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Business Description

The franchisor is Marriott International, Inc. (“Marriott”), a corporation incorporated under the laws of the State of Delaware in 1997. We will refer to the franchisor as “we” or “Marriott” throughout this disclosure document. The terms “we” or “Marriott” do not include our corporate officers, employees, directors, stockholders, affiliates, or subsidiaries. We will refer to the person or entity that is considering purchasing a franchise as “you.” When we refer to the “United States” in this disclosure document, such term includes only the 50 states of the United States of America and the District of Columbia and does not include any possessions or territories of the United States. Capitalized terms not defined in this disclosure document have the meaning ascribed to them in the franchise agreement attached as Exhibit B. We are a publicly-traded corporation listed on the NASDAQ Stock Market. Our principal business address, and the principal business address of most of our affiliates, is 10400 Fernwood Road, Bethesda, Maryland 20817 (“Marriott Headquarters”). We and our affiliates currently do business as AC Hotels by Marriott®, African Pride Hotels®, Autograph Collection® Hotels, Autograph CollectionSM Residences, Bvlgari® Hotels and Resorts, Courtyard® by Marriott hotels, Delta Hotels® by Marriott, Edition® Hotels, Edition® Residences, Fairfield by Marriott™ hotels, Fairfield Inn® by Marriott hotels, Fairfield Inn & Suites® by Marriott hotels, Gaylord Hotels®, Horizons by Marriott Club, JW Marriott® Hotels, JW Marriott® Hotels & Resorts, JW Marriott MarquisSM Hotels, JW Marriott® Residences, Marriott® Conference Centers, Marriott Executive Apartments®, Marriott Hotels®, Marriott® Hotels and Conference Centers, Marriott® Hotels & Resorts, Marriott Marquis® Hotels, Marriott ResidencesSM, Marriott Resorts®, Marriott Suites® Hotels, Moxy® Hotels, Protea Hotels® by Marriott, Protea Hotel Fire & Ice!SM, Renaissance® ClubSport® Hotels, Renaissance® Hotels, Renaissance ResidencesSM, Residence Inn® by Marriott hotels, RitzCarlton® Hotels and Resorts, Ritz-Carlton Reserve®, The Residences at The Ritz-CarltonTM, The RitzCarlton Residences®, SpringHill Suites® by Marriott hotels, and TownePlace Suites® by Marriott hotels (collectively, the “Marriott Brands”). The Marriott Brands, the Starwood Brands (as defined below), and any other lodging brands we may develop or acquire in the future are referred to as the “Company Brands.” Hotels operating under the Company Brands, whether owned, leased, managed, franchised, or part of a project containing a residential or condominium component operating under a Company Brand, are referred to as “Company Brand Hotels.”

Prior Experience

We and our predecessors have owned and managed Residence Inn by Marriott hotels since 1987, and we have offered franchises for Residence Inn hotels since 1984. As of December 31, 2017, we and our subsidiaries operated 109 Residence Inn hotels in the United States and Canada.

Business Offered

Residence Inn hotels are residential-style hotels designed to offer high quality accommodations and related services to the traveling public. Residence Inn hotels feature spacious suites, and cater to business persons, groups, families, and vacationers, depending on their location and market orientation. Hotels typically feature a mix of 60 to 150 studio, 1-bedroom, and 2- bedroom suites with “zoned” spaces for sleeping, bathing, and relaxing (i.e., living room), and fully equipped kitchens. Hotels must offer a complimentary buffet breakfast, and weekly evening social events. Hotels also feature a branded pantry/vending concept referred to as “The Market,” meeting rooms, a buffet area that can be shielded from view, a guest laundry room, vending, and storage. All franchised Residence Inn hotels in the United States and Canada are part of a single system. If approved, we will offer you a non-exclusive franchise to use our “system” in connection with the establishment, development, and operation of a Residence Inn hotel at a specific location. The “system” consists of the “Residence Inn” trademark and other trademarks, design criteria, and specifications for Residence Inn hotels; high standards of cleanliness, quality, and service; training programs and materials; advertising, marketing, and promotional programs, including loyalty programs; a reservation system; a property management system; a revenue management system; and a quality assurance program. We may unilaterally add to, merge, discontinue, or otherwise modify components of the system at any time. Modifications to the system may be made for all Residence Inn hotels or any category of those hotels. A category may have specific physical and operating standards or merely be a descriptive designation or another designation as we determine.

