Marriott International, Inc., 2015, MAR
Marriott International is the largest hotel company in the world with more than 4,100 properties in over 80 countries and territories around the world, over 700,000 rooms, and an additional 200,000 rooms in the development pipeline. In June 2014, Marriott opened its 4,000th hotel, the Marriott Marquis in Washington, DC, and opened its 4,200th property in the summer of 2015. The majority of rooms and properties are franchised out, with 2,673 franchised properties containing a total of 360,451 rooms. About 1,057 Marriott properties with 283,029 rooms are company-owned with long-term management agreements. In total, about 97 percent of all Marriott rooms are either managed or franchised, as the company is opposed to owning the rooms outright.
The firm’s flagship brand is Marriott Hotels, designed to serve business and leisure travelers as well as meeting groups. Courtyard is another popular Marriott-owned property designed around transient business travelers. Courtyard hotels are smaller, often with 90 to 150 rooms, and upper moderately priced. Fairfield Inn & Suites are also designed for business travelers, but are priced below Courtyard. Marriott’s Residents Inn is designed for extended stay customers. Marriott’s Ritz Carlton hotels offer luxury accommodations.
Beginning in 2016 at many Marriott hotels you can unlock your room door with your phone, log into your Netflix account from your room television, and charge your wireless mobile device. Marriott’s Q1 2015 earnings were $207 million, up from $197 million the prior quarter, while company revenues dropped slightly to $3.513 billion from $3.559 billion the previous quarter.
Marriott traces its roots to an A&W root beer stand founded by Willard Marriott and his wife Alice in 1927 in Washington, DC. The following year, the Marriotts added hot food items to their menu and the new business name became Hot Shoppes. By 1957, the business had grown large enough to become a public offering selling out of stock within 2 hours at the opening price of $10.25 per share. Using capital from the sale of stock, Marriott opened its first hotel the same year in Arlington, Virginia, with 325 rooms. The firm experienced growth in the domestic market and international market over the next two decades, even opening an additional fast-food restaurant and forming a partnership with Sun Line cruise ships.
In 1983, Marriott introduced its Courtyard properties designed for business travelers. In 1987, Marriott introduced Fairfield Inn and acquired Residence Inn and Renaissance Hotel properties. Marriott is noted for including copies of the Book of Mormon in addition to the Holy Bible in its rooms. U.S. Republican Presidential candidate Mitt Romney, a Mormon, recently reported $260,390 in director’s fees from Marriott. Guinness World Records recently recognized the 5-Star JW Marriott Marquis Hotel Dubai as the world’s tallest hotel. In 2013, Marriott International introduced Vacations by Marriott, the company’s official travel deal website.
In 2014, Marriott began a new initiative titled “The Envelope Please” whereby its hotels leave an envelope in every room for customers to tip the housekeeper who cleans their room. Since cleaning is oftentimes performed by women working for minimum wages, tipping these individuals is a way to show your appreciation for their services. Marriott now places envelopes in 160,000 hotel rooms in the United States and Canada, urging its customers to tip the housekeepers. Roughly 750 to 1,000 hotels take part in the envelope campaign from Marriott brands such as Courtyard, Residence Inn, J. W. Marriott, Ritz-Carlton, and Renaissance hotels.
Mission, Vision, Values
Marriott does not report a vision or mission statement. However, the firm does state its core values and the founder’s philosophy. Marriott’s philosophy is to “Take care of associates and they will take care of the customers.” Marriott’s values are as follows:

