# How Marriott makes money

CXProWealth Business Lens · Marriott (MAR) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-03 with the SEC (accession 0001048286-26-000035): https://www.sec.gov/Archives/edgar/data/1048286/000104828626000035/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $7.1B (+12.9% on the year)
- Operating income: $1.2B (operating margin 17.4%)
- Net income: $766.0M (net margin 10.8%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $796.0M (11.3% of revenue)
- Cash conversion (operating cash flow / net income): 1.24x
- Capital expenditure: 2.1% of revenue

## Where the money goes (Q2 FY2026)

- Net fee revenues → Revenue: $1.5B
- Owned, leased, and other → Revenue: $466.0M
- Reimbursements → Revenue: $5.1B
- Revenue → Costs and expenses: $5.8B
- Costs and expenses → Cost of revenue: $5.5B
- Costs and expenses → General and administrative: $220.0M
- Costs and expenses → Depreciation, amortization, and other: $115.0M
- Restructuring and merger-related (recoveries) charges, and other → Costs and expenses: $10.0M
- Revenue → Operating income: $1.2B
- Operating income → Interest expense: $221.0M
- Operating income → Income before income taxes: $1.0B
- Interest income → Income before income taxes: $20.0M
- Gains and other income, net → Income before income taxes: $11.0M
- Equity in earnings → Income before income taxes: $5.0M
- Income before income taxes → Provision for income taxes: $278.0M
- Income before income taxes → Net income: $766.0M

## Where the revenue comes from

### Products and services (BUSINESS SEGMENTS - Schedule of Segment Revenue, Segment Expenses, and Segment Profits (Details))

| Member | Value | Share |
|---|---:|---:|
| Reimbursements | $5.1B | 71.5% |
| Net fee revenues | $1.5B | 21.9% |
| Owned, leased, and other | $466.0M | 6.6% |

The members sum to total revenue.

### Segments (BUSINESS SEGMENTS - Schedule of Segment Revenue, Segment Expenses, and Segment Profits (Details))

| Member | Value | Share |
|---|---:|---:|
| U.S. & Canada | $5.3B | 74.4% |
| Emea | $610.0M | 8.6% |
| Apec | $273.0M | 3.9% |
| Greater China | $164.0M | 2.3% |

The members do not sum to total revenue.

### ConsolidationItems (BUSINESS SEGMENTS - Schedule of Reconciliation of Total Segment Revenue and Profit to Consolidated Revenue and Profit (Details))

| Member | Value | Share |
|---|---:|---:|
| Total reportable segment revenue | $6.3B | 89.2% |
| Unallocated corporate and other | $761.0M | 10.8% |

The members sum to total revenue.

