SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[X] ANNUAL 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 Fiscal Year Ended January 1, 1999 Commission File No. 1-13881

MARRIOTT INTERNATIONAL, INC.

Delaware 52-2055918
(State of Incorporation) (I.R.S. Employer Identification Number)

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

Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------------------------------------------------- ---------------------------------------------

Class A Common Stock, $0.01 par value New York Stock Exchange
(244,566,605 shares outstanding as of January 31, 1999) Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange

The aggregate market value of shares of common stock held by non-affiliates at
January 31, 1999 was $6,467,559,611.

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 [_]

Indicate by check mark if disclosure by delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Documents Incorporated by Reference

Portions of the Proxy Statement prepared for the 1999 Annual Meeting of
Shareholders are incorporated by reference into Part III of this report.

PART I

Throughout this report, we refer to Marriott International, Inc., together
with its subsidiaries, as "we," "us," or "the Company."

FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this document that are based on the
beliefs and assumptions of our management, and on information currently
available to our management. Forward-looking statements include the information
concerning our possible or assumed future results of operations and statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates," or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these forward-
looking statements. You are cautioned not to put undue reliance on any forward-
looking statements.

You should understand that the following important factors, in addition to
those discussed in Exhibit 99 and elsewhere in this annual report, could cause
results to differ materially from those expressed in such forward-looking
statements.

. competition for each of our business segments;

. business strategies and their intended results;

. the balance between supply of and demand for hotel rooms,
timeshare units and senior living accommodations;

. our continued ability to obtain new operating contracts and
franchise agreements;

. our ability to develop and maintain positive relations with
current and potential hotel and senior living community owners;

. the effect of international, national and regional economic
conditions;

. the availability of capital to allow us and potential hotel and
senior living community owners to fund investments;

. our ability, and the ability of other parties upon which our
businesses also rely, to modify or replace on a timely basis,
computer software and other systems in order to function properly
prior to, in and beyond, the Year 2000; and

. other risks described from time to time in our filings with the
Securities and Exchange Commission (the SEC).

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

We are a worldwide operator and franchisor of hotels and senior living
communities and provider of distribution services. Our operations are grouped
in three business segments, Lodging, Senior Living Services and Distribution
Services, which represented 79, 6, and 15 percent, respectively, of total sales
in the fiscal year ended January 1, 1999.

In our Lodging segment, we operate, develop and franchise lodging facilities
and vacation timesharing resorts under 12 separate brand names.

In our Senior Living Services segment we develop and presently operate 113
senior living communities offering independent living, assisted living and
skilled nursing care for seniors in the United States.

Marriott Distribution Services (MDS) supplies food and related products to
external customers and to internal operations throughout the United States.

Financial information by industry segment and geographic area as of January 1,
1999 and for the three fiscal years then ended, appears in the Business Segments
note to our Consolidated Financial Statements included in this annual report.

FORMATION OF "NEW" MARRIOTT INTERNATIONAL - SPINOFF IN MARCH 1998.

We became a public company in March 1998, when we were "spun off" as a
separate entity by the company formerly named "Marriott International, Inc."
(Old Marriott). Our company - the "new" Marriott International - was formed to
conduct the lodging, senior living and distribution services businesses formerly
conducted by Old Marriott.

The Old Marriott shareholders approved the Spinoff and related transactions at
a special meeting held in March 1998. Old Marriott received a ruling from the
Internal Revenue Service that the Spinoff would be tax-free to Old Marriott and
to our shareholders.

The Spinoff was effected through a dividend of one share of our common stock
and one share of our Class A Common Stock for each share of Old Marriott Common
Stock outstanding on March 20, 1998. As the result of a shareholders' vote at
our 1998 annual meeting of shareholders, on May 21, 1998 we converted all of our
outstanding shares of common stock into shares of Class A Common Stock on a one-
for-one basis.

At the same time as the Spinoff, Old Marriott merged its remaining businesses
- - food service and facilities management - with the similar businesses of
Sodexho Alliance, S.A. (Sodexho Alliance) in the United States and Canada, to
form Sodexho Marriott Services, Inc. (SMS). SMS also successfully completed a
public cash tender offer for substantially all $720 million of Old Marriott's
public debt. We are providing certain transitional administrative services to
SMS, and MDS provides food distribution services to many of SMS's food service
locations.

LODGING

Our lodging business included 1,686 operated or franchised properties with
328,293 units at January 1, 1999, under 12 distinct brands. Although managed by
an overall lodging management organization, each brand serves a distinct tier of
the lodging industry, as follows: Marriott Hotels, Resorts and Suites (full-
service); Ritz-Carlton (luxury); Renaissance (full-service); New World (full-
service); Ramada International (moderate-price, full-service); Residence Inn
(extended-stay); Courtyard hotels (moderate-price); SpringHill Suites (upper
moderate-price, all-suites); TownePlace Suites (moderate-price, extended-stay);
Fairfield Inn (economy); Marriott Vacation Club International (vacation
timesharing); and serviced apartments including those operated internationally
under the Marriott Executive Residences brand.

Company-Operated Lodging Properties

At January 1, 1999, we operated a total of 803 properties (203,836 units)
across our 12 lodging brands under long-term management or lease agreements with
property owners (together, the Operating Agreements).

Terms of our management agreements vary, but typically include base and
incentive management fees and reimbursement of costs (both direct and indirect)
of operations. Such agreements are generally for initial periods of 20 to 30
years, with options to renew for up to 50 additional years. Our lease
agreements also vary, but typically include fixed annual rentals plus additional
rentals based on a percentage of annual revenues in excess of a fixed amount.
Many of the Operating Agreements are subordinated to mortgages or other liens
securing indebtedness of the owners. Additionally, a number of the Operating
Agreements permit the owners to terminate the agreement if financial returns
fail to meet defined levels and we have not cured such deficiencies.

For units that we manage, we are responsible for hiring, training and
supervising the managers and employees required to operate the facilities and
for purchasing supplies, for which we are reimbursed by the owners. We provide
centralized reservation services, and national advertising, marketing and
promotional services, as well as various accounting and data processing
services. We prepare and implement annual budgets for lodging facilities that
we operate. We are also responsible for allocating funds, generally a fixed
percentage of revenue, for periodic renovation of buildings and replacement of
furnishings. We believe that our ongoing refurbishment program is adequate to
preserve the competitive position and earning power of the hotels.

Franchised Lodging Properties

We have franchising programs that permit the use of certain of our brand names
and our lodging systems by other hotel owners and operators. Under these
programs, we receive an initial application fee and continuing royalty fees,
which typically range from four percent to six percent of room revenues for all
brands, plus two percent to three percent of food and beverage revenues for
full-service hotels. In addition, franchisees contribute to our national
marketing and advertising programs, and pay fees for use of our centralized
reservation systems. At January 1, 1999, we had 883 franchised properties
(124,457 units).

Summary of Properties by Brand
- ------------------------------

The following table shows properties and units that we operated or franchised
at January 1, 1999. A total of 35 Courtyard, Renaissance and Marriott Hotels,
Resorts and Suites properties (10,017 rooms) shown on the table were "reflagged"
from Ramada International and New World during 1998.

Company-operated Franchised
---------------------------------- ----------------------------------
Brand Properties Units Properties Units
- ------------------------------------------------- --------------- -------------- --------------- --------------

Marriott Hotels, Resorts and Suites.............. 208 91,795 143 42,809
Ritz-Carlton..................................... 35 11,784 - -
Renaissance...................................... 69 27,350 14 5,414
New World........................................ 7 3,651 - -
Ramada International............................. 8 1,514 38 6,421
Residence Inn.................................... 124 16,527 170 18,523
Courtyard........................................ 245 37,369 170 20,507
TownePlace Suites................................ 8 812 9 887
Fairfield Inn and SpringHill Suites.............. 54 7,472 339 29,896
Marriott Vacation Club International............. 37 3,938 - -
Marriott Executive Residences and other.......... 8 1,624 - -
--------------- -------------- --------------- --------------
Total............................................ 803 203,836 883 124,457
=============== ============== =============== ==============

We plan to open 200 hotels (approximately 30,000 rooms) during 1999. We
believe that we have access to sufficient financial resources to finance our
growth, as well as to support our ongoing operations and meet debt service and
other cash requirements. Nonetheless, our ability to sell properties that we
develop, and the ability of hotel or senior living community developers to build
or acquire new Marriott properties, which are important parts of our growth
plans, are partially dependent on the availability and price of capital.

Marriott Hotels, Resorts and Suites primarily serve business and leisure
travelers and meeting groups at locations in downtown and suburban areas, near
airports and at resort locations. Most Marriott full-service hotels contain
from 300 to 500 rooms. Marriott full-service hotels typically have swimming
pools, gift shops, convention and banquet facilities, a variety of restaurants
and lounges and parking facilities. The 19 convention hotels (approximately
19,800 rooms) are larger and contain up to 1,900 rooms. The 35 Marriott resort
hotels (approximately 15,000 rooms) have additional recreational facilities,
such as tennis courts and golf courses. The 10 Marriott Suites (approximately
2,600 rooms) are full-service suite hotels that typically contain approximately
250 suites, each consisting of a living room, bedroom and bathroom. Marriott
Suites have only limited meeting space.

We operate conference centers located throughout the United States. Some of
the centers are used exclusively by employees of the sponsoring organization,
while others are marketed to outside meeting groups and individuals. The
centers typically include meeting room space, dining facilities, guestrooms and
recreational facilities.

Room operations contributed the majority of hotel sales for the fiscal year
1998 with the remainder coming from food and beverage operations, recreational
facilities and other services. Although business at many resort properties is
seasonal depending on location, overall hotel profits have been relatively
stable and include only moderate seasonal fluctuations.

Marriott Hotels, Resorts and Suites
Geographic Distribution at January 1, 1999 Hotels
- ---------------------------------------------------------------------- -------------

United States (40 states and the District of Columbia)................ 266 (108,565 rooms)
=============
Non-U.S. (36 countries and territories)
Americas (Non-U.S.).................................................. 19
United Kingdom....................................................... 26
Continental Europe................................................... 19
Asia................................................................. 9
Africa and the Middle East........................................... 9
Australia............................................................ 3
-------------
Total Non-U.S......................................................... 85 (26,039 rooms)
=============

Ritz-Carlton hotels and resorts are renowned for their distinctive
architecture and the quality of their facilities, dining and guest service.
Most Ritz-Carlton hotels have 200 to 500 guest rooms and typically include
meeting and banquet facilities, a variety of restaurants and lounges, gift
shops, swimming pools and parking facilities. Guests at most of the 10 Ritz-
Carlton resorts have access to additional recreational amenities, such as tennis
courts and golf courses.

Ritz-Carlton Luxury Hotels and Resorts
Geographic Distribution at January 1, 1999 Hotels
- ------------------------------------------------------------ ------------

United States (11 states)................................... 20 (7,177 rooms)
============
Non-U.S. (14 countries and territories).................... 15 (4,607 rooms)
============

Renaissance is a global quality tier brand which targets business travelers,
group meetings and leisure travelers. Renaissance hotels are generally located
in downtown locations of major cities, in suburban office parks, near major
gateway airports and in destination resorts. Most hotels contain 300 to 500
rooms; however, a few of the convention hotels are larger, and some hotels in
non-gateway markets, particularly in Europe, are smaller. Renaissance hotels
typically include an all-day dining restaurant, a specialty restaurant, club
floors and lounge, boardrooms, convention and banquet facilities. There are
eight Renaissance Resorts which have additional recreational facilities
including golf, tennis and water sports.

Renaissance Hotels
Geographic Distribution at January 1, 1999 Hotels
- ----------------------------------------------------------------------- --------------

United States (15 states and the District of Columbia)................. 34 (15,573 rooms)
==============
Non-U.S. (25 countries and territories)
Americas (Non-U.S.)................................................... 7
United Kingdom........................................................ 4
Continental Europe.................................................... 16
Asia.................................................................. 15
Africa and the Middle East............................................ 6
Australia............................................................. 1
--------------
Total Non-U.S.......................................................... 49 (17,191 rooms)
==============

New World primarily targets international business travelers. New World hotels
are located exclusively in the Asia-Pacific region and are concentrated in the
major business districts of gateway cities in China and Southeast Asia. With
hotels in the key gateway markets to China of Beijing and Shanghai, New World
has expanded into China's secondary business centers. New World hotels typically
range in size from 300 to 600 rooms and offer multiple restaurants and lounges,
executive floors and a variety of recreational, banquet and meeting facilities.
At January 1, 1999, seven New World hotels (3,651 rooms) were located in three
countries outside the U.S. During 1998, five New World hotels (3,025 rooms) were
reflagged as Marriott or Renaissance hotels.

Ramada International is a moderately priced brand targeted at business and
leisure travelers. Each full-service Ramada International property includes a
restaurant, a cocktail lounge and full-service meeting and banquet facilities.
Ramada International hotels are located primarily in Europe in major and
secondary cities, near major international airports and suburban office park
locations. We also receive a royalty fee from Cendant Corporation (successor to
HFS, Inc.) and Ramada Franchise Canada Limited for the use of the Ramada name in
the United States and Canada, respectively.

Ramada International
Geographic Distribution at January 1, 1999 Hotels
- ---------------------------------------------------------------------- --------------

Continental Europe.................................................... 31
Asia.................................................................. 7
Americas (Non-U.S.)................................................... 3
Africa and the Middle East............................................ 4
Australia............................................................. 1
--------------
Total (17 countries and territories).................................. 46 (7,935 rooms)
==============

Residence Inn is the U.S. market leader among extended-stay lodging products,
which caters primarily to business, government and family travelers who stay
more than five consecutive nights. Residence Inns generally have 80 to 130
studio and two-story penthouse suites. Most inns feature a series of
residential style buildings with landscaped walkways, courtyards and
recreational areas. The inns do not have restaurants but offer complimentary
continental breakfast. Each suite contains a fully equipped kitchen, and many
suites have wood-burning fireplaces.

Residence Inns
Geographic Distribution at January 1, 1999 Hotels
- --------------------------------------------------------------------- --------------

United States (44 states)............................................ 289 (34,270 rooms)
==============
Canada............................................................... 4 (704 rooms)
==============
Mexico............................................................... 1 (76 rooms)
==============

Courtyard is our moderate-price limited-service hotel product. Aimed at
individual business and leisure travelers as well as families, Courtyard hotels
maintain a residential atmosphere and typically have 80 to 150 rooms. Well
landscaped grounds include a courtyard with a pool and social areas. Most hotels
feature meeting rooms, limited

restaurant and lounge facilities, and an exercise room. The operating systems
developed for these hotels allow Courtyard to be price competitive while
providing better value through superior facilities and guest service.

Courtyard Hotels
Geographic Distribution at January 1, 1999 Hotels
- ----------------------------------------------------------------------- --------------

United States (42 states and the District of Columbia)................. 383 (52,633 rooms)
==============
Non-U.S. (seven countries)............................................ 32 (5,243 rooms)
==============

SpringHill Suites is our newly announced all-suite brand in the upper-moderate
priced tier of lodging products. SpringHill Suites feature suites that are 25
percent larger than a typical hotel guest room and offer a broad range of
amenities, including complimentary continental breakfast and exercise
facilities. In October 1998, we announced plans to convert our Fairfield Suites
open or under construction to the SpringHill Suites brand. At January 1, 1999 17
properties (1,674 rooms) were located in 13 states.

TownePlace Suites is a moderately priced, extended-stay hotel product that
is designed to appeal to business and leisure travelers. The standard TownePlace
Suites hotel consists of two interior-corridor buildings containing 95 units
consisting of high quality one- and two-bedroom suites. Each suite has a fully
equipped kitchen and separate living area. Each hotel provides housekeeping
services and has on-site exercise facilities, an outdoor pool, 24-hour staffing
and laundry facilities. At January 1, 1999, 17 TownePlace Suites (1,699 rooms)
were located in nine states.

