Marriott

Marriott International, Inc.

Company Profile Publication Date: 7 Jul 2011

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Marriott International, Inc.

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Marriott International, Inc. TABLE OF CONTENTS

TABLE OF CONTENTS Company Overview.............................................................................................. Overview..............................................................................................4 4 Key Facts............................................................................................................... Facts...............................................................................................................4 4 SWOT Analysis..................................................................................................... Analysis.....................................................................................................5 5


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Marriott International, Inc. Company Overview

COMPANY OVERVIEW Marriott International (Marriott or ‘the company’) is a global hospitality company that operates and franchises hotels and lodging facilities. The company operates in Americas, Europe, Africa, and Asia-Pacific. It is headquartered in Bethesda, Maryland and employs about 129,000 people. The company recorded revenues of $11,691 million during the financial year ended December 2010 (FY2010), an increase of 7.2% over FY2009. The operating profit of the company was $695 million in FY2010, as compared to an operating operating loss of $152 million in FY2009. The net profit was $458 million in FY2010, as compared to a net loss of $353 million in FY2009.

KEY FACTS Head Office

Marriott International, Inc. 10400 Fernwood Road Bethesda Maryland 20817 USA

Phone

1 301 380 3000

Fax Web Address

http://www.marriott.com

Revenue / turnover (USD Mn)

11,691.0

Financial Financia l Year Year End E nd

December

Employees

129,000

New York Ticker

MAR


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Marriott International, Inc. SWOT Analysis

SWOT ANAL AN ALYSIS YSIS Marriott International (Marriott or ‘the company’) is a global hospitality company that operates and franchises hotels and lodging facilities. facilities. The company with its global presence and strong brand brand recognition is a formidable player player in the international lodging market. However, However, the threats of terrorist attacks could hamper the company's international operations. Strengths

Weaknesses

Technical innovations to ease the business process and increase hassle-free experience for the customers Higher brand recognition and recall makes the company priority choice for clients Global presence and strong brand portfolio diversifies the revenue sources

Business model which has the potential to dilute the brand perception and limit the revenue growth High debt burden will affect the future capital generation and expansion projects

Opportunities

Threats

Strong growth in the hotel and motel industry in emerging markets Improving hospitality market in the US Brand innovations and expansion

Vulnerability to terrorist attacks raises security and safety concerns Fragmented Fragmented and intensely competitive lodging industry

Strengths

Technical innovations to ease the business process and increase hassle-free experience for the customers Marriott had adopted several innovative technical programs to suit its business r equirements and support the customer related problems. These programs have have been developed either in-house or with the external support. One of the frontrunners of the technical success has been the Marriott's Automated Automated Reservation System for Hotel Accommodations (MARSH), a well known reservation system being used by the Marriott. This system encompasses the entire database of all its customers visiting anywhere in any part of the world. Thus, the information of a customer customer visiting Courtyard, London would already be available through MARSH as that customer had once visited Ritz-Carlton, Millenia Singapore.The Singapore. The MARSH, hence, gives gives the Marriott an edge over its competitors, in providing personalized attention to each of its customer. The MARSH success led to the implementation of the e-business strategy which transformed Marriott from a property-focused to a customer- focused company. company. The main aspect of this strategy was the more importance impor tance given to revenue revenue earned per


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customer than the revenue revenue earned per property proper ty and to provide better customer service through the use of information technology proactively and through facilities on offer through websites. Another technical innovation at Marriott was related to the development development of an auditing tool for price auditing.The tool was developed developed as a response to the renegotiation requests from its clientele during the recent recession. The renegotiation was proving extra burden burden financially for the hotels as they were forced to undertake the labor-intensive task of continually loading, auditing and monitoring the shifting corporate rates. Marriott tackled this problem by automating the process and developed the Property Guest Object Oriented Or iented System (PGOOS), an auditing tool which automatically audit every night its central reservations system, i.e. MARSH. The implementation of PGOOS enabled the company to streamline its published rates with the negotiated rates and ensured that the negotiated rates are at or below published rates. Thus, PGOOS became one of the competitive advantages advantages of Marriott since the customers where proactively given lower rates that coincided with market situation. The clients were, thus, assured of better rates at Marriott. The continuous focus on using technologies to better the customer experience at Marriott, Marri ott, hence, is one of the competitive edges of the company and enables it to distinguish itself its elf from its competitors. 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 such as Marriott Hotels & Resorts, JW Marriott Hotels & Resorts, The Ritz-Carlton, Bulgari Hotels & Resorts, Grand Residences and mid-priced brands like Courtyard, and Fairfield Inn. At a corporate level, Marriott has a high brand recall. The company ranked 37 in the Fortune's 2011 rating of World's Most Admired Companies after ruling the list as the number one for ten consecutive consecutive years. The ‘Most Admired’ list is made up of companies that are ranked by Executives, Directors, and Analysts in their own industry on eight criter criteria, ia, including innovation, people management, uses of corporate assets, social responsibility, responsibility, quality of management, financial soundness, long-term investment, investment, and products/services quality. The J.D. Power and Associates' recent North America Hotel Guest Satisfaction Index Study gave the best scores to the two Marriott brands; Ritz-Carlton Hotel in the Luxury Segment and SpringHill Suites in the Mid-Price Limited Service Ser vice Segment. In addition, addition, three brands were placed second in their segments; Renaissance Hotels and Resorts, Courtyard, and Residence Inn. The Marriott brands occupied the survey with either first or second place in five of the six segments into which J.D. Power Power divided the industry. industry. The brand recognition and acceptance related with customer satisfaction makes Marriott a popular choice among the customer base. This gives Marriott an edge over its competitors when clients opt for lodging facilities. Besides, Besides, it also helps in retaining and maintaining a loyal customer base. Global presence and strong brand portfolio diversifies the revenue sources


