revenue includes revenue
         from the properties we own or lease, revenue from our ExecuStay
         business, land rent income and other revenue.
    2 -- Timeshare interval sales and services includes total timeshare
         revenue except for base fees, cost reimbursements, gains, and joint
         venture earnings (losses).
    3 -- Cost reimbursements include reimbursements from lodging properties
         for Marriott funded operating expenses.
    4 -- Owned, leased and corporate housing -- direct expenses include
         operating expenses related to our owned or leased hotels, including
         lease payments, pre-opening expenses and depreciation, plus expenses
         related to our ExecuStay business.
    5 -- General, administrative and other expenses include the overhead costs
         allocated to our lodging business segments (including ExecuStay and
         Timeshare) and our unallocated corporate overhead costs and general
         expenses.
    6 -- Gains and other income includes gains on the sale of real estate,
         gains from the sale of joint ventures, income related to our cost
         method joint ventures and the earn-out payments we made to the
         previous owner of the synthetic fuel operations and earn-out payments
         we received from our synthetic fuel joint venture partner.
    7 -- Equity in earnings/(losses) - Synthetic fuel includes our share of
         the equity in earnings of the synthetic fuel joint ventures and the
         net earn-out payments made to our synthetic fuel joint venture
         partner from January 3, 2004 through March 25, 2004. Beginning March
         26, 2004, we consolidated the synthetic fuel operations as a result
         of adopting FIN 46®, "Consolidation of Variable Interest Entities."
    8 -- Equity in earnings/(losses) -- Other includes our equity in (losses)
         earnings of unconsolidated joint ventures.
 
 

                         Marriott International, Inc.
                              Business Segments
                               ($ in millions)
 

                                             Twelve Weeks Ended
                                        ---------------------------   Percent
                                        September 9,  September 10,   Better/
                                            2005          2004        (Worse)
                                        ------------  ------------    -------
    REVENUES

    Full-Service                            $1,713        $1,459        17%
    Select-Service                             303           277         9%
    Extended-Stay                              149           133        12%
    Timeshare                                  451           348        30%
                                        ------------  ------------
      Total lodging(1)                       2,616         2,217        18%
    Synthetic fuel                              98            87        13%
                                        ------------  ------------
      Total                                 $2,714        $2,304        18%
                                        ============  ============

    INCOME FROM CONTINUING OPERATIONS

    Full-Service                              $129           $79        63%
    Select-Service                              49            42        17%
    Extended-Stay                               14            20       -30%
    Timeshare                                   50            34        47%
                                        ------------  ------------
      Total lodging financial results(1)       242           175        38%
    Synthetic fuel (after-tax)                  30            31        -3%
    Unallocated corporate expenses             (38)          (28)      -36%
    Interest income, (provision
     for loan losses) and
     (interest expense)                        (28)           10      -380%
    Income taxes (excluding
     Synthetic fuel)                           (58)          (56)       -4%
                                        ------------  ------------
      Total                                   $148          $132        12%
                                        ============  ============
 

    (1) We consider lodging revenues and lodging financial results to be
        meaningful indicators of our performance because they measure our
        growth in profitability as a lodging company and enable investors to
        compare the sales and results of our lodging operations to those of
        other lodging companies.
 
 

                         Marriott International, Inc.
                              Business Segments
                               ($ in millions)

                                          Thirty-Six Weeks Ended
                                        ---------------------------   Percent
                                        September 9,  September 10,   Better/
                                            2005          2004        (Worse)
                                        ------------  ------------    -------
    REVENUES

    Full-Service                            $5,093        $4,512        13%
    Select-Service                             868           788        10%
    Extended-Stay                              411           377         9%
    Timeshare                                1,233         1,083        14%
                                        ------------  ------------
      Total lodging(1)                       7,605         6,760        13%
    Synthetic fuel                             304           198        54%
                                        ------------  ------------
      Total                                 $7,909        $6,958        14%
                                        ============  ============

    INCOME FROM CONTINUING OPERATIONS

    Full-Service                              $275          $292        -6%
    Select-Service                             130           104        25%
    Extended-Stay                               43            48       -10%
    Timeshare                                  193           135        43%
                                        ------------  ------------
      Total lodging financial results(1)       641           579        11%
    Synthetic fuel (after-tax)                  92            73        26%
    Unallocated corporate expenses             (97)          (91)       -7%
    Interest income, (provision for
     loan losses) and (interest
     expense)                                  (32)           29      -210%
    Income taxes (excluding
     Synthetic fuel)                          (173)         (184)        6%
                                        ------------  ------------
      Total                                   $431          $406         6%
                                        ============  ============

    (1) We consider lodging revenues and lodging financial results to be
        meaningful indicators of our performance because they measure our
        growth in profitability as a lodging company and enable investors to
        compare the sales and results of our lodging operations to those of
        other lodging companies.
 
 

                          MARRIOTT INTERNATIONAL, INC.
 