Fairfield Inn is our economy lodging product which competes directly with
major national economy motel chains. Aimed at cost-conscious individual business
and leisure travelers, a typical Fairfield Inn has 65 to 135 rooms and offers a
swimming pool, complimentary continental breakfast and free local phone calls.
At January 1, 1999, 376 Fairfield Inns (35,694 rooms) were located in 46 states.

Marriott Vacation Club International develops, sells and operates vacation
timesharing resorts. Profits are generated from three primary sources: (1)
selling fee simple and other forms of timeshare intervals, (2) operating the
resorts and (3) financing consumer purchases of timesharing intervals.

Many timesharing resorts are located adjacent to Marriott hotels, and
timeshare owners have access to certain hotel facilities during their vacation.
Owners can trade their annual interval for intervals at other Marriott
timesharing resorts or for intervals at certain timesharing resorts not
otherwise sponsored by the Company through an affiliated exchange company.
Owners also can trade their unused interval for points in the Marriott Rewards
program, enabling them to stay at over 1,500 Marriott hotels worldwide.

At January 1, 1999, we had 16 resorts in active sales, including one in Aruba,
our newest addition in the Caribbean; one in Palm Beach Shores, our second
Vacation Ownership resort in South Florida; and one in Mallorca, Spain our
second European resort. Additionally, we announced a joint venture with
American Skiing Company, the largest operator of alpine ski, snowboard and golf
resorts in the U.S., which will enable us to develope vacation ownership
properties at premier, alpine resort locations across the country. During 1998
we added over 20,000 new owners, taking the number of our vacation owners to
over 120,000.

Marriott Vacation Club International
Geographic Distribution at January 1, 1999 Resorts Units
- ---------------------------------------------------------------------- -------------- -------------

Continental United States............................................. 32 3,284
Hawaii................................................................ 1 232
Caribbean............................................................. 2 262
Europe................................................................ 2 160
-------------- -------------
Total................................................................. 37 3,938
============== =============

Serviced apartments provide temporary housing for business executives and
others who need quality accommodations outside their home country, usually for
30 or more days. Some serviced apartments operate under the Marriott Executive
Residences brand which is designed specifically for the long-term international
traveler. At January 1, 1999, eight serviced apartment properties (1,624
units), including two Marriott Executive Residences, were located

in five countries and territories. In January, 1999, we announced the
acquisition of ExecuStay Corporation, which will expand our operations in the
area of serviced apartments. See "Recent Developments" below for a more
detailed discussion.

Other Activities

Marriott Golf manages 25 golf course facilities for us and for other golf
course owners.

We operate 17 systemwide hotel reservation centers, 10 of them in the U.S. and
seven internationally, that handle reservation requests for Marriott lodging
brands worldwide, including franchised units. We own one of the U.S. facilities
and lease the others.

Our Architecture and Construction Division assists in the design, development,
construction and refurbishment of lodging properties and senior living
communities and is paid a fee by the owners of such properties.

Competition

We encounter strong competition both as a lodging operator and a franchisor.
There are over 500 lodging management companies in the United States, including
several that operate more than 100 properties. These operators are primarily
private management firms, but also include several large national chains that
own and operate their own hotels and also franchise their brands. Management
contracts are typically long-term in nature, but most allow the hotel owner to
replace the management firm if certain financial or performance criteria are not
met.

Affiliation with a national or regional brand is prevalent in the U.S. lodging
industry. In 1998, the majority of U.S. hotel rooms were brand-affiliated.
Most of the branded properties are franchises, under which the operator pays the
franchisor a fee for use of its hotel name and reservation system. The
franchising business is fairly concentrated, with the three largest franchisors
operating multiple brands accounting for a significant proportion of all U.S.
rooms.

Outside the United States branding is much less prevalent, and most markets
are served primarily by independent operators. We believe that chain
affiliation will increase in overseas markets as local economies grow, trade
barriers are reduced, international travel accelerates and hotel owners seek the
economies of centralized reservation systems and marketing programs.

We have approximately a seven percent share of the U.S. hotel market (based on
number of rooms), less than a one percent share of the lodging market outside
the United States and a six percent share of annual worldwide timesharing sales
of about $6 billion. We believe that our hotel brands are attractive to hotel
owners seeking a management company or franchise affiliation, because our hotels
typically generate higher occupancies and Revenue per Available Room (REVPAR)
than direct competitors in most market areas. We attribute this performance
premium to our success in achieving and maintaining strong customer preference.
Approximately 40 percent of our ownership resort sales come from additional
purchases by or referrals from existing owners. We believe that the location and
quality of our lodging facilities, our national marketing programs, reservation
systems and our emphasis on guest service and satisfaction are contributing
factors across all of our brands.

We regularly upgrade our properties to maintain their competitiveness. The
vast majority of rooms in the Marriott lodging system either opened or have been
refurbished in the past five years. We also strive to update and improve the
products and services we offer. We believe that by operating a number of hotels
in each of our brands, we stay in direct touch with customers and react to
changes in the marketplace more quickly than chains which rely exclusively on
franchising.

The Marriott Rewards and Marriott Miles programs enhance repeat guest business
by rewarding frequent travelers with free stays at Marriott hotels or free
travel on 13 participating airlines. Marriott Rewards is a multi-brand frequent
guest program which covers eight Marriott brands. We believe that the frequent
stay programs generate substantial repeat business that might otherwise go to
competing hotels.

MARRIOTT SENIOR LIVING SERVICES

Through our Senior Living Services business, we develop and operate both
"independent full-service" and "assisted living" senior living communities and
provide related senior care services. Most are rental communities with monthly
rates that depend on the amenities and services provided. We are the largest
U.S. operator of senior living communities in the quality tier. The senior
living services market is one of the fastest growing segments of the U.S.
economy and we are expanding our Senior Living Services division to meet this
growing demand.

As shown in the table below at January 1, 1999, we operated 113 senior living
communities in 27 states.

Communities Units (1)
---------------- ----------------

Independent full-service
- owned........................................................... 3 1,193
- operated under long-term agreements............................. 42 11,275
---------------- ----------------
45 12,468
Assisted living
- owned........................................................... 28 3,027
- operated under long-term agreements............................. 40 5,049
---------------- ----------------
68 8,076
---------------- ----------------
Total senior living communities..................................... 113 20,544
================ ================

(1) Units represent independent living apartments plus beds in assisted living
and nursing centers.

At January 1, 1999, we operated 45 independent full-service senior living
communities, which offer both independent living apartments and personal
assistance units for seniors. Most of these communities also offer licensed
nursing care.

At January 1, 1999 we also operated 68 assisted living senior living
communities under the names "Brighton Gardens by Marriott," "Village Oaks," and
"Marriott MapleRidge" (our new name for communities formerly branded as
"Hearthside"). Assisted living senior living communities are for seniors who
would benefit from assistance with daily activities such as bathing, dressing or
medication. Brighton Gardens is a quality tier assisted living concept which
generally has 90 assisted living suites and in certain locations, 30 to 45
nursing beds in a community. In some communities, separate on-site centers also
provide specialized care for residents with Alzheimer's or other memory-related
disorders. Village Oaks is a moderately priced assisted living concept which
emphasizes companion living and generally has 70 suites in a community. This
concept is geared for the cost conscious senior who benefits from the
companionship of another unrelated individual. Marriott MapleRidge assisted
living communities consist of a cluster of six or seven 14-room cottages which
offer residents a smaller scale, more intimate setting and family-like living at
a moderate price.

The assisted living concepts typically include three meals per day, linen and
housekeeping services, security, transportation, and social and recreational
activities. Additionally, skilled nursing and therapy services are generally
available to Brighton Gardens residents.

Terms of the senior living services management agreements vary but typically
include base management fees, ranging from four to six percent of revenues,
central administrative services reimbursements and incentive management fees.
Such agreements are generally for initial periods of five to 30 years, with
options to renew for up to 25 additional years. Under the leases covering
certain of the communities, we pay the owner fixed annual rent plus additional
rent equal to a percentage of the amount by which annual revenues exceed a fixed
amount.

Our Senior Living Services business competes mostly with local and regional
providers of long-term health care and senior living services, although some
national providers are emerging in the assisted living market. We compete by
operating well-maintained facilities, and by providing quality health care, food
service and other services at competitive prices. The reputation for service,
quality care and know how associated with the Marriott name is also attractive
to residents and their families. The recent launch of the Marriott Assisted
Living Education Program, chaired by actress Debbie Reynolds, also demonstrates
our commitment to leadership in the Senior Living Services

business. This program aims to increase awareness of assisted living and to
highlight general benefits to adult children and their senior family members.
Additionally, we have focused on developing relationships with professionals who
often refer seniors to senior living communities, such as hospital discharge
planners and physicians. By educating these groups on the assisted living
concept, and familiarizing them with Marriott products and associates, we
generate a significant volume of referrals that helps our senior living
communities to quickly achieve high, stabilized occupancy levels.

MARRIOTT DISTRIBUTION SERVICES

MDS is a United States limited-line distributor of food and related supplies,
carrying an average of 3,000 product items per distribution center. This
segment originally focused on purchasing, warehousing and distributing food and
supplies to other Marriott businesses. However, MDS has increased its third-
party business to about 88 percent of total sales volume in the year ended
January 1, 1999.

MDS operated a nationwide network of 13 distribution centers at January 1,
1999. Leased facilities are generally built to our specifications, and utilize
a narrow aisle concept and technology to enhance productivity.

Through MDS, we compete with numerous national, regional and local
distribution companies in the $141 billion U.S. food distribution industry. We
attract clients by adopting competitive pricing policies and by maintaining one
of the highest order fill rates in the industry. In addition, our limited
product lines, operating systems, and other economies provide a favorable cost
structure which we are able to leverage in pursuing new business.

EMPLOYEE RELATIONS

At January 1, 1999, we had approximately 133,000 employees. Approximately
5,000 employees at properties we manage were represented by labor unions. We
believe our relations with employees are positive.

OTHER PROPERTIES

In addition to the operating properties discussed above, we lease an 870,000
square foot office building in Bethesda, Maryland which serves as our
headquarters. This lease has an initial term which expires in 2004, and
includes options for an additional 25 years.

We believe our properties are in generally good physical condition with need
for only routine repair and maintenance.

RECENT DEVELOPMENTS

On January 6, 1999, we entered into a definitive agreement to acquire
ExecuStay Corporation (ExecuStay), a provider of leased corporate apartments.
The total acquisition cost is estimated to be $115 million, to be paid as
approximately $53 million in our Class A Common Stock and $62 million in cash.
Including assumed debt, net of estimated assets, our investment will total
approximately $128 million. We now own more than 98 percent of the voting stock
of ExecuStay and expect to complete the acquisition during the 1999 first
quarter.

ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings pending against us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

The range of prices of Class A Common Stock and dividends declared per share
for the period since the March 27, 1998 Spinoff are as follows. No data are
presented for the periods prior to the Spinoff since we were not a publicly-held
company during that time.

Stock Price Dividends
------------------------------ Declared Per
1998 High Low Share
- -------------------- ------------ ------------ ------------

Second Quarter $ 37 1/4 $ 30 1/2 $ 0.095 /1/
Third Quarter 34 1/2 24 5/8 0.050
Fourth Quarter 30 1/4 19 3/8 0.050

/1/ Total of $.045 for the first quarter (declared and paid in the second
quarter), and $.05 second quarter dividend.

At January 31, 1999, there were 244,566,605 shares of Class A Common Stock
outstanding held by 52,769 shareholders of record. The Company's Class A Common
Stock is traded on the New York Stock Exchange, Chicago Stock Exchange, Pacific
Stock Exchange and Philadelphia Stock Exchange.

ITEM 6. SELECTED HISTORICAL FINANCIAL DATA

The following table presents summary selected historical financial data for
the Company derived from our financial statements as of and for the five fiscal
years ended January 1, 1999.

Since the information in this table is only a summary and does not provide all
of the information contained in our financial statements, including the related
notes, you should read "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our Consolidated Financial Statements.
Per share data and Shareholders' Equity have not been presented for periods
prior to 1998 because we were not a publicly-held company during that time.

As discussed in the financial statements included later in this report, in the
fourth quarter of 1998 we changed our accounting policy to no longer include the
working capital and sales of managed hotels and managed senior living
communities in our financial statements. Instead, our sales include fees earned
plus costs recovered from owners of managed hotels and managed senior living
communities. The table below reflects the restatement of prior periods to
conform with this new accounting policy.

Fiscal Year
---------------------------------------------------------
1998 1997 1996/1/ 1995 1994
--------- --------- -------- -------- --------
(in millions, except per share data)

INCOME STATEMENT DATA:
Sales......................................... $ 7,968 $ 7,236 $ 5,738 $ 4,880 $ 4,461
Operating Profit Before
Corporate Expenses and Interest............ 736 609 508 390 316
Net Income.................................... 390 324 270 219 162
PER SHARE DATA:
Diluted Earnings Per Share.................... 1.46
Cash Dividends Declared....................... .195
BALANCE SHEET DATA (AT END OF YEAR):
Total Assets.................................. 6,233 5,161 3,756 2,772 2,061
Long-Term and Convertible Subordinated Debt... 1,267 422 681 180 102
Shareholders' Equity.......................... 2,570

_______________________
/1/Fiscal year 1996 includes 53 weeks, all other years include 52 weeks.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following discussion presents an analysis of results of our operations for
fiscal years ended January 1, 1999 (52 weeks), January 2, 1998 (52 weeks) and
January 3, 1997 (53 weeks). Comparable REVPAR room rate and occupancy
statistics are used throughout this report and are based upon U.S. properties
operated by us, except that beginning in fiscal 1998, data for Fairfield Inns
include comparable franchised properties. Ramada International and New World do
not have any U.S. properties.

As discussed in our financial statements, in the fourth quarter of 1998 we
changed our accounting policy to no longer include the working capital and sales
of managed hotels and managed senior living communities in our financial
statements. Instead, our sales include fees earned plus costs recovered from
owners of managed hotels and managed senior living communities. We restated
prior periods and all references in the discussion below refer to financial
statement data prepared under our new accounting policy. This restatement
reflects reductions in sales of $2,240 million, $1,810 million and $1,529
million for 1998, 1997 and 1996, respectively, compared to sales as previously
calculated for those periods.

1998 Compared to 1997

Our net income increased from $324 million in 1997 to $390 million in 1998.
The increase in our net income was driven by contributions from new unit
expansion, including acquisitions, and strong profit growth from our Lodging
segment. The increase in lodging rooms and the increase in REVPAR in excess of
inflation resulted in a 21 percent increase in systemwide sales, to $16 billion.

LODGING

(in millions except REVPAR,
properties and units)
-----------------------------
Percentage
1998 1997 increase
-------------- ------------ -----------

Sales........................................ $ 6,311 $ 5,247 20%
REVPAR(all brands) .......................... $ 95 $ 90 6%
Operating profit............................. $ 704 $ 569 24%

Properties................................... 1,686 1,510 12%
Units........................................ 328,293 300,437 9%

Our 1998 Lodging operating profit rose on higher sales, benefiting from
contributions from new properties. The sales increase resulted from average
REVPAR growth of six percent across all comparable U.S. properties that we
manage and the addition of new hotels. This growth resulted in higher base
management and franchise fees. Growth also contributed to higher house profits
which resulted in higher incentive management fees. Lodging operating profit
also increased due to higher financing income arising from our sale of timeshare
notes receivable.

Marriott Hotels, Resorts and Suites profits were up 18 percent in fiscal 1998
on sales growth of seven percent, reflecting the net addition of 12 units (6,924
rooms) in the U.S. and seven units (1,454 rooms) internationally. REVPAR for
comparable U.S. hotels that we operate was up six percent to $108, primarily as
a result of a seven percent increase in average room rates. Sales gains,
coupled with profit margin improvements, generated higher incentive management
fees at many properties.

Average Ritz-Carlton room rates increased nine percent to $205 although
occupancy decreased by two percentage points to 75 percent, resulting in a six
percent increase in REVPAR for comparable U.S. properties. The results of Ritz-
Carlton properties were consolidated since we increased our ownership interest
to approximately 98 percent on March 19, 1998, resulting in additional sales of
$462 million in 1998.

