SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarter Ended June 20, 1997 Commission File No. 1-12188

MARRIOTT INTERNATIONAL, INC.

Delaware 52-0936594
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)

10400 Fernwood Road
Bethesda, Maryland 20817
(301) 380-3000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.

Yes [X] No [_]
Class Shares outstanding
- ------------------- at July 18, 1997
Common Stock $1.00 ------------------
par value per share 127,288,106

MARRIOTT INTERNATIONAL, INC.

INDEX

Page No.
--------

Forward-Looking Statements 3

Part I. Financial Information (Unaudited):

Condensed Consolidated Statements of Income -
Twelve and Twenty-four Weeks Ended June
20, 1997 and June 14, 1996 4

Condensed Consolidated Balance Sheet -
as of June 20, 1997 and January 3, 1997 5

Condensed Consolidated Statement of Cash Flows -
Twenty-four Weeks Ended June 20, 1997 6
and June 14, 1996

Notes to Condensed Consolidated Financial Statements 7-9

Management's Discussion and Analysis of
Results of Operations and Financial Condition 10-16

Part II. Other Information and Signature:

Legal Proceedings 17

Changes in Securities 17

Defaults Upon Senior Securities 17

Submission of Matters to a Vote of Security Holders 18-19

Other Information 19

Exhibits and Reports on Form 8-K 20

Signature 21

FORWARD-LOOKING STATEMENTS

When used throughout this report, the words "believes", "anticipates",
"expects", "intends", "hopes" and other similar expressions, which are
predictions of or indicate future events and trends identify forward-looking
statements. Such statements are subject to a number of risks and uncertainties
which could cause actual results to differ materially from those projected,
including: competition within each of the Company's business segments; the
balance between supply of and demand for hotel rooms, timeshare units and senior
living accommodations; the Company's continued ability to obtain new operating
contracts and franchise agreements; the Company's ability to develop and
maintain positive relations with current and potential hotel and retirement
community owners and contract services clients; the effect of international,
national and regional economic conditions; the availability of capital to fund
investments; the Company's ability to achieve synergies and performance
improvements subsequent to closing on acquisitions; and other risks described
from time to time in the Company's filings with the Securities and Exchange
Commission, including those set forth on Exhibit 99 filed herewith. Given these
uncertainties, readers are cautioned not to place undue reliance on such
statements. The Company also undertakes no obligation to publicly update or
revise any forward-looking statement to reflect current or future events or
circumstances.

PART 1 -- FINANCIAL INFORMATION

Item 1. Financial Statements
- ----------------------------

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in millions, except per share amounts)
(Unaudited)

Twelve weeks ended Twenty-four weeks ended
------------------------- -----------------------
June 20, June 14, June 20, June 14,
1997 1996 1997 1996
--------- -------- -------- --------

SALES
Lodging
Rooms............................. $ 1,061 $ 856 $ 1,959 $ 1,637
Food and beverage................. 393 327 714 630
Other............................. 260 205 491 394
-------- -------- -------- --------
1,714 1,388 3,164 2,661
Contract Services................... 1,164 964 2,318 1,854
-------- -------- -------- --------
2,878 2,352 5,482 4,515
-------- -------- -------- --------
OPERATING COSTS AND EXPENSES
Lodging
Departmental direct costs
Rooms............................. 232 191 428 375
Food and beverage................. 289 239 528 470
Other operating expenses......... 1,050 843 1,944 1,607
-------- -------- -------- --------
1,571 1,273 2,900 2,452
Contract Services................... 1,120 926 2,233 1,787
-------- -------- -------- --------
2,691 2,199 5,133 4,239
-------- -------- -------- --------
OPERATING PROFIT
Lodging............................. 143 115 264 209
Contract Services................... 44 38 85 67
-------- -------- -------- --------
Operating profit before
corporate expenses and
interest......................... 187 153 349 276
Corporate expenses..................... (21) (16) (42) (31)
Interest expense....................... (34) (23) (53) (37)
Interest income........................ 6 9 11 18
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES............. 138 123 265 226
Provision for income taxes............. 55 48 105 88
-------- -------- -------- --------
NET INCOME............................. $ 83 $ 75 $ 160 $ 138
======== ======== ======= ========

EARNINGS PER SHARE..................... $ .61 $ .55 $ 1.18 $ 1.02
======== ======== ======= ========

DIVIDENDS DECLARED PER SHARE........... $ .09 $ .08 $ .17 $ .16
======== ======== ======= ========

See notes to condensed consolidated financial statements.