## Income statement, as filed

| Line | Q2 FY2026 | Of revenue |
|---|---:|---:|
| Net fee revenues | $1.6B | 22.3% |
| Franchise fees | $1.0B | 14.5% |
| Base management fees | $343.0M | 4.9% |
| Incentive management fees | $212.0M | 3.0% |
| Net fee revenues | ($31.0M) | 0.4% |
| **Revenue** | $7.1B | 100% |
|   Net fee revenues | $1.5B | 21.9% |
|   Owned, leased, and other | $466.0M | 6.6% |
|   Reimbursements | $5.1B | 71.5% |
| Owned, leased, and other | $417.0M | 5.9% |
| Reimbursements | $5.1B | 72.1% |
| Depreciation, amortization, and other | $115.0M | 1.6% |
| General and administrative | $220.0M | 3.1% |
| Restructuring and merger-related (recoveries) charges, and other | -$10.0M | 0.1% |
| **Costs and expenses** | $5.8B | 82.6% |
| **Operating income** | $1.2B | 17.4% |
| Gains and other income, net | $11.0M | 0.2% |
| Interest expense | ($221.0M) | 3.1% |
| Interest income | $20.0M | 0.3% |
| Equity in earnings | $5.0M | 0.1% |
| **Income before income taxes** | $1.0B | 14.8% |
| Provision for income taxes | ($278.0M) | 3.9% |
| **Net income** | $766.0M | 10.8% |
| Earnings per share - basic (in USD per share) | $3 | 0.0% |
| Earnings per share - diluted (in USD per share) | $3 | 0.0% |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2007 | $13.0B | $1.2B | $696.0M | $778.0M | $671.0M | $107.0M |
| FY2009 | $12.9B | $765.0M | $362.0M | $641.0M | $357.0M | $284.0M |
| FY2010 | $10.9B | -$152.0M | -$346.0M | $868.0M | $147.0M | $721.0M |
| FY2010 | $11.7B | $695.0M | $458.0M | $1.2B | $307.0M | $844.0M |
| FY2011 | $12.3B | $526.0M | $198.0M | $1.1B | $183.0M | $906.0M |
| FY2012 | $11.8B | $940.0M | $571.0M | $989.0M | $437.0M | $552.0M |
| FY2013 | $12.8B | $988.0M | $626.0M | $1.1B | $296.0M | $844.0M |
| FY2014 | $13.8B | $1.2B | $753.0M | $1.2B | $411.0M | $813.0M |
| FY2015 | $14.5B | $1.4B | $859.0M | $1.5B | $305.0M | $1.2B |
| FY2016 | $15.4B | $1.4B | $808.0M | $1.6B | $199.0M | $1.4B |
| FY2017 | $20.5B | $2.5B | $1.5B | $2.2B | $240.0M | $2.0B |
| FY2018 | $20.8B | $2.4B | $1.9B | $2.4B | $556.0M | $1.8B |
| FY2019 | $21.0B | $1.8B | $1.3B | $1.7B | $653.0M | $1.0B |
| FY2020 | $10.6B | $84.0M | -$267.0M | $1.6B | $135.0M | $1.5B |
| FY2021 | $13.9B | $1.8B | $1.1B | $1.2B | $183.0M | $994.0M |
| FY2022 | $20.8B | $3.5B | $2.4B | $2.4B | $332.0M | $2.0B |
| FY2023 | $23.7B | $3.9B | $3.1B | $3.2B | $452.0M | $2.7B |
| FY2024 | $25.1B | $3.8B | $2.4B | $2.7B | $750.0M | $2.0B |
| FY2025 | $26.2B | $4.1B | $2.6B | $3.2B | $604.0M | $2.6B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +4.3% (year before +5.8%): steady
- Operating income: +9.9% (year before -2.5%): accelerating
- Net income: +9.5% (year before -23.0%): accelerating
- Free cash flow: +30.5% (year before -26.5%): accelerating

## Operating figures stated in the filing

- Properties in the system: 10,082 properties (as of 2026-06-30). "At the end of the 2026 second quarter, our system had 10,082 properties (1,813,698 rooms), compared to 9,805 properties (1,779,936 rooms) at year-end 2025 and 9,601 properties (1,735,819 rooms) at the end of the 2025 second quarter." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Properties in the system: 9,601 properties (as of 2025-06-30). "At the end of the 2026 second quarter, our system had 10,082 properties (1,813,698 rooms), compared to 9,805 properties (1,779,936 rooms) at year-end 2025 and 9,601 properties (1,735,819 rooms) at the end of the 2025 second quarter." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Rooms in the system: 1,813,698 rooms (as of 2026-06-30). "At the end of the 2026 second quarter, our system had 10,082 properties (1,813,698 rooms), compared to 9,805 properties (1,779,936 rooms) at year-end 2025 and 9,601 properties (1,735,819 rooms) at the end of the 2025 second quarter." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Rooms in the system: 1,735,819 rooms (as of 2025-06-30). "At the end of the 2026 second quarter, our system had 10,082 properties (1,813,698 rooms), compared to 9,805 properties (1,779,936 rooms) at year-end 2025 and 9,601 properties (1,735,819 rooms) at the end of the 2025 second quarter." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Worldwide RevPAR growth: 3.4% (as of 2026-06-30). "In the 2026 second quarter, worldwide RevPAR increased 3.4 percent, primarily driven by ADR growth of 3.5 percent." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Worldwide RevPAR (comparable systemwide): $139 (as of 2026-06-30). "Worldwide (2) $ 138.74 3.4 % 71.6 % (0.1) % pts. $ 193.66 3.5 %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Worldwide occupancy (comparable systemwide): 71.6% (as of 2026-06-30). "Worldwide (2) $ 138.74 3.4 % 71.6 % (0.1) % pts. $ 193.66 3.5 %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Worldwide average daily rate (comparable systemwide): $194 (as of 2026-06-30). "Worldwide (2) $ 138.74 3.4 % 71.6 % (0.1) % pts. $ 193.66 3.5 %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- U.S. & Canada RevPAR growth: 5.0% (as of 2026-06-30). "In the U.S. & Canada, RevPAR increased 5.0 percent in the 2026 second quarter and 4.6 percent in the 2026 first half, reflecting strong demand across all brand tiers and customer segments, as well as demand from the World Cup in June 2026." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Development pipeline rooms under construction: 44.0% (as of 2026-06-30). "At the end of the 2026 second quarter, our development pipeline included over 279,000 rooms, or 44 percent, that were under construction, including hotels that are in the process of converting to our system." (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Franchised, licensed and other rooms: 1,223,350 rooms (as of 2026-06-30). "Franchised/Licensed/Other (1) 7,939 7,439 500 7 % 1,223,350 1,138,838 84,512 7 %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Franchised, licensed and other rooms: 1,138,838 rooms (as of 2025-06-30). "Franchised/Licensed/Other (1) 7,939 7,439 500 7 % 1,223,350 1,138,838 84,512 7 %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Managed rooms: 560,449 rooms (as of 2026-06-30). "Managed 1,947 1,972 (25) (1) % 560,449 566,838 (6,389) (1) %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- Managed rooms: 566,838 rooms (as of 2025-06-30). "Managed 1,947 1,972 (25) (1) % 560,449 566,838 (6,389) (1) %" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)