REVPAR for U.S. Renaissance hotels that we operate increased seven percent due
to a five percent increase in room rates to $129 and a one percent increase in
occupancy, to 70 percent. Renaissance is now integrated into our reservation
system as well as sales, marketing and other operating programs.

Courtyard, our moderate-price brand, added a net of 48 properties (6,593
rooms) during fiscal 1998. Courtyard posted a 15 percent increase in sales,
following increases in average room rates and REVPAR of seven percent and six
percent, respectively, while occupancy declined by one percentage point to 80
percent.

Residence Inn, our extended-stay brand, added 36 properties (4,374 rooms)
during fiscal 1998 and generated 18 percent growth in sales, as average room
rates climbed four percent to $99. Occupancy dipped slightly to 83 percent
resulting in a four percent increase in REVPAR.

Fairfield Inn, our economy brand, reflected an increase of 10 percent in
sales. A four percent increase in average room rates to $56 was offset by a
slight decline in occupancy to 74 percent, resulting in a three percent increase
in REVPAR. Fairfield added 35 franchised properties (3,156 rooms) during fiscal
1998.

Marriott Vacation Club International posted an eight percent increase in the
number of timeshare intervals sold and nine percent growth in financially
reported sales under the percentage of completion method. The sales increase
resulted from strong performance in several locations, including sales at five
new locations opened during the year. Operating profit increased due to
increased profit from resort management and an increase in pre-tax gains on the
sale of timeshare notes receivable of $17 million over 1997.

MARRIOTT SENIOR LIVING SERVICES reported a sales increase of seven percent in
fiscal 1998 over 1997, primarily due to the opening of 24 communities during
1998 and maintaining 94 percent occupancy for comparable properties, partially
offset by the reduction in recorded sales resulting from properties sold subject
to long-term management agreements during 1997. Operating profit declined from
$32 million to $15 million mainly due to "ownership profits" from 29 Forum
properties sold to Host Marriott Corporation (Host Marriott) on June 21, 1997
being replaced with "managed operating profits." This decrease was partially
offset by the recognition in 1998 of $9 million of pre-tax gains relating to
sales of properties subject to long-term operating agreements, compared to $5
million in 1997.

MARRIOTT DISTRIBUTION SERVICES doubled its operating profit in 1998, from $7
million to $17 million. This was achieved despite a 24 percent reduction in
sales from $1,543 million to $1,178 million. The segment benefited from
consolidation of its food distribution facilities, and the realization of
operating efficiencies following a period of rapid expansion in 1996-97. See
"Liquidity and Capital Resources" below for a discussion of the possible future
impact to MDS of the bankruptcy filing of a major MDS customer.

CORPORATE EXPENSES rose by 25 percent to $110 million, primarily due to $12
million of year 2000 costs and personnel costs of additional corporate staff
required following continued growth of our operating segments.

INTEREST EXPENSE increased by 36 percent to $30 million due to share
repurchases and capital expenditures. Interest income of $36 million was 13
percent higher than 1997 primarily due to higher interest on cash reserves.

INCOME TAXES. Our effective income tax rate decreased to 38.25 percent from
39 percent in 1997, primarily due to the increased proportion of foreign
operations in countries with relatively low effective tax rates.

1997 Compared to 1996

Net income increased 20 percent to $324 million in fiscal 1997, on a sales
increase of 26 percent to $7 billion, driven by contributions from new unit
expansion, including acquisitions, and strong profit growth for the Lodging
segment.

Systemwide sales increased by 33 percent to $13.2 billion, driven primarily by
a 31 percent increase in lodging rooms and REVPAR increases in excess of
inflation.

LODGING

(in millions except REVPAR,
properties and units)
-----------------------------
Percentage
1997 1996 increase
----------- ----------- ----------

Sales.............................................. $ 5,247 $ 4,340 21%
REVPAR (all brands)................................ $ 89 $ 82 9%
Operating profit................................... $ 569 $ 452 26%

Properties......................................... 1,510 1,183 28%
Units.............................................. 300,437 229,514 31%

Our operating profit was up on higher sales, benefiting from favorable
conditions in the U.S. lodging market, and contributions from new properties.
The sales increase resulted from REVPAR growth across all comparable U.S.
properties that we manage and the addition of new hotels, including the
acquisition of Renaissance Hotel Group N.V. (RHG). This growth resulted in
higher base management and franchise fees which were partially offset by reduced
financing income, due to lower pre-tax gains on the sale of timeshare notes
receivable during 1997. REVPAR growth also contributed to higher house profits
which resulted in higher incentive management fees.

Profits for Marriott Hotels, Resorts and Suites increased in excess of 20
percent in fiscal 1997 on sales growth of five percent, which reflects the net
addition of two units (881 rooms) in the U.S. and eight units (2,903 rooms)
internationally. Comparable U.S. hotels that we operate achieved REVPAR
increases of nine percent as room rates grew by nine percent to $129. These
sales gains, coupled with profit margin improvements, generated substantially
higher incentive management fees at many properties. Profits for international
hotels also were higher, primarily because of contributions from new properties
in 1996 and 1997.

Ritz-Carlton reported an increase in average room rates of five percent to
$185 and an increase in occupancy of four percentage points to 79 percent,
resulting in a 10 percent increase in REVPAR.

The Renaissance, New World and Ramada International brands, contributed $445
million in sales since the March 29, 1997 acquisition. REVPAR for U.S.
Renaissance hotels that we operate increased six percent due to higher room
rates and a slight decrease in occupancy.

Courtyard, our moderate-price brand, added 53 properties (6,473 rooms) during
fiscal 1997. Courtyard posted a 17 percent increase in sales, as average room
rates and REVPAR were up eight percent, while occupancy remained at 81 percent.

Residence Inn, our extended-stay brand, added 34 properties (4,129 rooms)
during fiscal 1997 and generated 15 percent growth in sales, as average room
rates climbed eight percent to $95. Occupancy dipped slightly to 84 percent
resulting in a six percent increase in REVPAR.

Fairfield Inn and Suites, our economy brand, reflected an increase of 13
percent in sales. A two percent increase in average room rates to $51 was
offset by a slight decline in occupancy to 75 percent, resulting in no change in
REVPAR. Fairfield added 60 properties (5,603 rooms) during fiscal 1997,
primarily through franchising.

Marriott Vacation Club International posted a 21 percent increase in the
number of timeshare intervals sold and 51 percent growth in financially reported
sales under the percentage of completion method. The sales increase resulted

from strong performance in several locations, including Marriott Vacation Club
International's first European resort in Marbella, Spain, as well as Fort
Lauderdale and Orlando, Florida and Hilton Head, South Carolina. Increased
profits from resort development were offset by a reduction from 1996 to 1997 in
pre-tax gains arising on the sale of timeshare notes receivable.

MARRIOTT SENIOR LIVING SERVICES reported a sales increase of 20 percent in
fiscal 1997 over 1996, primarily due to the opening of 17 communities during
1997 and a two percentage point increase in occupancy, to 95 percent, for
comparable properties. Operating profit declined as "ownership profits" were
replaced with "managed operating profits" for 43 properties that were sold to
investors since the beginning of 1996. This decrease was partially offset by
the recognition of $5 million of pre-tax gains relating to these and other real
estate transactions.

MARRIOTT DISTRIBUTION SERVICES generated a sharp increase in sales for fiscal
1997 as a result of the addition of several major restaurant customers and the
net addition of two new distribution centers. Profits, however, were lower in
fiscal 1997 due to start-up costs associated with the new centers, as well as
costs of integrating the new business into existing distribution centers.

CORPORATE EXPENSES rose 21 percent in 1997, 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.

INTEREST EXPENSE decreased 41 percent from fiscal 1996 due to the sale of the
29 Forum Group communities to Host Marriott. Interest income declined 14
percent, primarily due to collections on, and sales of, notes receivable.

INCOME TAXES. Our effective income tax rate increased to 39 percent in 1997,
compared to 38 percent in 1996, primarily due to the RHG acquisition.

LIQUIDITY AND CAPITAL RESOURCES

Our goal is to add 150,000 hotel rooms to our worldwide system over the five
year period from 1998 to 2002. We believe that we have access to sufficient
financial resources to finance our growth, as well as to support our ongoing
operations and meet debt service and other cash requirements. Nonetheless, our
ability to sell properties that we develop, and the ability of hotel or senior
living community developers to build or acquire new Marriott properties, which
are important parts of our growth plans, are partially dependent on the
availability and price of capital. We are monitoring the status of the capital
markets, which have shown substantial volatility during the past year, and are
evaluating the effect, if any, that capital market conditions may have on our
ability to execute our announced growth plans.

Cash From Operations
- --------------------

Cash from operations was $605 million in 1998, $542 million in 1997 and $496
million in 1996. The increase in our operating cash flow from 1997 primarily
reflects higher earnings in 1998. While our timesharing business generates
strong operating cash flow, annual amounts are affected by the timing of cash
spent on the acquisition and development of new resorts and cash received from
purchaser financing. We do not include interval sales we finance in operating
cash flow until we collect the cash or the notes are sold for cash.

Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization
(EBITDA) was $802 million, $679 million and $561 million for fiscal years 1998,
1997 and 1996, respectively. This represents an 18 percent increase in 1998 and
a 21 percent increase in 1997. We consider EBITDA to be an indicator of our
operating performance because EBITDA can be used to measure our ability to
service debt, fund capital expenditures and expand our business. Nevertheless,
you should not consider EBITDA an alternative to net income, operating profit,
cash flows from operations, or any other operating or liquidity measure
prescribed by generally accepted accounting principles. A substantial portion of
our EBITDA is based on fixed dollar amounts or percentages of sales. This
includes lodging base management and franchise fees and land rent. With more
than 1,650 hotel properties, no single property is critical to our financial
results.

Our ratio of current assets to current liabilities was .94 at January 1, 1999,
compared to .79 at January 2, 1998. Each of our businesses minimizes working
capital through strict credit-granting policies, aggressive collection efforts
and high inventory turnover.

Investing Activities Cash Flows
- -------------------------------

ACQUISITIONS. We completed three major acquisitions during the last three
years: Renaissance Hotel Group N.V., a premier operator and franchisor of
approximately 150 hotels under three brands in 38 countries; Forum Group, Inc.
(Forum), a leading provider of senior living services; and a 98 percent interest
in The Ritz-Carlton Hotel Company LLC, one of the world's premier luxury hotel
brands and management companies. We expect to acquire the remaining two percent
of The Ritz-Carlton Hotel Company LLC within the next several years.

DISPOSITIONS. On December 29, 1998, we agreed to sell and leaseback, under
long-term, limited-recourse leases, 17 hotels for approximately $202 million in
cash. At the same time, we agreed to pay security deposits of $21 million which
will be refunded at the end of the leases. As of January 1, 1999, four of the
properties had been sold, resulting in a sales price which exceeded the net book
value by $13 million, which we will recognize as a reduction of rent expense
over the 15-year initial lease terms.

During 1998, we agreed to sell, subject to long-term management agreements,
eight lodging properties and 11 senior living communities for $184 million and
$178 million, respectively. As of January 1, 1999, sales of five of these hotels
and five of these senior living communities had closed, for a total of $181
million.

term, limited-recourse leases, another nine limited service hotels for
approximately $129 million in cash. At the same time, we agreed to pay security
deposits of $13 million, which will be refunded at the end of the leases. At
January 1, 1999, all of these nine properties had been sold, resulting in a
sales price which exceeded the net book value by $17 million, which is
recognized as a reduction of rent expense over the 15-year initial lease terms.
We can renew all of these leases at our option.

On April 11, 1997, we sold five senior living communities for approximately
$79 million in cash. On September 12, 1997, we agreed to sell another seven
senior living communities for approximately $95 million in cash. All of these
properties have been sold, and we will continue to operate these communities
under long-term management agreements.

On June 21, 1997, we sold 29 senior living communities acquired as part of the
Forum acquisition, to Host Marriott for approximately $550 million, resulting in
no gain or loss. The consideration included approximately $50 million to be
received subsequent to 1997 as expansions at certain communities are completed.
The $500 million of consideration received during 1997 consisted of $222 million
in cash, $187 million of outstanding debt and $91 million of notes receivable
bearing interest at nine percent which were repaid on April 1, 1998. Under the
terms of the sale, Host Marriott purchased all of the common stock of Forum
which, at the time of the sale, owned the 29 communities, certain working
capital and associated debt. We continue to operate these communities under
long-term management agreements.

CAPITAL EXPENDITURES AND OTHER INVESTMENTS. Capital expenditures in 1998,
1997 and 1996 of $937 million, $520 million and $293 million, respectively,
included construction and development of new senior living communities and
Courtyard, Residence Inn and TownePlace Suites properties. Over time, we expect
to sell certain lodging and senior living service properties under development,
or to be developed, while continuing to operate them under long-term agreements.

We also expect to continue to make other investments to grow our businesses,
including loans, minority equity investments and development of new timeshare
resorts in connection with adding units to our Lodging business. We also expect
to continue to invest in the development of new senior living communities.

We have made loans to owners of hotel and senior living properties which we
operate or franchise. At January 1, 1999, and January 2, 1998, loans outstanding
under this program totaled $213 million and $351 million, respectively.
Unfunded commitments aggregating $271 million were outstanding at January 1,
1999. These loans are typically secured by mortgages on the projects. We
participate in a program with an unaffiliated lender in which we may partially
guarantee loans made to facilitate third party ownership of hotels and senior
living services communities which we operate or franchise.

Most of our operating agreements require that specified percentages of sales
be set aside for renovation and refurbishment of the properties.

Cash From Financing Activities
- ------------------------------

In November 1998 we issued, through a private placement, $400 million of
unsecured senior notes (the Senior Notes) as follows:

Series Face Coupon Maturity
- -------------- ------------- ------------ -------------
(in millions)

A $ 200 6 5/8 % 2003

B $ 200 6 7/8 % 2005

We received $396 million in proceeds, which reflects the original issue
discount and the initial purchasers' discount. We have agreed to promptly make
and complete a registered exchange offer for the Senior Notes and, if required,
to implement a resale shelf registration statement. If we fail to do so on a
timely basis, we will pay additional interest to the Senior Note holders.

Non-interest bearing cash advances to or from Old Marriott were made prior to
the Spinoff to allow both the Company and Old Marriott to meet their cash
requirements. Through such advances, we had access to funds from Old Marriott's
$1.5 billion revolving credit facility and commercial paper program.

In 1996, Old Marriott received $288 million from the issuance of zero coupon
subordinated Liquid Yield Option Notes (LYONs) which have an aggregate maturity
value of $540 million in 2011. Each $1,000 LYONs was issued at a discount
representing a yield to maturity of 4.25 percent. Upon consummation of the
Spinoff, we assumed the LYONs, and SMS assumed a nine percent share of the LYONs
obligation. We calculated this percentage based on an estimate of the relative
equity values of SMS and the Company prior to the Spinoff. Each LYON is now
convertible into 17.52 shares of our Class A Common Stock and 2.19 shares of SMS
common stock. We remain liable to the holders of the LYONs for any payments that
SMS fails to make on its allocable portion.

In March, 1998 and February, 1999, respectively, we entered into $1.5 billion
and $500 million multicurrency revolving credit facilities. As of January 1,
1999, there were $73 million of letters of credit outstanding under the first
facility. The facilities also serve as a backstop for our commercial paper
program, which had an outstanding balance of $426 million at January 1, 1999.
The facilities have remaining terms of four and five years, respectively.
Borrowings bear interest at LIBOR plus a spread, based on our public debt
rating. Additionally, we pay annual fees on the facilities at a rate also based
on our public debt rating.

SHARE REPURCHASES. We purchased 13.7 million of our shares in the period from
the Spinoff through year end at a cost of $398 million. As of January 1, 1999,
we are authorized by our Board of Directors to purchase a further 6.3 million
shares.

