As the worldwide lodging industry emerges from the recession, you can feel the energy at Marriott International. Despite one of the most significant downturns ever to face our company in its 84-year history, we are uniquely grounded in our purpose to open doors to a world of opportunity and confident it will propel our success.

Despite the tough economy, over the last two years we strengthened our lodging brands with new designs and renovations, added new hotel brands, opened nearly 70,000 rooms, and right-sized our overhead. In 2010, signs of recovery emerged, as greater numbers of travelers yielded stronger demand for hotel rooms and improved pricing. With our outstanding products, this translated into significantly improved profitability for Marriott.

By the end of 2011, we expect to complete a transaction that will establish our timeshare business as a separate company. This will further our long-standing strategy to be a lodging management and franchise company, while positioning our timeshare business to grow faster. We have never been more excited about the future.

Performance in 2010

In 2010, revenues were $11.7 billion and diluted earnings per share totaled $1.21. Revenues from management and franchise fees increased over 9 percent to almost $1.2 billion, reflecting a nearly 6 percent increase on a constant dollar basis in worldwide revenue per available room (RevPAR) across our system. We saw particular strength from our hotels in Asia and from our Ritz-Carlton hotels worldwide.

Our balance sheet is strong, positioning us well for business opportunities. We reached our targeted debt level in 2010, ending the year with $2.8 billion in debt. Our credit ratings improved and we remain one of the few lodging companies with an investment-grade rating. Our cash balances amounted to $505 million at year-end and we resumed share repurchases in the 2010 fourth quarter.

Global Growth

In 2010, we opened nearly 29,000 new guest rooms and residential units. At year-end, our lodging port­folio totaled 3,545 properties and timeshare resorts comprising over 618,000 rooms in 70 countries and territories.

Our development pipeline includes nearly 700 hotels encompassing close to 105,000 rooms. Nearly one-third of these pipeline rooms are full service and about 45 percent are located outside North America. In 2010, approximately two-thirds of our incentive management fees — essentially our share of profits from hotels we operate — were generated by hotels outside the U.S.

We’re intent on growing in all corners of the globe. In China, Marriott’s largest market outside North America, the company aims to more than double its presence to 120 hotels by 2015. In India, we expect to grow from 12 to 100 hotels across seven brands by 2015. In Brazil, we announced a five-year plan to open 50 environmentally-friendly Fairfield by Marriott^SM hotels.

In Europe, where we have 180 hotels and more than 41,000 rooms, we plan to nearly double our presence by 2015. This will be fueled in part by a joint venture with AC Hotels to manage and franchise a new lodging co-brand, AC Hotels by Marriott, which at launch will include over 9,000 4-star urban hotel rooms in Spain, Italy and Portugal.

Revenue Generation

Our Sales & Marketing team did an outstanding job in the downturn, leveraging our industry-leading loyalty programs, website, and reservations and revenue management systems.

Our guest loyalty programs, including award-winning Marriott Rewards,^® have grown to more than 34 million members. Fifty percent of all room nights booked worldwide come from our Rewards members. Membership in China alone increased 27 percent in 2010. Our new Ritz-Carlton Rewards program brings greater recognition to our luxury guests, providing members with access to extraordinary travel experiences.

Marriott.com accounted for 22 percent of Marriott’s gross property-level sales in 2010, and we are the only lodging company among the top 10 worldwide consumer retail sites.

In 2011, we expect to begin rollout of our new Consolidated Inventory/Total Yield system, which is designed to optimize hotel-level profits among groups and the individual business traveler, an industry first and a significant competitive advantage for Marriott.

Our Portfolio of Brands

From The Ritz-Carlton to Fairfield Inn & Suites, we believe our portfolio of 18 brands is the broadest and most compelling in the business, delivering great experiences to our customers whatever their trip purpose. The portfolio includes innovative new brands as well as reinvig­or­ated favorites.

One year after its introduction, the Autograph Collection includes a portfolio of 13 upscale, independent hotels with distinctive personalities in major cities and desired destinations worldwide. Member hotels range from The Cosmopolitan of Las Vegas — a stunning property in the heart of the “Strip” — to the Algonquin Hotel, storied and stately, in New York City.