## Key insights

### Fees rose 12.8%, operating income did not

Net fee revenues grew from $1,371 million to $1,547 million, yet operating income slipped to $1,229 million, absorbed by an impairment, system costs and litigation.

Operating income was $1,229 million against $1,236 million a year earlier, while net fee revenues rose 12.84%. Operating income equalled 79.4% of net fee revenues, down from 90.2%. Three lines took the gain. Depreciation, amortization and other rose from $53 million to $115 million, which the filing attributes primarily to an impairment on a U.S. & Canada hotel that was then sold, with Marriott keeping a long-term management agreement. Owned, leased and other expense rose from $363 million to $417 million, including a property-related litigation accrual. _(from the filing)_
The third line is the system cost pass-through. Reimbursed expenses rose from $4,874 million to $5,100 million, while cost reimbursement revenue grew 2.55% to $5,058 million, so Marriott spent more on centralized programs than owners paid back in the quarter. The filing says these programs are not designed to affect its economics over the long term, and that the net varies with timing. _(from the filing)_
Analysis: two of the three items, the impairment and the litigation accrual, are tied to specific events the filing names, and the reimbursement shortfall is one the company describes as timing. Read that way, the fee engine grew while the reported operating line absorbed event-specific and timing items. The test is whether later quarters show the reimbursement gap closing. _(analysis)_

### Credit cards, not room nights, led fee growth

Franchise fees rose from $860 million to $1,023 million while worldwide RevPAR grew 3.4%, and the filing names co-branded credit card fees as the main driver.

Franchise fees were 66.1% of net fee revenues in the quarter, up from 62.7% a year earlier. The filing attributes the increase primarily to higher co-branded credit card fees, then to rooms growth at franchised hotels, higher RevPAR and other items. Over the same year, base management fees moved only from $340 million to $343 million, and system rooms rose from 1,735,819 to 1,813,698. _(from the filing)_
Card income reaches the books in more than one place. Co-branded card fees sit in franchise fees, and the segment note places credit card program fees and loyalty program revenue in unallocated corporate and other revenue, $761 million or 10.76% of revenue. The filing says new multi-year U.S. agreements with JPMorgan Chase and American Express are expected to lift revenue mainly in cost reimbursement revenue, followed by franchise fees. _(from the filing)_
Analysis: a rising share of fee growth comes from the Marriott Bonvoy brand outside the hotels, which ties part of Marriott's income to cardholder spending as well as to travel. Because the new agreements route most of the uplift to reimbursement revenue, which funds the loyalty program, the share that lands as Marriott's own fee is the part to follow. _(analysis)_

### Cash flow outpaced flat profit

Free cash flow was $796 million against $488 million a year earlier, while net income barely moved, from $763 million to $766 million.