DIVIDENDS. We declared and paid a quarterly dividend of 4.5c per share for
the first fiscal quarter of 1998, and 5c per share for the second, third, and
fourth fiscal quarters of 1998.

OTHER MATTERS

Conversion of Common Stock

On May 21, 1998, we converted, on a one-for-one-basis, all shares of our
outstanding Common Stock into shares of our Class A Common Stock. Our Board of
Directors took this action under authority granted by our certificate of
incorporation, as a result of a shareholder vote taken at our 1998 annual
meeting of shareholders.

Conversion of Host Marriott Corporation into a Real Estate Investment Trust

In December 1998, Host Marriott reorganized its business operations to qualify
as a real estate investment trust (REIT). In conjunction with its conversion to
a REIT, Host Marriott spun off, in a taxable transaction, a new company called
Crestline Capital Corporation (Crestline), acquired a portfolio of luxury hotels
for $1.5 billion, and completed partnership roll-ups representing new
acquisitions approximating $650 million. As part of the Crestline spinoff, Host
Marriott transferred to Crestline all of the senior living communities
previously owned by Host Marriott, and Host Marriott entered into lease or
sublease agreements with Crestline for substantially all of Host Marriott's
lodging properties, including the properties acquired in the acquisition and
roll-up transactions described above. Our lodging and senior living community
management and franchise agreements with Host Marriott were also assigned to
Crestline. In the case of the lodging agreements, Host Marriott remains
obligated under such agreements in the event that Crestline fails to perform its
obligations thereunder.

We continue to have the right to purchase up to 20 percent of Host Marriott's
outstanding common stock upon the occurrence of certain events generally
involving a change of control of Host Marriott. This right expires in 2017, and
Host Marriott has granted an exception to the ownership limitations in its
charter to permit full exercise of this right, subject to certain conditions
related to ownership limitations applicable to REITs generally.

We believe that these transactions have not materially changed our business or
legal rights as they previously existed with Host Marriott, although there can
be no assurance that the new structure will not adversely affect us under future
circumstances.

Boston Market

In 1996, MDS became the exclusive provider of distribution services to Boston
Chicken, Inc. (BCI). In May 1998, BCI disclosed that its independent auditors
had expressed substantial doubt about BCI's ability to continue as a going
concern. On October 5, 1998, BCI and its Boston Market-controlled subsidiaries
filed voluntary bankruptcy petitions for protection under Chapter 11 of the
Federal Bankruptcy Code in the U.S. Bankruptcy Court in Phoenix (the Court), and
announced that it would close approximately 16 percent of the restaurants in the
Boston Market chain. Subsequently, a franchisee of BCI announced closings of a
further five percent of the chain's restaurants. MDS continues to distribute to
BCI and has been receiving payment of post-petition balances in accordance with
the terms of its contract with BCI. In addition, the Court approved, and MDS
has been paid substantially all of its pre-petition accounts receivable
balances. The impact of BCI's bankruptcy on the Company depends on numerous
uncertainties, and we are still in the process of assessing the potential effect
on our future results of operations and financial position. If our contract
were to terminate, or if BCI ceased or further curtailed its operations: (i) MDS
might be unable to recover up to $32 million in contract investment, receivables
and inventory; and (ii) MDS could have more warehouse capacity and rolling stock
than it needs.

Inflation

Since inflation has been moderate in recent years, inflation has not had a
significant impact on our businesses.

Year 2000 Readiness Disclosure

The "Year 2000 problem" has arisen because many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications
could fail or create erroneous results.

STATE OF READINESS. We have adopted the following eight-step process toward
Year 2000 readiness:

1. Awareness: fostering understanding of, and commitment to, the problem
and its potential risks;

2. Inventory: identifying and locating systems and technology components
that may be affected;

3. Assessment: reviewing these components for Year 2000 compliance, and
assessing the scope of Year 2000 issues;

4. Planning: defining the technical solutions and labor and work plans
necessary for each affected system;

5. Remediation/Replacement: completing the programming to renovate or
replace the problem software or hardware;

6. Testing and Compliance Validation: conducting testing, followed by
independent validation by a separate internal verification team;

7. Implementation: placing the corrected systems and technology back into
the business environment; and

8. Quality Assurance: utilizing an internal audit team to review
significant projects for adherence to quality standards and program
methodology.

We have grouped our systems and technology into three categories for purposes
of Year 2000 compliance:

1. Information resource applications and technology (IT Applications) --
enterprise-wide systems supported by the Company's centralized
information technology organization (IR);

2. Business-initiated systems (BIS) -- systems that have been initiated by
an individual business unit, and that are not supported by IR; and

3. Building Systems -- non-IT equipment at properties that use embedded
computer chips, such as elevators, automated room key systems and HVAC
equipment.

We are prioritizing our efforts based on how severe an effect noncompliance
would have on customer service, core business processes or revenues, and whether
there are viable, non-automated fallback procedures (System Criticality).

We measure the completion of each phase based on documented and quantified
results weighted for System Criticality. As of January 1, 1999, the Awareness
and Inventory phases were complete for IT Applications and substantially
complete for BIS and Building Systems. For IT Applications, the Assessment,
Planning, Remediation/Replacement, and Testing phases were each over 95 percent
complete, and Compliance Validation had been completed for nearly half of key
systems, with most of the remaining work in its final stage. BIS and Building
Systems, Assessment and Planning are nearly complete. Remediation/Replacement
and Testing is 20 percent complete for BIS and we are on track for completion of
initial Testing of Building Systems by the end of the first quarter of 1999.
Compliance Validation is in progress for both BIS and Building Systems. We
remain on target for substantial completion of Remediation/Replacement and
Testing for System Critical BIS and Building Systems by June 1999 and September
1999, respectively. Quality Assurance is in progress for IT Applications, BIS
and Building Systems.

Year 2000 compliance communications with our significant third party
suppliers, vendors and business partners, including our franchisees are ongoing.
Our efforts are focused on the connections most critical to customer service,
core business processes and revenues, including those third parties that support
our most critical enterprise-wide IT Applications, franchisees generating the
most revenues, suppliers of the most widely used Building Systems and BIS, the
top 100 suppliers, by dollar volume, of non-IT products, and financial
institutions providing the most critical payment processing functions. We have
received responses from a majority of the firms in this group. A majority of
these respondents have either given assurances of timely Year 2000 compliance or
have identified the necessary actions to be taken by them or by us to achieve
timely Year 2000 compliance for their products.

We have established a common approach for testing and addressing Year 2000
compliance issues for our managed and franchised properties. This includes
guidance for properties we operate, and a Year 2000 "Toolkit" for franchisees
containing relevant Year 2000 compliance information. We are also utilizing a
Year 2000 best-practices sharing system.

COSTS. Many of the costs of Year 2000 compliance will be reimbursed to us
or otherwise paid directly by owners and clients pursuant to existing contracts.
We estimate that we will bear approximately $40-$50 million of the pre-tax costs
to address the Year 2000 problem. These costs, approximately $12 million (on a
pre-tax basis) of which have been incurred through January 1, 1999, have been
and will be expensed as incurred.

In addition, we had previously planned and/or begun implementing several
system replacement projects to modernize and improve our systems. The Year 2000
problem heightened the need for the timely completion and some project schedules
have been accelerated. These project costs have been included in our budgeting
process and internal forecasts and already form part of our financial plans.
Like the Year 2000 costs referred to in the preceding paragraph, many of these
systems replacement costs will be reimbursed to us or otherwise paid directly by
owners and clients pursuant to existing contracts. We estimate that we will bear
approximately $45-$50 million of the pre-tax costs of these system replacements,
most of which will be capitalized and amortized over the useful lives of the
assets.

The costs we will actually incur will depend on a number of factors which
cannot be accurately predicted, including the extent and difficulty of the
Remediation and other work to be done, the availability and cost of consultants,
the extent of testing required to demonstrate Year 2000 compliance, and our
ability to timely collect all payments due to us under existing contracts.

YEAR 2000 CONTINGENCY PLANS. Our centralized services and the properties we
operate, already have contingency plans in place covering a variety of possible
events, including natural disasters, interruption of utility service, general
computer failure, and the like. We are reviewing these contingency plans for
modifications to address specific Year 2000 issues, and expect modification of
master contingency plans to be substantially complete by the end of the second
quarter of 1999, with conforming changes to be added to individual unit
contingency plans during the third quarter.

RISKS POSED BY OUR YEAR 2000 ISSUES. We currently believe that the Year
2000 problem will not have a material adverse effect on us, our business or our
financial condition. However, we cannot assure you that our Year 2000
remediation or remediation by others will be completed properly and on time, and
failure to do so could materially and adversely effect us. We also cannot
predict the actual effects of the Year 2000 problem on us, which depends on a
number of uncertainties such as:

. the factors listed above under "Costs";

. whether our franchisees and other significant third parties address
the Year 2000 issue properly and on time;

. whether broad-based or systemic economic failures may occur, which
could include

. disruptions in passenger transportation or transportation systems
generally;

. loss of utility and/or telecommunications services;

. errors or failures in financial transactions or payment
processing systems such as credit cards;

. the severity and duration of such failures; and

. whether we are sued or become subject to other proceedings regarding
any Year 2000-related events and the outcome of any such suit or
proceedings.

As part of our contingency planning, we are analyzing the most reasonably
likely worst-case scenario that could result from Year 2000-related failures.
Our best estimate of this scenario, based on current information, follows.
Failure by others to achieve Year 2000 compliance could cause short-term
disruptions in travel patterns, caused by actual or perceived problems with
travel systems (such as the air traffic control system), and temporary
disruptions in the supply of utility, telecommunications and financial services,
which may be local or regional in scope. These events could lead travelers to
accelerate travel to late 1999, postpone travel to later in 2000 or cancel
travel plans, which could in turn affect lodging patterns and occupancy. Such
failures could be more pronounced in some areas outside the U.S. where we
understand that Year 2000 compliance efforts may not be as advanced. In
addition, failure by us or others to achieve Year 2000 compliance could cause
short-term operational inconveniences and inefficiencies for us. This may
temporarily divert management's time and attention from ordinary business
activities. We will, to the extent reasonably achievable, seek to prevent and/or
mitigate these effects through our compliance and contingency planning efforts.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates. We manage our
exposure to this market risk through our monitoring of available financing
alternatives and our development and application of credit granting policies.
Our strategy to manage exposure to changes in interest rates is unchanged from
January 2, 1998. Furthermore, we do not foresee any significant changes in our
exposure to fluctuations in interest rates or in how such exposure is managed in
the near future.

The following sensitivity analysis displays how our earnings and the fair
values of certain instruments we hold are affected by changes in interest rates.

We hold notes receivable that earn interest at variable rates.
Hypothetically, an immediate one percentage point change in interest rates would
change annual interest income by $3 million based on each of the balances of
these notes receivable outstanding at January 1, 1999 and January 2, 1998.

Changes in interest rates also impact the fair value of our long-term fixed
rate debt and long-term fixed rate notes receivable. Based on the balances
outstanding at January 1, 1999 and January 2, 1998, a hypothetical immediate one
percentage point change in interest rates would change the fair value of our
long-term fixed rate debt by $24 million and $5 million, respectively, and would
change the fair value of long-term fixed rate notes receivable by $2 million and
$5 million, respectively.

Our commercial paper has been excluded from the above sensitivity analysis.
Although commercial paper is classified as long-term debt based on our ability
and intent to refinance it on a long-term basis, all commercial paper matures
within five months of year-end. As a result, there would be no material
expected change in interest expense or fair value following a reasonably
expected change in interest rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following financial information is included on the pages indicated:

Page
----------

Report of Independent Public Accountants................................ 25
Consolidated Statement of Income........................................ 26
Consolidated Balance Sheet.............................................. 27
Consolidated Statement of Cash Flows.................................... 28
Consolidated Statement of Comprehensive Income.......................... 29
Consolidated Statement of Shareholders' Equity.......................... 30
Notes to Consolidated Financial Statements.............................. 31-46

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Marriott International, Inc.:

We have audited the accompanying consolidated balance sheet of Marriott
International, Inc. as of January 1, 1999 and January 2, 1998, and the related
consolidated statements of income, cash flows and comprehensive income for each
of the three fiscal years in the period ended January 1, 1999 and the
consolidated statement of shareholders' equity for the period from March 27,
1998 to January 1, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Marriott
International, Inc. as of January 1, 1999 and January 2, 1998, and the results
of its operations and its cash flows for each of the three fiscal years in the
period ended January 1, 1999, in conformity with generally accepted accounting
principles.

As explained in the notes to the consolidated financial statements, the Company
has given retroactive effect to the change in accounting for the working capital
and sales of managed hotels and managed senior living communities.

ARTHUR ANDERSEN LLP

Washington, D.C.
January 28, 1999

MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
FISCAL YEARS ENDED JANUARY 1, 1999, JANUARY 2, 1998 AND JANUARY 3, 1997
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

1998 1997 1996
---------- ---------- ----------
(52 weeks) (52 weeks) (53 weeks)

SALES.............................................. $ 7,968 $ 7,236 $ 5,738

OPERATING COSTS AND EXPENSES....................... 7,232 6,627 5,230
---------- ---------- ----------
OPERATING PROFIT BEFORE CORPORATE EXPENSES
AND INTEREST.................................... 736 609 508
Corporate expenses................................. (110) (88) (73)
Interest expense................................... (30) (22) (37)
Interest income.................................... 36 32 37
---------- ---------- ----------
INCOME BEFORE INCOME TAXES......................... 632 531 435
Provision for income taxes......................... 242 207 165
---------- ---------- ----------
NET INCOME......................................... $ 390 $ 324 $ 270
========== ========== ==========

1998 1997 1996
---------- ---------- ----------
EARNINGS PER SHARE (pro forma, unaudited)
------------------------

Basic Earnings Per Share............................ $ 1.56 $ 1.27 $ 1.06
========== ========== ==========
Diluted Earnings Per Share.......................... $ 1.46 $ 1.19 $ .99
========== ========== ==========

See Notes To Consolidated Financial Statements

MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
JANUARY 1, 1999 AND JANUARY 2, 1998
($ IN MILLIONS)

January 1, January 2,
1999 1998
------------ ------------

ASSETS
Current assets

Cash and equivalents........................................ $ 390 $ 208
Accounts and notes receivable............................... 605 489
Inventories, at lower of average cost or market............. 75 91
Prepaid taxes............................................... 200 159
Other....................................................... 63 45
------------ ------------
1,333 992
------------ ------------

Property and equipment........................................ 2,275 1,537
Intangible assets............................................. 1,712 1,448
Investments in affiliates..................................... 228 530
Notes and other receivables................................... 434 414
Other......................................................... 251 240
------------ ------------
$ 6,233 $ 5,161
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable............................................ $ 497 $ 473
Accrued payroll and benefits................................ 345 323
Self-insurance.............................................. 42 57
Other payables and accruals................................. 528 397
------------ ------------
1,412 1,250
------------ ------------

Long-term debt................................................ 944 112
Self-insurance................................................ 179 196
Other long-term liabilities................................... 805 707
Convertible subordinated debt................................. 323 310
Shareholders' equity
Class A common stock, 255.6 million shares issued........... 3 -
Additional paid-in capital.................................. 2,713 -
Retained earnings........................................... 218 -
Treasury stock, at cost..................................... (348) -
Accumulated other comprehensive income...................... (16) -
Investments and net advances from Old Marriott.............. - 2,586
------------ ------------
2,570 2,586
------------ ------------
$ 6,233 $ 5,161
============ ============

See Notes To Consolidated Financial Statements

MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEARS ENDED JANUARY 1, 1999, JANUARY 2, 1998 AND JANUARY 3, 1997
($ IN MILLIONS)

1998 1997 1996
----------- ------------ ------------
(52 weeks) (52 weeks) (53 weeks)
OPERATING ACTIVITIES

