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Marriott International
(3.5, 2.75)
Submitted to:
i t s s a l e o n September 15, 2004 to Cendant. It is the first hotel chain to serve food that is completely free of transfats at all of its North American properties. In 2005, Marriott International and Marriott Vacation Club International comprised two of t h e 5 3 entities that contributed the maximum of $250,000 to the second i n a u g u r a t i o n o f President George W. Bush. On July 19, 2006, Marriott announced that all lodging buildings they operate in the United States and Canada would become nonsmoking beginning September 2006. "The new policy includes all guest rooms, restaurants, lounges, meeting rooms, public space and employee work areas."
Mission:
To create an environment conducive and helpful to both our employees and customers, thereby encouraging our employees to work at their maximum capacity in being of service to our customers whilst providing our customers with Good Food & Good Service at a Fair Price
Marriott international tries to maintain its loyal customer base and attract new customers in both domestic and international markets with its commitment to provide best quality services. Marriott international will lead the industry through commitment to innovation, service, growth, and quality. Its franchise system ensures profitability for retailers, shareholders and franchisees while providing convenient access for customers. Marriott international desires to instill the belief that the company is a set of capabilities with high morale employees working in best conditions provided by Marriott. Marriott delivers superior profitability to their owners and franchisees. Marriott associates are the best in the business they do their best to serve their customers with skills, enthusiasm and work hard to guarantee the success.
External Audit
Opportunities:
1) Environmentally and family orientation 2) Decrease cost of real estate in U.S: there is gradually decrease in the cost of the real estate in America due to the recession. 3) Eco-tourism: Now days the trend of eco-tourism is developing so theres been an opportunity for the Marriott international to provide the nature friendly environment to their customers. 4) Emerging Asian travel and tourism markets: Now days there has been high increase in the Asian tourism and travel market that provides the opportunity for Marriott to spread its business in Asia. 5) Improving hospitality market in U.S: North America the single largest market of Marriott showing signs of normalcy after recessionary turbulence. The lodging industry which derives its growth from economic climate is also recovering fast from the recessionary blues. 6) Rising income: Owing to the rise in income levels, people have more spare money to spend, which is expected to enhance leisure tourism 7) Economic growth: it is noted that there has been economic growth of about 2.9% per year so its an opportunity for the Marriott to increase its business worldwide. 8) Population growth: there has been population growth of 310 million which allows Marriott to extend its business. 9) Franchising: there is opportunity for the Marriott to increase its franchises in the different countries around the globe. 10) Emerging markets: in order to offset the negative impact of such a challenging business environment and to capitalize on the opportunities present in emerging markets a number of hotels have turned to them. Marriott international is no different and Asia- Pacific countries became key target markets.
Threats
1) Vulnerability to terrorists attacks raise security and safety concerns: The tourism industry is affected by threats from terrorists attack after Sep 11, 2001. Marriott a symbol of luxury and power has been a prime target of terrorists attacks.
2) Timeshare business vulnerable in a dismal capital and credit market: The timeshare business segment of the company is still facing the heat of troubled financial and credit markets. The company, under this segment, markets and sells residential properties; finances consumer purchases; and operates resorts. 3) Fragmented and intensely competitive lodging industry: The Company faces a strong competition both as a lodging operator and as a franchisor. The US lodging market is highly crowded with several key players like Accor, Hilton Hotels, Starwood and Intercontinental Hotel Group and others, have a strong established base in US. 4) Labor issues: Some of the companys union contracts in New York, Chicago, Boston, and many other major cities are set near to expire. The hotel union is threatening a strike in all of these cities simultaneously. 5) Rising interest rates: The US has seen 17 successive interest rate hikes over the past few years leading to the current high of 5.25%. Inflation fears in US may see another raise in the short-term. This could affect the companys growth plans by increasing the financing costs. 6) High labor cost in America: there is high labor cost in America which is the most largest market for the Marriott International. 7) Economic recession: recession hits worldwide which affects the hotel industry highly and due to this the consumer spending get decrease. 8) Political instability: there is political instability in various countries which can appear as a threat to Marriott international and affects its business. . 9) Increase of real estate in Asia: there has been high increase of real estate prices in Asia so it can affect the Marriott international to generate revenues from Asia region. 10) Economy brand development: The rapid growth achieved by economy hotel brands in the last three years posses a potential threat for mid-scale, limited service brands such as Springhill suits.