Initial Fees

1. Application Fees and Related Fees A. Application Fees1 1. New-to-System Residence Inn Hotel. If you are submitting an application for a new-to-system Residence Inn hotel, including the conversion of a non-Company Brand Hotel to a Residence Inn hotel, the application fee is the greater of $75,000 or $500 per suite. If you have not signed a franchise agreement with us within 60 days after we issue a first draft of the franchise agreement, we may withdraw our approval of the application unless you pay an extension fee of $10,000. If you have not signed a franchise agreement within 60 days after we grant an extension, we will have the right to withdraw our approval of your application. 2. Existing Residence Inn Hotel. If you are submitting an application for an existing Residence Inn hotel or to convert a hotel that is currently managed by us or one of our affiliates to a franchised Residence Inn hotel, the application fee is the greater of $175,000 or $500 per suite. Hotel application fees are generally payable in full at the time you submit your franchise application. If we do not approve your application, we will deduct $10,000 plus our costs, and we will refund the balance of your application fee. We generally do not refund the application fee under other circumstances. B. Other Fees That May Apply to Your Transaction 1. Outside Counsel Costs. If you are acquiring an existing Residence Inn hotel or converting a hotel that is currently managed by us or one of our affiliates to a franchised Residence Inn hotel, we will engage outside counsel in connection with the transaction, and you will be required to pay our outside counsel costs directly to our outside counsel. These costs are payable and non-refundable, regardless of whether the transaction closes. 2. Extension Fees. Once you have signed a franchise agreement, if you wish to request an extension of the construction start deadline or the opening deadline, you must pay us $10,000 when you submit your written request that explains the need for such extension. No extension will be granted for more than six months. If we approve the extension request, you must execute an amendment to the franchise agreement that revises the applicable deadline. We may waive this fee or give you a credit if you meet the revised deadline, but we are not obligated to do so. If we do not approve your request, we will refund the $10,000 you submitted. 2. Pre-Opening Fees Listed below are certain estimated one-time non-refundable fees and reimbursements (excluding certain travel and related expenses) that you will pay to us on demand to open a Residence Inn hotel. If you are acquiring or converting an existing hotel, your pre-opening fees and costs will vary depending upon, among other things, the systems in place and experience of personnel that are retained at the time of acquisition or conversion. A. Computer Hardware and Software Systems The only amount you are required to pay us prior to opening your hotel for goods and services received from us for required computer and hardware systems is a fee of $16,000 for technology planning and installation costs for the required property management, reservation, and yield management systems. This does not include amounts payable to third parties (either directly or paid to us and remitted to third parties on your behalf) for hardware, software, or installation of the above systems or for other computer systems recommended or required for your hotel, or amounts payable to us for other recommended computer systems. The costs for such systems are subject to change. See Item 11 for a detailed description of our required and recommended computer systems. B. Pre-Opening Training and Services The costs for pre-opening training and services provided by us (not including costs discussed elsewhere in this Item 5 or costs incurred when purchasing an existing Residence Inn hotel, see Section 6 below) generally range from $28,750 to $50,500, are subject to change, and are non-refundable. This amount includes: training costs for the property management system, management and executive training, pre-opening on-site task force training, the opening authorization process, associate orientation materials, and pre-opening operations and sales and marketing support, as well as an estimate of the travel and living expenses for our trainers, which you must pay. We used the average travel and living expenses for our trainers last year in the range above, but your costs may vary. The cost also varies based on the training that we provide you, which depends on the experience and prior training of you and your associates, as determined by us. Specifically, the costs include the following: 1. A team determined by us will conduct on-site training for the departments in your hotel prior to its opening. The amount of training time and the number of trainers will vary based upon the size of your hotel, the market, and the experience of your associates. The number of trainers ranges from two to four. The amount of training time ranges from 8 to 14 days and will include a postopening hotel visit. We estimate these on-site costs (including reimbursement for the team’s transportation, lodging, and meals) generally will range from $10,640 to $21,450 based on the experience level and prior training of your associates and the size of your hotel. The cost of the trainers (including transportation, lodging, and meals) is included in our estimate of pre-opening training and services costs listed in Item 7. We recommend that you hire the general manager and sales directors/managers at least four to six months prior to hotel opening to participate in pre-opening training and to prepare the hotel for opening. 