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
($ in millions)
(Unaudited)

June 20, January 3,
1997 1997
---------- ----------

ASSETS
Current Assets
Cash and equivalents............... $ 351 $ 268
Accounts and notes receivable...... 917 754
Other.............................. 461 410
---------- ----------
1,729 1,432
---------- ----------

Property and equipment.................. 1,938 1,894
Intangible assets....................... 1,820 648
Investments in affiliates............... 519 496
Notes and other receivable.............. 313 293
Other assets............................ 308 312
---------- ----------
$ 6,627 $ 5,075
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable................... $ 944 $ 891
Other current liabilities.......... 1,018 868
---------- ----------
1,962 1,759
---------- ----------

Long-term debt.......................... 1,932 1,010
Other long-term liabilities............. 1,013 749
Convertible subordinated debt........... 303 297
Shareholders' equity....................
Common stock, 128.6 million shares
issued............................ 129 129
Additional paid-in capital......... 668 653
Retained earnings.................. 701 628
Treasury stock, at cost............ (81) (150)
---------- ----------

1,417 1,260
---------- ----------
$ 6,627 $ 5,075
========== ==========

See notes to condensed consolidated financial statements.

MARRIOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
($ in millions)
(Unaudited)

Twenty-four weeks ended
-----------------------
June 20, June 14,
1997 1996
--------- ---------

OPERATING ACTIVITIES
Net income............................. $ 160 $ 138
Adjustments to reconcile to cash
provided by operations:
Depreciation and amortization...... 82 66
Income taxes and other............. 88 82
Timeshare activity, net............ (9) (2)
Working capital changes............ (28) 3
--------- ---------
Cash provided by operations............ 293 287
--------- ---------
INVESTING ACTIVITIES
Capital expenditures................... (214) (110)
Loan advances.......................... (34) (25)
Loan collections and sales............. 24 67
Acquisitions........................... (854) (319)
Dispositions........................... 183 1
Other.................................. (67) (101)
--------- ---------
Cash used in investing activities...... (962) (487)
--------- ---------

FINANCING ACTIVITIES
Issuances of long-term debt............ 827 301
Repayments of long-term debt........... (9) (63)
Issuances of common stock.............. 21 20
Dividends paid......................... (20) (19)
Purchases of treasury stock............ (67) -
--------- ---------
Cash provided by financing activities.. 752 239
--------- ---------

INCREASE IN CASH AND EQUIVALENTS............. $ 83 $ 39
CASH AND EQUIVALENTS, beginning of period.... 268 219
--------- ---------
CASH AND EQUIVALENTS, end of period.......... $ 351 $ 258
========= =========

See notes to condensed consolidated financial statements.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation
---------------------
The accompanying condensed consolidated financial statements of Marriott
International, Inc. and its subsidiaries (the Company) have been prepared
without audit. Certain information and footnote disclosures normally included
in financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes
the disclosures made are adequate to make the information presented not
misleading. However, the condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1997. Capitalized terms not otherwise defined herein
have the meanings specified in the Annual Report.

In the opinion of the Company, the accompanying condensed consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of
the Company as of June 20, 1997 and January 3, 1997, and the results of
operations for the twenty-four weeks and twelve weeks ended June 20, 1997 and
June 14, 1996. Interim results are not necessarily indicative of fiscal year
performance because of seasonal and short-term variations. All material
intercompany transactions and balances between Marriott International, Inc.
and its subsidiaries have been eliminated.

Certain amounts previously presented have been reclassified to conform to
the 1997 presentation.

2. Earnings Per Share
------------------
Earnings per share is computed on a fully diluted basis using the weighted
average number of common shares and common equivalent shares outstanding plus
other potentially dilutive securities which, in the aggregate, totaled 139.0
million and 137.3 million for the twenty-four weeks ended June 20, 1997 and
June 14, 1996, respectively, and 139.2 million and 140.2 million for the
twelve weeks ended June 20, 1997 and June 14, 1996, respectively. Common
equivalent shares are computed using the treasury stock method based on the
higher of average or end of period market prices. The if converted method is
used for convertible subordinated debt.

3. Acquisitions and Dispositions
-----------------------------
Renaissance Hotel Group N.V. On March 29, 1997, the Company acquired
substantially all of the outstanding common stock of Renaissance Hotel Group
N.V. (RHG), an operator and franchisor of 150 hotels in 38 countries under
the Renaissance, New World and Ramada International brands. The total
acquisition cost, of approximately $1 billion, was funded with proceeds from
commercial paper borrowings, supported by the Company's long-term revolving
credit facility. The acquisition has been accounted for using the purchase
method of accounting. The purchase cost has been allocated to the assets
acquired and liabilities assumed based on estimated fair values. Goodwill is
being amortized on a straight line basis over 40 years. Amounts allocated to
management and licensing agreements are being amortized on a straight line
basis over the estimated lives of the agreements.