  1. We put people first.
  2. We pursue excellence.
  3. We embrace change.
  4. We act with integrity.
  5. We serve our world.
    Marriott plans to add over 5,000 hotels worldwide to its portfolio by the year 2017 with a focus on overseas markets, in particular Asia, where Marriott plans to double its exposure by 2017. The Middle East and Africa are also key areas of growth. With the recent acquisition of Protea in South Africa, Marriott expects to have a compounded growth rate of 25 percent from 2013 to 2017 in this region and also a 25 percent compounded growth rate in the Middle East over the same time frame.
    At year-end 2014, Marriott had 46 properties in the Middle East and in northern Africa, and 104 properties in Sub-Sahara Africa, but announced in January 2014 that the firm was adding 116 hotels in seven different Sub-Sahara African nations. The total deal was worth $187 million. Africa is a strategic focus for Marriott moving forward, citing the continent’s growing middle class and higher growth rates than the United States. Africa tourism grew 6 percent in 2013 and is expected to continue at this rate over the long term. The acquisition of Protea Hospitality Group makes Marriott the largest hotel company in Africa. However, the Ebola virus outbreak in western Africa is a primary concern for Marriott.
    Marriott is the largest hotel operator in Beijing and Shanghai, but not in China as a whole. The company plans to open a new hotel in China every few weeks for the next several years. Marriott is more focused on the luxury market in China, but has plans to get into the more middle-class market as this demographic in China grows.
    External Issues
    Hotels are rapidly developing smartphone apps to help speed up check-in for travelers, including letting customers go straight to their rooms by using their smartphone to unlock doors. In November 2014, Starwood Hotels and Resorts (HOT) became the first hotel to let guests unlock doors with their phones. The feature is available at 140 Aloft, Element, and W hotels at mid-2015. “Guests want this because it makes their lives simpler,” says Mark Vondrasek, who oversees the loyalty program and digital initiatives for Starwood. “The ability to go right to your room gives them back time.”
    In 2013, Marriott International (MAR) launched its check-in app at 330 North American hotels last year. By the end of 2014, that Marriott app was live at all 4,000 of its hotels worldwide. When a room becomes available, a message is sent to the guest’s phone. Traditional room keys are preprogrammed and waiting at the front desk. A special express line allows guests to bypass crowds, flash their IDs, and get keys. Marriott guests made $1.25 billion in bookings in 2013 through its mobile app, according to George Corbin, senior vice president of digital for the company. However, Marriott is holding off on using smartphones as keys until security issues can be resolved.
    With brands Hilton, Waldorf Astoria, Conrad, and Canopy, Hilton Worldwide (H) is the second hotel chain, behind Starwood, to announce plans for mobile room keys, which it plans to roll out at the end of 2015 at some U.S. properties. Guests can use also use maps on the Hilton app to select a specific room.
    Guests who like personal check-in attention, such as to ask about pool hours, restaurant hours, and so on, can still opt for the traditional check-in. Hotel companies say new technologies are not about cutting jobs. Many hotel chains desire travelers to eventually be comfortable using their mobile apps to interact, such as using an iPad, phone, or smartwatch to request a wakeup call or purchase suite upgrades, spa treatments, and room service. InterContinental Hotels Group (IGH) is testing express check-in at 60 hotels.
    The top 15 hotel companies have more than 42,000 properties worldwide with a combined 5.2 million rooms, according to travel research firms STR and STR Global. Thus, some hotels have made smart app technology updates over the past few years, but they remain the minority. One reason for reluctance is security. Starwood, for example, requires the phone to actually touch a pad on the outside of the door to open it. This is to assure the guests that if there is knock on the door late at night and guests go to the peephole to see who is there, their phones in their pockets will not accidently unlock the door.
    Industry Fragmentation
    The overall hotel industry is quite fragmented with only around 51 percent of the total hotel market being derived from the major brand’s properties. The top five hotel brand companies in the world account for only 41 percent of all branded hotels, leaving many other brands (and “mom-and-pop” hotels) divided among the remaining 59 percent of the branded hotel market. However, the future outlook appears much more positive for branded hotel companies in general, as 72 percent of hotels currently being developed belong to major hotel companies. Hotel industry fragmentation is even much more pronounced in markets outside the United States. For example, in the United States about 70 percent of all hotel rooms available are branded, leaving only 30 percent to independent operators. However, in regions such as China and India, branded penetration can be as low as 20 percent of the total rooms available. Analysts expect a great increase in branded penetration in developing markets such as China and India moving forward, as customers become more affluent, have increased disposable income, and are able to travel more. Many consumers prefer particular brands being assured generally of better security and consistency from one hotel to another of the same brand.