Net income......................................... $ 390 $ 324 $ 270
Adjustments to reconcile to cash provided by
operations:
Depreciation and amortization.................. 140 126 89
Income taxes................................... 76 64 69
Timeshare activity, net........................ 28 (118) (95)
Other.......................................... (22) 88 61
Working capital changes:
Accounts receivable............................ (104) (190) 18
Inventories.................................... 15 (3) (17)
Other current assets........................... (16) (15) 11
Accounts payable and accruals.................. 98 266 90
----------- ------------ ------------
Cash provided by operations........................ 605 542 496
----------- ------------ ------------
INVESTING ACTIVITIES
Capital expenditures............................... (937) (520) (293)
Acquisitions....................................... (48) (859) (307)
Dispositions....................................... 332 571 65
Loan advances...................................... (48) (95) (89)
Loan collections and sales......................... 169 47 296
Other.............................................. (192) (190) (160)
----------- ------------ ------------
Cash used in investing activities.................. (724) (1,046) (488)
----------- ------------ ------------
FINANCING ACTIVITIES
Issuance of long-term debt......................... 1,294 16 -
Repayment of long-term debt........................ (473) (15) (133)
Issuance of convertible subordinated debt.......... - - 288
Issuance of Class A common stock................... 15 - -
Dividends paid..................................... (37) - -
Purchase of treasury stock......................... (398) - -
Advances (to) from Old Marriott.................... (100) 576 (132)
----------- ------------ ------------
Cash provided by financing activities.............. 301 577 23
----------- ------------ ------------
INCREASE IN CASH AND EQUIVALENTS...................... 182 73 31
CASH AND EQUIVALENTS, beginning of year............... 208 135 104
----------- ------------ ------------
CASH AND EQUIVALENTS, end of year..................... $ 390 $ 208 $ 135
=========== ============= =============

See Notes To Consolidated Financial Statements

MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FISCAL YEARS ENDED JANUARY 1, 1999, JANUARY 2, 1998 AND JANUARY 3, 1997
($ IN MILLIONS)

1998 1997 1996
----------- ----------- -----------
(52 weeks) (52 weeks) (53 weeks)
(pro forma, unaudited)
--------------------------

Net income.................................................... $ 390 $ 324 $ 270

Other comprehensive income (loss):
Foreign currency translation adjustments.................... (3) (10) (12)
Other....................................................... 6 1 -
----------- ----------- ------------
Total other comprehensive income (loss)....................... 3 (9) (12)
----------- ----------- ------------
Comprehensive income.......................................... $ 393 $ 315 $ 258
=========== =========== ============

See Notes To Consolidated Financial Statements

MARRIOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM MARCH 27, 1998 TO JANUARY 1, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

Common Class A Additional Accumulated other
shares common paid-in Retained Treasury stock, comprehensive
outstanding stock capital earnings at cost income
- -----------------------------------------------------------------------------------------------------------------------

255.6 Spinoff at March 27, 1998....... $ 3 $ 2,711 $ - $ - $ (23)
- Net income, after the Spinoff... - - 301 - -
- Dividends ($.195 per share)..... - - (49) - -
1.5 Employee stock plan issuance and
other, after the Spinoff........ - 2 (34) 50 7
(13.7) Purchase of treasury stock...... - - - (398) -
- -----------------------------------------------------------------------------------------------------------------------
243.4 Balance, January 1, 1999........ $ 3 $ 2,713 $ 218 $ (348) $ (16)
=======================================================================================================================

See Notes To Consolidated Financial Statements

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements present the results of operations,
financial position and cash flows of Marriott International, Inc. (together with
its subsidiaries, we, us or the Company), formerly New Marriott MI, Inc., as if
it were a separate entity for all periods presented. During periods prior to
March 27, 1998, we were a wholly owned subsidiary of the former Marriott
International, Inc. (Old Marriott) and financial statements for such periods
have been prepared on a combined basis.

On March 27, 1998, all of our issued and outstanding common stock was
distributed, on a pro rata basis, as a special dividend (the Spinoff) to
holders of common stock of Old Marriott, and the Company was renamed "Marriott
International, Inc." Old Marriott's historical cost basis in our assets and
liabilities has been carried over. Old Marriott received a private letter
ruling from the Internal Revenue Service that the Spinoff would be tax-free to
it and its shareholders. For each share of common stock in Old Marriott,
shareholders received one share of our Common Stock and one share of our Class A
Common Stock. On May 21, 1998, all outstanding shares of our Common Stock were
converted, on a one-for-one basis, into shares of our Class A Common Stock.

Also on March 27, 1998, Old Marriott was renamed Sodexho Marriott Services,
Inc. (SMS) and its food service and facilities management business was combined
with the North American operations of Sodexho Alliance, S.A. (Sodexho), a
worldwide food and management services organization.

For purposes of governing certain of the ongoing relationships between us and
SMS after the Spinoff and to provide for orderly transition, we entered into
various agreements with SMS including the Employee Benefits and Other Employee
Matters Allocation Agreement, Liquid Yield Option Notes (LYONs) Allocation
Agreement, Tax Sharing Agreement, Trademark and Trade Name License Agreement,
Noncompetition Agreement, Employee Benefit Services Agreement, Procurement
Services Agreement, Distribution Services Agreement, and other transitional
services agreements. Effective as of the Spinoff date, pursuant to these
agreements, we assumed sponsorship of certain of Old Marriott's employee benefit
plans and insurance programs and succeeded to Old Marriott's liability to LYONs
holders under the LYONs Indenture, nine percent of which was assumed by SMS.

All material intercompany transactions and balances between entities included
in these consolidated financial statements have been eliminated. Sales by us to
SMS of $434 million in 1998, $434 million in 1997, and $406 million in 1996 have
not been eliminated. Changes in Investments and Net Advances from Old Marriott
represent our net income, the net cash transferred between Old Marriott and us
and certain non-cash items.

Prior to the Spinoff, we operated as a unit of Old Marriott, utilizing Old
Marriott's centralized systems for cash management, payroll, purchasing and
distribution, employee benefit plans, insurance and administrative services. As
a result, substantially all cash received by us was deposited in and commingled
with Old Marriott's general corporate funds. Similarly, our operating expenses,
capital expenditures and other cash requirements were paid by Old Marriott and
charged directly or allocated to us. Certain assets and liabilities related to
our operations were managed and controlled by Old Marriott on a centralized
basis. Prior to the Spinoff such assets and liabilities were allocated to us
based on our use of, or interest in, those assets and liabilities. In our
opinion, the methods for allocating costs, assets and liabilities prior to the
Spinoff were reasonable. We now perform these functions independently and the
costs incurred have not been materially different from those allocated prior to
the Spinoff.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
financial statements, and the reported amounts of sales and expenses during the
reporting period. Accordingly, ultimate results could differ from those
estimates. Certain amounts have been reclassified to conform to the 1998
presentation.

Fiscal Year

Our fiscal year ends on the Friday nearest to December 31. The 1996 fiscal
year includes 53 weeks, while the 1998 and 1997 fiscal years include 52 weeks.

Revenue Recognition

Our sales include fees and reimbursed costs for properties managed by us,
together with sales by lodging properties and senior living communities owned or
leased by us, and sales of our other businesses. Fees comprise management fees
and franchise fees received from third party owners of lodging properties and
senior living communities. Reimbursed costs comprise costs recovered from
owners of hotels and senior living communities.

Change in Accounting Policy

On November 20, 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus on EITF 97-2 "Application of FASB
Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements."
EITF 97-2 addresses the circumstances in which a management entity may include
the sales and expenses of a managed entity in its financial statements. As a
result of EITF 97-2, and related discussions with the staff of the Securities
and Exchange Commission, in our 1998 fourth quarter we changed our accounting
policy to no longer include in our financial statements the working capital and
sales of managed hotels and managed senior living communities. The financial
statements for prior years have been restated. The change in accounting policy
resulted in reductions of each of sales and operating expenses by $1,810 million
and $1,529 million in 1997 and 1996, respectively, and each of assets and
liabilities by $396 million as of January 2, 1998, with no impact on operating
profit, net income, earnings per share, debt or equity.

Profit Sharing Plan

We contribute to a profit sharing plan for the benefit of employees meeting
certain eligibility requirements and electing participation in the plan.
Contributions are determined annually by the Board of Directors. We recognized
compensation cost of $45 million in 1998, $36 million in 1997 and $29 million in
1996.

Self-Insurance Programs

We are self-insured for certain levels of general liability, workers'
compensation, employment practices and employee medical coverage. Estimated
costs of these self-insurance programs are accrued at the present value of
projected settlements for known and anticipated claims.

Cash and Equivalents

We consider all highly liquid investments with a maturity of three months or
less at date of purchase to be cash equivalents.

New Accounting Standards

We adopted Statement of Financial Accounting Standards (FAS) No. 130,
"Reporting Comprehensive Income," in 1998 by adding a Consolidated Statement of
Comprehensive Income. The taxes applicable to other comprehensive income are
not material.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

We adopted FAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," in the fourth quarter of 1998, by increasing the number of
our reportable segments from two to three and presenting increased footnote
disclosure of segment information.

We will adopt FAS No. 133, "Accounting for Derivative Investments and Hedging
Activities," which we do not expect to have a material effect on our
consolidated financial statements, in the fourth quarter of 2000.

In April 1998 the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities." We will adopt SOP 98-5 in the first quarter of 1999 by expensing
pre-opening costs for Company owned lodging and senior living communities as
incurred.

RELATIONSHIPS WITH MAJOR CUSTOMERS

In December 1998, Host Marriott Corporation (Host Marriott) reorganized its
business operations to qualify as a real estate investment trust (REIT). In
conjunction with its conversion to a REIT, Host Marriott spun off, in a taxable
transaction, a new company called Crestline Capital Corporation (Crestline),
acquired a portfolio of luxury hotels for $1.5 billion, and completed
partnership roll-ups representing new acquisitions approximating $650 million.
As part of the Crestline spinoff, Host Marriott transferred to Crestline all of
the senior living communities previously owned by Host Marriott, and Host
Marriott entered into lease or sublease agreements with Crestline for
substantially all of Host Marriott's lodging properties, including the
properties acquired in the acquisition and roll-up transactions described above.
Our lodging and senior living community management and franchise agreements with
Host Marriott were also assigned to Crestline. In the case of the lodging
agreements, Host Marriott remains obligated under such agreements in the event
that Crestline fails to perform its obligations thereunder. The lodging
agreements now provide for us to manage the Marriott hotels, Ritz-Carlton
hotels, Courtyard hotels and Residence Inns leased by Crestline. Our consent is
required for Crestline to take certain major actions relating to leased
properties that we manage.

We recognized sales of $2,144 million, $1,700 million and $1,315 million and
operating profit before corporate expenses and interest of $197 million, $140
million and $95 million during 1998, 1997 and 1996, respectively, from the
lodging properties owned or leased by Host Marriott prior to the transactions
described above. Additionally, Host Marriott was a general partner in several
unconsolidated partnerships that owned lodging properties operated by us under
long-term agreements. We recognized sales of $712 million, $1,054 million and
$1,230 million and operating profit before corporate expenses and interest of
$83 million, $122 million and $121 million in 1998, 1997 and 1996, respectively,
from the lodging properties owned by these unconsolidated partnerships. We also
leased land to certain of these partnerships and recognized land rent income of
$24 million, $23 million and $22 million in 1998, 1997 and 1996, respectively.

We have provided Host Marriott with financing for a portion of the cost of
acquiring properties to be operated or franchised by us, and may continue to
provide financing to Host Marriott or Crestline in the future. The outstanding
principal balance of these loans was $9 million and $135 million at January 1,
1999 and January 2, 1998, respectively, and we recognized $5 million, $9 million
and $17 million in 1998, 1997 and 1996, respectively, in interest and fee income
under these credit agreements with Host Marriott.

We have guaranteed the performance of Host Marriott and certain of its
affiliates to lenders and other third parties. These guarantees were limited to
$70 million at January 1, 1999. No payments have been made by us pursuant to
these guarantees. We continue to have the right to purchase up to 20 percent of
Host Marriott's outstanding common stock upon the occurrence of certain events
generally involving a change of control of Host Marriott. This right expires in
2017, and Host Marriott has granted an exception to the ownership limitations in
its charter to permit full exercise of this right, subject to certain conditions
related to ownership limitations applicable to REITs generally. We lease land
to Host Marriott that has an aggregate book value of $264 million at January 1,
1999. Most of this land has been pledged to secure debt of these lessees. We
have agreed to defer receipt of rentals on this land, if necessary, to permit
the lessees to meet their debt service requirements.

We are party to agreements which provide for us to manage the senior living
communities owned by Crestline. We recognized sales of $173 million and $115
million and operating profit before corporate expenses and interest of $5
million and $1 million under these agreements during 1998 and 1997,
respectively.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

We are party to management agreements with entities owned or affiliated with
another hotel owner which provide for us to manage hotel properties owned or
leased by those entities. We recognized sales of $560 million and $407 million
during 1998 and 1997, respectively, from these properties.

PROPERTY AND EQUIPMENT

1998 1997
-------------------- --------------------
(in millions)

Land................................................................ $ 580 $ 425
Buildings and leasehold improvements................................ 732 486
Furniture and equipment............................................. 399 329
Timeshare properties................................................ 438 379
Construction in progress............................................ 490 230
------------------ ------------------
2,639 1,849
Accumulated depreciation and amortization........................... (364) (312)
------------------ ------------------
$ 2,275 $ 1,537
================== ==================

We record property and equipment at cost, including interest, rent and real
estate taxes incurred during development and construction. Interest capitalized
as a cost of property and equipment totaled $21 million in 1998, $16 million in
1997 and $9 million in 1996. We capitalize replacements and improvements that
extend the useful life of property and equipment. We compute depreciation
using the straight-line method over the estimated useful lives of the assets.
We amortize leasehold improvements over the shorter of the asset life or lease
term.

ACQUISITIONS AND DISPOSITIONS

The Ritz-Carlton Hotel Company LLC

On April 24, 1995, we acquired a 49 percent beneficial ownership interest in
The Ritz-Carlton Hotel Company LLC, which owns the management agreements on the
Ritz-Carlton hotels and resorts, the licenses for the Ritz-Carlton trademarks
and trade name as well as miscellaneous assets. The investment was acquired for
a total consideration of approximately $200 million. On March 19, 1998, we
increased our ownership interest in The Ritz-Carlton Hotel Company LLC to
approximately 98 percent for additional consideration of approximately $90
million. We expect to acquire the remaining two percent within the next several
years. We accounted for the acquisition using the purchase method of
accounting. We allocated the purchase cost to the assets acquired and the
liabilities assumed based on estimated fair values. We amortize the resulting
goodwill on a straight-line basis over 40 years. We amortize the amounts
allocated to management agreements on a straight-line basis over the estimated
lives of the agreements. Prior to March 19, 1998, we accounted for our
investment in The Ritz-Carlton Hotel Company LLC using the equity method of
accounting.

For periods prior to March 19, 1998, we included our income from The Ritz-
Carlton Hotel Company LLC in operating profit in the accompanying consolidated
statements of income. We received distributions of $17 million and $20 million
in 1997 and 1996 respectively, from The Ritz-Carlton Hotel Company LLC. Such
amounts were based upon an annual, cumulative preferred return on invested
capital.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Renaissance Hotel Group N.V.

On March 29, 1997, we acquired substantially all of the outstanding common
stock of Renaissance Hotel Group N.V. (RHG), an operator and franchisor of
approximately 150 hotels in 38 countries under the Renaissance, New World and
Ramada International brands. The purchase cost, of approximately $937 million,
was funded by Old Marriott. 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 as
follows:

(in millions)

Current assets................................................... $ 141
Management, franchise and license agreements..................... 380
Other assets..................................................... 7
Current liabilities.............................................. (119)
Long-term debt................................................... (12)
Other long-term liabilities...................................... (106)
Investments and net advances from Old Marriott................... (128)
Goodwill......................................................... 774
-----------------
Purchase cost.................................................... $ 937
=================

Goodwill is being amortized on a straight-line basis over 40 years. Amounts
allocated to management, franchise and license agreements are being amortized on
a straight-line basis over the lives of the agreements.