The Company's reported results of operations include RHG's operating
results from the date of acquisition. Summarized below are the unaudited pro
forma consolidated results of operations of the Company for the twenty-four
weeks ended June 20, 1997 and June 14, 1996, as if RHG had been acquired at the
beginning of the respective periods (in millions, except per share amounts).

Twenty-four weeks ended Twenty-four weeks ended
June 20, 1997 June 14, 1996
----------------------- -----------------------

Sales $ 5,680 $ 4,902
=========== ===========
Net Income $ 155 $ 126
=========== ===========
Earnings Per Share $ 1.14 $ .93
=========== ===========

Unaudited pro forma net income includes interest expense on borrowings relating
to the Company's acquisition of RHG's common stock as well as the impact on
historical interest expense of the revaluation of RHG's debt based on the
Company's borrowing cost. Amortization expense included in net income reflects
the impact of the excess of the purchase price over the net tangible assets
acquired. The unaudited pro forma consolidated results of operations are not
intended to reflect the Company's expected future results of operations.

Dr. Henry Cheng Kar-Shun is the Managing Director of New World Development
Company Limited (New World) and, together with his family and affiliated
corporations, owns or otherwise controls a majority of New World's common stock.
Effective June 1, 1997, Dr. Cheng was appointed to the Company's Board of
Directors. Dr. Cheng, New World and their affiliates own all or a portion of 87
hotels that are operated by the Company, and prior to the Company's acquisition
of RHG, owned a majority of RHG common stock. New World and other affiliates of
Dr. Cheng have indemnified RHG, its subsidiaries and the Company for certain
lease, debt, guarantee and other obligations in connection with the formation of
RHG as a hotel management company in 1995.

Property Sales. On April 3, 1997, the Company agreed to sell and leaseback,
under long-term, limited-recourse leases, 14 limited service hotels for
approximately $149 million in cash. Concurrently, the Company paid security
deposits of $15 million, which will be refunded upon expiration of the leases.
These operating leases have initial terms of 17 years, and are renewable at the
option of the Company. On April 11, 1997, the Company sold five senior living
communities for cash consideration of approximately $79 million. The Company
will continue to operate the communities under long-term management agreements.

Forum Group, Inc. On March 25, 1996, a wholly-owned subsidiary of the Company
acquired all of the outstanding shares of common stock of Forum Group, Inc.
(Forum), for total cash consideration of approximately $303 million. The
Company's results of operations include Forum from the acquisition date.
Unaudited pro forma consolidated results of operations of the Company for the
twenty-four weeks ended June 14, 1996, as if Forum had been acquired

at December 29, 1995, would have resulted in sales of $4,564 million, net
income of $135 million, and earnings per share of $1.00.

On June 21, 1997, the Company sold 29 retirement communities acquired as part
of the Forum acquisition, to Host Marriott Corporation (together with its
subsidiaries, Host Marriott) for approximately $550 million, including
approximately $87 million to be received as expansions at certain communities
are completed. The $463 million received at closing, which is subject to
adjustment based on finalization of working capital levels at the properties,
was comprised of $205 million in cash, $187 million of outstanding debt, $50
million of notes receivable due in 12 months, and $21 million of notes
receivable due January 1, 2001. The notes receivable from Host Marriott bear
interest at nine percent. Under the terms of sale, Host Marriott purchased
all of the common stock of Forum which, at the time of the sale, included the
29 communities, certain working capital and associated debt. The Company will
continue to operate these communities under long-term management agreements.

4. Commitments
-----------
The Company issues guarantees to lenders and other third parties in
connection with financing transactions and other obligations. These
guarantees are limited, in the aggregate, to $222 million at June 20, 1997,
including $151 million applicable to guarantees by or debt obligations of
Host Marriott, partnerships in which Host Marriott is the general partner or
other affiliated entities. As of June 20, 1997, the Company had extended
approximately $320 million of loan commitments to owners of lodging and
senior living properties. Previously, the Company had a $225 million line of
credit available to Host Marriott which was terminated by mutual consent on
June 19, 1997. Letters of credit outstanding on the Company's behalf at June
20, 1997 totaled $142 million, the majority of which related to the
Company's self-insurance program. At June 20, 1997, the Company had a
repurchase obligation of $75 million related to notes receivable from
timeshare interval purchasers that have been sold with limited recourse. New
World and another affiliate of Dr. Cheng have severally indemnified the
Company for loan guarantees with a maximum funding of $33 million and lease
guarantees by RHG with minimum annual payments of approximately $60 million.

