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October 9, 2014 Owner & Franchise Communications, Finance & Accounting

Overview of 2015 Budget Instructions and Notable Items

I wanted to take a moment to call out some of the more notable items included in the 2015 Budget Instructions, which are distributed to General Managers and Finance Leaders each year, as well as highlight some of the changes taking place for this coming year. Each of the items highlighted below, while requiring an investment from or process change for our owners, franchisees, and hotels, aligns with our goal of driving a strong return for you while ensuring we meet the needs of our customers today and in the future.

NOTABLE ITEMS

Ongoing Innovations to Support Strategic Priorities
In support of Marriott’s strategic priorities (The 4Ms: Marriott Hotels, Marriott Rewards, Mobile-Digital, Millennial Mindset), we are focused on tools and technologies that meet the needs of our guests today and into the future. To enable this, investments have been made in mobile-digital, as well as in meetings, and new enhancements are being introduced to capitalize on these innovations that will require future investment (e.g., mobile service requests, meeting services app 2.0).

Entertainment
Marriott is continuing to develop options for entertainment that meet evolving customer needs and interact with the numerous devices/digital content providers in the market. Continue to stay month-to-month on any expired or expiring contracts and consider transitioning to a new platform in 2015 as multiple new vendors and solutions are certified. A standard to move to a new solution will soon be announced for new builds, PIPs and renovations with TV replacements that also have expired contracts (as well as for anyone moving off of month-to-month contracts). More details will be shared in the near future.

Global Property Management System (GPMS)
For budgeting purposes, the list of CFRST and full service hotels targeted for GPMS installation in 2015 can be found on MGS and in the budget instructions. The 2016 installation schedule for CFRST and full service hotels will be available in Q3 2015. (Read the most-recent communication)

Global Point of Sale (GPOS)
In an effort to meet security requirements and reduce risk, we intend to migrate all POS systems to the Marriott network (for non-Marriott-managed systems) and make MICROS Simphony a Global Brand Standard in 2016. More details will be shared in the coming weeks. (Read the most-recent communication)

Marriott Rewards Program Changes
As recently communicated, Rewards charge-out rates will increase for 2015, and a ceiling on the total redemption nights that may be reserved at a hotel on a given night has been capped at 50%. (Read the most-recent communication)

Increase in Central Reservations User Group Rates
In order to continue investing in stronger digital reservation capabilities for our industry-leading channels, Central Reservations rates will increase by approximately 3% from 2014. Even with this increase, inflation-adjusted cost per reservation remains lower than 2004 levels.

Uniform System of Accounts for the Lodging Industry (USALI) 11th Edition
The new edition becomes effective on January 1, 2015 and includes a number of both material and cosmetic changes to hotel financial statements. Read the memo, based on audience, for more details: Marriott-Managed Hotels | Franchised Hotels.

CFRST General Managers Conferences
CFRST GMs should plan to attend a General Managers Conference in February 2015 at the Gaylord National Resort & Convention Center, which will be charged to all hotels in April.

Realizing the need to continually evaluate existing programs and on-going costs, we remain committed to reviewing all existing standards, systems and programs for potential savings and to identify trade-offs in terms of costs. We are still focused on important areas such as the full service operating model, knowing that work needs to be done to identify ways for the suburban full service hotel to be more profitable amid existing technological enhancements and the development growth strategy of Marriott. We have also identified a number of year-over-year cost savings/reductions toward the end of these budget instructions.

BUDGET GUIDELINES
Please feel free to view the budget instructions online at the following links and read more.

BRAND EXECUTIVE SUMMARIES
The brand-specific ‘2015 Executive Summaries’ provide context around the strategic direction and priorities for each brand. Please continue to review the budget instructions for details regarding approved programs/initiatives.

I sincerely thank you for your ongoing commitment to our brands and business. Please remember that we have a robust account management structure in place, and you can reach out to your contacts or me any time to discuss questions or concerns.

Thank you,
Liam Brown