2. We will provide pre-opening sales, marketing, and operations support at a cost generally ranging from $18,110 to $29,100 (which includes travel, lodging, and meals for the pre-opening team). This support may include (a) an in-market sales and marketing meeting approximately 90 to 120 days prior to opening to assist in the pre-opening direct sales effort, (b) follow-up webinars to support the pre-opening efforts, (c) opening operations support, including webinars and an opening certification visit, and (d) analysis of sales and marketing efforts. Executives of new-to-Marriott franchisees must attend Executive Orientation. Up to five people may attend Executive Orientation prior to the opening of your hotel at no charge. Additional attendees (in excess of five) and all attendees with open or conversion hotels must pay $495 per person. We also offer a franchise management training program in certain limited circumstances, in our sole discretion, to franchisees who desire to operate their hotels, but who we have determined would not be qualified to do so unless they have successfully completed additional training. The fee for participation in the program is $60,000. If we determine that you are qualified to operate a Residence Inn hotel, but are unfamiliar with the Residence Inn system, we may require you to participate in a franchisee onboarding program, through which we provide additional self-paced, web-based training on the use of Marriott programs, systems, and services. The fee for participation in this program is $7,500, and must be paid at least 16 months before the hotel opening deadline set forth in your franchise agreement. Franchisees that participate in the franchise management training program or franchisee onboarding program must also participate in Revenue Management Remote Solutions “Core Services,” the Area Reservation Sales Office program, and the Field Marketing program, at an additional cost. See Items 6 and 11 for more information regarding these programs. See Item 11 for additional details regarding these and other training and related fees that may apply to your hotel prior to opening. C. Pre-Opening Revenue Management Support and Optional Training The cost for pre-opening revenue management/MARSHA rate loading and consultation is generally approximately $3,000 to $3,500, and does not include conversion of system data or training. If conversion of system data is required, you will be charged $500 per day for such services. If you desire, optional training in revenue management, MARSHA, or One Yield is available for $500 per day. These costs are subject to change and are non-refundable. You must pay all of the travel and living expenses for our trainers. The cost of transportation varies greatly, and we are not able to give you a meaningful estimate. 3. Initial Design and Construction Review Services Fees We may charge you for hotel design and construction review services. If your project generally follows our prototypical architectural plans and adopts one of our interior design packages for both guestrooms and public areas, we will not normally charge you any additional fee for our review of your plans and project during construction. If your project is considered by us to be a modified prototype, we may charge a $5,000 fee to review your plans and project during construction. If your project is considered by us to be a custom design, a conversion, or an adaptive reuse, the cost of our design and construction review services will range from $20,000 to $50,000, depending on the complexity of the project, for the additional time spent reviewing your plans and inspecting your hotel during the construction or conversion process. In either scenario, the design and construction review charge includes up to three pre-opening site visits. If we determine that additional pre-opening site visits are necessary, you may be required to pay our then-current charge per site visit, presently $1,500. In some cases, we may require you to execute a written agreement detailing the full scope of services to be performed and the related cost. These amounts are payable on demand and are not refundable. You may request additional services from Marriott Design & Construction in connection with the design and construction of your hotel to assure compliance with our standards. Your use of these services is voluntary. The cost of these services varies depending on the services you request. We do not refund these fees. Prior to opening, you must either (i) provide a certification that verifies your hotel complies with our then-current fire protection and life safety standards and your hotel’s fire protection