    The overall hotel industry is also expected to see modest gains moving toward 2018, enhanced by limited (but positive) supply growth, an improving economy, higher room rates, and a willingness for both businesses and individuals to travel. A key area of revenue growth for hotels is add-on fees, much like airlines charge. Hotel fees have doubled in the last 10 years with luxury hotels often charging the lion’s share of the industry’s total fees. Internet and mini-bars have historically been prone to fees, but in addition now, business centers, in-room safes, and even mandatory valet parking are being added at some hotels to help improve the bottom line.
    Different Business Models
    Different firms in the hotel industry operate under some combination of four general business models that are (1) owned, (2) leased, (3) managed model, or (4) franchised. Hilton even structures its operations under the four models, whereas Marriott structures are based more on geographic region. Most all hotel firms provide segment data for both ownership type and geographic region breakdowns. Owned hotels are majority or even 100 percent owned by the parent company. Under the leased model, common in large cities, the major hotel brand leases space but otherwise has total control over hotel operations. The managed model consists of a third-party manager operating the hotel on the parent company’s behalf. In return, the branded hotel pays the manager fees, usually based on some combination of revenues and profits. Finally, a franchised hotel is owned and operated by an individual or group of individuals who benefit from the brand name of the company, yet have the luxury of owning and operating their own business. The individuals who run the hotel are required to pay franchise fees and usually a percentage of sales to the major brand company. Hotel brands enjoy franchising to third parties, as this drastically reduces initial capital. However, reduced risks in initial capital can be offset by loss of quality control in franchised properties.
    Industry Growth Globally
    The hotel industry as a whole enjoyed 4.4 percent overall RevPAR growth in 2013, but growth rates varied greatly between different regions and price points. The top-grossing region was the Americas, with RevPAR growing 6.6 percent attributed mostly to hotels being able to charge higher prices. Higher-end segments also enjoyed much better RevPAR numbers than middle- or lower-tier hotel properties.
    Growth in the Eurozone lagged many other global regions with industrywide RevPAR of only 3.2 percent in 2013 with hotel rooms available increasing only 0.9 percent. RevPAR in the InterContinental home market of the U.K. increased 3.9 percent. Germany was a laggard in Europe, only reporting an increase in RevPAR of 1.7 percent.
    Asia, Middle East, and Africa (AMEA) enjoyed an overall RevPAR of 6.1 percent. This region does not have the number of developed hotels as other regions; therefore, the numbers are a bit misleading because it is easier to achieve a higher percent gain when working off an initial revenue base much less than that of Europe and the United States. The 6.1 percent increase in RevPAR was buoyed by a 5 percent growth in the average daily rate charged and an increase in total hotel rooms of 2.6 percent. The Middle East and South East Asia enjoyed the largest percent gains of RevPAR at 11.4 and 7.9 percent, respectively. The Middle East numbers are especially impressive considering the ongoing civil unrest the region has experienced recently. Hotel rooms available increased by 4.6 percent in India in 2013, but demand did not rise as fast, resulting in a decrease of RevPAR of 3.3 percent.
    The hotel industry in China experienced a similar pattern as India in 2013, with an increase in available hotel rooms of 4.6 percent resulting in prices dropping 3.1 percent and total RevPAR falling 4.2 percent. Analysts blame not only the increase in available rooms but also the slowest growth in China this millennium at only 7.7 percent GDP in 2013. With a large population, a growing middle-class population, and China’s growing tourism, the long-term outlook remains positive for China’s hotel industry.
    Many thousands of hotel/motels compete for travelers’ dollars. Some major rival firms to Marriott are InterContinental, Wyndham Worldwide, Hilton Hotels, Accor S.A., Best Western, Choice Hotels, and Starwood Hotels & Resorts. Exhibit 9 provides a comparison of Marriott and two other competitors, and Exhibit 10 provides additional data regarding some competitors.
    Exhibit 9
    Marriott versus Rival Firms
    Marriott Hilton Starwood