                              Total Lodging Products(1)
    -------------------------------------------------------------------------
                                         Number of            Number of
                                         Properties          Rooms/Suites
                                     -----------------     ------------------
                                             Change vs.            Change vs.
                                    Sept. 9,  Sept. 10,   Sept. 9,  Sept. 10,
    Brand                             2005      2004        2005      2004
    ------------------------------  -----------------------------------------
    Full-Service Lodging
        Marriott Hotels & Resorts       502        15     181,599     3,268
        The Ritz-Carlton                 58         1      18,907       294
        Renaissance Hotels & Resorts    137         5      48,137       865
        Bulgari Hotel & Resort            1         -          58       -
        Ramada International              4      (199)        724   (27,034)
    Select-Service Lodging
        Courtyard                       680        34      98,043     5,381
        Fairfield Inn                   521        (3)     47,826    (1,299)
        SpringHill Suites               135        14      15,767     1,697
    Extended-Stay Lodging
        Residence Inn                   482        25      57,296     2,927
        TownePlace Suites               119         6      12,021       466
        Marriott Executive Apartments    16         2       2,809       338
    Timeshare(2)
        Marriott Vacation Club
         International                   44         1       9,231       694
        The Ritz-Carlton Club             4         -         280        19
        Grand Residences by Marriott      2         -         248         -
        Horizons by Marriott Vacation
         Club International               2         -         328         -
                                    ------------------   --------------------
    Total                             2,707       (99)    493,274   (12,384)
                                    ==================   ====================

    (1) Total Lodging Products excludes the 1,805 corporate housing rental
        units.
    (2) Includes products in active sales which are not ready for occupancy.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                            KEY LODGING STATISTICS

            North American Comparable Company-Operated Properties
    --------------------------------------------------------------------------

                                 Twelve Weeks Ended September 9, 2005 and
                                            September 10, 2004
                           ---------------------------------------------------
                                                                   Average
                               REVPAR         Occupancy          Daily Rate
                           -------------    -------------       -------------
    Brand                  2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    --------------------------------------------------------------------------
    Marriott Hotels
     & Resorts            $108.10   8.1%   75.7%   0.8% pts.   $142.75   6.9%
    The Ritz-Carlton(1)   $182.22  11.0%   72.7%   1.9% pts.   $250.61   8.0%
    Renaissance Hotels
     & Resorts            $100.97  12.8%   74.1%   3.1% pts.   $136.27   8.1%
    Composite -
     Full-Service(2)      $114.63   9.2%   75.2%   1.3% pts.   $152.50   7.3%
    Residence Inn          $90.15   6.8%   83.4%  -1.0% pts.   $108.13   8.1%
    Courtyard              $76.38   7.8%   73.5%  -0.5% pts.   $103.94   8.5%
    TownePlace Suites      $57.77   9.6%   80.9%   2.0% pts.    $71.43   6.9%
    SpringHill Suites      $74.94  13.0%   78.7%   0.7% pts.    $95.17  12.0%
    Composite -
     Select- Service &
     Extended-Stay(2)      $78.73   8.0%   77.0%  -0.3% pts.   $102.31   8.5%
    Composite - All(2)    $100.38   8.8%   75.9%   0.7% pts.   $132.29   7.9%
 

               North American Comparable Systemwide Properties
    -------------------------------------------------------------------------
                                 Twelve Weeks Ended September 9, 2005 and
                                            September 10, 2004
                           --------------------------------------------------
                                                                  Average
                               REVPAR         Occupancy          Daily Rate
                           -------------    -------------       -------------
    Brand                  2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    -------------------------------------------------------------------------
    Marriott Hotels
     & Resorts             $99.41   7.5%   73.5%   0.9% pts.   $135.30   6.2%
    The Ritz-Carlton(1)   $182.22  11.0%   72.7%   1.9% pts.   $250.61   8.0%
    Renaissance Hotels &
     Resorts               $96.14  12.2%   73.6%   2.5% pts.   $130.55   8.3%
    Composite -
     Full-Service(2)      $104.60   8.5%   73.4%   1.2% pts.   $142.42   6.7%
    Residence Inn          $89.12   6.7%   83.7%  -0.3% pts.   $106.42   7.1%
    Courtyard              $79.35   7.5%   75.7%   0.2% pts.   $104.84   7.1%
    Fairfield Inn          $57.25  10.0%   75.2%   1.7% pts.    $76.15   7.5%
    TownePlace Suites      $58.23   9.3%   80.4%   0.1% pts.    $72.46   9.1%
    SpringHill Suites      $70.33  11.1%   77.0%   1.5% pts.    $91.36   8.9%
    Composite - Select-
     Service &
     Extended-Stay(2)      $75.30   7.9%   78.1%   0.5% pts.    $96.47   7.3%
    Composite - All(2)     $87.63   8.2%   76.1%   0.8% pts.   $115.12   7.1%
 

    (1) Statistics for The Ritz-Carlton are for June through August.

    (2) Full-Service composite statistics include properties for Marriott
        Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-Carlton.
        Select-Service and Extended-Stay composite statistics include
        properties for the Courtyard, Residence Inn, TownePlace Suites,
        Fairfield Inn and SpringHill Suites brands. Composite - All statistics
        include properties for the Marriott Hotels & Resorts, Renaissance
        Hotels & Resorts, The Ritz-Carlton, Courtyard, Residence Inn,
        TownePlace Suites, Fairfield Inn, and SpringHill Suites brands.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                            KEY LODGING STATISTICS

            North American Comparable Company-Operated Properties
    --------------------------------------------------------------------------
                               Thirty-Six Weeks Ended September 9, 2005 and
                                            September 10, 2004
                          ----------------------------------------------------
                                                                  Average
                               REVPAR         Occupancy          Daily Rate
                           -------------    -------------       -------------
    Brand                  2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    --------------------------------------------------------------------------
    Marriott Hotels
     & Resorts            $112.37   8.2%   74.1%   0.7% pts.   $151.66   7.1%
    The Ritz-Carlton(1)   $206.85  11.9%   72.1%   1.0% pts.   $286.93  10.4%
    Renaissance Hotels
     & Resorts            $106.32  11.4%   72.6%   2.6% pts.   $146.54   7.4%
    Composite -
     Full-Service(2)      $120.10   9.2%   73.7%   1.0% pts.   $163.02   7.6%
    Residence Inn          $86.57   8.1%   80.7%   0.6% pts.   $107.34   7.2%
    Courtyard              $75.83   8.6%   71.8%  -0.5% pts.   $105.59   9.4%
    TownePlace Suites      $53.46   8.0%   76.4%   0.5% pts.    $70.02   7.4%
    SpringHill Suites      $71.07  17.3%   76.1%   4.2% pts.    $93.36  10.9%
    Composite - Select-
     Service &
     Extended-Stay(2)      $76.96   9.0%   74.8%   0.2% pts.   $102.91   8.7%
    Composite - All(2)    $102.84   9.1%   74.1%   0.7% pts.   $138.75   8.1%
 