Internal Audit
Strengths
1) Large expanse of brands: Marriott international have large expanse of brands which includes; the Ritz-Carlton, JW Marriott, Bulgari hotels and resorts, Edition, Autograph collection, AC hotels, Marriott hotels and resorts, Renaissance hotels, Courtyard by Marriott etc. 2) Geographic presence: Marriott is one of the key players in lodging and hospitality industry with operations spanning 68countries around the globe. Although the US is single largest market of the
Marriott, yet 43% of the earnings before interest and tax is contributed by the companys international operations. 3) Global leader in the hotel market: Marriott international is the leader in the global hotels market with a near 5% value share in 2007 and a large geographic presence. 4) Excellent strategies to attract and retain the customers: Marriott international have the excellent strategies to attract the customers and retain the customers through price, quality, satisfaction etc. 5) Eco-friendly: Marriott international is adopting the trend of eco friendly tourism to prevent the nature and the environment. 6) High revenue and growth rate: Marriott international generates the high revenue between 20042006 from $10.1 billion to $12.16 billion and enjoy the high growth rate. 7) IT solutions: Marriott international is upgrading its properties with technology that responds to the needs of business and leisure travelers. In the latter part of the review period for example it has transformed its public areas to encourage guests to work and socialize through the adoption of the latest design, technology, food and beverage offerings. 8) Franchising: Marriott international have large no of franchisees over 60 countries which facilitate the rapid expansion of its portfolio. 9) Strong presence in all the segments: The Company has presence in all the segments: luxury, upper moderate, moderate and lower moderate price segments. 10) Higher brand recognition and recall makes the company priority choice for clients: Marriott is one of the leading hotel and leisure companies known for its strong brand portfolio in all the major segments and market. The company operates in most major markets and segments around the world through its luxury brands.
Weaknesses:
1) Focus on US instead of international establishments (over reliance on US market): Marriott international mainly focus on the US as North America is its main market for the business. Marriott international remains heavily reliant on the US making sensitive to the changing fortunes of its domestic market. 2) Over dependence on luxury brands: Marriott international primarily focus on the luxury products but there is large population which cannot afford the luxuries. 3) Terrorism threats: Marriott international is being targeted by the terrorists and the extremists. 4) Lack of low cost lifestyle brand: Marriott international does not have a low cost lifestyle brand product portfolio like aloft from Starwood and hotel indigo from IHG.
5) Courtyard brand: the courtyard brand of the Marriott international is maturing and losing its core business customers. 6) Business model which has the potential to dilute the brand perception and limit the revenue growth: Marriott follows the business model wherein it emphasizes on managing and franchising hotels, rather than owning them. The company operated 46% of its hotel rooms under management agreements, 52% under franchise agreements, and only 2 % were owned or leased as of December, 2009. But, as compared to this, only 33.6% of the revenue in FY2009 were earned through franchise and management agreements while 66.4% from owned or timeshare sales and service. 7) High leverage combined with downgrade in rating will affect the future capital generation and expansion projects: The Company has substantial debt to equity ratio. The ratio increased from 0.7 in 2006 to 2.24 in2008 and stood at 2.01 in 2009. In percentage terms, the companys long term debt to equity ratio stood at 291.96% as against the industry standard of 56.07%. 8) Weak financial performance affecting the companys expansion plans: Marriott registered weak financial performance in the FY2009 due to the slowdown in the economy and the lodging industry. The companys revenues declined by almost 15.3% in 2009 compared to the previous fiscal. 9) Operating income decrease: Marriott international faces the loss of $76 million in 2006 due to high oil prices. 10) Low gross margins: Marriott international have low gross margin of 13.6% where as Hilton has 30%.