We included RHG's operating results from the date of acquisition. Our
unaudited pro forma sales and net income for 1997, calculated as if RHG had been
acquired at the beginning of 1997, were $7,383 million and $319 million,
respectively. Unaudited pro forma results of operations include an adjustment
for interest expense of $12 million, as if the acquisition borrowings had been
incurred by us. Amortization expense deducted in determining net income
reflects the impact of the excess of the purchase price over the net tangible
assets acquired. The unaudited pro forma combined results of operations do not
reflect our expected future results of operations.

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), an operator
of 43 senior living communities, 34 of which were owned or partially owned by
Forum, for total cash consideration of approximately $303 million. We accounted
for the acquisition using the purchase method of accounting. The purchase cost
was allocated to the assets acquired and liabilities assumed based on estimated
fair values. We amortize the resulting goodwill on a straight-line basis over
35 years.

On June 21, 1997, we sold 29 senior living communities acquired as part of the
Forum acquisition to Host Marriott for approximately $550 million, resulting in
no gain or loss. The consideration included approximately $50 million to be
received subsequent to 1997, as expansions at certain communities are completed.
The $500 million of consideration received during 1997 consisted of $222 million
in cash, $187 million of outstanding debt and $91 million of notes receivable
bearing interest at nine percent which were repaid on April 1, 1998. Under the
terms of the sale, Host Marriott purchased all of the common stock of Forum,
which at the time of the sale owned the 29 communities, certain working capital
and associated debt. We continue to operate these communities under long-term
management agreements.

Other Dispositions

On December 29, 1998, we agreed to sell and leaseback, under long-term,
limited-recourse leases, 17 hotels for approximately $202 million in cash. At
the same time, we agreed to pay security deposits of $21 million which will be
refunded at the end of the leases. As of January 1, 1999, four of the
properties had been sold, resulting in a sales price which exceeded the net book
value by $13 million, which we will recognize as a reduction of rent expense
over the 15-year initial lease terms.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During 1998, we agreed to sell, subject to long-term management agreements, a
further eight lodging properties and 11 senior living communities for
consideration of $184 million and $178 million, respectively. As of January 1,
1999, sales of five of these hotels and five of these senior living communities
had closed, for aggregate consideration of $181 million.

On April 3, 1997, we agreed to sell and leaseback, under long-term, limited-
recourse leases, 14 limited service hotels for approximately $149 million in
cash. At the same time, we agreed to pay security deposits of $15 million,
which will be refunded at the end of the leases. As of January 2, 1998, all of
the properties had been sold, resulting in a sales price which exceeded the net
book value by $20 million, which is recognized as a reduction of rent expense
over the 17-year initial lease terms. On October 10, 1997, we agreed to sell
and leaseback, under long-term, limited-recourse leases, another nine limited
service hotels for approximately $129 million in cash. At the same time, we
agreed to pay security deposits of $13 million, which will be refunded at the
end of the leases. At January 1, 1999, all of these nine properties had been
sold, resulting in a sales price which exceeded the net book value by $17
million, which is recognized as a reduction of rent expense over the 15-year
initial lease terms. We can renew all of these leases at our option.

On April 11, 1997, we sold five senior living communities for cash
consideration of approximately $79 million. On September 12, 1997, we agreed to
sell another seven senior living communities for cash consideration of
approximately $95 million. As of January 1, 1999, all 12 of these properties
had been sold, resulting in a pre-tax gain of $19 million, which is recognized
over a period of up to four years, as contingencies in the sales contracts
expire. We continue to operate all of these communities under long-term
management agreements.

During 1996, we sold and leased back four senior living communities for cash
consideration of approximately $53 million. The excess of the sales price over
the net book value of $9 million is recognized as a reduction of rent expense
over the 20-year initial lease terms.

We periodically sell, with limited recourse, notes receivable originated by
Marriott Vacation Club International in connection with the sale of timesharing
intervals. Net proceeds from these transactions totaled $165 million in 1998,
$68 million in 1997 and $148 million in 1996. Pre-tax gains from these
transactions increased by $17 million in 1998 compared to 1997. At January 1,
1999, we had a repurchase obligation of $76 million with respect to mortgage
note sales. Additionally, we sold, without recourse, first mortgage loans on
Marriott lodging and senior living properties of $18 million in 1997.

INTANGIBLE ASSETS

1998 1997
------------------- -------------------
(in millions)

Management, franchise and license agreements............................. $ 717 $ 595
Goodwill................................................................. 1,133 937
Other.................................................................... 23 23
------------------- -------------------
1,873 1,555
Accumulated amortization................................................. (161) (107)
------------------- -------------------
$ 1,712 $ 1,448
=================== ===================

We amortize intangible assets on a straight-line basis over periods of three
to 40 years. Amortization expense totaled $54 million in 1998, $42 million in
1997 and $12 million in 1996.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INCOME TAXES

Total deferred tax assets and liabilities as of January 1, 1999 and January 2,
1998, were as follows:

1998 1997
------------------ ------------------
(in millions)

Deferred tax assets...................................................... $ 457 $ 388
Deferred tax liabilities................................................. (417) (378)
------------------- -------------------
Net deferred taxes....................................................... $ 40 $ 10
=================== ===================

The tax effect of each type of temporary difference and carryforward that
gives rise to a significant portion of deferred tax assets and liabilities as of
January 1, 1999 and January 2, 1998 follows:

1998 1997
------------------- -------------------
(in millions)

Self-insurance........................................................... $ 91 $ 103
Employee benefits........................................................ 145 93
Deferred income.......................................................... 51 32
Other reserves........................................................... 28 27
Frequent stay programs................................................... 86 99
Partnership interests.................................................... (31) (31)
Property, equipment and intangible assets................................ (199) (195)
Finance leases........................................................... (44) (44)
Other, net............................................................... (87) (74)
------------------- -------------------
Net deferred taxes....................................................... $ 40 $ 10
=================== ===================

No provision for U.S. income taxes, or additional foreign taxes, has been made
on the cumulative unremitted earnings of non-U.S. subsidiaries ($138 million as
of January 1, 1999) because we consider these earnings to be permanently
invested. These earnings could become subject to additional taxes if remitted
as dividends, loaned to us or a U.S. affiliate, or if we sell our interests in
the affiliates. We cannot practically estimate the amount of additional taxes
which might be payable on the unremitted earnings.

The provision for income taxes consists of:

1998 1997 1996
------------------- ------------------- -------------------
(in millions)

Current - Federal....................................... $ 164 $ 168 $ 102
- State......................................... 35 34 21
- Foreign....................................... 18 28 13
------------------- ------------------- -------------------
217 230 136
------------------- ------------------- -------------------
Deferred - Federal...................................... 25 (19) 24
- State........................................ 1 (3) 4
- Foreign...................................... (1) (1) 1
------------------- ------------------- -------------------
25 (23) 29
------------------- ------------------- -------------------
$ 242 $ 207 $ 165
=================== =================== ===================

The current tax provision does not reflect the benefit attributable to us
relating to the exercise of employee stock options of $39 million in 1998, $38
million in 1997 and $27 million in 1996.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A reconciliation of the U.S. statutory tax rate to our effective income tax
rate follows:

1998 1997 1996
-------------------- -------------------- -------------------

U.S. statutory tax rate................................... 35.0% 35.0% 35.0%
State income taxes, net of U.S. tax benefit............... 4.1 4.0 4.0
Corporate-owned life insurance............................ (0.3) (0.8) (0.8)
Tax credits............................................... (4.2) (3.4) (2.2)
Goodwill amortization..................................... 1.6 1.6 0.6
Other, net................................................ 2.1 2.6 1.4
-------------------- -------------------- ------------------
Effective rate............................................ 38.3% 39.0% 38.0%
==================== ==================== ==================

Cash paid for income taxes, net of refunds, was $164 million in 1998, $143
million in 1997 and $96 million in 1996.

As part of the Spinoff, we entered into a tax sharing agreement with SMS which
reflects each party's rights and obligations with respect to deficiencies and
refunds, if any, of federal, state or other taxes relating to the business of
Old Marriott and the Company prior to the Spinoff.

During periods prior to the Spinoff, we were included in the consolidated
federal income tax return of Old Marriott. The income tax provision reflects
the portion of Old Marriott's historical income tax provision attributable to
our operations. We believe that the income tax provision, as reflected, is
comparable to what the income tax provision would have been if we had filed a
separate return during the periods presented.

LEASES

Our future obligations under operating leases at January 1, 1999 are summarized
below:

(in millions)
--------------------
Fiscal Year

1999................................................................................... $ 154
2000................................................................................... 149
2001................................................................................... 141
2002................................................................................... 139
2003................................................................................... 136
Thereafter............................................................................. 1,237
--------------------
Total minimum lease payments........................................................... $ 1,956
====================

Most leases have initial terms of up to 20 years, and contain one or more
renewal options, generally for five or 10 year periods. The leases provide for
minimum rentals, and additional rentals based on the operations of the leased
property. The total minimum lease payments above include $607 million
representing obligations of consolidated subsidiaries which are non-recourse to
Marriott International, Inc.

Rent expense consists of:

1998 1997 1996
------------- ------------- -------------
(in millions)

Minimum rentals.............................................. $ 138 $ 123 $ 110
Additional rentals........................................... 101 127 133
------------- ------------- -------------
$ 239 $ 250 $ 243
============= ============= =============

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

LONG-TERM DEBT

Our long-term debt at January 1, 1999 and January 2, 1998, consisted of the
following:

1998 1997
----------------- ------------------
(in millions)

Unsecured debt
Senior notes, average interest rate of 6.8% at January 1, 1999,
maturing through 2005.......................................... $ 402 $ -
Commercial paper, interest rate of 5.8% at January 1, 1999......... 426 -
Endowment deposits (non-interest bearing).......................... 111 108
Other............................................................ 35 28
----------------- -----------------
974 136
Less current portion.................................................. 30 24
----------------- -----------------
$ 944 $ 112
================= =================

In November 1998 we issued, through a private placement, $400 million of
unsecured senior notes (the Senior Notes). Proceeds net of discounts, totaled
$396 million. We have agreed to promptly make and complete a registered
exchange offer for the Senior Notes and, if required, to implement a resale
shelf registration statement. If we fail to do so on a timely basis, we will
pay additional interest to holders of the Senior Notes.

In March, 1998 and February, 1999, respectively, we entered into $1.5 billion
and $500 million multicurrency revolving credit facilities (the Facilities) each
with terms of five years. Borrowings will bear interest at the London Interbank
Offered Rate (LIBOR) plus a spread, based on our public debt rating.
Additionally, annual fees will be paid on the Facilities at a rate also based on
our public debt rating. Commercial paper, supported by the Facilities, is
classified as long-term debt based on our ability and intent to refinance it on
a long-term basis.

We are in compliance with covenants in our loan agreements which require the
maintenance of certain financial ratios and minimum shareholders' equity, and
also include, among other things, limitations on additional indebtedness and the
pledging of assets.

The 1998 statement of cash flows excludes $31 million of notes receivable
forgiven as part consideration for the March 19, 1998 acquisition of 49 percent
of The Ritz-Carlton Hotel Company LLC, and $12 million of long-term debt assumed
in 1998. The 1997 statement of cash flows excludes $226 million of debt assumed
by Host Marriott, $91 million of notes receivable related to the sale of 29
senior living communities to Host Marriott and $12 million of debt assumed in
the RHG acquisition. The 1996 statement of cash flows excludes $363 million of
debt that we assumed at the date of the Forum acquisition. Non-recourse debt of
$62 million and $29 million extinguished without cash payments in 1997 and 1996,
respectively, are not reflected in the statement of cash flows.

Aggregate debt maturities are: 1999 - $30 million; 2000 - $12 million; 2001 -
$11 million; 2002 - $11 million; 2003 - $640 million and $270 million
thereafter.

Cash paid for interest was $23 million in 1998, $11 million in 1997 and $19
million in 1996.

CONVERTIBLE SUBORDINATED DEBT

On March 25, 1996, Old Marriott issued $540 million (principal amount at
maturity) of zero coupon convertible subordinated debt in the form of LYONs due
2011. The LYONs were issued and recorded at a discount representing a yield to
maturity of 4.25 percent. Accretion is recorded as interest expense and an
increase to the carrying value. Gross proceeds from the LYONs issuance were
$288 million.

Each $1,000 LYON is convertible at anytime, at the option of the holder, into
17.52 shares of our Class A Common Stock and 2.19 shares of SMS common stock.
Upon consummation of the Spinoff, we assumed the LYONs, and SMS assumed a nine
percent share of the LYONs obligation based on the relative equity values of

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

SMS and the Company at the Spinoff. We are liable to the holders of the LYONs
for any payments that SMS fails to make on its allocable portion.

At the option of the holder, we may be required to redeem each LYON on March
25, 1999, or March 25, 2006, for $603.71 or $810.36 per LYON, respectively.
Subject to certain notice requirements to the holder, we may elect to redeem the
LYONs for cash, common stock, or any combination thereof.

The LYONs are redeemable by the obligor at any time on or after March 25,
1999, for cash equal to the issue price plus accrued original issue discount.
The LYONs are expressly subordinated to $1.2 billion of our senior indebtedness
at January 1, 1999 including guarantees, as defined in the indenture governing
the LYONs (Senior Indebtedness). SMS's obligations under the LYONs are
subordinated to both our Senior Indebtedness and that of SMS.

SHAREHOLDERS' EQUITY

300 million shares of our Class A Common Stock with a par value of $.01 per
share, are authorized. 10 million shares of preferred stock, without par value,
are authorized, with none issued.

On March 27, 1998 our Board of Directors adopted a shareholder rights plan
under which one preferred stock purchase right was distributed for each share of
our Class A Common Stock. Each right entitles the holder to buy 1/1000/th/ of a
share of a newly issued series of junior participating preferred stock of the
Company at an exercise price of $175. The rights will be exercisable ten days
after a person or group acquires beneficial ownership of 20 percent or more of
our Class A Common Stock, or begins a tender or exchange for 30 percent or more
of our Class A Common Stock. Shares owned by a person or group on March 27,
1998 and held continuously thereafter are exempt for purposes of determining
beneficial ownership under the rights plan. The rights are nonvoting and will
expire on the tenth anniversary of the adoption of the shareholder rights plan,
unless exercised or previously redeemed by us for $.01 each. If we are involved
in a merger or certain other business combinations not approved by the Board of
Directors, each right entitles its holder, other than the acquiring person or
group, to purchase common stock of either the Company or the acquirer having a
value of twice the exercise price of the right.

As of January 1, 1999, we have been authorized by our Board of Directors to
purchase up to 6.3 million shares of our Class A Common Stock.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

EARNINGS PER SHARE

For periods prior to the Spinoff, the earnings per share calculations are pro
forma, and the number of weighted average shares outstanding and the effect of
dilutive securities used are based upon the weighted average number of Old
Marriott shares outstanding, and the Old Marriott effect of dilutive securities
for the applicable period, adjusted (1) for the distribution ratio in the
Spinoff of one share of our Common Stock and one share of our Class A Common
Stock for every share of Old Marriott common stock and (2) to reflect the
conversion of our Common Stock into our Class A Common Stock on May 21, 1998.

The following table illustrates the reconciliation of the earnings and number
of shares used in the basic and diluted earnings per share calculations (in
millions, except per share amounts).