5. New Accounting Standards
------------------------
On January 4, 1997, the Company adopted FAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," with no material effect on the Company's consolidated financial
statements. The Company will adopt FAS No. 128, "Earnings per Share" and FAS
No. 129, "Disclosure of Information about Capital Structure" in the fourth
quarter of 1997, and FAS 130 "Reporting Comprehensive Income" and FAS 131
"Disclosures about Segments of an Enterprise and Related Information" during
1998. These statements are not expected to have a material effect on the
Company's consolidated financial statements.

Item 2. Management's Discussion and Analysis of Results of Operations and
- --------------------------------------------------------------------------
Financial Condition
-------------------

RESULTS OF OPERATIONS

Twelve Weeks Ended June 20, 1997 Compared to Twelve Weeks Ended June 14, 1996
- -----------------------------------------------------------------------------

The Company reported net income of $83 million for the second quarter, on sales
of $2,878 million. This represents an 11 percent increase in net income and 22
percent increase in sales over the second quarter of 1996. Earnings per share of
$.61 for the quarter increased 11 percent over the corresponding 1996 quarter.
Excluding the impact of the RHG acquisition, net income and earnings per share
for the quarter were up 19 percent and 18 percent, respectively, on 15 percent
sales growth.

LODGING added a net of 197 hotels (53,106 rooms) during the second quarter of
1997, including 150 hotels (46,496 rooms) as part of the RHG acquisition. The
Company expects to operate and franchise nearly 1,500 hotels (300,000 rooms) by
the end of 1997. Hotels by brand are as follows:

Hotels at June 20, 1997
-------------------------------------
Company-operated Franchised
------------------ -----------------
Brand Units Rooms Units Rooms
- --------------------------------------------- ------- ------- ------- -------

Marriott Hotels, Resorts and Suites.......... 198 85,416 121 36,269
Ritz-Carlton................................. 34 11,145 - -
Renaissance.................................. 63 24,398 8 2,587
New World.................................... 15 7,381 - -
Ramada International......................... 32 6,761 36 6,432
Residence Inn................................ 109 14,309 130 14,215
Courtyard.................................... 200 29,370 117 14,419
Fairfield Inn and Suites..................... 51 7,133 266 23,279
TownePlace Suites............................ 1 95 - -
------- ------- ------- -------
Total........................................ 703 186,008 678 97,201
======= ======= ======= =======

Lodging operating profits were up 24 percent, on a sales increase of 23 percent.
The revenue increase resulted from REVPAR growth across all brands averaging
nine percent, and the net addition of 433 hotels since the beginning of 1996.
This revenue growth resulted in the Company earning higher base management and
franchise fees. Revenue growth also contributed to higher house profits which
resulted in higher incentive management fees.

The following is a summary of average room rates and occupancy statistics for
the second quarter of 1997 and 1996, by brand./1/

Twelve weeks ended
-------------------------------------------
June 20, 1997 June 14, 1996
-------------------- --------------------
Brand Rate Occupancy Rate Occupancy
- -------------------------------------------- -------- --------- -------- ---------

Marriott Hotels, Resorts and Suites......... $ 130.66 81.0% $ 119.30 80.9%
Ritz-Carlton................................ 191.73 82.0% 180.09 76.4%
Renaissance................................. 124.90 74.8% 117.36 74.2%
Residence Inn............................... 95.47 86.7% 88.14 87.5%
Courtyard................................... 84.60 83.8% 78.61 83.5%
Fairfield Inn and Suites.................... 51.33 78.5% 49.69 80.7%

Sales for Marriott Hotels, Resorts and Suites, which comprise more than 60
percent of total lodging sales, increased nine percent over the prior year. A 10
percent increase in average room rate, and a slight increase in occupancy
generated a REVPAR increase of 10 percent which drove higher base management and
franchise fees. Profit growth reflects higher incentive fees at many hotels and
the addition of 22 properties since the beginning of 1996.

Ritz-Carlton reported an increase in average room rates of seven percent and
occupancy increased six percentage points to 82 percent, resulting in a 14
percent increase in REVPAR. Ritz-Carlton opened a property in Osaka, Japan this
quarter, and is on schedule to open new, managed properties in San Juan, Puerto
Rico and Kuala Lumpur, Malaysia by early 1998.