SWOT MATRIX:
STRENGHTS:
1. Large expanse of brands: Marriott international have large expanse of brands which includes; the RitzCarlton, JW Marriott etc. 2. Geographic presence: Marriott is one of the key players in lodging and hospitality industry with operations spanning 68countries around the globe. 3. Global leader in the hotel market: Marriott international is the leader in the global hotels market with a near 5% value share in 2007 and a large geographic presence. 4. Excellent strategies to attract and retain the customers: Marriott international have the excellent strategies to attract the customers and retain the customers through price, quality, satisfaction etc. 5. Eco-friendly: Marriott international is adopting the trend of eco friendly tourism to prevent the nature and the environment. 6. High revenue and growth rate: Marriott international
WEAKNESS:
1. Focus on US instead of international establishments (over reliance on US market). 2. Over dependence on luxury brands: Marriott international primarily focus on the luxury products but there is large population which cannot afford the luxuries. 3. Terrorism threats: Marriott international is being targeted by the terrorists and the extremists. 4. Lack of low cost lifestyle brand: Marriott international does not have a low cost lifestyle brand product portfolio. 5. Courtyard brand: the courtyard brand of the Marriott international is maturing and losing its core business customers. 6. Business model which has the potential to dilute the brand perception and limit the revenue growth. 7. High leverage combined with
generates the high revenue between 2004-2006 from $10.1 billion to $12.16 billion and enjoy the high growth rate. 7. IT solutions: Marriott international is upgrading its properties with technology that responds to the needs of business and leisure travelers. 8. Franchising: Marriott international have large no of franchisees over 60 countries which facilitate the rapid expansion of its portfolio. 9. Strong presence in all the segments: The Company has presence in all the segments: luxury, upper moderate, moderate and lower moderate price segments. 10. Higher brand recognition and recall makes the company priority choice for clients.
downgrade in rating will affect the future capital generation and expansion projects. 8. Weak financial performance affecting the companys expansion plans. 9. Operating income decrease: Marriott international faces the loss of $76 million in 2006 due to high oil prices. 10. Low gross margins: Marriott international have low gross margin of 13.6% where as Hilton has 30%.
OPPORTUNITIES:
1. Environmentally and family orientation: 2. Decrease cost of real estate in U.S: there is gradually decrease in the cost of the real estate in America due to
SO Strategies:
SO1. Apply eco-friendly efforts and eco-tourism across the chain to promote the nature as well open the hotels at the areas around the world which provides the ecotourism and strategically build the hotels/resorts that would
WO Strategies:
WO1. Expand in Asia as the travel and tourism industry of Asia is increasing and that can be profitable market for the Marriott international(W1,O4)
the recession. 3. Eco-tourism: Now days the trend of ecotourism is developing. 4. Emerging Asian travel and tourism markets. 5. Improving hospitality market in U.S. 6. Rising income: Owing to the rise in income levels, people have more spare money to spend, which is expected to enhance leisure tourism. 7. Economic growth: it is noted that there has been economic growth of about 2.9% per year so its an opportunity for the Marriott to increase its business worldwide. 8. Population growth: there has been population growth of 310 million which allows Marriott to extend its business. 9. Franchising: there is opportunity for the Marriott to increase its franchises in the different countries around the globe. 10. Emerging markets
W02. Make the joint ventures with the locals in the countries where is risk SO2. Acquire or establish and threats from the hotels in Asia as there is high terrorists and use the increase in the travel and locals tourism market of Asia(S2,O4) name(W3,W1,O4,O8) SO3. Allow the investors from other countries to open the Marriott international franchises to their countries(S8,S2,S3,O9) WO3. Build the low cost hotels in US as it is the large market for the Marriott international and provide the benefit to the medium and low level customers(W4,W2,O2.O5)
THREATS:
1. Vulnerability to terrorists attacks raise security and safety concerns. 2. Timeshare business vulnerable in a dismal capital and credit market. 3. Fragmented and intensely competitive lodging industry. 4. Labor issues: Some of the companys union contracts in New York, Chicago, Boston, and many other major cities are set near to expire. The hotel union is threatening a strike in all of these cities simultaneously. 5. Rising interest rates: The US has seen 17 successive interest rate hikes over the past few years leading to the current high of 5.25%. Inflation fears in US may see another raise in the short-term. 6. High labor cost in America. 7. Economic recession: recession hits worldwide which affects
ST Strategies:
ST1. Hire, train and support the localities where Marriott operate to win the heart and mind of the locals(T1,S4)
WT Strategies:
WT1. Make joint ventures with the locals in the other countries where is risk and threats from the terrorists(T1,W3)
ST2. Provide financial support to the franchisees in the Asia WT2. Use relationship to start or support the with employees in order to operations(S8,S3,S13,T9) temporarily reduce salaries to be more competitive(W8,T4,T6)
WT3. Focus on the other countries for the expansion of business and also make low cost hotels in other countries(W1.T4,T5)
the hotel industry. 8. Political instability: there is political instability in various countries. 9. Increase of real estate in Asia. 10. Economy brand development: The rapid growth achieved by economy hotel brands in the last three years posses a potential threat for mid-scale, limited service brands such as Springhill suits.