and life safety systems are operational, or (ii) retain us to verify that. If you provide a certification, it must be from a third-party licensed fire protection engineer, engineer, or recognized expert consultant on fire and life safety requirements approved by us. We may require that the certification be issued by a party who has not participated in the design of your hotel’s fire protection and life safety systems. If you retain us, you must pay us a fee generally ranging from $3,000 to $17,500 (which is based on the time needed for the testing and inspection, the size of your hotel, and the complexity of its design, and may be higher in some cases) and you must reimburse us for our expenses for travel, lodging, and meals. If you provide a certification, we reserve the right to visit the hotel to verify the information in the certification. The initial verification visit will be at our expense, but if any additional visits are required you will be charged our then-current Fire Protection and Life Safety Audit Fee. See Item 6. 4. Optional Purchasing and Supply Arrangements As described in Items 1 and 8, you and other franchisees may voluntarily purchase various products and services under the arrangements negotiated by us and our subsidiaries. Marriott Design & Construction charges for its procurement services. In 2018, we expect our procurement charges for these services to be: (i) for furniture, fixtures, and equipment, the greater of $3,500 or approximately 4.5% to 5% of the cost to us of the products and services provided; and (ii) for hotel opening operating supplies and equipment, the greater of $5,000 or approximately 4.5% to 5% of the cost to us of the products and services provided. MIP Americas does not charge for its procurement services. Instead, MIP Americas retains a portion of rebates received in connection with your purchases to cover the costs of providing such procurement services. These amounts are not refundable. 5. Pre-Conversion or Relicensing Property Improvement Plan Fee When converting a hotel (including another Company Brand Hotel) to a Residence Inn hotel, transferring an existing Residence Inn hotel, or converting a hotel that is currently managed by us or one of our affiliates to a franchised Residence Inn hotel, as set forth in Item 6, you will be required to pay our then-current non-refundable property improvement plan fee for us to review the hotel to determine the renovations or other work necessary to bring the hotel into good repair and to conform the hotel to our then-current Residence Inn standards, including fire protection and life safety standards, and prepare a property improvement plan (“PIP”). Payment is due when the review is requested. The PIP fee includes the cost of the initial Fire Protection and Life Safety Audit to determine the renovations or other work necessary to comply with our then-current fire protection and life safety standards (but does not include the cost of any additional audits that may be necessary). The amount of the PIP fee paid by you is nonrefundable. We may waive all or a portion of this fee under certain circumstances. If a site visit(s) is required after we issue the PIP, for any reason, including to enforce, review, or modify the requirements of the PIP, we may charge our then-current PIP Additional Site Visit fee for such visit, as set forth in Item 6. 6. Support and Training Services for Existing Company Brand Hotels When converting another Company Brand Hotel to a Residence Inn hotel, purchasing an existing Residence Inn hotel, or converting a hotel that is currently managed by us or one of our affiliates to a franchised Residence Inn hotel, we will assign a transition manager. In addition, we will assess the hotel and provide training and services if we deem it necessary or desirable based on the experience level and prior training of you or your management company (if you have retained an approved third-party management company to operate your hotel), and the number of other Company Brand Hotels owned or operated by you or your management company. In addition, certain franchisee personnel may be required to attend (i) Executive Orientation or other prescribed classes, and (ii) sales and marketing meetings at the hotel to analyze or assist in sales efforts. You will be required to pay $495 per attendee and all travel and living expenses of your personnel who attend Executive Orientation. You will be required to train your new managers and staff (or their replacements) and incur those costs as described in Item 11, as well as pay for training of replacement personnel who attend Executive Orientation. We estimate that the costs for on-site classes, training services, and relicensing assistance (not including reimbursement for Marriott personnel’s travel, food, and lodging costs) generally will range from $10,000 to $15,000 based on the experience level and prior training of your associates and the size of the hotel. 7. Other Fees Depending on the circumstances, certain of the fees discussed in Item 6 under the heading “Operations” may also apply to your hotel prior to opening. Such fees are noted with a statement in the “Remarks” column in Item 6.