               North American Comparable Systemwide Properties
    --------------------------------------------------------------------------
                               Thirty-Six Weeks Ended September 9, 2005 and
                                            September 10, 2004
                           ---------------------------------------------------
                                                                   Average
                                REVPAR         Occupancy          Daily Rate
                           -------------    -------------       -------------
     Brand                  2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    --------------------------------------------------------------------------
     Marriott Hotels
      & Resorts            $101.82   7.9%   71.9%   0.9% pts.   $141.68   6.6%
     The Ritz-Carlton(1)   $206.85  11.9%   72.1%   1.0% pts.   $286.93  10.4%
     Renaissance Hotels
      & Resorts             $98.74  11.4%   71.6%   2.4% pts.   $137.96   7.7%
     Composite -
      Full-Service(2)      $107.77   8.8%   71.8%   1.1% pts.   $150.02   7.1%
     Residence Inn          $84.19   7.7%   80.3%   0.7% pts.   $104.87   6.8%
     Courtyard              $76.84   8.3%   73.2%   0.4% pts.   $105.03   7.8%
     Fairfield Inn          $52.32  10.9%   70.4%   1.9% pts.    $74.36   8.0%
     TownePlace Suites      $54.81  10.3%   76.3%   0.5% pts.    $71.80   9.6%
     SpringHill Suites      $67.42  13.6%   74.6%   2.9% pts.    $90.38   9.1%
     Composite - Select-
      Service &
      Extended-Stay(2)      $71.54   8.9%   74.7%   1.0% pts.    $95.77   7.5%
     Composite - All(2)     $86.68   8.9%   73.5%   1.0% pts.   $117.93   7.3%
 

    (1) Statistics for The Ritz-Carlton are for January through August.

    (2) Full-Service composite statistics include properties for Marriott
        Hotels & Resorts, Renaissance Hotels & Resorts and The Ritz-Carlton.
        Select-Service and Extended-Stay composite statistics include
        properties for the Courtyard, Residence Inn, TownePlace Suites,
        Fairfield Inn and SpringHill Suites brands. Composite - All statistics
        include properties for the Marriott Hotels & Resorts, Renaissance
        Hotels & Resorts, The Ritz-Carlton, Courtyard, Residence Inn,
        TownePlace Suites, Fairfield Inn, and SpringHill Suites brands.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                            KEY LODGING STATISTICS
                                 (Constant $)

             International Comparable Company-Operated Properties(1,2)
    --------------------------------------------------------------------------
                        Three Months Ended August 31, 2005 and August 31, 2004
                        ------------------------------------------------------
                                                                   Average
                                REVPAR         Occupancy          Daily Rate
                            -------------    -------------       -------------
    Region/Brand(3)         2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin
     America               $100.71  10.3%   74.5%   3.0% pts.   $135.15   5.8%
    Continental Europe      $96.26   4.3%   74.9%   1.5% pts.   $128.51   2.2%
    United Kingdom         $141.41   5.2%   80.6%   2.4% pts.   $175.45   2.2%
    Middle East & Africa    $67.51  20.3%   70.9%  -0.3% pts.    $95.28  20.8%
    Asia Pacific(4)         $80.14  10.2%   76.3%  -0.6% pts.   $104.98  11.1%
    Ritz-Carlton
     International         $131.43  14.2%   67.7%  -0.5% pts.   $194.14  15.1%
    Total
     International(5)       $97.73   9.9%   75.6%   0.9% pts.   $129.35   8.6%

    Worldwide(6)            $99.66   9.1%   75.8%   0.7% pts.   $131.50   8.0%
 

             International Comparable Systemwide Properties(1,2)
    --------------------------------------------------------------------------
                        Three Months Ended August 31, 2005 and August 31, 2004
                        ------------------------------------------------------
                                                                    Average
                                REVPAR         Occupancy          Daily Rate
                            -------------    -------------       -------------
    Region/Brand(3)         2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin
     America                $95.27  12.5%   73.1%   4.4% pts.   $130.29   5.8%
    Continental Europe      $96.95   7.4%   71.9%   1.2% pts.   $134.79   5.6%
    United Kingdom         $119.95   2.3%   76.3%  -0.2% pts.   $157.14   2.6%
    Middle East & Africa    $65.41  18.4%   69.2%  -0.8% pts.    $94.51  19.7%
    Asia Pacific(4)         $85.92  12.0%   76.7%   0.2% pts.   $112.08  11.7%

    Ritz-Carlton
     International         $131.43  14.2%   67.7%  -0.5% pts.   $194.14  15.1%

    Total
     International(5)      $97.73   11.3%   74.5%   1.3% pts.   $131.14   9.4%