0.02
0.06
0.06
4 3
0.24 0.12
5. Improving hospitality market in U.S: North America the 0.04 single largest market of Marriott showing signs of normalcy after recessionary turbulence. The lodging industry which derives its growth from economic climate is also recovering fast from the recessionary blues. 6. Rising income: Owing to the rise in income levels, people have more spare money to spend, which is expected to enhance leisure tourism. 7. Economic growth: it is noted that there has been economic growth of about 2.9% per year so its an opportunity for the Marriott to increase its business worldwide. 8. Population growth: there has been population growth of 0.05
0.15
0.07
0.21
0.045
0.135
310 million which allows Marriott to extend its business. 9. Franchising: there is opportunity for the Marriott to increase its franchises in the different countries around the globe. 10. Emerging markets: in order to offset the negative impact of such a challenging business environment and to capitalize on the opportunities present in emerging markets a number of hotels have turned to them. Marriott international is no different and Asia- Pacific countries became key target markets. Threats 1. Vulnerability to terrorists attacks raise security and safety concerns. 2. Timeshare business vulnerable in a dismal capital and credit market 3. Fragmented and intensely competitive lodging industry. 4. Labor issues: Some of the companys union contracts in New York, Chicago, Boston, and many other major cities are set near to expire. 5. Rising interest rates: The US has seen 17 successive interest rate hikes over the past few years leading to the current high of 5.25%. Inflation fears in US may see another raise in the short-term. 6. High labor cost in America. 7. Economic recession: recession hits worldwide which affects the hotel industry. 0.05 0.05 0.09 0.05 3 2 4 3 0.15 0.10 0.36 0.15 0.035 4 0.14
0.05
0.15
0.04
0.16
0.07 0.08
3 3 2 3 2
8. Political instability: there is political instability in various 0.04 countries. 9. Increase of real estate in Asia. 10. Economy brand development: The rapid growth achieved by economy hotel brands in the last three years. Total Weighted Score 0.05 0.03 1.00
(Note: Assign a rating between 1 and 4 to each key external factor to indicate how effectively the firms current strategies respond to the factor, where 4= the response is superior, 3= the response is above average, 2= the response is average and 1= the response is poor and the weigh shows the relative importance of the factor to being successful in the industry (0.0) indicates that certain opportunity or the strength is not important and higher the weight goes the more important the opportunity or the threat is.
Analysis:
The total weighted score for Marriott international is 3.155, which is much above the average (2.50) this shows that Marriott international is doing extremely well by taking advantage of external opportunities and avoiding threats; however there is a definite room for improvement in some opportunities.
0.10
0.40
0.10
0.40
0.05
0.20
0.04
0.12
6. High revenue and growth rate: Marriott international 0.05 generates the high revenue between 2004-2006 from $10.1 billion to $12.16 billion and enjoy the high growth rate. 7. IT solutions: Marriott international is upgrading its properties with technology that responds to the needs of business and leisure travelers. 8. Franchising: Marriott international have large no of franchisees over 60 countries which facilitate the rapid expansion of its portfolio. 9. Strong presence in all the segments: The Company has presence in all the segments: luxury, upper moderate, moderate and lower moderate price segments. 10. Higher brand recognition and recall makes the 0.02
0.20
0.06
0.04
0.16
0.10
0.30
0.07
0.28
company priority choice for clients: Marriott is one of the leading hotel and leisure companies known for its strong brand portfolio in all the major segments and market. Weaknesses 1. Focus on US instead of international establishments 0.04 (over reliance on US market): Marriott international mainly focus on the US as North America is its main market for the business. Marriott international remains heavily reliant on the US making sensitive to the changing fortunes of its domestic market. 2. Over dependence on luxury brands: Marriott 0.04 international primarily focus on the luxury products but there is large population which cannot afford the luxuries. 3. Terrorism threats: Marriott international is being targeted by the terrorists and the extremists. 0.04 1 0.04
0.08
1 2
0.04 0.06
4. Lack of low cost lifestyle brand: Marriott 0.03 international does not have a low cost lifestyle brand product portfolio like aloft from Starwood and hotel indigo from IHG. 5. Courtyard brand: the courtyard brand of the Marriott international is maturing and losing its core business customers. 0.02
0.04