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Marriott is one of the key players players in lodging and hospitality industry industr y with operations spanning 70 countries around the globe. It earns revenues revenues from both matured and emerging markets. The established presence in matured markets like the US and Canada drives dri ves the value growth while the presence in emerging markets drives dr ives the volume growth. Besides, Besides, a global presence shields the country from risks risk s specific to a particular economy. economy. Besides, having a diversified geographical base, Marriott sources i ts revenues from a diverse customer base. The company has presence in all the segments: luxury, upper moderate, moderate, moderate and lower moderate price segments. Ritz-Carlton, JW Marriott and Bulgari brands of the company cater to the luxury segment while Marriott, Renaissance, SpringHill Suites and Courtyard target upper moderate-price tier segment and Fairfield Inn competes in the lower moderate-price tier. In addition, to these, the company has brands like Renaissance, TownePlace, Marriott Vacation Club and Grand residences which compete in different market segments. Marriott's hotel brands are one of the respected and known brands in the lodging industry. The awards and recognition, like the Fortune's ‘Most admired Brand ’ as mentioned above, signifies the company's brand value. The brand value combined with presence in all segments helps the company in generating revenues revenues from diverse customer base.

Weaknesses

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, agreements, and only 2% were owned or leased as of December, 2010. But, as compared to this, only 34.3% of the revenue revenue in FY2010 were ear earned ned through franchise and management agreements while 65.7% from owned or timeshare sales and service (excluding revenues revenues from cost reimbursement). The emphasis on management contracts and franchising although tends to provide more stable earnings in periods of economic softness, however however does not provide much scope for revenue growth. Besides, the revenues generation from incentive fees, revenues revenues earned when hotels reach certain profitability level, is very much dependent on the economic scenarios. Moreover, Moreover, the franchise and management agreement agreement can dilute the brand equity associated with Marriott properties. If the parties par ties involved in franchise or management agreement with Marriott does not deliver the quality with which the company is associated, it could seriously harm the company's reputation.The reputation. The franchised or business model, although gives a constant and safe source of income, but brings demerits like diluted brand perception and limited revenue revenue growth. High debt burden will affect the future capital generation and expansion projects


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The company holds a substantial amount of debt. In FY2010, the total debt of Marriott increased by $531 million to $2,829 million, from $2,298 million in FY2009. At the same time, the company's share holder's equity stood at $1,585 million, representing a debt-equity ratio of around 1.8. Further, the interest expenses of the company stood at to $180 million in FY2010, which is 25.9% of the operating profit of the company. company. The company's substantial debt limits its ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements which is a disadvantage to the company.

Opportunities

Strong growth in the hotel and motel industry in emerging markets The global lodging industry has seen remarkable growth from emerging markets like China and India over past few few years. The GDP growth, economic prosperity and the rise in disposable income in these countries have contributed to the growth of lodging market. The GDP growth has increased the number of business travelers travelling within these countries while growth in disposable income have resulted in increased leisure travelers According to the Datamonitor's report on ‘Hotels & Motels in India’, the Indian hotels and motels industry generated $3,800.4 million revenues revenues in 2009, representing a growth of 4.3%over the previous year. year. The Indian lodging market is expected to grow to the value of $7,236.8 million, an increase i ncrease of 90.4% since 2009. China, the world's fastest growing economy, economy, has also registered strong growth. The Chinese hotels and motels industry generated total revenues of $24.5 billion in 2009, representing a compound annual growth rate (CAGR) of 10.4% for the period spanning 2005 – 09. 09. The industry, industry, in the long run, is expected to thrive with an anticipated CAGR of 13.9% for the five-year period 2009 – 14 14 and projected value of $46.8 billion by the end of 2014. China is Marriott’s largest market outside North America. The company’s 55 property bases along with franchised and managed agreements at prime locations in China make it a formidable player in the luxury and the moderately-priced segment. Besides, the company is adding new properties to increase its number strength. The company aims to more than double double its presence to 120 hotels by 2015. The company had made similar growth in Indian market. Further, Further, Marriott plans to grow from 12 to 100 hotels in India across seven brands by 2015.With 2015. With further planned expansion to open new hotels both under owned and franchised system, the company is expecting to increase its volume strength in these markets. The expanding property base and strong brand recognition associated with Marriott, hence, gives the unique positioning to the company, company, to compete effectively with local and international players in the emerging markets. Improving hospitality market in the US North America, the largest market of Marriott, is showing signs of normalcy after recessionary turbulence. The lodging industry, which derives its growth from the economic climate, is also recovering fast from the recessionary blues. The industry is showing improvement improvement in all key