    Worldwide(6)           $89.40    8.8%   75.8%   0.9% pts.   $117.89   7.6%
 

    (1) International financial results are reported on a period basis, while
        International statistics are reported on a monthly basis.
    (2) Statistics are in constant dollars and include results for June
        through August. Excludes North America except for Worldwide.
    (3) Region information includes Marriott Hotels & Resorts, Renaissance
        Hotels & Resorts, and Courtyard and excludes The Ritz-Carlton.
    (4) Excludes Hawaii.
    (5) Includes Hawaii.
    (6) Worldwide includes international statistics for June through August
        and North American statistics for the twelve weeks ending September 9,
        2005 and September 10, 2004.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                            KEY LODGING STATISTICS
                                 (Constant $)

          International Comparable Company-Operated Properties(1,2)
    --------------------------------------------------------------------------
                        Eight Months Ended August 31, 2005 and August 31, 2004
                        ------------------------------------------------------
                                                                    Average
                                REVPAR         Occupancy          Daily Rate
                            -------------    -------------       ------------
    Region/Brand(3)         2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin
     America              $113.99   14.1%   75.3%   3.8% pts.   $151.45   8.4%
    Continental Europe     $94.73    3.2%   69.2%   0.7% pts.   $136.80   2.1%
    United Kingdom        $139.77    5.0%   76.5%   0.3% pts.   $182.69   4.6%
    Middle East & Africa   $77.70   27.1%   75.5%   4.7% pts.   $102.94  19.2%
    Asia Pacific(4)        $82.86   14.6%   75.3%   1.1% pts.   $110.00  13.0%

    Ritz-Carlton
     International        $149.35   21.7%   71.7%   4.6% pts.   $208.44  14.0%

    Total
     International(5)     $101.08   12.0%   73.9%   1.9% pts.   $136.79   9.0%

    Worldwide(6)          $102.41    9.8%   74.1%   1.0% pts.   $138.27   8.3%
 

             International Comparable Systemwide Properties(1,2)
    --------------------------------------------------------------------------
                        Eight Months Ended August 31, 2005 and August 31, 2004
                        ------------------------------------------------------
                                                                    Average
                                REVPAR         Occupancy          Daily Rate
                            -------------    -------------       -------------
    Region/Brand(3)         2005 vs. 2004    2005 vs. 2004       2005 vs. 2004
    --------------------------------------------------------------------------
    Caribbean & Latin
     America              $107.49   14.9%   73.6%   4.0% pts.   $146.00   8.7%
    Continental Europe     $92.79    5.8%   66.8%   1.1% pts.   $138.88   4.1%
    United Kingdom        $118.15    2.0%   71.8%  -1.9% pts.   $164.67   4.8%
    Middle East & Africa   $74.84   25.7%   73.4%   4.4% pts.   $101.95  18.1%
    Asia Pacific(4)        $87.11   14.9%   76.0%   1.7% pts.   $114.68  12.4%

    Ritz-Carlton
     International        $149.35   21.7%   71.7%   4.6% pts.   $208.44  14.0%

    Total
     International(5)      $99.23   12.5%   72.8%   2.1% pts.   $136.27   9.3%

    Worldwide(6)           $88.68    9.5%   73.4%   1.2% pts.   $120.82   7.7%
 

    (1) International financial results are reported on a period basis, while
        International statistics are reported on a monthly basis.
    (2) Statistics are in constant dollars and include results for January
        through August. Excludes North America except for Worldwide.
    (3) Region information includes Marriott Hotels & Resorts, Renaissance
        Hotels & Resorts, and Courtyard and excludes The Ritz-Carlton.
    (4) Excludes Hawaii.
    (5) Includes Hawaii.
    (6) Worldwide includes international statistics for January through August
        and North American statistics for the thirty-six weeks ending
        September 9, 2005 and September 10, 2004.
 
 

                         MARRIOTT INTERNATIONAL, INC.
                  Non-GAAP Financial Measure Reconciliation
                               ($ in millions)
We consider lodging operating income to be a meaningful indicator of our performance because it measures our growth in profitability as a lodging company and enables investors to compare the operating income related to our lodging segments to the operating income of other lodging companies. However, lodging operating income is a non-GAAP financial measure and is not an alternative to operating income or any other operating measure prescribed by United States generally accepted accounting principles.

    The reconciliation of operating income to lodging operating income is as
follows:
 
 

                                                     Fiscal Year 2005
                                             ---------------------------------
                                              First   Second    Third
                                             Quarter  Quarter  Quarter   Total
                                             -------  -------  -------  ------

    Operating income as reported                $158      $41     $135    $334

      Add back: Synthetic fuel operating loss     45       36       34     115
                                              ------   ------   ------  ------
    Lodging operating income                    $203      $77     $169    $449
                                              ======   ======   ======  ======
 
 

                                                  Fiscal Year 2004
                                     -----------------------------------------
                                      First   Second    Third   Fourth
                                     Quarter  Quarter  Quarter  Quarter  Total
                                     -------  -------  -------  -------  -----

    Operating income as reported        $151     $118      $99     $109   $477

      Add back: Synthetic fuel
       operating loss                      -       30       31       37     98
                                      ------   ------   ------   ------ ------
    Lodging operating income            $151     $148     $130     $146   $575
                                      ======   ======   ======   ====== ======
 
 

                           MARRIOTT INTERNATIONAL, INC.
                    Non-GAAP Financial Measure Reconciliation
                     (in millions, except per share amounts)
The table below details the impact on our continuing operations of our Synthetic Fuel segment for the 2005 and 2004 third quarters. Our management evaluates the figures presented in the "Excluding Synthetic Fuel" columns because management expects the Synthetic Fuel segment will no longer have a material impact on our business after the Internal Revenue Code Section 29 synthetic fuel tax credits expire at the end of 2007 and because the presentation reflects the results of our core lodging operations. Management also believes that these presentations facilitate the comparison of our results with the results of other lodging companies.
However, the figures presented in the "Excluding Synthetic Fuel" columns are all non-GAAP financial measures, may be calculated and/or presented differently than presentations of other companies and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                       Third Quarter 2005             Third Quarter 2004