Operating cash flow was $948 million, 1.24 times net income of $766 million, against $643 million a year earlier. Capital spending was $152 million, 2.15% of revenue, close to $155 million a year earlier. Free cash flow equalled 11.26% of revenue. _(from the filing)_
Per-share earnings rose faster than profit. Diluted earnings per share went from $2.78 to $2.90, while net income rose 0.39%. The filing's share counts show fewer shares outstanding after repurchases. A lower tax rate also helped: the provision was 26.6% of pre-tax income against 27.6% a year earlier. _(from the filing)_
Analysis: quarterly cash flow swings with working capital and timing, so one quarter does not set a trend. The pattern it shows is the asset-light one: little capital is needed to run the system, so most operating cash is free to return to shareholders or service debt. The impairment that cut operating income is a non-cash charge, which is part of why cash and profit moved apart. _(analysis)_

### Competitive edge

- **Asset-light model kept cash flowing in FY2020** In FY2020 revenue fell to $10,571 million from $20,972 million and operating income to $84 million, yet free cash flow was $1,504 million.
- **Franchised rooms are two-thirds of the system** Franchised, licensed and other rooms were 67.5% of system rooms, up from 65.6% a year earlier, as managed rooms fell and the system grew.

### What to watch

- **Middle East conflict is cutting into EMEA** The filing reports a sharp RevPAR decline in Middle East & Africa from March, continuing into the third quarter, in a segment earning 11.7% of operating income.
- **System costs are running ahead of reimbursements** Reimbursed expenses of $5,100 million exceeded cost reimbursement revenue of $5,058 million, so centralized programs cost Marriott money this quarter rather than breaking even.
- **Interest costs are rising faster than operating income** Interest expense rose 8.87% to $221 million while operating income fell 0.57%, taking 18.0% of operating income against 16.4% a year earlier.

## Operating income by segment

- U.S. & Canada: $770.0M (62.7% of operating income)
- Emea: $144.0M (11.7% of operating income)
- Apec: $69.0M (5.6% of operating income)
- Greater China: $55.0M (4.5% of operating income)

## Investor view

**Marriott's net fee revenues grew 12.8%, yet operating income slipped as an impairment and centralized program costs absorbed the gain**

### How it makes money

Marriott rents out its brands, its booking system and its loyalty program rather than its buildings. The filing says "we own or lease very few of our lodging properties." Franchisees pay royalties, typically a percentage of room revenue, and hotel owners who hire Marriott to run their hotels pay a base fee on revenue plus an incentive fee on hotel profit. Those streams, net of contract amortization, came to $1,547 million in the quarter, 21.9% of the $7,071 million reported revenue. _(from the filing)_
Franchise fees are the largest piece: $1,023 million, or 66.1% of net fee revenues. Base management fees were $343 million and incentive management fees $212 million. The franchise line is broader than hotel royalties: it also carries co-branded credit card fees and residential branding fees, which are payments for the use of the Marriott name and the Marriott Bonvoy program outside the hotels themselves. _(from the filing)_
Most of the reported revenue is not Marriott's to keep. Cost reimbursement revenue of $5,058 million, 71.5% of revenue, is what hotel owners pay back for centralized programs and services Marriott runs for the system: reservations, marketing, the loyalty program, and staff at managed hotels. The company says that "Over the long term, our centralized programs and services are not designed to impact our economics, either positively or negatively." _(from the filing)_
The small slice of hotels Marriott still owns or leases brought in $466 million of revenue against $417 million of owned, leased and other expense, a thin spread that shows why the company keeps this book small. Geographically, the business leans on its home market: the U.S. & Canada segment produced $770 million of segment profit, 62.7% of the quarter's $1,229 million operating income. _(from the filing)_