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performance metrics in May 2011. In year-over-year year-over-year measurements, the industry ’s occupancy was up 4.6% to 61.5%, and average daily rate ended the month with a 4% increase to $101.5. Another Another key metric, revenue per available available room also rose 8.8% to $62.5. The improvement in the hospitality market in the US is a boon for the company's brands which had to bear the impact of the turbulent US economy. economy. The company would be a forerunner in the lodging l odging industry to reap the benefits of the improving economic climate considering its volume and brand value in the North American lodging market. Brand innovations and expansion Marriott, through owned, leased, franchised and managed properties, is expanding its investment to either launch laun ch new brands or expand the existing ones. Among the new brand launches, Autograph Collection included a portfolio of 13 upscale, independent hotels in pr ime destinations around the world. Additionally, the company debuted its first two EDITION EDITI ON hotels in Waikiki, Hawaii, and Istanbul, Ist anbul, Turkey, Besides addition of the new brands, the company has invested in expanding its presence worldwide. In January 2011, Marriott announced its plans to open the 278-room Car tagena Marriott Hotel in Cartagena de Indias, Colombia, scheduled to open in 2014. In the same month, the company announced plans to open the 272-room Helsinki Marriott Hotel in Finland in early 2013, under a franchise agreement with Scandinavian Hospitality Management Espoo. Espoo. Courtyard by Marriott opened its fifth hotel in Paris, France, the Courtyard Paris Arcueil. Marriott opened its first hotel in Libya, JW Marriott Hotel Tripoli. Tripoli. In February 2011, Courtyard Cour tyard by Marriott opened its fourth hotel in Russia, the Courtyard Cour tyard Kazan under a management agreement with Transstroibank. Transstroibank. The company signed agreements to add three more hotels to its growing lodging portfolio in Europe, in February 2011. The company also opened a luxury JW Marriott Hotel in Cusco, Peru in 2012. Courtyard Courtyard by Marriott, opened its 900th hotel, the Courtyard Bali Nusa Dua, the brand ’s first hotel in Indonesia. In addition, in March 2011, Marriott announced its plan to open the 107-room Residence Inn Edinburgh in the UK. In April 2011, the company announced its plan to open the first Cour tyard by Marriott hotel in Mexico City. In the following month, Marriott opened its third hotel in Panama, the 120-room Courtyard Panama City MetroMall. In May 2011, the company announced to open its Renaissance Hotels portfolio por tfolio in Turkey Turkey,, the 212-room Renaissance Istanbul Bosphorus Hotel, scheduled to open in early 2012. In June 2011, Marriott Hotels & Resorts announced its global pipeline of nearly 50 new hotels and resorts resor ts to open in i n the next four years. Also in June 2011, JW Marriott Marri ott announced its plan to open 12 new properties worldwide, by year-end 2012. The company through brand introduction and expansion expansion is changing itself to suit the needs and interests of the present business and leisure travelers. These initiatives will help the company to expand its customer reach and provide the services in a better way. way. It will also provide opportunities oppor tunities for the company fully exploit the growth prospects present in diversified markets.

Threats


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Vulnerability to terrorist attacks raises security and safety concerns The tourism industry is affected by threats from terrorist attacks. Marriott, Marriott, a symbol of American luxury and power, has been a prime target of terrorist attacks. The company has suffered many many bomb blasts in the recent past. The 2002 car bombing at Karachi outside Marriott Marriott Hotel and 2003 attack on Marriott hotel, Jakarta, Indonesia killed many people people while several were were injured. The Marriott was again targeted in 2004 and then in 2008 in Islamabad, Pakistan causing many deaths. In another big attack on Marriott properties, Ritz Carlton and JW Marriott hotels in Jakarta, Indonesia were targeted in 2009, resulting in the deaths deaths of eight people while injuring at least 51 people. The attacks on Marriott properties have exposed the vulnerability of the hospitality industry to terrorist attacks. The aftermath of these terrorist attacks have weakened the consumer confidence in the security arrangements around Marriott and has instilled doubts and fear in the minds of certain international customers. These incidents could result in lower check-ins at Marriott hotels which will affect the company's business and reputation in the long run. Fragmented 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. players. These operators are primarily private management firms, but also include several large national chains that own and operate their own hotels and also franchise their brands. According to the industry reports, the lodging industry is highly fragmented and no player commands more than 20% of the market share. The company as mentioned above faces strong competition from Accor, Best Western International, Choice Hotels International, Inter national, Hilton Hotels, InterContinental Hotels Group and Starwood Hotels & Resorts in most of the markets. The intense competition results in a high demand for property space causing the increase in real asset prices. Marriott, known for its luxurious luxur ious spacing and large hotels, have to undertake heavy capital outlay to acquire such properties. Moreover, Moreover, intense competition fuels price war which makes Marriott's luxurious brands uncompetitive resulting in low market penetration opportunities for the company.


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Marriott

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