                      Continuing Operations          Continuing Operations
                 ------------------------------ ------------------------------
                   Income                         Income
                    from    Synthetic Excluding    from    Synthetic Excluding
                 Continuing   Fuel    Synthetic Continuing    Fuel   Synthetic
                 Operations  Impact     Fuel    Operations   Impact    Fuel
                 ---------- --------- --------- ---------- --------- ---------

    Operating
     income
     (loss)           $135    $(34)     $169        $99       $(31)    $130
      Gains and
       other income     39      21        18         43         19       24
      Interest
       income,
       (provision for
       loan losses)
       and (interest
       expense)        (28)      -       (28)        10          -       10
      Equity in
       earnings/
       (losses)         17       -        17         (8)         -       (8)
                 ---------- --------- --------- ---------- --------- ---------
    Pre-tax income
     (loss)            163     (13)      176        144        (12)     156
                 ---------- --------- --------- ---------- --------- ---------

       Tax Provision   (61)     (3)      (58)       (57)        (1)     (56)
       Tax Credits      28      28         -         29         29        -
                 ---------- --------- --------- ---------- --------- ---------
     Total Tax
      (Provision)/
      Benefit          (33)     25       (58)       (28)        28      (56)
                 ---------- --------- --------- ---------- --------- ---------

     Income from
      Continuing
      Operations
      before Minority
      Interest         130      12       118        116        16       100

     Minority
      Interest          18      18         -         16        15         1
                 ---------- --------- --------- ---------- --------- ---------

     Income from
      Continuing
      Operations      $148     $30      $118       $132       $31      $101
                 ========== ========= ========= ========== ========= =========

     Diluted Shares  229.3   229.3     229.3      238.9     238.9     238.9

     Earnings per
      Share -
      Diluted        $0.65   $0.13     $0.52      $0.55     $0.13     $0.42

     Tax Rate        20.2%                        19.6%
 
 

                         MARRIOTT INTERNATIONAL, INC.
                  Non-GAAP Financial Measure Reconciliation
                   (in millions, except per share amounts)
The table below details the impact on our continuing operations of our Synthetic Fuel segment for the 36-weeks ended September 9, 2005 and September 10, 2004. Our management evaluates the figures presented in the "Excluding Synthetic Fuel" columns because management expects the Synthetic Fuel segment will no longer have a material impact on our business after the Internal Revenue Code Section 29 synthetic fuel tax credits expire at the end of 2007 and because the presentation reflects the results of our core lodging operations. Management also believes that these presentations facilitate the comparison of our results with the results of other lodging companies.
However, the figures presented in the "Excluding Synthetic Fuel" columns are all non-GAAP financial measures, may be calculated and/or presented differently than presentations of other companies and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                     Third Quarter YTD 2005        Third Quarter YTD 2004

                      Continuing Operations          Continuing Operations
                 ------------------------------ ------------------------------
                   Income                         Income
                    from    Synthetic Excluding    from    Synthetic Excluding
                 Continuing   Fuel    Synthetic Continuing    Fuel   Synthetic
                 Operations  Impact     Fuel    Operations   Impact    Fuel
                 ---------- --------- --------- ---------- --------- ---------

    Operating
     income
     (loss)          $334    $(115)     $449       $368      $(61)     $429
      Gains and
       other
       income          97       20        77         95        28        67
      Interest
       income,
       (provision
       for loan

       losses) and
       (interest
       expense)       (32)       -       (32)        29         -        29
      Equity in
       earnings/
       (losses)        18        -        18        (37)      (28)       (9)
                 ---------- --------- --------- ---------- --------- ---------
    Pre-tax income
     (loss)           417      (95)      512        455       (61)      516
                 ---------- --------- --------- ---------- --------- ---------

      Tax
       (Provision)/
       Benefit       (152)      21      (173)      (172)       12      (184)
      Tax Credits     134      134         -         93        93         -
                 ---------- --------- --------- ---------- --------- ---------

     Total Tax
      (Provision)/
      Benefit         (18)     155      (173)       (79)      105      (184)
                 ---------- --------- --------- ---------- --------- ---------

     Income from
      Continuing
      Operations
      before Minority
      Interest        399       60       339        376        44       332

     Minority
      Interest         32       32         -         30        29         1
                 ---------- --------- --------- ---------- --------- ---------

     Income from
      Continuing
      Operations     $431      $92      $339       $406       $73      $333
                 ========== ========= ========= ========== ========= =========

     Diluted Shares 235.3    235.3     235.3      240.9     240.9     240.9

     Earnings per
      Share -
      Diluted       $1.83    $0.39     $1.44      $1.69     $0.30     $1.39

     Tax Rate        4.3%                         17.4%
 
 

                         MARRIOTT INTERNATIONAL, INC.
                  Non-GAAP Financial Measure Reconciliation
                   (in millions, except per share amounts)
The table below details the impact on our continuing operations of the $17 million leveraged lease impairment charge recorded in the 2005 third quarter which was associated with the impairment of our one investment in a leveraged lease. We do not consider the leveraged lease investment to be related to our core business.
Our management evaluates the figures in the "Excluding Leveraged Lease Charge" column because they allow for year-over-year comparisons relative to our on-going operations before the material charge and believes that this presentation facilitates the comparison of our results with the results of other lodging companies. Management also evaluates income- related financial measures that exclude the leveraged lease impairment charge in order to better assess the period-over-period performance of our core operating businesses.
However, the figures presented in the "Excluding Leveraged Lease Charge" column are all non-GAAP financial measures, may be calculated and/or presented differently than presentations of other companies, and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                        Twelve weeks ending           Twelve weeks ending
                         September 9, 2005            September 10, 2004
                   ----------------------------- -----------------------------
                     Income            Excluding   Income            Excluding
                      from   Leveraged Leveraged    from   Leveraged Leveraged
                   Continuing  Lease     Lease   Continuing  Lease     Lease
                   Operations  Charge    Charge  Operations  Charge    Charge
                   ---------- -------- --------  ---------- -------- ---------