Financing

Except as described below, generally we do not offer direct or indirect financing for franchised Residence Inn hotels or guarantee any of your financing, loans, or other obligations. However, from time to time, under very limited circumstances and at our sole discretion, we may offer for certain hotels credit support in the form of a contingent guaranty of a portion of a loan provided by a third-party lender, or we may make a mezzanine loan. In determining whether to offer you credit support or make a mezzanine loan, we will consider, among other factors: (i) market penetration opportunities; (ii) the size and location of your hotel; (iii) the economic and financial environment; (iv) the cost to you to complete the development or conversion of the hotel; (v) whether our offer of credit or financial support would aid in the successful development or conversion of the hotel; (vi) whether you are willing to commit to playing an active role in growing the system; and (vii) whether you meet our then-current criteria. The decision whether to offer any type of credit support or loan is one that we will make in our sole discretion. Because we generally do not offer loan guaranties, if we do offer to make a contingent guaranty of a loan provided to you by a third-party lender, the terms and conditions of such guaranty may vary, such as the amount of the guaranty (for example, a percentage of the principal balance of the loan or a percentage of the hotel development costs), your repayment obligations, the guaranty fee, interest, fees, costs, penalties, security interests, default provisions, and requirements for a personal guaranty. You may be required to sign certain documents in connection with the loan guaranty, such as a Credit Enhancement Commitment Letter, Reimbursement Agreement, Equity Pledge, and Guaranty. Because the terms of these guaranties and related documents vary, we do not have standard form documents, but have included a sample of each in Exhibit O. These documents are samples, and the final documents may vary considerably depending upon which lender you select, the terms of the loan, and other lender requirements. Because we generally do not make mezzanine loans and they are subject to the unique financial terms related to your hotel, we cannot determine in advance the key terms of any such loan we may choose to make, such as the amount, the annual percentage rate, the term of the loan, the number and amount of the payments, the type of security required for the loan, personal guaranty requirements, and default provisions. We do not have sample mezzanine loan documents. Those documents, including the intercreditor agreement between your primary lender and us, will be determined at the time of loan origination.