6. Business model which has the potential to dilute 0.02 the brand perception and limit the revenue growth: Marriott follows the business model wherein it emphasizes on managing and franchising hotels, rather than owning them. 7. High leverage combined with downgrade in rating will affect the future capital generation and expansion projects: The Company has substantial debt to equity ratio. The ratio increased from 0.7 in 2006 to 2.24 in2008 and stood at 2.01 in 2009. 0.03
0.04
0.06
8. Weak financial performance affecting the companys 0.02 expansion plans: Marriott registered weak financial performance in the FY2009 due to the slowdown in the
0.04
economy and the lodging industry. The companys revenues declined by almost 15.3% in 2009 compared to the previous fiscal. 9. Operating income decrease: Marriott international 0.04 faces the loss of $76 million in 2006 due to high oil prices. 10. Low gross margins: Marriott international have low gross margin of 13.6% where as Hilton has 30%. Total weighted score 0.05 1.00 1 1 0.04 0.05 3.01
(Note: We assign a 1-4 rating to each factor to indicate weather; that factor represents a major weakness (rating=1), a minor weakness (rating=2), a minor strength (rating=3), or a major strength (rating=4) and the weight assigns represents whether the importance of the factor to survive in the industry from (0.00) represents not important and higher the weight goes the important the factor become.
Analysis:
The total weighted score for Marriott international is 3.01 which is high. This shows that Marriott is doing very god and its internal position is strong but there is definitely rooms for improvements like tighten the security of its hotels as there is threat to Marriott and also expand its business internationally rather than focus only on US.
0.09 1.00
0.09 3.46
0.09 3.29
0.09 2.77
(Note: the ratings values are as follows; 1= major weakness, 2=minor weakness, 3= minor strength and 4= major strength and the weight assigned represents how much important the factor are to being successful in the industry) Analysis: The two most important factors to being successful in the industry are financial position and market share as indicated by the weight assigned are 0.17. Marriott international is fully utilizing its financial position, market share, global expansion, and product quality and customer service but there is a definite room for the improvement in advertising, management and price competitive as they are not fully utilized compared to the competitors. However Marriott international is doing much well than its competitors as its score is much higher than the competitors.
Financial Ratios:
2006 Liquidity ratios Current asset Current liability Current ratio 3314 M 2522 M 1.31 2005 3390 M 2133 M 1.59
3314 M 1208 M
3390 M 1164 M
2522 M 0.835
2133 M 1.043
Leverage ratios
Activity ratios
1117 M 33.315 M 34
1001 M 31.643 M 32
Profitability ratios
Net Income No. of shares common stock outstanding EPS Diluted EPS Basic EPS
Inventory turnover:
Inventory turnover shows how quickly the inventory is converted into cost of goods sold and then back into inventory. The inventory turnover ratio of Marriott international decreased slightly in 2006 as compared to the previous year.
Return on assets:
The return on assets shows the after tax profits per dollar of assets. ROA of Marriott international in 2006 is 0.070 which is slightly low than the previous year.
Return on equity:
Return on equity shows the after tax profits per dollar of stockholders investment. And in this case the ratio gets improved as compared to the previous year. In 2006 it is 0.232. Earnings per share: The basic EPS of Marriott in 2006 is $1.50 and diluted is $1.41.
SPACE Matrix:
Ratings Financial strengths
1. Return on investment 2. Revenue 3. Sales growth 4. Cash flow
+5 +6 +5 +6
Industry strengths
1. Technological know-how 2. Growth potential 3. Productivity 4. Financial stability
+4 +5 +6 +4
Environmental stability
1. Risk involved in business 2. Competitive pressure 3. Rate of inflation 4. Technological changes
-4 -2 -2 -3
Competitive advantage
1. Product diversity 2. Market share 3. Product quality 4. Customer loyalty
-1 -1 -1 -2
Conclusion: FS average = 5+6+5+6 = 22/4 = 5.5 IS average = 4+5+6 +4 = 19/4= 4.75 ES average = -4-2-2-3 = -11/4= -2.75 CA average = -1-1-1-2 =-5/4 =-1.25 Directional vector coordinates: X-axis: CA + IS = -1.25+ 4.75 = 3.5 Y-axis: FS + ES= 5.5 2.75= 2.75
Strategy Profile:
FS 6 5 4 3 2 1 CA -6 -5 -4 -3 -2 -1 -1 -2 -3 -4 -5 -6 1 2 3 4 5 6 IS
ES
Aggressive:
Backward, forward and horizontal integration. Market penetration Market development Product development Diversification
(Note: We assign a numerical value ranging from +1(worst) to =6 (best to each of the variable s that make up the FS and IS dimensions. Also we assign a numerical value ranging from -1(best) to -6(worst) to each of the variables that make up the ES and CA dimensions.)