### What shifted

Fees grew far faster than hotel demand. Net fee revenues rose 12.84%, from $1,371 million to $1,547 million, while worldwide RevPAR rose 3.4%. Franchise fees went from $860 million to $1,023 million, which the filing attributes primarily to higher co-branded credit card fees, then to rooms growth at franchised hotels and higher RevPAR. Incentive fees rose from $200 million to $212 million on higher profits at managed hotels in the U.S. & Canada, where RevPAR grew 5.0%. _(from the filing)_
None of that reached operating income, which went from $1,236 million to $1,229 million. Operating income was 79.4% of net fee revenues against 90.2% a year earlier. Three items took the gain: depreciation, amortization and other rose from $53 million to $115 million, mainly an impairment on a U.S. & Canada hotel sold in May and kept under a long-term management contract; reimbursed expenses rose from $4,874 million to $5,100 million while reimbursement revenue grew 2.55%; and owned, leased and other expense rose from $363 million to $417 million, including a property-related litigation accrual. _(from the filing)_
Below operating income, financing cost more. Interest expense rose from $203 million to $221 million, which the filing ties to higher debt from Senior Notes issuances. It took 18.0% of operating income, up from 16.4%. A lower tax rate, 26.6% of pre-tax income against 27.6%, helped net income edge from $763 million to $766 million. Diluted earnings per share rose faster, from $2.78 to $2.90, because repurchases cut the share count. _(from the filing)_
Cash moved the other way from profit. Free cash flow was $796 million against $488 million in the same quarter a year earlier, with operating cash flow of $948 million and capital spending of $152 million. Free cash flow was 1.24 times net income, and capital and technology spending was 2.15% of revenue. _(from the filing)_
The system tilted further toward franchising. Franchised, licensed and other rooms rose from 1,138,838 to 1,223,350, while managed rooms fell from 566,838 to 560,449. Total properties went from 9,601 to 10,082, and rooms from 1,735,819 to 1,813,698. The hotel sold in the quarter fits the same pattern: Marriott let go of the building and kept the management contract. _(from the filing)_

### Risks in the filing

The conflict in the Middle East caused a sharp fall in RevPAR in the Middle East & Africa region beginning in March, "with the impact from the conflict continuing into the third quarter." The company says the continued effect depends on how long and how widely travel stays disrupted. International RevPAR declined in the quarter as a result, while every other region grew. _(from the filing)_
The Starwood reservations database breach still carries legal exposure. The company is in mediation with U.S. consumer plaintiffs and says "we believe it is probable that we will incur losses in relation to these cases." It has recorded an accrual it calls not material, Canadian cases remain pending, and it cannot estimate losses beyond what it has recorded. _(from the filing)_
Funding depends on market access. Commercial paper has no committed buyers, so issuance is subject to market demand, with the revolving Credit Facility as backstop; that facility carries a single leverage covenant, which the company says it currently satisfies. Marriott also guarantees debt service and operating profit for some owners' hotels, and faces claims that it infringes others' intellectual property. The company states its broader risk factors are unchanged from its annual report. _(from the filing)_
Two of these risks are already visible in the quarter's numbers. The Middle East conflict shows in EMEA, the only reportable segment whose net fee revenues fell. Litigation shows in the owned, leased and other line, where a property-related accrual narrowed the spread on owned hotels. The financing risk is not stressing anything yet, but it shows as interest expense growing faster than the operating income that services it. _(analysis)_

## Founder view: mechanisms

### Fees on other people's capital

Marriott sells the right to use its brands, distribution and loyalty program to people who own the hotels. The owners carry construction, debt and the building's swings in value; Marriott takes a cut of room revenue and, on managed hotels, a share of profit. Its own costs are mostly the brand standards, the sales system and corporate overhead, which do not grow room by room. The result is a business that earns from the industry's volume without financing it. _(analysis)_

### Loyalty points sold as a currency

Marriott Bonvoy points are a currency that banks buy to reward cardholders. Every card purchase sends money to Marriott; the points are later redeemed as hotel nights, mostly at owners' hotels. Marriott earns a fee for the brand and the program while the cost of honouring redemptions is spread across the system. The program grows the brand's pull with travellers, which in turn makes the card more valuable to the bank. _(analysis)_

### System services charged at cost

Marriott runs reservations, marketing, the loyalty program and hotel staffing centrally and charges owners back what they cost. These pass-throughs make up most of the reported revenue but are meant to net to zero. The point is shared scale: one booking engine and one marketing budget for the whole system, cheaper than each owner could buy alone. The risk is timing: Marriott spends first and recovers later. _(analysis)_

### A base fee plus a share of profit

On managed hotels, Marriott earns two layers: a base fee on hotel revenue, paid whatever the profit, and an incentive fee on hotel profit, often only after the owner earns a set return. The base fee gives a steady floor; the incentive fee aligns Marriott with the owner and pays more in good years. In bad years the incentive layer shrinks first, which protects the owner and makes Marriott's own income more cyclical. _(analysis)_

## Member research

Signed-in members read, on the page: what Marriott's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Marriott 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/1048286/000104828626000035/ (2026-08-03)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02