Fulltime Employees 123,000 152,000 180,000

$ Net Income $753 M $673 $633 M
$ Revenue $13,795 M $10,502 M $5,983 M
$ Revenue/Employee $112,000 $69,000 $33,200
$ EPS Ratio $2.35 $0.56 $3.41
Market Cap. $23.5 B $27.9 B $13.86 B
Source: The creation of this table is based on Yahoo Finance and company websites.
Table 9 Full Alternative Text
Exhibit 10
Marriott and Rival Firms Number of Properties and Rooms
Parent Firm Major Brands Number of Properties Number of Rooms
InterContinental InterContinental, Holiday Inn, Crowne Plaza 4,700 687,000
Marriott International Marriott, Courtyard Residence Inn, Fairfield Inn, Renaissance 3,900 360,450
Wyndham Worldwide Days Inn, Ramada, Super 8, Travelodge 7,350 627,000
Hilton Hotels Hilton, DoubleTree, Embassy Suites, Hampton Inn, Waldorf Astoria and Conrad 4,000 678,000
Starwood Hotels & Resorts Sheraton, Westin 1,200 350,000
Source: Based on information at S&P Survey 2014.
Table 10 Full Alternative Text
Note in Exhibit 9 that Marriott leads both Hilton and Starwood on both total revenues and net income. Starwood has a significantly higher earnings-per-share (EPS) ratio but trails both rivals on market capitalization.
Hotel occupancy rates vary by location. Hotels located in urban areas and airports tend to have higher occupancy rates than other areas, such as resorts and suburban and highway properties. These properties benefit from both tourism and business travel. Exhibit 11 provides the 2013 occupancy rates for hotels in the United States based on quality of hotel property. Note that higher-end hotels, at least in the United States, enjoyed higher occupancy rates in 2013, with the most luxurious hotels (average rate over $200) enjoying the highest occupancy rates of all. The overall trend toward higher-end hotels and occupancy rates was similar in international markets as well. Generally, top tier, middle tier, and bottom tier are considered to be hotels with prices over $120, $85, and below $60, respectively.
Exhibit 11
USA Hotel Occupancy Rates in 2013 by Property Type
Source: Based on information at S&P Survey.
Figure 11 Full Alternative Text
Hilton Worldwide Holdings (HLT)
Headquartered in McLean, Virginia, Hilton is a large worldwide hotel chain with 10 brand names and properties in 91 countries. Hilton operates and/or franchises 4,000 hotels and timeshares with over 678,000 rooms and around 40 million customers in its rewards program; it employs over 150,000. Hilton’s vision is “to fill the earth with the light and warmth of hospitality” and its mission is “To be the preeminent global hospitality company—the first choice of guests, team members, and owners alike.” Notable properties Hilton operates include Waldorf Astoria and Conrad in the luxury segment, Hilton, Double Tree, and Embassy Suites in the Full-Service line, and Hilton Garden Inn, Hampton, Homewood Suites, and Home 2 in the Focused-Service segment.
Hilton’s three primary business segments for Hilton are (1) ownership, (2) management and franchise, and (3) timeshare. Year-end financial results were $4,075 million with EBIT of $926 million, $1,271 million with EBIT of $1,271 million, and $1,109 million with EBIT of 297 million for each of the three segments, respectively. Hilton reported overall net income of $415 million in 2013, up from $253 million just two years earlier. However, Hilton reported net income of $673 million in 2014, up 62 percent from 2013, while revenues increased 8 percent to $10,502 million.
InterContinental Hotels Group plc (IHG)
Headquartered in Denham, United Kingdom, InterContinental is world famous for its InterContinental flagship branded hotel. The company’s brands include Hotel Indigo, Crowne Plaza, Holiday Inn, Holiday Inn Express, EVEN, and several others. The firm’s rewards program is considerably larger than that of rival Hilton, with over 77 million members worldwide. The company owns, leases, or franchises over 4,700 hotels with over 687,000 rooms in 100 different nations around the world. In 2013, InterContinental opened an additional 237 properties and signed contracts to put 444 more in the pipeline. Key markets moving forward for InterContinental are the United States, the Middle East, Germany, the U.K., Canada, Greater China, India, Russia, Mexico, and Indonesia. Intercontinental reports earnings based on geographic region and broken down further by company-owned versus franchised-owned by each geographic segment.
Starwood Hotels and Resorts Worldwide (HOT)
Starwood operates luxury hotels, full-service hotels, resorts, select-service hotels, and extended-stay hotels under a variety of brand names, but the company primarily focuses on upper-end hotel offerings. Branded hotels by Starwood include the W, Westin, Le Meridien, Sheraton, Four Points, Aloft, and Element. Starwood is expanding its footprint with both management and franchise contracts; it doubled its international footprint between 2008 and 2013. As of March 2014, the hotel owned and operated 1,200 properties and 350,000 total rooms in 100 different countries. Headquartered in Stamford, Connecticut, Starwood reported net income of $635 million in 2013. Starwood is building the first-ever Aloft brand hotel to enter Australia by 2016 and will expand its Latin American presence by 20 percent by 2016 with the opening of 17 new hotels in that region. Starwood’s 2013 same-store RevPAR increased 5 percent and the company opened 74 new hotels totaling 16,200 rooms and signed 152 new deals for hotels—the most since 2007. Starwood at year-end 2013 had 590, 158, 133, and 130 properties in North America, Europe, Asia, and China, respectively. The firm reported revenues and net income of $5,983 and $633 million in 2014, respectively.
Marriott and the entire travel industry have experienced a growth in sales as the economy in the United States has improved and oil prices have fallen. The firm in 2015 announced plans to buy back 25 million shares or around 9 percent of total shares outstanding. Marriott also announced in January 2015 that it plans to buy Canadian-based Delta Hotels and Resorts for $125 million. The acquisition of Delta Hotels is in line with Marriott’s plans to expand internationally; however, the firm is mostly focused on emerging markets. In 2015, CEO Sorenson reiterated these plans in particular to India, where the firm currently operates 24 hotels with plans to operate 50 by 2020. Currently, Marriott has 40 hotels in the long-term pipeline for India; however, infrastructure issues continue to hamper expansion into India as rapidly as Marriott and other rivals would like. In addition to India, Marriott has 150 properties in Asia (not including China or India), with more than 200 in the pipeline. Chinese properties currently total 70, with more than 80 additional hotels scheduled to be operating by 2020. Marriott is opening a hotel every two weeks in China, and plans to increase the number of its properties in the Middle East and Africa by 75 percent and Latin America by 50 percent through 2020.
Currently many emerging markets are struggling and the strong dollar hurts overseas sales that are converted back to dollars. There are also many regions of the world in which Marriott and rivals would like to position their properties. Help CEO Sorenson develop a three-year strategic plan moving forward that most effectively uses Marriott’s resources.