    Operating income   $135       $-     $135         $99       $-       $99
      Gains and
       other income      39        -       39          43        -        43
      Interest
       income,
       (provision for
       loan losses)
       and (interest
       expense)         (28)     (17)     (11)         10        -        10
      Equity in
       earnings/
       (losses)          17        -       17          (8)       -        (8)
                   ---------- -------- --------  ---------- -------- ---------
     Pre-tax income
      (loss)            163      (17)     180         144        -       144
                   ---------- -------- --------  ---------- -------- ---------

       Tax
        (Provision)/
         Benefit        (61)       6      (67)        (57)       -       (57)
       Tax Credits       28        -       28          29        -        29
                   ---------- -------- --------  ---------- -------- ---------
     Total Tax
      (Provision)/
      Benefit           (33)       6      (39)        (28)       -       (28)
                   ---------- -------- --------  ---------- -------- ---------

     Income (Loss)
      from Continuing
      Operations
      before Minority
      Interest          130      (11)     141         116        -       116

     Minority Interest   18        -       18          16        -        16
                   ---------- -------- --------  ---------- -------- ---------

     Income (Loss)
      from Continuing
      Operations       $148     $(11)    $159        $132        -      $132
                   ========== ======== ========  ========== ======== =========

     Diluted Shares   229.3    229.3    229.3       238.9    238.9     238.9

     Earnings/(Loss)
      per Share -
      Diluted         $0.65   ($0.05)   $0.70       $0.55        -     $0.55
 
 

                         MARRIOTT INTERNATIONAL, INC.
                  Non-GAAP Financial Measure Reconciliation
                   (in millions, except per share amounts)
The table below details the impact on our continuing operations of the $17 million leveraged lease impairment charge recorded in the 2005 third quarter which was associated with the impairment of our one investment in a leveraged lease. We do not consider the leveraged lease investment to be related to our core business.
Our management evaluates the figures in the "Excluding Leveraged Lease Charge" column because they allow for year-over-year comparisons relative to our on-going operations before the material charge and believes that this presentation facilitates the comparison of our results with the results of other lodging companies. Management also evaluates income-related financial measures that exclude the leveraged lease impairment charge in order to better assess the period-over-period performance of our core operating businesses.
However, the figures presented in the "Excluding Leveraged Lease Charge" column are all non-GAAP financial measures, may be calculated and/or presented differently than presentations of other companies, and are not alternatives to operating income, income from continuing operations, net income, earnings per share or any other operating measure prescribed by United States generally accepted accounting principles.

                                   Thirty-six weeks ending September 9, 2005
                                 --------------------------------------------
                                                                    Excluding
                                   Income                            CTF and
                                    from        CTF      Leveraged  Leveraged
                                 Continuing  Transaction   Lease      Lease
                                 Operations    Charge      Charge    Charges
                                 ----------  ----------  ---------  ---------

    Operating income (loss)          $334       $(94)        $-        $428
      Gains and other income           97          -          -          97
      Interest income,
      (provision for loan losses)
       and (interest expense)         (32)         -        (17)        (15)
     Equity in earnings                18          -          -          18
                                 ----------  ----------  ---------  ---------
    Pre-tax income (loss)             417        (94)       (17)        528
                                 ----------  ----------  ---------  ---------

      Tax (Provision)/Benefit        (152)        32          6        (190)
      Tax Credits                     134          -          -         134
                                 ----------  ----------  ---------  ---------
    Total Tax (Provision)/ Benefit    (18)        32          6         (56)
                                 ----------  ----------  ---------  ---------

    Income (Loss) from Continuing
     Operations before
     Minority Interest                399        (62)       (11)        472

    Minority Interest                  32          -          -          32
                                 ----------  ----------  ---------  ---------

    Income (Loss) from Continuing
     Operations                      $431       $(62)      $(11)       $504
                                 ==========  ==========  =========  =========

    Diluted Shares                  235.3      235.3      235.3       235.3

    Earnings/(Loss) per
     Share - Diluted                $1.83     ($0.26)    ($0.05)      $2.14
 
 

                                  Thirty-six weeks ending September 10, 2004
                                 --------------------------------------------
                                                                    Excluding
                                   Income                            CTF and
                                    from        CTF      Leveraged  Leveraged
                                 Continuing  Transaction   Lease      Lease
                                 Operations    Charge      Charge    Charges
                                 ----------  ----------  ---------  ---------

   Operating income                  $368         $-         $-        $368
     Gains and other income            95          -          -          95
     Interest income,
      (provision for loan
      losses) and (interest
      expense)                         29          -          -          29
     Equity in losses                 (37)         -          -         (37)
                                 ----------  ----------  ---------  ---------
   Pre-tax income                     455          -          -         455

     Tax Provision                   (172)         -          -        (172)
     Tax Credits                       93          -          -          93
                                 ----------  ----------  ---------  ---------
    Total Tax Provision               (79)         -          -         (79)
                                 ----------  ----------  ---------  ---------

    Income from Continuing
     Operations before Minority
     Interest                         376          -          -         376