1998 1997 1996
--------------- ---------------- -----------------
(pro forma, unaudited)
------------------------------------------
Computation of Basic Earnings Per Share

Net income.............................................. $ 390 $ 324 $ 270
Weighted average shares outstanding..................... 249.8 254.2 254.9
------------------- ------------------- -------------------

Basic Earnings Per Share................................ $ 1.56 $ 1.27 $ 1.06
=================== =================== ===================

Computation of Diluted Earnings Per Share

Net income.............................................. $ 390 $ 324 $ 270
After-tax interest expense on convertible
subordinated debt.................................. 8 8 6
------------------- ------------------- -------------------

Net income for diluted earnings per share............... $ 398 $ 332 $ 276
------------------- ------------------- -------------------

Weighted average shares outstanding..................... 249.8 254.2 254.9

Effect of Dilutive Securities
Employee stock purchase plan....................... - 0.1 0.5
Employee stock option plan......................... 8.1 8.7 8.9
Deferred stock incentive plan...................... 5.7 5.4 5.8
Convertible subordinated debt........................... 9.5 9.5 7.3
------------------- ------------------- -------------------

Shares for diluted earnings per share................... 273.1 277.9 277.4
------------------- ------------------- -------------------

Diluted Earnings Per Share.............................. $ 1.46 $ 1.19 $ .99
=================== =================== ===================

We compute the effect of dilutive securities using the treasury stock method
and average market prices during the period. We use the if-converted method for
convertible subordinated debt.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INVESTMENTS AND NET ADVANCES FROM OLD MARRIOTT

The following is an analysis of Old Marriott's investment in the Company:

1998 1997 1996
----------------- ----------------- -----------------
(in millions)

Balance at beginning of year............................ $ 2,586 $ 1,444 $ 1,251
Net income.............................................. 89 324 270
Advances (to) from Old Marriott......................... (100) 576 (132)
Employee stock plan issuance and other.................. 116 242 55
Spinoff on March 27, 1998............................... (2,691) - -
----------------- ----------------- -----------------
Balance at end of year.................................. $ - $ 2,586 $ 1,444
================= ================= =================

EMPLOYEE STOCK PLANS

In connection with the Spinoff, we issued stock options, deferred shares and
restricted shares with the same value as the respective Old Marriott awards as
of the Spinoff under our 1998 Comprehensive Stock and Cash Incentive Plan
(Comprehensive Plan). Under the Comprehensive Plan, we may award to
participating employees (1) options to purchase our Class A Common Stock (Stock
Option Program and Supplemental Executive Stock Option awards), (2) deferred
shares of our Class A Common Stock and (3) restricted shares of our Class A
Common Stock. In addition we have an employee stock purchase plan (Stock
Purchase Plan). In accordance with the provisions of Opinion No. 25 of the
Accounting Principles Board, we recognize no compensation cost for the Stock
Option Program, the Supplemental Executive Stock Option awards or the Stock
Purchase Plan.

Deferred shares granted to officers and key employees under the Comprehensive
Plan generally vest over 10 years in annual installments commencing one year
after the date of grant. Certain employees may elect to defer receipt of shares
until termination or retirement. We accrue compensation expense for the fair
market value of the shares on the date of grant, less estimated forfeitures.
Prior to the Spinoff, Old Marriott awarded 0.2 million deferred shares under the
Old Marriott plan during 1998. Compensation cost recognized during 1998, 1997
and 1996 was $12 million, $9 million and $8 million, respectively.

Restricted shares under the Comprehensive Plan are issued to officers and key
employees and distributed over a number of years in annual installments, subject
to certain prescribed conditions including continued employment. We recognize
compensation expense for the restricted shares over the restriction period equal
to the fair market value of the shares on the date of issuance. We awarded 0.1
million restricted shares under this plan during 1998. We recognized
compensation cost of $3 million, $2 million and $2 million in 1998, 1997 and
1996, respectively.

Under the Stock Purchase Plan, eligible employees may purchase our Class A
Common Stock through payroll deductions at the lower of the market value at the
beginning or end of each plan year.

Employee stock options may be granted to officers and key employees at
exercise prices equal to the market price of our Class A Common Stock on the
date of grant. Nonqualified options expire up to 15 years after the date of
grant. Most options under the Stock Option Program are exercisable in
cumulative installments of one quarter at the end of each of the first four
years following the date of grant. In February 1997, 2.1 million Supplemental
Executive Stock Option awards were awarded to certain of our officers, which
vest after eight years. However, if our stock price meets certain performance
criteria the options may vest sooner. These options have an exercise price of
$25 and 0.2 million of them were forfeited during 1998. None of them were
exercised during 1997 or 1998 and 1.9 million remained outstanding at January 1,
1999.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

For purposes of the following disclosures required by FAS No. 123, "Accounting
for Stock-Based Compensation," we have estimated the fair value of each option
granted on the date of grant using the Black-Scholes option-pricing model, with
the following assumptions. For periods prior to the Spinoff, data have been
restated, where applicable, (1) for the distribution ratio in the Spinoff of one
share of our Common Stock and one share of our Class A Common Stock for every
share of Old Marriott common stock and (2) to reflect the conversion of our
Common Stock into our Class A Common Stock on May 21, 1998.

1998 1997 1996
------------------ ------------------ ----------------

Annual dividends................................... $ .20 $ .18 $ .16
Expected volatility................................ 28% 24% 25%
Risk free interest rate............................ 5.8% 6.2% 6.1%
Expected life (in years)........................... 7 7 7

Pro forma compensation cost for the Stock Option Program, the Supplemental
Executive Stock Option awards and employee purchases pursuant to the Stock
Purchase Plan subsequent to December 30, 1994, recognized in accordance with FAS
No. 123, would reduce our net income as follows (in millions, except per share
amounts):

1998 1997 1996
----------------- ---------------- ------------------

Net income as reported.............................. $ 390 $ 324 $ 270
Pro forma net income................................ $ 366 $ 309 $ 261

Diluted earnings per share as reported.............. $ 1.46 $ 1.19 $ .99
Pro forma diluted earnings per share................ $ 1.38 $ 1.14 $ .96

The weighted-average fair value of each option granted during 1998, 1997 and
1996 was $11, $13 and $11, respectively. Since we recognize the pro forma
compensation cost for the Stock Option Program over the vesting period, the
foregoing pro forma reductions in our net income are not representative of
anticipated amounts in future years.

A summary of our Stock Option Program activity during 1998 is presented below:

1998
------------------------------------------------------
Number of Weighted average
options exercise
(in millions) price
----------------------- ------------------------

New awards at the Spinoff....................................... 27.3 $ 16
Granted during the year......................................... 6.4 28
Exercised during the year....................................... (1.5) 11
Forfeited during the year....................................... (0.7) 20
-----------------------
Outstanding at end of year...................................... 31.5 19
======================= ==========================

Options exercisable at end of year.............................. 19.1 $ 13
======================= ==========================

At January 1, 1999, 54.4 million shares were reserved under the Comprehensive
Plan (including 31.5 million shares under the Stock Option Program and 1.9
million shares of the Supplemental Executive Stock Option awards) and five
million shares were reserved under the Stock Purchase Plan.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock options issued under the Stock Option Program outstanding at January 1,
1999 were as follows:

Outstanding Exercisable
---------------------------------------------------------- --------------------------------------
Weighted Weighted Weighted
Range of Number of average average Number of average
exercise options remaining life exercise options exercise
prices (in millions) (in years) price (in millions) price
- ---------------------- --------------- ---------------- --------------- ----------------- -------------

$ 3 to 5 4.3 8 $ 5 4.3 $ 5
6 to 9 2.7 9 7 2.7 7
10 to 15 7.0 9 13 7.0 13
16 to 24 5.0 12 20 3.2 19
25 to 37 12.5 14 29 1.9 28
- ---------------------- --------------- -----------------
$ 3 to 37 31.5 12 19 19.1 13
====================== =============== ================ =============== ================= =============

FAIR VALUE OF FINANCIAL INSTRUMENTS

We assume that the fair values of current assets and current liabilities are
equal to their reported carrying amounts. The fair values of noncurrent
financial assets and liabilities are shown below.

1998 1997
------------------------------------- --------------------------------------
Carrying Fair Carrying Fair
amount value amount value
-------------- ---------------- --------------- ------------------
(in millions) (in millions)

Notes and other receivables.................. $ 606 $ 622 $ 672 $ 685
Long-term debt, convertible subordinated debt
and other long-term liabilities............. 1,331 1,309 490 478

We value notes and other receivables based on the expected future cash flows
discounted at risk adjusted rates. We determine valuations for long-term debt,
convertible subordinated debt and other long-term liabilities based on quoted
market prices or expected future payments discounted at risk adjusted rates.

CONTINGENT LIABILITIES

We issue guarantees to lenders and other third parties in connection with
financing transactions and other obligations. These guarantees were limited, in
the aggregate, to $171 million at January 1, 1999, including guarantees
involving major customers, with expected funding of zero. As of January 1,
1999, we had extended approximately $271 million of loan commitments to owners
of lodging and senior living properties. Letters of credit outstanding on our
behalf at January 1, 1999, totaled $73 million, the majority of which related to
our self-insurance programs. At January 1, 1999, we had repurchase obligations
of $76 million related to notes receivable from timeshare interval purchasers,
that have been sold with limited recourse.

New World Development and another affiliate of Dr. Cheng, a director of the
Company, have severally indemnified us for guarantees by us of leases with
minimum annual payments of approximately $59 million.

SUBSEQUENT EVENT

On January 6, 1999, we entered into a definitive agreement to acquire
ExecuStay Corporation (ExecuStay), a provider of leased corporate apartments.
The total acquisition cost is estimated to be $115 million, to be paid with
approximately $53 million in our Class A Common Stock and $62 million in cash.
Holders of more than 55 percent of the voting stock of ExecuStay have agreed to
the terms of the acquisition. Completion of the acquisition, which is expected
to occur during the 1999 first quarter, is contingent on customary conditions,
including the successful completion of a cash tender offer and expiration or
termination of the Hart-Scott-Rodino Act waiting period requirements.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

BUSINESS SEGMENTS

We are a diversified hospitality company with operations in three business
segments: Lodging, which includes the development, ownership, operation and
franchising of lodging properties including vacation timesharing resorts; Senior
Living Services, which consists of the development, ownership and operation of
senior living communities; and Distribution Services, which operates a wholesale
food distribution business. We evaluate the performance of our segments based
primarily on operating profit before corporate expenses and interest. We do not
allocate taxes at the segment level.

1998 1997 1996
----------------- ----------------- -----------------
(in millions)
Sales

Lodging................................................... $ 6,311 $ 5,247 $ 4,340
Senior Living Services.................................... 479 446 373
Distribution Services..................................... 1,178 1,543 1,025
----------------- ----------------- -----------------
$ 7,968 $ 7,236 $ 5,738
================= ================= =================
Operating profit before corporate expenses and interest
Lodging................................................... $ 704 $ 569 $ 452
Senior Living Services.................................... 15 32 39
Distribution Services..................................... 17 7 16
Other..................................................... - 1 1
----------------- ----------------- -----------------
$ 736 $ 609 $ 508
================= ================= =================

Depreciation and amortization
Lodging................................................... $ 99 $ 89 $ 55
Senior Living Services.................................... 19 19 20
Distribution Services..................................... 6 6 4
Corporate................................................. 16 12 10
----------------- ----------------- -----------------
$ 140 $ 126 $ 89
================= ================= =================

Assets
Lodging................................................... $ 4,285 $ 3,649 $ 1,972
Senior Living Services.................................... 905 728 1,106
Distribution Services..................................... 179 190 173
Corporate................................................. 864 594 505
----------------- ----------------- -----------------
$ 6,233 $ 5,161 $ 3,756
================= ================= =================

Capital expenditures
Lodging................................................... $ 562 $ 271 $ 158
Senior Living Services.................................... 329 227 114
Distribution Services..................................... 2 6 8
Corporate................................................. 44 16 13
----------------- ----------------- -----------------
$ 937 $ 520 $ 293
================= ================= =================

Sales of Distribution Services exclude sales made at market terms and
conditions to other segments of $155 million, $159 million and $150 million in
1998, 1997 and 1996, respectively.

Segment operating expenses include selling, general and administrative
expenses directly related to the operations of the businesses, aggregating $635
million in 1998, $578 million in 1997 and $446 million in 1996.

The consolidated financial statements include the following related to
international operations: sales of $323 million in 1998, $294 million in 1997,
and $185 million in 1996; operating profit before corporate expenses and
interest of $49 million in 1998, $50 million in 1997, and $21 million in 1996;
and fixed assets of $46 million in 1998, $46 million in 1997, and $53 million in
1996.

MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

QUARTERLY FINANCIAL DATA - UNAUDITED

($ in millions, except per share data)

1998/1/
-------------------------------------------------------------------------------------
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
--------------- --------------- --------------- --------------- -------------

Systemwide sales /2/.......................... $ 3,257 $ 4,001 $ 3,566 $ 5,200 $ 16,024
Sales......................................... 1,715 1,927 1,804 2,522 7,968
Operating profit before corporate expenses and
interest................................... 163 186 164 223 736
Net income.................................... 89 101 86 114 390
Diluted earnings per share /3,4/.............. .33 .37 .32 .44 1.46
- -----------------------------------------------------------------------------------------------------------------------------------

1997/1/
-------------------------------------------------------------------------------------
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
--------------- --------------- --------------- --------------- -------------

Systemwide sales /2/.......................... $ 2,586 $ 3,173 $ 3,127 $ 4,310 $ 13,196
Sales......................................... 1,542 1,738 1,664 2,292 7,236
Operating profit before corporate expenses and
interest................................... 135 159 136 179 609
Net income.................................... 69 84 74 97 324
Diluted earnings per share /3,4/.............. .26 .31 .27 .36 1.19
- -----------------------------------------------------------------------------------------------------------------------------------

/1/ The quarters consist of 12 weeks, except the fourth quarter, which includes
16 weeks.
/2/ Systemwide sales comprise revenues generated from guests at owned, leased,
managed and franchised hotels and senior living communities, together with
sales of our other businesses already included in reported sales.
/3/ Earnings per share data for periods prior to the Spinoff are pro forma,
because we were not publicly-held during those periods.
/4/ The sum of the earnings per share for the four quarters may differ from
annual earnings per share due to the required method of computing the
weighted average number of shares in interim periods.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEMS 10, 11, 12 AND 13.

As described below, certain information appearing in our Proxy Statement to be
furnished to shareholders in connection with the 1999 Annual Meeting of
Shareholders, is incorporated by reference in this Form 10-K Annual Report.

ITEM 10. This information is incorporated by
reference to the "Directors Standing
For Election," "Directors Continuing In
Office" and "Section 16(a) Beneficial
Ownership Reporting Compliance"
sections of our Proxy Statement to be
furnished to shareholders in connection
with the 1999 Annual Meeting.
Information regarding executive
officers is included below.

ITEM 11. This information is incorporated by
reference to the "Executive
Compensation" section of our Proxy
Statement to be furnished to
shareholders in connection with the
1999 Annual Meeting.

ITEM 12. This information is incorporated by
reference to the "Stock Ownership"
section of our Proxy Statement to be
furnished to shareholders in connection
with the 1999 Annual Meeting.

ITEM 13. This information is incorporated by
reference to the "Certain Transactions"
section of our Proxy Statement to be
furnished to shareholders in connection
with the 1999 Annual Meeting.

EXECUTIVE OFFICERS

Set forth below is certain information with respect to our executive officers.

Name and Title Age Business Experience
- -------------------------------------- ------- ------------------------------------------------------------------------

J. W. Marriott, Jr. 66 Mr. Marriott is Chairman of the Board and Chief Executive
Chairman of the Marriott Officer of the Company. He joined Marriott Corporation in
International, Inc. Board and Chief 1956 and has served as a director of Marriott Corporation
Executive Officer (now known as Host Marriott Corporation) since 1964. He
became President of Marriott Corporation in 1964, Chief
Executive Officer in 1972 and Chairman of the Board in
1985. Mr. Marriott also is a director of Host Marriott
Services Corporation, General Motors Corporation, the
U.S.-Russia Business Council, and the Naval Academy
Endowment Trust. He serves on the Board of Trustees of
the National Geographic Society and The J. Willard &
Alice S. Marriott Foundation, and the Board of Directors
of Georgetown University, and is a member of the
Executive Committee of the World Travel & Tourism Council
and the Business Council. Mr. Marriott has served as
Chief Executive Officer of the Company since its
inception in 1997, and served as Chairman and Chief
Executive Officer of Old Marriott from October 1993 to
March 1998. Mr. Marriott has served as a director of the
Company since March 1998.