Question 1
Do you believe Marriott has a competitive advantage? What is it? Is it a sustained competitive advantage? What makes it “sustained”? What is Marriott’s strategy? Is it a successful strategy considering the competition? Are they being proactive? (minimum requirements: 5+ paragraphs)

Question 2
Conduct an External Analysis of the following forces: (1) Economic, (2) Social, Cultural, Natural Environment, (3) Political, Governmental, & Legal, and (4) Technological for Marriott International. Make sure to use the tables associated with each force to develop your answer (tables 3-1 – 3-4). Identify how each force impacts Marriott’s competitiveness in the Hotel industry. (minimum requirements: 5+ paragraphs)

Question 3
Conduct a Five Forces analysis for Marriott International. What does Rivalry look like for Marriot? Who are Marriott’s strongest competitors? What are possible substitutes in this industry? What is the bargaining power of buyers? What is the bargaining power of suppliers? How strong are the barriers to entry into this industry? Make sure to analyze each of the Five forces in depth. (minimum requirements: 5+ paragraphs)

Question 4
Recommend at least 4 specific strategies and long-term objectives. Show how much your recommendations will cost. *Do not make broad generalizations, be specific by stating, what, why, when, how, where and who (as applicable). Avoid recommending a course of action beyond an organization’s means, be realistic. Give ample justifications for your recommendations. (minimum requirements: 4+ paragraphs)

Sample Solution

find the cost of your paper