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Results for international lodging operations were favorable in 2000, despite a decline in the value of the euro against the U.S. dollar, reflecting strong demand in the Middle East, Asia, Europe and the Caribbean region. 

Marriott Vacation Club International also posted favorable profit growth in 2000, reporting a 34 percent increase in con- tract sales. The increase in contract sales reflects interest in our newest brands, Horizons by Marriott Vacation Club in Orlando, Florida, and The Ritz-Carlton Club resorts in St. Thomas, U.S. Virgin Islands, and Aspen, Colorado, as well as continued strong demand for our timeshare properties in Hawaii, Aruba and California. The profit growth in 2000 was impacted by a $6 million decline in gains from the sale of notes receivable arising from lower note sale volume. At the end of the year, 24 resorts were in active sales, 23 resorts were sold out and an additional 13 resorts were under development. 

The Marketplace by Marriott (Marketplace), our hospitality procurement business, launched as an independent company. In January 2001, Marriott and Hyatt Corporation formed a joint venture, Avendra LLC, and we each merged our respective procurement businesses into it. Avendra LLC is an independent professional procurement services company serving the North American hospitality market and related industries. Bass Hotels & Resorts, Inc., ClubCorp USA Inc. and Fairmont Hotels & Resorts, Inc. joined Avendra LLC in March 2001. 

## MARRIOTT SENIOR LIVING SERVICES 

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## 2001 Compared to 2000 

Marriott Senior Living Services posted a 9 percent increase in sales in 2001, as we added a net total of three new communities (369 units) during the year. Occupancy for comparable com- munities increased by nearly 2 percent to 85.3 percent in 2001. 

The division reported an operating loss of $45 million, reflecting restructuring and other charges of $62 million, pri- marily related to the $60 million write-down of 25 senior living communities held for sale to their estimated fair value and the write-off of a $2 million receivable no longer deemed collectible. These charges were partially offset by the favorable impact of the increase in comparable occupancy and the new units. 

## 2000 Compared to 1999 

Marriott Senior Living Services posted a 20 percent increase in sales in 2000, reflecting the net addition of nine properties dur- ing the year and a 4 percentage point increase in occupancy for comparable communities to 88 percent. Despite the increase in 

sales, profitability was impacted by start-up inefficiencies for new properties, higher administrative expenses, pre-opening costs for new communities, costs related to debt associated with facilities developed by unaffiliated third parties, and charges associated with our decision to limit new construction until the market improves, resulting in a loss of $18 million. 

## SENIOR LIVING SERVICES DEVELOPMENT 

Due to oversupply conditions in some senior housing markets, we decided in 1999 to dramatically slow development of planned communities. Consequently, a number of projects in the early stages of development were postponed or canceled. Additional projects were canceled in 2000. 

## MARRIOTT DISTRIBUTION SERVICES 

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## 2001 Compared to 2000 

Operating results for Marriott Distribution Services (MDS) reflect the impact of an increase in sales related to the com- mencement of new contracts in 2001 and increased sales from contracts established in 2000. The impact of higher sales on the operating results was more than offset by the decline in business from one significant customer, transportation inefficiencies and restructuring and other charges of $5 million, including sever- ance costs and the write-off of an accounts receivable balance from a customer that filed for bankruptcy in the fourth quarter of 2001. The Company commenced a strategic review of this business in January 2002. 

## 2000 Compared to 1999 

Marriott Distribution Services posted a 32 percent increase in sales for 2000, reflecting the commencement of service to three large restaurant chains in the year. Operating profit declined $17 million as a result of start-up inefficiencies associated with the new business and a $15 million pretax write-off of an investment in a contract with Boston Chicken, Inc. and its Boston Market-controlled subsidiaries, a major customer that filed for bankruptcy in October 1998. McDonald’s Corporation (McDonald’s) acquired Boston Market in 2000, and during the first quarter of 2000, MDS entered into an agreement with McDonald’s to continue providing distribution services to Boston Market restaurants (refer to the “Intangible Assets” footnote in the financial statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data”). 