Todd Clist 57 Todd Clist joined Marriott Corporation in 1968. Mr.
Vice President; Clist served as general manager of several hotels before
President, North American Lodging being named Regional Vice President, Midwest Region for
Operations Marriott Hotels, Resorts and Suites in 1980. Mr. Clist
became Executive Vice President of Marketing for Marriott
Hotels, Resorts and Suites in 1985, and Senior Vice
President, Lodging Products and Markets in 1989. Mr.
Clist was named Executive Vice President and General
Manager for Fairfield Inn in 1990, for both Fairfield Inn
and Courtyard in 1991, and for Fairfield Inn, Courtyard
and Residence Inn in 1993. Mr. Clist was appointed to his
current position in January 1994.

Edwin D. Fuller 54 Edwin D. Fuller joined Marriott in 1972 and held several
Vice President; sales positions before being appointed Vice President of
President and Managing Director - Marketing in 1979. He became Regional Vice President of
Marriott Lodging International the Midwest Region in 1985, Regional Vice President of
the Western Region in 1988, and in 1990 was promoted to
Senior Vice President & Managing Director of
International Lodging, with a focus on developing the
international group of hotels. He was named Executive
Vice President & Managing Director of International
Lodging in 1994, and was promoted to his current position
of President & Managing Director of International Lodging
in 1997.

Name and Title Age Business Experience
- ------------------------------------- -------- ------------------------------------------------------------------------

Paul E. Johnson, Jr. 51 Paul E. Johnson, Jr. joined Marriott Corporation in 1983
Vice President; in Corporate Financial Planning & Analysis. In 1987, he
President - Marriott was promoted to Group Vice President of Finance and
Senior Living Services Development for the Marriott Service Group and later
assumed responsibility for real estate development for
Marriott Senior Living Services. During 1989, he served
as Vice President and General Manager of Marriott
Corporation's Travel Plazas division. Mr. Johnson
subsequently served as Vice President and General Manager
of Marriott Family Restaurants from December 1989 through
1991. In October 1991, he was appointed as Executive
Vice President and General Manager of Marriott Senior
Living Services, and in June 1996 he was appointed to his
current position.

Brendan M. Keegan 55 Brendan M. Keegan joined Marriott Corporation in 1971, in
Executive Vice President - the Corporate Organization Development Department and
Human Resources subsequently held several human resources positions,
including Vice President of Organization Development and
Executive Succession Planning. In 1986, Mr. Keegan was
named Senior Vice President, Human Resources, Marriott
Service Group. In April 1997, Mr. Keegan was appointed
Senior Vice President of Human Resources for our
worldwide human resources functions, including
compensation, benefits, labor and employee relations,
employment and human resources planning and development.
In February 1998, he was appointed to his current
position.

Robert T. Pras 57 Robert T. Pras joined Marriott Corporation in 1979 as
Vice President; Executive Vice President of Fairfield Farm Kitchens, the
President - Marriott predecessor of Marriott Distribution Services. In 1981,
Distribution Services Mr. Pras became Executive Vice President of Procurement
and Distribution. In May 1986, Mr. Pras was appointed to
the additional position of General Manager of Marriott
Corporation's Continuing Care Retirement Communities. He
was named Executive Vice President and General Manager of
Marriott Distribution Services in 1990. Mr. Pras was
appointed to his current position in January 1997.

Joseph Ryan 57 Joseph Ryan joined Old Marriott in December 1994 as
Executive Vice President and General Executive Vice President and General Counsel. Prior to
Counsel that time, he was a partner in the law firm of O'Melveny
& Myers, serving as the Managing Partner from 1993 until
his departure. He joined O'Melveny & Myers in 1967 and
was admitted as a partner in 1976.

Name and Title Age Business Experience

Horst H. Schulze 58 Horst H. Schulze has served as the President and Chief
Vice President; Operating Officer of The Ritz-Carlton since 1988. Mr.
President and Chief Operating Schulze joined The Ritz-Carlton in 1983 as Vice President,
Officer, The Ritz-Carlton Hotel Operations and was appointed Executive Vice President in
Company, LLC 1987. Prior to 1983, he spent nine years with Hyatt
Hotels Corporation where he held several positions
including Hotel General Manager, Regional Vice President
and Corporate Vice President. Before his association
with Hyatt, Mr. Schulze worked for Hilton Hotels. Mr.
Schulze began his hotel career in Europe where he
completed hotel school and worked in world-class hotels
including the Bellevue Palace and Le Beau Rivage in
Switzerland, the Plaza Athenee in Paris, France, the
Savoy Hotel in London and the Kurhaus/Casino Bad
Neuenahr, Germany.

William J. Shaw 53 Mr. Shaw has served as President and Chief Operating
Director, President and Chief Officer of the Company since March 1997 (including
Operating Officer service in the same capacity with Old Marriott until
March 1998). Mr. Shaw joined Marriott Corporation in
1974, was elected Corporate Controller in 1979 and a Vice
President in 1982. In 1986, Mr. Shaw was elected Senior
Vice President--Finance and Treasurer of Marriott
Corporation. He was elected Chief Financial Officer and
Executive Vice President of Marriott Corporation in April
1988. In February 1992, he was elected President of the
Marriott Service Group. Mr. Shaw is also Chairman of the
Board of Directors of Host Marriott Services Corporation
and Sodexho Marriott Services, Inc. He also serves on the
Board of Trustees of the University of Notre Dame and the
Suburban Hospital Foundation. Mr. Shaw has served as a
director of Old Marriott (now named Sodexho Marriott
Services, Inc.) since May 1997, and as a director of the
Company since March 1998.

Arne M. Sorenson 40 Arne M. Sorenson joined Old Marriott in 1996 as Senior
Executive Vice President and Chief Vice President of Business Development. He was
Financial Officer instrumental in our acquisition of the Renaissance Hotel
Group in 1997. Prior to joining Marriott, he was a
partner in the law firm of Latham & Watkins in
Washington, D.C., where he played a key role in 1992 and
1993 in the distribution of Old Marriott by Marriott
Corporation. Effective October 1, 1998, Mr. Sorenson was
appointed Executive Vice President and Chief Financial
Officer.

James M. Sullivan 55 James M. Sullivan joined Marriott Corporation in 1980,
Vice President; departed in 1983 to acquire, manage, expand and
Executive Vice President - subsequently sell a successful restaurant chain, and
Lodging Development returned to Marriott Corporation in 1986 as Vice
President of Mergers and Acquisitions. Mr. Sullivan
became Senior Vice President, Finance - Lodging in 1989,
Senior Vice President - Lodging Development in 1990 and
was appointed to his current position in December 1995.

Name and Title Age Business Experience

William R. Tiefel 64 William R. Tiefel joined Marriott Corporation in 1961 and
Vice Chairman; was named President of Marriott Hotels, Resorts and
Chairman - The Ritz-Carlton Hotel Suites in 1988. He had previously served as resident
Company, LLC manager and general manager at several Marriott hotels
prior to being appointed Regional Vice President and
later Executive Vice President of Marriott Hotels,
Resorts and Suites and Marriott Ownership Resorts. Mr.
Tiefel was elected Executive Vice President of Marriott
Corporation in November 1989. In March 1992, he was
elected President - Marriott Lodging Group and assumed
responsibility for all of Marriott's lodging brands. In
May 1998 he was appointed to his current position.

Stephen P. Weisz 48 Stephen P. Weisz joined Marriott Corporation in 1972 and
Vice President; was named Regional Vice President of the Mid-Atlantic
President - Marriott Vacation Club Region in 1991. Mr. Weisz had previously served as
International Senior Vice President of Rooms Operations before being
appointed as Vice President of the Revenue Management
Group. Mr. Weisz became Senior Vice President of Sales
and Marketing for Marriott Hotels, Resorts and Suites in
August 1992 and Executive Vice President - Lodging Brands
in August 1994. In December 1996, Mr. Weisz was
appointed President - Marriott Vacation Club
International.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

(1) FINANCIAL STATEMENTS

The response to this portion of Item 14 is submitted under Item 8
of this Report on Form 10-K.

(2) FINANCIAL STATEMENT SCHEDULES

All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and therefore have been omitted.

(3) EXHIBITS

Any shareholder who wants a copy of the following Exhibits may
obtain one from us upon request at a charge that reflects the
reproduction cost of such Exhibits. Requests should be made to
the Secretary, Marriott International, Inc., Marriott Drive,
Department 52/862, Washington, D.C. 20058.

INCORPORATION BY REFERENCE
(WHERE A REPORT OR REGISTRATION STATEMENT IS
INDICATED BELOW, THAT DOCUMENT HAS BEEN PREVIOUSLY
EXHIBIT FILED WITH THE SEC AND THE APPLICABLE EXHIBIT IS
NO. DESCRIPTION INCORPORATED BY REFERENCE THERETO)
- ------------------------------------------------------------------------------------------------------------------

2.1 Distribution Agreement dated as of September Appendix A in our Form 10 filed on February 13,
30, 1997 with Sodexho Marriott Services, Inc. 1998.

2.2 Agreement and Plan of Merger dated as of Appendix B in our Form 10 filed on February 13,
September 30, 1997 with Sodexho Marriott 1998.
Services, Inc., Marriott-ICC Merger Corp.,
Sodexho Alliance, S.A. and International
Catering Corporation.

2.3 Omnibus Restructuring Agreement dated as of Appendix C in our Form 10 filed on February 13,
September 30, 1997 with Sodexho Marriott 1998.
Services, Inc., Marriott-ICC Merger Corp.,
Sodexho Alliance, S.A. and International
Catering Corporation.

2.4 Amendment Agreement dated as of January 28, 1998 Appendix D in our Form 10 filed on February 13,
among Sodexho Marriott Services, Inc., 1998.
Marriott-ICC Merger Corp., the Company, Sodexho
Alliance, S.A. and International Catering
Corporation.

3.1 Amended and Restated Certificate of Exhibit No. 2 to our Form 8-A/A filed on April 3,
Incorporation. 1998.

3.2 Certificate of Designation, Preferences and Exhibit No. 3 to our Form 8-A/A filed on April 3,
Rights of Series A Junior Participating 1998.
Preferred Stock.

3.3 Amended and Restated Bylaws. Filed with this report.

3.4 Rights Agreement dated as of March 27, 1998 with Exhibit No.1 to our Form 8-A/A filed on April 3,
The Bank of New York, as Rights Agent. 1998.

4.1 Indenture dated November 16, 1998 with The Chase Filed with this report.
Manhattan Bank, as Trustee.

4.2 Form of 6-5/8% Series A Note due 2003. Filed with this report.

4.3 Form of 6-7/8% Series B Note due 2005. Filed with this report.

4.4 Indenture with The First National Bank of Exhibit 2.02 to Renaissance Hotel Group N.V.'s
Chicago, as Trustee, as supplemented. Annual Report on Form 20-F for the fiscal year
ended June 30, 1996; Exhibit No. 4 to Form 10-Q of
Old Marriott for the fiscal quarter ended June 20,
1997 (First and Second Supplemental Indentures);
and Exhibit No. 4.1 to our Form 10-Q for the fiscal
quarter ended March 27, 1998 (Third Supplemental
Indenture).

4.5 Indenture with The Bank of New York, as Trustee, Exhibit No. 4.1 to Form 8-K of Old Marriott dated
relating to Liquid Yield Option Notes, as March 25, 1996; Exhibit No. 4.2 to Form 8-K of Old
supplemented. Marriott dated March 25, 1996 (First Supplemental
Indenture); and Exhibit No. 4.2 to our Form 10-Q
for the fiscal quarter ended March 27, 1998 (Second
Supplemental Indenture).

10.1 Employee Benefits and Other Employment Matters Exhibit No. 10.1 to our Form 10 filed on February
Allocation Agreement dated as of September 30, 13, 1998.
1997 with Sodexho Marriott Services, Inc.

10.2 1998 Comprehensive Stock and Cash Incentive Plan. Appendix L in our Form 10 filed on February 13,
1998.

10.3 Noncompetition Agreement between Sodexho Exhibit No. 10.1 to our Form 10-Q for the fiscal
Marriott Services, Inc. and the Company. quarter ended March 27, 1998.

10.4 Tax Sharing Agreement with Sodexho Marriott Exhibit No. 10.2 to our Form 10-Q for the fiscal
Services, Inc. and Sodexho Alliance, S.A. quarter ended March 27, 1998.

10.5 Distribution Agreement with Host Marriott Exhibit No. 10.3 to Form 8-K of Old Marriott dated
Corporation, as amended. October 25, 1993; Exhibit No. 10.2 to Form 10-K of
Old Marriott for the fiscal year ended December 29,
1995 (First Amendment); Exhibit Nos. 10.4 and 10.5
to our Form 10-Q for the fiscal quarter ended March
27, 1998 (Second and Third Amendments).

10.6 Restated Noncompetition Agreement with Host Exhibit No. 10.6 to our Form 10-Q for the fiscal
Marriott Corporation. quarter ended March 27, 1998.

10.7 LYONs Allocation Agreement with Sodexho Marriott Exhibit No. 10.9 to our Form 10 filed on February
Services, Inc. 13, 1998.

10.8 $1.5 billion Credit Agreement dated February 19, Exhibit 10.10 to our Form 10-K for the fiscal year
1998 with Citibank, N.A., as Administrative ended January 2, 1998.
Agent, and certain banks.

10.9 $500 million Credit Agreement dated February 2, Filed with this report.
1999 with Citibank, N.A. as Administrative
Agent, and certain banks.

10.10 Stock Purchase Agreement dated as of June 21, Exhibit No. 10.2 to Form 10-Q of Old Marriott for
1997 between the Company, as assignee, and Host the fiscal quarter ended September 12, 1997.
Marriott Corporation.

12 Statement of Computation of Ratio of Earnings to Filed with this report.
Fixed Charges.

21 Subsidiaries of Marriott International, Inc. Filed with this report.

23 Consent of Arthur Andersen LLP. Filed with this report.

27 Financial Data Schedule for the Company. Filed with this report.

99 Forward-Looking Statements. Filed with this report.

_____________________________

(b) REPORTS ON FORM 8-K

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934 we have duly caused this Form 10-K to be signed on our behalf by the
undersigned, thereunto duly authorized, on this 16th day of March, 1999.

MARRIOTT INTERNATIONAL, INC.

By /s/ J.W. Marriott, Jr.
_________________________________
J.W. Marriott, Jr.
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form
10-K has been signed by the following persons on our behalf in their capacities
and on the date indicated above.

PRINCIPAL EXECUTIVE OFFICER:

/s/ J.W. Marriott, Jr.
___________________________________
J.W. Marriott, Jr. Chairman of the Board, Chief
Executive Officer and Director

PRINCIPAL FINANCIAL OFFICER:

/s/ Arne M. Sorenson
______________________________________________
Arne M. Sorenson Executive Vice President,
Chief Financial Officer

PRINCIPAL ACCOUNTING OFFICER:

/s/ Stephen E. Riffee
______________________________________________
Stephen E. Riffee Vice President, Finance and
Chief Accounting Officer

DIRECTORS:

/s/ Henry Cheng Kar-Shun /s/ W. Mitt Romney
______________________________________________ ___________________________________
Henry Cheng Kar-Shun, Director W. Mitt Romney, Director

/s/ Gilbert M. Grosvenor /s/ Roger W. Sant
______________________________________________ ___________________________________
Gilbert M. Grosvenor, Director Roger W. Sant, Director

/s/ Richard E. Marriott /s/ William J. Shaw
______________________________________________ ___________________________________
Richard E. Marriott, Director William J. Shaw, Director

/s/ Floretta Dukes McKenzie /s/ Lawrence M. Small
______________________________________________ ___________________________________
Floretta Dukes McKenzie, Director Lawrence M. Small, Director

/s/ Harry J. Pearce
______________________________________________
Harry J. Pearce, Director