Marriott International, Inc. reported third quarter 2018 results. Just over two years since the completion of the Starwood acquisition, the hospitality group announced a 51 percent increase in its net income in this period compared to Q3 2017.

Marriott’s reported net income totaled $483 million in the 2018 third quarter, compared to 2017 third quarter reported net income of $485 million. Reported diluted earnings per share (EPS) totaled $1.38 in the quarter, a 7 percent increase from reported diluted EPS of $1.29 in the year-ago quarter.

Third quarter 2018 adjusted net income totaled $598 million, a 51 percent increase over 2017 third quarter adjusted net income of $397 million. Adjusted net income excludes merger-related adjustments, cost reimbursement revenue, and reimbursed expenses. Adjusted diluted EPS in the third quarter totaled $1.70, a 62 percent increase from adjusted diluted EPS of $1.05 in the year-ago quarter. See page A-3 for the calculation of adjusted results.

Base management and franchise fees totaled $781 million in the 2018 third quarter, a 14 percent increase over base management and franchise fees of $688 million in the year-ago quarter. The year-over-year increase in these fees is primarily attributable to higher RevPAR, unit growth, and higher credit card and residential branding fees.

Third quarter 2018 incentive management fees totaled $151 million, a 9 percent increase compared to incentive management fees of $138 million in the year-ago quarter. The year-over-year increase is largely due to higher net house profit at properties in Europe and the Asia Pacific region.

Owned, leased, and other revenue, net of direct expenses, totaled $82 million in the 2018 third quarter, flat compared to the year-ago quarter. Compared to the year-ago quarter, results largely reflect higher termination fees and stronger results at several owned and leased hotels in North America, offset by the $23 million negative impact from hotels sold during or after the third quarter of 2017.

General, administrative, and other expenses for the 2018 third quarter totaled $221 million, compared to $205 million in the year-ago quarter. The year-over-year $16 million increase largely reflects $7 million of incremental profit-sharing contributions in the 2018 third quarter and the unfavorable comparison to a $6 million state tax incentive recognized in the 2017 third quarter.

Gains and other income, net, totaled $18 million, compared to $6 million in the year-ago quarter. The year-over-year $12 million increase largely reflects an adjustment to the gain on the 2018 second quarter sale of two hotels in Fiji.

Equity in earnings for the third quarter totaled $61 million, compared to $6 million in the year-ago quarter. The 2018 third quarter includes a $55 million gain on a joint venture’s sale of the JW Marriott hotel in Mexico City.

Interest expense, net, totaled $81 million in the third quarter compared to $64 million in the year-ago quarter. The increase is largely due to higher interest rates and debt balances, and lower interest income.

The provision for income taxes totaled $85 million in the third quarter, a 14.9 percent effective tax rate, compared to $253 million in the year-ago quarter, a 34.3 percent effective tax rate. The lower effective rate in the 2018 third quarter largely reflects the effects of the U.S. Tax Cuts and Jobs Act of 2017, benefits relating to the sale of two hotels in Fiji, a joint venture’s sale of the JW Marriott hotel in Mexico City, and $11 million of favorable discrete items.

For the third quarter, adjusted EBITDA totaled $900 million, a 12 percent increase over third quarter 2017 adjusted EBITDA of $806 million. Compared to the prior year, adjusted EBITDA for the third quarter of 2018 reflects the $19 million negative impact from sold hotels. See page A-11 for the adjusted EBITDA calculations.

Arne M. Sorenson, president and chief executive officer of Marriott International, said, “In the third quarter, we were pleased to post gross fee revenues growth of 13 percent and adjusted EBITDA growth of 12 percent, as worldwide comparable systemwide hotel RevPAR increased roughly 2 percent. Our results in the third quarter highlight the resiliency of our asset light model and our ability to generate cash. Year-to-date through November 5, we have already returned more than $3.1 billion to shareholders through dividends and share repurchases and now believe we could return roughly $3.7 billion in 2018.

“It has been gratifying to see broad associate participation in Marriott’s retirement savings plans. Approximately 80 percent of eligible associates participated in and will receive a supplemental, one-time company match of up to $1,000. Our associates are our most important assets, serving our guests every day. We recognize their extraordinary efforts and, with this incentive, encourage them to save for the future.

“We expect Marriott’s fourth quarter 2018 comparable systemwide RevPAR on a constant dollar basis will increase roughly 2 percent worldwide, roughly 1 percent in North America, and 5 to 6 percent outside North America. Our forecast for RevPAR in North America reflects an estimated 110-basis-point headwind due to the 2017 hurricane relief efforts in Texas and Florida and it also reflects the slightly weaker than expected transient demand the industry experienced during September. Trends in most international markets are expected to remain strong.

“For full year 2019, based on our early budgeting analysis, we expect comparable systemwide RevPAR on a constant dollar basis will increase 2 to 3 percent worldwide, 1 to 3 percent in North America, and 3 to 5 percent outside North America.

“For the full year 2018, we anticipate our number of rooms will increase nearly 7 percent gross while room deletions should total nearly 2 percent, resulting in net rooms growth of roughly 5 percent for the year. For the full year 2019, we anticipate gross room additions will increase at a rate similar to 2018, but deletions should moderate to 1 to 1.5 percent for the year, resulting in net rooms growth acceleration to roughly 5.5 percent.”