      Minority Interest                30          -          -          30
                                 ----------  ----------  ---------  ---------

    Income from Continuing
     Operations                      $406         $-         $-        $406
                                 ==========  ==========  =========  =========

    Diluted Shares                  240.9      240.9      240.9       240.9

    Earnings per Share - Diluted    $1.69        -          -         $1.69
 
 

                         MARRIOTT INTERNATIONAL, INC.
                          Non-GAAP Financial Measure
                                    EBITDA
                               ($ in millions)
Our management considers earnings before interest, taxes, depreciation and amortization (EBITDA) to be an indicator of operating performance because it can be used to measure our ability to service debt, fund capital expenditures, and expand our business.
In the 2005 second quarter we recorded a $94 million charge associated with the agreements we entered into with CTF Holdings Ltd. ("the CTF transaction"). The $94 million charge was primarily non-cash and due to the write-off of deferred contract acquisition costs associated with the termination of management agreements. In addition, we incurred a material charge of $17 million in the 2005 third quarter associated with the impairment of our one investment in a leveraged lease. We do not consider the leveraged lease investment to be related to our core business. Management expects the Synthetic Fuel segment will no longer have a material impact on our business after the Internal Revenue Code Section 29 synthetic fuel tax credits expire at the end of 2007.
Management evaluates Adjusted EBITDA which excludes the leveraged lease impairment charge, discontinued operations and the impact of our Synthetic Fuel segment in order to better assess the period-over-period performance of our on-going core operating businesses. Management evaluates Adjusted EBITDA which also excludes the CTF transaction charge in order to better assess the Company's period-over-period performance of our lodging operations in light of the fact that the CTF transaction charge does not reflect the fact that new management agreements entered into as part of the CTF transaction substantially replaced the old management agreements the termination of which makes up the bulk of the CTF transaction charge. Management also believes that these presentations facilitate the comparison of our results with the results of other lodging companies.
    However, EBITDA and Adjusted EBITDA are non-GAAP financial measures, may
be calculated and/or presented differently than presentations of other
companies, and are not alternatives to operating income, income from
continuing operations, net income, cash flow from operations, or any other
operating measure prescribed by United States generally accepted accounting
principles.
 

                                                     Fiscal Year 2005
                                           ----------------------------------
                                            First   Second    Third
                                           Quarter  Quarter  Quarter    Total
                                           -------  -------  -------   ------
    Net income                               $145     $138     $149     $432
    Interest expense                           24       21       24       69
    Tax provision/(benefit) from
     continuing operations                      5      (20)      33       18
    Tax provision from discontinued
     operations                                 -        -        1        1
    Depreciation(1)                            30       29       34       93
    Amortization                                7        7        7       21
    Interest expense from unconsolidated
     joint ventures                            11        6        4       21
    Depreciation and amortization from
     unconsolidated joint ventures             12        9        7       28
                                           -------  -------  -------   ------
    EBITDA                                   $234     $190     $259     $683

    Synthetic fuel adjustment                  42       21       (6)      57
    Pre-tax gain discontinued operations        -        -       (2)      (2)
    Non-recurring charges -
      CTF acquisition charge                    -       94        -       94
      Leveraged lease charge                    -        -       17       17
                                           -------  -------  -------   ------
    Adjusted EBITDA                          $276     $305     $268     $849
                                           =======  =======  =======   ======
    Increase over 2004 Adjusted EBITDA        14%       9%      12%      12%

    The following items make up the
     synthetic fuel adjustment:
    Pre-tax synthetic fuel operating
     losses                                   $54      $28      $14      $96
    Pre-tax minority interest - synthetic
     fuel                                     (10)      (5)     (18)     (33)
    Synthetic fuel depreciation                (2)      (2)      (2)      (6)
                                           -------  -------  -------   ------
    EBITDA adjustment for synthetic fuel      $42      $21      $(6)     $57
                                           =======  =======  =======   ======
 

    (1) Does not include depreciation reimbursed by third party owners.
 
 

                                                Fiscal Year 2004
                                    -----------------------------------------
                                     First   Second    Third   Fourth
                                    Quarter  Quarter  Quarter  Quarter  Total
                                    -------  -------  -------  -------  -----
    Net income                        $114     $160     $133     $189    $596
    Interest expense                    22       24       23       30      99
    Tax provision continuing
     operations                         18       33       28       21     100
    Tax provision discontinued
     operations                          -        -        1        -       1
    Depreciation                        32       29       32       40     133
    Amortization                         7        8        7       11      33
    Interest expense from
     unconsolidated joint ventures      10       11        9       15      45
    Depreciation and amortization
     from unconsolidated joint
     ventures                           13        9       13       17      52
                                    -------  -------  -------  -------  -----
    EBITDA                            $216     $274     $246     $323  $1,059

    Synthetic fuel adjustment           28        5       (6)      21      48
    Pre-tax gain discontinued
     operations                         (1)       -       (1)      (1)     (3)
                                    -------  -------  -------  -------  -----
    Adjusted EBITDA                   $243     $279     $239     $343  $1,104
                                    =======  =======  =======  =======  =====

    The following items make up the
     synthetic fuel adjustment:
    Pre-tax synthetic fuel operating
     losses                             $-      $21      $12      $37     $70
    Pre-tax synthetic fuel equity
     losses                             28        -        -        -      28
    Pre-tax minority interest -
     synthetic fuel                      -      (14)     (15)     (11)    (40)
    Synthetic fuel depreciation          -       (2)      (3)      (5)    (10)
                                    -------  -------  -------  -------  -----
    EBITDA adjustment for
     synthetic fuel                    $28       $5      $(6)     $21     $48
                                    =======  =======  =======  =======  =====
 
