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Executives

J. Willard Marriott - Executive Chairman and Chairman of Executive Committee

Arne M. Sorenson - Chief Executive Officer, President, Director and Member of Committee for Excellence

Unknown Executive -

Marriott International, Inc. (MAR) 2012 Annual Meeting of Shareholders May 4, 2012 10:30 AM ET

J. Willard Marriott

Good morning. Welcome, everybody, thrilled to have you here today. I'm Bill Marriott, Executive Chairman of Marriott International. Welcome to our 2012 Annual Meeting of Shareholders.

I'm pleased to announce that based on our confidence in the company's future, our Board of Directors has declared a quarterly cash dividend of $0.13 a share, common stock payable June 22, to shareholders of record on May 18, 2012. That's a significant increase. So, the company is doing well and we're thrilled you're all here. Our company's paid a cash or stock dividend in every year, since going public in 1953. Our announcement today continues our focus on delivering shareholder value. This meeting is now called to order.

So I'll remind you that some of our remarks today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which would cause future results to differ materially from those expressed in or implied by our comments. In keeping with SEC regulations, we will also post a reconciliation of any non-GAAP financial measurements that we refer to today on marriott.com/investor.

I'd like to introduce and recognize the individuals on the desk. Please hold your applause until they're are all standing. Starting on my left, Bancroft Gordon, Corporate Secretary; Ed Ryan, Executive Vice President and General Counsel; Arne Sorenson, President and Chief Operating Officer.

I'm sure you know that on March 31, of this year, I officially handed the reins over to Arne as the third Chief Executive Officer in our company's history. I don't think there are very many Fortune 500 companies that have only had 2 CEOs in 85 years. And ours is one of them. Now we have 3.

There's no one more capable of assuming that role in this important time in our company than Arne. He knows the business. He lives our core values. He has the respect and admiration of all of our company stakeholders. And I have the utmost confidence in him and I hope you will show him the same encouragement and support that you've shown me all these years, as he will lead the company into the future. Please join me in congratulating him.

Now I'd like to recognize the other members of our Board who are seated in the front row. Please stand as I call your name and hold the applause until they all stand. Mary K. Bush, Lawrence W. Kellner, Debra L. Lee, John W. Marriott III, Vice Chairman of the Board; George Muñoz, Harry Pearce, Steven S. Reinemund, and Lawrence M. Small. Thank you.

To be fair to our shareholders, we follow orderly procedures for comments from the floor. We have procedures in written form. Let me review them briefly.

This year we have 3 items before us. Shareholders will be invited to comment after each item has been summarized. Please limit your comments to those items only. On your chair, you will find a gray card for your name and question. When you have a question, please fill out the card, hand it to the usher at the nearest microphone.

During the discussion of items and later in the second question-and-answer period, shareholders will be recognized in order at the 3 microphones on the floor, 1, 2, 3. We have a two-minute time limit appearance at each microphone. Our timekeeper today is Jack Stillwell. And Mr. Stillwell will help us observe the 2-minute time limit in the following manner. When you are speaking for 1.5 minutes, he will sound a warning chime. And after 2 minutes, you'll hear a buzzer. Not very nice. That means time's up.

Shareholders are asked to refrain from making a second appearance at the microphone until there are no other shareholders waiting for their first appearance. We have allotted up to 20 minutes for resolution discussion, and we will also have a 20-minute general question-and-answer period before the reporting of the balloting results.

Bancroft Gordon has reported to me that in compliance with the bylaws, the mailing of notice to shareholders was begun on March 30, 2012, to shareholders of record as of March 13, 2012. Those who registered to vote today received 3 colored ballots. Inspectors of the election today are and Areste Carshajo [ph] and Deborah Bass [ph] of Computershare. They will count the votes and report the results. The Secretary reports the majority of the issues and outstanding shares are represented at this meeting, either in person or by proxy. Accordingly, a quorum exists.

We have 3 items before us. Motions for all items listed have already been made and seconded. The polls are now open for each item to be voted on. When all items have been presented, all ballots will be collected and the polls will be declared closed.

So let's begin. The first item of business is the election of Directors of Marriott International. All of our Director candidates are standing for election today and each Director elected will hold office for a term of 1 year, expiring at the 2013 Annual Meeting or until his or her successor is elected or appointed.

The following current Directors of the company have been nominated for reelection as a Director. JW Marriott Jr.; John W. Marriott III; Mary K. Bush; Lawrence M. Kellner; Debra L. Lee; George Muñoz; Harry J. Pearce; Steven S. Reinemund; Lawrence M. Small; and Arne M. Sorenson.