Stars
QUESTION MARKS
Cash Cows
DOGS
High
Market Growth
Low
Analysis: The hotel industry is very fragmented and no one got the market share more than 20%.Marriott international has high market share in the industry of 9% as Marriott got the market cap of $16.97 Billion in 2006 which is highest in the industry, however the growth of industry is also high approx 7%, so Marriott international fall in the 2nd quadrant which is star and its follows backward, forward or horizontal integration, market penetration, market development, product development.
High 3.0 to 4.0 External Factor Analysis Average 2.0 to 2.99 II I III
IV
VI
VII
VIII
IX
should follow backward, forward or horizontal integration, market penetration, market development, product development strategies.
Quadrant I
Market development Market penetration Product development Horizontal integration Divestiture Liquidation
Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification
Quadrant IV
Analysis: The competitive position of Marriott international is strong and the industry has rapid market growth (about 7%, search from internet and the reference is mentioned in appendix) so Marriott international falls in 1st quadrant and which tell that Marriott international is in an excellent strategic position and should continued its strategy on market penetration, market development,
product development as they seems appropriate strategies. As Marriott international have excessive resources they should also consider on backward, forward or horizontal integration and it can also take advantage of external opportunities to in several areas.
Strategic Alternative
Launch new low cost brand worldwide to cater the low or medium income level population(product development) Open new franchises or hotels in Asia, Middle East(Market development)
Weight
AS
TAS
AS
TAS
0.03 0.05
1 3
0.03 0.15
2 1
0.06 0.05
2 3 0.12 0.12
4 1 0.24 0.04
6. Rising income: Owing to the rise 0.05 in income levels, people have more spare money to spend, which is
0.10
0.20
expected to enhance leisure tourism. 7. Economic growth: it is noted that there has been economic growth of about 2.9% per year so its an opportunity for the Marriott to increase its business worldwide. 8. Population growth: there has been population growth of 310 million which allows Marriott to extend its business. 9. Franchising: there is opportunity for the Marriott to increase its franchises in the different countries around the globe. 0.07 2 0.14 3 0.21
0.045
0.135
0.18
0.035
0.07
0.14
10. Emerging markets: in order to 0.05 offset the negative impact of such a challenging business environment and to capitalize on the opportunities present in emerging markets a number of hotels have turned to them.
0.05
0.10
Threats
1. Vulnerability to terrorists attacks raise security and safety concerns. 2. Timeshare business vulnerable in a dismal capital and credit market 3. Fragmented and intensely competitive lodging industry. 4. Labor issues: Some of the companys union contracts in New 0.05 2 0.10 4 0.20
0.05
0.09
0.18
0.27
0.05
York, Chicago, Boston, and many other major cities are set near to expire. 5. Rising interest rates: The US 0.04 has seen 17 successive interest rate hikes over the past few years leading to the current high of 5.25%. Inflation fears in US may see another raise in the short-term. 6. High labor cost in America 7. Economic recession: recession hits worldwide which affects the hotel industry. 8. Political instability: there is political instability in various countries. 9. Increase of real estate in Asia. 10. Economy brand development: The rapid growth achieved by economy hotel brands in the last three years. 0.07 0.08 -
_ 3
_ 0.24
_ 4
_ 0.32
0.04
0.05 0.03
2 -
0.10 -
4 -
0.20 -
Strengths
1. Large expanse of brands: Marriott international have large expanse of brands which includes; the Ritz-Carlton, JW Marriott etc. 2. Geographic presence: Marriott is one of the key players in lodging and hospitality industry with operations spanning 68countries around the globe 3. Global leader in the hotel market: Marriott international is the leader in the global hotels 0.10 4 0.40 2 0.10
0.10
0.20
0.40
0.10
market with a near 5% value share in 2007 and a large geographic presence. 4. Excellent strategies to attract 0.05 and retain the customers: Marriott international have the excellent strategies to attract the customers and retain the customers through price, quality, satisfaction etc. 5. Eco-friendly: Marriott international is adopting the trend of eco friendly tourism to prevent the nature and the environment. 6. High revenue and growth rate: Marriott international generates the high revenue between 20042006 from $10.1 billion to $12.16 billion and enjoy the high growth rate 7. IT solutions: Marriott international is upgrading its properties with technology that responds to the needs of business and leisure travelers. 8. Franchising: Marriott international have large no of franchisees over 60 countries which facilitate the rapid expansion of its portfolio. 9. Strong presence in all the segments: The Company has presence in all the segments: luxury, upper moderate, moderate and lower moderate price segments. 10. Higher brand recognition and recall makes the company priority 0.04 -
0.05
0.15
0.20
0.02
0.04
0.04
0.12
0.10
0.07
choice for clients: Marriott is one of the leading hotel and leisure companies known for its strong brand portfolio in all the major segments and market.