 

                         MARRIOTT INTERNATIONAL, INC.
                  Non-GAAP Financial Measure Reconciliation
                   (in millions, except per share amounts)
The following reconciles the non-GAAP estimates for the 2005 fourth quarter, full year 2005 and full year 2006 included in the press release to the most directly comparable GAAP measure.
                                                       Estimated
                                                    Full Year 2005
                                                    --------------
    General, administrative and other expense             $742
    Less CTF transaction charge                            (94)
                                                    --------------
    General, administrative and other expense
     excluding the CTF transaction charge                 $648
                                                    ==============

                                                       Range
                                          -------------------------------
                                            Estimated        Estimated
                                          Full Year 2005   Full Year 2005
                                          --------------   --------------
    Lodging operating income                    $699             $709
    Add back CTF transaction charge               94               94
                                          --------------   --------------
    Lodging operating income excluding
     the CTF transaction charge                 $793             $803
                                          ==============   ==============
 

                                          Estimated Fourth     Estimated
                                            Quarter 2005     Full Year 2005
                                          ----------------   --------------
    Gains and other income                       $65               $160
    Less synthetic fuel gains and other
     income                                      (10)               (30)
                                          ----------------   --------------
    Gains and other income, excluding
     synthetic fuel gains and other
     income                                      $55               $130
                                          ================   ==============
 

                                                      Estimated
                                                    Full Year 2005
                                                    --------------
    Interest expense and provision for loan
     losses, net of interest income                        $57
    Add back leveraged lease impairment charge             (17)
                                                    --------------
    Interest expense and provision for loan
     losses, net of interest income, excluding
     the leveraged lease impairment charge                 $40
                                                    ==============
 

                                          Range                  Range
                                   --------------------   --------------------
                                   Estimated  Estimated
                                    Fourth     Fourth     Estimated  Estimated
                                    Quarter    Quarter    Full Year  Full Year
                                     2005       2005        2005       2005
                                   ---------  ---------   ---------  ---------
    Diluted earnings per share
     from continuing operations       $0.95      $0.98       $2.78      $2.81
    Add back eps impact of
     leveraged lease impairment
     charge                               -          -        0.05       0.05
    Add back eps impact of CTF
     transaction charge                   -          -        0.26       0.26
                                   ---------  ---------   ---------  ---------
    Diluted earnings per share
     from continuing operations
     excluding the eps impact of
     both the leveraged lease
     impairment charge and the
     CTF transaction charge            0.95       0.98        3.09       3.12

    Less the eps impact of the
     synthetic fuel segment           (0.12)     (0.12)      (0.51)     (0.51)
                                   ---------  ---------   ---------  ---------

    Diluted earnings per share
     from continuing operations
     excluding the eps impact of
     the leveraged lease
     impairment charge, the CTF
     transaction charge, and the
     synthetic fuel segment           $0.83      $0.86       $2.58      $2.61
                                   =========  =========   =========  =========
 
 

                                                          Range
                                             --------------------------------
                                               Estimated         Estimated
                                             Full Year 2006    Full Year 2006
                                             --------------    --------------
    Diluted earnings per share from
     continuing operations                       $2.87             $2.97
    Add back eps impact of the charge
     associated with FAS 123 ( R)                 0.13              0.13
                                             --------------    --------------
    Diluted earnings per share from
     continuing operations excluding the
     eps impact of the FAS 123 ® charge        $3.00             $3.10
                                             ==============    ==============

This press release contains "forward-looking statements" within the meaning of federal securities laws, including REVPAR, profit margin and earning trends; statements concerning the number of lodging properties we expect to add in future years; our expected investment spending; anticipated results from our synthetic fuel operations; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including the pace and extent of the current recovery in both the economy and the lodging industry; supply and demand changes for our products; competitive conditions in the lodging industry; the availability of capital to finance hotel growth and refurbishment; the uncertain effect on our production plans of the potential reduction or elimination of projected future tax credits for synthetic fuel if average crude oil prices in 2006 exceed certain statutory thresholds; and other matters referred to in our most recent annual report on Form 10-K and quarterly report on Form 10-Q under the heading "Risks and Uncertainties"; any of which could cause actual results to differ materially from those expressed in or implied by the statements herein. These statements are made as of the date of this press release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

MARRIOTT INTERNATIONAL, INC. (NYSE: MAR) is a leading lodging company with more than 2,700 lodging properties in the United States and 65 other countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, Renaissance, Bulgari, The Ritz-Carlton, Courtyard, Residence Inn, SpringHill Suites, TownePlace Suites, and Fairfield Inn brand names; develops and operates vacation ownership resorts under the Marriott Vacation Club International, The Ritz-Carlton Club, Grand Residences by Marriott, and Horizons brands; operates Marriott Executive Apartments; provides furnished corporate housing through its Marriott ExecuStay division; operates conference centers; and manages golf courses. Marriott is also in the synthetic fuel business. The company is headquartered in metropolitan Washington, D.C. It is ranked as the lodging industry's most admired company and one of the best places to work for by Fortune® magazine. In fiscal year 2004, Marriott International reported sales from continuing operations of $10 billion, and the company had approximately 133,000 employees at year-end 2004. For more information or reservations, please visit our web site at http://www.marriott.com.

.
Contact:

MARRIOTT INTERNATIONAL, INC. 
http://www.marriott.com
.
Also See: Marriott International and the Marriott Family Pledge a Total of $3 Million to Support Hurricane Katrina Relief / September 2005
Marriott International and the Marriott Family Pledge a Total of $3 Million to Support Hurricane Katrina Relief / September 2005

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