In order to recognize the value that the independent Directors bring to the company and the Board, the company's corporate governance principles require the 2/3 of our Directors be independent. Our current Board of Directors in today's slate of Director nominees both satisfy this enhanced independent stand. Under our bylaws, nominations may also be made by any shareholder not less than 90 days in advance of the Annual Meeting. Since most of the these nominations were made, I declare the nominations closed. Are there any questions or comments on Item 1?

Our shareholders who do not vote by proxy and wish to vote by ballot, please indicate your vote on the yellow ballot.

The second item of business today is to ratify the appointment of Ernst & Young LLP, as the company's independent registered public accountants for fiscal 2012. Ron Arnold [ph] and Heather Rosenberger of Ernst & Young are with us today and available to answer your questions. Are there any questions or comments on Item 2?

All shareholders who do not vote by proxy and wish to vote by ballot, please indicate your vote on the pink ballot.

Third item of business is the nonbinding resolution to approve, on an advisory basis, the compensation of the company's executive officers. All our votes undecided are not binding and provide shareholders with an opportunity to express their view at the company's current executive compensation program. The Board will consider the outcome of this vote when making future compensation decisions. Any questions or comments on Item #3?

All shareholders who do not vote by proxy and wish to vote by ballot, please indicate your vote on the red ballot. The polls are now closed. Please pass your ballots to the center aisle for the ushers to collect.

While we're waiting for the results, we'd like to show you a terrific video that highlights some of our company's accomplishments, it was a very big year for us in 2011. To those of you participating through the webcast, we'll link this video as featured on marriott.com/investor. After the video, our new CEO, Arne Sorenson, will make a few remarks.

[Presentation]

Arne M. Sorenson

And as dynamic as that video is, it doesn't begin to convey the excitement and momentum at Marriott in 2012. Since we met a year ago at this Annual Shareholders' Meeting, it's a brand-new world. Our business continues to recover from the recession, business travel is rebounding and more people are going on vacation.

We completed the reorganization of our lodging group into continental structure that will allow us to grow faster around the globe. And in November, we completed the spin-off of our timeshare business, resulting in 2 strong, well-performing companies with solid core businesses.

Throughout 2011, our company delivered strong performance across the globe. In 2011, reported revenue totaled more than $12 billion and adjusted diluted earnings per share totaled $1.31. REVPAR for worldwide comparable properties increased 6.4% and average daily rates increased 3.4%.

We opened 210 hotels in 2011, with nearly 32,000 rooms around the world. Some examples across our portfolio include the Ritz-Carlton in Dubai International Financial Center; the JW Marriott Indianapolis; The Courtyard by Marriott in Moscow Paveletskaya in Russia; and the Renaissance Baton Rouge Hotel in Louisiana, the first full service hotel to be built in that city in 40 years.

At the end of the first quarter of 2012, there were 75 hotels flying our new AC Hotels by Marriott flag in Europe. And by the end of the first quarter of 2012, the Autograph Collection has grown to 30 independent hotels worldwide, including Scrub Island Resort, Spa & Marina in the British Virgin Islands.

Our lodging portfolio totals over 3,700 properties across 17 brands in 73 countries and territories. We have almost 800 hotels in our system today that weren't there 5 years ago. Now that's growth.

And our momentum is continuing this year. 2012 is off to a great start. Revenues totaled over $2.5 billion in the first quarter; diluted earnings per share were $0.30, a 30% increase over last year's first quarter. REVPAR for comparable worldwide system-wide properties was up 6.8%. And we added 24 new hotels with 3,200 rooms, including the Residence Inn by Marriott in Bahrain, the first residence inn to open in the Middle East.

We are very optimistic about 2012 and beyond. We anticipate now that full year 2012 REVPAR will grow 6% to 8% in North America; 6% to 8% outside of North America; and 6% to 8% worldwide.

We believe that 2012 diluted earnings per share could total $1.58 to $1.69. And we expect to open another 25,000 to 30,000 new hotel rooms, including what we expect to be the tallest hotel building in the world, the JW Marriott Marquis Dubai, slated to open later this year.

Despite a slow start due to the economic downturn, our luxury addition brand is on track for a great future. We expect to open 5 hotels on 3 continents by 2015, including one in the famed Clock Tower Building in New York City. Across the globe, we're expanding. With 56 hotels open, china continues to be our largest market outside North America. We signed our 100th hotel there, the JW Marriott Hotel Shenyang. Our growing pipeline should allow us to open a new hotel in China every month for the next 3 years.