RHG contributed $183 million in sales during the quarter. After intangible
amortization and interest expense, the RHG acquisition reduced earnings per
share by $.04 and is expected to reduce 1997 earnings per share by $.10 to $.14.
REVPAR increased seven percent, due primarily to room rate increases of six
percent, and a slight increase in occupancy. Integration of RHG into the
Company's payroll, procurement, marketing and sales, and reservation processes
is progressing on schedule. In addition to the 150 properties acquired in the
RHG acquisition, the Company opened four Ramada International properties in
Germany, Japan and Indonesia during the quarter.

Limited-service brands represent about 20 percent of total lodging sales for the
second quarter and each of the brands increased REVPAR for the quarter.

. Residence Inn, the Company's quality extended-stay brand, posted a REVPAR
increase of seven percent, due to an increase in average room rates of
eight percent, to $95.47, offset by a slight decrease in occupancy to 87
percent. Sales increased by 10 percent, primarily due to the addition of 43
properties since the beginning of fiscal year 1996.

. Courtyard, the Company's moderate price lodging brand, achieved a nine
percent increase in sales. Courtyard's average room rates increased eight
percent with no change in

- -----------------------
/1/ Comparable statistics are used throughout this discussion, and are based on
Company-operated U.S. properties. The Ramada International and New World brands
do not have any U.S. properties.

occupancy, resulting in a REVPAR increase of eight percent. Sales and
profits also reflect the addition of 64 units from the beginning of fiscal
year 1996.

. Fairfield Inn and Suites, the Company's economy lodging brand, had an
increase in sales of 10 percent over last year. While occupancy declined to
79 percent for Company-operated units, average room rates increased by
three percent resulting in flat REVPAR which reflects the impact of
aggressive rate increases for the past three years and supply additions in
this segment over the past several years. Sales also increased due to the
addition of 87 units since the beginning of fiscal year 1996, including the
Company's 300th unit in Minneapolis/St. Paul.

Marriott Vacation Club International sold approximately 5,700 timeshare
intervals in the second quarter representing an increase of 15 percent over the
prior year. The Company experienced very strong sales in several locations, and
is on schedule to commence sales at its new resort in Aruba later this year.
Increased profits from resort development were offset by minor operating losses
in Europe and start-up losses at the new Orlando golf institute and training
center.

CONTRACT SERVICES reported operating profit of $44 million on sales of $1,164
million, representing 16 percent and 21 percent increases, respectively, from
the second quarter of 1996.

Profit growth in the mid-teens for Marriott Management Services was paced by its
health care and corporate services groups. Health care was aided by new account
gains, and expansion of services to existing clients. Corporate services
benefited from increased catering sales and positive customer response to its
Crossroads Cuisines retail program. Results for the 1997 second quarter also
were favorably affected by contributions from food service and facilities
management contracts awarded by several major urban school districts in 1996.

Marriott Senior Living Services reported significant profit growth on sales
increases of 16 percent. Sales growth was due to the opening of 10 communities
since the second quarter of 1996, a two percentage point increase in occupancy
to 94 percent, and a four percent increase in per diem rates to $99. Operating
profit growth was a result of the increased sales and improved profitability for
the Forum communities. During the second quarter, the Company opened four new
assisted living communities, including the first two Village Oaks communities
developed for the moderate price market. The Village Oaks communities feature
the companion living concept, and can accommodate approximately 120 residents.
At the end of the quarter, the Company operated 79 communities totaling 15,700
units, and has 20 additional communities under construction. The Company is on
target to meet its goal of 200 communities by the year 2000.

Marriott Distribution Services' sales more than doubled due to the impact of the
new accounts added during 1996. Five new distribution centers were opened in
1996 and the first quarter of 1997 to service this new business. Profits were
lower in the 1997 quarter as a result of the start-up costs associated with
these new centers, and integration of new business into the operations.

CORPORATE ACTIVITY. Interest expense increased 48 percent over the second
quarter of 1996, despite lower effective interest rates, as the average debt
balance increased due to the acquisition of RHG. Interest income decreased from
$9 million to $6 million reflecting reduced loans receivable as a result of the
collection or sale of over $200 million of loans since the second quarter of
1996. Corporate expenses increased due to non-cash items associated with
investments generating significant income tax benefits as well as modest
staffing increases to accommodate growth and new business development. The
effective income tax rate increased from 39 percent to 39.5 percent reflecting
approximately a one percentage point increase due to nondeductible goodwill
amortization associated with the RHG acquisition, partially offset by credits
generated by tax related investments.

Twenty-four weeks ended June 20, 1997 Compared to Twenty-four weeks ended
- -----------------------------------------------------------------------------
June 14, 1996/1/
- ----------------

The Company reported net income of $160 million for the first two quarters, on
sales of $5,482 million. This represents a 16 percent increase in net income and
21 percent increase in sales over the same period in 1996. Earnings per share of
$1.18 for the period increased 16 percent over the corresponding 1996 period.
Excluding the impact of the RHG acquisition, net income and earnings per share
for the period were both up 20 percent on 17 percent sales growth.