We debuted our first two EDITION hotels in Waikiki, Hawaii, and Istanbul, Turkey, developed in partnership with renowned boutique hotel visionary Ian Schrager. Next are London and Miami.

We opened the JW Marriott Marquis Miami, the centerpiece of a major urban development in one of America’s most vibrant gateway cities. The hotel features a one-of-a-kind 50,000-square-foot, two-story indoor sports, lifestyle and entertainment complex. And in Pune, India, an emerging business capital, we celebrated our 500th Marriott Hotels & Resorts hotel with a spectacular LEED^® (Leadership in Energy and Environmental Design)-certified convention center property.

Courtyard, our largest brand with nearly 900 hotels in 34 countries at year-end 2010, rolled out its Refreshing Business lobby, providing travelers with a great place to work or relax with flexible seating options and free Wi-Fi. By the end of this year, our owners and franchisees will have spent more than $175 million to put the new lobby into over 270 Courtyard hotels. Our Residence Inn, Fairfield Inn & Suites, TownePlace Suites and SpringHill Suites brands have also deployed new and exciting designs in their hotels.

Marriott’s strong brands are particularly important to our timeshare business. We introduced the Marriott brand to the timeshare industry in 1984, providing credibility and trust to a fragmented industry. In 2010, Marriott Vacation Club International reported segment revenues of $1.5 billion and pre-tax segment results of $121 million. With 71 resort locations, we have the greatest distribution in the upscale timeshare business.

Our timeshare business has undergone substantial change in the past two years. As revenues declined with the weak economy, we right-sized the business and reduced overhead. In 2010, we launched Marriott Vacation Club Destinations, a flexible points program that drew nearly 65,000 members in its first nine months alone.

Two Public Companies

By the end of 2011, we plan to separate our timeshare and lodging businesses into two publicly traded com­panies, appealing to investors with different goals and risk profiles. Completion of this transaction is subject to a number of conditions, including regulatory approvals.

Marriott International will focus on the lodging management and franchise business, while the new timeshare business will become the world’s largest public stand-alone, pure-play timeshare company. Marriott will remain involved by licensing its leading Ritz-Carlton and Marriott brands to the timeshare business, and earning franchise fees.

While a name for the new timeshare company hasn’t been selected, we know it will include “Marriott,” a meaningful competitive advantage. The new company will continue to benefit from the great brands, deeply rooted culture and strong leadership team that it inherits. The company will continue to be led by Steve Weisz as chief executive officer, a savvy Marriott veteran, and chaired by Bill Shaw, who recently retired as Marriott’s vice chairman of the company after 37 years of distinguished service.

We see a bright future for the new timeshare business. Timeshare demand correlates highly with consumer confidence, which is returning, and new timeshare industry construction starts are very low. At year-end 2010, the timeshare segment had $1.5 billion in timeshare inventory on the books including more than $730 million in finished units, which should reduce near-term cash needs. As a separate company, it will be positioned to grow faster.

We are also optimistic about the future of Marriott International. New lodging supply in North America continues to decline, which should enable strong room rate increases in the next few years. Continued pressure on hotel owner profitability should encourage conversion to one of Marriott’s strong brands. In international markets, growing wealth is creating more middle-class travelers and providing greater new hotel development opportunities.

Serve Our World

People want to do business with those who share their values, and we are committed to being a responsible global corporate citizen. Our properties worldwide are focused on five global issues — poverty alleviation, the environment, community workforce development, the well-being of children, and diversity and inclusion. As we pursue global growth, we are committed to aligning with issues that are important to the communities where we operate hotels.

Our vision is to embed global diversity and inclusion into our organization so that it is integral to how we do business. To achieve our growth goals outside of the U.S., it is essential that our leaders truly embrace and understand different cultures.

Find Your World

The opening animation of this report symbolizes our global growth, innovation and change, as well as the diversity of our brands and people. It invites every Marriott stakeholder to Find Your World, whether you’re a shareholder, guest, owner, franchisee or associate. We look forward to welcoming you wherever your journey takes you.