In Europe, we're on track for 80,000 rooms by 2015. In the Middle East and Africa, we expect to double our portfolio to more than 70 hotels by 2016, adding hotels in places like Rwanda and Ghana. India is another exciting growth market for us. We expect to grow to about 100 hotels there. We have plans to double our presence in the Caribbean and Latin America by 2017, adding more than 70 hotels and 14,000 new jobs in that continent in the next 5 years. 173 of those rooms will be in Port-au-Prince, Haiti devastated by the 2010 earthquake. Together with the hotel's owner, the Digicel Group, and in collaboration with the Clinton Global Initiative, this hotel will create jobs and much-needed hotel and meeting space to help Haiti as it recovers. In putting our sign in Port-au-Prince, we're announcing that Haiti is open for business.

We also continue to pursue opportunities here in North America, such as the 1,175 room Washington Marriott Marquis, which is set to open in 2014, just a few blocks from the site of the second root beer stand that started it all 85 years ago. This great hotel will be directly connected to Washington Convention Center via an underground concourse.

As you can see, we're on the move and opening doors across the globe to welcome the growing number of international travelers. In fact, international arrivals have doubled in the past 20 years. And total cross-border travel is expected to exceed 1 billion people for the first time in 2012.

And as middle-class has continued to grow in places like Brazil, China and India, the travel industry expects to create 100 million jobs globally this year. We're very encouraged by recent progress to attract international visitors to the United States by easing the Visa process. This really matters. For every 35 visitors to the United States, one new American job is created.

As for Marriott, we expect to hire 60,000 people across the globe this year. This year, this month in fact, Marriott celebrates its 85th anniversary. We're proud of what we've achieved and we're excited about the accomplishments yet to come. Even as we innovate, we know that our success is rooted in our long-standing core values. Bill Marriott has instilled the sense of purpose beyond profits, as he has led this company for the last 40 years.

Our purpose is to open doors to a world of opportunity for our associates, our customers, our owners and franchisees, our business alliances and our communities. Our core values start with people. That's our first job, taking care of people is what we do.

We pursue excellence in everything we do. We embrace change. Our long history of innovation speaks for itself. We act with integrity. We're proud of our reputation for honesty and fairness. And we serve our world. Our spirit to serve sets us apart and our global reach gives us a unique opportunity to make a real difference in communities around the world like Haiti and elsewhere as we build our business and grow.

No one can fill Bill Marriott's shoes but we're fortunate that he has led by example, given us great encouragement. And through his tremendous focus on both core values and success, he has built a company that is prepared for even more growth and innovation in the years ahead. I'm excited about the opportunities ahead of us and what we can accomplish together. Thank you, all, for your loyalty and support.

J. Willard Marriott

Thank you, Arne. I'm sure you join me in saying we've got a great new CEO. Before I report the results of the voting, Arne and I will be happy to take your questions. So we'll start right now.

Question-and-Answer Session

Unknown Executive

Mr. Marriott, we have Mr. Freed from Rockville who has a comment regarding your tenure as CEO.

J. Willard Marriott

Thanks for coming, Dan, good to see you.

Unknown Shareholder

I haven't been here for your entire 40-year tenure. But beginning in 1988, I made my first appearance at this microphone, and for 21 straight years, I spoke here before taking a little break. I must tell you as I followed about your tenure, the first 4 years, 1988 through 1991 were probably 4 of the roughest years in Marriott history. Not only was our stock plummeting, our bonds were being downgraded, you, yourself had 3 heart attacks during the 1989 year. It was just a terrible period of time. Japanese investors were not buying our hotels anymore. We were just stuck. We couldn't turn off the pipeline quick enough. Our debt had gone to $3.6 billion. And I kept thinking, "My God, what else could go wrong for this company?" I think every Shareholder Meeting in the first 4 years, you and I didn't agree on anything. But thank God, when the going gets tough, great leaders get going. And in 1992, in my opinion, you made the critical decision to turn this company around. Your decision to adopt the plan to change Marriott Corporation into Host Marriott and Marriott International and give Host, God bless them, most of our long-term debt, enabled us to really free up and become a management services company. On behalf of the shareholders in this room and shareholders around the world, I just want to say thank you for the tenure that you've had. Thank you for increasing shareholder value. You've done a tremendous job and you've done it with a great deal of integrity. Thanks again.

J. Willard Marriott

Thank you, Dan.

Unknown Executive

Ronald Glasshouse from Dix Hills, New York has a comment about holding both CEO and Chairman of the Board title.