LODGING operating profits were up 26 percent, on a sales increase of 19 percent.
The revenue increase resulted from REVPAR growth across all brands averaging
nine percent, the addition of 433 hotels since the beginning of 1996, together
with better weather and fewer holidays in the first quarter of 1997. This
revenue growth resulted in the Company earning higher base management and
franchise fees. Revenue growth also contributed to higher house profits which
resulted in higher incentive management fees. The following table is a summary
of year-to-date rate and occupancy statistics by brand.

Twenty-four weeks ended
------------------------------------------
June 20, 1997 June 14, 1996
------------------- -------------------
Brand Rate Occupancy Rate Occupancy
- ------------------------------------------ -------- --------- -------- ---------

Marriott Hotels, Resorts and Suites....... $ 129.65 79.4% $ 118.18 79.6%
Ritz-Carlton.............................. 197.47 80.1% 187.33 76.1%
Renaissance............................... 124.90 74.8% 117.36 74.2%
Residence Inn............................. 94.55 85.2% 87.12 86.7%
Courtyard................................. 83.82 81.8% 77.92 82.0%
Fairfield Inn and Suites.................. 49.72 76.6% 48.39 78.9%

- ------------------------
/1/ Year-to-date 1996 statistics for REVPAR, occupancy and average room rates
have been adjusted to make them comparable to the 1997 statistics. Due to the
variations in the Company's fiscal year, which ends on the Friday closest to
December 31, the last week of calendar 1995 fell into the first quarter of 1996,
but the last week of calendar 1996 fell into the last quarter of 1996. The
adjusted year-to-date 1996 statistics are based on the same calendar days as the
1997 statistics. Comparable statistics are used throughout this discussion, and
are based on Company-operated U.S. properties. The Ramada International and New
World brands do not have any U.S. properties.

Sales for Marriott Hotels, Resorts and Suites comprised approximately 70 percent
of total lodging sales. Lodging sales for the first two quarters increased 10
percent over the same period in 1996 due to strong REVPAR growth and the
addition of 22 properties since the beginning of 1996. A 10 percent increase in
average room rate and no change in occupancy, generated a REVPAR increase of 10
percent. Profits increased as improved REVPAR generated higher base management
fees and higher house profits, resulting in increased incentive fees at many
hotels.

Ritz-Carlton reported an increase in average room rates of five percent and
occupancy increased four percentage points to 80 percent, resulting in an 11
percent increase in REVPAR.

The Company acquired RHG at the beginning of the second quarter of 1997. Please
see page 11 for discussion.

Limited-service brands represent about 20 percent of total lodging sales for the
first two quarters, and each of the brands increased REVPAR for this period. In
addition, the Company opened the first property under the TownePlace Suites
brand, which is designed to attract extended-stay travelers in the moderate
price range.

. Residence Inn posted a REVPAR increase of seven percent, due to an increase
in average room rates of nine percent, to $95, offset by a decrease in
occupancy to 85 percent. Sales growth in the period, of 12 percent, was
also due to the addition of 43 properties since the beginning of fiscal
year 1996, including its fourth property outside the U.S.

. Courtyard achieved a 10 percent increase in sales. Courtyard's average room
rates increased eight percent, to $84, while occupancy dropped slightly to
82 percent, resulting in a REVPAR increase of seven percent. Sales and
profits also reflect the addition of 64 units from the beginning of fiscal
year 1996. Courtyard opened its 300th unit in Fort Worth, Texas during this
period and expanded its non-U.S. operations to 10 franchised Courtyard
units in the United Kingdom.

. Fairfield Inn and Suites had an increase in sales of 11 percent over last
year. The slight decline in occupancy, to 77 percent for Company-operated
units, was offset by a three percent average room rate increase to $50,
resulting in no change in REVPAR which reflects the impact of aggressive
rate increases for the past three years and supply additions in this market
over the past several years. Sales also increased due to the addition of 87
units since the beginning of fiscal year 1996, including the Company's
300th unit in Minneapolis/St. Paul.

Marriott Vacation Club International sold over 11,000 timeshare intervals in the
first two quarters representing an increase of nearly 26 percent over the prior
year. The Company's increase in sales resulted from very strong performance in
several locations, including its first European location in Marbella, Spain, as
well as Florida and South Carolina. Increased profits from resort development
were offset by reduced financing income, due to lower note sales in the first
quarter of 1997, and minor operating losses in Europe.