Weaknesses
1. Focus on US instead of international establishments (over reliance on US market) 2. Over dependence on luxury brands: Marriott international primarily focus on the luxury products but there is large population which cannot afford the luxuries. 3. Terrorism threats: Marriott international is being targeted by the terrorists and the extremists. 4. Lack of low cost lifestyle brand: Marriott international does not have a low cost lifestyle brand product portfolio like aloft from Starwood and hotel indigo from IHG. 5. Courtyard brand: the courtyard brand of the Marriott international is maturing and losing its core business customers. 6. Business model which has the potential to dilute the brand perception and limit the revenue growth. 7. High leverage combined with downgrade in rating will affect the future capital generation and expansion projects: The Company 0.04 3 0.12 4 0.16
0.04
0.16
0.04
0.04
0.04
0.12
0.03
0.09
0.03
0.02
0.02
0.03
has substantial debt to equity ratio. The ratio increased from 0.7 in 2006 to 2.24 in2008 and stood at 2.01 in 2009. 8. Weak financial performance affecting the companys expansion plans: Marriott registered weak financial performance in the FY2009 due to the slowdown in the economy and the lodging industry. The companys revenues declined by almost 15.3% in 2009 compared to the previous fiscal. 9. Operating income decrease: Marriott international faces the loss of $76 million in 2006 due to high oil prices. 10. Low gross margins: Marriott international have low gross margin of 13.6% where as Hilton has 30%. 0.02 3 0.06 4 0.08
0.04
0.05
(The range for attractiveness Scores is 1= not attractive, 2= somewhat attractive, 3= reasonably attractive and 4= highly attractive.)
(product development).
2. Open new franchises or hotels in Asia, Middle East (Market development)
As the Total Attractiveness Score of second strategy Open new franchises or hotels in Asia, Middle East (Market development) so select this strategy.
Recommendations:
Marriott international mainly focus on the US as North America is its main market for the
business so instead of focusing mainly on US it should also focus on the other countries as they have great potential also.
Marriott international primarily focus on the luxury products but there is large population
which cannot afford the luxuries so it should introduce a low cost brand to cater the low and middle level income population.
Marriott international is being targeted by the terrorists and the extremist so they have to
tighten the security of their hotels in order to provide the safe environment to its customers,
Marriot international should have to focus on the improvement of its courtyard brand as it
managing and franchising hotels, rather than owning them. The company operated 46% of its hotel rooms under management agreements, 52% under franchise agreements, and only 2 % were owned or leased as of December, 2009. But, as compared to this, only 33.6% of the revenue in FY2009 were earned through franchise and management agreements while 66.4% from owned or timeshare sales and service.
Marriott international should make joint ventures in other high risk countries and use the
locals name.
Marriott international needs to pursue market development in Asia with new brands that
win the hearts and minds to increase its international and local customers.
Marriott international should use relationship with its employees to temporarily reduce
References:
Case study from book, Strategic Management 12th edition by Fred R. David http://hmghotels.wordpress.com/2011/05/28/news-economy-hotel-industry-expecting-
robust-growth-in-2011-and-2012/
http://www.hotelnewsnow.com/articles.aspx/7487/Hilton-Marriott-market-leaders-in-
US-BDRC