Unknown Shareholder

Good morning and thank you for the opportunity to speak. I realize it's very common in the United States to have a person hold those 2 titles. It's not that common in European countries, as I understand. I was wondering whether that was something that has been considered as far as our company and whether it would be better served to have 2 individuals hold those 2 titles rather than one. And please, Mr. Marriott, I'm not at all saying that you did not handle both in a very fine manner.

J. Willard Marriott

Well, we have that now. Arne is Chief Executive Officer and I'm Chairman.

Unknown Shareholder

Yes, I realize that. I was just thinking, whether that's in our bylaws, whether that would continue in the future?

J. Willard Marriott

It's going to continue as long as I'm alive. Next question? Anybody else?

Unknown Executive

Mr. Marriott, Mr. Freed again has a question about how Mr. Sorenson's future vision of the company might differ from yours.

Unknown Shareholder

Nothing like a loaded question for you, Arne.

Arne M. Sorenson

No kidding.

Unknown Shareholder

But I couldn't, again, I couldn't help thinking about when Bill took over from his father, this company was essentially a food and beverage company. And under Bill's vision, he totally transformed that from a food and beverage company into the great hospitality company that we are, the hotel company that we are today. I'm not looking for anything dramatic in the change from Bill to you. But I was wondering, are there things that you might put a little more emphasis on? For example, a lot of younger people don't think that the Marriott brand has quite the pizzazz that they would like. Those of us that have stayed in Marriotts for years, we love Marriott. But as I talk to my grandkids and others, is there an attempt to get whatever they call them, generation X or Y or whatever they are, more into the fold? And are there other tweaks that you might look at as you take over?

Arne M. Sorenson

That question, Dan, is one that we've both gotten frequently over the course of the last 2 months since the announcement was made. A lot of the press, what's the bold new direction, what's the different direction that the company's going to take? And to the extent people really want an answer to that, we always disappoint. Bill Marriott and I have been working together for 15 years. 16 years I've been at the company, working the last few years, particularly, closely around all of the issues that the company has faced. And so it's not as if the decisions that he's made and we've made as a company over the last few years have been made without input from me. I think what we'll see, though, is a continuation of some of the things that we have started in the last year. I'd start with increasing globalization of the company. We are seeing today, for the first time, over 1/2 of all the rooms in our global development pipeline are outside the United States. We're growing dramatically faster outside the U.S. than in the United States and that will have a profound impact to the way that we run the company, the way that we position our brands, the way that we recognize the different needs of customers from different parts of the world. So globalization would be first. The second would be around excitement and you could say, gen X, gen Y but I think it's broader than that. But this starts very much with Mr. Marriott. This is not something that is dramatically new and different. A few years ago, 5 years ago, I guess, we visited Ian Schrager in a hotel in New York Gramercy Park and really loved the new design that was associated with it. It had tremendous energy and excitement to it. But the day we were there to tour it, the first time, a guest who was staying in the hotel was leaving with their bag, saw Mr. Marriott and said, "Hey, Mr. Marriott, how are you?" That guest was certainly well into their 60s if not into their 70s, which tells you a little bit about the fact that this is not just gen X and gen Y but this is a whole group, a broad group of travelers that are looking for some excitement. And we think that with what's happening with Ritz-Carlton and Bulgari and Autograph, which launched 2 years ago, in addition, which is going well, we will continue to make bets in that space, to make sure we're bringing that level up. And then I think beyond that, maybe the biggest difference is I know how to use a BlackBerry.

J. Willard Marriott

I'm not sure that's an advantage.

Unknown Shareholder

On a personal note, Arne, I just want to congratulate you. I just don't think Bill Marriott could have a made a better choice. I wish you only the best in the years to come. Good luck.

Arne M. Sorenson

Thanks, Dan.

J. Willard Marriott

Thanks, Dan. Thanks for being here. Any other questions or comments from the floor? If not, I will move on to give you the results of the voting.

J. Willard Marriott

On item 1 to elect Directors for a term of one year, 87% of the votes cast, over 97% of the votes were in favor of each of the nominees. Therefore, all the nominees are elected to the Board.

On item #2, 99% of the votes cast were in favor of ratifying the appointment of Ernst & Young LLP, as the company's independent registered public accounting firm for fiscal 2012. Therefore, item #2 is approved.

On item #3, to approve the compensation of the company's executive officers, over 87% of the votes were in favor. Thank you for that, all of you.

Next year's Annual Meeting of Shareholders is scheduled for Friday, May 10, 2013, hopefully, here at the JW Marriott Hotel. Thank you for your support, 2012 Annual Meeting of Shareholders is now adjourned. Thank you very much.

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