Franchisee Revenue and Profit

1. Occupancy, Rate, and RevPAR As of December 31, 2017, there were 750 Residence Inn by Marriott hotels open and operating in the United States and Canada; of these, 641 were franchised and 559 were STR Included Franchised Hotels. “STR Included Franchised Hotels” means hotels that (a) had Smith Travel Research, Inc. (“Smith Travel”) data available and (b) were, as of December 31, 2017, open and operating as a franchised Residence Inn hotel for at least two years and satisfied the Conditions. “Conditions” means the hotel did not undergo at any time during the preceding two years any one or more of the following: (1) a rooms renovation that resulted in five percent or more of the total number of available rooms at such hotel being taken out of service during the year in which the renovation occurred; (2) a public space renovation that resulted in revenue displacement during the year in which such renovation occurred of five percent or more of the annual available room nights at the average daily rate of the most recent year prior to the renovation during which the hotel satisfied each of the Conditions; or (3) an expansion that resulted in an increase in revenues of five percent or more of the annual available room nights (before the expansion) at the average daily rate of the most recent year prior to the expansion during which the hotel satisfied each of the Conditions. 2. Reservations Residence Inn hotels received reservations from the following sources (collectively, “Reservation Channels”): (i) Marriott’s worldwide toll-free reservation phone numbers known as Marriott Worldwide Reservations (“Voice Reservations”), (ii) Marriott.com (including all international iterations of this site and Marriott’s mobile apps) (“Marriott.com”), (iii) global distribution systems that permit traditional travel agencies, as well as many third-party online travel websites, to reserve guestrooms (“GDS”), and (iv) online travel agencies with which we have distribution agreements (“OTAs”), such as Booking.com, Expedia and Hotels.com. Reservation Channels do not include group business and transient room nights booked directly at the property or through our area, regional or national sales offices. There were 559 franchised Residence Inn hotels in the United States and Canada that, as of December 31, 2017, were open and operating as franchised Residence Inn hotels at least two years and satisfied each of the Conditions (the “Included Franchised Hotels”). 3. Marriott Rewards All references to Marriott Rewards include both The Ritz-Carlton Rewards and the Marriott Rewards programs. Marriott Rewards has approximately 71.4 million members worldwide, and over 4,889 hotels and resorts in 97 countries and territories participate in Marriott Rewards. For the one-year period ended December 31, 2017, hotel guests at Included Franchised Hotels who were members of Marriott Rewards generated Marriott Rewards eligible revenue that was approximately 62% of the total room night revenue at such hotels, with an average daily spend of $148. The total of all Marriott Rewards room nights for such Included Franchised Hotels was approximately 11,452,000, generating approximately $1,699,578,000 in eligible spend, not including taxes and tips. 4. Extended-Stay Occupancy and RevPAR Residence Inn hotels are designed to accommodate extended-stay travelers. The chart below shows the average extended-stay occupancy (“ESOcc”) and the average extended-stay RevPAR (“ESRevPAR”) for the one-year period ended December 31, 2017 for the 559 Included Franchised Hotels. The average ESOcc is the total extended-stay rooms (defined as any stay of five or more consecutive nights) divided by total available rooms. The average ESRevPAR is calculated by multiplying the “average daily room rate for extended-stay rooms” by ESOcc. The “average daily room rate for extended-stay rooms” is the gross room sales for extended-stay rooms (defined as any stay of five or more consecutive nights) divided by total occupied extended-stay rooms. 5. Bases and Assumptions Smith Travel, an independent research firm servicing the travel industry, compiles occupancy rate, average daily room rate, RevPAR, RevPAR Index, and other relevant information concerning the lodging industry and is used by substantially all of the major lodging companies for tracking this data. The information in this Item 19 used in calculating average occupancy rate, average daily room rate, average RevPAR, and RevPAR Index was compiled and reported by Smith Travel, and such information has not been audited or otherwise confirmed by us. The data in this Item 19 regarding reservations, Marriott Rewards, ESOcc, and ESRevPAR was not provided by Smith Travel, but instead was drawn from Marriott’s internal databases. Because of Smith Travel’s minimum competitive set reporting requirements, some hotels that are Included Franchised Hotels and are reflected in Marriott’s internal databases may not be included in the Smith Travel data and, as a result, would not be STR Included Franchised Hotels. These statements relate to historical performance of franchised Residence Inn hotels in the United States and Canada that satisfy certain criteria as detailed above and are not projections of future performance of the system or a specific hotel. The figures above were based on hotels with at least two years of operating results. Hotels typically achieve lower results in their first year of operation. We do not claim or expect that you can or will expect to achieve the same average occupancy rate, average daily room rate, average RevPAR, RevPAR Index, reservations from Reservation Channels, Marriott Rewards room nights, ESOcc, or ESRevPAR, as these figures will vary from hotel to hotel and will depend upon many variables and factors, including size, location, seasonality, competition, general economic conditions, the length of time your hotel has been open or affiliated with us, the condition and attractiveness of the hotel, the perception of your hotel by customers utilizing our distribution channels, the reputation for quality of service at the hotel, how effectively you participate in our programs and market your affiliation with us, and the efficiency with which you operate your hotel. Operating results are subject to numerous risks and uncertainties, including economic conditions, public reaction to terrorist attacks and political unrest, supply and demand changes for hotel rooms, competitive conditions in the hospitality industry, relationships with customers and property owners, and the availability of capital. The reservations and loyalty program information disclosed in this Item 19 relates to the performance of Included Franchised Hotels using the Reservation Channels and Marriott Rewards in effect in 2017. We anticipate the reservation system and loyalty program may change as a result of the Integration Process described in Items 1 and 6. Your individual results are likely to differ substantially from the data and results indicated above. There is no assurance that you will do as well. If you rely upon the data and results above, you must accept the risk of not doing as well. We will provide you with written substantiation of the data used in preparing this Item 19 upon your reasonable request. The information described above that was provided to us by third parties has not been audited or otherwise verified by us. We are under no obligation to disclose specific information for a particular hotel in the system. Other than the preceding financial performance representation, we do not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting Eric Jacobs, 10400 Fernwood Road, Bethesda, MD 20817, (301) 380-3488, the Federal Trade Commission, and the appropriate state regulatory agencies.