CONTRACT SERVICES reported operating profit of $85 million on sales of $2,318
million, representing 27 percent and 25 percent increases, respectively, from
the first two quarters

of 1996. Excluding the impact of the Forum acquisition, sales and operating
profits for the twenty-four weeks ended June 20, 1997 would have increased by 22
percent and 12 percent, respectively over the prior year. This profit growth was
impacted by start-up losses for new senior living communities, new distribution
services accounts and recently opened distribution centers and the impact of the
sale-leaseback of four senior living communities in August 1996.

Marriott Management Services reported increased profits on a seven percent
increase in sales over the first two quarters of 1996. Increases in sales were
due to the increased number of operating days for higher education, school
services and corporate accounts during the period and improved weather, the
acquisition of Russell & Brand Limited, and increased sales on existing
accounts. Profit growth was due to positive response to the Crossroads Cuisine
retail program and cost control throughout the year.

Marriott Senior Living Services more than doubled profits on sales growth of
over 50 percent due to the acquisition of Forum in the second quarter of 1996.
In addition, occupancy rates increased three percentage points, to 94 percent
and average per diem rates also increased by four percent, to $99. Seven
properties opened in the first two quarters, including the Company's first
properties to feature special care centers for people with Alzheimer's and other
memory disorders, and the Company's first two Village Oaks communities.

Marriott Distribution Services more than doubled sales by adding several major
restaurant accounts, including Boston Market, Steak & Ale and Bennigans. Two new
distribution centers were opened in 1997, an increase of five since the second
quarter of last year. Profits declined due to the start-up costs at these new
centers and costs associated with integration of new business.

CORPORATE ACTIVITY. Interest expense increased 43 percent over the first two
quarters of 1996, despite lower effective interest rates, as the average debt
balance increased to finance the RHG acquisition. Interest income decreased from
$18 million to $11 million reflecting reduced loans receivable as a result of
the collection or sale of over $200 million of loans in the second half of 1996.
Corporate expenses increased due to non-cash items associated with investments
generating significant income tax benefits as well as modest staff increases to
accommodate growth and new business development. The effective income tax rate
increased from 39 percent to 39.5 percent reflecting approximately a one
percentage point increase due to nondeductible goodwill amortization associated
with the RHG acquisition, partially offset by credits generated by tax related
investments.

LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents totaled $351 million at June 20, 1997, an increase of $83
million from year end. Cash provided by operations increased $6 million over the
first two quarters of 1996, to $293 million, as higher net income was offset by
working capital changes. EBITDA increased 22 percent to $400 million. EBITDA is
an indicative measure of the Company's operating performance which can be used
to measure the Company's ability to service debt, fund capital expenditures and
expand its business. However, EBITDA is not an alternative to net income,
operating profit, cash from operations, or any other operating or liquidity
measure prescribed by generally accepted accounting principles.

Cash used in investing activities totaled $962 million for the first two
quarters of 1997, primarily consisting of the RHG acquisition and expenditures
for the construction of limited-service lodging properties and senior living
communities. Cash generated from dispositions of $183 million primarily included
$79 million from the sale of five Senior Living Services communities and $99
million from the sale-leaseback of 10 limited service hotels (the other four
properties discussed in note 3 to the financial statements will be sold during
the remainder of 1997). The Company expects that, over time, it will continue to
sell certain lodging and senior living service properties under development, or
to be developed, while continuing to operate them under long-term agreements.

The Company entered into a $400 million bank facility in February, 1997, which
along with the Company's pre-existing $1 billion revolving credit facility, was
replaced with a single $1.5 billion credit facility on March 27, 1997. This new
facility has a term of five years and bears interest at LIBOR plus a spread,
presently 21.5 basis points, based on the Company's senior debt rating.
Additionally, annual fees are paid on the total facility at a rate, presently 11
basis points, also based on the Company's senior debt rating. On June 20, 1997,
the Company had $584 million available under the facility.

The Company continues to grow its businesses, in part, by investing in new
units. The Company's principal investments will continue to include loans,
minority equity interests, business acquisitions and direct development and
ownership of certain lodging and senior living services projects. The Company
expects that cash generated by operations, together with its borrowing capacity
and proceeds from the sale of assets, will be sufficient to finance its planned
growth and capital requirements.

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings
- --------------------------

There are no material legal proceedings pending against the Company.

Item 2. Changes in Securities
- ------------------------------

None.

Item 3. Defaults Upon Senior Securities
- ----------------------------------------

None.

Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------

On May 9, 1997, the Company held its Annual Meeting of Shareholders. The
shareholders (i) re-elected directors Floretta Dukes McKenzie, Roger W. Sant and
Lawrence M. Small to terms of office expiring at the 2000 Annual Meeting of
Shareholders and elected William J. Shaw as a director for a term expiring at
the 1999 Annual Meeting of Shareholders, (ii) ratified an amendment to the
Company's 1995 non-employee directors' deferred stock compensation plan, (iii)
ratified an increase in the number of shares authorized for issuance under the
Company's employee stock purchase plan, (iv) ratified the appointment of Arthur
Andersen, LLP as the Company's independent auditors, (v) defeated a shareholder
proposal to adopt cumulative voting for the election of directors, and (vi)
defeated a shareholder proposal to adopt the fair value method of accounting for
stock-based compensation plans pursuant to Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123). The
following table sets forth the votes cast with respect to each of these matters:

MATTER FOR AGAINST WITHHELD ABSTAIN BROKER
NON-VOTES
- ---------------------------------------- ----------- ---------- -------- --------- ---------

Re-election of 109,774,478 912,507
Floretta Dukes McKenzie
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Re-election of 109,883,730 803,255
Roger W. Sant
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Re-election of 109,895,193 791,792
Lawrence M. Small
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Election of 109,868,099 818,886
William J. Shaw
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Ratification of 1995 106,637,696 3,312,192 737,097
non-employee directors' deferred stock
compensation plan amendment
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Ratification of increase of common 109,169,957 991,832 525,196
stock authorized under the employee
stock purchase plan
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Ratification of appointment of Arthur 109,953,157 351,732 382,096
Andersen, LLP as auditors
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Shareholder proposal on cumulative 19,695,884 79,967,901 1,204,332 9,818,868
voting for the election of directors
- ---------------------------------------- ----------- ---------- -------- --------- ---------
Shareholder proposal to adopt the fair 3,178,126 95,218,916 2,471,075 9,818,868
value method of accounting pursuant to
FAS 123
- ---------------------------------------- ----------- ---------- -------- --------- ---------

The following elected directors have a term expiring at the Annual Meeting of
Shareholders in the year noted:

DIRECTOR YEAR TERM EXPIRES
- --------------------- -----------------

J.W. Marriott, Jr. 1999
- --------------------- -----------------
Richard E. Marriott 1998
- --------------------- -----------------
Gilbert M. Grosvenor 1998
- --------------------- -----------------
Harry J. Pearce 1998
- --------------------- -----------------
Mitt Romney 1999
- --------------------- -----------------

In connection with the RHG acquisition, the Board appointed Dr. Henry Cheng Kar-
Shun as a director of the Company for a term beginning on June 1, 1997, and
expiring at the 2000 Annual Meeting of Shareholders. Shareholders of the Company
will be asked to ratify Dr. Cheng's appointment at the 1998 Annual Meeting of
Shareholders.

Item 5. Other Information
- --------------------------

Following its acquisition of RHG, the Company guaranteed the payment of
principal and interest on the $120,000,000 8-7/8% Guaranteed Notes Due 2005 (the
RHG Notes) of RHG Finance Corporation, an RHG subsidiary. The Company
subsequently sought and obtained noteholder consent to conform certain covenants
and other terms of the indenture governing the RHG Notes to those that generally
apply to the various series of senior public debt securities issued under the
indenture between the Company and Chemical Bank, as trustee.

Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------

(a) Exhibits

Exhibit
No. Descriptions
------- ------------

4 Indenture among RHG Finance Corporation,
as issuer, RHG and the Company, as
guarantors, and The First National Bank
of Chicago, as trustee, consisting of:
(a) Indenture dated as of October 1, 1995
(incorporated by reference to Exhibit
2.02 to RHG's Annual Report on Form 20-F
for the fiscal year ended June 30, 1996);
(b) First Supplemental Indenture dated as
of April 11, 1997 (filed herewith); and
(c) Second Supplemental Indenture dated
as of April 27, 1997 (filed herewith)

10 1995 Non-Employee Directors' Deferred
Stock Compensation Plan (amended and
restated)(incorporated by reference to
Appendix A to Proxy Statement for the
Annual Meeting of Shareholders held on
May 9, 1997)

11 Computation of Earnings Per Share

12 Computation of Ratio of Earnings to Fixed
Charges

99 Forward-Looking Statements

(b) Reports on Form 8-K

On April 14, 1997, the Company filed a report announcing that it had
completed the acquisition of RHG through a public tender offer.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

MARRIOTT INTERNATIONAL, INC.

August 1, 1997 /s/ Stephen E. Riffee
________________________________
Stephen E. Riffee
Vice President, Finance and
Chief Accounting Officer